In an earlier post, I reviewed how Toyota had great success at General Motors. With Toyota’s help, what was GM’s poorest performing plant became GM’s highest performing plant inside of a year. Did the GM leadership race to implement the Toyota Product System at other plants? No! Why?
In the mid twentieth century, Deming attempted to convince American executives of the benefits of what became the foundation of lean. Frustrated by the lack of traction in the US, he took his message to Japan. Deming’s teaching became the foundation of the Toyota Product System otherwise known as lean. Are Japan executives smarter than American executives? No! Why then the difference in response?
Agile was born by software development engineers who gathered to find a better way. Many of the defined agile values and principles moved away from centralized control to collaboration and self-empowered teams. Agile gathered the best management and engineer practices and packaged them in such a way that the benefits of the whole were greater than the sum of the individual practices. While well executed agile has brought great benefit to many businesses and customers, it is still thought of by some executive and middle managers as a “developer thing”. There appears to be so little motivation by management to understand and leverage the practices that have transformed numerous organizations. Is it a question of motivation? Perhaps!
Who are the leaders of our corporations? What is the mindset of the canonical executive? What drives their behavior?
I have never been good at mindreading. However, perhaps if we contrast the values between agile and lean principles and executive incentives we will gain some insight into behavior.
Executives are often incented by results tied to the performance of the company. Measure tied closely to customer and business benefits are essential. Effective measures are hard to game and take the whole value stream into account. Good metrics drive good behavior.
The inverse is also true. Arbitrary measures have large disconnects between the measures and the benefits to the customer and business. Metrics that are easy to fudge and tied to financial rewards are likely to be gamed. Poor metrics also drive local optimization. Local optimization occurs when a metric incents one organization to complete their work at the expense of another organization within the enterprise.
The more arbitrary a measure becomes and the greater the financial reward, the more likely bad behavior results. Human nature being what it is, tying financial gain to arbitrary metrics drives the organization to focus on the wrong behavior, invites the gaming of metrics and to practice local optimization
Earlier I contrasted Japan companies with American companies. To summarize, “Short term thinking companies are in business to make money while long term thinking companies make money to remain in business”. Who is more focused on long term and short term thinking? Which companies are likely to sustain profitability?
Why are executives so short term focused? To answer the question, we have to look to how we incentivize our leaders. Incentives are tied to what is valued. Are values the core reason for the gulf between executives and agile and lean teams? Let’s compare.
Agile and lean principles value the following
- Deliver working software – measure what matters to the customer and the business vs. an arbitrary metrics
- Sustainable pace – sustained performance vs. meeting a short term goal
- Test first development and pairing – system thinking (understand the whole) by eliminating problems at the source vs. local optimization (don’t care what happens down the value stream)
- Self-directed teams – accountability vs. avoiding blame
- Transparency – providing a clear pictures of the issues vs. manipulating perceptions
- Collaboration – team work and shared goals vs. making one look better at the expense of another
- Courage – do what is needed to make things better vs. fear of taking risks
- Continuous improvement – recognize what is not working, identify root cause and improve vs. burying ones head in the sand or redirecting blame
I have seen organization succeed with agile. I have also seen organization with functioning agile team impaired or rendered ineffective by executes suffering from the value discontinuity that often exists between agile and lean teams and executives incented by arbitrary measures which drive bad behavior.
How does this get fixed? This is a hard conversation to have with an executive. Besides the obvious risk to one’s career, the message is likely to be missed.
Think of it this way. Many successful executives are good and figuring out the unspoken rules. The better they can navigate the hidden rules, the more likely they are to rise. What are the rules? They can be different from company to company but I have seen the following.
For successful companies, it is a matter of riding the wave. Such companies are typically very profitable and in a stable market. Because of the company’s market dominance, maintaining the status quo is what is valued. So, building relationships and managing perceptions are on the critical path to success. If your strengths are relationship building and perception management, you will likely do well in such a company. Such a company typically frustrates and drives away those that are results oriented.
For new or growing companies, it is about fighting for day to day survival or improving market position. Such companies typically value results. They look for people that can make a difference. The difference is measured as impact to survival or growth. A skilled and results oriented person will typically find such a company a rewarding experience. While it is important to have a good working relationship, the relationship is valued more for results they bring and not for gaining favor.
The former companies are likely, at one point, to lose market dominance. Given that relationships matter more than results, the skills of the company and consequently it ability to respond to market threats are greatly diminished. We have seen this time and time again when well established market leaders lose position to upstarts. Remember, change is constant and the rate of change is accelerating.
The later example is also has its risk. Once a growing company establishes its position in the market, it can lose the values that helped it succeed.
Agile and lean values are about results now and for the long term. It is about continuous improvement and rewarding behavior that connects to the customers and the business. Agile and lean enables the executives and the staff to align to the same goals and share a common set of values. This leads to sustainable success. There is nothing more demoralizing to strong performing teams then to see rewards parceled out by club membership or perception manipulation instead of adding value.
Who has the brighter future, GM or Toyota? Which company declared bankruptcy? Which company required government bailouts to survive? Which company continues to grow and is admired for the quality of its product by its customers?
Executives, it is time to remove the blockers to your company’s present day and long term success. It is time to align what you measure to the value you deliver. Yes, it is hard to rock the boat. Your chance of implementing change is small; the risk to your club membership is high. Consequently, we don’t see many established companies transform themselves. There is too much executive self-interest to overcome.
On the other hand, leaders with courage and vision have been able to transform organizations. Companies fortunate to have such leaders are companies that have a long history of success and have the ability to learn from failure and pivot towards success. If you are such a leader, look to agile and lean. I believe both reflect the values and provide the practices that will help you identify and remove the blockers to sustained business success.