Steve Holt
An organization which aims to continually improve its performance exposes itself to risk and internal resistance. How can these be reduced as much as possible? Might it even be possible to create an environment where people proactively and willingly seek improvement?
In his presentation at this year’s TOCICO conference1, Steve Holt, associate technical fellow at Boeing, introduced a number of tools that can help businesses consistently succeed in their improvement initiatives.
Overthrowing old paradigms: the leap into the Unknown
A big part of fundamental change initiatives lies in identifying and replacing invalid assumptions that have governed business policies for many years. It goes without saying that this is often a painful process.
Learning processes in organizations happen in two “loops”. Steve Holt calls this “double loop learning”, based on a 1977 article by Chris Argyris.2 The first – far more common – loop looks for solutions to problems within the existing paradigms. As a result, there is only limited scope for improvement: you will never go beyond known parameters.
The second loop seeks to pick apart the paradigms themselves and replace them with new and better (but heretofore unknown) ones. This is the only way to breakthrough solutions. Holt calls this the “unknown unknowns”, based on the famous Rumsfeld quote after the Iraq war in 2002.
By analyzing each situation along the known / unknown lines as suggested by Holt, you can get a very good picture of what you know (or think you know) and don’t know, and the various ramifications of that distribution. You will also recognize in this Eli Goldratt’s famous phrase “Never say ‘I know’” – one of the pillars of the Theory of Constraints.
Own representation based on Steve Holt: Complacency, intuition, weak signals.3
Changing paradigms is a common effort
In order for such fundamental paradigm changes to take hold in an organization, they must be “sold” convincingly, rather than just dictated from up above while ignoring any reservations employees might have. Without the support and active cooperation of all employees, you will have considerable trouble implementing any change initiative. To avoid this, two things are needed: understanding and trust.
Understanding
Change initiatives that do not make sense to the staff have a far lower chance of success. An employee who does not understand why they are to change their behaviors will be tempted to manipulate metrics, sabotage the new measures or, at best, half-heartedly integrate them into their routine.
This is why it is paramount not simply to announce major change initiatives, but to explain the reasoning behind them (using appropriate workshops or training sessions). Do not be put off by this initial time investment – it will be worth its (metaphorical) weight in gold, because informed employees offer you something very valuable: their own ideas! If people fully understand the aims of their organization, and the logic behind it, they are able to bring in their own suggestions. Negative feedback too can be helpful and should not be brushed aside. This is where the second important factor comes into play.
Trust
Ideas, willingness to learn and to experimentation are important attributes for a successful organization. Unfortunately, most businesses do not encourage innovation at all levels. Good ideas do not originate exclusively in the upper echelons of management or the R&D department, but often from the very people involved in the day to day running of your business. The intuition and insights of these “people on the ground” should not be underestimated. But for them to share their ideas with you, they must be sure they will be appreciated and taken seriously.
To foster an encouraging working environment, you could offer regular idea workshops or introduce set feedback mechanisms. These can be integrated into existing employee performance evaluations: feedback then becomes a two way street.
Steve Holt suggests methods such as Crawford Slip or a „Pre-Mortem“ at the beginning of initiatives or projects, allowing employees to voice any reservations. The pre-mortem works on the premise that a project has failed spectacularly and proceeds to dissect the reasons. This provides a safe environment for employees to bring up their “this is never going to work” objections, and to constructively work through them.
It is just as important in this environment that occasional failures do not lead to finger-pointing or negative consequences for the employees involved. Instead, they should be seen as part and parcel of the improvement process: you can learn from mistakes! Of course for this to be true, they must be submitted to careful analysis to work out the reasons for the failure.
This approach allows you to go further than just lukewarm assurances that no one will be blamed if a suggestion doesn’t pan out. Instead, you can convincingly argue that failures too can have a positive outcome by providing you with additional knowledge, for a stronger business in the future.
Protection against disasters
Such willingness to innovate does of course come with a caveat: you must protect the business from disaster. Steve Holt suggests a few further measures to secure your business.
Detecting weak signals
Every business should have a careful monitoring mechanism in place, allowing for timely detection and response to changes in the market, with competitors or within its own operations. This is all the more important when implementing considerable improvement initiatives, so that you can adapt your strategy if required. Holt stresses the importance of paying attention even to weak signals – here your employees’ intuition can yet again be of great value. Because humans are very good at detecting patterns, they will often intuitively pick up on minute changes or disruptions in their environment.
Evaluating risks
Before launching a new measure or project, you should analyze the risk potential and whether your business can sustain it. To do this Holt draws on the “waterline concept”: hitting the hull of your “business boat” above the waterline will be disruptive, but not the end of the world – you have enough time to repair the damage. Below the waterline however, things quickly go down – these are risks that you should avoid at all costs. If they are unavoidable, make sure you have a repair kit in place (a plan B, additional safety buffers, etc.).
Analyzing surprises
With a functional and thorough monitoring system picking up the first warning signs, nothing should surprise you. If you do still find yourself taken unawares, you proceed as before: analyze the reasons, draw your consequences, do better next time. The same goes for near-misses: even when there was no actual damage, you should use the opportunity to learn from the experience.
Using the proposed methods, improvement initiatives in your business will not only lead to greater success, but become an integral part of your company culture, proactively driven by all employees. This comes with the added benefit of creating a more enjoyable working environment for everyone!
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1: Succeeding in a Complex World: Practices to Enable Continued Superior Performance, TOCICO 2015
2: “Double Loop Learning in Organizations” Harvard Business Review, Sept/Oct 1977
3: Succeeding in a Complex World: Practices to Enable Continued Superior Performance, TOCICO 2015, Slide 14