Category Archives: Organization Architecture
The Presidential election is tomorrow. I shall not disclose my position, but I am a San Francisco/Bay Area Native. Any doubts who I most likely am inclined toward? Most likely not! But the campaign throughout the year got me thinking. Imagine … over $1.3B have been spent to either bash someone or to send a message out. Over $1.3B! I do not have the actual numbers, but what I do know is that about $1B was spent in 2008 and it is estimated that the total spend was at least 30% more for the 2012 campaign. That makes it one of the biggest annual marketing budgets. To put it in context, that is almost 50% more than what Apple spent on advertising in 2011 ($933M).
We are expecting about 100M people to vote. 100M people to give a like for either party. Now look at it this way. $1.3B suggests that the total presidential campaign budget would translate to over 400M clicks (assuming $3 per click) or over 650 billion impressions (assuming $2 per 1000 impressions). Of course, that is not actually the case because there is payroll, organization expenses, etc, etc, etc. But you get the point. It is a big big budget … and it is one of the very few budgets that tend to be managed very well. Despite the largesse, it does not take into account the volunteer base that goes into the campaigns.
Now the outcome associated with political campaigns is fairly concrete. Either you have put the money to good use, hence resulting in the election of the appropriate person or your money spent has not been good enough. Who do you fire? The person who loses either goes moves shop from White House or considers becoming the CEO of the next big thing – perhaps a public equity capital group. Either way, we can take some learnings from all that have transpired and apply it to organizations. Of course, most organizations do not have this massive budget but regardless … they do have substantial marketing budgets and so the question is: What can we learn from what we have seen in the political theater that would enable the organization to shape and landscape the customer and employee mindshare.
Here are a few key points:
1. Pounding the message: Organizations have to be focused on the end goal and ensure at all times that any and all message that is being delivered is being done to attain a set of key objectives that enables organization success. That means that there should be no ambiguity as to what the organization and its brand represents. Dilution of the message may open up pockets of undecided customers or employees that could vote with their wallet and their feet quite readily.
2. Creating advocacy groups: Organizations have to create and nurture product and message evangelists by placing these nodes across many fields where potential customers and employees may come in contact with the organization. That would mean almost all social media channels, offline channels, conferences, elicit testimonials, investor and public relations efforts, timing special news releases etc. Advocacy groups are a proxy for all channels that an organization must leverage.
3. Aspirational Inclinations: Sell a dream! Sell possibilities! Sell the Why Nots! People tend to converge upon a platform of optimism. Yet, organizations must also be able to short their competitor’s offerings or perhaps not mention them at all.
4. Polling the behavior: If you notice, political campaigns have taken a page out of Lean Startup methodology. If polls go haywire …resources and messages are tweaked to create a semblance of stability and to get back to desired radar frequencies. Tweaking of the message and the presence of the messenger becomes important. This is field deployment of solutions associated with what all the data intelligence gathered is telling you.
5. Super PACS and Angel Affiliates: You have limits as do all organizations! No problem! Create evangelists that are not directly on the take. These are folks that will push your culture to the furthest corners of the globe. So recognize them and support them. They carry the torch since they fully believe in your mission and that your organization outcomes will impact them positively. How? Let them know? Drill. Baby. Drilllll the message.
6. Electoral College wins, not popular polls: Focus on the profitable customers; get the very best employees. Stratify your business so that you buy the win. You may not have the most likes but you would have had enough among the strata that truly matters.
7. Give the final reason: Give customers and employees a reason to vote. You want them to vote for you, but all the same you still want them to vote. You want the market of ideas to expand, even though they may serve competing visions in the tapestry of organizations in your space. But in trying to harness the turnout to the polls, you will have done as well as you can to draw them to your mojo.
“Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things. And the reason they were able to do that was that they’ve had more experiences or they have thought more about their experiences than other people.”
– Steve Jobs
What is the Medici Effect?
Frans Johanssen has written a lovely book on the Medici Effect. The term “Medici” relates to the Medici family in Florence that made immense contributions in art, architecture and literature. They were pivotal in catalyzing the Renaissance, and some of the great artists and scientists that we revere today – Donatello, Michelangelo, Leonardo da Vinci, and Galileo were commissioned for their works by the family.
