The Business Sensei

What are the symptoms telling us?

This is an excerpt from my new book, Organizational Psychology for Managers

Earlier, we discussed the process of looking at symptoms as the route to finding the problem. The danger here is that we become too focused on the symptoms. Treating the symptoms will often make us feel better in the short term, but only serves to mask the real problem. For example, if your car is making a weird knocking noise from one wheel, you can simply deal with the symptom by closing the windows and turning the music up. As they said on Car Talk, this approach works great until your axle breaks and the wheel comes off.

Of course, knowing that we get focused on symptoms isn’t the real question. The real question at this point is, why do we get focused on symptoms? The answer is because they’re there. Symptoms are easy to see and they seem easy to deal with. Making a symptom go away feels good. For a short time, everything appears to be working.

In one technology company, one of the engineering teams couldn’t make decisions. Now, we’ve looked at decision making from several different angles, and we therefore know that we’re looking at a symptom. There are any number of factors that can cause this symptom to appear:

1. We could be looking at a so-called leaderless team. As we’ve discussed, leaderless teams don’t work. This is one of the reasons why.
2. The team could be using wrong decision making method for the organizational culture or for the team’s stage of development. Stage one teams that attempt to use voting systems often end up stuck. Stage two teams are particularly resistant to directive leadership.
3. Lack of engagement: if the team isn’t committed, it isn’t really taking the decision seriously. As a result, and note that this is an additional symptom, no one is asking questions or pushing back on ideas.
4. Perceived lack of control: if the team doesn’t believe that their actions will matter, they won’t try. Decisions are a ritual they go through even though they “know” it won’t matter.

Indeed, even the basic problem, “can’t make decisions,” can mean different things: are decisions being made but not implemented? Are decisions not being made at all? Are they being made and then revisited and second-guessed? Each of these scenarios present different symptoms and point to different underlying problems.

Boiling the Frog

There is an old and hoary claim that if you put a frog in boiling water, it will immediately jump out, but if you put it in cold water and slowly increase the temperature, the frog will sit there until it cooks. In fact, this happens only if the frog is equipped with little frog cement galoshes rendering it unable to jump: frogs are too smart to be boiled alive. They leave long before the water gets hot enough to cook them. Why, then, does this story have such longevity?

Read the rest at the CEO Refresher.

If It Ain’t Broke…

There are a great many ways to complete the phrase, “If it ain’t broke…” The classic, of course, is “don’t fix it,” but I’ve found that “then it doesn’t have enough features,” is also pretty popular. While some other popular endings include “then you haven’t hit it hard enough,” “clearly it’s unbreakable,” and “don’t upgrade it,” for the most part, they’re variations of the first two.

Read the rest at Enterprise Management Quarterly.

The Bi-Lingual Advantage in IT

Imagine a typical software solutions problem. The company needs to improve its bottom line revenue, the customers are complaining and want their problem solved yesterday. At best, the engineer sees a technical challenge involving algorithms and code. At worst, he sees an annoying interruption to solving interesting technical challenges. The engineer’s goal is to build a robust, elegant solution to a problem. The manager, on the other hand, sees something very different. His focus is not on the technology but the process of assembling and coordinating a team. Who has the right skills? What skills are needed? What will this cost? How quickly can it be done? The manager’s goal is to give the customer what they really want, even if that is not the most elegant solution.

Dilbert highlights, to great effect, the gap between management and engineering. Frequently, the two groups seem to live in different worlds. More significantly, they often appear to work for completely separate companies with totally contradictory agendas. Sadly, there is some truth to this. Ed Schein, professor emeritus of business psychology at MIT Sloan, points out, managers and engineers form two distinct, separate organizational subcultures. Each group has very specific goals, which may not always be in alignment. Unfortunately, since both groups are working for the same company, and apparently speaking the same language, they tend to assume that they have the same image in mind. As many managers and engineers have discovered, this can lead to more than a little friction.

Read the rest at Enterprise Management Quarterly

Why Teams Fail

In today’s high-tech workplace, it is virtually impossible to not be part of a team. Projects are too big, too complex, too involved for a single person to do it all. Yet far too often people find teamwork to be frustrating and exhausting. Even when the team successfully ships a product, team members often feel burned out, frustrated, or surprisingly unhappy with their accomplishment.

Many managers have heard of the four stages of team development: Forming, Storming, Norming, and Performing. What is not as well known is the importance of that early, forming stage. During this phase, team members determine whether or not they feel emotionally and intellectually safe working with one another; they develop a sense of group identity, or remain a collection of individuals.

