Organizations, Systems|

I have spent the better part of two decades helping organizations solve big, complex challenges that hold back performance and create problems with strategy execution. The problems have varied from talent to teams to the operating model and workforce management. And the solutions have ranged from compensation, to communication, to work redesign, matrix decision making, leadership behaviors, and much more. But the one thing that has been a critical part of the diagnosis and finding solutions in all cases has been systems thinking.

Systems thinking has roots that trace back over six decades ago to Kurt Lewin (1951), and include approaches promoted by prominent authors including Leavitt (1965), Galbraith (1977), Tichy (1983), and many more. At its most fundamental, this approach demands that we look at the entire organizational system when diagnosing the sources of performance problems to identify solutions that work.

Yet despite the long pedigree of systems thinking and a proven track record, it is rarely applied as a diagnostic tool in organizations today, and especially not by people who sit in talent and workforce diagnostic roles. In my work with leadership and analytics groups I see a time honored pattern of repeating the mistakes made by generations of budding social scientists when they are just learning the tools of the diagnostics trade. They play around in the data, looking for interesting patterns. They fall into the trap of going down one path of inquiry because it seems like a good idea, when doing the alternative of taking a step back, pausing and examining a bigger landscape would help them see a better way to go. They declare victory when they find interesting insights so long as there is something useful that can be accomplished from the insights. The end result is a lot of effort expended for relative low ROI.

In one blog like this I cannot provide a full treatment of systems thinking and how organizational diagnostics need to be conducted differently. Here I introduce the idea of systems diagnosis at the job, team and organizational levels. At the end there are links to related posts that go further into some aspects of systems diagnosis. There also is a link to a workshop Alexis Fink and I are leading that provides a deep dive and skill building on the topic as a way to improve organizational performance.

Systems diagnosis to improve job performance

There are two critical aspects of systems diagnosis at the job level that need to be applied any time you want to look for improvements in job performance: (a) addressing job design simultaneously with motivation/engagement and skills, and (b) including high performance work design principles.

The problem with non-systems thinking at the job level starts with half-baked attempts to improve performance by both business leaders and HR. Job performance is driven by three interdependent parts: job design, motivation and skills (competencies). Yet rather than consider all three at the same time – the basic tenet of systems thinking and diagnosis – 99% of the time those parts are bifurcated and addressed separately, and wholly incompletely, by the business and by HR.

Job design is typically addressed only by business leaders, separately from motivation and skills. Job design is controlled directly when business leaders redesign the org structure and work processes to improve performance. It’s also controlled indirectly by leaders through the annual budgeting process: when they decide what parts of the business will get new investments, and when they set compensation budgets based on simplistic assumptions about how much money needs to be spent to generate the desired performance levels. Their approach comes up short because they believe that by specifying the nature of jobs and how much to spend on them, that alone will produce desired performance. It usually does not.

A comparable problem arises from the way HR approaches improving performance using the levers of motivation and skills only. Since HR isn’t invited to focus on job design and is asked to focus solely on motivation / engagement and skills, it’s hard to blame them for ignoring job design since they are usually excluded from the most important job design decisions. Yet that means they daily go into battle without a key weapon in the job performance arsenal. Sometimes it’s possible to improve performance by focusing only on motivation/engagement, on skills, or both. But the solution often falls short of what should be achieved because job design issues aren’t addressed: the job’s roles and responsibilities, how it’s resourced, how it fits into other jobs on the team and within the organization more broadly, etc. I can’t count how many times I’ve been asked to help a company diagnose the sources of performance issues, only to find that key elements of job design hold back true breakthrough improvements. Ignoring job design is like going into battle with one arm tied behind your back. Not generally advisable.

A similar problem stems from ignoring high performance work design principles. Also called high involvement work design by Ed Lawler, high performance work design diagnostics start from the reality that there are choices to be made about decision rights, the amount of discretion/autonomy, and the skills needed to staff any role. At one end of the spectrum are traditionally designed jobs where the employee is treated as someone not to be trusted, with little discretion over how to do the work, very close supervision (a.k.a. micromanagement), and a job profile best suited to people who won’t rebel against being so closely controlled. Examples include many call center, data entry, merchandising, and assembly line jobs, among others. Those workplaces are staffed by managers who spend their time constantly looking over the shoulders of their employees to make sure they don’t step out of line.

High performance jobs in contrast have a lot more freedom, transferring some key decision making from managers to employees, freeing up the managers to focus on coaching and developing their people, and on finding ways to improve operations. While it sounds like those are preferable choices under any circumstance, the history of organizational performance has proven that there are tradeoffs that align closely with the business model. A cashier at low margin fast food restaurants is a traditionally-designed job; at Starbucks it’s a high performance job with the fancy name of barista. In each case, the company’s business model points strongly toward whether jobs should be designed with more traditional versus high performance characteristics.

