The Seeker

The seekerTo seek: search for, attempt to find something.

Seeker: as in ‘a tenacious seeker of the truth’ or ‘a tireless seeker of justice’

Seeking is very different to conventional management.

Conventional Management

Conventional management constantly defines up front the ‘what’ and the ‘how’…and then toils to achieve the espoused ‘strategy/ plan/ target operating model…blah, blah, blah’ through pulling levers of (supposed) control.

It is about:

  • being (seen to be) certain of yourself;
  • having ‘an opinion’ and knowing ‘the answer’;
  • retaining confidence (at least outwardly); and
  • forcing through the barriers in your way (rather than contemplating why they are there).

Their drive is to be able to assert (whether through fear or power…or a combination of both) that they have conquered what they defined up front….and then repeat the (single-feedback) loop….and on and on.

Seeking

A seeker has a deep-rooted resolve, but doesn’t know where they will be going – and is okay with this. Their journey will be ever changing (dynamic). Note the use of the words tenacious and tireless in the definitions above.

Their drive is to explore what is before them, whilst always seeking their ‘true north’. This will lead them on many collaborative adventures, much learning and growth and a constantly regenerating desire. They will continually question, and change, themselves (double-loop).

A purpose-seeking organisation

I love this phrase. For me, it says so much.

Breaking it down into its parts:

  • Purpose: a clear, meaningful, ongoing endeavour – for the fundamental reason why our system should exist (which will never be ‘to make money’);

  • Seeking: as above. Not a destination, but an ongoing quest;

  • Organisation: everyone, joined together. About how we all interact, not how we act taken separately.

A purpose-seeking organisation can do amazing things (that others wouldn’t dare put into a plan) and can sustain and reinvent itself. It will possess that most treasured of desirable system properties – self-organisation.

So what?

There is a gulf between conventional and purpose-seeking organisations…and much to do to bridge the gap.

But the first step is for those ‘in positions of power’ to see the gap. You can then question why it exists. If you rush into changing something before you have properly seen and questioned, then you will remain stuck in the same conventional loop.

Are you a seeker?

Footnote:

This short post comes about from re-reading my notes on ‘Organisational Learning’ (Chris Argyris).

I recognise that it might be a bit philosophical (bullshit?) for some. I have a couple of follow-up posts in mind that are perhaps a bit more practical 🙂

Advertisements

Memo to ‘Top Management’ – Subject: Engine Technology

I’ve just been searching for a post that is hugely relevant to a recent conversation, and have found that it was an old piece that didn’t get published onto this blog…so here it is:

Jet engine“Management thinking affects business performance just as an engine affects the performance of an aircraft. Internal combustion and jet propulsion are two technologies for converting fuel into power to drive an aircraft.

New recipes for internal combustion can improve the performance of a propeller-driven airplane, but jet propulsion technology raises total performance to levels that internal combustion cannot achieve. So it is with management thinking.

Competitive businesses require jet (even rocket!) management principles. Unfortunately, internal combustion principles still power almost all management thinking.” (H. Thomas Johnson)

And so Johnson nicely compares and contrasts the decades old ‘command and control’ management system with a new ‘systems thinking’ way.

Let’s take incentives as an important example:

You report to a manager, who reports to a manager, who…etc. You have ‘negotiated’ some cascaded objectives and you will be rated and then rewarded on your ‘performance’ in meeting them. Sound familiar?

Here are the fundamental problems with this arrangement:

  • Obey and justifyYou will tell your manager what you think he/she wants to hear, and provide tailored evidence that supports this, whilst suppressing that which does not;

  • If you are ‘brave’ and tell your manager something that they might not like, you will do so very very carefully, like ‘walking on eggshells’…and, in so doing, likely de-power (i.e. remove the necessary clout from) the message;

  • You realise that it’s virtually suicidal to ‘go above them’ and tell your manager’s manager the ‘brave’ thing that they should hear…because you fear (with good reason) that this will most likely ‘come back to bite you’ at your judgement time (when the carrots are being handed out);

  • You are locked into a hierarchy that is reliant on a game of ‘Chinese whispers’ up the chain of command, with each whisperer finessing (or blocking) the message to assist in the rating of their own individual performance;

  • Each layer of management is shielded (by their own mechanism) from hearing the raw truth and, as such, they engineer that they ‘hear what they like, and like what they hear’.

…and therefore this system, whilst fully functioning, is perpetually impotent! It has disabled itself from finding out what it really needs to know.

“Hierarchies don’t like bad news…. bad news does not travel easily up organisations” (John Seddon)

If you’ve been in such a system and HAVE broken one of the rules above through your passion to make a real difference for the good of the organisation you work for (or perhaps worked!), then you’ve probably got some scars to show for it.

If you’ve always played it safe, then this is probably because you’ve seen what happens to the others!

The ‘Bottom line’ for ‘Top Management’:

If you want to transform your organisation, change ‘engine technology’! Tinkering with your existing one is simply not going to work.

