Organizational Development – More (lost in translation)
The papers dealt with in this entry are as follows:
* Gary Hamel &, Liisa Valikangas, The Quest for Resilience, Harvard Business Review, Vol. 81/9, p52, 12p, 2c (2003)
* Nitin Nohria, William Joyce & Bruce Roberson, “What Really Works”, Harvard Business Review, Vol. 81/7 p42 11p (2003)
* Anita L Tucker, Amy C Edmondson, Why Hospitals Don’t Learn from Failures: Organizational and Psychological Dynamics That Inhibit System Change. California Management Review, Vol. 45/2, p55, 18p, 1 diagram (2003)
* Weick, Karl E., Sutcliffe, Kathleen M., Hospitals As Cultures Of Entrapment: A Re-Analysis Of The Bristol Royal Infirmary, California Management Review, Vol. 45/2 p73, 12p (2003)
* Thomas H Davenport & John Glaser, Just-In-Time Delivery Comes To Knowledge Management, Harvard Business Review, Vol. 80/7, p107, 5p, 2c (2002)
* Ayse Saka, Internal change agents’ view of the management of change problem, Journal of Organizational Change Management Vol 16/5 p 480-496 (2003)
* Martin E. Smith, Changing an organisation’s culture: correlates of success and failure, Leadership and Organization Development Journal, Vol 24/5, p 249-261 (2003)
* Dan Lovallo, Daniel Kahneman, Delusions of Success, How Optimism Undermines Executives’ Decisions, Harvard Business Review, Vol. 81/7 p56, 8p, 2c (2003)
* Robert Chapman Wood & Gary Hamel, The World Bank’s Innovation Market, Harvard Business Review, Vol. 80/11, p 104-111 (2002)
* Lynda Gratton & Sumantra Ghoshal, Improving the Quality of Conversations, Organizational Dynamics Volume 31/3, p 209-223 (2002)
* Inger Stensaker, Christine Benedichte Meyer, Joyce Falkenberg & Anne Cathrin Haueng, Excessive Change: Coping Mechanisms and Consequences, Organizational Dynamics Volume 31/3, p. 296-312 (2002)
* Michael A Roberto, Lessons from Everest: The Interaction Of Cognitive Bias, Psychological Safety, And System Complexity, California Management Review, Vol. 45, p 136-158 (2002)
* Michael Useem, The Leadership Lessons Of Mount Everest, Harvard Business Review, Vol. 79/9, p51, 7p, 1c (2001)
* Peter F Drucker, The Discipline of Innovation, Harvard Business Review (originally Nov/Dec 1998 , p 149), Vol. 80/8, p95, 7p, 2c (2002)
* Gary A Williams & Robert B Miller, Change The Way You Persuade, Harvard Business Review, Vol. 80/5, p65, 9p, 6c (2002)
* David A. Garvin, Michael A. Roberto, What You Don’t Know About Making Decisions, Harvard Business Review, Vol. 79/8, p108, 9p, 2 charts (2001)
* Kathleen M Eisenhardt, Jean L, Kahwajy & L.J. Bourgeois III, How Management Teams Can Have A Good Fight, Harvard Business Review Vol. 75/4, p77, 9p, 1 chart (1997)
* Sumantra Ghoshal & Peter Moran, Bad For Practice: A Critique Of The Transaction Cost Theory, Academy of Management Review, Vol. 21/1, p13, 35p (1996)
The world is becoming turbulent faster than organizations are becoming resilient. Of the 20 largest U.S. bankruptcies in the past two decades, ten occurred in the last two years. In their 1994 best-seller, “Built to Last,” Jim Collins and Jerry Porras singled out 18 visionary companies that had consistently outperformed their peers between 1950 and 1990. In less turbulent times, established companies could rely on the flywheel of momentum to sustain their success.
