While Dr. W. Edwards Deming, and others, have estimated that the organizational system is responsible for a large percentage of problems and performance in organizations (70-85%), it is not at all clear how he (or the others) came to this conclusion nor if it is based on any empirical evidence. Organizational systems do not exist without the humans they interact with and influence. In other words, organizations without humans have no ontology – they do not exist. Consequently, it is not clear how one can study and allocate blame to either the system or the humans since the organization system cannot be studied without the humans. Without an understanding of human behavior, we cannot understand organizations. And, if we don’t understand organizations, we cannot redesign them to perform better. It seems that Deming knew this when he proposed psychology as one of four key components in his system of profound knowledge (Deming, 1994).
Deming’s three psychology concepts
1. People are different – People come in infinite varieties. They have different personalities, educations, interests, values, so on and so forth. And, when we combine them into groups, the permutations appear endless. This seems obvious, but when it comes to management practice and policy, we seem to act as if everyone is the same and just like us.
2. People learn differently – While some psychologists claim that they do not have empirical evidence for different learning styles, the fact that people learn in diverse ways and at different speeds is obvious to even the least experienced teacher. Yet, we continue to design training and education as if one “size” (combination of methods, sources, etc.) meets everyone’s needs.
3. Phenomenon of overjustification – People are often demotivated by the extrinsic incentives we provide and, in many instances, would have been happier doing it for the simple enjoyment of the task (intrinsic motivation). But this isn’t the only thing that is wrong with our current approaches to incentives. Unfortunately, our current incentives often actually reduce performance – the opposite of the desired result. We have known this for a while, but management continues to ignore the empirical evidence. According to Dan Pink, the key to motivation for many contemporary jobs are not extrinsic financial rewards but rather intrinsic rewards and incentives around three key concepts of autonomy, mastery, and purpose. If you get nothing else from this post, go watch Dan Pink’s TED talk titled “The Puzzle of Motivation.” And then use it to influence the design of incentives in your organization.
Stakeholders are humans too!
Creating sustainable excellence requires we design organizations so that they create value for multiple stakeholders. Stakeholders are humans (mostly) and come in a wide variety of “shapes and sizes” (personalities, motivations, values, etc.). For most organizations, these stakeholders can be organized into six groups, including (a) workforce, (b) customers, (c) investors, (d) suppliers and partners, (e) the public and community, and (f) the natural environment. As I noted in a previous post, the bar is being raised, and all six stakeholder groups are putting increasing pressure on organizations to create value for their group.
The good news is when stakeholders are viewed through the “lens” of systems thinking, we can better understand the interconnections between the groups and how they can create value for each other, thus avoiding the “zero-sum game” of trade-offs. For example, a highly engaged, capable workforce combined with cooperative high performing suppliers and partners to design, develop, and deliver products and services that create memorable experiences for customers results in customers who come back and spend more (repeat business) and bring their friends with them (referral business). This increases the top-line revenue, which makes it a great place to invest. And, if done properly, the organization is a great “citizen” to have in the community and the world.
The trick is to design organizations with just enough of the proper structure and incentives and no more. Managers want to manage. Otherwise, they feel like they are not doing their job. Maybe it is time to get rid of management as traditionally practiced and make managers designers of systems that have the proper structure, features, and functions to facilitate stakeholder engagement and performance.
Deming, W. E. (1994). The new economics: For industry, government, education (2nd ed.). Cambridge, MA: Massachusetts Institute of Technology Center for Advanced Engineering Study (MIT CAES).