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Hierarchical Growth
I’m currently in the process of reading Donella Meadows’s Thinking In Systems. Donella says that successful hierarchical systems grow from the bottom up, one layer at a time.
In the case of a human-made system of humans, as an assembled group of people becomes successful at what it does, it starts growing horizontally. The group finds a way to extract what it needs to sustain and grow itself (like money in exchange for products and services) from its surrounding environment.
In order to keep the group aligned and coordinated, the next higher level is formed from a small sub-group within the first level. Both levels feed each other in a mutually beneficial relationship and the organization keeps growing sideways. At a certain point, the second level becomes wide enough to require a third level to keep it synchronized with the group’s overall organizational goals. As growth continues, more and more layers are needed to keep the overall system from diverging from its true purpose.
At some unpredictable point in time, a strange and seemingly irrational inversion starts taking place as growth continues. The smaller, but higher layers in the hierarchy start consuming a more disproportionate share of the fruits of the organizational effort. The original, mutually beneficial, two way relationship transforms into an unbalanced one way relationship that is strangely accepted and taken for granted by everyone at all levels.
As a result of the imbalance, the bottom layers begin to atrophy from a lack of nourishment. As the one way upward flow of nourishment continues, the weight of the top layers increases and the strength of the lower layers decreases. In the worst case, the organization loses its balance and comes crashing to earth in a disintegrated mess.
In the early stages of growth, everyone in the organization fully understands that each successive layer is put in place to take care of the layer below it, and vice versa. When this understanding gets lost, all is lost. It’s just a matter of time until disaster strikes. Can the process be reversed? Sure it can, by restoring the balance and never losing sight of why the upper layers were created in the first place.
Who’s That Masked Man?
I’m very skeptical of management consultants, but the dudes at VitalSmarts are really good. They are responsible for the wonderful “crucial” pair of books:
I’ve read both of these along with Influencer. They’re all very “down to earth” and highly accessible tomes that detail what works and what doesn’t work in terms of leading organizations of people. Their simple and “executable” advice is backed by academic research and, most importantly, their direct experiences from interacting with lots and lots (thousands) of real people in working organizations around the globe.
The following snippet from their latest e-newsletter caught my eye:
“People are excellent at masking ability problems.”
Man, ain’t that the truth! Along with you, I ‘ve put the “mask ” on many times, both willingly and unwillingly. The question is: “what would cause people to do this?”.
I think the main reason why people try to feign expertise is because they are stuck working in archaic corpo CCHs (Command & Control Hierarchies). All CCH orgs unquestioningly assume that everyone within the pyramid walls is supremely competent, regardless of whether they are or not. In a CCH, anyone who dares to persistently point out “ability” problems is excommunicated, regardless of how much evidence is presented to prove the case so that a beneficial change can be made. Heaven forbid the case where a lower level masked associate points to the huge masks being worn by one or more of the obviously infallible managers entrenched in an upper echelon. Retribution is swift and unambiguous.
Three Things
Three things: people, money, and time. These three interdependent resource types are the weapons that managers can deploy to create and sustain wealth for an organization. Managers are tasked with the challenge of judiciously apportioning these raw resources to the creation and sustainment of value-added products and services that solve customer problems. In addition to the creation and sustainment of products and services, the difficulty of continuously aligning and steering large groups of people toward the goals of growth and increasing profitability causes problem “fires” to be ignited within the corpo citadel. Bloated processes and warring factions are just two examples of the infinite variety of “pop up” fires that impede growth and profitability.
Left unchecked, internal brush fires always grow and merge into paradoxically massive, but hidden, forest fires that consume valuable resources. Brush fires feed on neglect and ignorance. Instead of creating wealth and continuously satisfying the external customer base, the three resource pools get exhausted by constantly being allocated to extinguishing internal fires.
Unless managers can “see” the growing fires, one or more massive fireballs can burn the organization to the ground. So, how can managers prevent massive fireballs from consuming would-be profits and customer goodwill? By constantly listening to, and investigating, and smartly acting on, the concerns of their people and their customers. Just listening is not enough. Just investigating is not enough. Just listening and investigating is not enough. Just listening and investigating and ineffective action is not enough. Listening, investigating, and effective action are all required.
Sloppy and Undisciplined
If a company is sloppy and undisciplined in execution, then almost all of its value-creation resources (people, time, money) are constantly putting out legacy product fires instead of developing new products/services – creating wealth. Revenues and, especially, profits may suffer. “May” and not “will” you ask? Yes, I say. You see, if a company can get customers to continuously pay for the messes that the company has innocently but surely created, then financial performance may actually be perpetually “good”, or even “excellent”. Say what? Hoodwinking customers to pay for cleaning up your messes? What customers in their right mind would do this? Government customers who love to spend other people’s money, of course. Nice work if you can get it.
