by Yves Morieux
The contradictions among compactness, low cost, and reparability were not new for MotorFleet. What was new was the competitive pressure that removed the possibility of satisfying one requirement at the expense of the others.
MotorFleet had already created functions like that of Mr. Reparability for other requirements. There was a Ms. Cost, a Ms. Safety, a Mr. Energy Consumption, and several more. Each of these defined its processes, KPIs, and incentives to align engineers with a specific requirement. The idea, typical of strategic alignment, was that if there are as many KPIs as there are requirements, each with the adequate weight and right incentive, the engineers’ behaviors will necessarily place themselves at the weighted average of KPIs in the scorecards.
What was the effect of the new reparability function on the engineers? Because of all the other KPIs and incentives, and despite a relatively large proportion of variable compensation (more than fifteen percent in some cases), a good achievement on the reparability KPI could only make a tiny difference in the total compensation per engineer—a miniscule 0.8 percent. In other words, nothing. We know that incentives can actually have a counterproductive effect on behaviors but, in this case, the effect was neither counterproductive nor effective; it was just negligible, with no impact on the reparability of vehicles.5
To deal with this mass of processes, procedures, and rules (MotorFleet’s handbook eventually ballooned to include some ten thousand operating procedures), the engineers resorted to their informal network of friends and colleagues to find solutions. They counted on good interpersonal relationships to get by. But the limitation of informal networks is that people all do their best to avoid making any tough decisions that could impose adjustment costs on one another and thus jeopardize the good feelings. In the informal network, the resource is good relationships with others. To preserve this key resource, people tend to avoid difficult trade-offs that, were they to address them, would strain their relationships and, thus, damage their key resource. Moreover, the various bonding events that had been organized to bring the mechanical and electrical engineers together had actually worked. They did feel closer kinship and that made them even more reluctant to strain their relationships and effectively cooperate.
When the tough choices had to be made about contradictory requirements, decisions inevitably got booted upstairs where senior engineering managers, with less direct knowledge of the issues, accepted poor compromises. The after-sales teams continued to struggle with costly repair operations, and MotorFleet found it impossible to extend the warranty period without wrecking the budget. The company was unable to add value by reconciling reparability with the other requirements, but spent a great deal of money and added a lot of complicatedness in the attempt.
… But Cooperation Can
At last, MotorFleet changed its approach. Instead of framing the issue according to the principles of strategic alignment—“we need reparability, so we need a reparability structure, with re-parability processes and systems”—executives realized the issue was cooperation:
When engineers designed the vehicles, they would have to take into account the constraints of the service people who would repair them.
Engineers, notably in the mechanical and electrical units, would have to cooperate with one another, given the impact their combined decisions had on the work of the mechanics in the after-sales garages.
This reframing of the issue radically changed the terms of the problem. Instead of making procedures and scorecards more sophisticated by using the best practice of strategic alignment, the management team decided to find a way to make the insufficient cooperation of engineers become a constraint for them. For years, the cost of their lack of cooperation had been externalized, pushed onto the after-sales network—particularly, the garage mechanics—and customers as well. How could the context be changed to reintroduce this cost as a constraint for the engineers? How could they be exposed to the consequences of their actions on others and the overall results?
The answer was to make engineers walk in the shoes they had made for others, specifically the after-sales mechanics, with an elegant and ingenious solution: some of the engineers were assigned to work in the company’s after-sales network of garages after the launch of a model they had designed. Their responsibility was to manage the warranty budget for that particular model. If the warranty budget exploded because of the hard-to-repair design choices they made, it would explode in their hands. The prospect of being asked to work in the after-sales network—the implied time bomb—had a far more powerful effect on the quality the engineers delivered than could any amount of interfaces, coordinators, or formal metrics.
When the mechanical and electrical engineers fully understood that they might have to deal personally with the consequences of their choices, they began to work in a very different way. They abandoned the touchy-feely approach to teamwork, with its convivial avoidance of real cooperation, and started to address head-on the need for tough solutions. By working with marketing and with each other, the engineers were able to make choices that eventually enabled MotorFleet to match its warranty period with that of its competitors without compromising its other performance requirements.
Of course, the solution involved the adjustment of the organization, but just one element—career paths.6 But if the management team had continued to strive for strategic alignment, it would have found it impossible to come up with this elegant solution. That’s because career paths come too late in the linear sequence of alignment. Senior executives would not have considered career paths until they had aligned everything else—structures, processes, and systems. The responsibility for adjusting the career paths would have fallen to an HR person who would only have been asked to make Mr. Reparability’s compensation, benefits, and career path suitably attractive—thus further increasing complicatedness.
