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Does Requisite Organization Really Work Over the Weekend?

Week-end pleasure. (c) 2010 lilie Mélo

I have a question about the role of Requisite Organization and what Chris Argyris calls “Model I behaviours”. Jaques, in Requisite Organization, 2nd Ed., says that his work has led to what he calls his “weekend theory of change”, that if you implement Requisite Organization (RO) policies and structure on Friday night, everyone will change over the weekend from crabby, defensive and counterproductive (what Argyris calls Model I) to happy, productive, cooperative employees.

So here’s my question:

Is there any evidence, even from your experience, that Requisite Organization will solve the Model I problem of defensive coverups that Argyris describes?

Jaques clearly believed that by correcting the structural problem within the organization, you will eliminate these anti-social (or at least counterproductive) behaviours on the part of individuals. Note what he said in his keynote address to the Mid-Winter Conference of the Consulting Psychology Division (XIII) (February 8, 2002):


A CEO and his immediate subordinates were using “group decision making” in order to be democratic. Their work was spoiled by what they complained was the autocratic personality and behavior of the CEO, who always seemed to be trying to control discussions in his direction, because after all, as he put it, the Board held him accountable for the decisions. Special discussion to ”remove the group dynamics” problems, led instead to the important conclusion that you cannot have group decisions in managerial systems, because there must always be an accountable manager in charge. They eliminated group decision making. Their behavior changed overnight, to a supportive two-way collaboration with the CEO to help him to arrive at his best decisions: all so-called autocratic behaviors ceased.

. . . . . . . . . . . .

The second general conclusion is that it does not take a long time to change individual behavior, and to overcome resistance to change, in social institutions. It does require such conditions when we are trying to help individuals overcome difficulties in themselves, as part of individual clinical practices. But social behaviors in social institutions in which individuals find themselves in accountable interactions, are most heavily determined by the institutional policies and practices, and the institutional constraints.

Given what I have called requisite social constraints in our institutions, gross changes in individual behavior can be warmly accepted, and not resisted, and can occur overnight if systematically worked out and well-formulated. I would emphasize: changes in behavior due to a release of constructive behaviors that had been suppressed by anti-requisite systems, not changes in the individuals themselves.

[Elliott Jaques, in his keynote address for the Mid-Winter Conference of the Consulting Psychology Division (XIII), February 8, 2002]

Let’s look at a standard description of the Model I fancy footwork behaviour. Chris Argyris, in Overcoming Organizational Defences, that C-note paperback, discusses an interaction with between a VP and Consultant1. I understood his example (pp. 52-57) to be an older, more experienced VP of the Consulting Firm working with young consultants. The defensive routines he describes in the following manner:

In another episode VP raised another concern. He acknowledged that he was prone to making sweeping statements. He wanted his and others’ statements confronted.

VP: I’m worried that if I agree with something, it may taken as final. Als, it is important for me to be able to say, “Hold on, I think it is more complicated than that,” without suppressing others’ views or being seen as unfair.

CONS 1: I would say that you are being unnecessarily nervous about this case team.

Again, we see the pattern of CONS 1’s holding the VP responsible and psychoanalyzing him (“you are being unnecessarily nervous”) even though he would not want others to psychoanalyze him.

If I use Requisite Organization theory to interpret this interchange, I would say that the VP is more than one Stratum above CONS 1, the subordinate. The other young consultants, CONS 2 and CONS 3, participating in the case team with the VP, might be in the same Mode as the VP and therefore have an understanding of him even though he is more than one Stratum above them. CONS 1 does not share a Mode (final level of information processing complexity) with VP, so he is not getting any context in which to work. The VP is describing “things are more complex up here” which is consistent with Requisite Organization theory, but he is so far up above CONS 1 that he cannot adequately communicate context for CONS 1’s work.

Someone with Requisite Organization experience, give me an answer.

You see, if the answer is “yep, sure does”, then I have to rethink all my current consulting. The best way to have continuous learning is to have a Requisite Organization, and I cannot do anything about that.

Image credit: Week-end Pleasure. © 2010 lilie Mélo (CC BY 2.0)

About

E. Forrest Christian is a consultant and writer with The Manasclerk Company who helps executive-level managers and experts translate their complex knowledge into products and materials that non-experts like clients and buyers understand. He has worked in functions as varied as web security, ghost writing, requisite organization, executive coaching, software design, environmental compliance, documentation, enterprise architecture, ISO 9001 and training. He even developed one of the earliest catalog websites in 1994 and has held certifications in IT security (CISSP), training and hazmat response. Forrest lives and works in the outer edge of the Chicago metro area in Valparaiso, Indiana.  [contact]

There are 29 comments .

jmmj

As long as were asking questions, I have one:

High CIP seems (from my simple perspective) to imply higher empathy: Being able to hold multiple perspectives simultaneously in your head says you are talented at imagining how other folks feel.

Does complexity correlate to compassion?

Of course this begs a couple questions, like:
How would I define compassion?
Would I even understand the compassion of a Strat VI?
Does it look like the “Cinderella Man” of the Rush song who holds “up his riches to challenge the hungry”?

Forrest Christian

I don’t think that there is a correspondence. Just because you have a long time horizon doesn’t mean that you are a good person: lots of StrVII folks have been evil bastards. Also, one of the problems may be feeling empathy for work done in lower Strata. I think that compassion would play out considerably differently.

And only you would quote Rush about this. ROTFL.

j —

It seems to me that your initial question can be answered by some of the things gmehl and namewithheld have been discussing. You can establish a structure that is based on RO. But unless you put the correct person in the right spot in the RO based structure, you still haven’t fixed the problem. Cronyism, CEO being too low on the complexity scale (probably inter-related), incorrect identification of levels, someone growing quicker than their promoted, and a whole bunch of other issues could crash this whole RO thing. So it seems to me you could have the utopian RO structure and still have a hellish reality. . . .