Renaissance was the resurgence of the old Athenian democracy. It merged distinctive areas of humanism, philosophy, sciences, arts and literature into a unified body of knowledge that would advance the cause of human civilization. What the Medici effect speaks to is the outcome that is the result of creating a system that would incorporate what on first glance, may seem distinctive and discrete disciplines, into holistic outcomes and a shared simmering of wisdom that permeated the emergence of new disciplines, thoughts and implementations.
Supporting the organization to harness the power of the Medici Effect
We are past the industrial era, the Progressive era and the Information era. There are no formative lines that truly distinguish one era from another, but our knowledge has progressed along gray lines that have pushed the limits of human knowledge. We are now wallowing in a crucible wherein distinct disciplines have crisscrossed and merged together. The key thesis in the Medici effect is that the intersections of these distinctive disciplines enable the birth of new breakthrough ideas and leapfrog innovation.
So how do we introduce the Medici Effect in organizations?
Some of the key ways to implement the model is really to provide the support infrastructure for
1. Connections: Our brains are naturally wired toward associations. We try to associate a concept with contextual elements around that concept to give the concept more meaning. We learn by connecting concepts and associating them, for the most part, with elements that we are conversant in. However, one can create associations within a narrow parameter, constrained within certain semantic models that we have created. Organizations can hence channelize connections by implementing narrow parameters. On the other hand, connections can be far more free-form. That means that the connector thinks beyond the immediate boundaries of their domain or within certain domains that are “pre-ordained”. In those cases, we create what is commonly known as divergent thinking. In that approach, we cull elements from seemingly different areas but we thread them around some core to generate new approaches, new metaphors, and new models. Ensuring that employees are able to safely reach out to other nodes of possibilities is the primary implementation step to generate the Medici effect.
2. Collaborations: Connecting different streams of thought in different disciplines is a primary and formative step. To advance this further, organization need to be able to provide additional systems wherein people can collaborate among themselves. In fact, the collaboration impact accentuates the final outcome sooner. So enabling connections and collaboration work in sync to create what I would call – the network impact on a marketplace of ideas.
3. Learning Organization: Organizations need to continuously add fuel to the ecosystem. In other words, they need to bring in speakers, encourage and invest in training programs, allow exploration possibilities by developing an internal budget for that purpose and provide some time and degree of freedom for people to mull over ideas. This enables collaboration to be enriched within the context of diverse learning.
4. Encourage Cultural Diversity: Finally, organizations have to invest in cultural diversity. People from different cultures have varied viewpoints and information and view issues from different perspectives and cultures. Given the fact that we are more globalized now, the innate understanding and immersion in cultural experience enhances the Medici effect. It also creates innovation and ground-breaking thoughts within a broader scope of compassion, humanism, social and shared responsibilities.
Implementing systems to encourage the Medici effect will enable organizations to break out from legacy behavior and trammel into unguarded territories. The charter toward unknown but exciting possibilities open the gateway for amazing and awesome ideas that engage the employees and enable them to beat a path to the intersection of new ideas.
“We chose steel and extra wide panels of glass, which is almost like crystal. These are honest materials that create the right sense of strength and clarity between old and new, as well as a sense of transparency in the center of the institution that opens the campus up to the street.”
What is Transparency in the context of the organization?
It is the deliberate attempt by management to architect an organization that encourages open access to information, participation, and decision making, which ultimately creates a higher level of trust among the stakeholders.
The demand for transparency is becoming quite common. The users of goods and services are provoking the transparency question:
- Shareholder demand for increased financial accountability in the corporate world,
- Increased media diligence
- Increased regulatory diligence and requirements
- Increased demand by social interest and environmental groups
- Demands to see and check on compliance based on internal and external policies
- Increased employees’ interest in understanding how senior management decisions impact them, the organization and society
There are 2 big categories that organizations must consider and subsequently address while establishing systems in place to promote transparency.
- External Transparency
- Internal Transparency
Some of the key elements are that organizations have to make the information accessible while also taking into account the risk of divulging too much information, make the information actionable, enable sharing and collaboration, managing risks, and establishing protocols and channels of communication that is open and democratic.
