87% of today’s leaders around the world cite culture and employee engagement as one of their top organizational challenges. This is according to a recent report from Deloitte, who interviewed over 3,300 executives and HR leaders in 106 countries.
Organizations must find ways to change and adapt to the changing needs of their stakeholders in order to maintain high performance.
Organizational culture change at any scale can be challenging. And in order to overcome challenges like these, we often have to start diving into the depths the organization and figure out what is truly driving the culture.
But, what does that mean to you as a leader?
As Deloitte’s study highlights; many business leaders know the importance of organizational culture, but most still don’t grasp what really defines their culture to begin with, or how it connects to performance.
You can’t change what you don’t understand. If you’re unable to understand what drives your organization’s culture, how can you possibly begin to change it?
The Iceberg of Organizational Culture Change
Most people think of culture as the visible values and behaviors within an organization; shaped by employee perks and benefits, the office policies and environment, and the corporate brand and values.
These are all part of your culture, but like an iceberg, the majority of what drives the behaviors within your organization is unseen and largely inaccessible, far below the surface of what anyone in your company consciously thinks about.
“The way things get done around here” is our favorite catchall definition of organizational culture. We see it in the stories employees tell about the organization, the conversations they have with each other, and the way they go about their daily work.
But, these visible indicators are only part of the story.
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How to See Below the Surface
The following are some indicators that the area below the water line of your organization isn’t doing you any favors:
Visible and Tangible Indicators
Business performance is suffering
Employees are disengaged
Turnover is high
Less Visible but Accessible
Leadership and management development challenges
An undercurrent of frustration with the current systems and processes
Invisible and Subconscious
Culture and strategy are misaligned
Stakeholders don’t fully understand and embody the organization’s values
Leaders are resistant to change
Are any of these indicators visible in your organization? If so, here are three ideas on how to explore the deeper issues behind them:
1. Constantly Ask “Why”. Why do we do it this way? Why haven’t we considered doing it this way instead? If you get a lot of responses like, “That’s just the way we’ve always done it,” you may be able to get people to realize that the way you’ve always done things is not yielding the same positive results. By engaging people in face-to-face dialogue about it, you’ll have the opportunity to dig deeper into the underlying beliefs and assumptions that exist in your organization.
2. Dive Deep. Ask yourself what aspects of your personal value system have led to your company’s success and how an over reliance on those things may be serving to cut you off at the knees. As a leader, are these personal values still aligned with the values of your organization? Are they holding your organization back?
3. Consult an Outsider. Find an outsider who is willing to experience your organization for a while. Since they aren’t part of your culture, they will see things you don’t and be able to question why you do things the way you do them.
In our decade of experience, we’ve found that successful and sustainable organizational culture change starts with a rigorous assessment. You may not see more than the tip of the iceberg at first glance, but by having conversations with your people, asking the right questions, and digging deep into the true motivation behind the way you’re doing things today, you’ll be able to better understand what needs to change.
Through our blog, we aim to educate, entertain, inform and inspire leaders like you as you begin to understand the critical importance of organizational culture in driving the performance you desire.
And over the past year, we’ve been writing a lot. Below you’ll find our 7 most popular blog posts of the year so far. We hope the articles here serve as a spark that ignites the change you need to reach your goals.
No matter what last year means to your organization, 2015 is a brand new year, and for most companies, it means an opportunity to do things differently. You may be wondering how to reignite the flame that drove your business in the very beginning. Maybe you need that one big change that’s going to excite your team to succeed in the New Year.
Before you make any major changes to the surface of your business, like an office makeover, or a change to employee benefits, make sure it’s in the best interests of your underlying culture. Read More
Understanding, and more importantly, developing a high-performing culture allows you to build and achieve your strategic objectives. A well defined, established corporate culture will provide the framework for your organizational development and strategic planning. Allow this culture to guide your planning process.
Though there is no single, perfect, cookie cutter method to ensure that your culture and organizational strategy align, there are some critical pieces that should be considered. Read More
Some of the most inspiring leaders today recognize that employees are at the heart of their business. As JW Marriott said, “If you take care of your people, your people will take care of your customers, and your business will take care of itself.” You’ve probably heard this before. The challenging part is getting past that theory and effectively engaging your team members in a way that drives your organization’s success. Read More
In recent years, the term “hacking” has grown in popularity, especially “growth hacking” within the marketing field. Growth hacking involves using analytics to target specific consumer groups, test which messages are successful in driving viewership, and scale the most effective strategies.
This process can also be applied to implement organizational change, hence I’d like to term this alternative approach “orghacking.” Read More
There’s no doubt that today’s business landscape is changing rapidly. Now is the time for organizations to consider changing their culture to support their younger team members, or risk losing them to the more forward-thinking competition.
