Colourful offices to inspire creativity and innovation, like Google?

Amongst many things, Google is also well known for its creatively designed office and work spaces. The logic behind the colourful and playful design is to create environments that can nurture creativity and innovation within the people that work in these places. Google is acknowledged as one of the most innovative companies in the past decade or so with a variety of products and services that are significantly impacting and changing our lives.

This is quite a common trait of many tech companies too. And similarly these companies also adopt conditions that are designed to encourage creativity and innovation.

Of course, such conditions are not only confined to office space design. Values, management practices, and leadership play equally big roles.

I believe that environment shapes culture, and in the case of Google and the likes, how much do you think the office and work space design (colourful and playful) contribute towards the respective organisation’s innovative culture? 

3 reasons why innovation is the only way out of this rut

The world is changing so quickly that whatever we know now is quite simply out of date already. What got us here, won’t get us where we want to go next. A new thinking is required.

Economies, like businesses, are stagnating – creating huge stresses within society and environment. No new wealth is created, but wealth is instead being recycled from existing resources. Population is growing, resources are depleting and the economy is plateauing. Social welfare is at risk, as resources become more expensive but wages stagnate with the economy. Distribution of wealth remains unchanged: no new businesses are created, and wealth continues to remain within existing circles. Of course, the rate of stagnation varies from one country / society to another. So the issue of stagnation may be more, or less, apparent in different countries / societies. That being said, the trend of reducing marginal utility is quite commonly seen as countries / societies develop or progress.

To address this reality, big problems have to be solved; we must adapt to changing variables; and create new opportunities and new wealth for society.  

This is the innovation process. While invention is the process of converting value into ideas, innovation is about converting ideas into value. With new value, comes new opportunities, adaptability to change, and problems newly solved.

Innovation may be a concept, idea, and word that has been overused. But it is becoming more necessary in the world today for the following three reasons.

Reason number 1 – Innovation gets us out of dead ends. 

We frequently face challenges and obstacles that seem to prevent us from moving forward. Sometimes these obstacles may be minor and we choose to accept or live with them, but other times the obstacles may be so threatening such that something must be done about them. Today we face many obstacles that threatens our society – climate change, depleting resources, geo-political and social imbalances etc.  

global goals for sustainable development

These are big obstacles or problems that, if not effectively addressed, will threaten long term sustainability of the global society. As these are big problems, by nature they cannot be solely solved by the same approaches and ideas that we have utilised till now. Often these will require significant boldness and new thinking. 

Reason number 2 – Innovation helps us adapt and survive in times of major change and disruption.

We live in a world where change is happening at an increasingly fast pace. Disruptive forces are ever present, not just in technology, but in many different areas such as politics, economics, society, environment and laws. Some of these disruptive forces can be seen clear as daylight – such as the political shifts in the USA and other parts of the world; and other disruptive forces may not be apparent today – such as the technology march that was so imperceptible until it reached a tipping point and hit once profitable and dominant firms such as Kodak and Nokia.

People, firms, governments, political parties etc will need to be constantly adaptable to these changing forces. There is no point for these groups to fight and deny these changing forces. For there is no way to stop the change of weather; instead, we must find ways to adapt to it.

Innovation is about being constantly sensitive to these shifts and being able to adapt to them. It is about sensing these signs and changes, then identifying and creating ways to adapt, even take advantage of these shifts. Innovation is about being adaptable, being open to new information / knowledge, and listening / observing to find ways to produce solutions for these changing times.

Reason number 3 – Innovation allows us to create new opportunities.

New opportunities matter.

Human society is amazing in its ability to innovate. But it also has a down side when it is unchanging and complacent – which tends to breed arrogance, greed, inefficiency and neglect.

This is why human society can never stand still. Without innovation or new opportunities, society’s existing elites and usual suspects will tend to reign supreme in the existing opportunities and will continue to lock others out from gaining more share of these opportunities.

This situation becomes even more acute when the demand far outweighs the supply of such opportunities. The gravity of the problem is further multiplied when arrogance, greed, inefficiency and neglect increases. The cost one has to pay for such opportunities will become sharply higher and extend beyond the reach of those who cannot afford it. This then creates a vicious cycle which will ultimately lead to social issues.

Innovation is society’s renewal and rejuvenation process. 

The innovative process is inherently disruptive. It is about bringing about something new because the existing solutions have become inefficient, slow, and no longer relevant to the needs of present day society. This disruption acts as a reset to level the playing field and re-distribute opportunities and wealth from the incumbents towards those that create new value. This reset is crucial to unseat the complacency that tends to take hold of society.