  • Managers should not be rating the performance of individuals. Rather, they should understand what the system is preventing the individual from achieving…and then work with them to change that system to release their untapped potential;

  • Managers should not be incentivising individuals to comply. Rather, they should be sharing the success of the organisation with them. (These are very different things!)

Neither of these fundamental changes is in the gift of ‘middle management’ – they belong to those that determine the management system.

… and so, if (and this is a big ‘if’) ‘top management’ want to know the raw truth (‘warts and all’) they must constantly remove, and guard against, system conditions (e.g. incentives, performance ratings) that would prevent the truth from easily and quickly becoming lucid and transparent.

Afterthought, to counter a likely retort from ‘Top management’:

I have often (professionally) provided well intended feedback to ‘management’ as to what’s actually ‘happening out there’, particularly when I believe that they may not be aware of this. Many an Executive has derived great worth from this feedback (and thanked me accordingly).

This isn’t saying that I’m always right, or that I know everything. Obviously I’m not, and I don’t. But I do know what I see and hear.

However, there has been a subset of deeply command-and-control executives that confidently respond with “no Steve, you are wrong – that’s not the case at all. My people tell me exactly what’s happening…and there’s no problem here”.

I find this interesting (sometimes amusing, but mostly disappointing).

A manager can never be sure that people are being totally open and honest with them…but they can constantly look for, and understand, what mechanisms and practices would put this desired feedback in doubt or at risk….and then tirelessly work to remove these system conditions, for the good of all.

Footnote: I wrote this post before I wrote ‘Your Money or your Life!’…which considers the question as to whether ‘Top management’ in large corporates CAN change.

A journey through five words

words-quoteIf you are a systems thinking ‘Deming disciple’ working in Command-and-Control land then your constant expressing of (what many of your ‘leaders’ think of as) unconventional thinking may get you a bad name!

…and those choosing to see you in this negative light may use all sorts of words aimed ‘at’ you.

Perhaps the first word used is that you are ‘cynical’.

Owch!

I had a rather wonderful comedy discussion with a fellow, ahem, ‘cynic’ on this and we found ourselves going on a journey through five words.

So, for all you fellow people ‘getting a bad name for yourselves’1 out there…here’s the journey, featuring useful definitions from the wonderful Oxford English Dictionary (OED).

Start here: The ‘cynical’ label

cynicOkay, you cynic….but are you?

1. “Cynical:  believing that people are motivated purely by self-interest; distrustful of human sincerity or integrity.

This definition easily shows that its usage ‘aimed at’ us is so wide of the mark that it’s easily debunked.

THE point of nearly everything that people like ‘us’ put forward  is that it ISN’T about heroes or bad people, it’s about the bad system that people are forced to operate within. In fact, in quite the opposite direction, our thinking is often accused of being too sympathetic of people. But we’re okay with that (and so was McGregor).

Further, the use of the cynical label is rather hypocritical when used by Command-and-Controllers2.

If we successfully get the “we aren’t actually cynics” point across then a revision is thrown at us:

“Okay, ‘cynic’ is perhaps not fair…but you are ‘sceptical’!”

scepticErm, I’ll have to think about that one…

2. “Sceptical: Not easily convinced; having doubts or reservations.

Yes, I can live with being sceptical (as should every scientist)…but it’s not complete.

Most organisations should actually see scepticism (as properly defined) as a highly desirable quality, and not load the word with the usual negative connotations. We should be experimenting, not blithely implementing something we are copying from elsewhere. And those experiments should be robust, with new learning arising (whether as predicted or not).

In contrast, bucket loads of money are wasted by ‘believers’ rushing around shoving in the next fad or fashion, as directed by the current ‘in vogue’ management gurus. A bit more (healthy) scepticism could do wonders for meaningful progress!

Why isn’t the ‘sceptical’ label complete? Well, being sceptical might suggest being deliberately awkward – perhaps sitting around with a teacher’s ‘red pen’ to tear things apart – and thereby requiring everyone around ‘us’ to do all the creative thinking.

Just being sceptical doesn’t require much work…and this narrow label isn’t acceptable as a descriptor of my reality – I do a hell of a lot of thinking! (and if you are a reader of this blog then I expect you do too).

“Righto – I ‘get’ your scepticism. How about ‘critical’? Surely you’d agree with that!”

criticLet me critique that label for a moment…

3. “Critical: Expressing or involving an analysis of the merits and faults of a work.”

Yep, getting much warmer!

People like ‘us’ are very critical. We (aim to) look:

  • for data, for evidence…to work with facts rather than opinions;
  • from multiple angles…to identify a range of world views, and (importantly) why these are held;
  • at the wider picture…to see the bigger system that the problematic situation sits within
  • at the dynamics of the situation…to see what has happened (including the variation within), and may happen over time.
  • …and on and on.