For example, it is important that employees ought to able to trace the integrity, quality, consistency and validity of the information back to the creator. In an open environment, it also unravels the landscape of risks that an organization maybe deliberately taking or may be carrying unknowingly. It bubbles up inappropriate decisions that can be dwelt on collectively by the management and the employees, and thus risks and inappropriateness are considerably mitigated. The other benefit obviously is that it enables too much overlap wherein people spread across the organizations may be doing the same thing in a similar manner. It affords better shared services platform and also encourages knowledge base and domain expertise that employees can tap into.
Organization has to create the structure to encourage people to be transparent. Generally, people come to work with a mask on. What does that mean? Generally, the employees focus on the job at hand but they may be interested to add value in other ways besides their primary responsibility. In fact, they may want to approach their primary responsibility in an ingenious manner that would help the organization. But the mask or the veil that they don separates their personal interest and passions with the obligations that the job demands. Now how cool would it be if the organization sets up a remarkably safe system wherein the distinction between the employees’ personal interest and the primary obligations of the employee materially dissolve? What I bet you would discover would be higher levels of employee engagement. In addressing internal transparency, what the organization would have done is to have successfully mined and surfaced the personal interests of an employee and laid it out among all participants in a manner that would benefit the organization and the employee and their peers.
Thus, it is important to address both – internal and external transparency. However, implementing transparency ethos is not immune to challenges wherein increased transparency may distort intent, slow processes, increase organizational vulnerabilities, create psychological dissonance among employees or groups, create new factions and sometimes even result in poor decisions. Despite the challenges, the aggregate benefit of increased transparency over time would outweigh the costs. At the end, if the organization continues to formalize transparency, it would also simultaneously create and encourage trust and proper norms and mores that would lay the groundwork for an effective workforce.
Reputation is often an organization’s most valuable asset. It is built over time through a focused commitment and response to members’ wants, needs, and expectations. A commitment to transparency will increasingly become a litmus test used to define an association’s reputation and will be used as a value judgment for participation. By gaining a reputation for value through the disclosure of information, extensive communications with stakeholders, and a solid track record of truth and high disclosure of information, associations will win the respect and involvement of current and future members.
Kanter and Fine use a great analogy of transparency like an ocean sponge. These pore bearing organisms let up to twenty thousand times their volume in water pass through them every day. These sponges can withstand open, constant flow without inhibiting it because they are anchored to the ocean floor. Transparent organizations behave like these sponges: anchored to their mission and still allowing people in and out easily. Transparent organizations actually benefit from the constant flow of people and information.
Plans to implement transparency
Businesses are fighting for trust from their intended audiences. Shel Holtz and John Havens, authors of “Tactical Transparency,” state that the realities associated with doing business in today’s “business environment have emerged as the result of recent trends: Declining trust in business as usual and the increased public scrutiny under which companies find themselves thanks to the evolution of social media.” It is important, now more than ever, for organizations to use tools successfully to be sincerely but prudently transparent in ways that matter to their stakeholders.
“Tactical Transparency” adopted the following definition for transparency:
Transparency is the degree to which an organization shares the following with its stakeholder publics:
▪ Its leaders: The leaders of transparent companies are accessible and are straightforward when talking with members of key audiences.
▪ Its employees: Employees or transparent companies are accessible, can reinforce the public view of the company, and able to help people where appropriate.
▪ Its values: Ethical behavior, fair treatment, and other values are on full display in transparent companies.
▪ Its culture: How a company does things is more important today than what it does. The way things are done is not a secret in transparent companies.
▪ The results of its business practices, both good and bad: Successes, failures, problems, and victories all are communicated by transparent companies.
▪ Its business strategy: Of particular importance to the investment community but also of interest to several other audiences, a company’s strategy is a key basis for investment decisions. Misalignment of a company’s strategy and investors’ expectations usually result in disaster.
Here are some great links around transparency.
According to J.D. Lasica, cofounder of Ourmedia.org and the Social Media Group, there are three levels of transparency that an organization should consider when trying to achieve tactical transparency.
