The Danger of Teams

A lot is said about the power of Teams and about consensus based decision-making. Working with more or less democratically organized teams seems to be the standard mode of operating in most companies.

How much is said about the danger of teams and the disadvantages of seeking consensus?

First of all, usually people talk about The Team, and: you are either in it, or you are not. So although a team suggests cooperation and inclusion, it also excludes a lot of people, who are not on The Team. The notion of having a team, deciding who’s on it, and making sure the team is successful seems over valued. The team should be a means to an end, such as implementing the company strategy, not an end in itself. In my experience teams are kept together for much too long, even when it has become clear that the team dynamics are not advantageous, and far too much energy is spent on fixing the team, rather than on fixing company issues. All energy is spent on off-sides, team meetings, assessments, external help, rather than on customers, the product and on growth.

This would perhaps all be worth it if teams would make better decisions than individuals, but this is arguably not the case. On the contrary.

How decision-making works

Some background on decision-making, from the must-read book by Nobel Prize winning author Kahneman: Thinking Fast and Slow. He won a Nobel Price in Economics, but Mr Kahneman is a psychologist and his research was on Decision-making. He is not optimistic about the quality of decision-making. In fact for most decisions the outcome is better if you have a monkey throw a dart at a dartboard to select an option. In particular he is fearsome of decisions made by experts or by teams.

In thinking in general, and in decision-making in particular we have two systems we can use.

System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control. When system 1 gets into trouble it feeds system 2 with impressions, intuitions, intentions and feelings. System 1 has biases, has limited understanding of logic and statistics, and is lazy. It sometimes replaces difficult questions or choices by simpler ones, and easily jumps to conclusions.

System 2 allocates attention to the effortful and more complex mental activities that demand it. The operations of system 2 are often associated with the subjective experience of agency, choice and concentration. System 2 is also credited with the continuous monitoring of your own behavior – the control that keeps to polite and alert and it is the source of doubt and judgment.

Why teams lead to bad decisions

Biases are a major reason for bad judgement. And bias is strengthened in teams by Priming effects like Framing (presenting information in a certain way, Halo effects (the one who brings his point across first or most assertive is usually followed). Another form of bias that often causes disturbance in teams and is not easily controlled is “availability bias”: members of a team usually feel they have done more and contributed than their share, and also feel that the others are not adequately grateful of their individual contributions. When individuals are asked what their contribution has been, the total almost always exceeds 100%. Typical System 1 thinking. This system is heuristic (it works with “rules of thumb”). Only when system 2 is engaged with its focus on content and analytics a more realistic picture arises. Unfortunately this seldom happens in discussions. Or, as psychologist Jonathan Haidt said: “The emotional tail wags the rational dog”.

Another problem, where a team could add value, but usually does the opposite is: collecting and analyzing information. Instead of bringing all available information to the table, team members often feel reluctant to do so. Social pressure plays a role here, which leads to people to silence themselves because they fear the disparagement of powerful others. Synergy is usually an illusion. In fact, even when they would speak up, their influence would be limited: information held by all or most group members has a lot more influence than information held by one member. This is called “the common-knowledge effect”.

This is actually quite comforting for decision makers. It is only natural to build the best possible, coherent story with limited information available to you. With little information it is easier to construct a story that makes sense. The reason behind this: our almost unlimited ability to ignore our ignorance.

So we have bias, we have limited excess to information, and we overestimate what we know. As if that was not enough: we are naturally negative and resistant to change.

Negativity and loss aversion are purely human emotions, and they tend to win from positivity and curiosity. It is an evolutionary survival mechanism, and causes us to be driven more by the aversion of losses than to achieve goals. In a team this gets stronger and is reflected in goal-setting. Therefore goals will be set without much ambition: not achieving a goal is a loss, exceeding the goal is a win, but the aversion to the failure of not reaching the goal is much stronger than the desire to exceed it.

Funny example for golfers: after analyzing 2.5 millions puts by professional golf players it was discovered that putts to avoid a bogey were significantly more successful to putt to achieve a birdie.

In a team, this behavior leads to resistance to change. Plans for change or reform almost always produce many winners and some losers while achieving an overall improvement. However, potential losers will be more active and determined that potential winners. The outcome will be biased in their favor and inevitably more expensive and less effective than initially planned.

The conclusion, as we can also read in Cass Sunstein’s book Wiser: Groups usually do not correct individual mistakes, as is the general consensus, but actually amplify those mistakes.

How to fix it

So is there no hope? Of course there is. The alternative is avoiding teams as a goal, but organizing knowledgeable, committed and responsible individuals in changing teams or  ecosystems with some simple rules and a clear process for collecting and assessing information.

