Niels Pflaeging

Why management is quackery. And what leadership for the 21st century must really look like

Keynote at University Villingen-Schwenningen Villingen-Schwenningen/Germany, 19 December 2012 Illustrations used with kind permission by Jurgen Appelo

?!Typical questions about work & organizations

?!Together, we are kind of dumb. But why?

Not much healing going on here. But still a great business

Thinking Doing

The dependence model – inherited from the industrial age Looks like a grid. No coincidence.

There could be intelligent life in the lower part of the pyramid…

Don´t do evil.

Complicated/many rules > Stupid behavior

Simple/few principles > Complex behavior

An organization

Most organizations are obsessed with individual performance. But individual performance is a myth, actually.

We know that everyone in an organization is interconnected. So performance and success are complex things…

Complexity and its consequences for work and leadership

Formal part – solution: machine

Dynamic part – solution: man

The impact of complexity on work: Value creation has two parts

Formal part of value creation Solution: machine

Dynamic part of value creation

Solution: man

high dynamic

t

Age of crafts manu- facturing

1850/1900

Local markets, high customi-zation

Formal part of value creation Solution: machine

Dynamic part of value creation

Solution: man

sluggishness/low dynamic high dynamic

t 1970/80

Age of crafts manu- facturing

Age of tayloristic industry

1850/1900

Spacious markets, little competition

Local markets, high customi-zation

Formal part of value creation Solution: machine

Dynamic part of value creation

Solution: man

sluggishness/low dynamic high dynamic high dynamic

The dominance of high dynamics and complexity is neither good or bad. It‘s a historical fact.

t 1970/80 today

Age of crafts manu- facturing

Age of tayloristic industry

Age of global markets

1850/1900

Spacious markets, little competition

Local markets, high customi-zation

Outperformers exercise market pressure over conventional companies

Formal part of value creation Solution: machine

Dynamic part of value creation

Solution: man

Guess where in this “Taylor bathtub” timeline interdependence becomes vital!

t 1970/80 today

Age of crafts manu- facturing

Age of tayloristic industry

Age of global markets

1850/1900

Spacious markets, little competition

Local markets, high customi-zation

Outperformers exercise market pressure over conventional companies

Problems, information

Command, control

Frame: rules, responsibilities, job descriptions

“Socially dense market organization”. Is that possible?

Radical transparency, social density, group pressure Frame: values, principles, roles, shared objectives

Industry

Retail

Services

Governments & NGOs

It is possible

But… We have to build consensus about human nature. What are people like?

McGregor's critical distinction

Theory X Theory Y

People need to work and want to take an interest in it. Under right conditions, they enjoy it

People will direct themselves towards a target that they accept

People will seek and accept responsibility, under the right conditions

Under the right conditions, people are motivated by the desire to realize their own potential

Creativity and ingenuity are widely distributed and grossly underused

People dislike work, find it boring, and will avoid it if they can

People must be forced or bribed to make the right effort

People would rather be directed than accept responsibility, (which they avoid)

People are motivated mainly by money and fears about their job security

Most people have little creativity - except when it comes to getting round rules

Source: Douglas McGregor, ‘The Human Side of Enterprise’, 1960

Attitude

Direction

Responsibility

Creativity

Motivation

We have an observation problem

Behavior

Human Nature

Context

Power to the teams

Social density, or “peer pressure”

Low, or average performance High, or superior performance

Success is not a zero-sum game

Central coordination is luxury. One you cannot afford in complexity

Sales Back Office

Business team 1 Business team 2

Business team 3

Product Management

Functional division: a bad idea

Everybody knows this kind of structure. Disadvantage: It´s not actually real.

Structure No. 1

?!

?!

Structure No. 2

Structure No. 3

This one is also well-known. Much more real

But this?

1 Formal Structure

2 Informal Structure

3 Value Creation Structure

Now, this is real!

Center

Market

Periphery

Center

Market

Periphery

Center

Market

Periphery

1 Impulse 4 Command

2 Information

5 Reaction

Customer

! 3 Decision

!

! Center

Market

Periphery

1 Impulse

3 Reaction

Customer

! 2 Decision

!

!

!

!

!

Serves the periphery, if needed

Center

Market

Periphery

Organization & teams

Market (very powerful today)

When markets lead, it´s good to have a periphery that´s in charge. Decentralized decision-making becomes a question of survival

Periphery: roles, influence…

Center: roles, influence…

“Help the center lose its arrogance”. Because it´s hard

Practice. Practice. Practice

The in(ter)dependence model: Where everyone can think. And everyone has to!

The dependence model - nice illusion

Fixed & individual targets Management by Objectives Budgets & Plans Performance appraisals Pay by Position Pay for Performance Incentives & Bonuses …

Transparency & Improvement Peer team comparisons Comparisons w/previous periods Dialogue & dissent Pay by market value Result sharing …

The 10.000 hour principle

For mastery and learning.

Pretty important

Winning: only together, not individually.

Celebrate results. Not meeting targets.

Independence at work:

Leadership means working on the system. Not on people.

Law The In(ter)dependence The Dependence

model – Beta model – Alpha §1 Freedom to act Connectedness not Dependency §2 Responsibility Cells not Departments §3 Governance Leadership not Management §4 Performance climate Result culture not Duty fulfillment §5 Success Fit not Maximization §6 Transparency Intelligence flow not Power accumulation §7 Orientation Relative Targets not Top-down prescription §8 Recognition Sharing not Incentives §9 Mental presence Preparedness not Planning §10 Decision-making Consequence not Bureaucracy §11 Resource usage Purpose-driven not Status-oriented §12 Coordination Market dynamics not Commands

Organizing the work requires a new codex: based on scientific insight. understanding of complexity & human nature

.!. Let´s bring independence to work.

It works.

!!

Niels Pflaeging, www.nielspflaeging.com www.betacodex.org @NielsPflaeging

All illustrations: Jurgen Appelo www.noop.nl and Niels Pflaeging