The new career path for engineers reduced some of the benefits that might have been gained from continued experience within their group (such as the intense learning that comes from repeating a task or the innovation that can result from single-minded focus), but the analysis showed that such potential productivity improvements were insignificant compared to the benefits of greater cooperation between engineers and with the after-sales network.
As simple rule five was implemented, the management team found that it opened up opportunities to apply some of the other simple rules, such as reinforcing the role of integrators. The company was able to remove the cross-functional coordinators (including the reparability structure), interfacing roles, processes, scorecards, and incentives. Eighty percent of those in interface roles were returned to positions where they could cooperate with others in satisfying the multiple requirements of performance. Within three years, overall productivity at MotorFleet increased by 20 percent, and the company now makes its extended warranty the cornerstone of its communication campaign.
The Effect of the Extended Shadow: Increased Engagement
Extending the shadow of the future changes what people have at stake—their goals and problems—and often it constrains what they have to do by taking into account the constraints of others, not only their own. This is why, when extending the shadow of the future, people must be granted sufficient autonomy and room to maneuver. It would be absurd (and unjust) to expose people to the consequences of their actions without giving them enough say in how they can act or by preventing them from taking any actions that might have an impact on future results. If an outcome makes a difference for you, you should be able to make a difference in the outcome. Without room of maneuver and enough influence on those whose cooperation people need, a feedback loop only traps them. When that happens, the only way to deal with that kind of suffering is to disengage or, as the receptionists at InterLodge did, resign.
Engagement, therefore, is prospective, not retrospective. People do not choose to engage as a result of gratitude for how things have gone in the past, but rather as a reflection of what it will bring them. By extending the
shadow of the future, a company makes people’s engagement more worthwhile to them because they have the ability to make a greater difference in their personal trajectory. The potential is all the greater because the trajectory is not fixed and people can help create a better career for themselves where they are, rather than moving to another company or endeavor. To get this kind of engagement, companies have to create plenty of room to maneuver within roles and set up career paths that enable people to grow in various ways, by rising to a higher position or by enriching and broadening their current role as they create more value.
When people do not have any ability to affect the things that matter to them, it can be highly demotivating. This is proving to be especially true for senior populations in the workforce. Companies that are dealing with the demographic shift caused by the retirement of baby boomers tend to worry most about how they will deal with the resulting workforce shortages. They miss the much more significant issue of the declining productivity that results from disengaged employees who know that their next career move will be and can only be retirement.7 When the trajectory is defined in advance, the future has no shadow and there will be no engagement. The process of wear that accompanies the passage of time is accelerated. Mature employees do not age an enterprise; the enterprise ages them. Increasing the legal retirement age without roles that allow people to make and feel a difference only makes disengagement last longer.
Tools Put to New Purpose
The adventures of the companies we have described in this chapter illustrate attempts to satisfy multiple requirements through the hard approach of alignment: dedicating jobs to requirements (such as Mr. Reparability) or creating KPIs and metrics specific to a requirement (such as talent development at the mining company). We have seen that many of the performance requirements that a company must face can only be satisfied by fostering cooperation, not by creating dedicated functions, procedures, or systems in a quest for strategic alignment.
We have also learned about how to foster cooperation by creating feedback loops that extend the shadow of the future and how this involves using classical tools of management, such as career paths. When applying the simple rules, companies need not and cannot abandon all the organizational levers such as goal setting, processes, role definition, career paths, and the rest. There are no other elements to design organizations.
Indeed, there is no single lever or one magic element beyond these basic ones that can instantly produce a cultural transformation, an adaptive company, a learning organization, or any of the other models that seem so appealing. Properties such as reparability, customer centricity, flexibility, speed, and others emerge from interaction patterns that are shaped by contexts, and these are, in turn, created by the combination of organizational levers.