Ecosystem

If people in organizations, as animals in nature acknowledge their interdependency and take responsibility, adaptation to changing environments is enabled. Divergent perspectives will be respected and valued. Conflicting opinions will be seen as options based on data and members’ individual knowledge, to be evaluated and ultimately decisions will be by those who have been authorized to do so. To create such an environment you have to pay attention to several rules:

Rules

Rule 1. Assigning authority and taking responsibility.

The accountable leader will have to surround himself with knowledgeable people, and ask who will take responsibility for what. To the individual who is responsible for something authorization needs to be assigned. It might help to agree that these authorizations are by definition temporary. Individuals should not become attached to them, or feel they own them. Always the starting point should be: what is best for the organization at a certain point in time.Compare this to a national soccer team. Even if you are selected to join the team, you don’t know if you will play. And if you play, you cannot be sure of your position on the field. It all depends on fitness for the job, on the adversary, on the available alternatives and on a lot of other circumstances. But everyone’s goal is to bring the cup home.

Rule 2. Differences

Leaders create a safe space to disagree by his own behavior and by making explicit the expectation that conflicts can be surfaced and resolved. Teams need to commit to listening with respect, debating and deciding. This needs some ground rules that need to be enforced. One of them is to tolerate the discomfort of divergent and passionate viewpoints, despite the tension it may raise for the team. Another one is that ultimately agreement between all is not necessary. The responsible person can, or maybe should say: “Thank you all for your input and for the discussion. I will let you know what I have decided.” After that the whole team must commit to executing the decision as best they can.

Rule 3. Interdependence

A key opportunity for interdependence exists if team members support each other’s goals, and seek each other’s  expertise and perspectives. Feedback, especially on behavior should be given directly to anyone and by anyone. Complaining to others afterwards, creating kongsi’s or lobbying for support in upcoming meetings is undesirable behavior and should not be tolerated.

Rule 4. Engage others

Teams can become insular and self-referential. It might be necessary for the leader to re-assign responsibilities, swap team members, encourage an inward-looking team to ask stakeholders for input and alignment on both operational and strategic matters. This can be done by inviting other stakeholders or subject matter experts to attend meetings, exchange information or just listen in.

Kahneman believes in rule based decision-making. Select the most important variables and come up with a simple algorithm, and score the variables, based on collected data. An example: the apgar score for newborns. Selection of candidates, chosing stocks to pick? Follow the best algorithm you can come up with and refrain from sticking to your first impression or your intuition.

Process

The best way to deal with coming to new ideas and new solutions is to create a two stage process: first collect as much information as you can, preferably anonymous, or brainstorm for new solutions. In the second stage critically select the best solution from those identified in the first stage.

And finally: if there are people with irrational or destructive behavior and personal motives, no ecosystem, no rules and no process will help you. You will have to confront them and ultimately remove them.

Coaching, Cooperation and Confidence

One of the finest moments in the life of a parent, and one of the most decisive moments in the life of a child is when he is better at something than his father or mother. For fathers is often a sport, and when it comes to football that moment is near for me. Sometimes we bring that moment closer by letting our kids win a game, but they don’t really believe. It does make them happy for a moment, but for their confidence it does not do much.

 

In companies it is often the other way around: the managers are usually afraid that their staff, or others in the company, will become better at something than they are. Sometimes they already are. They keep their team on a short leash and take a position of seniority by instructing their staff which method to use, and thereby create a dependency, because they are the experts. This serves no other purpose than boosting the ego and amplifying the senior position of the expert manager to confirm the power-relation. These people emphasize their own interest in an organization by claiming successes that should be attributed to others.

 

Leaders who hire people who are better than they are quite rare. Perhaps out of fear of being irrelevant.

 

This is a pity of course, because the organization will be weaker rather than stronger, and the full potential of the organization is not utilized. Moreover it is quite frustrating and demotivating when someone hijacks your successes to secure his own position. It will lead to conflicts. And: “Internal conflict is like an autoimmune disease: the technical cause of death may be pneumonia, but the real cause remains and hidden from plain view.” Negative circle …

 

We have a tendency to instruct. People working with me might recognize that. We think we know how things should be done; we give the order and request an update on the results a week later. In an environment with a lot of educated content experts this is not surprising: since our schooldays this is how we acquired knowledge: the teacher instructed us, we did our homework, and then she tested whether we had done well.

 

It may work, but this may not be the most motivating method.

 

There is also much talk about the “Master-Apprentice” principle. The Master passes his knowledge and experience on to the Apprentice, who goes to work right away, is continuously instructed and corrected and sometimes gets assignments to figure something out for himself. I would call this mentoring.

Mentoring comes from Greek mythology, where Odysseus, when he left for Troy, entrusted his home and the education of his son Telemachus to his friend Mentor, with the command: “Teach him everything you know.”

 

 

 

 

 

 

Still a lot like the schooldays.