Interesting extension of that thought – RO Consultant called in and asked to build an RO by a CEO who’s not qualified to run it. . . . . I could envision great difficulty bringing that one to a successful conclusion.

j —

I also think all this stuff is extremely oversimplified. Its one thing to be an academic and write about “changes being warmly accepted.” It’s another thing to try and change an hide bound organization that’s experienced years of poor leadership. There is a huge disconnect between rubber and road – academic and reality.

I finally think we’re treading on dangerous ground when we say everyone in a homeless shelter is stratum I or lower. First off, reading all the other posts on this blog, I would expect this to be false – should be a representative sample of all stratums in any social group. Second, standing on top of that slope looking down at the homeless ladies is the first step in that quick descent into the hell of lacking respect for others. Saying they are sub stratum 1 is the second step. Implying they cannot connect all the dots to lead a normal life (loosely defined to mean that they don’t require the use of a homeless shelter) is the third.

This stuff makes me nervous.

Michelle

I agree with Manasclerk. Looking at CIP in a vacuum is not a good idea. It has to be anchored with one’s knowlege/skills/experience and values. I think compassion would be highly influenced by these other pieces of the total model.

On another note, I believe that having a personal understanding of CIP makes one more compassionate because you can be more clear on why some people “just don’t get it” like you do.

In light of CIP knowledge, I, personally, found myself becoming more compassionate.

Contrary to popular belief (as mine used to be), making it in this world doesn’t wholly have to do with trying harder, getting a better education, reading more, going to training, having passion, being persistent, being driven, or being motivated. Instead, some people just don’t connect the dots like you nor are they able to consider all the variables you do when making a decision.

Consider those who have capability at the Stratum I level. Except for concrete/specific situations, they don’t have the ability to see problems coming. I can’t imagine living a life where I was constantly blindsided by the realities of living in this world. Even budgeting money over the course of a month to meet all your monthly commitments would pose a problem without someone providing very specific guidelines or training.

I did some contract work at a day shelter for homeless women. I wasn’t aware of CIP and its implications at the time. It is clear to me in hindsight that many of them were homeless due to having CIP at stratum I or BELOW.

But for the grace of God go I.

Regards,

Michelle

Michelle

J, your post brought up many afflictive emotions for me. I have, in essence, staked my career on RO because I believe it is the most HUMANE model I have every seen. To suggest that I am being elitist (standing at the top of the slope), hurts my feelings. You are entitled to your opinion, but I feel like I must defend mine.

I said MANY of those in the homeless shelter where I worked appear to have been stratum I or below. You quoted me as saying EVERYONE. Certainly overwhelming life circumstances, mental illness, and substance abuse played a big part in this too regardless of CIP level.

I had the utmost respect for these ladies. That’s why I took the training assignment for non-profit pay. It was to train them for telephone reservations/ customer service positions. We spent 3 weeks, full time together going over customer service skills, basic ettiquette, resume writing, interviewing skills. I believed that they were hungry and motivated, and most were. I believed that if they just wanted it badly enough, and I gave them the skills and self confidence, then they could succeed. I’m sad to say that despite my best effort and (usually) theirs, about 80% of the time, that was not the case.

Sure, this could be a poor program, but I had been developing and delivering training for over 10 years in the corporate world, and I’d never been so stymied by the ineffectiveness of a program. And, by the way, the homeless shelter thought 20% success was admirable based on their past success rate with training programs.

I think the reality was that what we were expecting of these ladies what was beyond their current means to deliver in terms of CIP.

I am not an academic. I was a marketing professional, a regional training manager for one of the world’s largest corporations, and an independent OD consultant long before I encountered RO or CIP. I wasn’t looking for it, nor did I believe I would find one model to be so explanatory. But when presented with it, it just really puts your past work experiences in a perspective you never had.

I’ve seen RO work in a variety of contexts with a variety of clients – where the rubber meets the road.

I can understand your nervousness. It runs counter to many of our American Way values. I would encourage you to continue learning about it, if for no other reason than to be able to continue to debunk it. I belive you will find more validity in it than you expect.

As far as your comment regarding a CEO brining in a consultant to create an RO culture, only to find out s/he is unqualified for his current role. This tends not to happen. Because to be successful in a role, it requires a CIP/stratum level equivalent to that called for by the role. However, we have a dissertation thesis that suggests that to bring about transformational change (such as instituting RO systems), the leader must have capacity at least one level beyond that called for by his/her role. Thus, a leader calling for the instituion of RO within his/her organization will likely be overqualified rather than under.

However, we have performed talent pool evaluations that conclude that managers within the current talent pool are under their current roles. This is not usually a shock to those involved. It is usually very validating. Because the leaders are thinking: “I’ve tried everything with this guy, I’ve coached him, I’ve covered him, I’ve sent him to training, I’ve pleaded, I’ve hinted but nothing seems to work. He’s a nice guy and he tries hard but he just can’t do the work.”

The good news is that firing the person is not necessary. Reassigning them to a role that fits their ability is what’s called for. Also, it keeps them from being blackballed from future promotions. As they mature in CIP, they may eventually become qualified for the role they could not handle previously.

Regards,

Michelle

j —

Michelle,
I apologize for hurting your feelings.

By any chance, would you know if your success rate was/is similar to the success rate for the phsycological treatment of debilitating mental illness/addictive behavior? I would bet there is. I would bet it has nothing to do with CIP.

