S P H E R E Advisors l Diagnostics - Blog Meldungen

NeuroScience and Leadership

lukasmichel — Wed, 12 Nov 2008 22:59:44 +0100

Recent advances in neurobiology provide interesting insights into leadership and have highly relevant implications on how we lead and control organizations.

Change programs require impartial guidance and experience: Change goes against routine and habits. On top of that our brains are primarily geared towards detecting and eliminating errors, not with adapting to change. That is why change needs a lot of guidance to continuously help people step out of the correcting into the adapting and changing mode.

Performance management requires a fundamental rethink: Especially under pressure we tend to resort to fear and control to run things. While this can have some benefits in the short term, it is useless, indeed self-defeating, in the mid and long term. When decisions come from the ‘outside’ the person, it is our frontal part of the brain that works. But what you really want is to engage the middle parts of the brain, because that is where we create routines and ‘views of the world’. This is where our mental hard wiring happens. The way to achieve that is by giving people control over decisions. In other words you help them convince themselves of what needs to be done. So, ‘empowering’ people in decision making is not just a ‘do-gooder issue’. It is profoundly based in the way our brains are built and how they work. The result is highly sustainable and authentic adaptation in how people make sense of events and act.

Be real, be authentic. As a leader you will often be advised to be human and ‘nice’. But bear in mind that people have an exquisitely fine tuned sense for authenticity. And if they sense that you are play-acting, tweaking the truth, not being who you really are, they will distrust you. As a result they will second-guess your statements and decisions, lose respect for you and often become cynical. Of course you must always be decent of people, respect their dignity and provide hope. But being your authentic self is the best way to gain and keep authority.

Focus provides power: Especially as a CEO you are constantly confronted with a barrage of decisions and actions. Multitasking can work for highly automated tasks, to a degree, but for high stakes decisions, it just doesn’t work. The frontal part is the part of the brain that uses most energy and that is the one you use for new, complex decisions. So you have to shunt as much energy as possible to that part. You do that by focusing your thinking and by limiting outside sensory input. Many of us have forgotten how to get this high level of focus quickly. The same is true for a bunch of people, let alone an organization. You can adapt management techniques to help the organization as a whole to learn how to focus. There are specific techniques that help organizations focus the attention.

Expectations shape reality: We constantly scan the future for what may happen and how we would react to it. The ‘scenarios’ are memorized, so in a way we create a memory of the future. When events do happen then we compare them to these ‘memories of the future’ and act accordingly. Unless you change these memories of the future, people will continue along these thinking pathways. Create new memories of the future by helping people generate their own insights, not by providing your own. Only then can the memories of the future be rewired. This means that as leaders we have to create occasions for new insight by asking question rather than providing the insights. What we need are new leadership practices.

Come back. We keep on track with the advances in NeuroScience. And, we know how to make these insights work for our clients.

Complexity Reviewed

lukasmichel — Wed, 12 Nov 2008 22:52:17 +0100

Usually we try to deal with complexity by reducing it, ie. by trying to make things simple – except they aren’t. By trying to deal with complexity by simplification, we often miss the key subtle but very powerful dynamics that are inherent to complexity. So if you can’t simplify complexity, what can you do? Here are a few ideas:

Tighter control does not work: When things get rough, t he intuitive reaction is that we tighten control and change towards a command mode. With this, employees follow the given direction rather than to sort through the challenges and issues at stake. Tighter control eliminates the benefits that we gain from delegation. Hence, as leaders, we need to override our natural behaviors and continue to delegate, provide direction, and encourage risk taking.

More detail and perfection makes things worse. Another observation is that when organizations grow and complexity rises, they refine their managerial processes and systems: HR tightens performance management, the CFO introduces more controls, compliance does more checks... However, more detailed rules and policies create higher complexity not less. Higher complexity requires a fundamental rethink of the purpose of control systems and how they support leaders cope with complexity. What we mean is that we have to be very careful how we change our managerial controls as this impacts all our decisions, behaviors and actions. Often, this perfecting happens over years without anybody noticing it. Hence, as leaders, we must pay attention to the design and use of managerial systems in our organizations.