Strategic resilience is about continuously anticipating and adjusting to deep, secular trends that can permanently impair the earning power of a core business. The quest for resilience cannot start with an inventory of best practices. Instead, it must begin with an aspiration–zero trauma. Any organization that hopes to become resilient must address four challenges: the cognitive challenge, the strategic challenge, the political challenge, and the ideological challenge. Strategies decay for four reasons. Over time they get replicated, they lose their distinctiveness and, therefore, their power to produce above-average returns. In most organizations, a manager’s power correlates directly with the resources he or she controls–to lose resources is to lose stature and influence.
Cognitive challenge: focus on changes leading to success, get rid of denial
Strategic challenge: seek options and alternatives, look in places where new ideas emerge, places different from your own, ie young executive group
Political challenge: develop capacity to support a broad range of experiments
Ideological challenge: seek optimization
In this article, Nohria (Richard P. Chapman Professor of Business Administration at Harvard Business School in Boston) and colleagues urge us to “Separate the facts from the fads” and promote this research as “a ground breaking, five-year study, the must-have management practices that truly produce superior results”. Through the manner in which the data was collected and analysed, this study complements and reinforces the large scale study undertaken by James Collins and Jerry Porras reported in “Built to Last”. The multiyear research by Nohria and his colleagues examined more than 200 well-established management practices as they were employed over a ten-year period by 160 companies.
They report, “Most of the management tools and techniques we studied had no direct causal relationship to superior business performance. What does matter, it turns out, is having a strong grasp of the business basics. Without exception, companies that outperformed their industry peers excelled at what we call the four primary management practices – strategy, execution, culture, and structure. And they supplemented their great skill in those areas with a mastery of any two out of four secondary management practices-talent, innovation, leadership, and mergers and partnerships.”
“We learned, for example, that it doesn’t really matter if you implement ERP software or a CRM system; it matters very much, though, that whatever technology you choose to implement you execute it flawlessly. Similarly, it matters little whether you centralize or decentralize your business as long as you pay attention to simplifying the way your organization is structured. We call the winning combination the 4+2 formula for business success.”
OF strategy, Nohria and colleagues say, “Whatever your strategy, whether it is low prices or innovative products, it will work if it is sharply defined, clearly communicated, and well understood by employees, customers, partners, and investors”, in other words “build a strategy around a clear value proposition for the customer”.
The Parthenon, Athens Acropolis (more)
Execution means flawless operation, consistency, meeting customers”™ expectations and putting decision-making authority close to the front-line*. Of culture they say, “Corporate culture advocates sometimes argue that if you can make the work fun, all else will follow. Our results suggest that holding high expectations about performance matters a lot more.” They advocate inspiring all managers and employees to do their best and empowering employees and managers to make independent decisions and to find ways to improve operations- including their own.
As to structure, “Managers spend hours agonizing over how to structure their organizations (by product, geography, customer, and so on). Winners show that what really counts is whether structure reduces bureaucracy and simplifies work.” Their exhortation: “Simplify. Make your organization easy to work in and work with.
Promote cooperation and the exchange of information across the whole company.
Put your best people closest to the action. Establish systems for the seamless sharing of knowledge.”
Is this what senior executives continue to do when they restructure their organization, or do they just move the bases around a bit and lay off unfortunate employees without consideration for their future?
Of “secondary” management practices, they found, “winners hold on to talented employees and develop more” and they advocate “fill mid- and high-level jobs with outstanding internal talent whenever possible” and “create and maintain top-of-the-line training and development programs” (talent); an agile company turns out innovative products and services and anticipates disruptive events in an industry rather than reacting when it may already be too late and relentlessly pursues disruptive technologies to develop innovative new products and services (innovation).
When it comes to leadership they observe that choosing great chief executives can raise performance significantly and they advocate closely linking leadership team”™s pay to its performance. (See the article on governance by Daily and colleagues for a contrary view.) Last, on mergers they say, “enter new businesses that leverage existing customer relationships and complement core strengths”.
Nohria and colleagues conclude, “A company that consistently follows this formula has better than a 90% chance of sustaining superior business performance.”
This is a major piece of research.
