by Yves Morieux
Understand how organizational structures, processes, and systems affect the work context. The formal structures, processes, and systems of the organization have an impact on behaviors and performance, but a very indirect one. Their impact depends on how they combine with each other to shape the goals, resources, and constraints to which people adjust their behaviors. When managers have an in-depth understanding of the dynamics shaping human behavior in the organization, they are then in a position to use the usual tools that they have available—organizational design, metrics, role definitions, and so on—to influence the work context and nudge people’s behavior in a direction that will result in improved performance.1
Avoid being led astray by the hard and the soft approaches. Armed with this new understanding, we will then revisit the hard and soft approaches to understand in more detail why they can only produce complicatedness. Freeing yourself from the assumptions of the hard and soft approaches will allow you to avoid the obfuscations that typically keep managers from understanding what is really going on in their organizations and how performance is generated from behavior.
Understanding what people do and why they do what they do is so utterly fundamental that it is our simple rule one. Before you, as a manager, do anything to solve a performance problem, you can save yourself a lot of time and money by first applying this rule. To illustrate the value of the first simple rule, we will tell the story of what we call InterLodge, a travel and tourism company we worked with to improve the performance of its hotel unit, interspersing the story with segments of analysis and interpretation. (Like all the companies described in the book, this is a real company, but we have changed the name.) The management of InterLodge made two attempts to improve performance based on the hard and soft approaches. Neither succeeded because both fundamentally misunderstood the problem. Finally, the organization came fully to understand the behaviors that were causing the poor performance in the hotels. InterLodge was then able to make relatively modest changes that, by shifting the context, resulted in new behaviors that generated performance improvements well beyond management’s initial expectations.
InterLodge: A Bold Commitment to Improve
The management team at InterLodge faced a big problem: the company’s share price was declining and had been falling for some time. Costs were too high and profitability was too low. Both the occupancy rate and the average price point per room were below target. According to surveys the company had conducted, customer satisfaction was far from what it should be.
The solution to these problems, the management team decided, was to embark on a set of restructuring and reengineering initiatives. It created a shared services program to serve groups of hotels by region, which it believed would reduce costs and also result in a higher and more consistent quality in the hotels’ services, amenities, and fixtures. It recast or redefined some roles and responsibilities of hotel employees with the goal of improving productivity and also focusing resources more sharply on quality. Finally, it rolled out a new, computerized, yield management system that it hoped would improve occupancy rate.
A year later, none of these changes had produced any of the improvements the management team sought. The occupancy rate and average room price had not gone up. Customer satisfaction scores had not improved. Profitability remained below target. The share price continued to slide.
Concerned (and a little bit panicked), the management team decided to take a bold step: in a public announcement, InterLodge committed to doubling its share price within three years. The intent of this commitment was to boost shareholder confidence and, just as important, energize the organization’s own people. The commitment had a powerful effect on InterLodge employees, particularly the hotel managers, but it was the opposite of what management had intended. They were not so much energized as terrified. The hotels were expected to increase the occupancy rate, boost the average price point, and improve customer satisfaction all at the same time. How could they possibly do that? They had no choice but to work with the shared services offerings and the centralized yield management systems, so there was little they could do with those aspects of their operations. The organization—including reporting structure, roles and responsibilities, and staffing levels—had been carefully designed in the restructuring initiative and could not be altered yet again.
So, the hotel managers looked for other ways to make improvements and settled on customer satisfaction as the element they could most influence. They came to the conclusion that an important cause of dissatisfaction was the interactions that guests had with hotel staff. They felt that the hotel receptionists, in particular, were a problem. These junior staff had the most contact with guests, but their customer engagement skills were limited to handling basic transactions. The managers also felt there was an issue with the type of person who typically held this (relatively low-paid) position. They were generally young and just didn’t seem to care that much about doing a good job. They certainly had no loyalty to the job or to the company, as evidenced by the high turnover rate in the position. The sales people who were primarily responsible for increasing the occupancy rate agreed. The receptionists, they said, often did not sell rooms to travelers who arrived late in the day even when rooms were available; instead they simply said that the hotel was full. This approach made absolutely no economic sense.
The management team at InterLodge took three actions to address the problems with the receptionists. First, executives further clarified the roles, scorecards, and process definitions for reception. Second, they put the receptionists through a training program to improve their skills in “guest engagement,” on the theory that better interactions would make guests happier. Third, they set up an incentive plan to motivate receptionists to sell more rooms and help increase the occupancy rate.
