A lot of people just don’t like traditional structures. They say that rigid hierarchies stifle people’s creativity and slow down decision making. I think they are right. However there are also fish hooks in very informal structures. They can be overcome, but this takes a lot of work.
The founders of Hewlett-Packard were early adopters of Management by Objective, or MBO. Dave Packard said, “No operating policy has contributed more to Hewlett-Packard’s success than the process of MBO. This gave our people the flexibility to work toward goals in ways that they determined best for their own areas of responsibility.”
In 1993 Ricardo Semler wrote Maverick! – a book about how he took over the family business from his father and promptly gave employees a tremendous amount of latitude, which in turn delivered greatly improved financial results. He said, “People are responsible adults at home. Why do we suddenly transform them into adolescents with no freedom when they reach the workplace?”
In the mid-2000s, an American company Ternary Software developed a system call Holacracy, which Wikipedia describes as “A method of decentralized management and organizational governance, in which authority and decision-making are distributed throughout a holarchy of self-organizing teams rather than being vested in a management hierarchy.”
Currently, a US video game company called Valve lives in Flatland. There is no structure. There are no managers. This is how they describe work assignments for employees: “We’ve heard that other companies have people allocate a percentage of their time to self-directed projects. At Valve, that percentage is 100. Since Valve is flat, people don’t join projects because they’re told to. Instead, you’ll decide what to work on after asking yourself the right questions. Employees vote on projects with their feet.”
Here’s the thing – for these more informal systems to work, everybody must be crystal clear on exactly what the organisation is trying to achieve. The culture must very strongly reinforce the importance of aligning to those goals. This normally involves incredibly hard work in the set-up phase, and success is not guaranteed. Peter Drucker, perhaps the most revered management guru, said: “Management by objectives works if you know the objectives: 90% of the time you don’t.”
If you want to be informal, you have to be totally committed to making it work. My observation is that it requires more effort than a little bit of structure, but plenty of people have made the effort and enjoyed the fruits of their labour.
Last month in the Beacon we looked at the basics of structure – how to organise the work into discrete jobs and then deciding on which jobs will report to which other jobs.
This month is a bit of a download of the tips that I have found most useful when assisting clients with their structure:
Put your best people closest to the action. If you have a leadership team, put your best player in the job that has the biggest strategic impact on your business. In other roles, make sure your best people are the ones that have most contact with the customers.
Focus on value. Does your business have all the roles required to implement its strategy? Are the specific activities required for success actively built into jobs rather than left to chance? Does each job add value?
Have crystal-clear interdependencies. Has duplication of effort been eliminated? Is anything falling between the cracks? Does everyone know EXACTLY where one job stops and another job starts? Are hand-offs between jobs minimised (this is where most errors occur)?
Do-able jobs. Is the job content realistic or are people overworked? Is there a tough managerial accountability somehow residing in a lower level job?
Decision making. People generally do not react well to a vague waffle about empowerment. They react much better when they have explicit decision-making authority delegated to them, and when that authority is sufficient for them to be able to do their jobs without constant recourse to their manager.
Communication around decision making. Is it totally clear to everyone, for every important decision, which jobs provide input, which job(s) makes it, and how conflicts are resolved?
Establish systems for the seamless sharing of knowledge. Everybody should have available to them every piece of information that might help them do their job better.
Embrace the informal. Structure and job design are formal mechanisms for organising people to achieve outputs. We have all heard the expression “Its like herding cats,” and this is often the case when managers try to rely exclusively on these formal mechanisms. Norms, commitments, understandings, networks, values get the job done if they are allowed to. They complement the formal structure by providing customary ways of filling in the blanks and finding work-arounds that always exist.
Next month we’ll look at flatland and other less traditional models. Have a great month!
Happy New Year! I hope you have had a relaxing break, and for those of you who worked through, I hope it was rewarding, and that a period of R&R is imminent.
This month we will start to look at the fourth (of four) primary management practices you need to excel at, in order to succeed in business – Structure.
An organisation is called an organisation because it is supposed to be organised. Its structure is simply the formal model used to explain how it is organised. The ‘wiring diagram’ is the last step in the process, not the first. So, if you want to structure your business, you should first of all organise the work that needs to be done.
This in turn involves understanding work. Jobs are for achieving outputs. The first step in organising work is to list down all the outputs that you need to be achieved. For example:
The next task is to group all the outputs that are related to each other into a function. For example, the above outputs might be grouped together in a sales department. Once you have got all the outputs grouped into functions, you can estimate how many people are needed in each of those functions.
Next, for each function where this is more than one person, decide if they should all report to you, or if one of them should manage the others. As a rule of thumb, I recommend you avoid directly managing more than 6-7 people.