I think RO, based on what I’ve read here, is a pretty good model. I don’t think its the panacea, and I’m not particularly out to debunk anything. I just enjoy learning. My real problem is with the concept that all we have to do is change the org structure and put people in the right position in it. Invariably, some people will have to go down because they are in a position way over their head. I would expect, based on my experience managing people, that this will not be warmly accepted by anyone. When I make the night supervisor the director ops, the director ops the plant manager, and the plant manager the night supervisor, I’m gonna have problems. There is no way around that. And it won’t be with just the three impacted employees. Afterall, if I can do it to them, I can do it to anyone. Not to mention the litigation this will spawn if any of the demotees are in a protected class.

Perhaps “academic vs reality” was a little too pointed. I don’t think you really have any substantiative hope of creating an RO utopia overnight or over the weekend. I didn’t mean to point fingers at you or your boss with the A vs R point. I was trying to convey the great difficulty which you would face trying to make these kinds of wholesale changes in any organization. I apologize for my bluntness and failure to communicate effectively.

As far as an unqualified CEO trying to implement RO, I would think that would be fairly likely to happen. The CEO is probably fairly intelligent and probably knows that changes need to happen, just not what exactly to do, because he/she just can’t see the whole picture. Reaching out to an outside consultant would be a fairly logical avenue for such a person to try.

Please see my previous statements about demotions. I’ve been in plants bleeding money because people have tried demotions and it flat out doesn’t work. A little thing called ego is what most demotees have trouble with. Anyway, in roughly 20 years of management experience, the only organization that pulls it off with any success is the U.S. Army and there it’s only because your manager can send you to jail for malingering.

Thanks, j

Forrest Christian

Michelle and I have just had a conversation today that touched on this issue. (Also a conv with her People Fit co-conspirator, Glenn.) Jaques really doesn’t talk about the implementation phase. One of the Canadian Centre guys talked to him about it, telling him that he needed more than 10 minutes about implementation in his multi-day training. Jaques listened but was unmoved: he simply wasn’t interested in the issues of implementation. So you’re right: the simply “make it happen” isn’t simple and requires a host of skills that OD and Change Management folks have developed over the past half-century.

Still, there is something deeply troubling about a manager who will let a subordinate continue in a position of management who cannot do the job. The person will actually shrink the role down to fit him or her, and will either fire or get rid of any subordinate at his or her stratum or above. New hires will be at least one stratum beneath the incapable manager. So the CEO is consciously allowing this to continue.

Part of the problem is a question of pay: you can’t demote someone in pay without having some serious backing in paperwork, just for the lawyers. But you can reassign someone without reducing their pay.

The Army has a long record of allowing incompetent officers remain in command because of their connections or out of a desire of saving face. I think that the problems with certain officers in the Vietnam war produced some changes.

One thing that you’ve talked about (at least over the phone) is how the Army is hesitant to promote quickly nowadays. They seem to be using Jaques’s ideas to promote only when the person is able to handle the new Stratum of work. This makes the officer’s subordinates happier since he or she has the capability to really be the boss.

The financial institutions may be a little better at this, but only because you have to actually produce to stay on the job. Your previous years of millions will only last so long. Having a performance-oriented culture reinforces a lot of the ideas of RO.

The last comment I’d make is how incompetent the managers who promoted these people must be. Of course, some people get promoted into a position that is StrIII in Year One but becomes StrIV in Year Five due to changes in the company (mergers, acquisitions, growth). It’s not that managers don’t want to demote anyone. It’s that they don’t want their incompetence as managers to be found out. They promoted someone into a position that he or she could not do.

More than likely, this happened because what is necessary to advancement is not known. Titles and perqs are given instead of pay (known technique). This is incompetent management, but I believe in execution.

In fact, EXECUTION, that business book by the CEO from Honeywell and that academic, has some great stories of him firing people who couldn’t do the job. It’s worth reading (I bought the CDs and listened to it in the car but you can probably download it from Audible.com for less) especially in light of your comments. I think that he would say that you haven’t been in Execution Cultures. Which sounds like the Army gone mad, of course, but he meant something different.

namewithheld —

Ok, now we’re getting somewhere. Put incompetent senior management in her scenario, and you have my world. . . . Top it off with an owner who only wants a cash cow. . . . Very frustrating for everyone, but the milkman.

Michelle

I don’t have time to respond in full right now, but another scenario I’ve seen where you end up having incompetent managers who no one wants to fire is when I company goes through explosive growth. I’ve seen the person responsible for purchasing office supplies become Director of Purchasing, the person who did payroll become the Director of HR, and a skilled equipment operator with people skills become Director of Training.

This is not the employees fault, and they don’t deserve to be fired. The are solid, loyal employees who have tenure and are responsible but they are simply out of their league in the larger roles.

The company made the mistake of not bringing in people over them as the company grew. Sometimes they weren’t even really promoted; it happened by default as they kept hiring people in underneath them.

The CEO’s were distracted by growth and overlooked these departments until crisis time.

Harald Solaas —

The question “Does RO Really Work Over the Weekend?” instantly caught my interest, and I would like very much to make some reflections about it.

How does RO change behavior? I would try the following explanation: us humans are equipped with several senses related to the world of work. We can intuitively recognize:

· What is a fair and just level of pay for the full application of our capability in a common wealth-generating undertaking in which differential levels of capability and effectiveness are deployed.

· The quality of our own work and of that of those around us.

· Our own level of capability relative to that of others. A corollary of this is that we readily recognize those who could be good leaders for us (one stratum up) and those who could be effectively led by us (one stratum down) in a trust-inducing, non-damaging type of relationship.

This list might be longer or more precise, but I think it is enough to make the point. The point is that according to RO theory these senses are a part of human nature. They are not affected by personal, cultural or organizational differences. They are universal, and they simply are there. They are, so to speak, constants.

So when an organization is set up in such a way that it matches this inborn senses, the effect on individuals is one of personal integration (productive work and individuation reinforce each other) and trust inducement. I believe this is the central point of RO theory: the match between human nature and organizational structure. The organization “feels right” or “feels wrong”, and the result is trust-inducement or mutual suspicion.

