070 – Why the goal of every organization is the same (encore)

In this episode, I discuss the surprising idea that the goal of every organization is the same. Join me as I explain how this finding is part of a new way to think about management, called Management by Positive Organizational Effectiveness.

Charles G. Chandler, Ph.D.

069 – The Amazon Way

In this episode, I am joined by author John Rossman as we talk about The Amazon Way, a book he wrote on his experience as an Amazon executive. Tune in to explore some of the 14 principles that are part of the Amazon Way.

To take advantage of the free offers that John mentioned in this episode, go here. You can read a chapter of each of his books for free, as well as get a free poster for future use.

Charles G. Chandler, Ph.D.

068 – Simplicity on the far side of complexity

In the spring of 1804, explorers Lewis & Clark and their party, began an assent of the Missouri River from St Louis in search of an overland passage to the Pacific Coast. They were on a mission of discovery at the request of President Thomas Jefferson, who had added a vast tract of land to the country through the Louisiana Purchase, made up largely of the Mississippi River basin. After a cold winter in present-day Montana with the Mandan Indian tribe, Lewis & Clark arrived at Lemhi Pass in August 1805, on the continental divide, where they hoped to see a gentle plain sloping to the Pacific Coast. Instead, they saw more and more mountains, some capped with snow, as far as the eye could see.

Oliver Windell Holms, Sr. (poet and medical reformer of Boston) was quoted as saying: “For the simplicity on this side of complexity, I wouldn’t give you a fig. But for the simplicity on the other side of complexity, for that I would give you anything I have.” At Lemhi Pass, Lewis & Clark found themselves lost in the middle of a complex series of mountains, and their expectation for a simple route to the coast had fallen apart. At that point, they would have given anything they had for simplicity on the far side of the complex situation they found themselves in, but they would not successfully complete their journey to the Pacific for many more months.

When management is considered as a field of study, it appears rather complex. There are numerous terms, techniques, and approaches to be considered, and there are luminaries of the field (both past and present) that have written extensively on the topic. When today’s organizations find themselves in the midst of a complex situation, there are management consulting firms that offer their services. Yet hiring an outside firm may be only the beginning of a voyage of discovery with no satisfactory end in sight. Managers are too often presented with a choice among simple answers to the complex environment they face. Such choices can become traps, because they represent simplicity on this side of complexity. Like Lewis & Clark, it may be a long time before they find simplicity on the other side of their complex situation, if at all.

While organizational effectiveness is the most important form of organizational performance, much of current management practice is based on the Goal Model, where an organization is said to be effective if it achieves its stated goals and objectives. Yet the goal model serves an aging, and largely top-down, bureaucratic reality. Let’s call it “last century” technology. It is not reliable, because it accepts arbitrary goals that often focus on the wrong things.

The traditional approach to management is to set up a particular organizational form (organizational chart), program the organizational units with a series of goals and objectives, then lead and direct the staff to fulfill them. This is the basic idea behind Management by Objectives, which utilizes the goal model for effectiveness. The problem with this approach is that the goal model will accept almost any goal that management wishes to use, and not all goals have any relation to improvements in organizational effectiveness. It is impossible to know whether the right goal has been specified, and even if a stated goal is achieved, it may not mean that the organization is effective.

For example, selecting a new executive team with a new set of goals can be a risky strategy with unpredictable results. In 1974, Peter Drucker wrote in response to a rash of reorganizations in large American firms, “the main causes of instability are changes in the objective task, in the kind of business and institution to be organized. This is at the root of the crisis of organization practice.”

In fact, it appears that the more single-minded an organization is in focusing on a narrow financial goal (such as maximization of profit or shareholder value) at the expense of everything else, the more likely it is that instability and dysfunction will emerge. That is because organizations are complex adaptive systems and can respond in unexpected ways when forced down a self-defeating path. This is explained in more detail in my 2017 book, Become Truly Great: Serve the Common Good through Management by Positive Organizational Effectiveness.