To which a Command-and-Control manager might respond:

“Blimey! Why would you work so hard…it must send you crazy! Why can’t you just accept what you are being told and run with it – you’d find it soooo much easier.”

And this nicely turns to…

The actual word that could best label us:

 passionate4. “Passionate: Having, showing, or caused by strong feelings or beliefs”

Yep, we are seriously passionate about making our organisation:

  • A great place for everyone to work; and
  • A fantastic experience for our customers;

…which will create and sustain a highly successful organisation.

What’s not to like!

Just as a sense check, the opposite (antonym) of passionate is:

Apathetic: showing or feeling no interest, enthusiasm, or concern.”

I’m not sure that apathy is going to work out well for any organisation….I suppose that passion will trounce it every time.

But you said a journey of five words…and that’s only four!

delusionalOh yes, once my colleague and I thought we had finished our ‘labelling’ journey, we realised that nothing had actually changed. And so we turn to:

5. “Delusional: Holding idiosyncratic beliefs or impressions that are contradicted by reality”

If our passion fails to change ANYTHING but we continue on in the same way, then we can probably be labelled as delusional. 😦

So, if we want to avoid this label being accurately applied to us, we need to be clear as to:

five-words

I know that I am passionate about what I do…but I’d like to avoid being delusional.

Footnotes:

1. Getting a ‘bad name’: I have been provided with some ‘quiet career advice’ on this in the past (i.e. “stop pushing your crazy ideas – it’s rocking the boat!”)…and, oh, it made me laugh 🙂

2. Cynical: We can say that any management system using carrots and sticks ‘on’ their people (i.e. by incentivising their employees to behave in a certain way, to comply with their wishes) fits the cynical word rather too well:

“Behind incentive programs lies management’s patronising and cynical set of assumptions about workers….Managers imply that their workers are withholding a certain amount of effort, waiting for it to be bribed out of them.” (Scholtes)

Oh…so that’s why ‘Command and Control’ doesn’t work very well!

social systemWarning (or advert for some): Sometimes I write long(er) ‘foundational’ type posts – this is one of them 🙂

Russ Ackoff researched and wrote a great deal about systems.

It is within his writings1 that I find an excellent explanation about why many organisations adopted the command and control management model, why there is a major problem with this and, most importantly, why there is a better way.

First, A recap:

Before looking at types of systems, I should allow Ackoff to remind us what is meant by ‘a system’ and why this matters:


“A system is a network of inter-dependant components that work together to try to accomplish the aim of the system…

The two key pieces here are that:

  • there is an aim; and
  • it is made up of parts that need to work together (either directly or indirectly) to achieve that aim

If you have parts but no aim then you don’t have a system…you simply have a ‘collection’.

If you have a part that (truly) isn’t required to achieve the aim then it isn’t actually part of the system…which is why your ‘appendix’ body part got its name.


…If each part of a system, considered separately, is made to operate as efficiently as possible, the system as a whole will not operate as effectively as possible…

The heart and lungs are parts of the body but if they function according to what’s best ‘for themselves’ then they won’t function as required for the overall good of the whole. It’s no good if the brain is telling the heart and lungs to ‘work flat out’ to run like hell from a chasing pack of lions and these organs both respond with a “no thanks, this doesn’t suit  us!” The same is true for parts of (e.g. functions within) organisations.


…The performance of a system depends more on how its components interact than on how they act independently of each other…

You can buy a ‘light as a feather’ carbon frame, an awesome set of aero wheels and a precision engineered 11-speed group set but you can’t ride them as a bike if they don’t fit together. Further, someone with a basic ‘sit up and beg’ bike frame with cheap wheels and components that do fit will easily beat you in a bike race.


…When a system is taken apart it loses its essential properties.”

If you take apart an alarm clock, you will have all of the parts necessary for the system but the disassembled collection of parts isn’t sufficient to tell you the time.

The above has huge implications.

So, on to Ackoff’s system types:

Ackoff defined a number of types of systems2 and the problems that occur when an organisation adopts a management model that does not match the correct system type.

Here goes….

Type 1: Deterministic (e.g. mechanisms)

alarm clockA deterministic system is one which has no purpose and neither do its component parts. This might seem rather strange…”Erm, I thought you said a system had to have an aim?!” – the point is that a deterministic system normally serves a purpose of an entity external to it, such as its creator. Its function, and that of its parts, is simply to provide that service when required.

Mechanisms are the most obvious examples of deterministic systems: An alarm clock is such a system. Its purpose (to tell the time) has been provided to it by its creator (the clock maker)….and that is what it is for, nothing more and nothing less. It can’t decide to do something else!

Even a computer, whilst incredibly more complicated than an alarm clock, is such a system – it is reliant on the inputs and programs provided to it by its external sources.

Type 2: Animated (e.g. most organisms)

monkeyAn animated system is one which does have a purpose of its own but its parts don’t.

Animals (and therefore humans) are the most obvious example. They have a purpose of their own – where this might be argued as (at a minimum) survival, and (more optimistically) to enjoy doing so, in the manner of their own choosing.

