In today's world of rapid advancements in technology, some of the basic truths of business effectiveness and sustainability seem to have been forgotten as we embrace the belief that technology will solve everything. The current belief among business leaders is that the road to business success and productivity is paved with technology.
But a business is a complex system and technology is just one aspect of the system, along with company policies, work processes, quality control, testing, and, of course, people doing work.
According to George Westerman, research scientist at the MIT Center for Digital Business, when the technology transformation of a business is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.
It is my experience, after 35 years of working with and studying business performance, that the internal business systems (the rules and processes that govern the flow of work) have a much greater impact on human performance, human behavior, and the work culture of the organization than most people realize.
The management sage W. Edwards Deming says it much better: “The supposition is prevalent the world over that there would be no problems in production or service if only our production workers would do their jobs in the way that they were taught. Pleasant dreams. The workers are handicapped by the system, and the system belongs to the management.”
The system determines the culture, and leadership establishes the system.
The Real Role of Leadership
Much attention over the past several decades has focused on the role of leaders in motivating people, providing a compelling vision, leading and role-modeling values, and management by walking around. All good stuff. But unless the system supports productive behaviors and attitudes, coaching, mentoring, and motivating will lead to frustration rather than improvement.
The real job of leadership is to shape the business system (policies and work processes) to make it easier for people to deliver performance. The system determines the culture (how things are done around here), and leadership establishes and perpetuates the business systems and policies. Most business systems were developed early in the life of a company and were in alignment with the marketplace and business context at that time. However, the world of work is now a global marketplace with rapid changes reshaping and disrupting almost every industry and business. And in most companies, the legacy internal business systems are out of alignment with the pace of work, customer expectations, and competitive pressures.
If the system is out of alignment and legacy policies and processes are proving to be barriers to employee performance and business results, you can either blame the employees or change the systems and policies. And that’s the role of leadership.
Here's an example. The executives of a retail company noticed that customer satisfaction scores were falling, so they called on HR to ramp up staff training. “Get people to focus more on customers” was the battle cry across the region. Much money and time was spent on training, with absolutely no positive impact on customer satisfaction scores.
Stepping back to look at the entire company as a system of policies and work practices beyond just sales staff behavior, we discovered the real driver behind the falling customer satisfaction scores. At a certain time twice a day, the senior buyers from corporate demanded that all people on the sales floor fill out the latest inventory templates and send them up to the head office. The buyers and merchandise heads needed to make buying decisions and the numbers were critical.
When we spoke with sales staff about the poor customer service scores, they said that the time taken away from helping customers to do the inventory paperwork and reporting was a major issue. But in this company system, the merchandise function (fulfilled by buyers and senior merchandise executives) was seen as the most powerful part of the company. The system was designed to satisfy the needs of the merchandising function, not the customer.
Fortunately, in this example the CEO and president got together, realized the negative impact the system of merchandising checks was having on sales and service, and, with the support of the entire senior team, developed an alternative set of processes that got merchandising its requirements while also freeing up more time for sales staff to interact with customers.
According to W. Edwards Deming, “A manager of people needs to understand that the performance of a worker is governed largely by the system that he works in, which is the responsibility of management.”
Change the system, change the culture, change the results!
The leaders of the company determine the elements of the business system and company policies, and they are the only ones who can change it. That's the real job of leadership. If they have the courage.
Note: These insights about culture being a business system and not just an HR or people issue are elaborated on in a new book, Culture Rules!: The 10 Core Principles of Corporate Culture, coming to Amazon in paperback and e-book format in October 2017. Download a free synopsis of Culture Rules!