Humility - one of the new clues to complexity. As leaders, we claim to know how things need to get done. However, this attitude prevents us from engaging employees for their knowledge and insights. With intelligent employees in place, we can rely on them to sort through complexity. Hence, it is beneficial for leaders to acknowledge that their main task is to ask questions rather than to provide answers and solutions. Moreover, in organizations with delegated decision making, the interaction between leaders and employees is more important than ever. It is the means to demonstrate leadership by providing direction. The quality of these interactions (Personal, direct, honest, supportive, timely, …) are one of the most powerful capabilities that help organizations deal with increasing complexity. But, interactions need to be personal ... not through blackberries, emails, busy schedules, and no time.

Only variety can cope with variety. It is well know that diversity in the workforce creates better solutions. As leaders, we are encouraged to create teams that cross organizational boundaries and bridge hierarchies to get things done. People with different perspectives come up with new solutions that otherwise would not appear. In line with this ...

Recognize serendipities. New things cannot be mandated through rules and regulation. They cannot emerge from routine or the normal distribution. Hence, innovations require a new setting, doing new things, and they ask for new processes. With increasing complexity, it is important to recognize that new perspectives, cross-teams, inverted pyramids, new structures, accepting conflicts, or changed conditions help to to cope with it.

Come back. We keep on track with the advances in complexity. And, we know how to make these insights work for our clients.

⇒ more on complexity and complexity conferences

Enabling Control in the Knowledge Economy of the 21st Century

lukasmichel — Wed, 12 Nov 2008 22:37:35 +0100

The knowledge economy fundamentally changes the role of control in organizations from backwards looking safeguards to a future oriented enabler for good decision making. Leaders are well advised to adjust their controls to the needs of their organization.

More than internal controls. The idea of control is to align business activities with desired business outcomes. As such, it needs to support sustainable and profitable growth, efficiency and effectiveness of operations, reliability of financial reporting, and the compliance with regulatory and ethical standards. Traditional control focuses on safeguarding the company’s assets with internal controls as a backward oriented governance system. Its main purpose is to uncover and correct faulty behaviors and actions.

Purpose decision making. In modern, decentralized organization, decisions are increasingly delegated to employees at the periphery. This is where the knowledge is and where the signals from the market are quickly translated into responses and benefits to clients. The challenges with delegated decision making are that strategy needs to be informed and that decisions need to be made in alignment with the strategy and the vision. For this, leaders need to install feedback cycle that inform the strategy and enable good decision making. Furthermore, modern control systems include the future oriented strategy controls and the performance cycles to secure that the organization meets its promises. The focus simultaneously is on prevention and direction. The task is to introduce a balanced approach to control.

5 controls. This balanced view requires five different controls. First, process independent internal controls are required regardless of a specific position in an organization. The purpose is safeguarding organizational assets. Other process dependent controls include: Diagnostics, processes, interaction, and principles. Diagnostic controls include all metrics, goals, objectives, strategies, beliefs and boundaries of an organization. Such controls are used diagnostically through management processes. The objective is to have controls and processes that make it possible to set standards, to measure performance, and to provide feedback to where decisions are made. Such processes don’t work in isolation. They are used by leaders interactively, meaning that controls are the communication tools across hierarchies and organizational boundaries. Such modern approaches to control are based on a set of solid principles rather than standardized operations procedures.

Decompose. Today’s complex organizations in the knowledge economy require a new approach to management processes. Decomposed management processes provide higher flexibility and less bureaucracy. They better fit decentralized management as compared to the traditional, industrial type approaches.

Sequence? In traditional, industrial organizations, it is a preset sequence of management processes with strategy, planning, performance, and review. This means that strategy implementation follows strategy creation in a timely sequence. This has worked well in stable economies and clearly structured organizations.