RO theory is not about persuading people about better ways of doing things, nor about instilling values. People “already know” how to work well together, though they cannot articulate this “knowledge”, and values are implicit in organizational systems. (Of course, it is necessary to persuade and work on values to get to the executive decision to start RO, but this is not the way RO works once it is implemented.)

I believe this may help clarify the time framework. The time it takes for these changes to take place is simply the time it takes people to learn the new rules. “Weekend” is of course a way of saying no time at all.

Let me give an example from my own repeated experience. Carrying out a CPC (current potential capability) program, two of us (HR officers) met with the evaluators (MoR and Mgrs) for a two-hour training session. Then we proceeded to take their judgments on CPC of evaluees, and held the gearing meeting. It all happened within one morning. Up to 150 people were evaluated in this time. And the important remark is, it all took place in a climate of harmony and agreement. No cronyism, no parochialism, no bitter argument over whether John should be evaluated higher than Mary. This is the kind of situation that led Jaques to tell us at one of these meetings: “you are now watching ordinary people doing extraordinary things.” This is a very meaningful (and in my own view almost poetic) phrase: the people as such did not change at all, but their feelings and their behavior did.)

At the time, these very same managers had to evaluate effectiveness of subordinates with an awful system of points and quotas. These evaluations had effects on compensations of employees. All kinds of grievances surrounded this process (which was later changed, and these hard feelings instantly vanished.)

So this is the time frame of change brought about by RO: no time at all. I have explained the process in terms Jaques did not use, but I believe I have not deviated in the least from the essential discourse of his theory. I have merely presented it in a different way, which I hope can make it easier to understand. If someone disagrees, I would like very much to learn about it.

Now I would like to do a bit of theorizing of my own to compare the time frame of personal change with that of organizational change. Manasclerk’s quote of Jaques includes the following:

The second general conclusion is that it does not take a long time to change
individual behavior, and to overcome resistance to change, in social
institutions. It does require such conditions when we are trying to help
individuals overcome difficulties in themselves, as part of individual
clinical practices.

I think the difference lies in the mourning process, that is a necessary part of overcoming individual problems, but not of changes in individual behaviors precipitated by organizational changes. Mourning hurts, and it does take time to work out. But it does not hurt at all to change when all you have to face is a welcome riddance of dysfunctional and undesirable organizational practices.

So much for the time frame of organizational change. Now I would like to make some comments on the Argyris case, etc.

Working with Jaques, he insisted all the time on the use of hard data. This pestered us psychologists, so much given to a free-flowing heuristic discourse. But this was only until one actually learnt to use the hard data (by this I mean essentially time-span). Then the effect was fascinating: these measurements were for real, and they did explain things in a marvelous way!

What I am getting at is, I think this Argyris case lacks enough information to be interpreted in terms of RO theory. We do not really know about either the level of work or the CPC of the characters involved. Under these circumstances, it is really outside the spirit of RO theory to try to connect hypotheses with facts.

Furthermore, I think the defensive attitude of this VP fits within what Jaques calls RB (required behaviors.) This is a mature individual, aware of characteristics of himself that may have dysfunctional effects, making them explicit and trying to sort them out. A far cry from suspicion-driven behavior, which is what RO aims at weeding out.

Manasclerk says: “The best way to have continuous learning is to have a Requisite Organization”. I am a bit more optimistic than that. I think from my own experience that all you need for first-class continuous learning is the opportunity to get the right information on a given organizational situation, however requisite or non-requisite the organization may be.

Glenn Mehltretter (gmehl)

Harold’s experience with the process for determining CPC (current potential capability) is similar to my own. That is, with little instruction, an MoR and his direct reports can effectively determine CPC for those in the next two subordinate layers. The process is quick and reasonably accurate the first time. I say reasonably accurate because accuracy is impacted by the structure of the organization when the process is executed. Accuracy increases rapidly. If the review is conducted quarterly, by the third time the judgments of CPC are becoming quite stable.

A “reasonable level of accuracy” is adequate as a starting point. This provides a first set of concrete data that can now be tested. We encourage client organizations to hold that data loosely and to test their judgments by adjusting task assignments and changing the clearly dysfunctional organizational relationships. Adjustment of these situations generally yields rapid improvement.

Forrest Christian

Harald and Glenn raise some very interesting points from their long experience with RO. Harald points out the difference between individual and social dysfunction:

I think the difference lies in the mourning process, that is a necessary part of overcoming individual problems, but not of changes in individual behaviors precipitated by organizational changes. Mourning hurts, and it does take time to work out. But it does not hurt at all to change when all you have to face is a welcome riddance of dysfunctional and undesirable organizational practices.

Which is important for me to keep in mind with my current research. It stills seems to me that we are creating psychological pathologies through our hierarchical organizations. The flat organization — where there is a CEO, some people reporting to him and then everyone else — seeks to save us from those pathologies but merely creates new ones all too often. I’m guessing that what has happened is that as we moved from “I gotta hire my brother-in-law” to a more rational hiring structure, we threw out the baby with the bathwater: we forgot how to trust our instincts about whether or not someone could do the job.

And it’s true that I don’t have any hard data on the Argyris story. I’m still wondering if improper management reporting relationships isn’t causing a lot of the defensiveness that he identifies.

I’m also curious about how all of this plays out in non-MAH life. If Jaques’s theory of Human Capability (outlined in the book entitled the same) is correct, we should be able to use the idea of trust and recognition that are embedded in Jaques’s work to create better social relationships outside of MAHs.

Right now, it strikes me that trust and recognition (seeing someone for who they really are) are at the base of Jaques’s work.

