The Process Fallacy Slowly Killing Large Companies

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I had the pleasure of speaking with Jonathan Rosenberg and Alan Eagle, long-time senior Google executives and authors of How Google Works and Trillion Dollar Coach, for an episode of the Future Squared podcast.

Trillion Dollar Coach unpacked the leadership playbook of legendary Silicon Valley coach, Bill Campbell.

Campbell mentored the likes of Steve Jobs, Larry Page, Eric Schmidt, and Jeff Bezos, among other tech luminaries, and played a major role in the success of their companies.

In order to empower great people to succeed, Campbell knew that an environment that liberates and amplifies their energy is critical.

To do that, managers must support, respect and above all, trust their people.

Human Flourishing Requires Trust

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As author David Rose argues in Why Culture Matters Most, prosperity requires large group cooperation. This requires trust, but as societies grow larger this becomes more difficult to sustain.

Human flourishing, he says, requires the general prosperity that comes with a free market system. Without trust, the foundations of said free-market system come crashing down.

There is a danger of ‘redistributive favoritism’, which undermines trust in the system generally. This is manifest nowadays in inequality, political tribalism and left-leaning voices demanding the redistribution of wealth due to a withering away of trust in the capitalist system and financial markets — especially on the back of 2008’s financial crisis.

Workplace Flourishing Requires Trust

A 2014 report by Interaction Associates on trust in the workplace found that just four in 10 employees have a high level of trust in management and the organisation.

Sadly, in stark contrast to the culture of trust that Bill Campbell sought to build, only 38 percent of employees surveyed in the report said that they feel safe communicating their opinions with leadership.

More than half don’t trust their line manager.

Interestingly, high-trust companies are two-and-a-half times more likely to be high-performing organisations relative to ‘trust laggards’.

This makes total sense. When things are changing faster outside your walls than inside your walls, innovation becomes key — and trust, as we’ll learn — is key to speed and adaptability, two attributes that are absolutely fundamental to innovation.

The Process Fallacy

Human beings are wired to be opportunistic, so if you find yourself with an opportunity that won’t harm anybody, you’ll likely take it.

In a small group or tribe, we know that our actions might impact someone we know or care about. The harm becomes more real and visceral. Conversely, when we’re in a large group, this disposition withers away, and we can much more readily find ourselves rationalising misconduct.

This is one of the reasons why the larger a typical organisation gets, the more embroiled it becomes in process and procedure — not just to keep the proverbial ship afloat, but to minimise misconduct and mistakes.

As of writing, Fortune 500 companies represent more than US$1 trillion in profits, US$21 trillion in market value, and employ about 28 million people globally.

Policy and procedure ensure the smooth delivery of an existing and repeatable business model.

Such organisations can’t afford to let avoidable screw-ups — such as privacy leaks — jeopardise their share price, and see billions stripped from company valuations, and executive wealth, virtually overnight.

The Sony PlayStation Network privacy hack of 2011 — which compromised 77 million accounts — cost the company an estimated $171 million.

When Processes Become a Recipe for Disaster

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Source: Oliver Powell

Processes are supposed to help organisations scale, improve efficiency and minimise screw-ups. But like almost anything taken too far, per the inverted-U (left), they have unintended and dire consequences.

This is especially true when the same procedures bind both high- and low-risk activities.

Without trust, we end up with burdensome processes —politics and consensus-seeking meetings reign supreme, and organisational cadence grinds to a halt.

We end up pushing away our best talent — who thrive on purpose and autonomy — and attract ‘talent’ who enjoy hiding behind procedure and counting down the minutes to 5PM.

Herein lies the fallacy — policies and procedures that were introduced to ensure seamless execution of an existing business model actually have a devastating, counter-productive effect — an inability to adapt to change — something that modern organisations can ill-afford.

Seth Godin echoed these sentiments in a recent Future Squared podcast conversation, saying that ‘the assembly line is great…providing the world stands still’.

Today’s world is anything but standing

As Stephen Hawking was thought to have said, ‘Intelligence is the ability to adapt to change.’ Manifestations of a Low-Trust Culture

When Process Compromises Progress

Just some ways that process compromises progress:

  • The need for approvals: an unreasonable number of approvals are needed to get anything done — no matter how consequential, signaling a lack of trust.
  • A focus on process instead of people: today, if you present a problem to a typical government employee, chances are they will respond with a process instead of a solution: ‘Fill out these forms, and we’ll get back to you within 14 to 28 business days.’
  • An overdependence on meetings: it’s just not true that every decision requires a meeting, yet you’d think that this is the case, given how business executives spend their time.
  • Not supporting team morale: the best employees are motivated not only by extrinsic rewards like pay, but more so by intrinsic rewards like purpose, autonomy and growth. Inundating your best people with process leaves them disgruntled and far lesser versions of themselves.

For a humorous take on how today’s organisations unwittingly behave like secret service spies trying to sabotage their foreign adversaries, check out the article below.

How to Hit the ‘Sweet Spot’

This brings me to what Jeff Bezos calls Type 1 and Type 2 decisions.

Type 1 decisions are big, hairy, irreversible and high stakes. They require careful consideration: think decisions about security protocols that protect the privacy of your customer data and mitigate the chances of a seven-figure privacy breach coming your way.

Type 2 decisions are reversible. If you screw up, you can make amends without too much, if any, harm having been caused — think the font used in a landing page you’re building to test appetite for a new product.

The reality is that most decisions are Type 2 decisions, and should be made quickly as a result.

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But at most organisations, it’s not uncommon for staff to wait several weeks for the inconsequential matters, that ultimately inhibits learning. For example, one might wait several weeks for marketing to green-light the font, colour-scheme, position of a button and so on, on a simple web prototype, before a product team can perform any market testing.

Bezos warns in one of his Amazon shareholder letters:

‘As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.’

Closing Thoughts

By striving to build a company culture whereby process serves its purpose, and does not alienate our best people and leave them sitting in meetings and seeking permissions ad infinitum, we can attract, engage and retain top talent, move and learn quickly, and increase our chances of thriving in a fast-changing world.

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Steve Glaveski is the co-founder of Collective Campus, author of Time Rich, Employee to Entrepreneur and host of the Future Squared podcast. He’s a chronic autodidact, and he’s into everything from 80s metal and high-intensity workouts to attempting to surf and do standup comedy.

Founder: Collective Campus, Host: Future Squared, Author: Time Rich & Employee to Entrepreneur. Clubhouse: @steveglaveski Visit: #MELB

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