Six months later, however, the problems remained. In fact, things had gotten worse. The occupancy rate had dropped further. Average price point was down. Customer surveys showed lower levels of satisfaction. Receptionist turnover had risen.
Needless to say, by this point, the management team at InterLodge was extremely frustrated. The company had invested considerable resources in the two rounds of improvement initiatives—first, the restructuring and reengineering, and then the incentivizing and training. What else could it do?
The answer: it could do the most important thing of all—understand what its people were actually doing and why, starting with the context of the work in the hotels.
Analyze the Work Context
To understand what people do and why they do it, you need to understand the context of their work. This context is composed of three elements: goals, resources, and constraints.2 Behaviors are the solutions people find to deal with their problems and achieve their goals, given the resources and constraints they encounter in their situation at work. In this sense, behaviors must be treated as rational strategies. People may not always be right in what they choose to do. They make mistakes. Still, their behavior is always a solution they have found to deal with what matters to them. If they had found a better solution, they would do something else. What’s more, all the organizational mechanisms—structures, procedures, scorecards, incentives, and so on—that managers typically think drive performance are really only resources or constraints that employees will use or try to sidestep to achieve their goals. These organizational mechanisms certainly influence behavior, and thus performance, but only indirectly and often in a counterintuitive way. It all depends on how people use them.
Form Hypotheses about Goals, Resources, and Constraints
To determine the context, you have to gather information and data about the work, develop a hypothesis about why people behave as they do, and then test your hypothesis with further observation and data gathering. Once you understand what people do and why they do it, it is easier to improve performance, not by asking or telling people what to do, but by changing their context. You’ll end up using fewer and more-appropriate organizational me
chanisms, creating more value at lower costs.
Goals. Goals are what people are trying to achieve, the problems they are trying to solve, and the stakes for them in a particular situation. When you observe behaviors and learn about what people do through conversations or interviews, ask yourself: to what kind of problem is this behavior a solution? What goal does it help people achieve? (See the sidebar “Questions to Ask to Analyze Context.”)
SIMPLE RULES TOOLKIT
Questions to Ask to Analyze Context
What are the most interesting aspects of your work? Why?
What are the most difficult, annoying, or frustrating aspects? Why?
What are the key problems that you have to deal with in your job?
How do you go about solving them?
How can you know if these solutions work?
Who (departments, people) do you have to interact with to do your job?
Which interactions are the most important ones for your work? Why?
Which are the most difficult or involve the most conflict? Why?
Who do you depend on?
What is it that they do that affects your ability to do well?
When they act, do they take into account the impact of their actions on you?
The answers to these questions provide the raw materials to start the analysis of the context.
Adapted with permission from Erhard Friedberg, “L’Analyse sociologique des organizations,” Pour, special issue (Paris: L’Harmattan, 1987).
As you try to answer these questions, do not think only about the formal goals set by the performance management system or by job definitions. It’s not the formal goals of the organization that you want to understand, but rather the actual goals of individuals and work groups that, in fact, may not have much to do with the organization’s formal goals. Instead, try to determine the problems people are trying to solve in their day-to-day activities and what is at stake for them personally in a particular situation.
The real goals and problems people are dealing with are not so easy to determine. This is partly because individuals are usually unable to articulate their goals, even when you ask them directly. Or they may know their real goals but will not tell you for any number of reasons. For instance, they may fear that you will use this information against them. For this reason, what people say in interviews and conversations must always be considered along with other sources of information such as direct observation of actions and interactions. You can then triangulate this data to figure out what is really going on.
Resources. Resources are what people use to solve their problems in achieving what matters to them at work. Some typical resources include an individual’s skills and unique strengths, the cooperation of colleagues, time, information, budget, and power (for example, being able to influence something that matters to other people). What some people perceive as a resource, others can perceive as a constraint.
Constraints. Constraints are things that people try to avoid, minimize, or sidestep. Constraints hinder or restrict them in achieving the goals that matter to them. A person’s constraints may include things such as performance targets, specific organizational rules, lack of room for maneuver, or dependency on others to achieve what he or she wants to achieve. Constraints are inherent to organizations. Like resources, they are neither good nor bad in themselves; these are analytical concepts to understand why people do what they do.
