Monday, January 31, 2011

Organizations as Knowledge Societies: Co-transformation with Employees

It is amazing to see how employees and organizations are often overtaken by issues of rewards and recognitions while considerations of performance and knowledge remain muted. Employees are singularly focused on individual performance while organizations at best are able to expand individual performance considerations to departmental and company levels. Clearly, there is a need for a deeper understanding of the triggers for this manner of organizational behavior and management, and arising from that definition of a transformational paradigm to actualize employees and organizations.

Recognition versus worthiness

In organizations, each time recognitions and rewards are bestowed upon some employees and some teams such actions, how well-intentioned and well-calibrated they are, cause perceptions of inequity in others. The perceptions of distraught when such actions are not well-thought out can only be imagined. Even post-recruitment new employees often get into a spin with multiple comparisons. Unfortunately, organizations are not sensitive to the implications of reward-recognition syndrome and measures to correct them. As a result, it is not uncommon to come across in any type of organization employees or managers who carry a chip on their shoulders. Equally common is to see employees who feel or assume that they are fine but it is their peers, subordinates or superiors are the ones who carry a chip on their shoulders.

As a metaphor, the phrase ‘chip on the shoulder’ describes people who nurse a grievance which requires either disputation or redress. Often, a self-righteous feeling of oppression or inferiority causes such employees to display a state of perceived inequity or oppression at the slightest provocation. Many times, superiors and peers too fail to recognize the existence of such feelings caused by valid circumstances or events. If these individual issues are not addressed appropriately in a timely manner the cumulative impact could be in terms of distorted culture and lowered morale caused by frequent friction among employee groups, and also between employees, their peers and superiors, and could erode the level of motivation in an organization.

Employee ’chippiness’ arises from several factors of organization design and talent management. Firstly, misalignment of organization structure and strategy on one hand and improper fit of the person and job result in performance warps that are not directly attributable to employees or their team members. Secondly, inadequate appraisal of an employee's performance and potential against internal goals and external benchmarks results in perceptions of either low self-worth or false superiority. Thirdly, inequitable deployment of performance management systems, in terms of reward or punishment, results in individual and organizational turbulence. Fourthly, unwillingness or diffidence of managers and leaders to counsel their team members in a transparent manner as to where they stand often results in unrealistic and assumptive self-evaluation in employees.

Left unattended ‘chippiness’ accumulates over time in an organization in an insidious manner, expanding from an individual centered perception to a shared cultural feature. Its negative behavioral impact ranges from passive participation to aggressive defiance in organizational activities by the affected employees. The former sub-optimizes organizational performance while the latter de-stabilizes organizational harmony. While employee reward syndrome is not a serious threat to organizational performance, the causative factors such as structure-strategy or person-job misalignment and managerial-leadership diffidence are more fundamental issues which are likely to erode organizational effectiveness. To that extent, unabated and unresolved reward-recognition issues constitute an early warning sign of latent impediments to organizational performance.

From an organizational behavior perspective, employee concern on rewards and recognitions is reflective of an internal debate in an employee's mind, whether grounded on right reasons or wrong perceptions, on his or her talent-performance equation. Despite the negative associations it has, the chip an employee carries on his or her shoulder is indicative of the human need for an employee to reassure the status he or she has in the organization. Ignorance of the syndrome by the employees and managers leads to an unhealthy preoccupation with virtual performance and potential rather than healthy equilibrium with validated performance and potential. Clearly, as companies seek to achieve tangible performance in a competitive manner the need to keep employees fully aligned and motivated cannot be overemphasized.

As organizational experts are aware, an employee is essentially trained to operate conceptually and analytically in the functionalities of planning and executing as well as identifying and resolving organizational problems. The typical employee is thus a ‘mind’ employee. As a physical metaphor, chip on the shoulder may reflect a weight the employee copes with while discharging his work, but in reality the chip resides in the mind of the employee. The feeling one has of chip on the shoulder is somewhat reflective of the mind's ability to discriminate and process information. There is, therefore, merit in transforming the employees from a preoccupation with the negative recognition syndrome that employees usually fall prey to into a positive worthiness culture that needs to be assiduously cultivated in the employees and the broader organization. However, the journey from ‘recognition chip on shoulder’ to ‘worthiness chip in the mind’ would be a complex and challenging journey.