With that in mind, below are 3 key considerations for building a company culture that engages and supports the millennial generation. Read More
When I work inside an organization, I pay particular attention to the stories that are being told, and it doesn’t take long to pick up on things.
Each of those stories has a place, and tells a message – either of a corporate value being applied or being ignored, about the future of the organization, its past, or the leaders. Sometimes those stories serve the organization well, and other times they don’t.
Either way, stories are the DNA of culture, and they have great power to alter it. Read More
As a leader, every decision you make shapes your organizational culture, and when it comes to budgeting your limited resources, these decisions send powerful messages to your people about what’s most important. After all, money doesn’t just talk — it shouts your priorities through a bullhorn. You have to make budgeting decisions that drive your business’s strategy and goals. But too often, the technical aspects of your strategy are prioritized over the most important facet of your organization’s long-term performance: the people. Read More
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We’re always looking for interesting ways to connect with people and organizations who are excited about organizational culture and change as much as we are! And last week we got just that opportunity in San Francisco, at the event, “Culture Design: Positive Change Without Authority.” This workshop was led by Christopher White to promote his new book, Changing Your Company From the Inside Out: A Guide For Social Intrapreneurs, and was organized by Culture Lab X, “a global community of founders, designers and practitioners who curate conversations, connect communities and experiment with the future of work.”
From the moment we entered, the buzz in the room was immediately palpable; there was so much passion and desire for attendees to learn how to change their organizations from within using some of the lessons from social movements, or larger scale group actions that mobilize for change.
After sharing his own story of his failed attempt to change the water bottle use at a company as a summer intern, and contrasting that with another case study of a successful intraprenurial organizational change, Christopher led participants through an exercise where in pairs we workshopped a specific intrapreneurial change we wanted to make in our own organizations.
These intrapreneurial changes were framed within the broader context of social movements; a sense of urgency and ability to mobilize people is crucial for making change, whether in society or in an organization.
Some big picture concepts that we gleaned throughout the evening regarding how to think about making an intrapreneurial change included:
When: How does the timing play a role in the specific change? Is there an opening? Can you create a sense of urgency?
Who: How are you engaging key allies and a variety of influencers within the system to get more support for and momentum around the change?
Why: How are you telling the story of why the change is important? What’s in it for the entire organization as well as individualized groups that will make them want to mobilize around the change?
How: Given your understanding of your organization’s culture and its potential aversion to change, how are you best tying this change to existing programs and systems? Or how are you framing it as an experimental pilot or focusing on the change being carried out by a self-organized group within the organization?
In our pair at the workshop, we found that thinking through the answers to these questions allowed for a more strategic, dynamic approach in making a plan of action for implementing the change.
At gothamCulture, we take a similar approach to supporting organizational change with our clients; our Assess phase allows us to understand our client’s organization and our Dialogue phase includes conversations around some of these broader issues before we move on to Design and Implementation together with our clients.
Special thanks to Culture Lab X for organizing this great community event and for building energy around the importance of organizational culture and how to make change in organizations. We’re excited to read Christopher’s book and learn more.
What other events should we be attending? What are other books about organizational change should be next on our list?
I have worked in finance for over 15 years and have always made sure that I am servicing ‘the client’ to the best of my ability.In most cases, my clients are my fellow employees and the executive team.
One of the biggest issues that I have encountered over the years is that, as the financial person in the company, I am expected to make sure our employees and bills are paid and the invoices are collected, all while trying to find time somewhere in between there to bring value and visibility to the financials for the executive team. It is hard to give the 30,000 foot view when you are stuck in the weeds of your daily work.
My current role as General Manager of gothamCulture is no different:There are high-level tasks that must be completed in addition to a barrage of daily tasks and requests from our growing team.
I imagine that you, as a leader in your company, can relate.
How do you effectively manage everything on your plate in a rapidly growing company? The answer for me has always been to work smarter, not harder. With that in mind, here are 5 of my favorite productivity tips that I’ve learned over the years:
1. Outsource Your Payroll
There is absolutely no good reason why anyone should be doing their own payroll processing; even Cisco Systems, a tech 100 company, uses an outside vendor. You cannot hire someone for the cheap price that most payroll providers charge and, more importantly, you are avoiding all the liability of making a mistake on tax reporting and remittances. Leave this to the payroll experts and focus on value-add.
2. Automate What You Can
As almost any support staff knows, a lot of little tasks can all add up to one big distraction. For example, I was the Controller for one company still doing paper timecards – the process was cumbersome and took the better part of a day to validate and then enter into the payroll system. Almost immediately, I moved the company to an electronic timekeeping system, cut the process down to an hour and a half, and got that day back every other week.