Assess the Adjustment Costs
A particular type of constraint is especially important in organizations. It concerns how behaviors combine with each other in producing overall results. As you analyze the work context, you will notice interdependencies among people. Whenever the work one person does has an impact on the ability of other people to do what they have to do, there are interdependencies. Whenever there is interdependency, there needs to be cooperation. To cooperate is to take into account in what you do—in your decisions and your actions—the needs and situations of others. It may mean providing them with more resources—information, knowledge, equipment, or time. It may also mean removing some of their constraints. As a result, cooperation gives others a broader range of possible solutions. It increases their ability to deal with their own tasks which enhances their effectiveness.
But cooperation is anything but easy, and you should not assume that it is happening in your organization. Cooperation between individuals with distinct responsibilities, resources, and constraints always involves what we call adjustment costs. Imagine a continuum of cooperation as a line between two end points. One of them represents what is ideal for one person in the situation; the other marks the ideal for the other person. When two people cooperate, they move the cursor along the continuum to a spot that is not ideal for either but that is more beneficial for the overall results. The distance between each one’s ideal and the solution they reach when cooperating is the cost of adjustment borne by each. Although the overall result is greater for the group as a whole, the adjustment comes at a personal cost for each individual. This cost can be professional, emotional, reputational, or, of course, financial. The adjustment cost for individuals is by no means lessened by the possibility of sharing the benefits that accrue from cooperation. (See figure 1-1.)
FIGURE 1-1
The cooperation continuum
A, B: an actor, i.e., a function, unit, team, or individual with specific goals, resources, and constraints.
Adjustment costs are signals at the level of the individual for how behaviors combine with each other to produce a given performance. When people use their autonomy to avoid cooperation, then someone else has to adjust. Often, it is other people in the organization. But sometimes, it is people external to the organization—for example, customers who bear the consequences in terms of defects, delays, or higher prices, or shareholders who get lower returns because of the dysfunctions in the organization. That’s why it is critical for management to understand the dynamics of adjustment costs and how they affect organizational performance. (See the sidebar “Clues for Assessing Adjustment Costs.”)
SIMPLE RULES TOOLKIT
Clues for Assessing Adjustment Costs
Stress or dissatisfaction. When one person or group adjusts to the needs of others, but the others do not do so in return, the result is usually a situation of high stress for those bearing the costs of adjustment.
Resentment. When a person or group avoids adjusting to the needs of others, and forces them to do the adjusting, that person or group is often the target of resentment.
Indifference. When a person or group neither makes adjustments nor forces others to do so, others often display indifference toward the individual or group.
Look for Anomalies
When you have identified the goals, resources, and constraints for a specific set of people or work groups, you often come up against anomalies—something that doesn’t quite fit with the behaviors you observe. For example, you might discover that something you consider to be a resource is not being used by people; managers don’t use the new IT system or the evaluation forms provided by the human resources department. Alternatively, you might find people spending a lot of time preoccupied with issues that to you look like they should be constraints—for instance, managers complaining bitterly about administrative tasks, but then spending hours in their office working on them.
Such anomalies are always a good sign: you start to really understand performance and how it is generated precisely when you discover things that people do that you did not expect. When that happens, you must dig into the anomaly instead of disregarding it. Indeed, if you are not finding anything unexpected or unusual, that is probably a sign that you are missing key aspects of the work context and are still too focused on org charts, process descriptions, models, or ready-made assumptions.
The point is, nothing is inherently a resource or constraint; it depends on people’s goals and problems. To return to a previous example, the administrative burden that managers complain about might ac
tually be a resource if their real goal is to avoid interacting with teams over which they have no real power. Although they may complain about it, such work provides a way to stay in the office and avoid confronting their lack of power. Dynamics such as this are why observing behaviors is so important. A resource is what people use. If people don’t use something, then it’s not a resource but, rather, it must be a constraint for them.
Looking for anomalies is important because resources and constraints aren’t immutable. They are reversible, depending on situations. When the goal or problem changes, a resource can become a constraint and vice versa. What’s more, goals, resources, and constraints are always in dynamic interaction: each partly determines the other. People do not necessarily set a goal and then look for the resources to achieve it. People adjust their goals to the available resources as much as they try to adjust resources to meet a goal. People often set ambitions and discover new aspirations according to the opportunities their resources make it possible to pursue.3
It’s like when you play poker with your friends. Is your goal to win? Often, it depends on the cards you have been dealt. If the cards are poor, you will probably lose interest in the game. Your attention will focus somewhere else: you might check out the TV that is on in the background, start a conversation with one of the other players, pour yourself a drink. Your goal is not to win the game but simply to have a good time. But when you are dealt good cards in the next round, suddenly winning the game seems possible. You pay closer attention. You reengage. Your goal is to win.