Here are some useful guidelines for structuring your business:
It is quite mind-bending how convoluted big corporates can get with their structure, to zero benefit for anyone except the managers who ‘win’ the latest round of restructuring. Don’t let this happen to you, let common sense rule the day. More on structure next month.
By the time you read this, we’ll be approaching Christmas, New Year, and the good old Kiwi holiday at the beach. Many business owners use this time to reflect on their business and what they need to do differently in the new year, so I thought I would take a break from the four primary management practices (three down, one to go) and provide some suggestions about structuring that reflection time.
The first thing I suggest you do, is forget about it. Most likely, your business has driven you crazy over the last few weeks. You didn’t get everything done you wanted to, and for the first few days of your holiday, you’ll be in recovery, de-tox, and stress reduction mode. This is not the right time to start trying to plan for the future. Remember there are more important things than making yourself fabulously wealthy. Relax. Read, fish, go to a concert, socialise, swim, snooze, whatever floats your boat. Never fear, your brain will be surreptitiously sorting through all the factors you need to include in your thinking about your business. Ever marvelled at the way you get a sudden flash of inspiration about something you haven’t been consciously thinking about? Hunh.
After 3-4 days, you can start to think constructively about the future. Now’s the time for a bit of note-taking while those insights burst out. Supplement them with some reflection on these questions:
Collate the answers to those questions with the insights you recorded earlier. Sift through it all, and carefully come up with the THREE most important projects you need to complete in 2019. Big chunky projects that will take most of the year, are challenging yet achievable, and which you would be delighted to complete. Write them out in full, making it clear exactly what is required. Share them with your team when you start back, and assign accountabilities for leading and contributing to each priority action.
In closing, I’d like to wish every reader a Merry Christmas, and a very happy and prosperous 2019. God bless you all!
Whether you like it or not, your business has a culture. Beliefs, norms, customs, acceptable behaviours all evolve over time. They are introduced, refined and nurtured by individuals and groups – either subconsciously bringing their own preconceived ways of interacting into a workspace, or by proactively setting out to design and nurture an “ideal” culture.
The only thing up for grabs is whether you, as the business owner, want to have the major influence on how your company’s culture develops. My strong advice is that you do just that – as I wrote two months ago, culture is a combination of an organisation’s ideology and personality. “The way we do things around here.” Your business culture determines how your people interact with customers and with each other, and what things get prioritised. In other words, when you are not there, your business culture helps to keep everything going the way you want it to.
Culture is not just one aspect of the game – it is the game. Lou Gerstner
In a recent interview Tom Peters said, “CEO job No. 1 is setting – and micro-nourishing one day, one hour, one minute at a time – an effective, people-truly-first, innovate-or-die, excellence-or-bust corporate culture.” He also reminds us that Lou Gerstner, the CEO who saved IBM, said, “Culture is not just one aspect of the game – it is the game.” That’s how important your business culture is.
This is not to say that you should design and mould your business culture alone. Consulting with your people about the best cultural attributes to emphasise is a wise move. They will have great ideas.
A Harvard Business Review article from May 2013 was entitled “Creating the Best Workplace on Earth.” It reported on the “six common imperatives” that described a business operating at its potential. They were:
If you were to consult with your team and adopt core values that supported those imperatives, together with some specific cultural attributes that describe how the company would achieve those “six common imperatives,” you would be well ahead of the game. 60%-70% of employees report that their company is not doing enough to engender a positive culture. Now all you have to do is that micro-nourishing that Peters was on about.
Take control of the environment in your business today. Promote yourself to Chief Culture Officer
Last month I introduced the topic of business culture and core values. This month I will discuss a couple of examples to highlight the difference a bit of effort and passion can make in building an organisation that differentiates your business and attracts top talent.
You can search for Netflix Culture and get a lot of information on how they built a very effective culture. I ended up with a 125-slide deck and have no hope of jamming it all into this article. Here are the highlights for me:
An important point here for me is this didn’t take five minutes. It took many years of building up, learning and refining, getting clearer and more confident, taking pains to document the outcomes carefully. And not being afraid to be different – for example eschewing brilliant jerks and management control. With the company values at the centre, they built six other aspects of their culture around helping them to achieve excellence. The key is to build a cohesive culture based on authenticity.
“Culture eats strategy for breakfast.” A quote attributed to Peter Drucker, one of the most admired leadership academics of all time.
While a brilliant strategy may be admired, it is an organisation’s culture, supported by leadership, that attracts, engages, energises and aligns great employees to the achievement of business goals.
“So what exactly is business culture?” you ask. Good question. For me, it is a combination of an organisation’s ideology and personality. “The way we do things around here.” “The things that matter to us.” We will explore this in the next column or two.
