Obliquity – Reaching Goals and Objectives indirectly

The dictionary definition of obliquity is:

                                   a. A deviation from a vertical or horizontal line, plane, position, or direction.
                                   b. The angle or extent of such a deviation.
At first glance, this would not seem to be a term that would be of much importance to business.  In his recent book entitled Obliquity.Why our Goals are best achieved indirectly, John Kay (a leading economist in the UK) explains why this word and the concept behind it may very well be invaluable in the implementation of business strategy.
In attempting to achieve our goals, we often take the most direct route possible.  It turns out, writes Kay, that this is often counter-productive.
One of the more vivid examples from the book, was the topic of fighting forest fires.  Initially, the US forestry department had as a goal to put out all forest fires as soon as they occured.  This turned out to be a disastrous policy, since forest fires are part of the natural regeneration of fires.  In other words, in order to minimize the amount of damage done from forest fires, the forestery department, had to slowly learn that best way of fighting forest fires was to allow certain fires to go unchecked.
Forest Fire
Similar forces are in play in the economy.  The well known top level objective of maximizing shareholder value is probably best achieved by not pursuing every profitable opportunity.  Kay lists various examples, among them the chemical company ICI. He noted that in the postwar period until the 1990s, that ICI’s top-most objective was “the responsible application of chemistry”.  Under the pursuit of this goal, ICI achieved admirable results and created substantial value for its shareholders.  In 1997, the orientation of the company shifted towards maximizing shareholder value.  A series of acquistions and re-engineering efforts were made in the direct pursuit of profit.  The result was a destruction of shareholder value.  ICI ceased to exist as an independent company in 2007.
Jack Welch was quoted to say: “Shareholder Value is the dumbest idea in the world…The job of a leader and his her team is to deliver commitments in the short term while investing in the long term health of the business.  Employees will benefit from  job security and better rewards.  Customers will benefit from better products and services.  Communities will benefit because successful companies and their employees give back.  And obviously shareholders will benefit because they can count on companies who will deliver on both their short term commitments and long-term vision.”
In other words, Jack Welch – historically one of the greater creaters of shareholder value achieved that distinction by not pursuing the maximization of shareholder value directly.

The reasons that the direct approach often fails are many according to Kay:

Pluralism:  There are many solutions to a problem, not just one.  Often the direct or most obvious route is not the best solution.  True innovation requires thinking outside of the box – a highly indirect undertaking.
Interaction:  The objective and its attainment will shift through the interaction of various players.  Lowering price for instance in order to get market share may be counterproductive.  If competitors lower their prices to meet your initiative, the direct approach just leads to lower profits for everyone.
Complexity:  Complex environments are unpredictable.  They are like the weather.  We may know a lot about the individual variables that influence the weather – but we don’t know all of them.  In addition, predicting weather patterns requires knowledge about initial conditions – information that is outside of our reach.  As complexity science has shown, weather prediction can only be approximate at best.  Economic systems are in many ways similar to weather systems.  Who could have predicted the turmoil caused in the mobile phone industry by the introduction of the iphone?
Incompleteness:  We are always working from incomplete information.
Abstraction:  High level goals and objectives such as “maximize shareholder value” are abstract in the sense that even if you have increased shareholder value by a greater amount than your competitors, did you really maximize it.  What was the overall potential? 
What are the implications for business?  Typically strategy attempts to clarify top-line goals as much as possible.  Often substantial market analysis and evaluation of organizational capabilities is involved in setting those targets.
The traditional way of implementing these organizational goals and objectives is then for managers to take the overall goals and break them down into action items for their departments and teams.
This traditional process is the direct approach.
Obliquity implies that this process more often than not will be unsuccessful – or at least not optimal.  What obliquity requires is an ability to change direction in pursuit of top-level goals – and perhaps even an ability to question those goals if better opportunities should present themselves.
Strategy conversations
In my experience, the oblique approach begins with leaders taking ownership of the goals and objectives.  I worked for a pharmaceutical company that was in the business of selling generic drugs in the oncological sector.  An opportunity arose to actually acquire a company with patented pharmaceutical products in their line of business.  Since this was not their normal business model, they wanted buy in from their top managers before going ahead.  The top 60 managers were invited to deliberate on this new strategy and its implications.  The board was not willing to go forward without a consensus decision from these 60 managers.   They realized the risks to the business and the changes that would have to occur were not insignificant.  Right from the beginning of the implementation of this new strategy, they realized they needed buy-in from all key leaders in the organization.
Understanding the risks involved and reaching consensus was done through a large participatory process where each person had the opportunity to voice their concerns and listen to others’ perspectives at the same time.
Mayne Group
I think this type of ownership should be no different for so called “normal” strategic initiatives.  Only if leaders throughout the organization have a sense of JOINT ownership of the strategy, the oblique approaches that will be necessary to be successful will not be explored.  Each leader will break down the strategy into as direct and as linear a process as possible, often conflicting with the actions of others inside the company.