The animal is made up of parts (e.g. organs) and whilst these parts have a necessary function for the good of the whole, they do not have a purpose of their own.

In this way we can compare a computer to a person and see that they are fundamentally different. The computer’s purpose is provided to it whilst the person provides their own.

Type 3: Social (e.g. organisations, societies)

flagsA social system is one which has a purpose of its own and so do its parts (the people within).

Indeed each social system is usually part of a larger social system (e.g. a family is part of a community, which is part of a nation, which is part of ….)

And even more complex, a person belongs to multiple social systems – which have different, sometimes conflicting, purposes3.

So, bringing these three types together, we have:

System Type4: The whole is: The Parts are:
Deterministic (e.g. a mechanism) Not purposeful Not purposeful
Animated (e.g. a human) Purposeful Not purposeful
Social (e.g. an organisation) Purposeful Purposeful

These three system types form a sort of hierarchy: The deterministic alarm clock is given purpose by the animated (clock making) person who also lives within their social group. The linkages don’t go the other way….or at least they shouldn’t…which leads on to…

Okay, interesting stuff but what’s the point?

Well, now that we have an understanding of three different types of systems, we can see the consequences of the misunderstanding of an organisation as a system:

A ‘deterministic’ model applied to an organisation:

Adam Smith (often referred to as the father of economics and of capitalism) wrote a famous book called ‘The wealth of nations’ (1776). In it, he used the example of a pin factory to explain the concept of ‘the division of labour’. He explained that one person performing all the steps necessary to making a pin could perhaps make only 20 pins a day but if the pin-making process were broken up into a series of limited operations, with separate people performing them in a joined-up line, productivity could rise to thousands of pins per day per worker.

Now that sounds fantastic doesn’t it! But for who?

Smith’s thinking was taken on board by industrialists who went on to employ vast factories of ‘unskilled labour’ in the new concept of ‘manufacturing’ (and who likely still do in the sweat shops of 3rd world countries).

Standing back, we can see that this is using people as replaceable machine parts i.e. we have a defined mechanism (the manufacturing process) which is given its purpose externally by its creator (e.g. make pins)…and wow, this mechanism sure can make pins!

Henry Ford’s phenomenal success worked in the same way. He designed a mechanism to make Model T Fords (his mass production factory) and installed workers as the mechanism’s parts. He (and other ‘owners’ at this time) could use workers in this mechanistic way because:

  • unskilled workers, whilst poorly educated, were adequate for the simple tasks required of them;
  • such workers were willing to tolerate being treated as a machine part since there was high unemployment and virtually no social security safety net…giving them little option (i.e. work as required or starve);
  • there was a large pool of available labour – the human parts of the machine were easily replaceable; and
  • such business owners were subject to very little societal controls (such as governmental interventions and constraints) limiting their treatment of their worker ‘parts’4.

It’s worth noting that, even though worker conditions were massively in his favour, Ford’s ‘mechanism’ had an astounding 370% turnover of workers in 1913, with new hires staying an average of only 3 months. Many workers simply ‘walked off the job’ without notifying anyone…which is what happens if you ask humans to perform monotonous (demoralising) work without having to use their brains.

An ‘animated’ model applied to an organisation

So times moved on. We had two world wars that caused/ enabled major societal changes – a major shakeup of the class system, the birth and rise of the Labour movement and worker unions, massive improvements in education, social security and welfare, and great advances in technology.

The other significant change was the raising of capital (necessary for post war growth and development) from the public and the consequent birth/ rise of publically owned corporations. This separated the ownership and management of these new organisations.

A big difference from before was that:

  • the workers were now far more educated and empowered; and
  • the required work had become far more skilled (utilising new technologies).

Managers were no longer able to treat workers as merely replaceable cogs in a machine – it took time to train them, and they now had worker rights and choice.

Now, rather than seeing an organisation as a deterministic system with the all-powerful owner dictating its purpose (as the likes of Ford had done), they operated as an animated system would6: with a ‘brain’ (senior management) and a ‘body’ (the various operating functions performing the work).

Such a model works by senior management providing the instructions (the what: commands) and procedures (the how: controls) and then the operating units carrying them out accordingly.

“Command and control represents the division of labour between decision-making and doing the work.” (Seddon)

We all know that the ‘operator’ parts within the organisations ‘body’ are actually human beings but the ‘command and control’ management instruments don’t really recognise this fact:

  • the organisational ‘brain’ (often annually) decides the strategy and breaks this down into a set of objectives for the parts of the ‘body’ and locks these into a cascaded grand plan;
  • the organisational ‘brain’ provides incentives for the ‘body’ to act as it requires: thus assuming that it is simply a matter of extrinsically motivating each part to comply as required;
  • the organisational ‘brain’ considers the performance of each part of the ‘body’, scores it and delivers this judgement back: thus assuming that each part can and will accept such feedback for the good of the whole;
  • the organisational ‘brain’ performs (frequent) reorganisations on the ‘body’ parts, as if shifting pawns around a game board. The brain does this by dictating such redesigns to the body rather than asking the body if (and how) it could better rearrange itself;
  • The organisational ‘brain’ thinks that the answer to an increasingly complex environment is simply to increase the quantity and regularity of communication with the ‘body’ parts. This fails to realise that communication is not the underlying problem.