Defining employee and organizational mind-space

Conceptually we can define two layers of mind-space that exist in a company. The first layer, which is the macro or cover layer, is the mind-space that the organization in the overall has. The second layer is the micro or the foundation layer that exists at the individual employee level. The occupancy of these two mind-space layers in terms of key issues provides a background for transformation from a recognition mindset into worthiness mindset. Typically, the organization’s mind-space is occupied by three sets of issues. The first set of issues relates to physical and financial goals for the markets. The second set comprises enabling goals such as quality, safety, environment, productivity and innovation. The third set relates to the competitive dynamics, flexibility, opportunities, challenges or constraints imposed by the industry and regulatory environment on which the company has little control. As it navigates through the three sets of issues, the organization cannot recognize itself or reward itself except through performance. The organization also cannot morph itself to move from low recognition/reward areas into high recognition/reward areas. In contrast, the employee mind-set is occupied not only by professional goals that cascade down from the organization goals but also by personal goals that are influenced by the family and society of which the employee is a part.

Secondly, institutions are expected to deliver returns to shareholders. The controlling groups of companies, whether investors or lenders legitimately expect both growth and profitability, and in any case profitability as recognition mechanisms. That said, companies can secure profitability even in competitive, fragmented markets. Industry structure rarely goes beyond a four-hierarchy structure (end product, aggregate, component, raw material), and each tier has relatively flat distribution of firms with potentiality of varying scale but reasonable profitability profiles. In other words, firms can actualize investors with profits and market capitalization, independent of scale through deployment of appropriate strategies such as innovation and excellence. On the other hand, individual employees of organizations have little option of recognition except through growth in the hierarchy. The way organizations are designed there remains only lesser and lesser room as one seeks to grow higher and higher. The more high performers an organization enables, strangely the greater the competitiveness for growth that it bears. While organizations can fight it out with competitors legitimately, employees perforce have to compete internally with their own colleagues to seek growth. To date, no organization design has succeeded in enabling equal growth opportunities for all its performers on the platforms of collaboration or competition. Chippiness is thus a mild form of inter-employee comparison and competition that naturally occurs even in the most collaborative organizations.

Thirdly, forced ranking and relative titration are inescapable concomitants of any human endeavor which is based on evaluation criteria. This has no relationship with the level of intelligence, aspiration or aptitude of the entrants to the bottom of the organizational pyramid. Even if an organization recruits all Ivy League graduates to its frontline employee ranks, such employees would find the room for growth insufficient or find themselves rank ordered to suit the slots available. The only way more competencies can be rewarded is by transforming the classic pyramid organization structure into a square organization structure, which is impractical. As the recent experience with Wipro, a leading information technology company in India, showed even at the ostensibly enlightened level of top management the concept of dual CEOs would not work. A study of over 6000 firms in the USA by Mercer showed that just around one percent had co-CEOs or co-chairmen. The picture is the same even at domain level; dual leadership is hardly ever practiced. Given these three factors, solutions for employee harmony have to look beyond organizational titles and examine deeper than superficial competencies.

Organizations as knowledge societies

If organizations are designed, developed and managed as knowledge societies as much as delivery entities, probably the unhealthy comparisons that exist in an organization would dim. Organizations have to be primarily execution focused, pushing the spotlight, in its wake, on individual and team performance. This, in turn, leads to parity in performance versus equity in rewards debate. However, when organizations are also simultaneously shaped as intellect driven knowledge societies not only performance would be even higher but also comparisons would be justified in terms of intellectual perspectives. Shaping a knowledge society would be contingent on the following ten principles.

1. Avoiding strategy-structure mismatch

Structure inevitably follows strategy, as well established by Alfred Chandler and other follow-on experts in their research. Yet, organizational or corporate structure tends to be rigid while corporate strategy is required to be, and can be, relatively more flexible. Unless, constant attention is paid to alignment, and realignment of strategy and structure, organizations would present to their employees a format of suboptimal strategic execution. In such a situation it would be difficult to differentiate between structure related handicaps and employee related deficiencies that affect performance.

The structure-strategy mismatch can be addressed by integrating various disciplines, and more particularly, the human resources function in strategy development, both at strategic and operational levels so that structural solutions are well-aligned. Secondly, HR professionals need to focus on reinventing the organization structure from time to time based on changes in corporate dynamics and competitive trends. It is important to remember that strategy can be executed only through motivated people actions.

2. Matching the position and the person

Strategy and structure, even when aligned need matching talent to achieve perfect execution. Identifying positions in an organization as a byproduct of strategy-structure match, defining the job requirements, and recruiting the right talent would be essential enablers for desired execution of strategy. In the absence of an appropriate person-position alignment, the responsibility for sub-optimal performance devolves more on the leadership than on the person, himself or herself. Many times organizations deal with person-position definitions in a piecemeal departmental fashion not realizing the advantages that could accrue by a holistic definition of organizational needs and standards.