*NOTE: When the late HG (Nugget) Coombs and colleagues reported in 1975 on their review of Australian Government administration, they recommended that senior executives sit at the front desk; it was ignored!
* Daniel T. Holt, Dennis R. Self, Alfred E. Thal, Jr, Steven W. Lo, Facilitating organizational change: a test of leadership strategies, Leadership & Organization Development Journal Volume 24/5 pp. 262-272 (2003)
A sample of 339 employees embroiled in a major organizational change completed a survey that was designed to explore how specific change messages (e.g. appropriateness, valence, and management support) and change facilitation strategies (participation and training) relate to the perceptions of the change benefits and quality of information conveyed. Results indicated that appropriateness and extrinsic valence were strong predictors of perceptions of change benefits while supervisor support and extrinsic valence most influenced perceptions of information quality. Further participation and training were related to perceptions of information quality. Contrary to expectations, participation was inversely related to the benefits of the change.
THREE STUDIES OF HOSPITALS WITH BROAD IMPLICATIONS
* Anita L Tucker, Amy C Edmondson, Why Hospitals Don’t Learn from Failures: Organizational And Psychological Dynamics That Inhibit System Change. California Management Review, Vol. 45/2, p55, 18p, 1 diagram (2003)
A detailed study of hospital nursing care processes conducted to investigate conditions under which nurses might respond to failures they encounter in their hospital’s operational processes by actively seeking to prevent future occurrences of similar failures suggested that, in spite of increased emphasis on these issues, hospitals are not learning from the daily problems and errors encountered by their workers. Process failures are not rare but rather are an integral part of working on the front lines of health care delivery. The lessons learned have implications for managers in other service organizations as well.
Hospitals historically have relied on a dedicated and highly skilled professional workforce to compensate for any operational failures that might occur during the patient care delivery process. Great doctors and nurses, not great organization or management, have been seen as the means for ensuring that patients receive quality care. Recently, however, the medical community has responded to increased public awareness of shortcomings in health care delivery by calling for systematic, organizational improvements to increase patient safety. Examples of such initiatives include creating shared databases of medical errors to facilitate widespread learning from mistakes and focusing renewed attention on hospital processes, culture, and reporting systems.(n4)
Two types of process failures–problems and errors are identified:
“¢ an error – execution of a task that is either unnecessary or incorrectly carried out and that could have been avoided with appropriate distribution of pre-existing information, eg a patient who had been unnecessarily prepared for colonoscopy at significant expense to the hospital and discomfort to the patient before the specialist reviewed her case–revealing that the patient was not an appropriate candidate for the procedure–and cancelled it.
Hospital errors have received considerable nationwide attention recently; however, an emphasis on only those errors that lead to severe consequences such as the death of a patient has perhaps obscured the subtler phenomenon of errors that take place within the care delivery process everyday – most errors are caught and corrected before patients are harmed; however, a lack of attention to the process errors that precede more visible, consequential failures may limit opportunities for organizational learning.
“¢ a problem – a disruption in a worker’s ability to execute a prescribed task because either: something the worker needs is unavailable in the time, location, condition, or quantity desired and, hence, the task cannot be executed as planned; or something is present that should not be, interfering with the designated task, eg missing supplies, information, or medications. Unlike errors, work process problems have received little attention in the literature or press. Like errors, problems are a valuable source of information about ways in which the system is not working.
Workers are well aware of the problems they encounter. In contrast, by definition, people are unaware of their own errors while making them
Second-order problem-solving behavior occurs when the worker, in addition to patching the problem so that the immediate task at hand can be completed, also takes action to address underlying causes. Second-order problem solving includes: communicating to the person or department responsible for the problem; bringing it to managers’ attention; sharing ideas about what caused the situation and so on. Second-order problem solving can have positive consequences for workers and the organization. If the worker’s action is successful and the problem does not recur, they will not have to face similar obstacles in the future. As a result, second-order problem solving is a way that real change is achieved.
