Whether you are tuning an existing operation with incremental change or running a transformational change programme, there are always important people factors involved. The factors with the biggest leverage are incentives and trust. Yet these are often forgotten or side-lined in the rush for structure, methodology, plans and the supporting technology.
All projects are ‘business’ projects, although many are influenced by, facilitated by, or crucially reliant upon IT. Even the project with 100 per cent IT content, such as upgrading an organisation’s wide-area network, is not done for IT’s sake, it is done to deliver benefits to the organisation.
The measurement of success must be focused on those benefits, and not driven by the technical performance. Most importantly, the project preparation must include all stakeholder communities, meaning everyone who is, even in the most secondary way, touched by the change.
These stakeholder communities will range from sponsor(s) and senior management to project team, operational staff, user groups, reporting and regulatory teams, sales and marketing people, suppliers, customers and many others. The benefits delivered to them, the incentives within them and the trust between them will vary enormously. Understanding, influencing and aligning incentives, and establishing, building and maintaining trust are the cornerstones of sponsoring and managing successful change.
While our technology capabilities are on an exponential curve since the first Industrial Revolution, our social abilities have hardly altered in millennia. We primarily operate from a point of self-interest; that can mean things other than money, such as power, self-esteem, competition, curiosity or simply feel-good. Often it means a combination of those things.
You might say that our tools have become better and exponentially better, whilst we have only become a little bit socially smarter. We collaborate in groups (companies, societies) because we cannot get it done by ourselves, but the individual incentive is almost always self rather than group.
Charlie Munger, a partner of legendary investor Warren Buffet, gave a lecture at the Harvard Business School in 1995 entitled The Psychology of Human Misjudgement. It became a celebrated and widely-referenced lecture wherein he lists 24 standard causes of human misjudgement, and the first cause is under-recognition or misunderstanding of incentives. Munger uses as his main example the Fedex night shift case.
Fedex were paying the night shift workers by the hour, the shift was not finishing its work on time and the logistics were falling apart. After considering a lot of possible reasons, the management had the bright idea of changing the incentive through paying them by the shift and they were free to go home once the work was completed. Instead of spinning the work out to earn the maximum, the workers now sped up to minimise the time spent earning the fixed amount. Problem apparently solved.
To my mind, this example as cited by Munger and others may be over-simplified. The main concern when moving to a time incentive is that the quality falls – in this case parcels could be misdirected, leaving someone else to sort out the mess. So it’s not quite as straightforward as replacing one incentive with another; safeguards need to be added to ensure other problems are not created as a consequence.
Trust can be between individuals, groups of people (departments, projects), or whole organisations. It often takes a long time to establish trust, yet it can be lost in an ill-judged moment. Trust is a very personal assessment, an ephemeral thing, yet hugely powerful. It is a large factor in how we humans successfully cooperate in groups.
As to the question ‘what is it really’ I provide this very broad suggestion: it is being comfortable in putting aspects of your own success in the hands of someone else.
Think of any aspect of your life where you are doing something new; are you not more comfortable, more relaxed if you know what to expect, if you are confident it is the right thing, if the outcome is reasonably predictable? In other words, if you trust the situation, the people involved, and indeed your own judgement? If you have certainty?
It is no different in organisations, in fact it’s even more so. People are usually nervous about changes, for a whole raft of reasons - a lot of it is uncertainty, born out of a lack of understanding about the what, why, where, when, who and how of the change.
There is a virtuous circle to be had here: if we reduce uncertainty, through some clear and appropriate communication, then we build trust; and if we build trust, through showing and sharing understanding, then we reduce uncertainty. It is a matter of communication, which includes tone of voice and body language (or written style and imagery) as well as the content of what is said.
When transformation is required across a large organisation there is often the following conundrum with no perfect solution. The executive team should operate solely with the organisation's best interests as top priority; sadly, that rarely seems to happen. Instead their top priority is advancing, or at least protecting, their own ‘backyard’ - their division, section or department - because that is how they are incentivised.
So the only person with a panoptic (organisation-wide) incentive is the CEO. In which case the transformation director has to operate at the CEO level, which makes them a perceived threat to everyone, including the CEO. Conflicts galore. Yet the panoptic remit is essential for the transformation director. The challenge remains that they will have responsibility beyond their authority, and thus will have to create effective, ego-less partnerships with the executive team.
The organisation can help in this by ensuring that the Executive Team members are both tactically and strategically incentivised, at least in part, to prioritise the best interests of the whole organisation. Furthermore, those incentives have to feel as immediate as do the backyard ones, otherwise they still won’t work.
The fundamental tool is great communication:
- be open and honest with a positive mindset;
- ensure two-way communication so people can provide feedback, make suggestions, and have a sense of belonging;
- handle problems early, don’t assign blame, treat as opportunity.
Here are some of the ways of establishing and maintaining trust between individuals or groups:
- find common ground, common interests or concerns;
- adapt your language and terminology to that of others;
- adapt to people’s styles or preferences in communication and management;
- be the change (act as you wish others to act);
- deliver on small commitments, be consistent;
- if breaking a promise, do it early, deliver something, and make a new promise.
Understanding and aligning a person’s incentives is a four-step process:
- figure them out yourself, by putting yourself in their shoes;
- check, correct and expand that by talking to their direct line manager;
- final tune and check, if practical, by having an informal conversation with the person – clearly this has be done sensitively and perhaps by asking oblique questions – the alternative is to use an appropriate psychometric test;
- then you can explain the change and ask for action in the best possible context for that person.
Whilst these good practices need to be used by all members of a team, it is essential that the sponsor and senior management lead by good example.
- Vine, Nic, How Can We Make This Happen? Successful Change Through Incentives and Trust (Trenchant Books, 2016)
- Munger, Charles, The Psychology of Human Misjudgement