▪ Operational Transparency: That involves creating or following an ethics code, conflict-of-interest policies, and any other guidelines your organization creates.
▪ Transactional Transparency: This type of strategy provides guidelines and boundaries for employees so they can participate in the conversation in and out of the office. Can they have a personal blog that discusses work-related issues?
▪ Lifestyle Transparency: This is personalized information coming from sites like Facebook and Twitter. These channels require constant transparency and authenticity.
Create an Action Plan around policies and circumstances to promote transparency:
Holtz and Havens outline specific situations where tactical transparency can transform a business, some of which are outlined in this list.
▪ Major Crises
▪ Major change initiatives
▪ Product changes
▪ New regulations that will impact business
▪ Financial matters
▪ Media interaction
▪ Employee interaction with the outside world
▪ Corporate Governance
▪ Whistleblower programs
▪ Monitoring corporate reputation internally and externally
▪ Whistleblower programs
▪ Accessibility of management
Posted in Corporate Social Responsibility, Employee Engagement, Employee retention, Leadership, Learning Organization, Learning Process, Management Models, Organization Architecture, Risk Management, Social Dynamics, Social Systems, Walled Garden
Tags: boundaries, communication channel, conversation, crowdsource, democracy, diversity, employee engagement, learning organization, mass psychology, organization architecture, risk management, social systems, strategy, transparency
Most of you today have heard the word “pivot”. It has become a very ubiquitous word – it pretends to be something which it is not. And entrepreneurs and VC’s have found oodles of reasons to justify that word. Some professional CXO’s throw that word around in executive meetings, board meetings, functional meetings … somehow they feel that these are one of the few words that give them gravitas. So “pivot” has become the sexy word – it portrays that the organization and the management is flexible and will iterate around its axis quickly to accommodate new needs … in fact, they would change direction altogether for the good of the company and the customers. After all, agility is everything, isn’t it? And couple that with Lean Startup – the other Valley buzz word … and you have created a very credible persona. (I will deal with the Lean Startup in a later blog and give that its due. As a matter of fact, the concept of “pivot” was introduced by Eric Ries who has also introduced the concept of Lean Startup).
Pivots happen when the company comes out with product that is not the right fit to market. They assess that customers want something different. Tweaking the product to fit the needs of the customer does not constitute a pivot. But if you change the entire product or direction of the company – that would be considered a pivot.
Attached is an interesting link that I came across —
It gives examples of eight entrepreneurs who believe that they have exercised pivot in their business model. But if you read the case studies closely, none of them did. They tweaked and tweaked and tweaked along the way. The refined their model. Scripted.com appears to be the only example that comes closest to the concept of the “pivot” as understood in the Valley.
Some of the common pivots that have been laid out by Eric Ries and Martin Zwilling are as follows 😦http://blog.startupprofessionals.com/2012/01/smart-business-knows-8-ways-to-pivot.html). I have taken the liberty of laying all of these different pivots out that is on Mr. Zwilling’s blog.
- Customer problem pivot. In this scenario, you use essentially the same product to solve a different problem for the same customer segment. Eric says that Starbucks famously did this pivot when they went from selling coffee beans and espresso makers to brewing drinks in-house.
- Market segment pivot. This means you take your existing product and use it to solve a similar problem for a different set of customers. This may be necessary when you find that consumers aren’t buying your product, but enterprises have a similar problem, with money to spend. Sometimes this is more a marketing change than a product change.
- Technology pivot. Engineers always fight to take advantage of what they have built so far. So the most obvious pivot for them is to repurpose the technology platform, to make it solve a more pressing, more marketable, or just a more solvable problem as you learn from customers.
- Product feature pivot. Here especially, you need to pay close attention to what real customers are doing, rather than your projections of what they should do. It can mean to zoom-in and remove features for focus, or zoom-out to add features for a more holistic solution.
- Revenue model pivot. One pivot is to change your focus from a premium price, customized solution, to a low price commoditized solution. Another common variation worth considering is the move from a one-time product sale to monthly subscription or license fees. Another is the famous razor versus blade strategy.
- Sales channel pivot. Startups with complex new products always seem to start with direct sales, and building their own brand. When they find how expensive and time consuming this is, they need to use what they have learned from customers to consider a distribution channel, ecommerce, white-labeling the product, and strategic partners.
