Common sense and being smart in an economic crisis …
published by , on 15/07/2009

It would be profoundly reassuring to view the current economic crisis as simply another rough spell that we need to get through.  If you are waiting for things to return to normal you might be very disappointed. Your focus on short term performance goals such as cost-cutting, sales, and market share growth might turn out to be necessary, but totally insufficient to safeguard the long term viability of your organization. “Normal” may in fact be a thing of the past. Regulation is back and will even influence your challenge space more than before and it will have the potential to block your innovation and future growth.

Charles Handy, the British management thinker and author, once said that “…most of management seems common sense. The trick is to glimpse the sense before it becomes common. That’s what gives you the competitive edge.”  His words have particular value for management and labour today, at the auto companies and other organizations trying to come to grips with this recession. Some organizations are searching for a “new model”,  others are wondering if capitalism is on the brink. They may be headed in the right direction, but my own feeling about what could work, and what offers the most hope, is based neither on introspection nor ideology. My best feeling is based on what’s probably been on the minds – though not on the negotiating table – of managers and workers for some time, that “us versus them” no longer works, and that a new deal must be struck. Trust must be built and attention must be paid to the enduring contribution that management and labour collaboration can make to the success of the organization. To me, this seems like eminent common sense.

The basic question then is how to build the new deal ? The simple answer may lie in involving everyone at his/her level in the question  “Where is this organization going and what is going to get it there?”.  Taking the above common sense seriously means that everyone who is a leader or wants to be a leader – of an organization, division, department or team – must be able to formulate, articulate and communicate at his or her level a compelling vision if they are to engage and cope with the challenges. They must also ensure that meaning is created from the context in which they operate. The common sense is that the meaning making process is probably one of the essential processes in the company that will enable the identification of opportunities and the creation of alternative solutions.

Restoring trust

The basic question is how to organize trust so that the meaning making process  moves people to action, changes their behaviors and enables everyone to focus on key priorities ? To answer this, we might look at how companies succeed in aligning the “size of roles” with the “size of persons”.

The concept of “size of roles” was first described in Requisite Organization Theory (see Elliot Jaques, 2002). This approach  identifies and defines in the first place the structures and processes that enable organizations to produce value. It outlines a number of work strata, related managerial accountabilities and performance indicators. The approach assumes that a number of managerial problems, like poor communication, weak leadership, unfair pay, bureaucracy, too much/too little consensus, lack of lateral cooperation and other symptoms that cause poor performance arise from faults in managerial organization structure and processes.

What we call a requisitely organized company is one whose structure and processes conform to the normative framework of the theory. It also explains the value-adding capacity of any and all accountability hierarchies.

Each successive work level :

– Has a unique contribution and a more complex level of innovation that creates value for customers, shareholders and society;
– Has a planning horizon that is further into the future;
– Has discretionary control over a broader and more complex set of resources;
– Is accountable for contribution to financial results reaching farther into the future and deeper into the income statement and balance sheet;
– Integrates an increased variety of functions, businesses or industries.
Too often, the organizational design does not take into account the natural way in which roles could contribute in relationship to each other. One of the consequences is that we mismatch accountabilities and authorities.  We ask employees to be accountable for things for which they have no control. The gap between authorities and accountabilities is one of the root causes for employees not to engage themselves in the meaning making process. The consequence is that trust is broken and strategy building and execution fails.

The concepts of “size of the person” have recently been elaborated from developmental psychology (Laske, 2009) and describes how people develop increasingly broad perspectives on the world and of themselves in relation to the world. One’s ability to organize, group and extrapolate information is a result of the social emotional and cognitive developmental stage one is in. We all mature in how we construct reality. People’s meaning and sense-making capabilities develop through youth and into maturity, in predictable patterns. This means that each person has an inherent potential for cognitive and social-emotional development over time. Since there are quite some differences in the patterns of individual growth curves, not everyone can develop him/herself to whatever desired level. Not everyone can become a ‘leader’.

There is a one for one correspondence between the level of work in a role, and level of reality construction necessary to handle a role.  People are wired to work.  They do not need to be coerced.  They only need (1) work suited to their level of reality construction and interests and (2) as leadership suited to their level of capability. The golden rule of leadership levels is that a healthy organization requires no more than one leadership role per level of complexity. In a specific chain of command, if more than one leadership role is found at a given level of complexity, it denotes over-tiering, with roles having overlapping decision rights (“compression”). It is also possible for a hierarchy to be too flat by having a missing leadership role. I have seen cases in which one part of the same chain of command was too flat while another was over-tiered. These issues do not cancel each other out; rather they compound dysfunction. Putting highly capable, high potential executives in a reporting structure in which they are more capable than the work they are asked to do creates “jam-up” (organizational dysfunction with its true origin in the work system). This almost guarantees the breaking down of the trust and the meaning making process.

Towards a different mode of leadership

In today’s context, managerial leadership has the glance of being an improvisational and experimental art. The skills that enabled most executives to reach their positions of command – analytical problem solving, crisp decision making, the articulation of clear direction – can get in the way of success. Although formal thinking and logical decision making are still appropriate, more will be needed to safeguard the viability of a company.

