I recall an interesting incident which happened a few weeks back which I think I must share with you. I was driving from my home to office. When I reached and turned on the main Agra Bombay Road, as usual traffic from all directions was converging near the lifeline hospital and everybody was trying to get ahead of each other. It is a common occurrence and as usual no traffic cop was in sight to resolve it.
What was uncommon that day was a person going on a bicycle stopped and parked it on the side. He then came near the point of traffic jam and started directing it to make the vehicles move out wherever he found some space. This had an almost electric effect on others and everybody was cooperating with him. Within minutes the bottleneck had disappeared and traffic was moving smoothly. The bicycle person quietly picked it up and was on his way.
It was both an enlightening as well as a humbling experience. We come across many such cases where all of us are looking to our narrow interests and unmindful of the effect on the overall system, may it be the family, organization or even the economy. We need somebody to disentangle the mess we create for ourselves. Can we be the disentangler next time around?
Your views and inputs are valuable; please share.
Recently, I and my wife visited our doctor for consultation. While we were waiting, I tried to make use of the bonus time to read a book and make some notes. I was so absorbed in what I was reading that the pen slipped off from my hand to the floor. With one eye on the page, I groped around to locate the pen and pick it up. As i was lifting my hand holding the pen, I felt pain and there was a scratch on my forearm. I noticed that a corner of the glass top of the center table kept near my chair had chipped off and the sharp edge had caused the cut on my hand.
My first reaction was one of anger. But it quickly gave way to how it could be avoided in future for others. I saw the doctor’s assistant passing by. I called him and showed him both the chipped corner of the table as well as my hand. I expected him to do nothing, at least not immediately. But to my pleasant surprise, he rolled up his sleeves and requested me to help him to pick up the table to rotate in such a way that the chipped corner was turned to the corner of the room where it was unlikely to hurt anybody. The table was heavy and both of us were finding it difficult to lift and turn it around. The receptionist who was sitting nearby rushed in to join hands and three of us together to accomplish the task in no time. All of us felt happy with what we had done; smiled at each other and went our way.
Later when I was thinking of this incident while driving back home, I realized that this small incident had many elements of what system improvement is all about.
• Problem of one person was converted into opportunity for benefit to many in future.
• Rather than passing the buck or shrugging off that it is not my responsibility, the focus was on what can be done about it.
• A person who noticed that her help could be useful jumped in without being called.
• The task accomplished gave satisfaction to all concerned.
• There was no thought or attempt to take any credit.
Isn’t system improvement really about small things handled well collectively here and now?
Currently I am reading an interesting book “The leader’s guide to radical management” by Stephen Denning because it is about my favorite topic of exploring Scrum concepts in organizational context. According to the author, in the new business environment “The key to an enduring future is to have a customer who is willing to buy goods and services both today and tomorrow. It’s not about a transaction; it’s about forging a relationship. For this to happen, it isn’t enough that the customer be passively satisfied. The customer must be delighted. When the delight of the client is kept continuously and rigorously in mind, many of the problems of workplace disappear, and the possibilities of a different kind of work – more productive and more satisfying – become possible. When that principle is ignored, all sorts of workplace problems become insoluble.”
One of the principals of management is that you can’t manage anything unless you can measure it. But it is tough to measure customer delight. As per the author, “typical customer satisfaction surveys are long and complicated, and few people like to fill them in. In fact, trying to get them completed tends to annoy the very customers whose satisfaction is being measured. As a result the answers given may not accurately reflect how the customers feel about a product or service.”
I had a similar experience recently with the new car I bought. I am quite happy with the car and would willingly and enthusiastically recommend it to my friends. However, the car company has an irritating feedback system. I have received phone calls almost a dozen times in last three months whether I was happy with the car. The worst case was when somebody called from what sounded like a call center. He started asking my satisfaction about every transaction in minute detail. First few questions I was okay but then he just kept on mechanically and unemotionally asking questions. Slowly my irritation started rising and at one point I told him that I am going to tell my friends to keep away from this company. He said I have been given this work and I have to complete the entire questionnaire. That was just too much and I hung up on him.
The author has cited interesting work done by Fred Reichheld who spent twenty five years trying to understand how firms create relationships of trust and loyalty and the business impact they get from that. Fred & his team faced problems similar to those cited above. Ultimately they came up with a simple solution called “net promoter score” or NPS for short. Typical customer satisfaction surveys “had focused too much on the entire range of customers, from the most satisfied to the least, with a large body of customers falling into the undifferentiated middle, which concealed what was going on at the extremes where the real engines of growth lay.”