The first lever for change is management support, the second, people need to be able to talk about them without fear of ridicule or punishment; third, management must respond by following through and facilitating boundary-crossing. “if second-order problem-solving effort does not lead to any positive changes, workers will be discouraged about spending their time on this in the future..”
Our study shows that it is difficult for hospital workers to use problems as opportunities for improvement. The dynamic pattern described in this article is not unique to hospitals, although it may be exaggerated in health care by the task variability, the extreme time pressure faced by workers, and the increasing cost pressures faced by hospitals. By reframing workers’ perceptions of failures from sources of frustration to sources of learning, managers can engage employees in system improvement efforts that would otherwise not occur.
This research has very wide implications, if you think about it!
The authors say, “While culture enables sustained collective action by providing people with a similarity of approach, outlook, and priorities, these same shared values norms, and assumptions can also be a source of danger if they blind the collective to vital issues or factors important to performance that lie outside the bounds of organizational perception. Cultural blind spots can lead an organization down the wrong path, sometimes with dire performance consequences.”
At the Bristol Royal Infirmary (BRI) a sustained period of blindness associated with organizational culture occurred. The BRI pediatric cardiac surgery program had significantly higher mortality rates than other centers in England and failed to follow the overall downward trend in mortality rates seen in the other cardiac surgery programs. The case shows how small actions can enact a social structure that keeps the organization entrapped in cycles of behavior that preclude improvement.
Culture can entrap hospitals into actions from which they cannot disengage and which subsequently lead to repeated cycles of poor performance.
Again, research with broad implications.
Knowledge-sharing programs often fail because they make it harder, not easier, for people to do their jobs. But the novel approach taken by Partners HealthCare offers hope
No matter what the industry, knowledge workers often can’t keep up with the knowledge being generated. Take the story of Dr. Goldszer, for example. He is the associate chief medical officer and head of the Special Services Department at Brigham and Women’s in Boston and a professor at the Harvard Medical School. As a high-end knowledge worker at the top of the medical profession, there is so much knowledge available about Dr. Goldszer’s work that he cannot possibly absorb it all. It is difficult for Goldszer to stay on top of even a fraction of all the new knowledge being generated in his field and still do his job. Knowledge management, which became popular in the mid- to late 1990s, is still a good idea. It just needs a new approach. Davenport and Glaser recommend baking [sic] specialized knowledge into the jobs of highly skilled workers–to make the knowledge so readily accessible that it cannot be avoided. While just-in-time systems revolutionized inventory management, by following much the same philosophy, Davenport and Glaser believe that this method could revolutionize knowledge management; they explore how just-in-time knowledge has been embedded into Dr. Goldszer’s work and other physicians’ work at a few Partners hospitals.
Saka is from the Department of International Economics and Business, University of Groningen, Groningen, The Netherlands.
The vital importance of change management in today’s competitive climate has been widely investigated. While the need for successful change management is intensively proclaimed by “expert” consultants, the response for some time has been regarded as falling short of what is required. The heavy emphasis in the literature on a rational-linear approach to understanding organisational change overlooks the significance of the cultural and political dimensions of organisational life. This article highlights a systemic-multivariate view of change by investigating internal change agents’, that is managers’, accounts of the barriers to change management. It addresses the limitations of change management by attending to the perceptions of managers, that is those actors who generally determine organisational priorities and make crucial resource allocation decisions. The systemic line of thinking adopted by managers undergoing major restructuring efforts in their organisations differs from the espoused values of managers that constitute the rational-linear view of change management.
People tend not to question status quo unless they are forced to by an obligatory change such as financial or political crisis. To encourage change “unfreezing” the organization is needed by disconfirming and creating anxiety and psychological safety and institutionalising new behaviours.
Organizational change efforts that had culture change as an objective were studied in 59 cases. Culture change was a common type of organisational change and usually occurred in combination with other types of change. The success rate for culture change was low. Success was more likely when the sponsors were perceived to be mid-level rather than senior executives. Culture change was most often undertaken because of competition and customer issues.