And I think that what everyone has said is that, yes, you really can change these back-stabbing, dissent-raising, curse-muttering little connivers into “good citizens” immediately, just by changing the structure and accountability.

j —

“And I think that what everyone has said is that, yes, you really can change these back-stabbing, dissent-raising, curse-muttering little connivers into “good citizens” immediately, just by changing the structure and accountability.”

I agree that the three RO professionals and yourself say that. I don’t.

I strongly agree that a clear concise org chart helps remove ambiguity and doubt in employees. I can rationalize and understand the bit about understanding complexity and time span of discretion; primarily because I have experiences that validate it.

I don’t accept simple solutions to complex human behaviors. A clear org chart and understanding peoples capabilities are just the beginning. Understanding the individuals and working them into a team takes a whole lot more, because people are a whole lot more than just how long a project they can manage. Its intuitively obvious that we’ve greatly oversimplified management in this whole discussion.

Glenn Mehltretter

I received the following relevant comment from Paul Tremlett (http://www.coreinternational.com/). He said it would be ok to post.

My best recollection of EJ on this one was he (at least initially) made the weekend change comment around the basic accountabilities and authorities of managerial leaders, i.e. if the CEO simply insisted that these minimal things be put in place, much would happen quickly. I think the “weekend” thing was metaphorical. I connect it with Kurt Lewin’s field theory of behavior, to which I think EJ was aligned. Lewin basically (as did EJ) talk about behavior and that it’s driven by personality, the structures/situations in which personalities are place, and the various mechanisms used to connect the “personality” to the situation/context (such as performance feedback and appraisal processes). I think EJ simply argued that it’s not management’s job (or consultants for that matter) to be messing around with “personality” (and the pseudo-psychoanalyzing that does go on in companies)but rather looking very hard at the situations and structures we put people in and the systems we have to make connections. If we do a better job of the latter, then some of the conditions we/people experience will disappear (or at least be lessened). I also don’t think EJ was under any delusion that achieving a perfectly requisite organization was necessarily in the cards (maybe for some but probably not most companies). He often said to me that firms don’t need to change overnight either, but they should have a clearer vision of what would constitute more “requisiteness” and put a plan in place to achieve it. Which, is where I think, there is valid support for the notion of consulting help to execute that plan, including “holding the client to account” for what they’ve decided to implement (albeit at some risk at times).

mark van clieaf

this is a fascinating discussion

I would put forward a couple of observations based on
10 + years of experience:

1) the time-span for planning and TS-Decision Discretion alone are not adequate to determine Levels of Work that create value for customers and shareholders

2) in some organizations you cant change the structure over the weekend, the change process does not work that fast.

I just returned from an offsite sponsored by a CEO which I facilited where his own VP’s & Directors could NOT draw out the 15 – 20 big process steps for how the end to end organization works and makes money.( $ 200 million + company )

This was painful for both the CEO and execs in the room as they watched each other.

Not that some in the room were not capable, just that the CEO had not let go nor held them accountable for that Level of Work or higher.

The CEO held himself at fault for failing to clarify the accountabilities of the top 15 roles in the enterprise
and assigning appropriate level of accountabilities and decision authorities.

So we are now clarifying end to end business processes, accountability and decision authorities across the core business processes – cross functionally. But that is more than just a weekend, sorry.

AND now we have to deal with getting the structure right ( that is horizontally and not just vertically ) the CEO is dealing with the painful realization that if he does not get individuals with the right capability
( more than just CIP to use the language here ) in these newly defined roles then the structure becomes the capability of the people he has even if he does let go.( and he still has a board and SEC filings to worry about )

The CEO’s compassion and loyalty for others has been the barrier to removing individuals who have been with him for 10 + years, but not at the right level of capability. And he was zooming down and doing their work!

But he now sees that the sustained growth of the enterprise ( they are in a market growing at 40 % a year ) requires new and clarified structure / accountability AND new talent.

The change process to brings this about is more than a weekend. But the realization for change for key players was done in 4 days of interviews and a one day offsite where we brought it all together.

3) Now for something completely different but related

The Boards of Directors of public companies is an Association not an MAH.

Yet there are two problems

1) Many Boards who themselves are at the wrong level of capability relative to the complexity of the enterprise and required response in the marketplace to survive.

2) CEO’s who are at the wrong level of capability
we estimate this is 50 % of the top 1000 public corporations, based on 5 year financial analysis

You can draw a 4 box matrix of Board / CEO capability
relative to what is require for the enterprise to sustain itself.

And many of these boards have been reluctant to clarify the accountabilities of the CEO, for fear of seeming confrontational. This is Board reality. But starting to change.

So even if a lead Director or Board Chairman gets it
( as in Levels of Work / RO ) the dynamics of how many of the largest North American companies really
operate in the Boardroom where the MAH and Association meet results in a change process that takes
more than a weekend.

Some Board Directors have suggested that if a key institutional investor got up at the Annual Meeting and
asked the Board to clarify what it is holding trhe CEO accountable for, what is their process for evaluating management, and how do they tie this into pay for longer term performance, that will start the change process in the Boardroom.

This is about changing the governance and accountability structure of much of the current capitalist system.

How long do you think that will take ?

Forrest Christian

Man, oh man! That was DEEEE-LICIOUS!

First, I just want to clarify again that my original question, “Does RO Work Over the Weekend?” was about changing individuals’ behaviours. I assumed that all the hard work had already been done and that someone had put the structure into its initial “right” position: given that, would people change “overnight”? And the answer there seems to be, yeah, their behaviours within the organization can change abruptly.

Like Jaques, apparently, I ignored the whole question of the change process for the organization.

I’m also interested in how much what you’re saying, Mark, sounds like what Jim Collins’s team discovered in their Good to Great work. You have to get the right people on the bus, and the wrong people off. And then you have to get the right people into the right seat on the bus.

