Take People for granted – at your peril

Don't take me for grantedThe Maturity Institute’s purpose is “to increase both organization and societal value by educating and enabling organizations to move up to higher levels of leadership and management maturity”. The time for help in this area has never been more important; we are seeing continued scepticism around the capitalistic model of business with calls for change around the world. Many of these “protests” are driven by individuals who feel that “the system” is no longer working for their benefit – or to be more realistic it’s “..not working fairly.” Yet this is a time when many parts of the world are entering the 4th industrial age where a key driver of growth and success is intellectual capital which in turn is the outcome of human “thinking.”

George Santayana[1] wrote (in The Life of Reason, 1905) “Those who cannot remember the past are condemned to repeat it.” The importance of human engagement could well fit into this quote; there have been many instances in the past of organizations seeking performance improvement through various investments and programs yet failing to deliver the benefits. Learning from the past is particularly important today as yet another “improvement initiative” has organizations pumping millions into investment yet risking failure; this initiative is analytics. There are two core factors that leaders must remember; first, effective performance comes from a combination of both tools to perform the task plus engagement of the people who use the tools. While the tools being used will change over time and might require people to possess different skills sets, the foundational aspect of people PLUS tools has always been true. (Even in a completely automated environment people still have to design, maintain and improve the “system” and respond to problems). Second, the engagement of people means “just that” – they must be engaged and not just present at work; this requires leaders[2] to create a business environment where people have the required skills but also where they are motivated to use them and contribute to success. Having the best qualified people in the world is basically useless unless they make the decision to bring their skills and contribute their efforts (it’s like buying the most advanced piece of equipment in the world but not “plugging it in.”) What can we learn from history that supports this need?

In his book “A Better Idea: Redefining the Way Americans Work” (1991) Don Peterson the Ford CEO demonstrated the massive changes needed organizationally to “turn the pyramid upside down” in order to engage employees. Some of the fiercest opponents were finance who complained that the time “wasted” on these initiatives would have significant negative financial impact through “unabsorbed overhead” when the lines were down. However using this approach Ford went on to become a leader in the North American market.

Staying with the automotive industry we also know that starting in this time frame, many manufacturers looked to Japan as the emerging leader especially in the area of quality and in particular Toyota; many copied the process approaches that formed part of the TPS (Toyota Production System) JIT, Lean, Six Sigma, Kaizen, Kanban, SMED and many others, yet many failed to achieve the desired benefits that matched those seen by Toyota. The difference was that successful organizations recognized that while the processes needed to be changed, the people engaged in the processes also needed to be committed to a new way of operating which in turn required a shift in culture from directive, top down prescriptive style to a participative and collaborative style. Thus the human aspects of an organizations “system” had to be changed which in itself meant as a minimum a shift in leadership style. Only when people “bought in to” and “owned” the new approaches would the benefits start to flow.

Today automation continues to be a centre of attention although now it is the continuing evolution and capability of computers and communications that is emerging as a core strategy. The terms “big data” and “business analytics” are emerging as “must do” initiatives to create competitive advantage. Again this is a wise “task focused” strategy to invest in technology and communications that can collect, sort, process, and manipulate data rapidly in order to identify trends and opportunities and to simulate the possible effects of strategic and operational decisions. What is needed to interpret this data and hopefully the information that the data helps to develop, is smart and knowledgeable people who can ask the right questions that allow choices to be made when interpreting the information. Data that drives strategic choices never stands on its own and is always contextual in history, current performance and future projections; assumptions have to be made and alternative scenarios developed.

It is important for boards, leaders and managers to remember that most of the “task” tools are freely available to anyone who wants to buy them whether its software packages or process methods implemented by consultants – so owning the task capability will never create in itself the competitive advantage required. This will only come from combining the best tools available with the most engaged, and committed human workforce who implement and use the tools in a way that delivers advantage. As a final note one can use implementation of the SAP integrated software as an example; there are stories about successful implementations an stories about VERY unsuccessful one’s; the software wasn’t different but the approach to implementation typically was. Those who succeed, whether its SAP or any other task improvement methodology only succeed by harnessing the human capital within their organization that ultimately converts the organizational system capability into value thatcreates competitive advantage and future sustainability.

The cries of unfairness and failure of the capitalistic system stem in many cases from decisions being made in organizations that “disempower” employees; while inequity in pay systems and other problems contribute to the causes, decisions to implement changes with people’s involvement rather than imposing them will lead to a lower level of negative response. It’s not that people dislike change – it’s more that people don’t like being told and forced to change with no engagement.

Nick A Shepherd, FCPA, FCGA, FCCA, FCMC

August 2016

[1] Jorge Agustín Nicolás Ruiz de Santayana y Borrás, known in English as George Santayana see https://en.wikipedia.org/wiki/George_Santayana

[2] For more on the importance of leadership see “Reflective Leaders and High-Performance Organizations” (2013) by Nick A. Shepherd and Peter J. Smyth

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