Successful projects were characterized by addressing the needs of employees, especially rewarding employees for change and innovation; visible and sustained sponsorship; and effective project management. A number of negative factors correlated with failure, but the strongest correlations all had to do with breakdowns in leadership, in communication with employees about the change, and project management failures. The strength of the existing culture was also identified as a significant barrier to culture change. From these observations, we infer the following requirements for managing organisational change:
Managers need guidance. Culture change is difficult. Published estimates for success range from 10 percent to 32 percent. The degree of difficulty derives from managing culture change in support of, or in combination with, other types of organisational change over a period of time that may extend for years and span a number of work groups. There is limited awareness of many of the most significant success factors and barriers to culture change.
The role of the sponsor in managing change is pivotal: they should be versed in developing support for the change among key executives, organising the project’s infrastructure (e.g. appointing a capable and dedicated project team), positioning the culture initiative as part of the business strategy, protecting project commitments from other organisational priorities, and demonstrating continued support for the effort in ways that are visible to stakeholders.
Optimism undermines the decisions of executives. In planning major initiatives, executives often exaggerate the benefits and discount the costs, setting themselves up for failure. A high number of business failures are the consequence of flawed decision making. When forecasting the outcomes of risky projects, executives fall victim to the planning fallacy. Managers make decisions based on delusional optimism rather than on a rational weighting of gains, losses and probabilities. They overestimate benefits and underestimate costs.
Executives and entrepreneurs are susceptible to cognitive biases. Studies that compare the actual outcomes of capital investment projects, mergers and acquisitions and market entries with managers’ original expectations for those ventures show a strong tendency toward overoptimism. In business situations, people’s native optimism is magnified by two other kinds of cognitive bias, anchoring and competitor neglect, as well as political pressures. Anchoring occurs when executives and their subordinates adjust their forecasts based on market research and financial analysis. The outcome of a business initiative is also influenced by the behavior of competitors.
There are interesting and relatively simple ways of correcting for some of these errors of judgement outlined in this paper.
Compare the findings addressed by Lovallo and Kahneman (joint winner of the Nobel Prize in Economics in 2002) with the next two articles. Both show the importance of choice and the unreliability of human decisions and, even more so, subsequent interpretation of the reasons for the outcomes.
The experience of the World Bank’s first Development Marketplace held to capture novel ideas within the Bank for alleviating poverty is described. The forum let people informally present their anti-poverty ideas to potential funding sources. They describe how the new-products team brainstormed to create a market for ideas, how it got senior management’s support, and how it has expanded on the original concept for these innovation marketplaces. The program’s success offers a valuable example of how large organizations can make space for radical, low cost innovations–even when they can’t easily change the minds of those who favor perpetuation over innovation.
With all the criticism of the World Bank this is a very interesting paper, not least for the fact that the President of the Bank was prepared to strongly support the innovative proposals.
This extremely important paper commences with the statement “Conversations lie at the heart of managerial work, yet the vast majority of conversations in companies are dehydrated, ritualised talk that adds little value. We categorise conversations based on two dimensions”“”“analytical rationality and emotional authenticity”“”“and illustrate how companies like BP, Royal Dutch Shell, Ogilvy, One Worldwide and UBS Warburg Ltd. have improved the quality of conversations in their organisations by enhancing one or both of these dimensions. For top-level leaders, the challenge of shaping curious and creative learning organisations lies in creating a social context for good talk: one in which questioning and doubt are institutionalised; space and time are created for rich and deep conversations to occur; big, broad questions are legitimised; and some rules and forums exist to stimulate creative dialogue. ”
The paper explores what it takes to build a context in which exciting conversations can occur, so that people can learn something new about themselves or others, discover new insights, hear and make counter-intuitive arguments, and come to creative and novel solutions to problems. And how companies can improve the quality of conversations in their organisations.