 

I believe that it is clear and ultimately vital that the society we live in today must push for innovation in order for our society to deal with some of the pressing issues as mentioned above. Innovation is not just about products and businesses, but also about thinking, attitudes and cultures. Stagnation is bad for society – and we see some signs of this stagnation in many areas. It is urgent that innovation is given more than just lip service. Efforts must be taken to create the right conditions for innovation to flourish. Work to create conditions for innovation – not just talking about it or appointing people to the task of innovation. Failure to encourage innovation will almost certainly result in significant social crisis.

I will in future write about what I believe are the right conditions for innovation to flourish and discuss these further. Thank you for reading. 

Hate the bell curve? Try this framework for a new performance model

Management always talk about creating a performance culture.

To achieve the above, we see the implementation of performance management tools which (1) incorporates target setting exercises, (2) performance evaluations against these targets, and then (3) distribution of annual performance bonus (often) according to where staff rank in the annual performance bell curve.

Whether these tools promote the much desired performance culture is debatable. The intent is noble, but the implementation and outcomes are often not. More often than not, staff and supervisors alike find these tools demotivating. 

Yet year after year, company after company – we see these performance management tools continue to be pushed, tweaked, automated, enhance, and what have you.

I have personally been involved in this aspect of management for a large part of my career. And yet, I still find this aspect of management as elusive as ever. This is almost like the holy grail of management.

That being said, I have put quite some thought on the alternative – and here, I aim to cover an implementation framework how this can be done. I must caution that this is much tougher than it seems due to many deep set management practices and mindsets that often work against this proposed alternative performance management model. To make it work we must be willing to unlearn and relearn a lot of what we have learnt about management from books as well as our past practices.

In this post, I will cover the following –

  • Truths about people and how they operate in firms
  • Assumptions in relation to behaviours based on studies
  • Organisational pre-requisites and enablers
  • The model itself

Truths

There a few truths that are consistent across all organisations.

The first truth in organisations comprising more than one person, people work together in order to achieve the organisational results. No single person can deliver results in an organisation. This has to do with work distribution, functional focus and inter-dependency. In other words, people in all organisations operate as teams. Whether these teams are good or bad, is a separate discussion.

The second truth about organisations is that they exist to serve a particular purpose or need of a stakeholder or customer. Related to this truth, is that organisational performance matters. And improvements to that performance matters equally. If an organisation ceases to perform in the eyes of that customer or stakeholder, then the organisation will cease to earn its reason to exist. In short, organisations are measured by its stakeholders or customers – an outside-in, not an inside-out measure.

The third truth about organisations – its employees are not machines that can be programmed and predicted. Organisations are organic entities that act and re-act to many variables in many different ways. People behaviours are not always objective, and are often subjective – often deciding and doing things based on circumstances including emotions and feelings at that point in time and place.  

So, (a) people in organisations work as teams, not individuals; (b) organisational performance is measured by the customers or stakeholders it serves, not an internal yardstick; and (c) people are not machines – so practices to “manage” human performance cannot be treated like machine code.

Assumptions

In order to put together a performance management model, we need to understand the nature of human motivation. This is a lot more difficult. From Maslow’s Hierarchy Of Needs to McGregor’s Theory X vs Theory Y, one can say is that people are unpredictable creatures. But to narrow this down, I am focusing my attention to organisations that require knowledge from its people rather than physical force. I’m also making the assumption that knowledge and new ideas cannot be forced upon, but must be encouraged. 

I would also make the assumption that intrinsic motivation, rather than extrinsic motivation, yields better long term value, rather than short term results. This is because we need to allow the mind to find solutions on its own, by connecting the dots from various points, rather than forcing the mind to find short cuts.

To this end, we assume that people are intrinsically motivated by autonomy, mastery and purpose – as proposed by Daniel Pink in his book “Drive”. Of course, money, titles, promotion etc – are still fairly effective extrinsic motivators. But the problem with extrinsic motivation – its absence would cause demotivation and a loss of drive. Extrinsic motivators are difficult to sustain under all business conditions. 

If we are more concerned about motivating people in an industrial context, then we would focus more on extrinsic motivators, basic hierarchy of needs and restrict the people focus through a tight leash. But our discussion will be concentrating more on motivating knowledge workers, thus we emphasise on intrinsic motivators.