And your description of the Boardroom is very close to what Argyris calls out against: boardmembers talking about how they are holding the CEO accountable but no one ever actually saying anything.

Were I given a mid-sized firm (say, $20B or so) that I was forced to run, I would figure on a five to ten year change plan to renew the organization. I would have to first get my own team together and working while at the same time making money. We would have to figure out the right roles before we could figure out the right people for them. We would have to work and rework and work and rework. I’d figure on five years to discover what was actually going on and get rid of stuff we shouldn’t be doing, and five years more to finish any transformation.

I think that setting up clear accountabilities to the board is pretty difficult to do. This may be a time-span issue but I couldn’t say. I do know that people resist putting out clearly what they want.

You can change society in twenty years. Remarkable but fairly easy to prove as true. Certainly within forty years you can turn a society on its ear. And that’s easing into it. The West has seen massive changes in our culture since the early 1960s. Japan changed itself in the 19th century to create the culture we think of as characteristically Japanese. All that stuff about lifetime employment and loyalty to the firm all pretty much got invented and implemented in about a twenty year timespan.

And think about the American idea of Christmas: up into the mid-1800s, Christmas was a time of carousing and drunken revelry. In the late 18th century, mobs of working class drunks would mob rich houses demanding treats and free goods. “We won’t leave until we get some” of that blasted “figgy pudding” wasn’t the quaint friendly jibe we think it was: it was a real threat of burning down your house if you weren’t going to share the wealth. There’s a book about the invention of the secular holiday of Christmas written about ten years ago, I think. So you can totally change an entire society, even instill a deeply held belief, in pretty much twenty years.

Rwanda went much easier into chaos, of course. But I think that destroying society is much easier than building it.

So I would say that changing the current capitalist system would take less than ten years. But I would give myself twenty to be safe.

If I remember correctly, there was a group of influencers in the UK at the end of the Victorian era who took this long view and were remarkably successful. They engineered England’s Boer War and the rise of British-American friendship. America had been much friendlier with France than the UK for obvious reasons. Suddenly, by the end of the First War, America and Brittain were friends. By the end of the second, we had no great ally. So you can accomplish as complete change in a society a lot faster than you would think.

Also on that is a comment in Scott’s Seeing Like a State. He tells of an African tribe that had maize (corn) and within seventy years already had a complex myth of the Maize Goddess bringing it to them. And let’s not forget the introduction of potatoes (also a New World plant) to the Irish. According to our family tale — which probably has all the validity of the Maize Goddess Myth — the jerk who kicked us into the States wanted the Irish to eat potatoes. He knew that if the Scottish overlord gave it to them they wouldn’t take it. So he put a seven-foot tall fence around his potatoes and put guards about it. Within a year, potatoes were all over his county.

You could also point to tomatoes in Italian cooking, Belgian fried potatoes, etc.

So this might be a nice new game:

What’s the fastest a society has been transformed? Be specific. Use examples.

j —

Once again, the answer is not, “yeah.” I’ve been studying and doing management for nearly 20 years and only a very small percentage will change over night for any reason. People are complex and changing a lifetime of performance norms over night, over a weekend, or over any short time period is very unusual.

You were correct in that Mark’s situation sounds “Collins’esque.” Except, he’s missing one important distinction: he’s defined the roles and is trying to find people to fill them. The CEO should be finding the people and defining the role around them. This is not to say when you need a VP quality, you don’t look for a person with lots of quality experience. It is to say, you don’t lock the work roles in stone till you have the right people and then tweak your roles to fit the strengths and weaknesses of your team.

The reason people like to be vague is to avoid being held accountable. This is especially true of senior management. Please refer to my many comments to the effect that we have forgotten what true leadership looks like. . . .

Briefly to your society question, society decays quickly to something less than it was. To improve your society takes hard work over a long period. One could argue, that the great experiment of American democracy was the sum total of all Western Civilization – the great pinacle before it recedes/d. It would have been imposible without the Magna Carta, Enlightened Absolutism, Divine Rights, the Reformation, etc. Hence, the success of the American experiment was laid on the underpinnings of centuries of hard work and effort, not a decade or two.

Having said that, occasionally, a significant event can occur that changes the world forever. Jesus Christ, Buddha, Mohhamed, Levee en Masse, rifled weapons, the english longbow/gunpowder, Hitler, Lenin, Ghengis Khan, Ceasar are a few. Three of these occurred in the last two hundred years. The rest cover thousands of years. So maybe we can predict a nominal rate of one or two significant events per century. Even at that generous rate, change is still a slow process, when measured over the entirety of human history.

Forrest Christian

The point about people changing dramatically is true. I’ve seen that happen. As the others have said, the actual process to get there can be long. But humans seem to change state discontinuously, or at least greatly discontinuously.

The following seem to be necessary but not sufficient antecedents for this remarkable overnight change in a person’s social behaviours. (Note that this is not personal behaviours: they may still be drunk at work, but won’t be drinking to eliminate the pain of being at work.)

Organise the roles in a requisite (i.e., required naturally) hierarchy. This takes a long time to figure out and get done. And it’s about time-span of the role, nothing else. I don’t understand this completely, but there it is.
Make sure that the people are the right stratum fit for their role.
Ensure that every manager is one stratum above all his or her subordinates.
Create clear management accountabilities. This is a whole lot easier when you know that you can trust your managers to do their jobs. JMMJ told me recently that his company is creating a more structured, “objective” performance review process. He asked in the meeting if this didn’t mean that the company didn’t trust their managers (he’s not one). Afterwards, an upper manager pulled him aside and said, yes, they can’t trust their managers to do subjective performance evaluations. Managers in the right place will solve this.
Make sure that the responsibilities of every role line up with that person’s values. If they don’t want to do the job, they won’t. Capability doesn’t trump my values. If I’m a technical guy who doesn’t value managing people, no amount of coercion (i.e., “training”, pep talks, mentoring) will get me to manage well, regardless of whether or not I want to do it.
Pay people according to the felt-fair pay scale. Amazingly, this works. It really does look like magic.
If the person values the responsibilities of the role and is big enough for it, but does not have the knowledge or skills, start training. You can teach people anything that they value. But you can’t teach them to value a particular type of work, nor can you teach someone to think a stratum above where they are.