For those who have no insecurities about their own position and relevance, and who dare to look at the potential of people rather than just their current performance, there is a third way: coaching.

If we create a coaching culture and use a management style that focuses a bit more on coaching instead of directly diving into the facts and methods, we could cooperate in such a way that our coworkers become aware of the possibilities for working smarter, and for removing obstacles to success, without handing over the responsibility for their work and their own accomplishments. Then everyone can claim his or her own success.

Success builds confidence, confident people to take personal responsibility, and so on. Positive circle!

 

Let’s help each other so, instead of trying to outsmart one another.

Not that this is exactly easy. John Whitmore, of whom more later, said: “It maybe harder to give up instructing than it is to learn to coach”.

 

My own first experience with coaching was not entirely voluntary. I will explain why. With one of my best friends I have a deal to learn something new together every year. We do this mainly because we’re both busy and otherwise we might spend too little time with each other, but also because new things are interesting. It was not easy to agree on what is interesting enough to learn, though. We looked at twenty weeks of furniture making, at ten days cooking course at Le Gordon Blue in Paris, at a curriculum at Harvard, and at some other things, but consensus was not reached. Therefore, the deal was adjusted: one year he decides, the next year I will. My choice for example was to follow a curriculum of Art History at The Hermitage. Ten weeks, one evening per week. For me a nice and safe option, with a classical education, and a history as a gallery owner in Amsterdam. Maybe I wanted to start my learning experience as an expert, and not feel inadequate or look like a schoolboy. When his turn came up last year he got back at me and opted for a course in Professional Coaching” I guess because he knew that I would otherwise never do that. I’ve already written about this before, and I am very glad we did it. Incidentally, as my revenge, next year we will follow a training course in Skydiving. This was my choice, because a long time ago he was selected to train as an F16 fighter pilot. He had to parachute jump, too. For some reason, after two jumps, he did not dare to jump out of a plane anymore. Dream gone, and replaced by a career in e-commerce, which turned out rather well. But still, this fear has always bothered him, and now he has to get over it.

 

 

 

 

 

 

 

 

 

 

Sometimes we need a bit of external help and pressure to make you us aware of what we do not know or what we can do but are not doing. In the end, it remains our own responsibility what we do with it.

Behavior and Brilliant Bastards

Behavior is a funny thing. We usually take it for granted because it seems to be something personal. It seems part of someone’s personality, not to be meddled with. And can we even influence or change it?

But then, on the other hand, it is too important to just let it go. It can be one of the most powerful assets in a company, if the collective behaviors of people work towards a collective ambition and common goals. And if not it can turn into a very destructive instrument.

Another reason why behavior cannot be ignored or in all cases accepted is that there is a clear relation between behavior and Company Culture.  Because of this relation it can influence culture and thereby have an effect on other people’s engagement and performance. This in turn of course has an effect on the chance of implementing your strategy and being successful. A mouthful, of course. But everyone knows this.

Our Qhuba Leadership team had a diner last week and we had asked the twelve participants to do an Erika. Remember Erika? She was the first streaker, throwing off all ballast (more specifically: all her clothes) to focus on her goal (whatever that may have been, probably five minutes of fame).

 

 

 

 

This was in the eighties so I think she got what she wanted.  The reason I mention her is because of the “Erika Principle”, which might help you focus. It stands for:

• Erase
• Reduce
• Increase
• Keep
• Add

So we asked everyone what not to do (or do much less) and what to start doing (or do much more) to implement our Strategy. we expected discussions about focus, markets, services, strategic directions, or activities, but what we noticed was that many of the things people mentioned were behaviors.

The relation between behavior and culture, as mentioned before is a direct one, but not a one-on-one relation. There are many definitions of what a company- or a corporate culture is. They range from “the way we do things around here”, to “the collective attitude of all the people”. I prefer a more specific definition: a Corporate Culture consists of shared ambitions, behaviors, shared values and shared assumptions of all who play a role in the company.

 The tricky thing is that even if some of the ambitions, behaviors, values and assumptions are shared explicitly, a lot remains below the surface. Mental picture: the Iceberg. What is visible is usually in documents that no one reads and in behaviors that everyone sees. That is why I believe that the influence of behaviors is large, which is exactly why as the leader of a company you cannot accept disruptive or destructive behavior and should do everything you can to promote behavior that is in line with your ambitions, values and believes. And sometimes that hurts.