Favorite Companies
Over the years, I’ve been on a constant watch for unique companies. By unique, I mean those that stand apart from the rest of the herd in the way that the executive leadership balances the needs of all stakeholders – not just the shareholders, or especially, themselves. Of course, unless you’ve worked at a company, it’s pretty tough to know if the company really lives up to its core values and “walks the talk”. That’s because all companies project the image that they are great places to work, regardless of whether they really are.
So, how do I decide whether a company is a cut above the rest? Via subjective evaluation of external observations, of course. Here’s my unscientific list of “research” methods:
- Read third party accounts of experience given by former and current non-management employees.
- Read, listen, and watch multiple interviews with CEOs and executives.
- Scour publicly available mission statements, visions, core values and cultural descriptions for authenticity, lack of corpo jargon, and attention to detail.
- Stay away from glossy annual reports.
- Ignore whatever the hand picked company spokesperson(s) say.
Of course, my methods aren’t perfect, but do you know of any better ones?
Here’s my current list of faves. What are yours?
Forgive Me
If you have read many of my posts, you may have formed the opinion that I’m rabidly against bozo managers who are members of a hierarchically structured organization. That’s not quite right. I’m not against them as individual persons. I’m against the behaviors that they are compelled to manifest and the decisions that they have to make because of the archaic structure that they are an integral part of. It doesn’t matter who the particular individuals are in a command & control hierarchy. Unless they are enlightened (and very few are), they will auto-behave in ways that are detrimental in the long term to customers, owners, and employees. Not detrimental to themselves and their brethren, of course.
A colleague who dogmatically worships at the alter of corpo-man recently told me that I was jealous of hierarchs. He said that I wanted to be “just like them”. Hmmm, interesting opinion, no? Since nothing is impossible, I guess that could be true. Deep down I just may be an imposter and a fraud 🙂 . In Thorstein Veblen‘s “theory of the leisure class“, he proposes that the middle class in “developed” countries doesn’t hold hierarchs accountable for the havoc they wreak because the middle class wants to be “just like them”.
I’ve often thought of what I would do if I was offered to be knighted by a hierarchical corpo king. Whenever I think of that possibility, it reminds me of the Galileo and Pope Urban story. Galileo, as you probably know, subscribed to the Copernican theory that the earth was NOT the center of the universe. In the all powerful eyes of the hierarchical church and its rabid followers, any such thinking was sacrilegious blasphemy – curiosity was a sin. Before Urban was given the papal throne, he was a friend of Galileo’s. Urban was intrigued by Galileo’s logic and compelling evidence that the earth revolved around the sun. Bingo, as soon as he became pope, Urban instantaneously flipped into a corpo droid incapable of independent thought. He gave Galileo a tour of the torture chambers and placed him under house arrest for the last years of his life. Uh, so much for friendship.
Ironically, in a standard command and control corpo hierarchy, the only way anyone has any chance of changing things for the better is if he/she secures a corpo title from the sitting politburo. Since I think I could possibly make a positive difference, I’d actually be tempted to take on an institutional title and become a corpo man. Alas, I don’t think I’d do it because I don’t have the psychological strength to withstand the corpo peer pressure to flip – just like pope Urban didn’t have. Bummer 😦
Netflix Culture
I’m constantly scouring the landscape for companies with cultures that stand apart from the herd (moooo!). Via my e-friend Byron Davies’ discovery, I’ve just added another gem to my list: Netflix. Here’s the link that triggered the addition: Netflix Culture. It’s a simple, unadorned (content over format), behemoth 128 page presentation, but it’s so authentically different and norm-busting that it’ll stir your emotions (yuk, can’t have emotions in business, right?) if you’re a culture hound like me. Just in case you’re curious, but short on time, here are some zingers that rang my bell:
- The real company values, as opposed to the nice sounding values, are shown by who gets rewarded, promoted, or let go.
- We particularly value these nine skills and behaviors: judgment, communication, impact, curiosity, innovation, courage, passion, honesty, selflessness.
- You focus on results and not process.
- You challenge prevailing assumptions when warranted, and suggest better approaches.
- You say what you think, even if it’s controversial.
- You question actions inconsistent with our values.
- You only say things about fellow employees you will say to their face.
- You share information openly and proactively.
- It’s about effectiveness, not effort or hard work.
- Responsible people thrive on freedom and are worthy of freedom.
- Most companies curtail freedom as they grow bigger and to avoid errors, thus, we try to increase freedom.
- Process-focus drives talent to leave.
- The key to managing growth and complexity is to increase talent density; not to institute more freedom-constraining processes.
- We value simplicity, not the simplistic.
- Freedom is not absolute, a few basic and common sense rules are needed.
- In environments that demand creativity, fixing errors is cheaper than (fruitlessly) trying to prevent them via religious process adherence.
- Regularly scheduled strategy and context meetings.
- Flexibility is more important than efficiency in the long term.
- Set the context for your people instead of trying to control them.