- Product versus services pivot. Sometimes products are too different or too complex to be sold effectively to the customer with the problem. Now is the time for bundling support services with the product, education offerings, or simply making your offering a service that happens to deliver a product at the core.
- Major competitor pivot. What do you do when a major new player or competitor jumps into your space? You can charge ahead blindly, or focus on one of the above pivots to build your differentiation and stay alive.
Now please re-read all of the eight different types of “pivot” carefully! And reread again. What do you see? What do you find if you reflect upon these further? None of these are pivots! None! All of the eight items fit better into Porter’s Competition Framework. You are not changing direction. You are not suddenly reimagining a new dawn. You are simply tweaking as you learn more. So the question is – Is the rose by any other name still a rose? The answer is yes! Pivot means changing direction … in fact, so dramatically that the vestiges of the early business models fade away from living memory. And there have been successful pivots in recent business history. But less so … and for those who did, you will likely have not heard of them at all. They have long been discarded in the ash heap of history.
Great companies are established by leaders that have vision. The vision is the aspirational goal of the company. The vision statement reflects the goal in a short and succinct manner. Underlying the vision, they incorporate principles, values, missions, objectives … but they also introduce a corridor of uncertainty. Why? Because the future is rarely a measure or a simple extrapolation of expressed or latent needs of customers in the past. Apple, Microsoft, Oracle, Salesforce, Facebook, Google, Genentech, Virgin Group, Amazon, Southwest Airlines etc. are examples of great companies who have held true to their vision. They have not pivoted. Why? Because the leaders (for the most part- the founders) had a very clear and aspirational vision of the future! They did not subject themselves to sudden pivots driven by the “animal spirits” of the customers. They have understood that deep waters run still, despite the ripples and turbulence on the surface. They have honed and reflected upon consumer behavior and economic trends, and have given significant thought before they pulled up the anchor. They designed and reflected upon the ultimate end before they set sail. And once at sea, and despite the calm and the turbulence, they never lost sight of the aspirational possibilities of finding new lands, new territories, and new cultures. In fact, they can be compared to the great explorers or great writers – search for a theme and embark upon the journey …within and without. They are borne upon consistency of actions toward attainment and relief of their aspirations.
Now we are looking at the millennial generation. Quick turnarounds, fast cash, prepare the company for an acquisition and a sale or what is commonly called the “flip” … everything is super-fast and we are led to believe that this is greatness. Business plans are glibly revised. This hotbed of activity and the millennial agility to pivot toward short-term goal is the new normal — pivot is the concept that one has to be ready for and adopt quickly. I could not disagree more. When I hear pivots … it tells me that the founders have not deliberated upon the long-term goals well. In fact, it tells me that their goals are not aspirational for the most part. They are what we call in microeconomic theory examples of contestable agents in the market of price-takers. They rarely, very rarely create products that endure and stand the test of time!
So now let us relate this to organizations and people. People need stability. People do not seek instability – at least I can speak for a majority of the people. An aspirational vision in a company can completely destabilize a certain market and create tectonic shifts … but people gravitate around the stability of the aspirational vision and execute accordingly. Thus, it is very important for leadership to broadcast and needle this vision into the DNA of the people that are helping the organization execute. With stability ensured, what then happens are the disruptive innovations! This may sound counter-factual! Stability and disruptive innovations! How can these even exist convivially together and be spoken in the same breath! I contend that Innovation occurs when organizations allow creativity upon bedrock of discipline and non-compromising standards. A great writer builds out the theme and let the characters jump out of the pages!
When you have mediocrity in the vision, then the employees have nothing aspirational to engage to. They are pockets sometimes rowing the boat in one direction, and at other times rowing against one another or in a completely direction. Instability is injected into the organization. But they along with their leaders live behind the veil of ignorance – they drink the Red Bull and follow the Pied Piper of Hamelin. So beware of the pivot evangelists!