Some people in key positions can be very good at their jobs in the sense that they have all the intellectual capabilities and the experience to succeed, but they can still be unsuccessful and even damaging to the company because of how they behave. We call them Brilliant Jerks. Sorry for the title of this blog, I could not resist the alliteration. Some have limited social skills which might alienate especially those they have a hierarchical relationship with. Even more serious is negativity, sarcasm and disputing as a way of participating in conversations. This behavior is often seen in College fraternities – in fact the Dutch word for Fraternity is Dispuut. It  has no place in a professional environment, though. Still, you will see it everywhere. The colleagues who can not sit and listen to anyone or any presentation without interrupting every few minutes. And when that does not have the desired effect or kickstart a heated argument, they will up the ante and by taking remarks or even words out of context to pin someone down that way.

We do not accept this. Instead we ask them if they are aware they do this, and if they are, why they do it. Explaining how it destroys any exchange of information, as well as cooperation, creative processes and decision-making sometimes helps. If it continues, we confront them, and as a last resort: we remove them.

Of course the best way to influence behavior is by setting the example ourselves,  and expect the same from our (Leadership) team.

 

Management Charter

In a growing company like ours, once you have passed the start-up and discovery stage where you operate like a Band of Brothers, and you embark on the Long March to Execution, Growth and Success, there is an increasing demand for clarity. Not only on Goals, Strategy and Successfactors, but also on how you want to operate, how you want to lead, how you want to make decisions and on what is desirable or destructive behavior. In Qhuba I have shared my first thoughts on this in a Management Charter, which I have summarized below:

Qhuba Management Charter:

1. Qhuba Shareholder meeting decides who will be P&L responsible (Director) for what. Main areas: Leadership, Development, Operations, and Practices with Qhuba majority participation. Division of roles of individual Shareholders with a Managementfee will also be at discretion of Shareholder Meeting.
2. Directors decide who report to them, what responsibility can be taken and what reward is fitting. In case of shares/options as part of the package the Shareholder meeting will need to agree. In all other cases: responsible Director decides
3. MT aligns all plans, goals and BSC targets and assigns budgets. In case of doubt: Accountable (Director Operations) decides.
4. All decision are made by the person responsible, within budgets and BSC, after collecting relevant information. („thanks for the input; I will let you know what my decision is”)
5. Meetings: there will be:

• Regular Shareholder Meetings (once or twice per year)
• Regular MT Meetings (weekly): with people invited because of their day-2-day All-Qhuba operational responsibilities. General Director schedules and invites.
• Regular Operations Meetings (Monthly): with the MT members, and the Profit and Loss responsible (Practice) Directors, like the PPM Practice, the Executive Search Practice and the Market-focussed Practices. General Director schedules and invites
• Regular Leadership Meetings (Quarterly): with Operations Meeting attendants and Qhuba Partners.Regularly All Hands Meeting (Once or twice per year): with all Qhubans. Open book approach on Performance, Plans, Questions and Answers.

 

Decision-Making:

• Responsible people can and should ask for input (Information), Advice (Consult) or Support (“Can you help me with…”)
• Others can and should provide Information (“Did you know that…?”)
• Others can and should ask Questions (“Have you considered…?”)
• Others can and should offer Support (“How can I help you…?”)
• Once decisions are taken by the person responsible (“Thanks for your input, I will let you know what I have decided…”), they will be communicated to those involved, but preferably to all Qhubans
• We are reluctant with opinions about those decisions

Behavior (For us and for all):

1. We do not talk about the behavior of people who are not present. We talk to them directly, and tell others to do so. About individuals’ performance: either offer help, or talk (only) to the responsible person he or she reports to.
2. If someone does not have a full-time commitment, no exclusivity, no Pride of Association? Then (s)he is no Qhuban, and needs to go (or maybe go to Q-Start as a candidate).
3. Brilliant jerks? Capable professionals with Lack of trust, Arrogance, Aggression and other destructive behavior? Confront them first, then give them one warning to change behavior, then get rid of them.
4. Meetings and presentations are to understand other peoples’ ideas, issues, proposals, presentations. Listen and ask questions to understand. Support is constructive. Criticism and judgement is usually destructive.
5. Financial demands, or allocation blackmail? Explain once, then tell them there is no room for individual arrangements.

Paradoxes and Dilemma’s

Last Sunday, for the first time in five years, Qhuba had a Beach Party: we had Beach Volleyball, a Sand sculpture-artist, barbecue, Soccer Championship on a big screen, and… partners and kids.

It was great. Why didn’t we do that before? Company – Family – Party,

Indeed, why did we not? Work life and personal life are interconnected nowadays, we work from home sometimes, they hear the stories, and how much fun is it when your kids and your spouse get to meet the people you work with and talk about? Great Fun! And probably I am the reason it never happened before, because work and home were different worlds me, and I kept them separate. This seemed like a good idea, and now it does not sound like such a good idea anymore. Or maybe for some people it still is, since not every attends these kinds of Parties, and not everyone who does attend brings his family. Not everyone has a family, for that matter.

Trying to think this through it becomes obvious that companies and people are constantly faced with Paradoxes.