But the reality for every organisation is that they have purposeful parts – you and I – whether they like it or not…and so to treat these parts as merely having a function for the whole is to inevitably generate conflict.

A social model applied to an organisation

…and so we reach the point at which we conclude the obvious that:

  • the organisation (hopefully) has a purpose;

AND

  • the humans working within it have separate purposes.

…and therefore any management model that doesn’t understand and work within such a social system will be very limiting – causing loss of immeasurable value to the organisation AND to the people within.

Now you might say “okay, interesting stuff, but treating an organisation as an animated system and using command and control methods has worked fine so far…why do we need to change?”

The rate of change in our world has been massively accelerating. It used to be that change was seen as generational and this made it relatively easy for people to adapt but this no longer holds true.

Organisations are operating in more complex and less predictable environments with the result that:

“Over the last 50 years, the average lifespan of S&P 500 companies has shrunk from around 60 years to closer to 18 years.” (Source: The art of corporate endurance )

Here’s a classic Deming quote: “It is not necessary to change. Survival is not mandatory.”

But if survival is desired, then the best chance that an organisation has is to operate a management model that actually fits with the correct type of system! In so doing, it can get the best out of everyone within.

What might this model look like? Studying ‘Deming’s 14 points for Management’ would be a great start. A post to follow next.

Who’s been successfully operating a social model for decades? Two brilliant examples are Toyota and Handelsbanken.


Footnotes:

1. Credit: The core of this post comes from learnings derived from a classic Ackoff essay entitled ‘Reflections on systems and their models’ which can be found in the book ‘Ackoff’s Best: His classic writings on management’.

2. I’m aware that other system thinkers have created other, more sophisticated, classification schemes (e.g. Boulding, Beer). Ackoff’s system types nicely serve the purpose of this post.

3. This fact is probably relevant to the need for, and creation of ‘soft systems thinking’…which is where Peter Checkland’s work fits in (A ‘giant bio’ currently in draft)

4. For those ‘system’ geeks out there: Ackoff explained a 4th system type, that of an ecological system – where the parts are purposeful but the whole is not. Ecological systems contain interacting mechanistic, organismic and social systems, but do not have a purpose of their own. However, their function(s) serve the purpose of the systems that are their parts.

Example: the purposeful use of fluorocarbons as propellants by humans (a purposeful part of the ecological system) affects the ozone layer in a way that is determined, and not a matter of choice for our planet (the whole)…the planet cannot decide that it is harmful to it and decide to ‘do something about it’– the outcome (even though we may not understand it) is determined.

5. Henry Ford realised the problem and, in an attempt to compensate for their conditions, paid his workers well as compared to what they could earn elsewhere.

6. Stafford Beer wrote a famous book called ‘The brain of the firm’ (1972) that explored in detail the analogy of an organisation working as the human body does.

Don’t be an Ostrich

OstrichHere’s something that I’ve noticed over the years: ‘Command and control’ managers really don’t like being referred to as….well…’command and control’ managers.

In fact, they don’t like this apparently grubby ‘command and control’ phrase being used to describe anything around them – it seems to irritate them….a lot!

So it got me pondering about why this might be:

  • Perhaps they see it as disrespectful, as in “how dare you, don’t you know who I am?!”
  • Perhaps they are somewhat embarrassed, as in “shhh – keep your voice down! I’m not very comfortable with you bandying that term about.”
  • Probably there’s an element of both.

If you are that ‘irritated manager’

…and this is the point of this very short post, putting your fingers in your ears and humming “lalalala” doesn’t make it go away.

Fingers in ears

If someone uses the dreaded ‘command and control’ phrase ‘at’ or about you (or your management team) then, rather than being an ostrich, how about asking for, and respectfully drilling into, their perspective as to why they feel this way?

You might learn quite a bit (but that would depend upon you).

…and even if you aren’t able to bring yourself to accept (some of) what they say, remember that perception is reality.

And before you are tempted by the “well that may be your opinion Bob, but you are the only one saying it!” riposte…stand back and have a think about that.

One of THE attributes of a ‘command and control’ environment is fear…and so there should be no surprise that there is only one foolish/ brave/ wise/ disengaged/ about to retire/ got another job* ‘Bob’ prepared to tell you. (* select as appropriate)

Perhaps you would have accepted Bob’s critique, say, last year but you have been doing your best to progress towards a better way. However, don’t be offended if the ‘command and control’ label doesn’t melt away overnight – it won’t because it can’t.

