From homogeneity to heterogeneity through loss of control

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I was reading Jon Gordon’s blog yesterday:

We had a good laugh but Cary’s customer service was no laughing matter. I go there all the time and have bought hundreds of meals because I know when I go there I’ll get what I want. It’s no wonder that Aqua Grill has been open for 20 years while every week it seems another restaurant in my area has opened and closed.

Success is simple. Give customers what they want and they’ll come back. You don’t have to give away the house. In fact Aqua Grill and Pappasito’s cost a little more than their nearby competition but they are busier and more successful.

If it is so simple, why is it so hard? Why is it so hard to give people what they want? One word. Control.

Control is a way to deal with heterogeneity. To produce homogeneity. If I only give one type of dish, I can make more of it, faster. It is based on yesterday’s world of thinking – where productivity was king and we standardized everything in order to produce more.

Those days are gone.

We are slowly but surely moving away from a world of productivity and mass production, to a world of creativity and customization. And trying to use the same mechanisms of control that were used to stifle heterogeneity in a world where heterogeneity needs to thrive, is crazy.

But we still do. Maybe it is our human nature. Maybe it is just bad habits or our resistance to change. It does not matter. The rules, regulations and other forms of control, all these things that deny people their autonomy and freedom in the work place have an expiry date. We don’t that date yet, but they do.

Read this example Gary Hamel’s post in the Management Lab about unshackling employees where he explains how by letting local employees set the opening times of their bank branches (at night, during the weekend or whenever), a bank created not only engaged employees, but more business. Here is a little excerpt (read the whole thing, it’s worth it):

Blair summarizes the changes at BNZ with a telling anecdote. “I was walking by one of our stores on a Sunday morning with my kids, and my son said, “Dad, the doors on the bank are open.” And I thought, crap, someone forget to close the doors. But then I looked in, and saw that the entire store was open. No one is forced to roster on Sunday, but team members had come in from other branches in order to swap their hours. One mom was there working on Sunday because she wanted to take Wednesday off. And it hit me: no one at head office even knows when the stores are open.” Adds Chris, “The freedom to open when you want may not be the biggest thing we’ve done, but it’s the most symbolic in terms of telling our people, ‘we trust you, and we’re serious about empowering you.’”

It is the same process. Same hours for all branches. A mechanism of control that is supposed to create homogeneity that is supposed to lead to productivity. However what the bank realized is that by losing control and succumbing to the heterogeneity they enable creativity that leads to the customization that customers wanted.

Elad

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Embrace the revolution – overcome the Illusion of control

Photo by Steven Snodgrass

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In the last few days I have read a lot about heuristics. For those of you who still haven’t been exposed to this intriguing concept, here is a short definition from Wikipedia:

[A]n adjective for experience-based techniques that help in problem solving, learning and discovery. A heuristic method is particularly used to rapidly come to a solution that is hoped to be close to the best possible answer, or ‘optimal solution’. Heuristics are “rules of thumb“, educated guesses, intuitive judgments or simply common sense. A heuristic is a general way of solving a problem

We all use heuristics every day. We have to. If we had to think about every decision and process every input fully, we would be totally overwhelmed. So we use these intuitive rules to make quick decisions. From estimating distances according to how well we see the object to estimating numbers instead of doing complex calculation. From deciding we like someone because he reminds us of someone else we like to taking business risks because of over optimism in our abilities. And many times, these are great mechanisms (we sometimes want people to take risks… because this is how progress is created, so it is good to be a little over optimistic, for example). However, as the research of behavioral economics has taught us heuristics are not always a smart way to make decisions.

In his book, Judgment in Managerial Decision Making, Max Bazerman writes about one heuristic that sometimes goes wrong, The Illusion of Control:

People falsely believe that they can control uncontrollable events …, and they overestimate the extent to which their actions can guarantee a certain outcome… Evidence suggest that experienced dice players believe that “soft” throws are more likely to result in lower number being rolled…

Two other researchers, Dan Lovallo and Daniel Kahneman, in an article in Harvard Business review, wrote the following paragraph:

Managers are also prone to the illusion that they are in control. Sometimes, in fact, they will explicitly deny the role of chance in the outcome of their plans. They see risk as a challenge to be met by the exercise of skill, and they believe results are determined purely by their own actions and those of their organizations. In their idealized self-image, these executives are not gamblers but prudent and determined agents, who are in control of both people and events.

Yes, you read it right. Managers have an illusion that they are in control of people. That their actions, more than anything else, will determine the success of the people around them. That if people will only do as they said, everything will be all right. That everybody around them is a cog to be used just in the right way. And why shouldn’t they have this illusion. For so many years, it worked. Bill Drayton and Valeria Budinich reminds us of how it used to work in a post on the Harvard Business review blog:

Fifty years ago, Detroit was the symbol of American ingenuity and prosperity. Henry Ford and his small group of managers did all the thinking and told everyone else what to do. This command-and-control approach works in a relatively static world where most tasks are repetitive — such as building cars on an assembly line. It does not work in today’s fast-paced, change-is-the-name-of-the-game world; and it will not work tomorrow.

Like every heuristic, The Illusion of Control is rooted in truth. But also like every heuristic, there comes a time when it becomes detrimental and instead of helping people make decision, it actually limits them and forces them to make mistakes and err in judgment. As Drayton and Budinich so accurately point out, the historic validity of the illusion led to the creation of mechanisms of control and to the creation of conventional wisdoms about how people should be managed, conventional wisdoms that are built on Tayloristic assumptions that people are just parts in a big machine of productivity.