“Continuity through change” is the motto of Bertelsmann AG’s founder. United Parcel Service of America Inc. (UPS) has reinvented itself many times, and continues to do so, with transformations now coming with increasing frequency. “Change or perish” has become a corporate mantra, making strategic change an accepted norm in today’s organizations. In this article we focus on consequences that arise when change becomes excessive. Excessive change occurs when several simultaneous change programs are being carried out within the same department, or when a new change program is introduced before the previous one has been completed. Excessive change has important consequences for the individuals involved in the change program as well as for the organization. Performance consequences were a result of implementation failure and loss of effectiveness. We conclude the paper by focusing on how organizations can avoid excessive change.
TWO LESSONS FROM CLIMBING MOUNT EVEREST
Papers by Roberto and by Useem have very interesting although different lessons about failure and what one can learn from it.
Roberto, making reference to lessons to be learned from tragedies such as the Challenger disaster, the Bay of Pigs fiasco, and the Three Mile Island accident, asserts that important lessons about leadership and decision making from the unfortunate events that took place on Mount Everest several years ago.
On May 10, 1996, 23 people reached the summit along the South Col route in Nepal including Rob Hall and Scott Fischer, two of the world’s most skilled and experienced high-altitude climbers. Unfortunately, Hall, Fischer, and three members of their expeditions died as a storm enveloped the mountain during their descent. Others barely escaped with their lives after many hours wandering in the dark while braving subzero temperatures.
Roberto considers that while there have been many competing explanations for this tragedy, they have focused on the tactical blunders. The conceptual analysis of the information suggests that cognitive biases, team beliefs about interpersonal risk taking, and system complexity interacted to create a fatal disaster.
“Often, when an organization suffers a terrible failure, others attempt to learn from the experience. But by concluding that human error caused others to fail, ambitious and self-confident managers can convince themselves that they will learn from those mistakes and succeed where others did not.
Roberto says, “we cannot think about individual, group, and organizational levels of analysis in isolation. Instead, we need to examine how cognitive, interpersonal, and systemic forces interact to affect organizational processes and performance. System complexity, team structure and beliefs, and cognitive limitations are not alternative explanations for failures, but rather complementary and mutually reinforcing concepts.
“Most leaders understand that there are many ways to arrive at the same outcome. Nevertheless, we have a natural tendency to blame other people for failures, rather than attributing the poor performance to external and contextual factors. We also tend to pit competing theories against one another in many cases, and try to argue that one explanation outperforms the others. The Everest case suggests that both of these approaches may lead to erroneous conclusions and reduce our capability to learn from experience.
The important observations are “cognitive biases may have impaired the climbers’ judgment. These biases include overconfidence, a failure to ignore sunk costs, and a tendency to overestimate the probability of recent events. A second analytical lens focuses on group dynamics. The evidence strongly suggests that the conditions and beliefs required for effective team learning and performance did not exist. Finally, the complex systems perspective suggests that multiple, interconnected breakdowns occurred within the human, technological, and natural systems involved in the Everest ascent. Human error alone did not cause the tragedy, and the usual precautions and safeguards could not have prevented a serious accident. Instead, the complexity of the system made failure inevitable.
“We need to recognize multiple factors that contribute to large-scale organizational failures, and to explore the linkages among the psychological and sociological forces involved at the individual, group, and organizational system level.”
A team of 20 hikers, including MBA graduates and midcareer executives, took a trip to the Himalayas to heighten their awareness on true leadership, part of the Mount Everest program, an annual two-week trek along the lower slopes of Mount Everest, developed by Michael Useem: Useem believes that leadership lessons are far more effective, and students far more receptive, when their senses are heightened to certain risks.
Over the course of the journey, four essential principles emerged with this particular group. They were: (1) Leaders should be led by the group’s needs; (2) inaction can sometimes be the most difficult–but wisest–action; (3) if your words don’t stick, you haven’t spoken; and (4) leading upwards can feel wrong when it’s right. After covering 80 miles and reaching a height of 18,000 feet, the journey appeared to be a success. Each trekker had a deeper, fuller appreciation for what it really takes to be a leader.