The less we touch data, the faster the process and the less room for error. At gothamCulture, we use a time entry and expense system and align everything else to it.That way, there is one data entry point to monitor and validate. Everything else; payroll, invoicing, payables, and reporting, flow from that system semi-automatically and save a tremendousamount of time. Even something as simple as creating invoice templates can help – no amount of automation is too small!
Automate everything you can and get that time back for more important tasks.
3. Stick to a System
I am a world-class procrastinator, so being a finance professional presents somewhat of a dilemma for me. In response, I’ve learned to manage my daily tasks through a series of systems. I operate by my calendar, checklists and processes. I look at my calendar to see what is coming up the next day and the rest of the week (orMonday as it may be) and have links in my calendar to specific checklists and/or processes like reconciliations, journal entries, month-end prep, month-end close, AR, AP, etc.
4. Minimize Distractions
Keeping your inbox clean and no web browsing – you have heard this a million different ways, but the fact is that this is a major distraction for many people. I give myself 15 minutes in the morning to look at nytimes.com and then shut the tab. Same with email: the night before I look at items needing attention and address them in the first 1/2 hour of work. After that, it is for true emergencies only until after lunch, when I take another 1/2 to answer emails. I don’t always stay true to this schedule but have found it to help me be more productive by limiting the amount of online distractions throughout the day.
5. Keep Meetings On Point
Meetings can be a huge time suck for a company of any size. To control the amount of time we spend on them, we do a 1/2 hour standup meeting every Monday and a 1/2 hour closeout meeting every Friday for support and planning staff. These meetings are deliberately kept brief and are supposed to help the team as a whole know the workflow and see where they might be able to support the team. In addition, we hold a 1/2 hour meeting after the Monday meeting for the larger team for quick Q&A’s, operational announcements and anything else that that the entire staff needs to know. This keeps the team efficiently aligned; aware of what’s going on besides what they immediately touch, and lets them know that the support is always available.
So why do I do these productivity shortcuts? Like I said at the start of the conversation, it is all about customer support and the customer is my internal team. These shortcuts help me make the everyday ‘time sucks’ as minimal as possible, which leaves the maximum time available to support the team and analyze the finances for having meaningful discussions with the leadership.
We are a small, growing consultancy with enormous flexibility, but for someone like me that can mean I am still working after putting my kids to bed. This process helps me organize my workflow and deliver ‘true’ value-add while ensuring that I have enough down time after work and on weekends to enjoy the life that I am working so hard to earn money for in the first place!
Why is it that many large-scale change initiatives fall short of expectations? Some might say it’s because leaders weren’t communicating the effort effectively. Others might say employees were stuck in a “business as usual” attitude. I would argue that the failure of many change efforts can be attributed to three factors:
The organization didn’t target the right individuals
The organization didn’t incentivize the change to match the values of its employees
The organization tried to make the change too substantial rather than incremental
I’d like to offer an alternative approach that leverages insights from emergence, antifragility, and analytics to circumvent standard “top-down” strategies.
In recent years, the term “hacking” has grown in popularity, especially “growth hacking” within the marketing field. Growth hacking involves using analytics to target specific consumer groups, test which messages are successful in driving viewership, and scale the most effective strategies.
This process can also be applied to implement organizational change, hence I’d like to term this alternative approach “orghacking.”
Orghacking offers a way to implement rapid, testable, repeatable, and scalable interventions that bypass conventional organizational limitations like hierarchy, stovepipes, and communications protocols. Each intervention caters to the values of key demographic groups and leverages the many social networks and relationships that exist among employees.
Changing Our Perspectives
Many large-scale change efforts see the world from a top-down perspective. Leadership has an idea, they develop a policy to capture the idea, and they rely on managers to implement the policy at the ground level. In this approach, information moves up through the hierarchical chain while decisions flow down.
The problem with this strategy is that it often fails to appreciate the complexities inherent within an organization. Employees often interpret and respond to situations differently. They may also interact and organize very differently across departments. As a result, organizations function more as a network of clusters, where employees congregate around certain individuals and processes and share ideas and values with those closest to them.
A top-down approach may easily glaze over these factors, leading to unintended consequences such as employees misinterpreting the policy or outright ignoring it. The disconnect between top-down strategies and the way organizations inherently operate makes it difficult to align the workforce to a new strategy and vision.
Orghacking, on the other hand, bypasses the standard top-down approach and instead moves from the focal point outward.
As the diagram above shows, orghacking involves a combination of process mapping and culture-based analytics to pinpoint what issues exist, where they occur, and who is involved. It then uses precise interventions to target hubs within the organization’s social networks, shape the intervention to tap into the influencers’ values to incentivize behaviors, allow the intervention to spread throughout the social network, measure its impact, and modify the approach.