I think that’s it. It’s hard. It takes work. But you can turn around nasty corporate behaviours very quickly once you put it into place. When people are in the right place for them, and have good, “real” managers, they start cooperating. We really do want to cooperate with each other.

Will that eliminate jockeying for power and prestige? I don’t know. There is an agression factor in human males that this doesn’t account for.

For societies, the build up takes a long time and you have to build on top of existing values and norms. But you can pick the ones you want. And the actual shift occurs quite suddenly, in a discontinuous way. Last year you were this way: this year you are this way. We forget the strong violence of the American story. Life in the 17th century wasn’t very pleasant: it was brutish and violent and uncaring.

j —

I think you have described Collins’ “turning the flywheel till breakthrough” using a different model. Anyway, sounds like an awful lot of antecedents. Kinda like a whole lotta work and effort and planning and management. Not very much like “over the weekend” change. . . . . Maybe you should loose the quick fix language and try something more descriptive. I now suspect our disagreement lies more in our use of language than in the content.

mark van clieaf

As a follow up to the above

In managing talent for a mid to larger organization I still think goals and strategy for the enterprise comes first
then structure to accomplish and then talent to make it happen. EJ’s whole point was getting accountability clear to minimize the dysfunctional behavior in organizations. He was right .

to the point about Jim Collins work

What Jim discovered in much of his newer work was really about stages of ego development – per Kegans work – that is Collins 4-5 level leadership model

If you link that with EJ’s ,Gillian Stamp, David Billis and our research then you get at the conceptual capability required. Again required but not sufficient recapability.

Th US Army took both as a basis for exec development

If a company is set up as an investment trust in real estate or oil and gas to maximize returns from the exisiting asset base, then it does not need a stratum 4 or 5 capable executive as CEO. But the Board has to be clear on strategy and purpose for the enterprise.

As for boards is has to do with the people dynamic.Too many Board member forgot who owns the majority of the company , and that they are accountable to the shareholders NOT the CEO. That is why major pension investors in the US are trying to had the right to nominate directly to the board as part of Board nomination process.

Some board members have told me they did not want to challenge the CEO on on accountabilities for the fear of seeming confrontational. But failing to set clear CEO accountabilities at the right Level of Work is a core Board role. Something missing on all the governance buzz.

When you focus a CEO ( organization ) on 1-2 year EPS or EBITDA how much investment in the business are you going to get to sustain the enterprise ? not much. Change those goals and link to compensation and you change behavior, yes over the weekend.

This is more than just academic. A review of the proxy statements of the of the S&P 500 finds that some 55 % of companies only have 1 year goals for their CEO’s

This is the major problem today. Too many companies have accountabilities structures starting at Stratum 4 or even 3, but are paying their CEO’s like its Stratum 5 or 6 work. Thats what happens when you have compensation consultants Stratum 3 capable addressing stratum 4 and 5 business problems.

So much for Elliott’s Felt Fair Pay – at least in the U.S.

Cheers

Forrest Christian

Van Clieaf has said some of this in a more expanded version in Ivey Business Journal (“Are boards and CEOs accountable for the right level of work?”, May/June 2004). The article has more details about his research, which seems extensive, on the issue of CEOs returning real value. He also had a presentation to the Strategic Leadership Forum of Toronto entitled “Real Work, Real Leadership , Real Value” that is quick and covers some of the same material. I just read his argument that CRM fails because it needs to be managed and run within the Marketing function and not IT and did a “Well, duh!”, so he’s stating the obvious that none of the rest of us know. I even had opinions about CRM implementations — which fail at a notorious rate even for an IT project — that have been totally turned on their heads by that insight. I hate it when someone gets to the obvious before I do. He also describes the governance issue in a recent issue of CA Magazine (“Board’s due diligence”, December 2003).

For the curious:

EBITDA = “Earnings Before Interest, Taxes, Depreciation, and Amortization”

EPS = Earnings Per Share

Gillian Stamp was (is?) director of the Brunnel Institute of Organisation and Social Studies which Jaques founded. She has an interesting article available online from Bob Janes (“A Matrix of Working Relationships”, 1990). Also, Fast Company profiled Stamp and her relationship with her son, Robbie.

Robert Kegan did some interesting syntheses of a variety of developmental models, which is what he’s describing. I’ll try and summarize it later after I figure out exactly what Kegan is saying. I’m not sure I exactly understand the point about Collins’s Level 5 leadership being about ego development. I think I do, but I’m pretty sure that I am mising something here.

I recommend reading Van Clieaf’s article in IBJ cited above and continuing this discussion.

APFG —

Mr. Van Clieaf’s article is well written and distinguishes the risk to corporations and their shareholders. The challenge in the current public market is that there are so many small investors who for the most part are not sophisticated with respect to investing and are depending upon the fund manager. There is no guarantee that the fund manager will reside with the fund nor is there a penalty for fund managers who don’t perform. The management fees continue to get deducted regardless of performance. The story is very much the same across this sector.

We need to consider that accountability among publicly traded corporations will need to be reinforced by governing legislation and the requirements of the securities exchange commissions. Mark’s points could be expanded to assert that CEOs should not hold the dual role of Chairman of the Board in addition to CEO. We need to emphasize as well that, while the accountabilities defined within the article for the CEO role are correct, the Board is accountable for the outputs of the CEO.