There’s an old saying that a couple isn’t really married until they’ve had their first fight. The same is true of teams. Part of working together involves arguing with coworkers: put any group of people together, and they are bound to have their own approaches and solutions to problems. If team members feel unable or unwilling to argue with one another, they avoid any conflict. If they are forced to argue but haven’t developed effective means for conflict management, the argument can quickly turn personal. In either case, the exchange of thoughts and ideas is blocked, anger builds, tension mounts, and the ability of team members to work together is severely compromised. Instead of developing group identity, team members may become convinced that their best strategy is maximizing personal gain instead of team performance.

The problems are exacerbated when the leader’s expertise is not management but engineering. There is a persistent, and ultimately painful, myth that engineers will only respect another engineer. Unfortunately, the very personality traits and skills that make someone a good engineer are often exactly the wrong skills to be a good manager. A team leader needs to have the social skills and empathy to manage the evolving dynamics of his team, and the interpersonal knowledge to apply those skills.

Of those people who do possess both sets of skills, even fewer can do both simultaneously. A good manager spends his time building the team. If he’s busy writing code, designing circuits, or what have you, then he’s not building the team. If he’s like most people thrust into a new situation and tasked with doing something he’s really good at, and something he’s not good at, he’ll gravitate toward the former.

Another problem faced by team leaders is that the storming phase can get, well, pretty stormy. The focus of that storm is often the leader. If the leader feels attacked, she’s likely to respond accordingly. This is a perfectly natural reaction. It’s also counterproductive. Managing conflict effectively means not getting enmeshed in the conflict in the first place: team progress can be set back weeks, months, or longer. Once conflict is joined, replacing the leader may improve things in the short-term, but can often make things worse long-term. The fundamental team dynamic needs to be repaired.

Unfortunately, more than half the teams in businesses become stuck in conflict or avoidance. When a team becomes stuck, it is stressful and exhausting to the team members. The company pays for this in lower productivity, reduced product quality, increased illness and absenteeism, and higher staff turnover, all of which can be fatal to a business.

Killing the Goose

Despite claims to the contrary, lack of regulation does not cause people to commit crimes or engage in foolish actions. Nor is the presence of regulation a guarantee that people won’t violate the law or do something stupid: remember Long Term Capital Management for a perfect example of the latter. Just as no lock can keep out a thief who is determined to rob your house, regulation will not stop someone who is determined to cheat: remember Enron? How about Bernie Madoff? Regulation will, however, provide the grounds to prosecute those who do cheat. Attempting to prevent all forms of cheating merely overburdens the system.

So, if this is true, why do we have the toxic financial mess that has shaped the news for the past several months? After all, didn’t that come because of a lack of regulation on Wall Street? Well, not exactly. While better regulation might well have prevented things from getting as bad as they have, the lack of regulation is not the cause, in much the same way that the lack of a safety belt does not cause an accident; however, the use of safety belts reduces the harm caused by an accident.

What then is the cause? Sure, we’ve all heard the news about subprime loans and toxic mortgages. But those instruments had to come from somewhere. Wall Street tycoons? It’s easy to think of Wall Street as being dominated by wealthy investors who are making millions by selling bad loans, but even that’s not true. The vast majority of people on Wall Street are people just like everyone else: working men and women whose job it is to make money. Quite simply, just like any other employee in any other company, folks on Wall Street go to work each day and worry about paying the bills, taking care of their families, and doing their jobs.

Here’s the problem: what do you do when you are told to make money and the financial markets aren’t offering up opportunities? You can’t go to your manager or your investors and say, “Sorry.” That’s not what they want to hear, and if your goal in life is to keep your job, you are not likely to go there. Instead, you get creative. Just like any employee in any job, you look for an innovative solution to your problem.

Now the fact is most people are not evil. Most people will not knowingly and deliberately break the law. If there are clear regulations telling people not to go somewhere, they usually won’t go there. But if there are no regulations, or if the existing regulations are honored in the breach, that’s a different story. It’s not that people will set out to cause harm or do stupid things, it’s that focused on the short-term needs of solving their particular problems, they are easily blinded to the larger ramifications of their actions. Regulations, optimally, map out the territory: they define the box in which people should work. They prevent you from falling off a cliff and taking everyone else along with you.

So then is the cause of the problem people just doing their jobs and the financial meltdown all a tragic “oops?” No again. The problem is that the cause is not what we have but what we don’t have.