This was an example; there are many more, bigger and smaller:

 

• Work and Private mixed or separated
• Command & Control, or Self Steering?
• Customer Focus, or People First?
• Collective growth or personal development
• Lean, or Agile?
• Exploitation or Exploration?
• Management or Leadership?
• Focus or differentiation?
• Short term or long term
• Cash or Value?
• Product focus or Market orientation?
• Network company or traditional Hierarchy?

 

The list goes on as long as you want, but first this: are these Dilemma’s or Paradoxes. I believe the difference is crucial. As far as I am concerned they are Paradoxes. In my definition a Dilemma is an “either-or” contradiction, usually the result of, or the solution to a problem. Good stuff for tough Leaders, because they need to make a choice between two alternatives that appear to be equally attractive or unattractive.

A Paradox on the other hand is an “and-and” challenge, seemingly contradictory and exclusive at first glance.

 

 

But what if the juxtaposition of alternatives is only perceived, and we do not think the challenge through, or we are not open to new possibilities as a result of our background or our worldview? Our opinions are often shaped by assumptions about what is right, and we act in accordance with those assumptions, without questioning where they came from.

If we do this, we turn Paradoxes into Dilemma’s, which we will then solve by making choices that have only losers, leading to polarization, negativism and missed opportunities.

 

Bob de Wit and Ron Meyer wrote about this in their book “Strategy Synthesis – Resolving Strategy Paradoxes to create Competitive Advantage”:

Most people are used to solving puzzles, resolving dilemmas and making trade-offs. These ways of understanding and solving problems are common in daily life. They are based on the assumption that, by analysis, one or a number of logical solutions can be identified. It might require a sharp mind and considerable effort, but the answers can be found.

However, most people are not used to, or inclined to, think of a problem as a paradox. A paradox has no answer or set of answers – it can only be coped with as best as possible. Faced with a paradox, one can try to find novel ways of combining opposites, but one will know that none of these creative reconciliations will ever be the answer. Paradoxes will always remain surrounded by uncertainty and disagreements on how best to cope.

 

So Paradoxes require effort, and learning how to deal with them, rather than killing them by making simple choices. A few simple steps might help, but it is a journey into uncharted waters.

The first step: Acknowledgement: make clear and agree on the fact that you are dealing with a paradox and not with a Dilemma that requires a “yes” or “no”, or a “left” or “right”.

Then: Accommodate a conversation, a discussion or a process. This might be the hardest part; talk about the paradox without all your preconceived notions of “how we do it”, or what is best, but instead look at the alternatives from all sides, seriously considering both their positive aspects as well as their negative aspects.

After that: Acceptance: we need to accept that for most paradoxes there are not simple solutions, and that the outcome is uncertain, as it the future. A change mindset helps. Let’s have that Family–thing and see what happens.

And finally: Creativity: look for workable ways to deal with complex concepts, systems, structures and solutions. Experiment and be prepared to turn the whole thing upside down.

 

And complexity…? If we can give each other the leeway to organize a Beach Party, to attend or not to attend, and to bring spouse and kids are not bring them, and if our kids can build sandcastles together, and decide to destroy them again, or finish them, or to play volleyball or watch soccer then we should be able to deal with the business paradoxes, too. Especially if we are able to admit that we will be wrong sometimes, or even that we want to be wrong.

 

For all who want: another Beach Event next year. With kids, Or without, Or both. I will be there.

Why we all (should) hate “How”

So much can be read from the way people talk. The choice of words is something worth paying attention to. Are they constantly talking about I rather than about We? No need to explain what it means. Although: here context plays a role, too. Are you having a discussion about Strategy and choices? Than the I-sayers might have more focus on their own agenda and personal feelings than on the collective ambition and the team. Are they we-sayers when talking about Execution, Objectives and responsibilities? Make sure people take responsibility for what they promise to accomplish, for the effort they put into it, and for the results.

I have similar experiences with the word „How”. Usually How refers to the process, and as soon as people, for instance in a Management Team, start diverting attention from the content to the process, you can conclude that they either lack the content, and have no opinion about the subject at hand, or they are stalling. Both pose serious problems for decision-making. The question Why a decision should or should not be taken is the crucial one.

When executing, it is the other way around. When someone has taken responsibility for implementing a decision, focus from his Peers or his Manager on How he should do this will most likely not lead to better results, but reduces the responsible person to someone who does not feel trusted with the task.
Not letting your employees figure out how to go about their business is an excellent way to make them stupid. Treat them like kids and you will have a Kindergarten on your hands instead of a company. or an Army – which in some circumstances (like War) has it use too.
Talking about Words, War and Companies: don’t we all love the idea of People, Planet, Profits, as sketched by Peter Frisk? Or for the realists, like Ben Horowitz: People Product Profits? And don’t we usually see the exact opposite? More along the lines of Politics, Paranoia and Pay-for-Preceived-Performance? Now that is something we want to do something about. An excellent Why (we want to do it differently).