In this way, orghacking flips conventional logic on its head by making interventions small in scope, targeted to the individual, and adaptable to new insights.
How does orghacking work?
Based on the diagram above, orghacking entails the following steps:
Step 1: Executing process mapping to understand challenges
One of the more succinct ways to identify bottlenecks is through process mapping. Process mapping allows us to see the flow of how products/deliverables are produced in an organization.
We can gauge how effective certain parts of the process are by obtaining feedback from focus groups, looking at financial data to assess returns, and examining process metrics to determine where delays occurred.
Through this approach, we can pinpoint specifically what challenges exist, what type of issue it is (people, process, tools related), and where it exists in the process.
Step 2: Leveraging analytics to discover insights about employees
Organizations are overflowing with data that can be used in orghacking. Everything from personality indicators to satisfaction surveys give us insights into the different types of people who work at an organization, how they think, and what they value.
Depending on the level of granularity in the data, we can even look at correlations among the responses to identify connections among different sets of values/attitudes and demographics. Examples would be if people who rate the organization low on trust also tend to rate the organization low on delegating authority. Or, whether males in purchasing tend to rate the organization low on trust also tend to value clearly defined processes.
The goal is to identify hidden insights about our employees and find connections. In the end, we can develop profiles for different types of people in our organization, each including a demographic indicator and one or more values/attitudes.
Step 3: Engaging in observation to understand how people organize
Emergence and self-organization are fundamental to how organizations operate. Understanding how people organize to get work done is a key component of orghacking.
Observations can be conducted in-person by seeing who talks to whom and/or through data driven methods such as counting the number of individuals that enter a given room or office. Observations should be validated with employees (even anecdotally) to verify their accuracy and determine the context of the discussion, like why people are congregating around a specific person. This helps us understand who are the key influencers in the organization that help move work forward.
Notionally, we assume that people congregate around others with similar values and perspectives, enabling influencers to spread ideas and permeate change.
Step 4: Using all three to create custom-tailored interventions
Orghacking is different from other approaches in that it aims to change the most fundamental units within organizations. Ultimately this comes down to identifying the influencers and those closely connected to them, communicating in their language, and developing incentives based on their profile to drive the desired change in behavior. This can increase the likelihood that a message and intervention will stick.
Another difference is how interventions are implemented. Orghacking implements numerous bite-sized interventions that invoke small changes in someone’s behavior.
Each intervention is conducted using an A/B test approach, where there are intervention and control groups. This allows us to estimate the impact and effectiveness of any one approach. Since the change is small, it can be easier to assimilate, and follow-on interventions can be conducted in rapid succession. Interventions are also given time to work their way through the various social networks and will look different across groups.
For this reason, change occurs much more organically to the unique culture of a particular group or sub-group, allowing it to scale over time.
Finally, due to its small size and scope, the risks associated with any given intervention are fairly miniscule. The failure of any one intervention does not jeopardize the whole effort. In fact, failures give us ample opportunities to fine-tune our strategies.
Step 5: Gauging the impact of our interventions
It’s important to have a clear idea of the desired outcomes from an intervention. Outcomes should be measurable, even with something as simple as a yes/no metric. Outcomes help us determine whether an intervention was successful. The lessons learned from this step allow us to determine what went wrong and make adjustments to improve the approach in the future.
Step 6: Adapting strategies based on lessons learned
While some approaches succeed, others will fail. These opportunities enable us to modify our strategies to optimize the message and incentive.
Best practices within one intervention can be applied to others as well. Eventually, we can fine-tune our approach to a set of key strategies that work for a given group, or even across groups. Then, we can broaden the outreach of the interventions to other hubs and influencers. Over time, larger segments of the organization will start exhibiting the desired outcomes and effectively internalize the change.
Repeat Steps 4-6 until the desired end-state is achieved
Coming Full Circle
The effectiveness of change ultimately depends on how it is packaged. Orghacking uses micro targeting to fine-tune the package to better incentivize behaviors. By doing so, it gives us a highly adaptable and effective way to systematically internalize change within our organizations. In this way, it can be a preferable alternative to traditional top-down change strategies.
In today’s fiercely competitive startup landscape, entrepreneurs are faced with new challenges on a daily basis. Beyond the actual viability of the market for their product or service, they must ensure that they focus on building a sustainable organization that continues to thrive as they grow and change.
Guiding a company from startup to success means finding the balance between a sustainable growth strategy, a culture that reflects your values and supports your people, and a leadership team that will help drive the change.
Finding that balance is a challenge, however. It’s not just about having a cool office or great benefits. You have to ensure your employees and your culture are aligned with your vision for growth. Your leadership has to be invested in the values and direction of the company; fostering an ecosystem that drives the behaviors you need for success.