In order to achieve optimal person-position match, the international competitive trends which continuously raise the bar of performance need to be continuously studied. Simultaneously, the need to equip the employees with new skills and knowledge and extend their horizons of operation is also paramount. This requires that the organization is committed to continuously upgrade its knowledge levels and practices to state-of-the-art standards to remain competitive.

3. Balancing hard work with smart approaches

Several studies have pointed to the decline of number of working hours in advanced nations as a causative factor for declining productivity. On the other hand, developing countries and emerging markets, in their hunger for growth, tend to work hard to meet the growing opportunities. That said, hard work needs to be balanced with creative, efficient and effective methods of work to be able to achieve desired competitiveness. Japan and Korea have established themselves as role models of hard work combining with innovation to develop world-class products. China and India in certain sectors, have emerged as role models of hard work providing handsome dividends when carried out in a creative way (for example, the global delivery model of the Indian IT sector). Organizations need to recognize differently employees who combine their hard work with smart application.

4. Combining efficiency and effectiveness

Students are educated and employees are trained to be efficient. Efficiency is usually measurable in terms of speed of delivery. Efficiency as exemplified by speed is, however, only one facet of overall performance. Effectiveness of delivery in terms of various other essential measures of performance is equally important. Machine shop managers who achieve higher throughput by operating machine tools at the highest levels of speed and feed would perhaps be causing more reworks and higher cutting tool consumption than managers who operate the machines at optimal speeds and feeds.

Developing measures for organizational effectiveness is a challenging task. In normal organizations where often activity is mistaken for achievement, it is quite a task to acknowledge that even achievement is not equivalent to effectiveness. Clear definition of goals as well as pathways to achieve goals at one level and enshrining business aspirations in ethical principles at another level are helpful. These let employees discriminate between efficiency and effectiveness, and therefore achieve a balanced pursuit.

5. Rewarding knowledge-based performance

One of the important gifts of industrial engineering to industrial management has been work simplification and work definition. This has enabled employees become more productive than ever before. In addition, standard operating procedures ensure that jobs are carried out as per well thought-out procedures to achieve required parameters. A concomitant of this efficiency movement has been a more dominant stress on “know how” rather than “know why”. The subordination of the inquisitive self has probably led also to a lower premium on acquiring knowledge other than what is strictly required by the job on hand.

While organizations do try to overcome this self-imposed constraint by seeking contributions in related areas and emphasizing continuous learning, the impact would not be same as building knowledge societies of organizations. A complete understanding of the value chain, for example, is important for every employee regardless of whether he or she works only one part of the value chain. End-to-end thinking with focused execution is the key for knowledge-based delivery. Japanese organizations have long perfected, beneath the veneer of conformist organizations, an unending know-why approach. The seeds of such approach start really with all entry level employees being put through a total company, operations and technology induction to expand the knowledge base – a model worth emulating.

6. Facilitating continuous learning

One of the striking features of modern day knowledge management is the pace of information obsolescence. New technologies are not only enhancing product and process knowledge but are also mandating new ways of doing business, on a more global scale than even before. A pre-occupation with internal best practices and a diffidence to evaluate external best practices often accentuates the knowledge gap. In many organizations it is often left to individuals’ aptitude and grit to upgrade their capabilities through formal education processes.

An employee’s career typically spans over three decades; development of knowledge over such a long span or on a rolling decade basis is likely to grow exponentially. An awareness of the huge frontiers of knowledge one needs to cross will bring to an employee the needed humility to view his or her performance in the right perspective. The diffidence of a manager or a leader to counsel or mentor his employee is also directly related to the knowledge-edge that such managers and leaders develop through their own upgrade initiatives.

7. Supporting execution with resources

Employees would need an appropriate balance of responsibility, empowerment and accountability. While position-person match defines responsibility and strategy-structure match defines goals and accountability, empowerment is both intrinsic and extrinsic to an employee. As discussed earlier, development of a knowledge base and continuous updating would enable a more effective executive. Extrinsic to the employee’s performance, however, is the resource deployment provided for the employee to execute on his plans. In the absence of appropriate resources, it would be easy for the average employee to obfuscate any shortcomings of his role in terms of resource shortfalls, which may or may not be germane to specific cases.