And what about “How”? Does it have any use? Sure it does. In: „How can I help?”

How to build a business – focus

A new year, that means resolutions, plans and budgets. This is a confusing process, both personally and professionally, since it has to do with choices. In business of course the first choice of course is: are we going to choose – and thus focus – or are we going to diversify – and thus have more opportunities and less risk? Then there is a multitude of related choices: Clients Satisfaction first, or Employee Engagement; Command and Control or Self Steering teams, Cash or Value?

 

 

Undecided, you read a book under the Christmas tree – thank you Santa – and you stumble across the immortal quote: “It is our choices that show what we truly are, far more than our abilities”. Admittedly it was not Seneca or Socrates who said that, and not even Jim Collins or Michael Porter. It was Harry Potter. He did not do too badly for himself, did he? So that is decided. We choose. We choose why we do things, and what we do. And on a personal level how we do them. Professionally we let others decide how they do the things they are supposed to do. Or we should, if we can resist the urge to manage, or at least: to micro-manage. There we go again. More choices: do we Strategize, do we Lead, or do we Manage? Zappos gets rid of managers this year  but not of all hierarchy, and it might work for them. We tried it at Qhuba, too, last year but were not too happy with the results. A lot of time got wasted on… making choices. Time that could have been spent on clients, or on communication, or on learning, or on employee engagement, building trust and celebrating successes.

 

The answer of course is: we need to do a lot, for different purposes, and at the same time we need to focus and filter out the distractions.

 

As a Business we will focus on what we do best and where we can make a real difference: Business Technology Management. If there is no Technology component we won’t do it. Better to build on an established reputation, network and organisation than trying to establish new ones. Saras Sarasvathy  would probably call this the Bird in Hand principle. A treat she recognized in expert entrepreneurs.

 

As Leaders we will focus our attention, too. That seems easy enough, but after some searching, researching and soul-searching, this is also a subject with several dimensions. Most things come in three’s (even airline crashes). In this case: focus on yourself, focus on others, and focus on the wider world.

 

The inward focus, usually associated with authenticity, self-awareness and self-control (or: willpower) is an important characteristic for leaders, if in balance with the focus on others.

 

The focus on others does not come natural to all. It is usually associated with the term Empathy, which is often misunderstood as “being overly sympathetic”, “soft” or “compassionate”. It is none of those, but has more to do with (of course) three things: how we can explain ourselves to others and understand how they perceive us (cognitive empathy), being able to understand how other people feel (emotional empathy) and being able to sense what other people need from you (empathic concern). Being able to do all that, and especially in emotional empathy some of us, including myself, could still learn a thing or two, enable us to decide if we want to meet the other person’s need. And hopefully that is a deliberate, and sometimes tough, decision.

 

The focus on the outside world – and this is where the distraction lurks in the shadows – is a balance between focus on the job at hand: taking advantage of what we have and what is working now (exploitation), and all the people, information and opportunities out there, that might be crucial for your future success (exploitation). The problem is that there is so much out there, and the minds of the curious easily wander off. Or maybe exploration is just much more fun than exploitation. Still, more is not always better, and more than forty years ago we have been warned that “a wealth of information creates a poverty of attention”. The original text of Herbert Simon’s “Designing organizations for an information-rich world”   is fun and gives an interesting perspective on where we came from, if you can spare the time and attention.

 

 

And as a person? Well: get back to the my New Year’s resolution:

Focus your attention, pick your battles, plan your travels and pop your bottles.

Oh yes and I have just sent in my registration for a coaching course. Questioning, ok. Listening: to be improved. Emotional empathy: might need some work. Happy New Year.

 

How to build a business – Strategy Execution Cycle

Building a Business starts with an idea, which is then converted into action.

Simple and straightforward, but not always enough to be successful. Libraries can be filled with books about how this conversion is done, and usually the terms Strategy and Management are introduced on the first page. It is not always clear what is meant by the terms, and the explaining usually involves many more terms, like mission, vision, leadership. Once you are sufficiently confused you are lucky if you can understand where the author is taking you. Bullshit Bingo is never far away.

What is a Strategy really: is it a statement, or a plan, or just a hypothesis about value creation?

And what about Management? Sometimes you are introduced to the world of let it all run it’s course, your people will know what to do, the collective will manage itself (as Ricardo Semmler does), and sometimes to give every single employee a specific responsibility and task, and constantly measure how the task is performed, with Key Performance Indicators (Robert Kaplan).

