TED Talk link: http://www.ted.com/talks/tim_harford
Karl Marx died thinking that the first communist revolution would occur in Great Britain, driven by the long hours and unsafe / unhealthy conditions in the factories, and the rampant urban squalor and poverty so memorably illustrated by Charles Dickens. Pre-industrial, agrarian, peasant Russia would never have even made his list of potential candidates.
With hindsight and a more robust economic theory to guide us, it seems pretty clear now that pre-War England was economically complex beyond the point of no return for anyone to have seriously entertained installing a centrally-controlled economy, and probably had been so for more than a century, ever since Robert Walpole, Great Britain’s first Prime Minister, single-handedly invented the modern state financial system.
On the other hand, his megalomanic psychopathology aside, it’s easy to see how Stalin, with no history of having lived or worked within a developed, industrial economy, could have imagined it entirely possible to centrally control his newly/barely industrialized, still largely agrarian post-War economy, hence his succession of failed five-year plans.
The same can likely be said for the large, modern corporation – that it too is largely past the point of no return when it comes to centralized control. I made a point in this previous post (“Metrics for the Subconscious Organization”) that your business “functions day-after-day, minute-by-minute, without your active control or even your conscious knowledge – this is an organization that has long since learned what to do and pretty much runs itself.”
How does a large commercial organization manage to coordinate itself so well? The market gets by with a single mechanism, price, whereas the larger society within which markets operate has a more complex set of values (i.e. safety, health, education, civil rights, etc …) and thus requires a broader toolkit, including laws, regulations and policy. In this sense, a large commercial business is more like a society than a market, coordinating itself with a wide array of policies, incentives, metrics, strategic objectives, values, mission statements, stories and leadership.
That’s all well and good for day-to-day operations, staying on an even keel, maintaining stasis. But what about when you want to bring about change to your organization? In this post (“Changing corporate culture is like losing weight”), I addressed the big hurdle encountered when attempting to make big changes – “The feedback loop, the thermostat that exists in every organization to maintain normalcy and stasis against a changing environment. You’re trying to enact change against organizational processes that have evolved to specifically minimize change.”
That post discussed making big changes, where, against the tide of homeostasis you push hard and go long and hope that the initial result lands somewhere close to your goal. But what about small changes and continuous improvement? How can you hope to get incremental change to stick when all your basic organizational processes are programmed to resist and expel the invading virus of change?
Through the process of evolution.
Evolution through natural selection has two required elements. The first is variation, a diverse assortment of characteristics and processes that can be acted upon by selective pressure. That’s your INNOVATION, which I leave to you (and why innovation is so important for all organizations – whether or not you see yourself specifically as a product innovator, you still need internal process innovation regardless, or you will go extinct). The second element is environmental pressure, something to do the selecting among the variations/innovations, something that rewards fitness.
These environmental factors are nothing more than my list of levers for losing cultural weight, but employed now in the service of continuous improvement:
- Organizational structure and design
- Rewards, incentives, recognition and performance management / metrics
- Tools, resources, systems, data and processes
- Hiring / selection / training / orientation
- Leadership / stories / heroes / values / communication
In order to support continuous improvement, the idea would be to internally develop not just a one-time set of levers to be utilized against a single, big strategic objective, but to establish something like an Office of Environmental Pressure with the objective of identifying the targets, levers and incentives across the organization that you want subject to continuous improvement. Likely targets might be:
- Customer centricity
- Back office processes
- Production processes
- etc …
For just this once I won’t excoriate you for navel gazing and lack of external data and benchmarks, because the data you need to support continuous improvement is already in-house. You are of course going to want to run some analytics against that all that data, explore it, visually, to see where the insights and connections and correlations are.
- What functions or processes are ripe for improvement? (an activity-based approach wouldn’t hurt here)
- What factors are correlated with Quality (or time-to-market, or cycle time, or service level, etc …)?
- Instead of measuring the same thing three different ways, what’s the single best metric?
- Which levers are best associated with which behaviors?
- Which incentives / rewards are most effective?
- As with your homeostatic Subconscious Metrics, which metrics are the ones everyone (by function / role) should be monitoring for Continuous Improvement?
As a nation’s leadership and policy comes from the top, so too does corporate strategy and vision. But just as Stalin’s Central Party Committee could not will tractors into existence against the reality of the market, neither can the office of the CEO micro-manage the continuous improvement of their organization. If instead they approach the challenge by directing the evolution of the business via selective pressure in the desired direction, progress can be made.
The most important point Tim Harford makes in his TED talk (above) is about the success of a complex system. Just as most mutations are detrimental to an organism, a heavy-handed, top-down approach to change is more likely to cause damage than improvement. The law of unintended consequences: fix one problem only to have that fix create three more. Incent one group to improve their performance and they’ll do it at the cost of overall organizational efficiency and fitness. But by allowing the organization to steadily evolve under pressure, it can work out for itself the myriad of interconnected kinks and links among processes and functions, and emerge holistically more fit to compete and perform than before.