Wednesday, June 03, 2009

#ASTD09 How to Create Adaptable Organizations

Presentation: Bullish on Uncertainty: How to Create Adaptable Organizations
- Alexandra Michel, University of Southern California
- Stanton Wortham, University of Pennsylvania, Director of CLO Program

One of the very successful banks in the study AMPLIFIED uncertainty
- Most organizations attempt to reduce it

Studying 14 different organizations. Most fleshed out case studies banks.

How can firms cultivate high performance in employees? Looking at it from human potential perspective.

[survey of audience and how uncertainty generated among their organizations]

Uncertainty - from new competitors, from new technologies "breaking the frame" of previous technologies, from over-enthusiastic CEOs who are into change for change sake....

Learn to benefit from uncertainty
- Effective organizational coping strategy: Uncertainty amplification
- Compare to traditional strategy: Uncertainty reduction.
+ Specific goals, breaking down are all part of uncertainty reduction
+ This doesn't work.
- Understand what the 2 strategies look like
- Understand what relative strengths and weaknesses are
+ How affects org and employees

Data from 2 year study of investment banks.
- Both banks face high uncertainty: Industry deregulation, globalization,, fast pace of tech change, political instability
- Used ethnographic approach. Interviews, hanging out - 120 hrs per week. Mirroring workweek of bankers
- Both banks struggling with the uncertainty at the time.
- Only thing differed on - strategies for coping

Found that strategies that had been working for years suddenly stopped working
- Melt-down of financial markets
- Break down of some very sophisticated models. Had believed exceptions to the models would occur every 100 years. Finding exceptions 2-3x per week! (find you tube explanation of financial markets)
- 1 bad decision can bring down banks
- Banks wanted to help their employees cope with uncertainty

[If you haven't seen this video - this will provide some background.]

Case Study: Bank 1

- Bank 1 felt banks fail when
+ Individuals overwhelmed with the information they get or tasks have to do
+ No clear goals or directives
+ Don't get the training
+ Getting inconsistent messages from HR processes.

- Strategy: Reduced banking uncertainty
+ Clear organiztional strategy -> Bankers' specific goals
+ Hired experts
+ Carefully trained their superstarts in a narrow domain of expertise
+ Matched people to projects based on expertise
+ Every banker had predetermined role on projects
+ Top person not talk to clients - goal to research market, create strategy that was clearly communicated to underlings.

- Understand that this was a viable strategy for a long time.
+ Based on the individual
+ Top-down strategy
+ Very dependent upon the accuracy of their prediction. Right - works. Incorrect - you have problems.
+ Bankers were happy, clients pleased, organizational theorists pleased ("fundamental need for certainty").
+ Big drawback - when superstar left, entire units collapsed

- This bank no longer among us

Case Study: Bank 2
- AMplified uncertainty for its bankers
+ Emergent strategy
-- CEO does what everyone else doing - working with clients
-- Strategy comes from bankers closest to market
+ Bankers had no specific goals - almost daily feedback on consequences of action and trusted to self-adjust
-- They got stacks of information. Other deals, new competitors
-- How are you and juniors spending time?
-- limited guidance.
-- Decision-making becomes intuitive
+ Not as dependent of prediction. Allowed to follow instinct for profit.
+ They hired grads WITHOUT FINANCE KNOWLEDGE. Put them on deals day 1

- From a hired grad - 1 day of intro training, which wasn't really training but socializing, then given big pile of stuff and told to deal.
+ Person felt completely helpless and incompetent
- Staffed bankers based on first best warm body rather than "expert"
+ Bankers subbed for one another when need to

- VPs still regularly confronted with deals about which they know little.

- Bank 2 results
+ Made money for decades
+ Organizational theorists puzzled
+ Clients initially displeased.
+ When senior bankers left, the bank did not suffer additional attrition. This is unheard of!
+ Clients wound up staying with bank because the expertise resided in bank, not in the individual banker.
+ Knowledge more diffused among organizaiton
+ Natural to admit that didn't know everything - so would more easily draw on other people. More likely to ask questions of client, of each other.
+ Able to come up with more unique, customized solution.

- There are some cultures that quickly overwhem individual proclivities
+ Some work as social cocoons. 120 hrs a week. Work shaping people.

Performance adaptability
- Bank 1
+ 15 org changes during 2 years, crisis-driven (about 10 years ago!)
+ no innovations at task level (e.g. analytics)
+ Innovation based on imitation. "Best practices"
+ The chain approach - problem is that information moving too slowly from bottom to top.