“The straight line lies, the truth is a circle.”                                                                                                         Friederich Nietzsche

Leadership vs. Leaders – a new framework to differentiate the two

In a 2006 article published in the Financial Times, business school professor Henry Mintzberg attacked the obsessive focus on individual leaders as the pillar of organizational effectiveness: “By focusing on the single person…leadership becomes part of the syndrome of individuality that is … undermining organizations”.

Henry Mintzberg is not alone in bemoaning the excessive attention to individual leadership.  Many authors have voiced their objections.  To be fair however, the fixation on leaders as individual actors results from the lack of an alternative framework from which to view leadership.

That alternative framework is readily available today.  The difficulty is that old habits and ways of thinking die hard. It is far too easy for us to conceive of leadership in terms of the individual actor.  As a result, we do not see the alternative framework – even when it stares us in the face.

The frame of reference that helps us to better understand the effectiveness of  leadership  is the network.  Work in organizations gets done through the collaboration of individuals.  Individuals that work with each other (and/or exchange information) form the basis of a network.  A mapping of the networks inside of an organization reveals how information flows inside of an organization and what patterns of collaboration exist.  From this framework we can begin to talk about leadership in the plural.

Let us look at an example:

Network analysis

The above diagram is a network analysis of two companies that have recently merged.  Each small square represents an individual.  From this diagram it is clear that managers are still only interacting with those individuals from the company from which they came.  There is one individual who straddles the information flow between the groups, but otherwise the groups interact separately (with minor exceptions).

The individual at the center of the information flow  could be seen as an invaluable asset to the organization.  He or she is the leader that connects the two organizations.  From a systemic perspective that same individual could potentially also be seen as a major bottleneck in the effective collaboration of the two teams.

Through network analyses like this one, the role of leadership can be visualized.  Leadership is the interaction of various “leaders”.  Effective leadership in this case would visibly alter the pattern of collaboration.

Creating maps such as the one above is not difficult.  The software and analysis tools to create such diagrams are readily available.  The biggest inhibitor in using the network frame of reference is our lack of familiarity with it.  If we were able to change the mental models of our leaders so that this frame of reference were commonplace, the impact on our organizations would be immense.

Individual leadership development is as necessary as ever.  Perhaps as part of that leadership development, we should teach our leaders to view leadership from a different perspective.

“Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.”       Marcus Aurelius

A small company invests in leadership – Part 1

Last week I had the opportunity to meet with a small to medium sized company in the precision instruments business.  With manufacturing in Europe and the US and the opening of distribution centers in China and Brazil, it has become in the past few years a truly global enterprise.

G33_InCoherentSources_mwn G36_Detectors_mvn

I have known the director of the German operations for many years.  Over that time we have had interesting conversations on leadership, culture and high performance teams.  The conversations usually ended with her telling me that I should help her with her business, but nothing concrete materialized.  I always told her that when the time was right, she would know.  Over the years, she has had a lot on her plate to put the house in order.  There were two changes in ownership of the organization.  This disruption was accompanied by operations running in the red for a few years.  Re-organizing production and distrubution were top priorities.

When I took a tour of the facilities last week, I was impressed with what had been achieved.  They have a catalogue of approximately 12.000 items – most of which can be assembled and shipped within twenty-four hours of receiving an order.  They are able to do this even though most products have to be assembled before being shipped.  Approximately 180 orders go out a day.

They have also done an admirable job in attending to the culture of the organization.  When a new employee comes into the organization, they have a one-on-one session with the director and talk about the values of the company.  Absolute priority is given to customer orientation.  As proof of that commitment, an extensive feedback system has been developed in which scientists who use the instruments are in constant dialogue with the company’s management.  The company’s CEO takes pride in being part of those conversations.

After reading the feedback from her employees from a 360° feedback instrument, the director of the German operations decided that it was time to invest in leadership.  Despite or perhaps because of all of the success that had been achieved, there was a limit as to how much further she could take the company, based on her leadership capabilities alone.  She realized that the time had come for an increase in the level of leadership within the organization.

Last week we had a discussion on what it would take for her team to begin to take more ownership for the direction in which the organization is developing and more accountability for the alignment and commitment of its employees.

I will be putting a proposal together in the next two weeks and hope through this blog to keep you informed on the way the  leadership consulting process unfolds through this most interesting case study.

“I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.”                                                                                                                                 – Johann Wolfgang von Goethe

“If you’re walking down the right path and you’re willing to keep walking, eventually you’ll make progress.”                – Barack Obama

Global6 – Assessing Leadership in a Global Context – Part 1

What is considered good leadership practice  in Germany may not be considered good leadership in Japan or may need some modifications when dealing with US Americans.  Intercultural differences have been the subject of much study since the 1950s.  I have always been fascinated by the insights derived from these studies given that I am thoroughly multicultural person myself.