Tags: boundaries, choice, core, creativity, employee engagement, extrinsic motivation, intrinsic motivation, lean startup, learning organization, mass psychology, organization architecture, pivot, platform, talent management
MECE is a thought tool that has been systematically used in McKinsey. It stands for Mutually Exclusive, Comprehensively Exhaustive. We will go into both these components in detail and then relate this to the dynamics of an organization mindset. The presumption in this note is that the organization mindset has been engraved over time or is being driven by the leadership. We are looking at MECE since it represents a tool used by the most blue chip consulting firm in the world. And while doing that, we will , by the end of the article, arrive at the conclusion that this framework alone will not be the panacea to all investigative methodology to assess a problem – rather, this framework has to reconcile with the active knowledge that most things do not fall in the MECE framework, and thus an additional system framework is needed to amplify our understanding for problem solving and leaving room for chance.
So to apply the MECE technique, first you define the problem that you are solving for. Once you are past the definition phase, well – you are now ready to apply the MECE framework.
MECE is a framework used to organize information which is:
- Mutually exclusive: Information should be grouped into categories so that each category is separate and distinct without any overlap; and
- Collectively exhaustive: All of the categories taken together should deal with all possible options without leaving any gaps.
In other words, once you have defined a problem – you figure out the broad categories that relate to the problem and then brainstorm through ALL of the options associated with the categories. So think of it as a mental construct that you move across a horizontal line with different well defined shades representing categories, and each of those partitions of shades have a vertical construct with all of the options that exhaustively explain those shades. Once you have gone through that exercise, which is no mean feat – you will be then looking at an artifact that addresses the problem. And after you have done that, you individually look at every set of options and its relationship to the distinctive category … and hopefully you are well on your path to coming up with relevant solutions.
Now some may argue that my understanding of MECE is very simplistic. In fact, it may very well be. But I can assure you that it captures the essence of very widely used framework in consulting organizations. And this framework has been imported to large organizations and have cascaded down to different scale organizations ever since.
Here is a link that would give you a deeper understanding of the MECE framework:
Now we are going to dig a little deeper. Allow me to digress and take you down a path less travelled. We will circle back to MECE and organizational leadership in a few moments. One of the memorable quotes that have left a lasting impression is by a great Nobel Prize winning physicist, Richard Feynman.
“I have a friend who’s an artist and has sometimes taken a view which I don’t agree with very well. He’ll hold up a flower and say “look how beautiful it is,” and I’ll agree. Then he says “I as an artist can see how beautiful this is but you as a scientist takes this all apart and it becomes a dull thing,” and I think that he’s kind of nutty. First of all, the beauty that he sees is available to other people and to me too, I believe. Although I may not be quite as refined aesthetically as he is … I can appreciate the beauty of a flower. At the same time, I see much more about the flower than he sees. I could imagine the cells in there, the complicated actions inside, which also have a beauty. I mean it’s not just beauty at this dimension, at one centimeter; there’s also beauty at smaller dimensions, the inner structure, also the processes. The fact that the colors in the flower evolved in order to attract insects to pollinate it is interesting; it means that insects can see the color. It adds a question: does this aesthetic sense also exist in the lower forms? Why is it aesthetic? All kinds of interesting questions which the science knowledge only adds to theexcitement, the mystery and the awe of a flower! It only adds. I don’t understand how it subtracts.”
The above quote by Feynman lays the groundwork to understand two different approaches – namely, the artist approaches the observation of the flower from the synthetic standpoint, whereas Feynman approaches it from an analytic standpoint. Both do not offer views that are antithetical to one another: in fact, you need both to gather a holistic view and arrive at a conclusion – the sum is greater than the parts. Feynman does not address the essence of beauty that the artist puts forth; he looks at the beauty of how the components and its mechanics interact well and how it adds to our understanding of the flower. This is very important because the following dialogue with explore another concept to drive this difference between analysis and synthesis home.
There are two possible ways of gaining knowledge. Either we can proceed from the construction of the flower ( the Feynman method) , and then seek to determine the laws of the mutual interaction of its parts as well as its response to external stimuli; or we can begin with what the flower accomplishes and then attempt to account for this. By the first route we infer effects from given causes, whereas by the second route we seek causes of given effects. We can call the first route synthetic, and the second analytic.