Know WHY You’re In Business
The most important aspect of your startup culture is ensuring it aligns with WHY you’re in business. Is it about providing exceptional customer service? Is it speed and efficiency? World change?
Whatever it is, the culture should be reflected in what your customers see and experience. What are people passionate about, and what is the ideal environment that supports that? Some would argue attention to culture is even more important than processes, plans, and requirements.
Keep in mind: looking for culture fit is great when hiring, so long as you want to reinforce the culture you currently have. If, however, you are looking to change the culture, hiring and keeping people who embody those values and behaviors is the way to go.
Start by understanding why you’re in business and what kinds of values define your organization. Starting with an intentional and authentic understanding of this can serve as a hiring lens as your company grows.
It’s then the responsibility of senior leadership and other key personnel to give it the momentum you need to drive change in the right direction. You have to ensure that your people feel supported by the leadership and culture so they stick around.
How Important Are First Impressions?
Today’s rapidly growing startups are often pressured to find the balance between looking cool, hip and successful to attract top talent, while not blowing their budget on office space and benefits.
While a small company cannot keep up with the likes of Google in terms of benefits or campus amenities, first impressions are still critical to attracting and retaining the right people.
Careful attention must be paid to the culture that is visible. But, more importantly, the substance must be there as well. Perks, games, and exposed brick walls mean nothing if they are simply window dressing. They must serve some sort of greater purpose within the organization.
Start with ‘why’ and align your culture and your people around those values.
3 Tips For Building A Thriving Culture
Here are three specific considerations for your rapidly growing company to build and nurture a sustainable startup culture:
1. Use core values as the hiring lens. Core values should align with, and reflect company culture. If they don’t, it may be time for you and your team to do some rethinking to do on that front first!
Core values are where an organization has opportunity to reflect culture in written form. So much of culture is intangible or understood and not necessarily discussed or documented. Revisit the ideas that inspired you to be in business in the first place, and use them as a compass to guide your hiring decisions.
Put those core values to work.
2. Long to hire and quick to fire. It’s an old business axiom but it has some relevance here. Take the time to explore, inquire, test, and evaluate each candidate to ensure that they align well with your organizational culture. Do they believe in the same values that your company follows? Are they going to proactively improve the existing culture as your company grows and changes?
Having extended dialogue with each of your candidates also ensures you’re giving them the opportunity to evaluate company fit as well. Beyond just wanting or needing a job for a job’s sake, what role can your company play in their career and/or personal development over time? Does your company’s mission align with their goals as a person and a professional?
“Quick to fire” may not be as important here as “quick to ensure people are sticking to core values” and practicing the kinds of behaviors and qualities you want to see reflected in your culture.
3. Disrupt patterns through culture oriented actions and events. Reinforce your company culture through disruptive and experiential organization activities.
Internally, this means nurturing your culture among your team. Host events to discuss organizational objectives and provide opportunities for people to provide their input. Think about development programs to train on specific intended outcomes.
Externally, it means creating customer experiences that involve personnel in culturally specific ways. These are opportunities to show off your company culture to your customers, and give them an idea of how your values and your people align with your branding and customer experience.
It is almost too easy to ignore culture in a growing/thriving startup. We get caught up in the operations of success, the glory of new outcomes, or the challenges faced. Ignoring culture now, however, at this crucial juncture, more than likely creates trouble spots as the company grows. Being mindful of using culture as a hiring lens, as a means for guiding continued development, and as a springboard for a broader diversification of experiential activities will lead to benefits not only in the maturation of culture, but in the growth and success of the business overall.
When a key employee decides to leave your organization, a million thoughts fly through your head at once: Why is this employee leaving in the first place? Was there anything you could have done to prevent his departure? And, of course, what will you do without him?
If that employee had unique expertise in a specific area, losing him could be a serious threat to your organization. Don’t let important institutional knowledge slide out the door on that employee’s last day! Instead, develop a culture that values the effective and continuous transfer of knowledge so the loss of one employee doesn’t bring your company to a standstill.
You Need a Culture That Supports Knowledge Transfer
An employee serving notice isn’t the only scenario in which you may need someone else to understand a key process or how to operate a critical system. What if your office manager falls ill, leading you to fall behind on accounts payable? Someone on your team should be able to step up and address the situation to keep your company from getting hit with late fees. If your business suddenly experiences rapid growth, you’ll need processes in place to allow you to transfer knowledge and continue to scale quickly.
The best thing you can do to prepare for these situations is to develop a culture that supports the ongoing transfer of knowledge. Here are some ways to keep employees engaged in the knowledge-sharing process:
1. Develop a culture of support. Long before you ever need one employee to transfer knowledge to another, you should work on developing a company culture that’s supportive of these types of efforts. Show that you value continual learning and people’s ability to step in during a crisis. Both the trainer and the trainee should feel that their efforts are recognized and appreciated.
