Six Simple Rules. Yves Morieux
and interfaces that have become so common in companies. (See the sidebar “Beyond the Org Chart.”)
KEEP IN MIND
Beyond the Org Chart
Whether to organize a company by function, geography, product, customer segment, technology, or some other dimension is an issue that companies face continually. Often, an organization will cycle through various options over time.
But in an environment of complexity, whether a particular task is contained in this or that box in the org chart has become less important. Performance increasingly depends on the cooperation between the boxes. If you organize by function, you will have to make people cooperate to satisfy varying local customer needs. If, on the other hand, you organize by geography, you will need to make people cooperate to develop functional expertise, and so too whether you organize by product, technology, or customer segment. No matter how you arrange the boxes, there will always be performance requirements that fall between them requiring cooperation.
Even the question “Where does the P&L sit—in the regions, or the business units?” that is often at the center of discussions about organization design has little relevance any more. The proof is that companies that make the profit-and-loss statement (P&L) the cornerstone of accountability end up with multiple P&Ls—a P&L per region, per business unit, per key customer account, per product, and even sometimes per product component—in short, more complicatedness. We are not saying that organization design is unimportant. Organization design is critical. But, as we will see, it must be performed in a way very different from the current practices.
The “Soft” Approach to Management
But the hard fixes have some squeaky wheels that need greasing, and to do that companies turn to what we call the soft approach—practices such as team building, people initiatives, affiliation events, off-site retreats, and the like (all added on top of the work itself)—so that people will feel better at work and work better together. The soft approach has its main origins in the work of Elton Mayo in the 1920s, which led to the development of the human relations school of management. According to this perspective, an organization is a set of interpersonal relationships and the sentiments that govern them.12 Good performance is the by-product of good interpersonal relationships. What people do is predetermined by personal traits, so-called psychological needs and mind-sets. In other words, to change behavior at work, change the mind-set (or change the people).
At first glance, the soft approach may seem like the antithesis to the hard approach, but it isn’t. Both seek to control the individual. The only difference lies in the fact that the soft approach assumes that what really matters is emotional rather than financial stimuli. Emotional stimuli include affiliation activities, celebrations of all kinds, and the display of appropriate “leadership styles.” The dynamic that these two responses to complexity produce goes something like this: the hard approach raises new obstacles for people and contributes to dissatisfaction and disengagement. Because people feel bad and ineffective, managers use the soft approach, ostensibly to help them feel and work better. Managers then assume they have addressed the problem, even though they have only addressed the symptoms. Paradoxically, this puts the onus for any continuing disengagement on the victims themselves. If problems persist (and, of course, they always do), it must be because there is something wrong with the psychology of the people involved—they have a bad attitude or the wrong mind-set. They just don’t get it. As we shall see in some of our company examples, at its worst the soft approach can become a disguise for simple prejudice and stereotyping—for example, about the attitudes of women or young people in the workforce—leading to an enormous waste of talent and compounding ineffectiveness with injustice.
Hard and Soft Approaches Are the Root Problem
In our experience, complexity can only be addressed by people using their judgment in the moment. People’s autonomy is therefore essential to deal with complexity. No amount of structure, planning, or formal rules and procedures will ever be enough to anticipate the kinds of problems people on the front line of the business will face, solutions they will need to innovate, or new opportunities they will recognize. In this respect, the human factor isn’t the weak link—something to be minimized and worked around. Rather, it is the key resource for coping with complexity. Companies need to invest in—and trust—the intelligence and ingenuity of their people by expanding their autonomy and room for maneuver. Only then will employees be able to make judgments, balance complex trade-offs, find creative solutions to new problems, and do the right thing, making the best use of the available information and interpreting the rules to fulfill the spirit and not just the letter of the law. Simply piling up structure upon structure and multiplying procedures and formal rules (including some that contradict each other) with the hard approach only adds new obstacles to dealing with complexity.
It is also in the nature of complexity that no one individual has the entire answer. So it is equally necessary that people use their autonomy to cooperate with each other. Companies need to encourage—and, indeed, impel—people to perform their specialized tasks in a way that also enhances the effectiveness of others. But the more people cooperate, the harder it becomes to determine who contributed what to the ultimate solution. The proliferation of metrics and incentives of the hard approach not only adds to complicatedness but actually obstructs the kind of cooperation necessary to deal with business complexity.
These two characteristics—autonomy and cooperation—are precisely what the hard approach seeks to eliminate. Its goal is to immunize the organization against the perceived risks inherent in people’s autonomy and to minimize the need for cooperation. The belief is that if the structures, processes, and systems are adequate, and that if everyone has received the necessary training and the right incentives, then everyone can remain within their silos, do what they have to do, and there will be no need for cooperation. As for the soft approach, it negates people’s autonomy in using their intelligence because it views the individual’s decisions and actions as Pavlovian responses to psychological needs and emotional stimuli (just as the hard approach views these decisions and actions as Pavlovian responses to financial stimuli). Moreover, as we will see in the next chapters, the emphasis on good interpersonal feelings typical of the soft approach creates obstacles to cooperation. Cooperation has nothing to do with a touchy-feely conviviality. The two pillars of current management practices are unable to handle the new challenges that corporations face. As the hard and soft approaches are being stretched beyond their limitations, companies have to resort to stitches and patches in their structure and management processes that not only fail to address complexity but also make failure increasingly costly for all stakeholders.
The Doom Loop of Management
The encounter between business complexity and the hard and soft approaches triggers a chain reaction of complicatedness and a doom loop for organizations. In front of the new complexity, the hard and soft attempts to control individuals can only create complicatedness. Complicatedness leads to stagnant productivity and disengagement, which then feed off each other. In response, companies redouble their efforts with more hard fixes and soft initiatives, which only serve to make the problem worse. (See figure I-2.)
But as we shall see, there is another way.
FIGURE I-2
The doom loop of management
Smart Simplicity
The simple rules are a way for managers to break out of this doom loop and start moving beyond the hard and soft approaches in order to deal effectively with business complexity (see the sidebar “The Six Simple Rules Overview”). The primary goal is to create more value by better managing business complexity. However, as managers peel away the stitches and patches that have accumulated through the use of approaches that are obsolete in today’s world, the by-product is also the elimination of complicatedness and its attendant costs. In this respect, the six rules constitute a third revolution in management—”smart simplicity.” By helping manage complexity and remove complicatedness, the simple rules allow organizations simultaneously to improve performance and engagement. What’s more, the doom loop is transformed into a virtuous