We can easily see how the cause effect relationship is translated into a relationship between the analytic and synthetic foundation.
A system’s internal processes — i.e. the interactions between its parts — are regarded as the cause of what the system, as a unit, performs. What the system performs is thus the effect. From these very relationships we can immediately recognize the requirements for the application of the analytic and synthetic methods.
The synthetic approach — i.e. to infer effects on the basis of given causes — is therefore appropriate when the laws and principles governing a system’s internal processes are known, but when we lack a detailed picture of how the system behaves as a whole.
Another example … we do not have a very good understanding of the long-term dynamics of galactic systems, nor even of our own solar system. This is because we cannot observe these objects for the thousands or even millions of years which would be needed in order to map their overall behavior.
However, we do know something about the principles, which govern these dynamics, i.e. gravitational interaction between the stars and planets respectively. We can therefore apply a synthetic procedure in order to simulate the gross dynamics of these objects. In practice, this is done with the use of computer models which calculate the interaction of system parts over long, simulated time periods.
The analytical approach — drawing conclusions about causes on the basis of effects – is appropriate when a system’s overall behavior is known, but when we do not have clear or certain knowledge about the system’s internal processes or the principles governing these. On the other hand, there are a great many systems for which we neither have a clear and certain conception of how they behave as a whole, nor fully understand the principles at work which cause that behavior. Organizational behavior is one such example since it introduces the fickle spirits of the employees that, at an aggregate create a distinct character in the organization.
Leibniz was among the first to define analysis and synthesis as modern methodological concepts:
“Synthesis … is the process in which we begin from principles and [proceed to] build up theorems and problems … while analysis is the process in which we begin with a given conclusion or proposed problem and seek the principles by which we may demonstrate the conclusion or solve the problem.”
So we have wandered down this path of analysis and synthesis and now we will circle back to MECE and the organization. MECE framework is a prime example of the application of analytics in an organization structure. The underlying hypothesis is that the application of the framework will illuminate and add clarity to understanding the problems that we are solving for. But here is the problem: the approach could lead to paralysis by analysis. If one were to apply this framework, one would lose itself in the weeds whereas it is just as important to view the forest. So organizations have to step back and assess at what point we stop the analysis i.e. we have gathered information and at what point we set our roads to discovering a set of principles that will govern the action to solve a set of problems. It is almost always impossible to gather all information to make the best decision – especially where speed, iteration, distinguishing from the herd quickly, stamping a clear brand etc. are becoming the hallmarks of great organizations.
Applying the synthetic principle in addition to “MECE think” leaves room for error and sub-optimal solutions. But it crowd sources the limitless power of imagination and pattern thinking that will allow the organization to make critical breakthroughs in innovative thinking. It is thus important that both the principles are promulgated by the leadership as coexisting principles that drive an organization forward. It ignites employee engagement, and it imputes the stochastic errors that result when employees may not have all the MECE conditions checked off.
In conclusion, it is important that the organization and its leadership set its architecture upon the traditional pillars of analysis and synthesis – MECE and systems thinking. And this architecture serves to be the springboard for the employees that allows for accidental discoveries, flights of imagination, Nietzschean leaps that transform the organization toward the pathway of innovation, while still grounded upon the bedrock of facts and empirical observations.
Posted in Business Process, Employee Engagement, Innovation, Leadership, Learning Organization, Learning Process, Management Models, Model Thinking, Motivation, Organization Architecture, Recognition, Risk Management, Social Dynamics, Social Systems
Tags: Analysis, creativity, employee engagement, employee recognition, innovation, learning organization, mass psychology, Mental Construct, Mental Models, organization architecture, social network, social systems, Synthesis, Systems Thinking, talent management, uncertainty
The Balanced Scorecard Model (BSC) was introduced by Kaplan & Norton in their book “The Balanced Scorecard” (1996). It is one of the more widely used management tools in large organizations.
One of the major strengths of the BSC model is how the key categories in the BSC model links to corporate missions and objectives. The key categories which are referred to as “perspectives” illustrated in the BSC model are:
Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the “unbalanced” situation with regard to other perspectives. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.
Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups
Internal Business Process Perspective
This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not necessarily something that can be developed by outside consultants. My personal opinion on this matter is that the internal business process perspective is too important and that internal owners or/and teams take ownership of understanding the process.
Learning and Growth Perspective
This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people — the only repository of knowledge — are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization.
Kaplan and Norton emphasize that ‘learning’ is more than ‘training’; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers, the engagement of the workers, the potential of cross-training that would create pockets of bench strength and switch hitters, and other employee specific programs that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call “high performance work systems.”
This perspective was appended to the above four by Bain and Company. It refers to the vitality of the organization and its culture to provide the appropriate framework to encourage innovation. Organizations have to innovate. Innovation is becoming the key distinctive element in great organizations, and high levels of innovation or innovative thinking are talent magnets.
Taking the perspectives a step further, Kaplan and Cooper instituted measures and targets associated with each of those targets. The measures are geared around what the objective is associated with each of the perspectives rather than a singular granule item. Thus, if the objective is to increase customer retention, an appropriate metric or set of metrics is around how to measure the objective and track success to it than defining a customer.
One of the underlying presumptions in this model is to ensure that the key elements around which objectives are defined are done so at a fairly detailed level and to the extent possible – defined so much so that an item does not have polymorphous connotations. In other words, there is and can be only a single source of truth associated with the key element. That preserves the integrity of the model prior to its application that would lead to the element branching out into a plethora of objectives associated with the element.
Objectives, Measures, Targets and Initiatives
Within each of the Balance Scorecard financial, customer, internal process, learning perspectives and innovation perspectives, the firm must define the following:
Strategic Objectives – what the strategy is to achieve in that perspective
Measures – how progress for that particular objective will be measured
Targets – the target value sought for each measure
Initiatives – what will be done to facilitate the reaching of the target?
As in models and analytics, the information that the model spouts could be rife with a cascade of metrics. Metrics are important but too many metrics associated with the perspectives may diffuse the ultimate end that the perspectives represent.
Hence, one has to exercise restraint and rigor in defining a few key metrics that are most relevant and roll up to corporate objectives. As an example, outlined below are examples of metrics associated with the perspectives:
Financial performance (revenues, earnings, return on capital, cash flow);
Customer value performance (market share, customer satisfaction measures, customer loyalty);
Internal business process performance (productivity rates, quality measures, timeliness);
Employee performance (morale, knowledge, turnover, use of best demonstrated practices);
Innovation performance (percent of revenue from new products, employee suggestions, rate of improvement index);
To construct and implement a Balanced Scorecard, managers should:
- Articulate the business’s vision and strategy;
- Identify the performance categories that best link the business’s vision and strategy to its results (e.g., financial performance, operations, innovation, and employee performance);
- Establish objectives that support the business’s vision and strategy;
- Develop effective measures and meaningful standards, establishing both short-term milestones and long-term targets;
- Ensure company wide acceptance of the measures;
- Create appropriate budgeting, tracking, communication, and reward systems;
- Collect and analyze performance data and compare actual results with desired performance;
- Take action to close unfavorable gaps.
The link above contains a number of templates and examples that you may find helpful.
I have discussed organization architecture and employee engagement in our previous blogs. The BSC is a tool to encourage engagement while ensuring a tight architecture to further organizational goals. You may forget that as an employee, you occupy an important place in the ecosystem; the forgetting does not speak to your disenchantment toward the job, neither to your disinclination toward the uber-goals of the organization. The forgetting really speaks to potentially a lack of credible leadership that has not taken the appropriate efforts to engage the organization by pushing this structure that forces transparency. The BSC is one such articulate model that could be used, even at its crudest form factor, to get employees informed and engaged.
Posted in Business Process, Employee Engagement, Employee retention, Financial Metrics, Financial Process, Innovation, Leadership, Learning Organization, Learning Process, Management Models, Organization Architecture, Recognition, Risk Management, Social Dynamics, Talent Management
Tags: bain and company, balanced scorecard, business process, communication channel, employee engagement, employee recognition, extrinsic motivation, financial process, innovation, intrinsic motivation, learning organization, management tools, mass psychology, model, organization architecture, rewads, risk management, social systems, strategy, talent management, value, value management