2. Create a checklist. As I described in a previous article on knowledge transfer, helicopter pilots go through a checklist of specific procedures before they take off. The same thing should happen during any knowledge transfer. Make a list of skills, processes, and anything else that’s important to a specific role, and use this checklist to guide training and to ensure consistency and repeatability.
3. Give learners time to transition. If an employee quits suddenly and forces you into an abrupt knowledge transfer, that’s a less-than-ideal situation to be in. In the best-case scenario, you’d give learners plenty of time to shadow the employee they’re learning from, ask questions, and gain hands-on experience for a smooth and comfortable transition.
4. Provide the right tools. While it’s sometimes good to let the departing employee help find his replacement, it’s more important that he feels comfortable in his role as a teacher. Remember: You’re essentially asking someone who’s been a doer to become a teacher, and the transition isn’t always easy. To position your team for success, train the trainer, and give him the necessary tools to teach what he knows.
5. Test the process. Don’t let the day of departure be the first time you test your process. Create simulations that force people to temporarily jump into new roles. Throughout the year, this happens naturally when people go on vacation. If a certain employee’s function comes to a grinding halt while she’s away, that may indicate that you have a gap in your system.
Ultimately, preventing brain drain and keeping your company’s collective knowledge intact rests on your culture and the value you place on people engaging in these types of behaviors. By supporting your team’s efforts to share their insights, you’ll keep all the knowledge where it belongs and ensure that your new employees are able to pick up the torch and run with it.
Although it’s been out for a couple years, I recently reread Nassim Nicholas Taleb’s books The Black Swan and Antifragile. When they came in out the midst of the recession, they quickly caught the attention of readers looking for answers as to why we didn’t see the financial crisis coming and how can we protect ourselves in the future.
When I picked them up again recently, I realized that Taleb wasn’t focused specifically on finance. Rather, the applicability of his risk mitigation paradigm across disciplines and markets. In this light, he offers some excellent insights that are especially useful for shaping and enhancing organizational cultures.
What is Fragility?
Taleb defines fragility as systems that are negatively impacted by shocks, disruption, and disorder. At the opposite end of the spectrum, he invents the term antifragility (mainly because there is not word in the lexicon that captures this concept) to describe systems that grow and flourish when exposed to shocks, disruption, and disorder. Sitting in between these extremes is robustness, where a system remains neutral and neither gain nor decline from random events.
The concepts of fragility, robustness, and antifragility ultimately come down to risk.
Fragility comes about when we assume too much risk in a particular area. This hinders our ability to adapt when risks become actualized. As an example, Taleb points to the financial sector during the financial crisis where firms had invested significant portions of their portfolio in high risk areas. Since they had not changed their practices from previous crises, they were susceptible to the same issue areas.
All it took was one big shock and these organizations crumbled. Hence; “fragile.”
Conversely, antifragility occurs when we diversify our risks and use failures (which are small because risk is dispersed) as opportunities to learn and improve the system. Taleb uses the airline industry as an example of antifragility.
When accidents occur, the airlines conduct a thorough after-action review to determine the root cause of the failure. They then take that information and use it to update their systems and practices in their existing and future fleets. Although tragic, the accident serves to make every subsequent flight safer and improve the airline industry as a whole.
At the outset, the distinction may seem fairly simple: fragility occurs when we have concentrated risks, antifragility occurs when risks are dispersed. But Taleb points out another critical aspect of the equation:
We have no way of knowing (1) the real level of risk we have (Taleb is skeptical of models, especially since we rarely consider the assumptions and limits they are based on), and (2) when risks will come to fruition (Taleb believes in the inevitability of large, unpredictable “black swan” events).
We are largely working in the dark and must act as if we will be exposed to risk at any moment. Therefore, the ultimate goal of antifragility is to determine how to live, act, and thrive in a world we do not fully understand.
Building An Antifragile Culture
So far, we have outlined the central ideas within the fragility/antifragility framework. Here’s a quick recap of what we’ve covered:
Risks are inevitable and we have no idea when they will happen
Fragility = bad for growth, results from concentrated risks and lack of feedback loops, crumbles under risk
Antifragility = good for growth, results from dispersed risks and active use of feedback loops, flourishes from risk
How can this concept foster resilient organizational cultures?
It is not a huge leap to think that organizations and their cultures can also be fragile or antifragile. Fragile cultures are those that are unable to adapt to changing environments and unforeseen risks.
