The premise of The Root Cause is that failure to understand business system complexity and the disruptive nature of events undermine CEO EffectivenessTM.
Complexity refers to the fact that these networks of business functions, –processes, interfaces, and technological tools―are intricately interconnected and dependent upon each other. In order to justify the ever increasing cost of operating ever more advanced means of production―such as computerized platforms―demands they are shared among multiple business functions and organizational departments. The subsequent tight coupling of resources has increased system complexity even further.
The challenge posed by complexity and tight coupling is the fact that cause and effect relationships are not immediately obvious―it requires a serious effort to determine the root cause(s) of a systemic problem. In my experience, the root cause(s) of a systemic problem is nearly always a series of small errors that were either latent―dormant―within the system or active, triggered by an event from inside or outside the business system.
Leaders find it hard to deal with systemic problems; the fact that mistakes, errors, and the resultant under-performance is caused by, what I call, Business GovernanceTM―the system’s design, organization/structure, implementation, maintenance, and management.
The idea that the same system producing intended and wanted results is also producing unintended and unwanted results is just incomprehensible to them.
Statistics show that ninety-four percent of all results are systemic in nature. That means that only six percent of all results are directly attributable to individual or groups of people! And so―contrary to popular doctrine―time, money, and effort is spent more effectively and efficiently when improving Business Governance rather than micro-managing employee behavior. Question: Which individual is ultimately responsible for Business Governance? Answer: S/he who has ultimate authority to change Business Governance―the Chief Executive Officer!
Therefore, it is rather unfortunate that leadership literature seems to suggest implicitly that executives are always right and that all problems are caused by employees, such as those reflected in frequent complaints about a lack of employee engagement, the high cost of labor and employee training, the war-for-talent (high turn-over rate of key talent), the perceived threat of organized labor, and government labor regulations. However, these complaints are symptomatic of a failing system due to a lack of CEO Effectiveness at Business Governance, and more specifically solving systemic problems.
Improving Business Performance
IBM’s Global CEO Study Capitalizing on Complexity concludes that creativity is the preferred solution to being perplexed by complexity. However, encouraging CEOs to be more creative with a topic they admittedly don’t comprehend―effectively suggesting they engage in trial-and-error―is rather reckless. Even without conducting a global study first, I feel confident to state that developing a good understanding of complexity is the more obvious solution.
Business education seem to program students’ minds with economic doctrine, which defines the purpose of a business as “making money”, reduces decision-making to a series of dispassionate cost-benefit calculations, and measures “success” in terms of quarterly earnings, net-profits and earnings per share.
Not surprisingly, business literature is all about the latest-and-greatest best-practices in enhancing operational efficiency in order to boost bottom-line results. And, executive coaching seems to have cornered the market for improving communication and inter-personal behavior, in the mistaken belief that an individual or group of employees could out-perform a business system’s capability and capacity―if they’d only set their minds to it.
And yet, executives are perplexed to learn from one study after another that the majority of their employees are actively looking for a new employer.
Here is some more bad news in case anyone decided to decrease dependency on people by replacing them with machines; automation will make you even more dependent on people.
Business performance will not change until you―the person with ultimate authority and thus ultimate responsibility―change your level of thinking about Business Governance.
CEO Adventure is our modern-day hero-journey. The objective of such a journey is human maturation―to become a whole human being. In order for an executive to self-actualize, s/he will need to experience and discover the spiritual world with its moral- or humanistic principles; this in addition to economic principles of the world of common day, which are part of our formal business education. And so, every hero receives the journey for which s/he is ready―an opportunity to develop the moral will to doing what is right and the moral skill to discover what the right thing to do is.
It is no secret that economic principles often conflict with humanistic principles. For example, paying employees the bare minimum and skimping on employee benefits may make good economic sense in the short run but causes employees to disengage from their job due to financial anxiety about their ability to pay bills and to provide for family members’ educational and medical needs. And that tension is what these businesses are experiencing in their employees every single day. What is masqueraded as economic crises are more often than not moral crises.
Dr. W. Edwards Deming wrote extensively about similar leadership decisions that prioritize economic principles over humanistic principles, thus quashing employees’ job satisfaction, their motivation, passion, prowess, pride of workmanship and overall engagement. And, employees whose minds are not on the job are less caring and vigilant, and thus more likely to allow mistakes and errors to occur. These unintended consequences of economic principles are costly examples of systemic problems due to poor Business Governance.
Moreover, these companies tend to have unnecessarily high employee turnover rates, which is expensive. Unfortunately, this cost is not limited to actual incurred cost for hiring and training but includes the unknown and unknowable cost of losing institutional or corporate memory, and becoming known in the market as an undesirable place to work.
Regardless of a leader’s inter-personal behavior in his/her communicating with employees, it will neither alleviate employee anxiety nor will it increase employee engagement or their job satisfaction. Only increasing the conditions under which people work can do that.
The returning hero CEO is Master of two worlds; the spiritual world and the world of common day. His/her assignment is to harmonize economic- and humanistic principles in order to develop sound Business Governance practices. Harmonizing seemingly conflicting principles is an art form, which relies on personal judgment as opposed to pre-scribed rules or best practices. It relies on knowing WHY a decision is right while beating a path through uncharted territory. This is where a CEO demonstrates his/her integrity; his/her moral will to do what is right, and the moral skill―creativity, originality, and authenticity―to discover what the right thing to do is. Masters of two worlds recognize there is much more to success than making money alone.
Leaders who reject to embark on a hero journey, and who are reliant on PREscibed HOW to do WHAT and WHEN scenarios, keep themselves hostage to doing the same thing over and over again, hoping for a different outcome. And, everyone knows what that is called …