Pre-requisite Enablers

To me there are four critical enablers for my proposed performance management model:

  1. Clarity of vision and purpose – this is important to ensure that employees in the organisation are clear around the organisational purpose and vision, and the clarity on who the organisation serves. It is also important that employees are able to organise themselves around this vision and purpose so they know how they contribute towards the team in achieving the vision and purpose. Often organisations come up with generic, uninspired, and unclear vision and purpose as part of a management exercise. Once done, the vision and purpose are never looked at again. We must avoid making vision and purpose a wall poster exercise.
  2. Govern through a set of values, not detailed rules – aside from having clarity of the vision and purpose, the organisation needs to be unambiguous with regards its shared values. The value system is the critical factor in guiding employees make choices and decisions in their day to day activities. No amount of detailed rules will be exhaustive enough to cover all circumstances employees face in their daily affairs. This is especially so in a VUCA (volatile, uncertain, complex and ambiguous) world we live in today. Besides, no employee will be able to remember a whole rule book, but they will be in a better position to understand a set of values.
  3. Transparency and access to information – for employees to be able to make decisions and choices, they will need transparent access to information. Information needs to be made available based on need, not authority. Key performance initiatives for the organisation and their impact will equally need to be made transparent too.
  4. Resources and coordination needs to be dynamic and flexible – it also needs to be understood that resources will need to be made available where there is the need. Coordination amongst teams will also need to flexible to address these immediate needs. There are too many factors in a VUCA world which prevents resource availability and coordination to be static, one-time exercise and inflexible. Employees will need to feel they can take initiative without being put in straightjackets. 

The Alternative Performance Management Model

The typical performance management model as practiced by many firms goes as follows: 

  • staff & supervisor negotiate to set targets at the start of every year
  • difficulty of the target depends on who “wins” the target setting negotiations
  • targets are set to be hit, but not necessarily to stretch
  • targets often based on what is known at the start of the year and changes during the year will have little impact on the targets set
  • at the end of the year, the performance of staff is measured against the targets – further negotiations may be necessary
  • staff are then grouped into performance categories from high to low – the problem arises when targets setting and evaluation of performance against targets are not comparable, not equally robust
  • bonuses are distributed to the staff in accordance with the high-low performance categories

Often this model fails because (a) the target setting process is an exercise of minimisation, so it doesn’t lead to stretching towards full potential; (b) inconsistency of target setting and evaluation across the organisation; (c) bonus and pay is tied to the performance appraisal leading to claims of unfairness, lack of transparency etc.

Much as we would like to fix these problems – but it is impossible to do so mainly because people are not machines. People are imprecise, unpredictable and prone to errors. The traditional model of performance management works in a precise or machine driven environment. But introduce the human variability, some VUCA and performance demands into the mix, then the model starts to break down because the level of ambition across staff and supervisors are different. Furthermore, when pay is linked to performance – more efforts will  be directed towards gaming the system.

It is no wonder that both staff and supervisor find the whole affair de-motivating.

Here is a possible solution:

  1. Ensure that staff remuneration reflects their worth or contributions to the firm. The remuneration is to cover the work that is expected of the staff according to their role and deliverables / contribution in their day to day function. The only target is to deliver on what they were hired to do. At this point, I believe it is pointless to spend time differentiating how the person delivers on their role. Either this day to day expectations are delivered or not. As long as the role is delivered in the right way and aligned to the vision, purpose and values – that is sufficient.
  2. Inspire the organisation to have goals of being the best. These types of goals are simple, easy to communicate, easy to accept (who does not want to be the best?), and evergreen. Because of this, these goals need not be set every year, nor negotiated – thus, saving a lot of painful resource hours.
  3. Set organisational-level goals on what success looks like. These targets need not be cascaded all the way downwards – sufficient to be cascaded / adopted at division levels. If the organisation collectively over-achieves its goals, reward all employees equally, only for those who at the minimum deliver on their own individual roles
  4. Create process to identify non-performing individuals, based on criteria of persons who did not do their part to contribute towards the organisation’s performance. Refer to simple targets set in point 1 above. These people, aside from their pay, should not be rewarded with any bonus whatsoever.
  5. Encourage people to deliver well beyond their existing deliverables. Inspire them to “move the needle”, i.e. drive perceptible improvements to the organisation. We don’t need to negotiate a target with them. Just be clear that the perceptible improvement should be something that is measured outside-in by the stakeholder / customers. These improvements should be perceptible to the stakeholder / customers. An imperceptible change would not have moved the needle.
  6. Since creating perceptible improvements are often not possible individually, encourage people to form teams (especially cross functional teams) to deliver on these perceptible improvements. These teams should not default to functional teams dictated by the organisation. There is no need to create any specific targets at the start of the year. Allow these teams to identify these potential improvements during the year, set their own targets and form their own teams organically. The more the team stretches itself and its targets, the better chances it has in realising the perceptible improvement. Often the more diverse / cross-functional the teams, the more likely the improvements will be perceptible as it cuts across the organisation rather than remain only within a single function.
  7. Create an exercise involving top leadership, peers, and external parties to evaluate all the teams and their improvement initiatives based on an outside-in impact criteria, and grouped by different improvement categories – e.g. avoid grouping and comparing revenue-related improvement initiatives with process related improvement initiatives. A running database of all such initiatives will need to be maintained – this is should be comparatively easier to maintain and monitor as compared to a database monitoring the individual performance of all the staff within the organisation.
  8. Reward teams based on the impact they’ve made to the organisation and its stakeholder / customers. Distribute rewards equally within the teams. If certain individuals are members of more than one team and each teams were rewarded, then that individual will have his / her share of rewards for more than one team that was rewarded. This multiple rewards will motivate people to participate in more improvement initiatives.