The simple rules use the familiar elements of structure, processes, and systems, but in a very different way. What matters are not the elements per se, but the way people integrate them into their strategies. These elements are not selected according to their supposed intrinsic pros and cons, or according to their consistency in the abstract, but according to the behaviors that become rational strategies for people when the various elements come together. In doing so, you can design work contexts with surgical accuracy, in a much more specific way than with generic structural patterns. The accuracy is not in the details of what people ought to do, but in understanding why they do what they do and the way behaviors combine to produce adaptiveness, customer centricity, and performance in general. This is why a major benefit of the simple rules is that you use much fewer elements and the ones you use are really effective. The simple rules help you choose organizational levers by approaching them both at a specific level and holistically, according to their combined effect on the context of goals, resources, and constraints from which behaviors and performance arise. This smart simplicity helps you avoid falling into the complicatedness trap hidden in best practices and in the strategic alignment sequence—more and more structures, processes, and systems that set the organization further and further adrift.
SUMMARY OF SIMPLE RULE FIVE
Increase the importance to people of what happens tomorrow as a consequence of what they do today. By making very simple changes you can manage complex requirements, while also removing organizational complicatedness. With the strategic alignment typical of the hard approach, these simple solutions—for instance, career paths—often come at the end of a sequence that starts by installing the most cumbersome changes: new structure, processes, systems, metrics, and so on. Simple and effective solutions are then impossible. You can extend the shadow of the future in four ways:
Tighten the feedback loop by making more frequent the moments when people experience the consequence of the fit between their contributions.
Bring the end point forward, notably, by shortening the duration of projects.
Tie futures together so that successful moves are conditioned by contributing to the successful move of others.
Make people walk in the shoes they make for others.
6
Simple Rule Six
Reward Those Who Cooperate
Rule six is the third of the three simple rules that impel people to best use their judgment and energy to deal with complexity. Although all three of these rules rely on the creation of feedback loops, the loops of rules four and five are direct. Rule six, by contrast, is indirect.
Sometimes, the nature of tasks and activities is such that feedback can only come indirectly—through the judgment and evaluation made by other people, usually managers—and rule six is about creating this kind of feedback loop. This type of indirect feedback loop may be necessary when there is a long time lag between causes and effects, or when jobs are so insulated from one another that people in those jobs are immune to the reciprocal impact of others’ behavior.
In such cases, senior managers can close the feedback loop by following the sixth simple rule: reward people who cooperate and do not reward those who do not. To this end, managers will need to use the familiar tool of performance evaluation, although in a very different way.
In this chapter, you will learn:
How to move beyond using purely technical criteria in performance evaluations. In practice, most performance evaluations are about finding technical causes for problems and identifying the people responsible to then place blame. A more effective use of performance evaluations is to foster cooperation.
How to make those who don’t cooperate bear the cost. People should not be blamed for failures, especially when they happen in an attempt to meet a performance requirement. Rather, people should be blamed for failing to help others who are in need of help.
How to change the managerial dialogue to make transparency a resource rather than a constraint. Many organizations play a game of target setting that discourages transparency and prevents groups from achieving their full potential. The managerial dialogue around performance evaluation should use people’s knowledge to best effect and to encourage innovation.
In this chapter, we will illustrate these points through a detailed case study of how managers at a passenger railway company we call RapidTrain changed the performance evaluation process to get its trains to run on time.
RapidTrain: Improving On-Time Performance
On-time performance used to be RapidTrain’s strong suit. But over the past ten years, due to the rapid increase in traffic, on-time arrivals had declined below 80 percent. Leveraging its long history of technological excellence, the company had tried many different solutions: upgrading its traffic control systems, creating a new function to monitor delays, and rationalizing some operations such as cleaning and equipment checks. But each initiative, even if it did slightly increase on-time performance, also had a negative impact on other performance requirements, including cost, quality, and safety. Given the company’s strict standards, this was unacceptable, so RapidTrain stopped each on-time improvement initiative before it could improve punctuality.
/> Then, competition from other railways and alternative transportation modes intensified. RapidTrain had no choice but to improve its on-time performance while also keeping to its strict standards for safety, quality, and cost. How could the company possibly do that? We suggested to the executive team members that they focus on improving cooperation instead of relying on individual accountability and adding new resources. However, many people did not see the need to improve cooperation. For instance a maintenance supervisor said: “Lack of cooperation is an excuse. If we are all accountable in our silos the trains will be on time, cooperation or not. My job is to make sure the trains leave maintenance in the right way at the right time.” The hard approach. A recently hired manager responded: “Your silo-mentality is typical of the bureaucratic mind-set we find here, because of the civil servant history in a state-owned company.” This was the soft approach, according to which mind-sets drive behaviors, and the only solution for sure is “to change mentalities.”