Unless you want to turn into a one-man show, it is important is to be able to share your idea with others: Why do you want to do it, what do you want to do and for whom. And how will you be successful: Can you identify what the success-factors are, decide which of the underlying activities are vital and are you able to measure if they are performed up to the standard you have set for yourself and your business?

There is no single truth of course: are we talking about a bar in Berlin, a multi-national enterprise run from the United States, or a Production Plant in China? Hardly the same thing. Where you do it matters a lot: Context is crucial.

Equally important is who you have around you. Can you inspire them and share your vision and some of your responsibilities with them, delegate some of the vital activities to them? Time to get organized.

This requires planning and probably money. Decisions are needed on what initiatives have priority are and how they are funded.

Once you are in business the execution of your idea needs constant evaluation and adjustment, just like a hypothesis needs testing and change.

We believe these are five steps that not only reflect common sense but are also universally crucial to bring a business idea to fruition. We have called this approach SCOPE. An acronym where each letter represents a stage in the process of Strategy Execution:

Strategy – Context – Organisation – Planning – Execution

For Qhuba and its clients we have taken the “buffet approach”. You will pass all the five stations, but what you use from the process and the templates depends on your needs and appetite. The full cycle looks like this:

In the middle the basic templates for communication:

1. The Business Blueprint, which describes the building blocks behind the idea: the values, and the vision, the words you want to own and the x-factor you think you have. In short: the success-factors
2. The Strategy Map, which describes the value creating activities through series of cause and effect linkages, clustered per success-factor
3. The Scorecard, which describe the objectives per activity per success-factor.

Nothing is new here, nothing is revolutionary. The Plane, the Crew with the Flight Plan and the Cockpit, if you like analogies.

The only aim is to make a clearly defined approach with unequivocal terms and definitions and some practical tools available for all.

In five short articles we will describe the five steps, as well as the three tools, and then we will go through the whole sequence for our own company.

If you like the approach you might want to do the same for yours.

How to build a business – Agility and Innovation

Recently someone drew my attention to the report NL2030, published by BCG. The authors believe that in the Netherlands, to enable further growth of our prosperity and wellbeing we need to adopt a radically new business model. That raises some interesting questions, such as “Does something like  Dutch business model even exist?”, “what would it be based on?”, and: “why does it need to change?”.

The premise of the argument of the authors seems to be that country specific advantages that we used to have in the past, such as geographical location, infrastructure, and the associated foreign language skills and commercial spirit, no longer give us a any benefits. Thus, we are dependent on business benefits.

Ok. What do companies have to deal with? They are faced with an accelerating speed of change, mostly through technological innovations, with customers who have more and more specific wishes, and with a world that becomes flatter. I assume the authors are referring to Friedman’s idea of a global marketplace and almost realtime access to data, information and ideas from virtually anywhere

At first sight it seems to me that those are circumstances in which good companies could flourish.

The final step in the reasoning of BCG: If changes take place faster and faster we need innovation talent and social adaptability. People that love change and a society that facilitates it. And unfortunately – says BCG – those are not qualities that The Netherlands excels in.

The World Economic Forum, by the way, does not agree. In their “Global Competitiveness Report 2012-2013” they rank The Netherlands in the top ten, and they say: ”

The Netherlands continues to progress in the rankings, moving up to 5th place this year. The improvement reflects a continued strengthening of its innovative capacity as well as the heightened efficiency and stability of its financial markets. Overall, Dutch businesses are highly sophisticated (4th) and innovative (9th), and the country is rapidly and aggressively harnessing new technologies for productivity improvements (9th). Its excellent educational system (ranked 5th for health and primary education and 6th for its higher education and training) and efficient markets—especially its goods market (6th)—are highly supportive of business activity. And although the country has registered fiscal deficits in recent years (5.0 percent of GDP in 2011), its macroeconomic environment is more stable than that of a number of other advanced economies. Last but not least, the quality of its infrastructure is among the best in the world, reflecting excellent facilities for maritime, air, and railroad transport, ranked 1st, 4th, and 9th, respectively.”

For this ranking the WEF not only considers the traditional country-specific conditions such as infrastructure and education, but also markets as well as “Business Sophistication and Innovation”.

True or not, BCG makes a number of recommendations that are valuable, such as: Find opportunities in international niches, instead of catering with a broad portfolio of products or services, exclusively for the domestic market. And another one that makes sense: Based on expertise, focus on process orchestration (from design to production to sales and distribution) and not on performing all the activities yourself.

Finally they sketch the agenda for the Dutch government, and frankly I got a little confused here. Of course, good education is important, and of course we must educate scientists to conduct fundamental research. And naturally talent should be encouraged, and for some students we need to accommodate more generic international courses such as those offered by University Colleges. But how is that different from what our education system offers already and why not leave those choices up to young people? They will choose what they want, and what the market needs.