This model may not be perfect. In time, this model should be continuously improved and from time to time dismantled and start again. It is important to remember at all times the truths about organisations, revisit the assumptions around people behaviours, and build robust enablers. Making constant references to literature on management models for the knowledge / information age is necessary. I would also suggest reading more on Beyond Budgeting, which is currently my model of choice for management reinvented.

Any other model is worth considering if we currently have a performance management model that is not delivering on the high performance culture, and at the same time causing a lot of de-motivation amongst staff and supervisors alike. What is there to lose?

12 principles of highly adaptable, ethical and performing organisations

innovation and management

As a member of the Beyond Budgeting Roundtable (BBRT) I have been studying management activities that encouraged or impeded performance and adaptability in organisations.

Initially, it started out with the dysfunctional effects of budgeting. We all hated the budget, yet many companies go through the annual budget process religiously with nobody even questioning why we do it.

I started to question the value of budgeting when many of our units within the organisation start to claim that they could not carry out certain (seemingly important) tasks because of the lack of a budget. Whilst this is a shocking thing to hear, it is not uncommon. Listen carefully, and you will discover that this is one of the most common “excuses” for not being able to do things.

But as I investigated further, it was not just about the budget. It had to do with the whole interconnected nature of management activities, including the way the organisation is governed, the way people are made accountable, the way we motivate people and as well as the way we plan and control the organisation. There are twelve principles that fall into these categories of management practices. It can be found on the BBRT website as follows: http://bbrt.org/about/the-beyond-budgeting-principles/

If you want innovation, you have to encourage independent thought

We live in an age where technology, customer expectations, and markets shift rapidly. Sticking with dogma and age old ideas, methods, products and services will no longer cut it.

Assuming that we believe in the above – and I would not be too far off the mark, I’d guess – then we need to be able to adapt, respond, anticipate these shifts before and as they happen. We need to be agile, and most of all we need to be innovative. We need to find even more effective solutions to old and new problems. What worked in the past will not guarantee to work in the future.

Innovation is the key to winning in the fast changing world.

But innovation is not just an activity. It is more than that. It is a mindset, a culture, a function that everyone plays – and not just some people in labs and research centres.

Like creativity, you cannot force innovation. Like creativity, innovation must be allowed to flow, naturally. The biggest enabler for innovation is allowing individuals the freedom to have independent thought.

The seed of a new idea would only come from a ground that is fertile with many different thinking. In groups of people, society and organisations – allowing people to think different allows them to explore new ideas, test new perspectives, find new solutions in ways never been thought of before. A social group that emphasises conformity over individuality will psychologically limit the collective minds. This is often the subtle tyranny of the majority.

A society or organisation that is conscious of these subtle effects will need to take steps to allow individuality and take these steps even further by bringing in people who would be expected to see things differently – given they come from different backgrounds and thus would naturally see things differently. Artists will see different solutions to problems than would engineers or accountants. People from different industries will see different ways to solve problems. This is vital in order to encourage innovation. Societies and organisations will need to infuse their own culture and groups of people with people from other backgrounds in order to create a much richer diversity of thought.