Our view of organizational effectiveness is based on a model that pairs a defined concept of effectiveness with a way to verify it in the field, overcoming a key limitation of the past, and forming the basis for a new management approach called Management by Positive Organizational Effectiveness (M+OE).

Compared to current management practice, the new approach differs in seven key areas:

1. The goal model has been discarded, because it will accept virtually any goal that management chooses to use, without a way to discriminate between useful and non-useful goals. Within the new approach, by contrast, the goal of every organization is the same, that is, to be effective within its environment. Organizations that consider their goals to be the maximization of profit, shareholder value, or other such goals driven primarily by financial & economic gain are not using M+OE.

2. The approach uses a new outcome-focused model (OFM) to gage effectiveness of an organization’s individual offerings, and in turn, the overall effectiveness of the organization’s portfolio of offerings. Expected external outcomes (EEOs) are the demand-side behaviors of customers and other actors that can be observed in the field to validate effectiveness, confirming that the supply-side of the organization is offering what the demand side in the environment willingly takes up, adopts, and uses.

3. It counsels the incorporation of positive values within the organization from the start, to instill virtuousness, attract & amplify success, and be protective on the journey toward greatness.

4. Our new approach offers a way to make both manual workers and knowledge workers productive. While Taylor’s “scientific management” enabled manual worker productivity by increasing task efficiency through time and motion studies, the new model enables the production of internal outputs and their conversion into expected external outcomes through the management of benefit exchanges at the supply/ demand interface. The new approach programs the organization for knowledge worker productivity because tasks can be specified once an offering’s results chain and expected external outcomes (EEOs) have been determined.

5. The new approach encourages an organization, once it verifies the effectiveness of its offerings, to occupy one or more niches within its environment, and to serve them so well that the competition is irrelevant.

6. The approach encourages an organization to co-create value over time with stakeholders in the environment in order to continuously adapt to change and to serve the needs of the environment more fully. In this way, a pipeline of new offerings can emerge to replace mature products and services that become outdated, or to expand offerings in promising new areas. Observations of demand-side behavior are instructive as feedback to hone the preferred attributes of an organization’s offerings over time.

7. Within the new approach, effectiveness is an instantaneous measure that can be observed in the field every day (or measured periodically, as appropriate). True greatness, on the other hand, is the longer-term and cumulative impact of effectiveness that is associated with an organization’s reputation and impact over time. An organization can expect to spend at least five years applying the principles of effectiveness (while maintaining positive values) to become firmly established as a truly great organization in its chosen niche.

Utilizing M+OE within your organization means that product and service teams are empowered to consider a key question every day, “How can we serve our environment well today?” Businesses, government agencies and nonprofits have the same challenge. It’s a probing question, and the answer may change over time. It’s a question that will be difficult to answer quickly in a bureaucratic, top down, command-and-control management system. It is best handled by flexible, team-based management focused on the success of individual offerings to the environment by capable teams of knowledge workers. Of course, we are not suspending the principles of accounting, economics, or finance, in making such decisions, but these are not necessarily constraints. To the extent that the approach generates true greatness, it is likely to deliver superior financial and economic performance as well.

Does being truly great and occupying a niche mean that you don’t have competitors? Perhaps not, but it does mean that you are paying attention to the big things and the little things that create effectiveness at the supply-demand interface, and that you are always testing new things to serve your environment better. So, why isn’t the goal of every organization to be great rather than to be effective? Well, because an organization needs to focus on something that can be observed every day, to provide feedback and correction. Greatness (and superior reward) is something that is a natural outgrowth of being effective over time, together with serving your environment using positive values.