The foundation of a business culture is a set of Core Values. According to Collins and Porras in “Built to Last” (2002 paperback edition), Core Values are a business’ “essential and enduring tenets – a small set of timeless guiding principles that require no external justification.”
Along with a Core Purpose (covered in The Beacon in October 2017), they make up an organisation’s Core Ideology – a “self-identity that remains consistent through time and transcends product/market life cycles, technological breakthroughs, management fads, and individual leaders.” These don’t sound a lot like “maximise shareholder wealth,” or “make the boss obscenely rich.” But time and time again, when studies are undertaken about enduring business success, these very “unbusinesslike” Core Values lurk in the findings.
My favourite set of Core Values are The Body Shop’s:
In previous articles in The Beacon on Execution, we have covered the imperative of prioritising strategic execution time in your calendar, focus, and accountability. This month I want to finish off the topic with two more items – cadence and review.
During these meetings you decide on the tasks that must be completed each week, in order to be on track for successful execution of your 90-Day Actions by the end of the quarter. I suggest an agenda like this:
The next most important cadence is quarterly. At the end of every 90 Days, take a half day out to review your execution performance for the quarter. Again, all your management team should attend. Be brutally honest with yourselves. What went well? What went badly? Did you achieve all your 90-Day Actions? If not, why not? What are our major learnings about how to execute? How will we apply them in this next quarter to execute better? Document and circulate your findings, and go again. Update your SWOT Analysis and decide on your next 90-Day Actions. Once a year, when your 1-Year Actions are due, take a whole day, review some elements of your strategic plan, and start the whole execution cycle again.
Last month in The Beacon we discussed focus, one of the most important disciplines in successful execution. This month I want to focus on Accountability, but before we get into that I’m going to briefly cover off a very important tool – the SWOT Analysis.
The SWOT Analysis identifies positive and negative influences on your business originating from inside the organisation (Strengths and Weaknesses) and from outside (Opportunities and Threats). Its purpose is to help you identify factors you can take advantage of, or ones you need to mitigate, in order to successfully complete your priority actions. You should review this analysis quarterly and only include the five most important factors in each category. Only include factors that you can act on – “plummeting exchange rate” is a threat I sometimes come across, but as I have not yet been engaged by the Reserve Bank, I have never met anyone who can fix it, so it doesn’t make the cut.
The willingness to focus on just a few key actions at a time is the biggest differentiator between teams that can execute and teams that can’t. The second most important is the willingness to be individually accountable for actions. Mediocre teams prefer to hide in a group – “we’re all in this together.” At the end of the quarter failure, confusion, finger-pointing and sometimes scapegoating reign. Co-accountability is no accountability.
When someone is accountable for something, it means they are on the line for the end result. Doing their best, or putting in a good effort, is not good enough. They have to make sure the Action is completed. Part of the deal is that you give them all the resources, time and support they need to get these actions done. Plus, encouragement to sing out as soon as they encounter obstacles. Team members who don’t have an action of their own proactively seek out those that do and offer their time and resources to perform some of those tasks. These teams know that they really are all in this together – it’s just that they have clarity about who’s on point for what.
In the March Beacon we talked about your big three strategic moves which you should make in the 3-5-year timeframe, and how if you try to achieve more than three goals, you will actually complete fewer than if you just went for three.
To have any chance of success, you must limit your strategic projects to two or three. When I introduce this concept to clients, I often get a vibe that goes something like, “Yeah, that might be the case for mere mortals, but I can multi-task” (they can’t) or “I’m more motivated than everyone else, (they aren’t) I’m going for six”. Three months later they have to admit they took on too much. Focus.
Take your 3-5-year Strategic Moves and figure out how much of each one you can achieve over the course of one year.
Now, in the one-year space we need to be more specific than in the strategic timeframes. We want 1-Year Actions that start with a meaningful verb like “complete”, “develop”, or “design, build and install”. We also need a deadline, a specific date – this is frequently the last day of your financial year but does not have to be. And we need to know which individual in the business is accountable to you for making sure this action is completed by the deadline. Note this does not mean they have to do all the work themselves.
Once the 1-Year Actions have been documented, decide how much of each one can be completed in a quarter, and generate 90-Day Actions to a similar format.
A word to those of you who are sole traders or who have a very small number of employees who might not be able to help you to execute your strategic objectives – in your case, one or two is better than three.
Next month we will cover a couple of equally important disciplines that will help you excel at execution.
Let's Talk Business
by Chris Bunce
Chris has 28 years’ experience as a management consultant and business coach. During this time he has worked with clients in many industries and of all shapes and sizes, including some in Australia, Asia and the US. Nowadays he is passionate about improving the lives of Aucklanders by helping business owners to master the very few management practices that actually make a difference to their success. Chris lives in Blockhouse Bay with his wife, Cathie, having lived in or around the area for most of his life.