The labor market will become more flexible much faster than the government can take measures to stimulate this. Professionals trade historic rights for autonomy, relevance and networks of peers. Unions are becoming increasingly irrelevant.

The government should just step back. Buy-in from society, changing laws and regulating the labor market? No idea how that would help anyone. De-regulation would help, but if making laws is core business, what can we expect from a government.

Companies can orchestrate processes, but the government cannot orchestrate businesses. Entrepreneurs will.

The most useful recommendation is perhaps: to use more English as business language. The size of our own market is the limiting factor, but now the world becomes easily accessible; many markets are global, technologies enable shorter go-to-market times, and there is no reason why we should address these opportunities as a country, or why companies should be chauvinistic. And we don’t. In our company we have been communicating in English from day one. We have employed people from the US, South Africa, Australia and other countries.  Starting a business in The Netherlands is not difficult, and many of the best-educated and most innovative people are independent, or are willing to accept positions in those companies where their talents are appreciated and developed.

Business Sophistication and Innovation are the key enablers for success in a rapidly changing world: Agility as a strategy. Most large companies have been mainly striving for efficiencies, and cannot adapt or adopt change.

So, that brings us back to Thomas Friedman (The World is Flat) and John Kotter’s article in the Harvard Business Review (“Accelerate“).

This last article has received quite a bit of attention in the industry. Kotter explains why change is unnatural to large hierarchical organizations, and why a better approach, which he calls a dual operating system, is needed to be both agile and efficient.

He proposes the creation of a volunteer (self steering) tribe drawn from people from all corners of the organization, at all levels. These people will form a network that works in parallel with the existing hierarchical structures.

The two entities form a Dual Operating System, each contributing to the vitality and viability of the organization in a different and complementary way. The network’s task is to propose and co-creation the strategies of the future, while the hierarchy continues to operate as efficiently as possible. Exploration and exploitation as two sides to the same coin. Highly aligned, but loosely coupled.

The network strategy will involve no additional costs or overheads, as staff are invited to volunteer their time, knowledge and ideas to contribute to the future of the organization in a capacity that differs from the date-to-day work.

Good companies in the Netherlands and in other countries understand that besides Exploitation Exploration is crucial. That changes are opportunities and not always threats. For years we have been calling this the power of the Network, of Intrapreneurship and of Effectuation – and we have never needed the Government (or BCG) to help us with it.

How to build a business – demotions

There has been a lot of publicity lately about demotions and salary cuts for older employees in IT Services companies like Capgemini, whose market value does no longer justify their salaries.

 

Like they did not see that one coming.

 

What is this fuss all about?

 

Of course people are aware that the number of years you are with the company and the number of times you had your salary raised has no correlation to the value you will bring to the clients. Many years with the company? Maybe that has given you insights in the internal organization, or maybe you can manage or coach younger colleagues. That is not very interesting for a client, who wants practical knowledge, results and tangible benefits.

 

 

Especially now, with a much more dynamic and flexible labour market, clients are much more critical and service providers see rates that feel the pressure of the crisis. So how could they have put themselves in this situation? Probably everyone has always been focused on the short-term, because collective labour agreements have dictated that salaries be raised every year, because clients were never the most important stakeholder in companies like this?

In The Netherlands we have almost four hundred collective labour agreements. In only six of them demotion as an instrument is part of the agreement. Unions, whose members are to be found under the older employees, have every intention to keep treating demotions as a taboo.

 

The whole idea of demotion is not new of course. In 2000 the Wetenschappelijke Raad voor het Regeringsbeleid published a report suggesting that “the salary profile and the productivity profile” are getting out of sync. Their solution: more flexibility in salaries, no automatic correlation between age and salary increases, and ultimately demotion.

 

So what is the alternative and how could they have prevented this?

 

First of all, is seems more logical to correlate pay directly to productivity or market value. This can be done by paying basic salaries, plus additional components for both individual market value (measured through billable revenues) and company performance.

 

The question both companies and their employees will have to start asking themselves is how they can influence revenues per employee. Market value is determined by what clients are willing to pay based on the perceived benefits – although most people seem to think rates are determined by smart sales people. The employee feels he has limited influence on his market value. This of course is not true.

It can be increased by development though experience, training and smart matching. The first two are up to the professional. Matching – placing the professional on the assignments where he or she can add most value – is usually done by sales people. Unfortunately usually the match is made based on competences in CV’s and not on Character, Values, Culture and soft skills.

 

Our solution: make groups of professionals responsible for their own success and value. Self Steering teams determine what kind of professional education and training they need, and they are stimulated to build a network of clients. With some commercial training they are able to help the sales people not only with leads and opportunities, but also with better matches for proper rates.

The budget available for salaries and other compensation has a direct correlation with the revenues generated. The team members together determine their  own salaries. Demotion: a concept of the past.