After lot of permutations and combinations, Fred & his team came up with a single question “How likely is it that you will recommend this firm or service or product to a colleague or friend?” where the customers were are asked to respond on a 10 point scale; 0 -unlikely, 6 – somewhat likely, 8 – likely, 10 – highly likely. The responses were divided in three groups: 9-10 promoters / 7-8 passively satisfied / 0-6 detractors. This was used to calculate the NPS as follows.
% Net promoters = % Promoters – % Detractors
Because of its simplicity and dependence on response to only one question, this solution has been criticized by some experts but it is practical and intuitive, and most importantly it drives rapid learning and action across the organization. Many organizations have found that it is adequate for practical purposes to move ahead. It also makes sense to frontline managers who intuitively grasp what it means to be increasing number of promoters and reducing the number of detractors. This makes more sense than trying to increase the mean of their satisfaction index.
Though I did not find any specific information in references on this aspect, I believe that information gathered by typical customer satisfaction surveys will still have value to help identify specific action areas and not as a measure of customer satisfaction / delight.
May be it is worth trying out?
This is the last of the three part post about some unusual but useful ideas from the book “Maverick!” by Ricardo Semler, the owner of Semco Brazil. The first part covered the challenges of creating and sustaining self-organizing teams and we saw some parallels between Semco’s approach and that of Scrum. In the next part, we saw how Semler came up with an idea of creating three concentric circles of the organization in place usual pyramid structure and how it helped Semco to become much more agile and lean. In this concluding part, I would like cover some ideas related to compensation and appraisal management and how it helped them to truly empower their employees and create a robust organization which could weather the storms created by Brazil’s runaway inflation.
Employees are told to set their own salaries keeping the following criteria in mind. “What they thought they could make elsewhere; what others with similar responsibilities and skills made at Semco; what friends with similar background made; and how much money they needed to live.” There was initial worry that people may ask too much, but “We needn’t have worried. Except for half a dozen people, everyone set salaries that were in line with our expectations. In five of the six exceptions, people set salaries lower than we had projected. it wasn’t always easy to get them to raise their figure either.” There are three reasons why reasonable prevails. “First, everyone knows what everyone else is paid. Second, we try to keep our top salaries within ten times our entry level pay. The third reason is to do with self-preservation. Our people know salaries account for most of our operating costs. It’s easy to solve a budget problem by eliminating a salary that seems to high, and no one wants to stick out.”
As regards profit sharing, “We begin with Semco’s total profits, the revenue minus expenses. Then 40% would be deducted for taxes, 25% for dividends to shareholders, and another 12% for reinvestment – the minimum the company needed to prosper. That left 23% per cent.” As regards the distribution, “Each quarter, the profit made by each autonomous unit is calculated and 23% of that sum is delivered to the employees of that unit. (If we don’t have any profit to share, we don’t give any consolation prizes.) What happens to the money after that is up to them. They can divide it up by head count or they can consider years of service, salary or other criteria. They can decide that rather than distribute the money, they will use it for other purpose, such as loans so workers can buy the houses. But whatever they decide, it applies to that quarter only. Three months later, they have to decide all over again”. Management doesn’t get into any of these details.
“We just wanted to know why some people hadn’t become the successes we thought they would be when we promoted them, and naturally asked those who worked for them. That led us to draw up a form subordinates now use to evaluate their managers twice a year. It has about three dozen multiple choice questions designed to measure technical ability, competence, leadership and other aspects of being a boss. The questionnaire is filled out anonymously, so no one is afraid to be honest. We calculate a grade which is posted, so everyone knows where everyone stands. 70% is passing, but most managers get between 80% and 85%. Managers who score below 70% are not automatically dismissed, but a low grade usually creates intense pressure on an individual change. What we want to see is improvement from one year to next. Supervisors meet with their subordinates to discuss their grades, so the process of change starts very quickly.”
“We developed the questionnaire to find out why some managers were failing. But we also had cases in which managers we admired – and repeatedly promoted – got such low marks that it made us wonder how we could be so wrong. But such cases are rare. Far more often the evaluation process helps people change. For promotions and new hires, we added one more step – group interviews – or interviews, since candidates are often asked to return for four or five meetings. I am sure it tries their patience, but it gives them and us a chance to be really sure.”
The above quotes from Semler are self-explanatory for what real empowerment is and why Semco was voted the best place to work for in Brazil.
