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I heard a recent job recruiting statistic that should give every business leader pause. Currently, for every 10 open positions there are approximately only 5 motivated and willing workers.

This means that job seekers have the power, and likely will for many more years to come. Recruiting is certainly more challenging, but retention is an even larger concern. Even after we make a great hire, that new employee will have plenty of opportunities elsewhere as more and more companies fight for fewer and fewer talented people.

As I covered in What Drives Happiness (and Performance) At Work?, company culture drives retention – even more so than pay and benefits. Employees want to know that we as leaders truly care about them as people and not simply their ability to produce. And they want to look forward to coming into the office or joining the Zoom meeting each day – not only because the work is interesting and meaningful, but also because they enjoy the people and culture. Remember, for the foreseeable future new employees will have many other attractive options. They actually don’t “need” to be there each day.

Companies that strategically build their culture and cultivate the ability of leaders to develop strong relationships, will have a massive edge in recruiting, retention, and performance. This is no longer a nice-to-have. It’s a pre-requisite for success.

 

In the new landscape, business leaders must prioritize and cultivate skill in understanding the the complex web of human relationships that drive happiness and performance in an enterprise. This is not the job of our HR directors. It is now a core task for all executive-level leaders as much as strategic planning or managing M&A.

I met someone recently who works for a large, complex, and financially successful organization. He is a senior leader and an accomplished expert in the field of IT systems and statistical analysis.

Like many organizations, they have transitioned to a largely hybrid (virtual and in-person mix) workforce over the past several years. In the midst of this change, his role is to monitor day-to-day behavior of staff, time-on-task, and productivity – by unit, division, and at the individual level. To aid him in this analysis, every computer in the organization is equipped with software that provides real-time activity monitoring. This includes things like time logged-on, spent within, and logged-off of digital workspaces. It includes an analysis of busyness factors such as keystrokes, meeting attendance, attention, and focus.

He can tell if an employee is multitasking during meetings, checking the news during the CEO’s big speech, or shopping instead of solving the latest supply-chain challenge.

 

He utilizes this meta and micro data to produce reports on productivity, flag individuals not working to standard, and to inform the setting of performance and behavioral benchmarks across the company. He describes the value of his work as providing the crucial data and analysis needed to help the company to maximize performance by rewarding the productive, penalizing the unproductive, and setting explicit efficiency expectations for every individual person that comprises the organization.

 

Another way to look at his work is this:

He is paid to use his exceptional intelligence and technological expertise to produce confirmation of one of this company’s most deeply held beliefs. Namely, that individuals cannot be trusted.

 

In order to perform at their “best”, his company believes that people who choose to work there must be externally monitored, and then rewarded or punished according to the extent to which they have met standards imposed by leadership. There’s a further belief that by monitoring and analyzing each and every part, every person, the company improves the performance of the whole.

When I asked him if this was working, his responses were interesting. He didn’t share stories about excellence – people unexpectedly innovating or going above-and beyond the call of duty. Instead, he shares his pride that underperformance is kept to a minimum. He can assure the company that most people are, in his opinion, working to standard most of the time. This is usually followed by anecdotal examples of extreme underperformance that this analytical method of management exposed. A unit director is caught spending most of his day managing his fantasy football league. A marketing associate is spending up to a third of their day shopping for shoes. A new hire doesn’t seem to be at their computer after 1pm every Friday, etc.

That kind of individual behavior is concerning to be sure. However, I didn’t hear even one story that suggests that the time spent finding, exposing, and sanctioning such behavior produces a measurable positive benefit beyond “most people working to standard most of the time.”

Such organizations produce mediocrity at best, as the safest place to be is gathered around the mean, the average, and the good enough. These companies do not reliably produce exceptional performance because they focus on analyzing and “improving” parts, and not the culture and system in which they interact.

As the renowned organizational and systems-thinking theorist Russell Ackoff said, “If you take a system apart, and make every part operate as efficiently as possible considered separately, then there’s one thing you can be sure of about the system as a whole: it will not be operating as efficiently as possible. And yet, our whole method of management is based on the decomposition of the whole and improving the efficiency of the parts.”

 

This theorem is true because, as Ackoff said, “Performance is never the sum of the performance of the parts taken separately … It is the resultant of their interactions.”

 

Ackoff used the following example to illustrate this. If you analyzed the best individual parts from the top performing cars in the world, brought them together in one shop, and attempted to build the absolutely best vehicle, you would fail miserably. You’d be lucky to even build something that looked like a complete car. That’s because the parts don’t fit. And to the extent that they were top-performing parts, it was the web of inter-relationships within their prior system, among other parts that work together as a whole, that actualized the performance and made their individual excellence meaningful.

Similarly, you can bring together a collection of star performers, each with their own impressive resume and history of success, drop them into a company like the one described above, and produce stunning mediocrity. Without deep thinking about the system, the culture, that will unite and bring forth the best they can offer as a group, results will be disappointing. You might avoid failure by producing “good enough” results, but you will not call forth the full potential of the team.

 

This implication of this is, as Ackoff said with timeless insight, “If we are going to be able to cope with the accelerating rate of change in the world we are living in today, we are not going to be able to do it by analysis… It’s going to have to be done with systemic thinking.”

 

What my friend’s organization gets right is that individual behavior and performance do matter. The question is what is most likely to draw forth and encourage top performance: individual monitoring and analysis of people as mechanistic parts, or a culture, a “human system” that induces growth? The former is a culture focused on catching people at their worst – doing things wrong. The latter provides a system where there is maximum potential that each individual part will perform at their best in relationship with the other components.

 

Individuals have potential, but only healthy systems reliably produce excellence.

 

Even the most perfect acorn, Ackoff once said, will not produce an oak tree if you throw it in the ocean. That acorn requires the harmonious interaction of soil, water, nutrients, and sun to thrive – to become what it has the potential to be. However, even a somewhat common acorn can produce an exceptional tree in a field that has been painstakingly cared for, fertilized, and made maximally hospitable to growth. In other words, from a systems-thinking perspective, you try to solve problems by focusing on “the largest system to which you have access, and you move down only if you have to.”

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We have entered a truly historic period of uncertainty and complexity. What worked in leadership, strategy, and business structure even five years ago – will not work in the same way going forward.

This article is part of a series that explores how businesses must adapt and can continue to grow in these uncertain times. Check out the other articles in the series:

When It’s Raining Frogs, An Umbrella is Not Enough

What Drives Happiness (and Performance) At Work?

John Bailie profile picture
John Bailie

John has worked closely with business owners and their key executive teams to uncover performance gaps, develop the next generation of leaders, build a strategic plan for sustainable growth, and create a strong company culture that attracts and retains the best people. John's work is centered on leadership, organizational culture, and adult learning. Helping senior leaders learn how to forge stronger relationships, repair them when needed, and put those skills to work in building more successful companies is his life’s fascination.

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