5 Rules for CEOs to Simplify Their Job
Why do people feel so miserable and disengaged at work? Because today’s businesses are increasingly and dizzyingly complex — and traditional pillars of management are obsolete, says Yves Morieux, senior partner in charge of BCG’s Paris office. He says, it falls to individual employees to navigate the rabbit’s warren of interdependencies. Speaking at the TED conference last year, Morieux outlined ways CEOs can cut the complexity down to size.
March 17 2014 by ChiefExecutive.net
The Boston Consulting Group created an “index of complicatedness,” based on surveys of more than 100 U.S. and European listed companies, which measures just how big the problem is. The results show that over the past 15 years, the amount of procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed in each of those firms has increased by anywhere from 50% to 350%. According to BCG analysis over a longer time horizon, “complicatedness” has increased by 6.7% a year, on average, over the past five decades.
Complexity exacts a heavy price. In the 20% of organizations that are the most complicated, managers spend 40% of their time writing reports and 30% to 60% of it in coordination meetings. That doesn’t leave much time for them to work with their teams. As a result, employees are often misdirected and expend a lot of effort in vain. It’s hardly surprising that employees of these organizations are three times as likely to be disengaged as employees of the rest of the group—or that dissatisfaction at work is so high and productivity so often disappointing.
“I have spent the last years trying to resolve two enigmas, “ says Morieux. “Why is productivity so disappointing in all the companies where I work? Despite all the technological advances — computers, I.T., communications, telecommunications, the Internet. Enigma number two: Why is there so little engagement at work? Why do people feel so miserable, even actively disengaged? Some are even disengaging their colleagues and acting against the interest of their company. This continues, despite all the affiliation events, the celebration, the people initiatives, the leadership development programs to train managers on how to better motivate their teams.”
He says that upon further analysis this is due to the two pillars upon which most management systems are based: The hard — structure, processes, systems, and the soft — feelings, sentiments, interpersonal relationships, traits, personality. And whenever a company reorganizes, restructures, reengineers, goes through a cultural transformation program, it chooses these two pillars. Everything we read in business books is based either on one or the other or their combination. They are obsolete. The hard approach, starts from strategy, requirements, structures, processes, systems, KPIs, scorecards, committees, headquarters, hubs, and clusters. In addition, we need quality, cost, reliability, speed. And every time there is a new requirement, we use the same approach. We create dedicated structure processed systems, to deal with the new complexity of business. The hard approach creates just complicatedness in the organization.
To deal with complexity, to enhance the nervous system, Morieux and his colleagues have created what he calls the smart simplicity approach based on simple rules.
Simple rule number one: Understand what others do. What is their real work? We need to go beyond the boxes, the job descriptions, beyond the surface of the container, to understand the real content. For example, if an engineer puts a wire in a hard to reach place in an engine design, it often means that a mechanic will have to remove the engine to access the lights.
Simple rule number two: Reinforce integrators. Integrators are existing managers that you as a leader must reinforce so that they have power and motivation to make others cooperate. How can you reinforce your managers as integrators? By removing layers. When there are too many layers people are too far from the action, therefore they need KPIs, metrics, and these are poor proxies for reality. They don’t understand reality and they add complexity. The bigger we are, the more we need integrators, therefore the fewer rules we must have, to give discretionary power to managers. Yet somehow we do the opposite — the bigger we are, the more rules we create. And we end up with the Encyclopedia Britannica of rules. You need to increase the quantity of power so that you can empower everybody to use their judgment, their intelligence. Otherwise, people will withdraw. They will disengage.
Simple rule number three: Create feedback loops that expose people to the consequences of their actions. This is what an automotive company did when they saw that their “repairability initiative” had no impact. They said to the design engineers: In three years, when the new car is launched on the market, you will move to the after sales network, and take charge of the warranty budget, and if the warranty budget explodes, it will explode in your face. This was more powerful than 0.8 percent variable compensation.
Simple rule number four: Increase reciprocity, by removing the buffers that make us self-sufficient. When you remove these buffers, you hold me by the nose, I hold you by the ear. We will cooperate. You need to reward those who cooperate and blame those who don’t cooperate. The CEO of The Lego Group, Jorgen Vig Knudstorp, has a great way to do this. He says, blame is not for failure, it is for failing to help or ask for help. It changes everything. Suddenly it becomes in my interest to be transparent on my real weaknesses, my real forecast, because I know I will not be blamed if I fail, but if I fail to help or ask for help. When you do this, it has a lot of implications on organizational design. You stop drawing boxes and creating dotted lines. You look at the interplay. This also has a lot of implications on financial policies that we use.
Simple rule number five: Ensure this approach is carried through on all human resource management practices. When you do that, you can manage complexity without getting complicated. You create more value with lower cost. You simultaneously improve performance and satisfaction at work because you have removed the common root cause that hinders both.
Complicatedness: This is your battle, business leaders. The real battle is not against competitors. This is rubbish, very abstract. When do we meet fight competitors? The real battle is against ourselves, against our bureaucracy, our complicatedness.