Formal thinking has to do with approaching a problem/opportunity from a sequential point of view, assuming a process like problem definition, information gathering, re-conceptualization, etc . The assumption is that an issue can be solved ‘logically’, that we know where the problem comes from and that it can be solved.  The basis of his thinking is based on logical ‘decision making models’. The thinking on the first three levels of complexity (procedural, situational and process) has a high degree of logical thinking, looking at the world through the lens of single organizing principles. The recent economic crisis helped us discover that change doesn’t take place in smooth, linear progressions but as sequences of fast, sometimes catastrophic events and that we need a new thinking to cope with the peculiar nature if a financially interconnected world, where danger risk and profit are linked in ways that can be almost impossible to spot and manage.

Most of the problems on higher management levels require  a further developmental level  of thinking, which I would like to call different levels of ‘integrated systems thinking’. It is obvious that not all factors are available that would be needed for a solution to most management challenges. ‘Integrated systems thinking’ has to do with what we do in the absence of those factors and create interpretations on the ongoing changes, the scope of the problem, the nature of the interrelationships and the limits of the systems.  Leaders will probably need to develop ways of looking at problems that focus more on context, emerging change and common ground than on reductive answers, more on identifying multiple possible scenario’s and challenges than on forecasting.  It is clear that the era of viewing the world through the lens of single organizing principles is past. Managers who want to understand today’s complex, interconnected, globalized world are revising their assumptions about cause and effect, about parts and wholes, about what is constant and what moves, about systems and transformation and start to embrace creative new approaches ! The way of meaning and sense making is by definition cyclical, with no possible ‘best’ solution. We cannot solve the problem ‘logically’. The only thing we can do is to stay as close as possible by the issue, formulating hypothesis, theories, checking them, gathering information, etc.  Basically the meaning making process is an interwoven/cyclical, and not a linear process.

Dialectical thinking processes are characterized by continuously receiving, creating and processing additional information in more complex forms than the logical and integrative thinking stages. Open to the constant flow of additional information to consider, a dialectical thinker can construct conceptual systems of understanding about our complex world, free of closed-loop linear logics that fool us into thinking we understand how the world works and the assumption that we have “the” solution for each problem. The stream of thought will be transformational in the sense that everything is in constant transformation, seeking equilibrium, through attention to problems of coordination, a multiplicity of perspectives and change in a developmental direction.

Towards a different talent management approach

Most companies try to find the people for the jobs. Companies convinced that individuals have  different developmental profiles  align growth to the required constructive capabilities at the next higher level in hierarchy and redesign or even create assignments specifically for each potential. The content of the jobs they give to talents  is the crucial difference in whether they are developing them or just moving them around.  As roles change, the level of complexity changes in different aspects – the level of innovation complexity, the planning horizon, the level of complexity of assets/capital managed  and the level of complexity of customer/stakeholder groups to be managed. Individuals can identify where different aspects of their role are more complex than others.

To make growth assignments work, three elements need to be taken into consideration :

– The definition of the nature of the problem space. A problem space on a higher level has a broader accountability and decision authority. This means that the discussion on the organization of problem spaces needs to be organized in a transversal way in the organization.

– The supporting debate process(es) to succeed in the growth assignment. The key issue here is the one around setting the conditions for effective growth assignment completion. Since knowledge and skills are constructed through a process of interaction and feedback, it will be very important to shape the debate out of which the person can learn and change his/her reality construction/mental highway. The debate process is an essential collaborative process through which the new organizational reality can be constructed. We can call it the creation of a culture of courageous conversations where talents with different opinions can provide crucial insights and need to be protected from the organizational pressures to remain silent.

– The value concern. There is another significant aspect of development which everyone knows about but which is very difficult to capture in words. It is often referred to as values. Values are what moves a person, pushes him/her and generally focuses the attention in a certain direction. Our values co-determine what we see and what we learn from our experience. The question of a person’s values in relationship to the level of the growth assignment is of the greatest importance. Ones value system shifts while moving into a higher social-emotional phase. Someone functioning at an operational level stresses more values like efficiency/planning/success. Sticking to those values in the innovation domain will probably hinder the way one deals effectively with greater numbers of people from different directions and will not lead to the creation of new product/ technology/market combinations. This doesn’t mean that the values become unimportant in the innovation domain. Values such as sharing/trusting/accepting limits will probably be more of help in understanding of how tight to hold the reins of discipline under given circumstances and to sense when to tighten them and when to loosen them.

Run numerous experiments

Because it is not known where we are heading, as you build an organisations’ adaptability, it is prudent to avoid grand and detailed strategic plans. If the ‘size of roles’ is matched with ‘the size of persons’ you can restore trust and run at each level in the organization numerous experiments. Everyone will take responsibility for his/her domain, at his/her level of complexity and providing added value in the debate with what is going on on lower levels of complexity. You will get a zigzagging path that will be emblematic of your company’s ability to discover better products and processes. Innovation will take place at every level in the organization

Is there a reason why it should be different ?

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