Truly great organizations know their environment well and serve it effectively with their offerings. They closely monitor demand-side behaviors to determine if the environment is behaving as expected, to be alert for emerging new behaviors that need to be studied further. Once an organization has developed and tested a portfolio of results chains (with more in the pipeline), it has the keys within hand to survive and thrive. Continuous adaptation to the environment is critical for survival, since the danger over the mid- to long-term is that the environment will change in ways that make the organization’s offerings irrelevant. Major catastrophic events such as 9/ 11 (or the 2008 recession in the US) can compress this timeframe, of course, and make the need for an appropriate response immediate.

The single-minded pursuit of profit, shareholder value, or any other objective (other than effectively serving your external environment, and improving the whole) can create instability within an organization’s complex adaptive system for a variety of reasons.
Evolutionary processes operate on the population of organizations, while adaptive pressures act on individual organizations, to enforce “survival of the effective” over time. Ineffective organizations are marginalized or eliminated by their environment in the absence of a sufficient exchange of benefits across the supply/ demand interface. Organizations that intentionally harbor negative values are continually at risk, and can become unstable and short lived once the environment recognizes and rejects their corrosive attributes, then actively engages in efforts to expose and eliminate the offenders among them.

A new age of organizational effectiveness will arrive when C-suite teams and other executives and managers “think different” using the principles outlined above. In the new age, small and large organizations alike (whether business, government, or nonprofit) will serve their environment and be rewarded in return, thus managing capitalism for the common good. The world needs organizations that are virtuous, effective, and truly great. Such organizations represent simplicity on the far side of management complexity.

Charles G. Chandler, Ph.D.

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067 – ‘Greatness’ does not arise from negative values

If you have listened to this podcast for a while you will know that the philosophy I advocate to lead your organization is called Management by Positive Organizational Effectiveness (M+OE). It is outlined in my recent book, Become Truly Great. The approach has three phases: 1) Be Virtuous, 2) Discover Effectiveness, and 3) Become Truly Great. This week we are exploring Phase 1 of the process, Be Virtuous. Here you are invited to start your journey toward greatness by examining whether your organization is virtuous. If this seems puzzling, it should not be. Even drug cartels can manage effective organizations, so it is important to apply super powers for good rather than evil. Think of Google’s admonition to itself, “don’t be evil.” Yet the approach goes beyond simple slogans. Phase 1 of M+OE is about instilling positive values in your organization that can both attract and amplify success, while being protective on the road ahead. Positive values and attributes such as honesty, decency, transparency, high quality, resource conservation, and doing what’s best for the customer need to be guaranteed within your processes because internal behaviors matter. It is important to do this at the beginning of the journey, rather than discover 15-20 years down the road, during scandal, that positive values were never present (e.g., Enron). We can learn from highly reliable organizations (e.g., aircraft carriers, nuclear power plants) that are obsessed with potential failure modes, and incorporate ways to recognize and avoid them.

When I first began thinking about writing a book on management, my emphasis was largely on how organizations could become effective, since that was the key problem that I believed needed to be solved. The literature had few answers in this area, and I had some ideas on how to remedy that problem. It took a while to internalize the fact that bad actors can be effective, and that I needed to address the problem more comprehensively in the book. There have been examples of organizations in the past that have appeared to be effective for a time, but eventually came to grief because of bad behavior within the organization. It seems that organizations are often unprepared to hold internal agents accountable to a common set of positive values until it is too late. So, success is not just about being effective, but about being effective while honoring core values. To make this happen, organizations need to be intentional about being virtuous.

But why? Why be virtuous? Virtuousness should be considered a prerequisite for true greatness. It is about instilling positive values in an organization, and being sure that those values consistently result in positive behaviors. An organization needs to live its values and love its purpose. While values may change over time, they express beliefs and attitudes that permeate the organization, and shape its culture. Core values should also include attributes that the organization needs to maintain at a high level of reliability and resilience. Traditional business values have included things like efficiency, profitability, and management control, but these need to be balanced against higher values and virtues to help the organization aspire to greatness and connect its values to the common good. Here there is a need for management to lead the way. It is often the leader of the organization that embodies the values and acts as an example to others on how to live those values within the organization. An example of positive values, together with organizational virtuousness, would be the US Marine Corps — for the way it instills values within its members.