Turn Bob’s challenge on its head as a good thing – every time someone uses the ‘command and control’ label you have an opportunity to better, and more deeply, understand your current condition and its root cause and then further improve.

…though, if it’s not getting better after a while, you are probably doing it wrong!

…and finally

If you are the employee using the ‘command and control’ label to describe what you see and feel, then please carry on with using this label when it is appropriate to do so…but carefully look out for any ostrich discomfort from management (whether verbal or body language) and, rather than withdrawing or defusing your comment, how about asking them “so why the discomfort?”

–  You may create an opportunity to inform and educate 🙂

Note: My next post will use an Ackoff essay to explain why ‘command and control’ is the wrong model to apply.

The Great Budget God in the Sky!

Great truthsSo, I’ve always intensely disliked the ‘budget’ thing. Not the basic idea of thinking ahead, about what might happen, and attempting to do sensible things to cope with this – don’t worry, I’m not about to advocate ‘sticking your head in the sand’ – but the management belief that we can and should carry out a grand planning exercise (usually annually) in which we attempt to predict ‘what will be’ in great detail, and then watch for, and attempt to explain away, any and all deviations from it.

Utter madness…and I believe that, underneath it all, many (most?) of you will likely agree with me – yet we carry on worshipping at the altar of the ‘Great Budget God in the sky’.

So why do I dislike it so? I’ll start with the following quote:

“If you cannot know what your customers will want or your competitors will offer next year – or even who your customers or competitors will be – you cannot develop an effective plan for achieving targeted levels of sales and profits.” (Stephan Haeckel)

Creating a detailed budget for the next year and then holding people to it is nonsense. Now, you might respond with “yeah, it’s not perfect but it is useful.”  I would respond that it does more harm than good, and that there is a better way.

I’ll need to explain my response in 2 parts. This post (part 1) deals with the ‘doing more harm than good’ part. Watch out for ‘there is a better way’ in part 2.

The (painful) grand planning exercise:

Picture the Chief Financial Officer (CFO) at the end of the multi-month annual budget setting exercise sat in his/her executive suite with that warm, fuzzy feeling:  A glorious projected profit figure as the bottom line in a sexy spreadsheet before them, carved out of much toil and pain (and wasted activity). Quick, load it into the accounting system as the ‘baseline’ before it gets away!

So how did that glorious budget come about?

Each manager was likely sent a (really annoying) financial template to fill in that was devoid of operational reality…

…which, after many iterations and re-runs (“because the #@$! numbers won’t save properly!”), was then sent back to Finance and ‘rolled up’ into a single view of ‘exactly what is supposed to happen next year’…

…to which the CFO responded “oh no, THAT won’t do, fiddle with it some more until it says what I want to see”…

and his/her accounting subordinates oblige, ‘rolling down’ their well intentioned meddling back to the unsuspecting ‘budget holders’ to catch and deal with…

…which only becomes transparent to these managers a few months later (i.e. once the year is well under way in a “hey, where did these numbers come from? They’re not what I sent in!” kind a way) and, despite their protests, they can do nothing about because “sorry about that, but it’s ‘locked and loaded’ now”.

And so, the year is off and running. Finance send out the following memo (often weeks after the period close):

“Here are your variances (actual from budget) for Period X.  I need specific reasons (by which I really mean ‘believable stories’) for each deviation from budget and an action plan as to how you are going to get back on track…please provide by return and good luck!”

Each manager then spends hours deciphering the numbers in a desperate attempt to reconcile and ‘explain away’ the differences. And, unsurprisingly, this task becomes more bizarre the further the year progresses as the budget predictions become more divergent from reality.

So, what is a budget?

Here’s a narrow definition, relating to the output of a budgeting process: “An estimate of income and expenditure for a set period of time” (Oxford Dictionary) i.e. a financial plan, usually annual.

However, a budget doesn’t come out of thin air and isn’t for filing away once drawn up. We must see and consider the much broader definition that encompasses what a budget is for, and about i.e. The performance management process that leads to, and executes, a plan.” (Hope & Fraser, ‘Beyond Budgeting’)

This process involves “agreeing upon and co-coordinating targets, rewards, action plans, and resources for the year ahead, and then measuring and controlling performance against that agreement.” (Hope & Fraser)

This has, with good reason, been labelled as the “Fixed Performance Contract” because, once negotiated, it forms a contract between each level of management as to what is required for the year ahead. But such a contract is cumbersome, inflexible and (most obvious to all) gamed.

Command-and-control by another name:

Very early on in my blog writings, I linked the ‘cascade component level objectives – set targets – dangle incentives – judge performance – provide rewards’ as the core components of the command-and-control management system (I often verbally refer to them as the management instruments of torture)…but the budget word hasn’t come up to date.

So it was a nice surprise for me when I read Jeremy Hope and Robin Fraser’s highly regarded book called ‘Beyond Budgeting’ (2003) and found their ‘Fixed Performance Contract’ label. It encompasses much the same meaning/ thinking.