Useem concludes, “The Himalayas are one of nature’s most demanding classrooms, but they can teach us four important principles about taking charge of our followers–and our own egos.”
Success is more likely to result from the systematic pursuit of opportunities than from a flash of genius. For managers seeking innovation, engaging in disciplined work is more important than having an entrepreneurial personality.
The major sources of opportunities for innovation within a company or industry, can be found in unexpected occurrences, incongruities of various kinds, process needs, or changes in an industry or market. Outside a company, opportunities arise from demographic changes, changes in perception, or new knowledge. These seven sources overlap, and the potential for innovation may well lie in more than one area at a time.
Innovations based on new knowledge, of course, tend to have the greatest effect on the marketplace. But it often takes decades before the ideas are translated into actual products, processes, or services. The other sources of innovation are easier and simpler to handle, yet they still require managers to look beyond established practices.
Drucker emphasizes that in seeking opportunities, innovators need to look for simple, focused solutions to real problems. The greatest praise an innovation can receive is for people to say, “This is obvious!” Grandiose ideas designed to revolutionize an industry rarely work.
Innovation, like any other endeavor, takes talent, ingenuity, and knowledge. But Drucker cautions that if diligence, persistence, and commitment are lacking, companies are unlikely to succeed at the business of innovation.
What wonderful revelations.
Knowing who the chief decision maker is among the executives you are trying to persuade and then tailoring your argument to that leader’s decision-making style is more effective than using a one-size-fits all approach. Most executives make it to the senior level largely because they are effective decision makers. A two year study of the decision-making styles of more than 1,600 executives across a wide range of industries found that executives typically fall into one of five decision-making categories: charismatics, thinkers, skeptics, followers, and controllers. The five styles span a wide range of behaviors and characteristics. Knowing the general characteristics of the different styles can help managers better tailor their presentations and arguments and deliver their information more effectively.
This is all asserted to be new research! Many years ago I read a book by Genie Laborde called “Influencing with Integrity” (Syntony Publishing, Palo Alto 1984) which talked of the how (or process) rather than the what (content) of communication and emphasised the skills of seeing, hearing and feeling (sensory acuity), the need to vary one’s behaviour to obtain the response one seeks (flexibility), and the importance of mutually establishing agreed goals or outcomes (congruence). Laborde described how rapport could be established through matching breathing and other movement rhythms, speech patterns, body postures, representational systems and observing unconscious but visible responses, combined with attention to effective meeting and negotiation procedures. All of these things assist in influencing; and, according to Laborde, they can also open up opportunities for manipulation. Sounds familiar!
Decision-making is arguably the most important job of the senior executive and one of the easiest to get wrong. Most leaders do not make decisions effectively because they treat decision making as an event, which it is not. There are two broad approaches to decision making: inquiry and advocacy. These two approaches have similarities but produce dramatically different results.
The process characterized by inquiry rather than advocacy tends to produce decisions of higher quality. Leaders seeking to improve their organizations’ decision-making capabilities need to pay careful attention to the ‘three C’s’ of effective decision-making: conflict, consideration, and closure. Superior decision-making is difficult to assess in real time, so the trick is to periodically assess the process, even as it is underway. Keeping people involved in the process is perhaps the most crucial factor in making a decision.
Advocacy is a contest involving persuasion and lobbying in which there are winners and losers as a result of downplay of weaknesses and defence of positions: minority views are discouraged or dismissed. Inquiry on the other hand involves collaborative problem solving, testing and evaluation, balanced arguments, examination of alternatives and constructive criticism: the outcome is collectively owned.
The paper outlines two different ways of structuring debate involving breaking a group into two subgroups, which can lead to people feeling more comfortable engaging in debate. One subgroup develops a proposal including recommendations and assumptions which is then presented to the other subgroup in written and oral form. In one technique (point-counterpoint) the second subgroup then develops one or more alternative plans of action and in the other (Intellectual watchdog) they develop a detailed critique of the assumptions and recommendations. The plans or critique is then presented to the first subgroup. Both groups then work to achieve a common set of recommendations.