- Bank 2
+ No org changes (about 10 years ago)
+ Continuous change at task level
-- If people saw something, they fixed it.
+ Industry leader in innovation - "People see something and fix it"
+ The organization more able to turn on a dime as the market changes

Other successful business also amplify uncertainty
- Apple's R&D Unit
- Google Chaos by Design
- US Army officer combat training intentionally creates "ambiguity and uncertainty"

Why are organizations flaunting the time-honored practice of uncertainty reduction?
- Why would it ensure that "less knowledge" is the NORM?
+ More knowledge = more likely to make assumptions
+ "Banks fail when people think of themselves as experts and don't realize that their knowledge doesn't apply to a new situation
+ Bank 2 = most catastropic losses happened when people thought were experts.

Bank 2 - created the 'insecure overachiever'
- Dumb experts
- Robert Rubin - models are useful, but can be dangerous because reality is always more complex than modesl.
+ Too easy to lose sight of the limitations and the assumptions.
+ Reality may not fit the model.
- Assumptions always built into your models and templates.

IBM missed boat famously (1990s)
- Mistaken belief that mainframes could sustain profitability.
- Internalized concepts prevented management from noticing readily available information.
- "It's about seeing what is there."

Experts over-rely on their own knowledge

Only when people are uncertain of their own knowledge do use organizational resources and pay close attention
- When people don't know, uncertain, crunched for time = more likely to ask.
- If you don't have to = you don't
- Bank 2 compulsively asking because they really don't know. Only way people talk and pay attention.
- Culture AROUND not knowing being OK.

- Designers do not specialize but move to a new industry after completing one project.
- Typically work on products where have no experience
- Focus on learning as you go.
+ Would NEVER tell the customer 'we don't know how to do that'.
- Advantage - not locked into a paradigm of how to solve a problem.
- Clients go to IDEO when they want to do something very different. New, fresh perspective. Big incentive to listen closely.
- IDEO designers more likely to work together, collaborate. Get many heads together.

US Army
- Tried to cultivate adaptable leaders through traditional training
- "The complexity, unpredictability and ambiguity of post-war Iraq is producing a cohort of innovative, confident, and adaptable junior officers.
+ In the field, the officers never knew what hat they had to wear - officer, diplomat, line soldier
- It's not which role - but how many. Before: you must know what your role is.
- Incredible amount of information carrying around in your head.
- Big thing - bottom-up fed
- A surprising lack of detailed guidance. Too volatile.
+ Wasn't ideal, but the junior officers dealt.
+ They learned to think on their feet and how to be adaptive.
- US Army recommendation - instill ambiguity and uncertainty instead of following closely scripted scenarios.

This is a tough change
- We are trained as experts. Individual competency.
- Stress levels very high. "This is the worst experience ever!"
- After 6 months
+ Bank 1 - stress levels high because your individual reputation as an expert on the line.
+ Bank 2 - "it's not about me" I can rely on the organization and my colleagues. Their ego is not at stake.

Bank 2 - there may be some attitude and personality requirements
- may need to be humble in regards to expert knowledge.
- May need to have loyalty to organization, sense of integrity
- Interesting, personality did not fit into selection process. Just looked for MBAs with good GPAs. They can fall in line with whatever is going on.

- Organizational identity - may actually shut down the conversation because questions become personal attacks rather than legitimate questions and listening.
+ Bank 2 - ego very pounded and not at stake.

- When catastrophy hits - people let go of identities. No longer relavent. Crisis - "we are all in this together."
+ Bank 2 is about perpetuating crisis.
+ People too busy doing the work.

Do people self-select out?
- In Bank 2 - hired in cohorts. Sense that they wanted to stay at least 4 years.
+ Gave immediate social
+ Turnover 5% - 10%
+ When people left - government, rockbands, own businesses. More variety.
-- People are learning how to draw on others
-- Continuously reinvent solutions
- In bank 1 - 25% turnover.
+ When people left - Stay in finance

Where did the theory come from?
- Bank 2 - was more like Bank 1, but lost a TON of money and let go of 25% of their people. Realized that their achilles heel was their experts.
+ Just finding ways to tinker.
+ After 6-8 years, you figure out something about finance.
+ Continually find other ways to keep person on their toes. International office, different job.

General observations
- Training too needs to be part of the mix of people on the ground
+ Training often compartmentalized.
+ Too removed from the business
+ Need to work on the ground and observe, collaborate with the people on the ground.
+ Co-train with your SMEs. No standard programs - keep going back and asking. What went well. What went wrong.
+ Keep sharing. Adapting the materials.

- If you design training to last years and years
+ But is is still relevant NOW?

- Continue communication of new discoveries in the field (whatever your field is)

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