Fifty years after Milton Freedman wrote that the only purpose of a business is to make money for shareholders, society cheered. His philosophy has been taught to students for years as a fundamental tenant of business. As a society, we have finally re-evaluated and largely rejected that notion, recognizing business must promote an economy that serves all Americans. More than 100 years after the death of another business school icon, Frederick Taylor, it’s time to re-evaluate his perspectives on standardization and process.
I have previously written about anti-fragile entrepreneurship, and how to manage meetings by saying less rather than more. There’s a natural correlation to these ideas related to how companies scale, and how to manage that scale in a more sustainable way, that managers rarely think about. Optimizing factories was all about standardization and process, but to achieve operational excellence at scale with knowledge workers, managers should be thinking about how to align incentives and remove process rather than adding it.
“Remove Process?!?” I can imagine my Kellogg MBA professors now, trying to see if they can retract my MBA for such business heresy. Ever since the days of Fredrick Taylor, we have been trying to figure out how to compartmentalize and standardize tasks. This was highly productive for factory environments. Getting unskilled laborers to perform the same task repetitively requires standardization, and the quality control that came from later variants like Six Sigma further reduced variability in standardized settings.
Unfortunately, all of this goes to hell in the world of knowledge workers. In the modern enterprise, the business problems aren’t all standardized. One issue doesn’t look like the next. Our days are spent troubleshooting edge cases in software, managing complex programs across various stakeholders, or trying to develop multi-party partnerships. The new economy requires new rules.
We can learn from Hans Monderman, a Dutch traffic engineer, who experimented with reducing street signs. “The trouble with traffic engineers is that when there’s a problem with a road, they always try to add something,” Monderman said to Wired. “To my mind, it’s much better to remove things.” This philosophy has shown amazing results, creating a reduction in accidents as well as stress in drivers. The key learning, according to Monderman, is that “when you treat people like idiots, they’ll behave like idiots.”
As managers scale companies, they often times treat their employees like idiots. They believe that we need to develop processes, the business equivalent of street signs, to govern every interaction. They try to remove autonomy and decision making at lower levels of the organization, afraid that their knowledge workers cannot be trusted to make decisions and that their managers will be blamed for any ambiguity that exists.
The result is bureaucratic paralysis. Rather than scaling elegantly, the employees of a company can’t intelligently process risk versus reward and aren’t empowered to make even the most obvious decisions. The knowledge workers who should be creating value for the company become terrified to execute on anything that doesn’t strictly fall within the constraints of some pre-imagined process.
How do you fix this? How do you actually create an organization where the velocity of execution scales with the number of people? The key is to focus on alignment rather than process. Three key components to this:
Focus on top to bottom organizational alignment.
What are the commitments of the CEO to the Board or shareholders? How does your team effect those commitments? What are the results that you’re achieving, that ultimately contribute to that business performance?
View mistakes as opportunities to improve alignment and information sharing rather than process.
If one of your employees makes the wrong decision, it’s an opportunity to do a root-cause analysis in the logic of their decision making. What were the inputs that led to the mistake? What didn’t they understand about the priorities of the business or their place in it? If they had the right alignment, and the right information, the proper decision should have been obvious.
Find processes to remove rather than add.
Less is more. Every year, I throw away any clothes I haven’t used in the past year to keep old stuff from accumulating. Same with business process. If a process isn’t being actively used, maintained, and updated, it runs the risk of becoming antiquated and doing more harm than good.
Business process has its place in the world, and is useful under certain circumstances. Like most tools, if used poorly and in the wrong context, it creates more harm than good. Focus on alignment, learn from mistakes, and remove rather than adding processes to make sure that your team is more agile and adaptable.
