Participative and Reflective Openness

Previously I have written about the importance of leaders listening to organizational members, to be open to them, as a way to build an excellent organization. Today I would like to discuss this issue of openness.

In many ways, a synonym for excellent organization is learning organization. This term was made famous by Peter Senge. In his book, The Fifth Discipline, Senge states there are two types of organizational openness: participative and reflective. Participative openness exists when organizational members have the freedom to express themselves. Reflective openness occurs when organizational members allow themselves to hear and understand what others are saying. Participatory openness is necessary but insufficient in the creation of excellent organizations. Both types of openness are required for organizational excellence.

Too often, organizations espouse openness and pride themselves on having everyone speak their mind. “Enlightened” managers have learned that encouraging participation increases commitment, creativity, and hard work. So, given that, they ensure that everyone has the opportunity to speak in meetings before decisions are made. They may even pride themselves on drawing out those who are reticent to participate in group settings. The real question is, is anyone listening?

I know a manager that depicts this perfectly. Mary (not the real name) prides herself on being a participative manager. She would never make a decision without including her management team in a discussion. The problem, however, is she enters those discussions with her desired outcome firmly in mind and doesn’t allow anything to deflect her from that goal. If you were to observe her and her team in action, you might be impressed by the energy; you might notice that everyone speaks, or if they don’t that Mary asks his or her thoughts; and you might be impressed with the quality of the debate. Debate is the right word; Mary takes great pride in being able to convince people of the correctness of her ideas; she (and her reports for that matter) listens for openings where they can make their points and weaknesses in the statements of others that they can jump on. Clearly there is participative openness but there is no reflective openness; no one learning anything -- except how to argue.

So how might the scene be different if Mary’s organization had both participative and reflective openness? Mary might present the topic in the same way. After that, the dynamic would be dramatically different. Rather than engaging each other in a confrontational way, each team member would be listening to understand the spoken and unspoken assumptions held by the others. Further, everyone, including and perhaps especially Mary, would be willing to suspend their own assumptions. This does not mean they would deny, suppress, or ignore their own assumptions or experiences. On the contrary, they would willingly share their assumptions and invite others to ask questions that they might fully understand one another.

As each person listened to the opinions of the others, understanding their assumptions and experiences that led to those assumptions, and as they clearly presented their own point of view and the reasons for it, very possibly a synthesis of their ideas would occur and perhaps a course of action different from that anyone might have developed on his or her own would be adopted. It is also possible the team will end up with the outcome Mary favored from the beginning. However, if that did happen, there would be greater commitment to its accomplishment; organizational energy is more likely to fully focused on the jointly defined goal.

To a great extent, the difference between the two scenes is the difference between discussion and dialogue. Discussion came into English from Latin and had an original meaning of dash or shake apart. This original meaning carries forward to the implication in the current usage of using argument or debate to elicit the truth or to establish a point. It is related to words such as percussion and concussion. The image of discussion is two people firing verbal canon back and forth until one’s opponent is beat into submission.

On the other hand, dialogue, entering English from the Greek dialogous, or “meaning passing or moving through”; now denotes conversation between two or more people. The mental image is of two people reaching an understanding through the flow of ideas. The purpose of dialogue is not to “win” but for expand knowledge and understanding of truth for all involved.

While discussion satisfies our competitive nature, dialogue is more likely to lead to the development of new understanding and better decisions. I think it is clear which method will most likely help organizations achieve excellence. Therefore the skills of both participatory and reflective openness need to be developed. Are you open to that possibility?

Compensation and Organizational Excellence

Compensation does not affect all organizations, and therefore does not impact the efforts of all organizations trying to become high performing. Today I will address a key issue for those organizations that do pay their organizational members and issues associated therewith.

Given the importance of culture on organizations, it is not surprising that one’s native culture impacts how individuals, and thus the organizations made of those individuals, view an issue as fundamental as compensation. Do you believe that all employees should share equally in organizational success? Do you believe that compensation should be based on longevity with the organization or at least with one’s profession? Do you believe that individual contribution should be rewarded through pay for performance systems such as commission based pay or at least variable pay based on attainment of key performance indicators? Your belief in what type of compensation program is most likely to support the development of a high performing organization. Despite cultural preferences, objective evidence can point to aspects of compensation systems that promote or detract from organizational excellence.

There is a variety of compensation systems which are implemented, singularly or in some combination, in organizations. Typical systems include pay for performance (some degree of pay is tied to specific predetermined outcomes), promotion based systems (high performers are selectively promoted to higher paying positions), tenure systems (after multiple years of at risk employment, high performers are promoted to positions with essentially perpetual job security), up or out promotion systems (employees either continued to be promoted or they are discharged from the organization), and profit sharing program (through bonus or stock purchase/grant/stock option plans). Constraints of this blog preclude me from addressing all of these systems; I will focus on pay for performance and profit sharing programs.

Let’s start with pay for performance systems (PPS). My problem with PPS is not that they don’t work but that they work too well. Based on both my experience and research I believe that significant financial incentives can affect behavior, but the effects may not be in the best interest of organizational excellence. The problems are several fold.

First, since PPS do tend to work, those behaviors for which incentives are in place tend to receive focused attention to the detriment of behaviors that are also important for organizational success but are not covered by the PPS. Second, the incentives established for one part of the organization often conflict with incentives for another part. This typically creates a situation in which suboptimal decisions and actions are taken. Third, subjective measurement systems are rarely effective because of lack of trust that fair decisions will be made. Objective measurement systems are better but identifying measurable outcomes that move the organization towards its goals are often difficult to identify. Fourth, even for roles for which objective performance measures can be identified (typically sales roles for example) the accomplishment of those outcomes are rarely solely due to the efforts of those who receive compensation based on those outcomes.

The results of these limitations are resentment among those who do not benefit from the PPS, manipulation of performance (or reporting) to maximize reward rather than what is best for the organization, and suboptimal decisions and performance. None of these conditions are representative of high performance organizations. They may generate short term performance but they do not lead to long term, sustainable, organizational excellence.

Profit sharing programs (PSP), whether they are bonus or stock purchase/grant/option based, have the ability to align people around the overall performance of the organization. Bonus programs tend to focus attention on shorter term performance and stock based programs tend to build longer term organizational loyalty.

Assuming that base compensation is appropriate, providing variable compensation based on organizational performance, particularly if that variable compensation is tied to factors that lead to excellence can have a powerful impact on aligning incentives and performance. The percentage of any given person’s compensation that is variable, or the total dollar value of that variable compensation, is important but less critical that all receive greater or less benefit in synch with one another.

As I have said in previous blogs, one of the key characteristics of an excellent organization is a high degree of commitment throughout the organization to common goals. Given the power that compensation can have, why do we insist on implementing incentives that create conflict, confusion, lack of clarity, and focus on individual rather than overall organizational accomplishment?