Flexible rigor. However, today’s environment is dynamic and uncertain. In complex organizations with multiple hierarchies, disintegrated management processes perform better. As loosely coupled systems, they enable organizations to react faster to market requirements, and they require less bureaucratic procedures as compared to traditional management cycles. With this, there is no need for a logical sequence of steps, and there is less dependency on specific deadlines.

Challenges. There are four challenges with the design of controls systems:

1: Controls do not fit the purpose of an organization.
2: Controls tend to be sticky. Once introduced, they remain as is.
3: Controls are automated in isolation. They disregard linkages.
4: Controls are formalized vs. used interactively and face to face.

Principles. Therefore, we recommend the following four principles in the use of controls:

1: Integrate control processes into the business activities.
2: Fit controls to the purpose of the organization. Stop those things that do not fit.
3: Consistently use controls as part for the corporate culture – beyond the traditional manuals and principles.
4: Controls are as good as their use – enable employees to make decisions.

With this, it is clear that controls need to be adapted to the specifics on an organization. The criteria include the life cycle, the strategy, the structure, the size, the complexity, the ownership, and the industry.

We believe that the knowledge economy changes the design and use of control in modern organization. As such, modern controls enable employees to make good decisions – being the driver of performance in organizations.

Come back. We keep on track with the advances in complexity. And, we know how to make these insights work for our clients.

⇒ more on corporate control.

Goals - Resolving the Conflict between Mission and Ambition

lukasmichel — Wed, 12 Nov 2008 22:22:30 +0100

It is an issue of scale. In most organization, the personal objectives of employees are used for a variety of conflicting goals.

First, personal objectives are to align the decisions and behaviors of employees with the strategy and the values of an organization. Second, personal objectives are to motivate employees to perform, capture opportunities, and take risks. Third, personal objectives are used to determine the payout of incentive schemes. The alignment with organizational mission, the motivation to capture opportunities, and maximizing individual performance are often conflicting goals. Good personal objectives should help employees to reconcile these conflicting goals.

The challenge for MbO is to choose among a variety of options for its design in ways that help employees to reconcile these conflicting goals. For every organization, this is an issue of scale as it relates to the number of employees in an organization. Hence, leaders need to pay attention to how individual performance management is designed.

Option 1: Traditional objectives. Employees and leaders agree on challenging objectives. As a good practice, these objectives resolve these conflicting goals by using a set of objectives that balance all aspects. However, most objectives focus on one year targets as fixed plans. For example: 10% better than last year, or, achieve x. With traditional objectives, employees tend to migrate towards achieving set plans. Performance beyond plans and below plans is considered as inferior - a considerable disadvantage to control.

Option 2: Relative objectives. Employees focus on relative objectives, e.g. objectives that are relative to the performance of competitors. For example: 10% better than competition. Performance beyond competition is considered as a desired goal. The disadvantage of this option is that internal competition prevents sharing and collaboration. As alternative, relative objectives are used for teams rather than individuals, deemphasize individual performance.

Option 3: Individual objectives. Employees and leaders agree on challenging individual objectives, e.g. those things that they feel most motivated to contribute. For example: Finalize [xy] by [date]. Individual performance objectives are built on the recognition, that only personal ambitions drive individual performance.

In our practice, we clearly recommend option 3 "individual objectives". However, the implications are far reaching. Organization that use individual objectives as the dominant principle for objectives agreement need to consider the following:

Maintain high quality conversations on objective agreements and performance reviews
Establish objectives' sets that include individual, team and organizational goals
Define jobs that enable employees to capture opportunities and take risks
Make sure that vision, values and mission statements enable employees to make decisions
Articulate the strategy in a way that allows employees to relate to it

Individual objectives enable employees to balance various conflicting goals. For organizations, this is an opportunity to unlock hidden performance potential. When all employees are motivated to perform at their best, this is a key performance driver for organizations. We suggest that leaders carefully look into the design of their individual performance management systems.

Come back. We keep on track with the advances in modern MbO. And, we know how to make these insights work for our clients.

⇒ more on performance management solutions.