The authors present an analysis of the Bay of Pigs fiasco and the Cuban Missile Crisis to elucidate their arguments.
This is not a recent paper but comes from a researcher who has published several important articles on this subject, one which is taken up in several recent articles, notably by Gratton & Ghoshal.
Eisenhardt (Professor of strategy and organization at Stanford University, California, where her consulting and research focus on strategy in fast-paced industries ) and colleagues say, “A challenge for management is to keep constructive conflict over issues from degenerating into dysfunctional interpersonal conflict, and to encourage managers to argue without destroying their ability to work as a team. In their study of top management teams, the authors found that the teams with minimal interpersonal conflict were able to separate substantive issues from those based on personalities. They found that these teams used the same six tactics for managing interpersonal conflict. Team members: 1) Worked with more, rather than less, information and debated on the basis of facts 2) Developed multiple alternatives to enrich the level of debate 3) Shared commonly agreed-upon goals 4) Injected humor into the decision process, 5) Maintained a balanced power structure and 6) Resolved issues without forcing consensus. In fast-paced markets, successful strategic decisions are most likely to be made by teams that promote active and broad conflict over issues without sacrificing speed. The key to doing so is to mitigate interpersonal conflict.” (See footnote)
Transaction Cost Theory might seem to be somewhat esoteric, even arcane, when it comes to the dynamics of organizations. However, the fact that economic theory is often applied to organisations to explain how people, especially managers, behave and the fact that Sumantra Ghoshal, who at the time held the Robert P. Bauman Chair in Strategic Leadership at the London Business School, was a highly respected researcher in management and a collaborator of Christopher Bartlett (Harvard Business School) in international studies of management (“The Individualized Corporation”, HarperBusiness 1999, which has as its “subtitle” great companies are defined by purpose, process and people – a title worthy of Adam Smith perhaps), made this at least worth a look.
Basically, transaction cost theory says that organizations are substitutes for structuring efficient transactions when markets fail. In other words, so long as markets will take care of transactions there is no need for organizations. It follows that the principal purpose of organizations is to manage transactions efficiently.
This paper trenchantly criticises that theory, particularly as it has been developed by Oliver E. Williamson (University of California, Berkeley Haas School of Business). They argue that “prescriptions drawn from this theory are likely to be not only wrong but also dangerous for corporate managers because of the assumptions and logic on which it is grounded”¦ [organizations] possess unique advantages for governing certain kinds of economic activities through a logic that is very different from that of a market. TCE is “bad for practice” because it fails to recognize this difference. We identify some of the sources of the “organizational advantage” and argue for the need to build a very different theory, more attuned to the realities of what Simon (1991) has called our “organizational economy.””
As good an extract as any is, “the advantage of organizations over markets may lie not in overcoming human pathologies through hierarchy, but in leveraging the human ability to take initiative, to cooperate, and to learn; it also may rely on exploiting the organization’s internalized purpose and diversity to enhance both learning and its use in creating innovations and purposive adaptation”¦ organizations fail when they are unable to create the social context necessary to build the trust and commitment that are needed for maintaining cooperation. In a theory of organizations and markets, learning and trust may well take the place that efficiency and opportunism occupy in the theory of markets and hierarchies whereas purpose may take the place of price. Such a theory may also yield some very different conclusions on issues of organizational diversification, control, and governance.”
1. A News item from Business Respect, Issue Number 63, 23 Sep 2003 reported, “Around 52 percent of Australians have little trust in their employers, according to the results of a survey of 5,000 people by Kelly Services. In addition, 47 percent of Australians believe that their employers do not have their best interests at heart – much more sceptical results than those of employees in New Zealand, Malaysia and Singapore. Kelly Services managing director Garie Dooley said: “It is particularly disturbing that the actions of just a small number of companies and senior executives can impact on workers’ morale and confidence and many other sectors”.”