Last week I had shared a few thoughts of Ricardo Semler from his book “Maverick!” about how he successfully created self-organizing teams at Semco and similarities with the practices that Scrum uses for the same purpose. This week, I would like to share from the chapter “Rounding the Pyramid”. Some of these ideas at first may appear weird, even crazy. But specific cases cited by him in the book make you wonder why other organizations shouldn’t try to benefit from them. I am quoting below a few excerpts from this chapter.
“The pyramid, the chief organizational principal of the modern corporation, turns a business into a traffic jam. Thousands of drivers start on the highway. But as it gets narrower, rewarding the few who keep climbing but demoralizing a far greater number who reach a plateau or fall by the way-side. Some drivers give up and take side roads to other destinations. Those who make their peace with the pyramid and develop specialized skills can expect job security. But is it reasonable to suppose that they will continue to be motivated? Because of the constraints of the pyramid, organizations are not ready to promote them fast enough to satisfy them, so many firms take the easy way out and create an extra level or two for their over-achievers but that only compounds the problem.”
After giving a lot of thought to this problem, Semler came up with an innovative solution. He created three concentric circles instead of a pyramid.
“The small innermost circle would enclose a team of half a dozen people, the equivalent of vice presidents and above in a conventional company. They would co-ordinate Semco’s general policies and strategies and be called Counselors. The second circle would enclose seven to ten leaders of Semco’s business units and be called partners. The last immense circle would hold virtually everyone else at Semco. They would be called associates. A group of associates is headed by a coordinator equivalent to departmental managers and supervisors.”
“The smallest circle would serve as a corporate catalyst, stimulating decisions and actions by the people in second circle, who actually run the company. The coordinators could have vastly different skills, responsibilities and salaries. Coordinators with relatively little ambition could move from one job to another provided there was an opening. They could also go back to being an associate. Associates could even earn more than the coordinators. A specialized software engineer as an associate, for instance, could make much more than a coordinator. The circles freed the people from the hierarchical tyranny; they could act as leaders when they wanted and command whatever respect their efforts and competence earned them. They could cease to be leaders whenever they wanted, or when the organization decided they no longer merited it.”
“How would decisions be made? Each associate would make all the decisions he felt confident to make by himself. if he was uncertain about a problem, he would go to his coordinator. Similarly, each coordinator would make all the decisions he felt confident of. He would bring other issues at a weekly meeting every Monday morning presided over by the partner of the business unit. Decisions that affected more than one business unit or involving large investments would be taken up to the Tuesday meeting attended by the representatives of each business unit (not necessarily the partner), plus all the counselors. All decisions in the meetings would be by vote; each person irrespective of his role has one vote.”
“Just three circles, four job categories and two meetings. That’s it.”
“Under the new rules one coordinator could not report to another coordinator and similarly one associate could not report to another associate. It was a big adjustment for those who held supervisor positions earlier but didn’t qualify now as coordinators. They found themselves floating in the big circle but their salary was not affected. Since there was a limit on number of coordinators, the associates have to take on more responsibility.”
It helps creation of self-managed to push decision making as far down as possible. Coordinator is there to help the associates make decisions only when required; similar to the role of a scrum master. Associates can easily get more exposure to different skills and capabilities and are encouraged to play multiple roles simultaneously in a team; very similar to Scrum. Whole team works for common goal.
Scrum teams could possibly benefit from two more practices from Semco; “Hiring and firing the boss” and “Sharing the wealth”. I will try to cover important aspects of these two next week and examine how these empower the teams to be more self-organized.
While on vacation, I am currently rereading an excellent book “Maverick!” by Ricardo Semler, owner of Semco Brazil. He is well known for his unusual management ideas. Basically, they are bottoms up like,
- Every new management hire is interviewed by people who would report to him. If they don’t give him an okay, he doesn’t get the job.
- During annual salary review each person is given a choice to decide his new salary level. He is provided with information about what others at similar level are getting within and outside the company. If he asks for an exorbitant raise, management does not say no. But he has to face the peer pressure because his salary is going to affect profit share of others in the business unit.
- Same applies to expense reports. If he decides to stay in a five-star hotels and others in similar situation normally stay in a three-star it is known to others and the peer pressure works.
- All the employees have access to financial statements and training is given to each person on how to read the balance sheet.
- Each new team can decide and buy the furniture they would like to use.
- Each employee has a vote in important decisions affecting them like where to locate the new plant out of multiple choices.
In short, employees have great freedom to make decisions. They are encouraged to have all the necessary information to take a decision. As a result they also have the responsibility for the decision because their actions are visible to all and those who are affected put the pressure either encouraging or discouraging such actions.
