Have you noticed the fundamental disconnect between hot business-topics and recurring challenges that confuse and bewilder the majority of decision makers worldwide?
If so, you must have recognized that the methods and tools people like to talk about have hardly any bearing on what a business system needs in order to be effective, sustainable, and profitable. For example, another round of ever higher investments in operational efficiency measures might reduce cost, but will that increase the business system’s capability or capacity to realize the purpose for which the business system was designed and created?
Or, initiating a stock buyback program might promise the highest Return on Investment, but will it contribute to the realization of the purpose for which the business system was developed in the first place?
Where do you think the money you want to “make” will have to come from: saving on operational costs or satisfying the needs of people who buy/use your products and services and doing so better than anyone else?
Hot topics tend to focus on issues regarding leadership; prescriptions of more desirable forms of human behavior, aiming to make already successful people even more successful. But, what about leaders who are not yet successful―those who admit struggling to deal effectively with complexity, a disengaged workforce, lackluster value propositions, and eroding profit margins; what about them?
Developing one’s interpersonal relationship skills is no substitute for developing a business system’s design, organization/structure, implementation, maintenance, and management. Consequently, applying the most advanced interpersonal leadership skills―in order to make the most of an otherwise poorly functioning business system―might be construed as an example of successful leadership, but is that what you really want?
Every Business is a System
The most elementary principle of any business is systematization of your workflow―you do not want to invent the wheel every time you receive another order for your product or service. The reason why anyone would want to systematize workflow is to make performance outcomes predictable; to make the production process, and thus the products and services as uniform as possible. Buyers and users like, and often demand, consistency. As a matter of fact, how a value proposition is perceived and experienced by users is integral to a brand’s identity.
Consequently, Dr. W. Edwards Deming was an ardent advocate of statistical process control. Did you know that ninety-four percent of all performance outcomes are systemic in nature? In other words, every (un)intended and (un)wanted result is the effect of executive decisions regarding a business system’s design, organization/structure, implementation, maintenance, and management. Therefore, business success and failure is measured neither in terms of its system effectiveness or efficiency, but in the extent to which its performance outcomes are consistent―reflective of a stable system.
What Matters Most
The key to successful leadership is found neither in better interpersonal relationships, or the latest-and-greatest best-practice methodology, or tools and technology, nor in more engaged employees. Make no mistake, people who do the actual work aren’t stupid! They KNOW what needs to be done in order to succeed, and I cannot imagine anyone of them putting “leadership with better interpersonal relationships” at the top of their list.
Successful leadership is a function of one’s insights into principles that determine key relationships between cause and effect, and means and ends. For example, these principles describe and predict:
a) Why employees cannot out-perform a system’s capability and capacity.
b) Why not even the highest level of interpersonal relationship skills can change a system’s design, organization/structure, implementation, maintenance, or management.
Therefore, leaders need to develop a keen understanding of their business on the level of process―how it functions as a singular, unique, integrated, and open system. This level of understanding creates appreciation, which means a recognition of its value. Can we agree that many so-called tough trade-off decisions would not have been made had the decision maker shown real appreciation for the system under his/her command? I refer to decisions that undermine the system’s capability and capacity to realize its purpose.
Business as a Cookbook Recipe
Insight into relationships between cause and effect, and means and ends can be gained from the I.P.O. model shown on top. The structure of this model is at the heart of every cookbook. First, it shows a picture of the Output variables, then a listing of the Input variables, and at last a description of the Process by which input variables are transformed into the desired outcome. Success is thus a measurement of the transformation process; the predictability of its outcome. Hence, competitive advantage is a function of a business system’s design, organization/structure, implementation, maintenance, and management.
Every business starts with a compelling vision, a mental image of its outcome variables. Then, input variables are chosen in accordance with that mental image. Now, a transformation process is designed honoring the principles that govern the relationships of cause and effect, and means and ends. This simply means that if you want to increase business performance, you’d better pursue continual development of your business system’s capability and capacity. And, if you want your employees to be engaged, you’d better create the best possible conditions for them to perform to the best of their abilities, treat them well, and reward them appropriately. Anything less will cause unnecessary friction and conflict, which makes the system less stable and reduces outcome predictability. It will show up in bottom line results.
Strategies aimed at developing system capability and capacity for the realization of a compelling vision create a more stable system that produces a more predictable outcome, at a lower cost, which is great for productivity, sustainability, and profitability.
Operational efficiency measures and leadership development programs are not known as effective solutions for improving a business system’s capability and capacity, or increasing output predictability, or creating a more engaged workforce. The nature of any perceived relationship between the aforementioned efforts and the system’s performance outcome is more correlation than causation.
The only effective antidote to being perplexed by system complexity―what it does in real time and what it is capable of doing―is to gain insight and understanding of a business as a singular, unique, integrated, and open system. That’s why I wrote CEO Adventure.