Synopsis: All corporate leaders want results. In this paper, we take the view that how we achieve is equally important as what we achieve. It is the how that determines our chances of success in the long run.
Whether you are a manager in the private sector, striving to improve the profitability of your business, or a public service executive faced with the unrelenting challenge of delivering more with less, you know that you will ultimately be judged by the results you deliver. Everybody wants results - there will never be any disagreement on this point - but the way in which managers go about obtaining them can be radically different from one organisation to the next.
In this article, we will argue that there are two fundamentally different approaches to leading an organisation, one enslaved to the balance sheet, focused on the short term and obsessed with costs and targets, the other based on a broader view of the organisation, capable of circumscribing not only the results (and the inevitable balance sheet) but also, crucially, a sound understanding of the systems and processes that generate the results.
Management lacking a solid understanding of the organisational systems over which they preside and moreover, lacking the very method for acquiring it, is the reality behind poor performance in many organisations. For it is possible to focus so hard on results that we forget the systems and processes from which they arise. And often, in a drive to improve results over the short term, we change the processes and systems for the worse, leaving the organisation unable to satisfy its customers in the long run. We are all familiar with cost reduction initiatives that drive staff to cut corners, lowering the quality of the product or service and creating problems that will eventually cost more to fix than the short term savings they generated.
Let’s make a comparison between the management style narrowly focused on results, which we will call “command and control”, and the continual improvement approach. The principles of the latter have been taught by W. E. Deming since the 1950s and have continued to be developed by a prestigious group of management thinkers including Peter Senge, Donald J. Wheeler, Russell Ackhoff, Peter Scholtes, Brian Joiner and John Seddon among others.
|Command & Control||Continual Improvement|
|Primary focus||Objectives and results. The quest for better results often warps the underlying processes and systems, making them less fit to deliver in the long term.||Results are seen as outcomes of work processes and systems. In order to improve the results, the processes must be improved. The change is sustainable and delivers long term benefits.|
|How management sees its role||Assigns objectives and targets to the workforce, monitors their performance and allocates rewards based on results. Senior managers take the view that the means by which the objectives are achieved is the business of their subordinates, forgetting that performance improvement can only happen through a coordinated effort across the entire organisation.||Management’s main responsibility is to shape and improve organisational systems and processes and make then better and better at delivering what the customer wants. Managers are the ones who have the authority and power to do it, so it is crucially important that the management steps up to the task. Else it will not get done.|
|Use of information and data||Compares actual expenditure with budgets, and results with target - two point comparisons that yield no insights into work processes. Reacts to routine variation as if it were exceptional, an error that often results in man-made chaos. With no understanding of inherent process dynamics, business forecasts are no more than wishful thinking and hoping for the best.||Always interprets data in the context of the process that generated it. |
Distinguishes between routine and exceptional variation and takes appropriate action in each situation.
Process behaviour charts enable reliable prediction and decision making based on factual evidence and sound understanding of work processes.
|Organisation structure||Fragmented by function - silo approach. Each functional department is held to account for achieving their assigned objectives. Suboptimisation can occur i.e. we optimise one part at the expense of the whole.||Systemic view of organisations. Looks at how the work flows across functional departments. Contributing to corporate goals takes priority over achieving one's targets in isolation.|
|Cost management||Focuses directly on reducing costs. Cost cutting initiatives often store up problems for later.||Looks at costs as outcomes of work processes.|
Cost reductions happen reliably over time as a result of process improvement.
|Cooperation versus competition||Promotes competition. Quotas and targets place departments and individuals in competition with each other, deterring staff from sharing important information and best practice.||Promotes cooperation. Individuals and departments have the best chance of achieving corporate goals by working together.|
|Motivation||Extrinsic, carrot and stick approach. Takes the view that people will strive to do their best only when motivated by bonuses and on-target-earnings.||Intrinsic. Employees should be paid good wages. Beyond that, the sooner we all forget about counting our pay, and focus on the work itself, the better. There is research* showing that a strong focus on monetary rewards destroys intrinsic drivers like the need for personal growth and achievement, which people are naturally inclined to seek in their work.|
The ‘command and control’ and ‘continual improvement’ descriptions build up to very different pictures of management. Some may think continual improvement is a lot more work than the command and control approach. That may be so, but we do the hard work in good time, before pressure builds up from our environment to cut costs and ‘tighten screws’. In the long run, it will save us the stress of constantly putting out fires, allowing us to direct all our resources to achieving required performance on a full-time basis.
Continual improvement is about gradually strengthening our competitive position, way before competitors are hot on our heels, or before government targets push us into a tight corner. This is the challenge of management: to move away from coping with history, on to skilled prediction and preparing for the future. The methodology for achieving this has been created, tried and tested. It’s there for all of us to learn and apply.
* See “A Meta-Analytic Review of Experiments Examining the Effects of Extrinsic Rewards on Intrinsic Motivation” Edward L. Deci, Richard Koestner and Richard M. Ryan, Psychological Bulletin 1999, Vol. 125, No. 6, 627-66