A useful model on how to instill virtuousness in organizations is illustrated by the methods used in high reliability organizations, such as aircraft carriers, nuclear-powered stations, air traffic control, and forest firefighting. These situations are dangerous and prone to error, and errors that are experienced can be devastating and costly. High reliability organizations are quite sensitive to, and preoccupied with, failure. They have identified the main modes of failure, and have implemented safeguards and checks to be sure that they do not occur. Such organizations contain a high degree of expertise, and work hard to keep their operations stable and failsafe. Using a similar approach, positive virtues and attributes can be intentionally instilled in an organization to amplify performance and to protect it from specific failure modes.

A good example of organizational virtuousness was the cleanup work conducted at the Rocky Flats nuclear waste site (in Colorado), where there had been a long history of nuclear weapons production. When an estimate was done of how much it would cost and how long it would take to clean up Rocky Flats, the estimate was for 70-years and $ 36 billion dollars. What makes this an amazing story, however, is that the work was completed 60-years early, while saving almost $ 30 billion in taxpayer funds due to the positive values and outstanding work of the clean-up contractor, Kaiser-Hill. The remediated nuclear waste site is now part of a wildlife refuge.

In Management by Positive Organizational Effectiveness it is important to start from a position of virtuousness. It is the values and virtues which are inculcated in the personnel carrying out the processes that set the organization up properly for success. If the intention is to become truly great, it would be difficult to argue that an organization should not clothe itself with virtuousness before starting the journey. The founder of Patagonia, Yvon Chouinard, noted in a recent interview that the values his company began with were critical in charting the course of its later success. Google, in its original outline of mission and vision talked about “don’t be evil.” Alphabet, which is the successor to Google, now calls for “doing the right thing” but Google still mentions “don’t be evil” within its admonitions to employees. It is the adherence to positive values and virtues that amplifies performance and protects the organization from falling into a ditch along the path to greatness. To be more intentional about its values, an organization needs to take the viewpoint of an outside observer and make an honest assessment of what values are expressed within its processes and culture.

But what happens if an organization, or some part of it, harbors negative values and embraces the dark side. Examples are numerous of organizations that have embodied negative values in various ways in the past — including Enron, WorldCom, Volkswagen, the World Football Federation (FIFA), Toshiba, and Bernard Madoff Investment Securities LLC. Several organizations have appeared to be paragons of performance, riding high before scandal, and whose names seemed to be synonymous with some form of greatness; but these same organizations were brought low by one or more people within the organization that behaved in non-virtuous ways.

In the case of Enron, management used off-balance-sheet accounting tricks and complicated financial instruments that intentionally hid the truth from investors. Eventually it was found that the real value of the company was considerably lower than the stated book value, causing a precipitous loss in the stock price, and bankruptcy in 2001.

In 2015, Volkswagen (VW) was trying to take over leadership in the auto industry and was selling lots of diesel vehicles worldwide. At the height of this apparent success (despite the self-serving goal), a scandal emerged by chance. A small lab at the University of West Virginia started testing diesel engine emissions on the road to understand how VW diesels were able to achieve their high mileage ratings. The new tests were conducted on the open road, as opposed to the test bed where the vehicles had been certified in conformance with standards. It turned out that because of deceptive software within their engine monitoring system, VW diesels were producing emissions on the road that far exceeded standards in the USA. The lab’s findings created a major scandal at VW, and a great brand was significantly tarnished.

In another example, Bernard Madoff was well-known in the securities industry and was believed to be an upstanding leader (as a former chairman of the NASDAQ stock market). Eventually it was discovered, however, that his investment firm was simply a Ponzi scheme, and that over $ 50 billion worth of hidden fraud had gone undetected.