As an aside – I was born in Panama, raised in Mexico, and studied in the US and Germany. My mother’s side of the family is French, my father’s US American. I have worked in Mexico, US, France, Belgium and Germany.  My work as a strategy and leadership consultant over the past twenty years has taken me to – at latest count – 30 different countries.  I truly think of myself as a World Citizen.

My first encounter with the intercultural literature was reading Edward T Hall – considered the founding father of intercultural communication as an academic field of study.  During the 1950s he worked for the US State Department,  teaching inter-cultural communications skills to foreign service personnel.  He came up with the concept of low-context versus high-context cultures – a concept still much in use today.  Low-context cultures such as the Germanic culture transmit information explicitly – i.e. through language and tangible information.  High-context cultures such as the Japanese culture transmit messages implicitly – the context, the body language and other non-verbal clues provide the information.  A spoken ‘Yes’ does not necessarily mean ‘Yes’ – it depends on the context.

The Three H’s of Intercultural Communication – Hall, Hofstede and House

edwardthall_1993Hofstede house_robert_rdax_192x226

Obviously leadership in these very different cultural environments needs to take on different forms.  Ever since Edward T. Hall various further attempts have been made to codify the differences between cultures.  As our economy has become more global, understanding how to navigate in these diverse waters and currents of culture has received increasing attention from both public and private sector leaders.

In the 1970’s Geert Hofstede significantly expanded the framework from which to look at different national and organizational cultures.  Using survey data from over 100.000 individuals from over 40 countries, he developed a model composed of 5 different dimensions of culture.  It was a great honor in the year 2004 to have Geert Hofstede talk at a Forum which was organized by my colleague Ted Baartmans and me in Maastricht.

This work has been continued through further studies.  The most recent and comprehensive being the GLOBE Study led by Robert House, professor at Wharton at the University of Pennsylvania.  The GLOBE study included 170 countries and established 9 cultural dimensions.  I was also very fortunate to be present in London in 2011 when he received the prestigious Lifetime Achievement Award from the International Leadership Association.

Yet despite all of this information, how can business leaders truly know how to change and adapt their style globally?

This week I had the privilege to be one of  the first people to be certified in the brand new 360° instrument – Global 6 created by the Center for Creative Leadership. It is the first instrument I am aware of that provides business leaders with practical information directly from the people they work with.   It gives them pragmatic advice on how they need to adapt their leadership style globally.  In my next blog I will explain how this instrument works.

If we are to achieve a richer culture, rich in contrasting values, we must recognize the whole gamut of human potentialities, and so weave a less arbitrary social fabric, one in which each diverse gift will find a fitting place.”  Margaret Mead

Communication, Communication, Communication (aka Leadership made simple)

When a painter considers what to paint there are two primary factors that he/she needs to take into account before beginning to paint on the canvas – form and color.  The approach to these two factors has influenced the style of painting throughout the ages.

Leaders also have two main ingredients with which to work –  Energy and Information.  The latter is so essential, that leadership without communication is unthinkable.

I recently assisted a mid-sized company to address the issue of effective communication at all levels.  This company is a family business in Germany’s Westphalia region which is specialized in the area of technical gases.  Over time, the number of products and services which the company offers has multiplied. As a result, the geographical footprint of where these products and services are sold has also expanded into 6 different countries.  With this much sought after and desired expansion, both the complexity of the business and the challenge of optimizing effective communication throughout the organization have increased.

As with any company, communication is at the heart of co-ordination, effectiveness and efficiency. But how do you go about adressing this key issue?

The first step in the process is to create a collective awareness of the specific issues at hand.  By doing so, the foundation is being established for taking decisive action and implementing concrete measures.  140 managers from across the organization were invited to participate in a 4 hour large group participative dialogue. During this dialogue, they discussed and mutually agreed on the communication issues which are of greatest importance for their work in the company. The following Word Cloud captures the key issues that were discussed.  (FYI – the larger the words, the more importance which was placed on the issue by the managers).

word_cloud_communicationAll of the 140 managers explored these issues together and identified concrete recommendations on how to improve the communication within the company.  The following mind map summarzies the managers’  key recommendations. A detailed data base of the individual entries were used to create this overview. The numbers adjacent to the recommendations record the number of suggestions made in this category.

Blog_Post_Communication

Through this large group dialogue process, the communication issues within the company was made visible to everyone.  The platform to launch a systemic change in the way the company communicates with each other (as well as with clients) has been established. The next step is to prioritize the issues and create working groups of managers throughout the company to put these ideas into action.