Each bull market, each economic boom, is carried forward by some form of leadership. In the 1950, it was the electronics boom. In the 1960s, it was companies like IBM and Polaroid. In the 1990s, Cisco, Intel, Microsoft, Amazon.com, Yahoo, etc. Technology leadership leads to a flowering of innovation, and a flowering of innovation leads to technology leadership.  Improvements in technology lead to greater productivity and a stronger economy.

What about the bull market that ran from 2003-2007? Volumes have already been written about how little “boom” this economic boom packed. Although we did see some technological innovation during this period, for example Google, Taser, the iPod, and GPS (a technology with its roots in government spending – we’ll come back to that), for most part what we had was a commodities boom. The problem with commodities is that they don’t fundamentally change the world in the ways that technology does. They don’t leave behind a world of greater productivity or improved communications.

Now, there are many reasons cited for the commodities bubble of the past few years: China, OPEC, developing countries, etc. Let me suggest a different, and more basic, reason: there wasn’t anything else. The small amount of innovative technology we saw during that period was hardly enough to drive an economy or a stock market. But people still needed to make money; investment had to go somewhere, and it went to commodities and mortgages.  What happened to the innovation?

Over the past hundred years, almost every economic boom and bull market had its roots in government spending on either innovation or infrastructure. Without providing an exhaustive list, a few highlights include: railroads at the start of the twentieth century: government investment in land and track; automobiles in the 1920s: government investment in transportation technology during WWI; electronics in the 1950s: government investment in radar and military technology in WWII combined with the development of the transistor; mainframe computers in the 1960s: investment in computer technology as part of the space program; biotech in the late 1980s: government research grants in life sciences; and, of course, the Internet, which started life as ARPANet: another government program.

Quite simply, the government investments that formed the seed of so many prior booms didn’t exist: the money wasn’t there. The argument is often, and loudly, made that low taxes are a boon to the economy because people get to keep more of what they earn and this stimulates growth. While there is a nugget of truth in this, in that if taxes are too high to being with, then lowering them will have the touted benefits. However, it is also a fact that the economy grew more under Bill Clinton than under George W. Bush. Was this despite the higher taxes during the Clinton presidency, or because of them? The traditional answer is the former; the truth, I believe, is closer to the latter.

If taxes are taken too low, then something has to give. Typically, what gets cut is basic research. Even the wars in Iraq and Afganistan are not producing remarkable new breakthroughs in technology; at least, if they are, those breakthroughs haven’t become commercial yet. For the most part, it seems as if these wars are being fought with refinements of existing technology or off-the-shelf equipment.

Some level of taxes, therefore, provides the fuel for investment in innovation and infrastructure that generates the next economic boom and bull market. This is a rather different perspective on taxes than what is traditionally said. When taxes are being funneled into the economy, they lead to growth. Taxes are an investment. Now, I don’t have exact numbers on this, but when taxes are reinvested, the money we pay in taxes is returned fivefold in our 401Ks. When taxes are cut to the bone and there is no money to invest in the future, the money we save is taken tenfold from our 401Ks. Now, again, the exact numbers are open to debate; however, I will venture to guess that most of us have lost far more in our 401Ks and IRA accounts this year than we gained in the previous two years, and far more than whatever we may have saved in taxes over that same time period.

Unfortunately, when the economy is booming, people tend to assume that it will never end: just look at any bull market in history for an example of that behavior! All markets are driven by fear and greed, and the latter dominates at the height of a boom. People start thinking about all the money they are paying in taxes; they start to see that as money being taken away, not as the price we have to pay to keep the boom going. Like fear, greed causes behavior that people would never imagine that they could possibly engage in… until they do.

Regulation provides the framework and the controls to keep the economic engine operating within tolerance. Just as a governor on an engine keeps it from redlining or stalling, regulations on economic behavior help to prevent the type of meltdown we are now experiencing. Like an engine, the governor causes a small amount of overhead; there is some loss of power. That loss is the price we pay to avoid catastrophic failure. However, regulations alone can’t do prevent all forms of failure; we need an ample supply of legitimate and economically safe ways of making money to prevent widespread fraud and abuse. On the other hand, we can’t entirely do without regulation because no matter how good things are, there will always be Enrons and WorldComs. Fear and greed both lead to illogical behavior; it’s vital to have the fences in place so that the economy won’t run off the cliff in a panic or fall victim to excessive greed.

Once we’ve prevented the economy from crashing, or at least made it less likely, we can get the engine running at capacity. Taxes feed innovation which feeds the economy: taxes are, in short, an investment in our own future. It’s time to recognize that investments are more than just something we put into a 401K and forget about. Regulation, taxes, and innovation: they are all connected. Mishandle one, you break the others.