- Highly aligned and loosely coupled as opposed to monolithic or siloed.
- Goal: fast, flexible AND big.
- Titles are not very helpful (all major league pitchers aren’t major league talents).
- No centrally administered “raise pools” every year.
- Whether Netflix is prospering or floundering, we pay at the top of the market.
- It’s a healthy idea, not a traitorous one, to understand what other firms would pay you, by interviewing and talking to peers at other companies.
- No bonuses, just include in salary. No free stock options – just big salary; and let people decide where to invest it.
- Rapid innovation AND excellent execution, creativity AND discipline, are required for continuous growth.
Here is my number one zinger:
- Netflix vacation and tracking policy: there is no vacation policy or tracking.
You read it right. One day, an employee pointed out that “we don’t track hours worked per day, night, or on weekends, so why do we track vacation days?“. The Netflix leadership responded to the challenge by removing the “N days per year” vacation rule. Pretty rad, removing rules instead of continuously piling them on, no?
Even if you’re extremely skeptical and can’t believe the Netflix leadership “walks the talk”, you gotta at least give them credit for writing down, in detail and with underlying rationale, the culture that they’re trying to build – so that they could be held accountable. No?
Cisco CEO “Gets It”
Cisco Systems Inc. CEO John Chambers “gets it”. In this interview, he states:
“Today’s world requires a different leadership style — moving more into a collaboration and teamwork, including learning how to use Web 2.0 technologies. If you had told me I’d be video blogging and blogging, I would have said, no way. And yet our 20-somethings in the company really pushed me to use that more.”
Ossified corpo executive teams that still operate according to the 1920’s doctrine of separation, closed door meetings, and infrequently used, one-way communication channels, deserve what they get – mediocrity and a disconnected work force.
On the subject of interviewing potential leaders, Mr. Chambers also “gets it”:
“Then I ask them who are the best people you recruited and developed, and where are they today? And that tells an awful lot.”
He knows that in order to build a viable, sustainable, and robust company, you’ve got to actively develop people and not just sit on your throne issuing brilliant commands from an omniscient position of superiority.
No Good Deed
Let’s say that the system engineering culture at your hierarchically structured corpo org is such that virtually all work products handed off (down?) to hardware, software and test engineers are incomplete, inconsistent, fragmented, and filled with incomprehensible ambiguity. Another word that describes this type of low quality work is “camouflage”. Since it is baked into the “culture”, camouflage is expected, it’s taken for granted, and it’s burned into everyone’s mind that “that’s the way it is and that’s the way it always will be”.
Now, assume that someone comes along and breaks from the herd. He/she produces coherent, understandable, and directly usable outputs for the SW and HW and TEST engineers to make rapid downstream progress. How do you think the maverick system engineer would be treated by his/her peers? If you guessed: “with open arms”, then you are wrong. Statements like “that’s too much detail”, “it took too much time”, “you’re not supposed to do that”, “that’s not what our process says we should do”, etc, will reign down on the maverick. No good deed goes unpunished. Sic.
Why would this seemingly irrational and dysfunctional behavior occur? Because hirearchical corpo cultures don’t accept “change” without a fight, regardless of whether the change is good or bad. By embracing change, the changees have to first acknowledge the fact that what they were doing before the change wasn’t working. For engineers, or non-engineers with an engineering mindset of infallibility, this level of self-awareness doesn’t exist. If a maverick can’t handle the psychological peer pressure to return to the norm and produce shoddy work products, then the status quo will remain entrenched. Sadly but surely, this is what everyone wants, including management, and even more outrageously, the HW, SW, and TEST engineers. Bummer.
Analysis Paralysis Vs. 59 Minutes
“If I had an hour to save the world, I would spend 59 minutes defining the problem and one minute finding solutions” – Albert Einstein
If they didn’t know that Einstein said the quote above, MBA taught and metrics-obsessed “go-go-go” textbook managers would propose that the person who did say it was a slacker who suffered from “analysis paralysis”. In the Nike age of “just do it” and a culture of “act first and think later” (in order to show immediate progress regardless of downstream consequences), not following Einstein’s sage advice often leads to massive financial or human damage when applied to big, multi-variable hairball problems.
The choice between “act first, think later” (AFTL) and “think first, act later” (TFAL) is not so simple. For small, one dimensional problems where after-the-fact mistakes can be detected quickly and readjustments can be made equally as quickly, AFTL is the best way to go. However, most managers, because they are measured on schedule and cost performance and not on quality (which is notoriously difficult to articulate and quantify), apply the AFTL approach exclusively. They behave this way regardless if the situation cries out for TFAL because that’s the way that hierarchical structured corpo orgs work. Since the long term downstream effects of crappy decisions may not be traceable back to the manager who made them, and he/she will likely be gone when the damage is discovered, everybody else loses – except the manager, of course. Leaders TFAL and managers AFTL.
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