I see a number of parallels with Scrum,
- The processes are few and light-weight. The administrative overheads are drastically reduced.
- Minimal but important information is collected which is freely made available to all concerned.
- There is a shared commitment; whole team either succeeds or fails.
In short the teams are self-organized. We can see lot of references on why self-organizing teams are so effective and successful. But in practice, it takes great efforts to bring that into reality. Semler had to drive it passionately and continuously from the top before it became an accepted way of working at Semco. Similarly, Scrum teams take time to reach a stage where the teams are really self-organized. Why is it so? As Semler says “It is all about giving up the control and those who are in control find it very difficult to do so.” That is the reason, so many people impressed with and talk highly of his approach but we do not see them widely being applied in many organizations. Similarly, unless the management completely understands what is involved in Scrum and prepared to implement the spirit of Scrum, the practices of Scrum may be put in place but real benefits may still elude.
I suspect there is another aspect which is not so obvious but has an important role in creating self-reorganizing systems. People want freedom but at the same time are reluctant to give up the structures which give them comfort. You can’t suddenly give complete freedom and hope that everybody will lap it up. People need structures. Hence when the management is ready to give up control, rather than adding new structures out of insecurity they have to understand the effects of existing structures and slowly starts loosening them so that people learn to demand and use the information and take collective responsibility.
Semler is already applying what has worked in business environment to the school system in Brazil. Combination of giving up control and progressively preparing people to take freedom responsibly and maturely will help apply these ideas in lot many organizations. Similarly, the right approach of creating self-organizing teams may help software development teams even if they are not following Scrum.
Concepts are useful, but beyond a certain point it is important to translate them into practical actions so that we can benefit from them. One such concept is innovation. We can spend days and pages to debate on what exactly it means. But it may be useful to start with a simple understanding of what it means to us and get on with details of how to bring it about. Based on what we learn on the way, we can always tweak the definition.
After going through various definitions, the one that makes most sense to me is “Innovation is doing anything new or anything existing in a new way so that it helps the system to be healthy”. We can say that any system is healthy when,
- There is a fine balance between continuity and change
- Those involved in the system feel the energy and creative tension, at the same time feeling good about being part of it
- Those dealing with the system feel that the system is fair to them and want to continue to associate with it
- The system in turn helps other systems it is dealing with to be healthy
- When challenged by the environment, the system may need some time to adjust but soon reaches a new state of equilibrium
We need good practices for a system to become and remain healthy. We commonly talk of best practices, but I prefer the term “good practices” because there can be multiple good practices to choose from in a given context and it provides flexibility to evolve new good practices. I like the tentativeness of “good” practices over the arrogance of “best” practices.
How do we arrive at the good practices? I feel we can start from some generic aspects.
- Everything that we do, in any domain or walk of life, tends to go through a three step process, plan -> execute -> review. We normally have well established good practices for these steps. However, we can compliment them with another three step process, prepare -> observe -> introspect. While we plan for the predictable, we could also prepare for the eventuality if something were to go wrong. Similarly, rather than just mechanically and blindly executing the plan, we can observe how the system is responding. After execution, we normally review to see whether we achieved what we had planned to achieve. This is important but rather than limiting it to just review, it would also help to introspect how we could have done better. Therefore around each set of tasks of a similar nature, we can build good practices for prepare -> observe -> introspect cycle which goes hand in hand with the plan -> execute -> review cycle.
- Another generic aspect applicable to any domain is interaction between expectations and commitments. In any interaction between a provider and consumer, if the expectations of the consumer are not correctly understood by the provider, it can lead to lot of wasted efforts as well as avoidable dissatisfaction. If the provider does not give enough thought before making a commitment and / or is not serious about keeping the commitment once made, it leads to lot of negativity in the system which in turn affects the system health. here again, building and using good practices for effective management of expectations and commitments would greatly help to make the system healthy.
There are other such generic aspects, which we can look at in the future posts. However, even if we can identify good practices for the above two aspects and examine what we currently do, it can lead us to think what we need to do differently and specific actions to be taken in a given context.
Edward De Bono is well known for lateral thinking. Currently, I am reading his book “Think” where he makes a strong and passionate case for encouraging creative thinking. Throughout the book, he keeps stressing on the theme that “logical thinking is excellent but not enough”. Logical thinking works very well where we are concerned with inanimate objects and systems. It has been the main driving force behind spectacular scientific advances in last couple of centuries. But it has also led to a belief that it is good enough in every field including human systems. Human beings are complex and so are the human systems. They have dimensions which either we are not aware of or we do not know enough about. Hence there is need to supplement logical thinking with creative thinking.
