Week One Oct

PART TWO

DIAGNOSE THE SYSTEM

IN MEDICINE, DIAGNOSIS COMES BEFORE treatment. As in the television show House, teams of doctors, nurses, technicians, scientists, and other health-care professionals devote extraordinary talent, skill, and energy to identifying the problem. Occasionally, the illness is identified backward by trying a particular treatment and seeing whether it works, but more often, tests, time, thought, and discussion are devoted to assessing the problem first. Treatment comes second.

In organizational and political life, people often jump to treatment without stepping back to clarify the nature of the problem itself, making enormous investments in solutions, rolling out large-scale new strategies and programs, without knowing as much as they should about the situation. As the United States learned in the war in Iraq, countries even go to war sometimes without adequately assessing the situation: Were there really weapons of mass destruction in Iraq? Did the United States have the manpower to fight in Iraq, secure the peace in Iraq, and at the same time finish the job of securing and stabilizing Afghanistan? Did the government have the public commitment and the funds to stay the course, if protracted, and what were the odds that it would be protracted? What impact might a protracted war have on many other national and global economic, social, and political priorities? When the chief of staff of the U.S. Army, General Eric Shinseki, told Congress before the war that hundreds of thousands of troops would be needed to win the war and secure the peace, the secretary of defense, Donald Rumsfeld, categorically disagreed. After Baghdad fell, Shinseki reiterated the need for more troops and was fired for saying so.

In medicine, when two highly skilled experts strongly disagree on the diagnosis and therefore the treatment, they remain in the diagnostic mode, probing to find out whose interpretation of the facts is closer to the truth, gathering more data, and, at most, taking action in small steps in an experimental way to generate more data. Only in nearly hopeless and desperate situations, would they take the risk of a major treatment intervention under great uncertainty about the nature of the problem itself. Many treatments are too dangerous and costly to try them without having some level of confidence that your diagnosis is accurate.

Too often, people trying to address tough issues are too smart for their own good, throwing guesses at tough problems, seeing the shapes they recognize because they fit what they know already, without even knowing that they are doing so. Impatient with the diagnostic process, and sensitive to the urgency with which the people around them look to them to be quick and decisive, they move with resolve. Indeed, people get rewarded for decisiveness and resolve and take pride in it, too. Sometimes decision and resolve are great virtues, but sometimes they push organizations into the wild blue yonder.

Merrill Lynch’s Story

In the late 1990s, financial services giant Merrill Lynch began developing a division focused on providing 401(k) services, a field where robust competitors had a considerable head start. The pay structures for the 401(k) sales force were based on the company’s existing corporate model. Specifically, the company determined bonus pay for the sales force (which typically made up a significant portion of salespeople’s annual income) by how people within the institution regarded each of them and how well he did against sales targets. The formula made sense for the firm’s established divisions. But it fell flat in the fledgling 401(k) division, where big growth would not occur until managers and sales reps had learned the business. Hampered by the traditional pay structure, the new 401(k) division could not attract the best and the brightest from within the bank. Worse, some of the most promising folks left for more lucrative opportunities at other companies.

To succeed in the 401(k) business, employees had to build external networks and sell unfamiliar new products. But that all-important bonus was still based on exceeding sales targets, so salespeople (understandably) focused their efforts on selling established products to existing clients. The compensation structure was nurturing behavior that generated success in other parts of the organization, but that same behavior undermined the new division’s efforts.

The company eventually changed the bonus criteria for 401(k) division sales. Of course, this move sparked some tension in other divisions that continued to operate under the old system. But the 401(k) business soon began generating a substantial new revenue stream, and the firm became a significant player in the 401(k) field.

Take some time to get on the balcony and consider your own organization’s structures and their impact.

ON THE BALCONY

• What behaviors do your organization’s compensation and recognition systems encourage? Discourage? How well do the encouraged behaviors support the organization’s strategic goals?

• What does your company’s organization chart say about which functions and roles are valued most? Valued least? Looking at who has direct access to whom, what might this imply about who is designed to work together and who in isolation?

• How are departments or teams organized in your enterprise? Who reports to whom? What does this suggest about who has input into decision making?

• Recall the last senior manager or executive hired by your organization. How did the process work? Who did this person formally meet inside the organization? What does all this imply about how the new person is supposed to interact with the organization?

• What do the size, criteria for membership, election system, and payment of the board of directors tell you about how decisions are made and what and how value is recognized by the organization?

ON THE PRACTICE FIELD

• With your team, write the organization’s mission on a whiteboard or flip chart. Draw two columns underneath. In the left column, list all of the organization’s structures that support the mission. In the right column, list the structures that impede the mission. Here’s a quick example:

Our mission: Improve quality of life for people in need

Structures supporting the mission Structures impeding the mission

• Hiring practices emphasize recruiting people with a not-for-profit background and long track records of public service. • Awards and other forms of recognition go primarily to those who get the biggest financial gifts from donors. Employees who find nonfinancial ways of serving our clients (such as establishing community mentoring programs) receive little recognition.