I have always disliked the budget game and seen it as related, but I hadn’t formulated it as being one and the same.

The games being played:

You might think that the fixed performance contract is necessary, and mainly benign…

…but walk your way through the following ‘fixed performance contract’ games that are understandably played by budget holders and their teams (as identified in, and with quotes from, ‘Beyond Budgeting’):

1. “Always negotiate the lowest targets and the highest rewards.” Each manager will attempt to ‘agree’ a target that is inwardly comfortable to them yet appears outwardly difficult to their supervisor.

2. “Always make the bonus, whatever it takes.” Any actions you can take are fair game if they help you reach your maximum bonus – even though they might stuff up another team elsewhere in the organisation (e.g. sell services that you know will likely lead to problems later down the line)

3. “Never put customer care above sales targets.” Everyone wants to satisfy customers… but that’s not how they are rewarded. Let’s ‘persuade’ customers to buy what we want them to.

4. “Never share knowledge or resources with other teams – they are the enemy!” The main competition is not the external market, but every other team who are all trying to obtain a higher share of the central resource pool than you!

5. “Always ask for more resources than you need, expecting to be cut back to what you actually need.” This is simply anticipating the negotiation process that you know will occur….and this can only get worse as time goes by through bluff and double-bluff.

6. “Always spend what’s in the budget.” If you don’t use it, you will lose it because higher management will reason that “if you didn’t need it this month/year then you obviously won’t need it the next!”  Not spending your budget therefore becomes the act of a ‘nutter’ (being either mad or eccentric…or both!)

7. “Always have the ability to explain adverse variances.” Financial variances tell management nothing about real causes. All you need is a ‘believable story’ to get them off your trail…and you should learn to blame plausible causes beyond your control…of which there will always be some.

8. “Never provide accurate forecasts” Don’t share bad news (you will be berated for poor performance) whilst there’s still time in which your fortunes might miraculously reverse. Don’t share good news (you will be expected to sustain higher results going forward) whilst there’s still time for unwanted surprises that might wipe the slate clean. In short, tell your superior what he or she wants to hear.

9. “Always make the numbers, never beat them.” Manage the results: if you are doing better than budget, find some way of holding it back to feed in later in the year when needed.

10. “Never take risks.” If it’s not in the budget, why would you take the risk! No one is expecting it and if it doesn’t work out, your job might be on the line!

Now you might look at the set of games above and cry out that this is a grossly exaggerated picture…and, yes, if every person was playing every game all of the time, we surely wouldn’t have a business! At least not for long…and it would be a hellish place to work in the meantime.

But it’s worth considering that:

  • I have seen every one of these budgeting games being played at some point in my working life so far, many of them openly, repeatedly and regularly …how about you?
  • the vast majority of people are decent human beings and don’t want to play such games…and yet the fixed performance contract induces them (to some degree) to do so – this mental strain is a very unhealthy place for a human to find themselves.

So where do we go from here?

So I’ve written enough on the problem.

‘Part 2’ (coming soon to a blog stall near you) will set out a different philosophy and, by revisiting the budget games played, will show what this ‘new way’ enables.

…over and out for now.

The Principle of Mission

NapoleanSo I’ve written a few posts to date about ‘purpose’.

This post explains a related term, ‘Principle of Mission’, by taking us back through military history (sadly the source of much of our breakthrough learnings).

The phrase ‘Command and Control’ as applied to the common form of organisational management is associated with the military and how they traditionally functioned.

I expect most of you have seen some classic war films/documentaries of a bygone age and you can paint the picture of the following scene in your mind’s eye:

  • A large area of land, perhaps outside a castle/ fortified town or out on the plains;
  • Various units of men drawn up in formations on either side
    • perhaps divided into infantry, cavalry, archers and artillery (where the technology available would depend on the age – from catapults through to cannons);
  • …and a small huddle of officers up on a hill (and a safe distance from ‘the action’), surrounding their General seated on a white stallion.

The General has an objective and a detailed plan of how he is going to achieve it!

“Roll cameras, action”, and we see the General giving orders (Command), watching the melee (perhaps via the help of a telescope), receiving reports ‘from the front’ (Control) and adding to and/or revising these orders.

battle scene

And so to 14th October 1806 and the twin Battle of Jena-Auerstadt , at which Napoleon’s far smaller French force faced the might of the Prussian Army. However, Napoleon won a decisive victory and he did so because he did far less of the commanding-and-controlling thingy and, instead, used a different way of thinking.

In the aftermath, the Prussian military performed what we might call a retrospective to work out how they were so convincingly beaten and what they should learn from this.

Their post-mortem noted that Napoleon’s system provided his officers with the authority to make decisions as the situation on the ground changed and, crucially, without needing to wait for approval through a classical ‘chain of command’. Thus, they could adapt rapidly to changing circumstances.