If we choose to expand our search to the shadowy and violent side of organizational performance, we could find somewhat effective but negative examples among drug cartels, and even terrorist organizations like ISIL or al Qaeda. Organizations such as these are likely to have relatively short and precarious trajectories, as state actors in the environment are mobilized and coordinated in efforts to eliminate them.

In the national election of 2016 in the US, the voters faced a choice between candidates (as usual). The narratives of each party (and their respective candidates) served as attractors to lead voters in the direction of one candidate or another for President. Unfortunately, narratives that we hear in the media, and that come to us through our televisions and radios (and across the Internet), are not subject to verification directly via first-hand knowledge. So, it is important that the validity of news sources be verified before buying into a narrative. It is well known that a lot of false information circulated in the media during the election season, and new parts of the narrative appeared even in the final days.

False narratives can lead us to vote for one or the other candidate for spurious reasons. Candidates that espouse false or misleading narratives can lead us in directions that may even be highly destructive. Despite the negative nature and questionable validity of some of the available information, political narratives clearly have extraordinary power to act as attractors to align voters’ preferences with one candidate or another – a phenomenon that was on display during the final days of the 2016 election. Although the polls may not have been wrong leading up to the election (as each reflected the situation at a single point in time), it appears that a significant number of voters changed their election day strategy in the final days in a rapid, non-linear fashion, typical of behavior in complex adaptive systems. The result on election night was surprising, and disconcerting (i.e., the election of Donald Trump).

If we turn now to the overall narrative of an organization, including its goals and how it expects to achieve them, the narrative is typically put forth by official sources. The official version can be verified for authenticity through conversations with internal sources and by observation of behaviors that can be observed internally and externally. This means that organizational narratives are verifiable, based on triangulation with multiple internal and external sources. False narratives within the context of an organization can be detected through a conflict between sources, including the official narrative, the informal narratives that we hear from internal sources, and observation of behaviors around us. If all sources are in alignment with the official narrative, we can feel confident that it is being acted upon in a deliberate manner. However, when we find sources are not in agreement, or observed behaviors that do not ring true, we begin to question the direction that the organization is taking.

That could be the case with Fox News. CEO Roger Ailes of Fox made his own news in 2016 when a sexual harassment suit was brought against him. Fox paid a single $ 20 million settlement to Gretchen Carlson, and perhaps others that came forward to accuse Ailes. Fox’s values are suspect because of what has gone on there, including reported “grotesque abuses of power… a culture of misogyny, and one of corruption and surveillance, smear campaigns and hush money.” What if other values, more positive values, had been in place? Would they have been protective? And what of the culture that has supported a corrosive environment for the last 20 years, with implications far beyond the man at the top? Based on available reports, Mr. Ailes appeared to be very intentional about the values in place at Fox News; unfortunately, they were negative values.

In another example, looking back on the US election of 2016, many Trump supporters were earnest and well meaning, with valid concerns about today’s economy, yet they were duped by a series of artful lies by the candidate himself and the enabling attention of the media. To believe that America will be made great again through the efforts of the dark-side forces that marked the Trump campaign is ludicrous. Greatness does not arise from negative values. That fallacy should have provided an obvious clue to the deception that was underway. Unfortunately, our news media and the voters failed to see this truth clearly.

Today we have explained the reason for the emphasis on positive values in Management by Positive Organizational Effectiveness, and why ‘Be Virtuous’ is Phase 1 in this approach. Positive values can serve to amplify benefit exchanges with customers, orient a diversified workforce to what behaviors the organization considers important for success, and act as a protective shield against scandal over time. They can become differentiators that define and distinguish a brand. Negative values, on the other hand, can cause great harm. It may seem that straying into negative territory is justified from time to time in difficult situations, but as the many examples have illustrated today, an excursion to the dark side is unlikely to turn out well.

Charles G. Chandler, Ph.D.

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