Systems diagnosis at the job level is required to assess where a job should fall on the traditional versus high performance ends of the spectrum, or somewhere in between, including how the job is paid and staffed. Yet time and again I come across jobs embedded in work systems and corporate strategies where there is misalignment between the different elements, greatly reducing performance and/or the ROI on the compensation spent on the job. Sometimes the problem lies in previous rounds of cost cutting and headcount reduction which create unrealistic performance expectations for the role. Sometimes the performance problems are self-inflicted by leaders who promise both cost savings and improved performance; this often happens when the starting point is full alignment, and the leader then tests the waters by holding back on the investments needed to maintain high performance, which leads to a slow motion bleeding of the resources needed to support the high performance design. Sometimes resources and budget have been hoarded by leaders who wanted to ensure their teams are well taken care of when they need to be redeployed to where they can better suit the enterprise. Whatever the underlying source of the misalignment, only a true systems diagnosis can determine how to get the investments targeted where they need to be both within any given job, and across the entire portfolio of jobs in the value creation chain.

Systems diagnosis to improve team performance

Team performance is an even bigger objective for leaders than job performance yet the solutions similarly fall short for lack of systems diagnostics. The problems parallel the job level issues because business and HR take a bifurcated, not systems, approach to tackling team challenges. And huge opportunity and value are left sitting on the table because the diagnostics that are used typically ignore principles of high performing team design.

First the lack of alignment between the business and HR. Business diagnosis and problem solving of team issues usually focuses on objectives (goal setting), performance management (holding the team accountable for performance), and staffing (who is on the team). Business leaders tend to ignore the interpersonal dynamics, career issues and other aspects of team development that are essential for effective team performance; those are left for HR to deal with.

There is deep body of knowledge about how to enable teams to function effectively which organizational development (OD) professionals typically employ to address team productivity issues. The insights include the importance of achieving milestones such as developing a shared understanding about the team’s objectives and how to accomplish them; achieving alignment and integration among the team members in how the work is performed; developing trust in team members’ ability and willingness to follow through on commitments; applying cross-training where appropriate to minimize disruptions from absenteeism and turnover; and more. Yet it is more the exception than the rule for companies to make extensive use of OD expertise in the HR function; that is the first barrier to improving team performance.

Second, the typical OD approach lacks a way to distinguish whether the team is appropriately oriented towards the business operating model. It is one thing to identify ways in which a team would perform better if given greater resources and support; it is an entirely different thing to determine the ROI of potential team improvements by evaluating them in the context of the business model, and a strategy-based view of resource allocation. Only a systems diagnostic that combines both the business and HR/OD approaches at the same time can identify the best way to target and provide that support.

A key part of the approach should include high performance team design diagnostics. Just as jobs can be designed with more versus less decision making / discretion, autonomy, micromanagement and skills, the same applies to teams. In fact, the decision is often over whether a team approach should be used at all, versus the work being performed by a collection of individuals whose jobs are managed separately from each other. The classic example is the introduction of self-managing work teams in assembly line manufacturing, which was a central element of high performance work design in manufacturing plants; that design converted individually-managed jobs into interdependent team jobs. High performance team design principles can be applied in customer service teams, maintenance teams, and so on. A systems diagnostic, done the right way, takes all of this into account when looking for team performance solutions, including the design of the work itself.

Systems diagnosis to improve enterprise performance

At the enterprise level there is another set of systems diagnostics that needs to be applied yet rarely is. An enterprise level systems diagnosis determines which teams should be prioritized for what types of investment, and the extent to which they should focus on incremental improvement to existing operations versus out-of-the-box innovation and big change to current business processes.

A major problem in most organizations is a lack of clarity and consistency around the sources of competitive advantage and how to align the organization to maximize it. It is one thing for the CEO and C-suite members to send messages about the strategy and how to accomplish it. Doing so means having a laser-like focus on the sources of competitive advantage: branding and distribution for consumer products companies; new product development and M&A for pharmaceuticals; innovation for tech consumer products companies; having a dominant platform or network for internet companies; customer service for high end retailers; and so on. Yet a laser-like focus on the sources of competitive advantage alone is not enough: when the work gets separated into different functions with leaders responsible for each part, competition for support and challenges of managing in a matrix structure creates tensions that have to be resolved at multiple organizational levels. A systems diagnostic is usually the only reliable way to determine the right tradeoffs among who gets to decide what, how to deal with conflict across organizational siloes, and which parts of the organization have higher priority for support and attention from both senior leaders and middle managers.

The other fundamental tension in organizations is between maximizing the efficiency and effectiveness of current operations versus exploring how best to innovate and create profitable new products and services that are substantial deviations from the company’s main offerings. Diagnosing how to do both at the same time requires a system-wide view of business and talent processes. Too often leadership sets unrealistic expectations for accomplishing both at the same time because each requires a fundamentally different orientation in business processes, culture and rewards. Increasing the effectiveness of current operations is essential for increasing margins, customer retention, and cash flow. It requires an efficiency orientation and continuous improvement mindset, which emphasize fine tuning business and talent processes. Innovating products and services in ways that are fundamentally different from your core offerings means changing mindsets, establishing new business processes, and rewarding people for different kinds of behavior. It requires challenging and making changes to current business and talent processes – which works opposite from the efficiency orientation needed to optimize those current processes. Systems diagnostics are needed to assess the full tradeoffs between the two approaches, including down to the team and job levels, so that options for doing both simultaneously can be thoroughly evaluated and vetted for effective decision making.

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