Fragile cultures are characterized by:
Highly centralized organizational structure
Dominance of one or two departments in the decision making process (all departments become exposed to the risks inherent to the dominant groups)
Attitudes of risk avoidance and insulation from change
Unsupportive of “tinkering” with new ideas on a small scale
Lack of (or disinterest in) feedback loops to integrate lessons learned
Antifragile cultures are those that are well versed in change and use dispersed risks as opportunities to learn more about how their organization functions under pressure and implement improvements.
Antifragile cultures are characterized by:
Moderately decentralized (“lean” or “flat”) organizational structure
All departments have say in decision making process (departments are represented in key decisions and given autonomy internally)
Embraces risk as opportunities for learning, disperses risks across the organization so no one risk can have a significant impact
High support of “tinkering” as way to test and improve the system
Significant interest (and use of) formal and informal feedback loops to integrate lessons learned
To illustrate the differences in these types of cultures, we can point to two real world examples.
Most large firms lean more toward the fragile side of the spectrum. Many are characterized by rigid processes, interdepartmental conflict, risk avoidance, disinterest in new ideas, poor communication, and the consolidation of risk into one or two significant projects.
Startups, on the other hand, lean more toward the antifragile side of the spectrum. Many are characterized by agile processes, manageable conflict, risk acceptance embracing new ideas, frequent communication within and across departments, and decentralized risks across a number of projects.
This is not to say that startups are more praiseworthy than large firms. At some point, most firms will mature and transition into formalized organizations. The challenge is making this transition without jeopardizing the firm’s ability to thrive under change.
How Your Organization Can Thrive
Here are some recommendations to foster antifragile practices within your growing organization:
Keep Decision Making Local: People closest to a problem are often the most equipped to solve it. In addition, this encourages experimentation with new ideas and strategies.
Encourage Frequent and Open Communications: One of the major causes of distress within organizations is the inability to communicate information across departments. Open communication sets a precedent that new ideas are welcome and establishes a feedback loop to incorporate lessons learned and best practices.
Encourage Risk Taking on a Small Scale: Many organizations focus on “avoiding” risks, but this may unnecessarily weaken the organization in the long run. Avoiding risk prevents us from learning from our failures, risks accumulate and overtime may become systemic. Dispersed risks enable organizations to try new ideas without putting the entire organization in jeopardy.
Celebrate Failure: Every failure is a learning opportunity for everyone. Failures enable us to identify the root causes of the issue, correct the issue, and improve the overall system. As long as failures are small and dispersed, they serve to benefit the organization as a whole.
Hedge Against the Future: It’s difficult to accurately predict what the market will look like 5-10 years down the road. Organizations should be cautious of ventures which could be a liability if the market takes a sudden turn.
Risks aren’t confined to the financial world, and are inherent in all aspects of our organizations, including culture. The way we approach risk heavily impacts whether we succeed or fail in the ever-evolving marketplace.
Fragility and antifragility are two ways of understanding and addressing organizational risks. By using antifragile practices to leverage small risks as opportunities,we can improve the way we manage our organizations and enhance our ability to thrive during periods of rapid change.
How does your organization manage risk through culture development?
I love Uber. I really do. I live in California but spend half of my time in New York, and for those of us who live on the road, the single greatest comfort is consistency. I know when I land, no matter where I land (mostly) I can open the app and call a car, skipping the taxi queue. I feel like a bigshot, too, on a budget.
With the recent bad press the new “sharing” economy pioneer has received, I started to wonder what is going on inside the company. While media coverage can be illuminating, it’s certainly not the whole picture about a company. And Uber’s recent press paints a picture of a company’s leadership more interested in settling scores, knee-capping their competitors and shooting the messenger than planning their future and creating value.
So on my last Uber ride, I asked my driver what his take was on all the recent coverage. I thought he would either shrug it off, displaying classic disengagement we see among so many frontline employees, or else vigorously defend Uber, who is known for making career opportunities among the classically disenfranchised labor force such as single mothers.
His answer was far more surprising.
Instead of addressing the topics du jour, he talked about his personal experience as a member of the Uber team. He said he didn’t like being treated like a “robot;” a cog in the wheel meant to take and fulfill orders. This reaction squares with another, more public view from the inside.
Granted, my driver’s comment was just one additional data point added to the canon of media coverage, but it rounds out the picture a little bit.
Most start-up companies focus on carving out a slice of the market – or in Uber’s case, creating a brand new market – and then filling that space. What often doesn’t get enough attention is the intentional conversation around culture. In the absence of that conversation, a cultural vacuum forms, filled in by excuses for behavior instead of a shared set of values, standards and qualities.
If you’ve ever heard someone explain why they did some shocking thing or another with “But you said the revenue targets had to be met!” or “My bonus isn’t based on whether my team likes me, it’s based on what I get done!” then you’ve seen the cultural vacuum in action.
It’s a culture on cruise control, letting other business priorities determine fundamental questions of identity, rather than choosing who you want to be as a company.