A rigorous yet flexible corporate planning and budgeting process is essential to focus on business goals, portfolio plans, delivery programs and the enabling financial and non-financial resources. Successful organizations have created independent planning and budgeting departments which are linked to strategic and operational units of the organization respectively, but are also intertwined with each other in terms of plan and budget development and review processes.

8. Fusing collaboration and competitiveness

Zones of comfort are helpful for teams to reach their higher potential. Mutual trust and dependence enhance shared commitment to corporate goals. Not unnaturally therefore much of the organizational behavior theory and practice has focused on the benefits of collaboration, not only within teams, but across functions and between firms even. While this is valid and relevant, zones of comfort could also lead to certain levels of complacence, and in some cases even mediocrity, as the bars raise higher in the industry, as a whole. Successful organizations have discovered the benefit of injecting mild and open competition as a strategy to enhance overall competitiveness.

Competition would be counter-productive when it is individualized; however it can be catalytic when it is related to corporate goals and achievements. Organization structures and team formations on one hand and portfolio division and geographic spreads on the other could be markers of competition. An ideal organization is one that integrates collaborative nuances with competitive dimensions. For example, an R&D division can learn from the best practices of another division, say manufacturing, and incorporate the best practices of productivity to enhance product development throughput. Vice versa, manufacturing division can observe how innovation and empowerment take place at employee level in a research organization and achieve significant innovations in shop-floor. Collaborating internally, the corporation can become stronger externally. At the same time, internal deficiencies can be made up by external collaborations; the competition induced by such moves makes internal divisions more adept.

9. External benchmarking

Benchmarking is the most effective manner of staying competitive. While most organizations incorporate internal benchmarking within their companies, very few resort to external benchmarking of attributes, skills or performance as a routine process input. A few organizations believe that a certain level of attrition and accretion helps in maintaining a cultural momentum to achieve weeding out of stale internal practices and integration of leading edge external approaches. On the other hand, a systemic and process-driven effort at external benchmarking will combine the advantages of organizational stability with potentialities of continuous reinvention.

As with research, a focus on competing in the industrial space with best practices helps achieve the goal. Encouragement to publish papers and monographs in peer-reviewed journals, enabling speaking assignments in prestigious conferences, participation in technology conferences and empanelment in practice upgrade initiatives at industry level would help employees appreciate the progress made in the external environment and accordingly assess the gaps.

10. Promoting self-actualization

To date, Abraham Maslow’s five step hierarchy of human or employee needs remains true and unshaken for its wisdom and relevance for individual and organizational development. Rewards and recognition may be passé but self-actualization would never be. It would continue to remain the most challenging goal and most satisfying achievement for employees and organizations. Self-actualization, unlike common perception, is not an end in itself; it is a process. As an employee or organization achieves self-actualization, the process of re-discovery commences yet again, leading to higher levels of knowledge acquisition and enhance actualization.

Organizations that practice self-actualization are competency-based and competitiveness oriented. They emphasize acquiring knowledge for the future as much as deploying available knowledge for the present. A complete organizational value chain that aligns strategy and structure, matches jobs and talent, enhances knowledge levels and performance outcomes through a combination of measures would be an assured pathway for self-actualization. Self-actualization can be organizationally driven with the company as an entity aspiring to become the best that it can.

Co-transformation of employees and organizations

Neither employees nor organizations can by themselves transform themselves into knowledge entities. Only through concerted and coordinated approaches, organizations and employees can co-transform themselves from a sub-optimal rewards culture to a virtuous self-actualization culture. Organizations as knowledge societies can be truly transformational to national economic development.

Posted by Dr CB Rao on January 31, 2011

1 comment:

Narayanan said...

I was reminded of a quote by F Scott Fitzgerald "test of a first rate intelligence is the ability to hold two opposed ideas in the mind and still retain the ability to function" upon reading this post. Recognition and Worthiness can be conceptualized as two ends of the spectrum; former as an extroverted attribute requiring validation from a peer group vs the latter being introverted, a self-portrait. I suspect employees need an optimum dose of both to maintain equipoise and co-creating such a desired state is in the best interests of both employees and the organization. While I agree with the impracticality of a square structure for obvious reasons, mapping employees on the performance (today) vs potential (future)matrix as alluded to in the post will promote thoughtful discussions at all levels. Such periodic and candid discussions between employees and their supervisors/managers leads to better emotional engagement, breaks mental barriers (real or perceived) and facilitates progression on the performance-potential axis benefiting both individuals and their paymasters. Done right, these initiatives have the potential to fundamentally transform the nature of relationship between the employee and his/her organization ultimately leading to better value for stakeholders by matching talent with capital in the most optimum manner,in real time.