If a French regiment got stuck in the proverbial mud, there was no wallowing around waiting to see what Napoleon thought they should do about it! Conversely, the Prussians in that same quagmire would be cannon fodder.

In the decades subsequent to the Battle, General Scharnhorst and then Helmut von Moltke built a new Prussian military culture, aimed at leading under conditions of uncertainty. Von Moltke wrote1.:

  • “in war, circumstances change very rapidly, and it is rare indeed for directions which cover a long period of time in a lot of detail to be fully carried out”;
  • “[I recommend] not commanding more than is strictly necessary, not planning beyond the circumstances you can foresee”;
  • “[instead] the higher the level of command, the shorter and more general the orders should be. The next level down should add whatever further specification it feels to be necessary…this ensures that everyone retains freedom of movement and decision within the bounds of their authority.”

And perhaps to the key point: Military orders must always clearly explain their intent i.e. the purpose of the order. This means that anyone carrying them out is focused on the intent and not blinded by any prescribed method.This new military way of thinking has been adopted widely though, perhaps surprisingly, the old command-and-control logic has lingered.

Hence why we get the best selling book ‘Turn the Ship Around!’(2012)2. in which Captain L. David Marquet eloquently writes about how he turned the fortunes of a U.S. Navy Nuclear submarine around by turning followers (his officers and staff) into leaders. A major theme in his story is about enabling his staff to think in terms of intent instead of merely waiting for, and following orders.

“What happens in a top-down culture when the leader is wrong? Everyone goes over the cliff.” [Marquet]

Bringing this together, The Principle of Mission is for leaders to describe the intent of the organisation’s mission, clearly communicate why it is being undertaken and then let the people get on with working out how to achieve it …and this is instead of, not as well as, making highly detailed plans and then controlling their execution.

And so to organisations:

We aren’t ‘in the army now’ but we all work with organisations that can learn from the above. We should be clear on each of our value-streams and their (customer-driven) purpose.

Such purposes set out clear intent to the system and its people tasked with delivering it.

…and a reminder that profit is not the purpose (or at least it shouldn’t be).

The role of the leader:

John Seddon wrote a fascinating book in respect of the UK public sector called ‘The Whitehall effect’3. In his chapter ‘Getting a focus on purpose’ he writes that:

Politicians* should get out of management. But they should have a lot to say about purpose….

[this] means a shift away from the central dictation of operating specifications such as targets, standards and activity. Instead, service leaders must be free to make responsible choices about the measures that will best enable them to achieve the purpose…Freed from the obligation to deploy the paraphernalia of [dictated methods], it will be up to the service leaders to choose how they improve their services against purpose, placing value on ‘better practise’ which is dynamic (anything can be improved) rather than ‘best practise’ [Ref. Benchmarking] which is static (as well as misleading). They will be guided by the rudder of efficacy, not the rudder of compliance – and they will be judged by the same token.”

* The Politicians in this quote are the leaders of what has been termed ‘UK Plc’. I am asking leaders of organisations to substitute themselves for the politicians in this quote.

Thus, the leader-service manager feedback question changes drastically:

  • From: “Have you done what I told you to do?”
  • To: “How do you know how well you are doing in achieving the (customer driven) purpose of the service?”

This is a radical shift and opens the way for true adult – adult coaching conversations.

An aside: Steering committees

I have seen a fair few high level steering committees over the years. Most fall into the command-and-control trap. Picture the scene:

  • A Project Manager reports back to the steering committee;
  • The committee discuss what is before them and, using their opinions, dictate how the Project should proceed;
  • The Project Manager is uncomfortable with this outcome but chooses to carefully manage his stakeholders (i.e. doff his cap to them)…so he takes the committees ‘decisions’ back to the team;
  • …and the team quickly and clearly explain why following such a path would be quite mad;
  • …and so the Project Manager has to commence an impossible juggling act.

In short: Committees should not dictate the ‘how’, but they should be absolutely clear on the ‘what’* and ‘why’ (the principle of mission).

* this is referring to a target condition, not a target date.

A HUGE clarification:

It doesn’t matter how clearly Napoleon, or any other leader, articulated intent if their people don’t want to follow.

Setting out a clear and meaningful purpose is but one (key) part of the overall system. The rest comes down to management’s beliefs and behaviours, and the environment that this creates.

…and finally, if you like the military discussion above, here’s a link to a short and highly related post called Why don’t you just written by ‘The Lean Thinker’.

Notes

  1. Source of quotes: von Moltke’s ‘Guidance for Large Unit Commanders’ as quoted by Stephen Bungay in his book ‘The Art of Action’.
  2. Marquet’s book is an excellent, easy read.
  3. For those of you who don’t know too much about the UK, Whitehall is a road in central London on which most of the government departments and ministries reside. When someone talks about ‘Whitehall’ they are usually referring to the centre of the British government and its civil servants.

The catalyst for writing this post was reading about the term ‘Principle of Mission’ within the book ‘Lean Enterprise’ by Humble, Molesky and O’Reilly.