Software development is very much a human system. Software is created by people for use by people. Even in situations where other automated systems use the software, it is the people who decide how it will be used. So there is a need for both the logical thinking and creative thinking. Success of logical thinking in other fields has led to complacency that processes are enough and people are just resources. Of course people need processes for activities which are well established. Without them we will keep on reinventing the wheel. Without them we would never be able to achieve the predictability & efficiency which is essential for timely delivery of quality software within cost. However, if we believe that processes are independent of people and are enough to keep things going, it is a dangerous assumption because it leads to the conclusion that we need to control them to the predefined state. If we find a deviation, we make attempts to remove or at least reduce it. This approach has two problems.
- We will not be able to adjust to the changes in the environment fast enough
- We will not use full creative potential of the people involved
Processes are for people, they do not exist in isolation. This approach changes the way in which processes would be defined, reviewed and kept updated for the benefit of the people. It would help people respect the processes as well as question them when they are not working for them.
There is another aspect which the author has brought out in the book. It is that there is too much emphasis on problem solving. Result is that If there is no problem, no thought is applied to still look for alternatives some of which may be even better than the current way of doing things. This requires creative thinking. It requires a different attitude. It requires willingness to try new things or new ways of doing existing things. Some of them may fail; but that’s okay. It requires questioning the existing perceptions which is not easy. It involves changing existing habits; which also is not easy. As they say “old habits die hard”. At a deeper level it requires not taking oneself too seriously.
These are some of the thoughts that come up when I read the book. Comments and other thoughts are most welcome.
Yesterday a little before noon, I was driving from M.G.Road to Nath Mandir when I saw a marriage procession. The bridegroom was on a horse all decked up and loaded with garlands. There were a few seniors with suits & turbans walking solemnly and perspiring profusely. Ladies in flashing saris and in all their finery were following the horse. Enthusiastic boys & girls were dancing and the band was providing some standard tunes played at such occasions.
May be all of them were enjoying their procession in the Sun at 44 C (112 F). But I just wondered in case any of them were not, what choice they had. The bridegroom would not have liked to miss a chance of a lifetime but surely might have preferred late evening. His father might be concerned about what the relatives will say. The ladies would be worried about breaking a tradition and poor members of the band had no choice unless they were prepared to give up their livelihood. Why then do we get involved in such rituals blindly, afraid to question? And who would be first to raise such a question?
We see similar situations in the organizations as well. Once certain traditions or conventions are established over time, its not easy to change them. Such system structures are invisible yet very powerful. Over a period of a few years in case of organizations (and over centuries for cultures), they build a momentum and provide the life force. But at the same time, they have lot of inertia and anybody wishing to change finds heavy resistance, not only from members but the system itself.
Whose call could it be? I feel anybody who feels strongly about it. Once he raises an issue and keeps raising with patience perseverance and with a positive approach, others will slowly start questioning, look for the reasons why such traditions were initially found useful and whether they still makes sense. Then more and more people would join the band wagon and ultimately we will see a new convention new tradition becoming commonplace. The person who started it all may be forgotten by that time, but he is still around he may feel a deep sense of satisfaction.
There are situations where we are either responsible for bringing about a change in others or want to help them when they desire to change. Few days back, I had posted on this blog the conceptual aspects of three “A”s of change management. The three “A”s are Awareness -> Acceptance -> Action. Anyone who wants to help change another can benefit from it.
When a person is used to doing things or thinking in a certain way, he tends to become blind to the reality. He is comfortable in his cocoon. It helps if we help by making him aware of the situation. Otherwise, nature has its own way of showing the reality which might be harsh.
Even when the person becomes aware, it does not mean he will readily accept the need to change. The temptation to remain in the comfort zone can be quite strong. We can help him by making him visualize the better future; how it will look & feel. You can help him with suitable ways to reach that new reality.
These two steps are essential but not necessarily sufficient. Awareness of reality and desire to change may not necessarily result in action. If we see that the old behavior is still continuing, we may have to create conditions where it is easier to adopt new behavior or difficult to continue with the old one.
These tips can be useful whether we are dealing with our children, spouse or even with our parents. Similarly, at work we may wish to change people reporting to us, our peers or those senior to us. The actions to be taken in each case would depend upon the situation as well as nature of the person we are dealing with. Please try it out. I would be keen to know what worked and what did not.