We are in a time of revolution. The mangers who will be able to overcome their heuristic towards control and understand that today, the power in every aspect of business lies in letting go of control and not in trying to sustain things as they are, will embrace the indirect power that comes with an environment with no rules, no mechanisms of control and that gives employees autonomy and purpose. It is not going to be easy, but this is one heuristic, that I believe managers can overcome.

Elad

Embrace the revolution – overcome the Illusion of control

Photo by Steven Snodgrass

[tweetmeme]

In the last few days I have been reading a lot about heuristics. For those of you who still haven’t been exposed to this intriguing concept, here is a short definition from Wikipedia:

[A]n adjective for experience-based techniques that help in problem solving, learning and discovery. A heuristic method is particularly used to rapidly come to a solution that is hoped to be close to the best possible answer, or ‘optimal solution’. Heuristics are “rules of thumb“, educated guesses, intuitive judgments or simply common sense. A heuristic is a general way of solving a problem

We all use heuristics every day. We have to. If we had to think about every decision and process every input fully, we would be totally overwhelmed. So we use these intuitive rules to make quick decisions. From estimating distances according to how well we see the object to estimating numbers instead of doing complex calculation. From deciding we like someone because he reminds us of someone else we like to taking business risks because of over optimism in our abilities. And many times, these are great mechanisms (we sometimes want people to take risks… because how progress is made, so it is good to be a little over optimistic, for example). However, as the research of behavioral economics has taught us heuristics are not always a smart way to make decisions.

In his book, Judgment in Managerial Decision Making, Max Bazerman writes about one heuristic that sometimes goes wrong, The Illusion of Control:

People falsely believe that they can control uncontrollable events …, and they overestimate the extent to which their actions can guarantee a certain outcome… Evidence suggest that experienced dice players believe that “soft” throws are more likely to result in lower number being rolled…

Two other researchers, , in an article in Harvard Business review, wrote the following paragraph:

Managers are also prone to the illusion that they are in control. Sometimes, in fact, they will explicitly deny the role of chance in the outcome of their plans. They see risk as a challenge to be met by the exercise of skill, and they believe results are determined purely by their own actions and those of their organizations. In their idealized self-image, these executives are not gamblers but prudent and determined agents, who are in control of both people and events.

Yes, you read it right. Managers have an illusion that they are in control of people. That their actions, more than anything else, will determine the success of the people around them. That if people will only do as they said, everything will be all right. That everybody around them is a cog to be used just in the right way. And why shouldn’t they have this illusion. For so many years, it worked. Bill Drayton and Valeria Budinich reminds us of how it used to work in a post on the Harvard Business review blog:

Fifty years ago, Detroit was the symbol of American ingenuity and prosperity. Henry Ford and his small group of managers did all the thinking and told everyone else what to do. This command-and-control approach works in a relatively static world where most tasks are repetitive — such as building cars on an assembly line. It does not work in today’s fast-paced, change-is-the-name-of-the-game world; and it will not work tomorrow.

Like every heuristic, The Illusion of Control is rooted in truth. But also like every heuristic, there comes a time when it becomes detrimental and instead of helping people make decision, it actually limits them and forces them to make mistakes and err in judgment. As Drayton and Budinich so accurately point out, the historic validity of the illusion led to the creation of mechanisms of control and to the creation of conventional wisdoms about how people should be managed, conventional wisdoms that are built on Tayloristic assumptions that people are just parts in a big machine of productivity.

We are in a time of revolution. The mangers who will be able to overcome their heuristic towards control and understand that today, the power in every aspect of business lies in letting go of control and not in trying to sustain things as they are, will embrace the indirect power that comes with an environment with no rules, no mechanisms of control and that gives employees autonomy and purpose. It is not going to be easy, but this is one heuristic, that I believe managers can overcome.

Elad

Bazerman Judgment in Managerial Decision Making<img src=”http://www.assoc-amazon.com/e/ir?t=thecompaadvan-20&l=as2&o=1&a=0470049456&#8243; width=”1″ height=”1″ border=”0″ alt=”” style=”border:none !important; margin:0px !important;” />

http://www.typepad.com/services/trackback/6a00d83451b31569e20120a73d1f5f970b

http://blogs.hbr.org/cgi-bin/mt/mt-tb.cgi/5531

I want to have a conversation with all of you

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For a number of days I have been thinking about how to introduce one of my new projects to the readers of this blog.

I think there is no better way to do that than this TED talk by Clay Shirky. The talk deals with issues I write about a lot in this blog, but from a different prescriptive (connectivity, transparency, autonomy, letting go the mechanisms of control and stopping with rules) and more then everything explain the essence of what this blog is about – a conversation with all of you.

Watch it. It will be worth your 16 minutes.

As effective is this blog may be, I found myself yearning to spread my thoughts in other mediums. Changethis is one of these mediums. Thus, I have a Changethis proposal up for a vote on their website. At the end of this post you will find the proposal. If you would like to see it written, please take a minute and cast your vote right here. Thank you.

Breaking time – Going after the Conventional Wisdoms

A few hundred years ago the world was flat. Everybody knew that. Trying to dispute that could result in being hung. It was the Conventional Wisdom. And it didn’t change for hundreds of years.

The field of management is a prominent victim of Conventional Wisdoms. Living in the 21st century, almost a century after Frederick Winslow Taylor wrote The Principles of Scientific Management, our understanding of the subtleties of managing has changed considerably. However, the average manager still conducts herself according to Taylor’s principles. It is our modern day Conventional Wisdom.

Isn’t it time we stop believing the world of management is flat? There is so much evidence out there to teach us that some Conventional Wisdoms are just wrong, but we continue to embrace rigid and unyielding ideologies. Isn’t it time we start breaking some of these Conventional Wisdoms? It’s breaking time!

Elad