“The art of communication is the language of leadership.”     James J. Hughes

3rd Industrial Revolution and Leadership

Let me start 2013 with a macro view of leadership…

I was in Philadelphia last year as part of the delivery team for one of the acknowledged top leadership development programs in the world – the Philips Octogon program.  It is a program involving 32 selected top performers at Philips.   The program takes place over 8 months in three locations.  The first session was at the Wharton School of Business.

steinberg center

Steinberg Conference Center – Wharton School of Business

Of course I felt quite comfortable coming back to this location.  Back in the 1980s I obtained my MBA at Wharton – one of the more prestigious business schools in the world.

I had the privilege to be able to listen to a presentation by Jeremy Rifkin on the first day of the program.  Mr. Rifkin established the Foundation on Economic Trends (FOET) .  Among many of his activities, he is a valued advisor of heads of state in Europe (including Angela Merkel) and has had very direct impact on European economic policy.  He is the author of the concept of the 3rd Industrial Revolution which is a road map for long-term economic sustainability.  This concept was formally endorsed by the European parliament in 2007.

This concept has fundamental implications for leadership in the 21st century.

His talk began pessimistically enough.  We are in the end phases of the Second Industrial Revolution and the only way out of this dead end is to completely change the fundamental infrastructure on which our current civilization is based.

Each industrial age is characterized by two fundamentals: energy and information.  Mastering a new energy process provides the means to create a new form of information dissemination.  The First Industrial Revolution centered around coal-fired steam-driven power generation.  This new energy regime also enabled the advent of mass produced newspapers and magazines based on steam-powered rotary press and linotype technologies.

The Second Industrial Revolution began with the advent of the internal combustion engine powered by fossil fuels.  This revolution was complimented by a communication revolution based on the creation of an electric grid infrastructure which eventually led to telephone, radio and television.

This Second Industrial Revolution is reaching its limits according to Rifkin.  The most important recent economic occurrence in the past five years is not the financial crisis of 2008, but the rise of oil prices to over 140$ a barrel in 2007.  This rise in the price of oil represents a major threat to the welfare of human society on the planet.  So many of current modern materials are based on fossil fuels (from plastics to fertilizer), that this price has seismic implications for the economy.  Rifkin concludes that the current economy is doomed to limited growth for decades to come.  Every time the price of oil goes over 120 $ a barrel, a new global recession is virtually assured.  The problem is not the amount of fossil fuel available.  There are still plenty of reserves.  The problem is that getting at those reserves is becoming more costly over time.  This limit threatens ALL economies including emerging economies such as China and Brazil.   It is a global phenomenon.

What is the way out?  What are the implications for leadership?  Stay tuned for more….

“One thing I have learned over these last 30 to 40 years is that people make history.  There is no fait accompli in any of this.”         Jeremy Rifkin

The Science of Motivation

One of the more provocative pieces of the Maersk workshop in Copenhagen had to do with the issue of employee motivation and performance appraisal.  Many corporate incentive and performance systems are not taking into account what the science is saying about what motivates people.  Daniel Pink in a TED talk outlined the key points:

  • As long as a task requires only mechanical skill, bonuses work as they would be expected – the higher the pay, the better the performance.
  • Once a task calls for even a rudimentary amount of cognitive skill, a larger reward often leads to poorer performance.
  • Extrinsic motivators, which Pink refers to as “if-then” rewards, often destroy creativity.
  • The secret to high performance isn’t rewards and punishment but rather that unseen intrinsic drive, the drive to do things for their own sake, the drive to do things because they matter.

There are two videos that I highly recommend.  The first is the original TED talk from August 2009.  More visually entertaining is the RSA video which shows the same content but portrays it using graphic recording.

The conclusions reached by Pink are the result of various studies.  For instance, in early 2009, economists at the London School of Economics looked at pay for performance schemes and concluded that “financial incentives … can result in a negative impact on overall performance.”  In the video, Pink cites studies sponsored by the Federal Reserve Board of the United States.

The implications of these studies for how we manage and lead our organizations is fundamental.  These findings are the essential building blocks of any modern approach to leadership.  So what motivates people?  Autonomy, Mastery and Purpose

In short, people are most motivated when they have choice, when they are able to demonstrably improve their skills and when what they do has meaning to them.

This may not seem like surprising results, but they do contradict what most business do in trying to incentivize performance.  Watching this video at Maersk produced the expected results.  Workshop participants had a long discussion on the implications for their performance review system and for the company bonus system.  At Maersk, there is a forced ranking of employees on a performance scale.  The ranking directly influences the bonus that an employee receives.  Every year, the “leaders of leaders” at Maersk could sense the demotivation that is created by this process. The Dan Pink video helped them to see their intrinsic unease with the process in a different light. Real motivation – that extra striving to do something not only well, but to the best of one’s abilities – is not created by a bonus system.

“Motivation is a fire from within. If someone else tries to light that fire under you, chances are it will burn very briefly.”  Stephen Covey