This isn’t a problem limited to start-ups, either. In more established companies, inertia often replaces the “do anything it takes” verve of a start up. If you’ve ever heard “That isn’t my job,” you know what I’m talking about.
Cultural vacuums are dangerous. It can be confusing for the people who work there, and can severely limit the growth potential of a start-up. Flame outs like Digg and Akimbo show that success takes more than just a great idea, good funding and a ready-made market.
I sincerely hope Uber redirects its energy to addressing its culture, towards making the drivers and support staff feel respected, where their contributions to the group are valued. I like their service, their drivers are great, and it makes my life easier. And while I don’t know how my Uber experience could get better, an intentional culture would help steer them through the PR storm they’re finding themselves in.
Before lifting a Black Hawk helicopter off the ground, the pilot goes through a lengthy written checklist: oil pressure, fuel pump and generator switches, safety harnesses, altimeters — on and on it goes. When I flew Black Hawks in Iraq, I didn’t dream of trying to memorize this list. That would’ve been dangerous. The best way to store and retrieve that information was a notebook.
Similarly, doctors don’t recite every patient’s medical history from memory. That’s what a medical chart is for, and it could mean the difference between life and death. In fact, the Mayo Clinic employs a sophisticated knowledge management system that captures what everyone knows and archives it
Even the transportation industry is getting in on knowledge transfer. Loriann Hoffman, vice president of talent and organization development for the New York City Transit Authority, shared with me that her organization is implementing several knowledge transfer initiatives. Safely moving more than 8 million(yes, million) people by bus or subway every weekday is no small feat, after all.
While your organization may not be responsible for people’s lives, getting the right information to the right people at the right time is still a critical component to your business’s long-term success.
What if the only person who understands a critical part of your company leaves? What if the marketing and engineering teams aren’t talking to each other except casually in the cafeteria?
Are you going to rely on that? Of course not! That’s where effective knowledge management comes into play.
Develop an Effective Knowledge Transfer System
Knowing who knows what, who needs to know what, and how to transfer that knowledge is critical — especially when so much of a company’s worth consists of information. Investing in developing an effective way to transfer knowledge may, in the least, save you some headaches and, at the most, save your business.
Here are some suggestions for implementing a system for knowledge management and transfer in your company:
1. Make it formal. While water-cooler banter is better than nothing, you need consistent, clear processes and tools. As an aviator, I’m partial to lists.
My team creates documents that clearly outline how a process works. We also use checklists and sample templates to ensure that following the process is easy. This increases the confidence of the team members who know that they’re not expected to just “figure it out” when the time comes. Even something as simple as taking notes during meetings and sharing them will keep your employees in the loop.
2. Create duplication. I’m not suggesting that you need two people for every job, but you do need to plan for the worst. Cross-training can mitigate the risk of a key person leaving with a head full of knowledge. Ensure that there are at least two people who can step in during an emergency.
For example, imagine a football team. If the quarterback is injured, another player has to step into that position. But what if no one has practiced that role? Your team probably wouldn’t win the game.
3. Train, train, train. By providing your team members with formal training opportunities, you ensure that you have duplication of skills in the system. However, if you don’t have the resources for formal training, you can try this simulation: Remove a key person from the system temporarily so the team can see what happens. If things fall apart quickly, people will be eager to figure out how to prevent that failure from happening in the future.
For organizations that have effectively transferred knowledge to others, these situations present opportunities for employees to put their knowledge into practice and build their confidence.
4. Use systems. Technology can capture key information for later generations to use. They shouldn’t have to relearn what others discovered. By standing on the shoulders of those who have come before, newcomers can take the ball and run with it rather than spinning their wheels rehashing the same ground that’s already been covered.
5. Create opportunities. Set up informal gatherings where team members can exchange information and develop networks organically. Develop communities of practice so employees can work together to find and share information. This is a great way to capture and share knowledge with a broad audience.
6. Be smart when using consultants. While a consultant can be a valuable asset, keep in mind that they’ll leave after the work is through. Make sure you plan to have their knowledge transferred to internal personnel so you can carry on once they’ve departed.
For any of these practices to make a real difference in your business, you have to communicate the importance of knowledge transfer, explain how it will be done, and, most importantly, practice it yourself.
If you can do that, knowledge transfer will be a key resource and differentiator for your organization. By continuously spot-checking to make sure the right knowledge is being captured and shared, your organization can leap ahead of competitors and seamlessly transition during the departure of key personnel.
On top of that, your employees will be more engaged in their work and have a more in-depth understanding of the systems around them. When your employees feel confident in their ability to step in and help, the different parts of your organization will move together effortlessly. With effective knowledge transfer, your organization will be healthier and happier overall.