Unfortunately, as indicated in many corporations the CEO controls the Board and this makes it extemely difficult if not impossible to build any measure of corporate governance. Many of the past board appointments have been patronage posts and the “old boys club”. I was in attendance at an AGM where one of the directors was not provided a microphone because although he had in the past been a very lucrative CEO his mind had since faded into the sunset. He was 87 and clearly had some form of dymentia.

Also significant is distinguishing that SST in addition to creating functional capability that rewards the corporation’s shareholders is its compelling social value to society by creating functional workplaces for people who work for a living at all levels in organizations and who can be enrolled into a value set that includes sustainable social responsibility for the broader planet and community. Much of this nevertheless is many years off as it will on the face of it appear too left wing for main stream CEOs. Business really needs to appreciate that in addition to abdicating strategic accountabilities when CEO’s are fixed on operational work that not only does the strategic future of the corporation hang in the balance and every level subordinate is apt to be micromanaged stifling any real creativity and abdicating accountability and decision making.

I would depart with Mark’s view (although acknowledged that he has not specified it very distinctly) that “pay for performance” should govern, leaving the impression that he supports the you get to eat what you kill philosophy. I would hold tight to fair felt pay compensatory systems with provision for merit pay of course but not incentives and stock options. In today’s corporate world shareholders are as negatively affected by dilution as they are by poor returns and as correctly pointed out these rewards often have more to do with commodity prices and broader market considerations than they do with the performance of the individual corporation let alone the CEO.

At the very core of these dysfunctional organizations are the dysfunctional and corrupt compensation systems that presently prevail.

mark van clieaf

Yes and dysfunction and lack of accountabiity happens at multiple levels in the broader capitalist system

ACCOUNTABILITY from

1)

Pension Beneficiaries ( you and I ) to Pension / Mutual Funds trustees as many are passvise versus active trustees and failing vote proxy including compensation –

in some companies 35 % of shareholders equity that has been diluted and to gifted to mgmt without trustees and shareholders understanding what was really going on

2)

From Pension / Mutual Fund Trustee to Board of Directors – In reality if board and company performing poorly – there is really not the ability to nominate Directors to the Board and place on the proxy statement for vote – this is a current debate with the SEC in the USA – so board is really not accountable to shareholders if they cant replace directors – look at Walt Disney Company and recent no vote for CEO and the newly appointed Chairman

3)

In the USA some 80 % of companies the Board do not have a separate chairman / lead director – a breakdown in accountability again

so the Association call the Board in many companies has failed to set clear 3 to 5 year + accountabilities for the CEO – the CEO has set their own accountabilities and usually 1-2 year operational

Our research has recently uncovered that this failure to set appropriate accountabilities for the CEO may be a breach of fiduciary duty , failing to meet the test of the “Business Judgment” rule and thus leaving board members without indemnification and directors and officers insurance to back them up ! WOW

See the recent Disney Decision in the State of Delaware

This may wake up a few directors up who are asleep at the switch!!

3 levels of accountability breakdown

and corrupt compensation systems where there is a mismatch in the time-spans of accountability of the ultimate investor ( 10 to 30 years ) and CEO accountability 1 to 3 and maybe 5 years

and

where some 59 % of top US companies over 5 years have failed to produce a profit greater than their cost of capital – not a viable business – ( lack of stratum 5 Accountability )

yet executive compensation has no tie to creating medium to longer term enterprise value which in turn drives sustainable shareholder value

The compensation consultants and Boards

asked the question HOW MUCH ( re pay ), designed one dimensional linear incentives linked to 1-3 yr stock price

benchmarked compensation for roles that use the same title but really operate across different Levels of Work and then averaged together ( distorts and ratchets up the compensation data and overpays for less complex CEO roles )

and have failed to ask the question FOR WHAT – thus the current disconnect between pay and performance ( 5 year + instrinic value AND shareholder value – non-linear )

APFG —

Great expansion of the basic issues. I am however not a fan of the designation of “lead director”. I think this is simply smoke and mirrors and the notion dilutes the real objective. Companies that are looking to hang on to the dual Chairman & CEO role have offered this out as an optical illusion to corporate governance. An independent board is the right place to begin. Structure the corporation “requisitely” and it will stand a chance of fostering within it a real measure of accountability.

There are a good number of examples readily available where corporations talk about one thing and are structured to and in actual fact execute another. Social responsibility, sustainability, environmental, socio economic and governance issues often show up here. It is not so much that these corporations set forth from the onset to be deceitful however when they are neither structured properly, nor have the essential supporting systems including board governance and auditing functions they may as well have set out deceitfully because the outcome is the same.

Forrest Christian

I am surely not competent to discuss the issues of what Boards and fund managers should do, but it certainly seems like companies that cost more than they make are heading to the unhappy place pretty fast. I’m not sure how one gets into that situation without being a dotcom in the boom runup.

It certainly frightens me that CEOs are being paid for performance over 2-5 years. I’m guessing that this has a cascading effect down the organization so that few decisions that take more than five years ever get made. Which is sad.

I’m still intrigued by Collins’s findings in Good to Great, simply because it seems like those CEOs were looking out at the long term. I think that anyone who returns $4M in bonuses so that the company he helped build up can resolve a complaint is thinking out farther than he’ll live.

If you haven’t checked out Mark’s articles, do so. They are linked somewhere above in this page. Or check out the other RO entries: I think that I’ve commented on his article on governance. They are certainly worth the read.

You gotta wonder why this isn’t an important topic in financial discussions. I suppose, though, that you would have to be thinking out 5-10 years for this to be interesting, which most folks are unlikely to be able to do. So perhaps the shortening of the timespan for the CEO role has been created through the close interest of the New Shareholder who wants to see an increase every week or he ditches the stock.

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