There is a common story told by entrepreneurs who have seen their companies explode to the upside. They say that they used to know every employee by name and everything that was going on, but no longer. Now they have to rely on indirect means of getting all the information that they were used to having at their fingertips. Where are we in the product release cycle? What are the risks? Where are we in our pipeline? Which of our customers have been late paying bills? These CEOs used to be able have a handle on the answers, but now they must rely on secondhand reports, making them quite uncomfortable. It can be far from clear how they know what they think they know, and how reliable the information might be.
The situation is even more pronounced at board level. Investors and outside directors are not involved in daily operations. Instead, they parachute in every few weeks to speak to management, who can well deliver a rather self-serving version of reality.
A great apprehension that managements and boards always share is that of the negative surprise. Despite the billions of dollars and countless hours spent each year on business intelligence software, leadership training, performance review processes and status meetings, surprises keep recurring. When they do happen recriminations often start to fly, with managers and directors pointing fingers at whomever they can blame for not doing their job properly in allowing the surprise to happen. The fact is, oftentimes it is indeed the failure of some managers to pay attention or report trouble early that leads to preventable surprises. The question, however, is not in how to find the culprits ex post facto but in how to prevent surprises in the first place. To borrow a simile from sailors, you cannot avoid the underwater rocks if you don't know where they might be hiding.
Few CEOs running companies with over 100 headcount can know everything going on inside the company, much less everything happening out in the marketplace or with every customer and sales process. At board level, the fog gathers that much sooner, often from the earliest beginnings. The deeper the layers of organization between the observer and the front line, the murkier the picture. The reasons for the fog are partly structural and partly psychological. Communications from the CEO are often parsed by managers and staff for narrow advantage, misunderstood or simply blown off as unimportant. Both managers and individual contributors have a very human tendency to hide problems from superiors, hoping that they will get resolved in time or simply to avoid a confrontation. Consequently, communications about priorities both up and down the line can become garbled or ignored entirely. What are CEOs and boards to do to spot emerging trouble before it metastases?
The tools in common use all have their benefits and limitations. The old Tom Peters classic of management by walking around, for example, has much to recommend it, even if it is honored more in the breach than the observance. The top manager can sometimes glean information from the rank-and-file in informal conversation that he would have trouble gathering through channels. However, the randomness of such encounters and the natural wariness that employees often have in the presence of the Big Boss all work to undermine its efficacy.
A variation on the random walk around is placement of trusted resources down in the hierarchy who can be relied on to pass on unvarnished information. These people, however, often lose effectiveness when they are inevitably discovered to have the CEO's or owner's ear. Moreover, they tend to amass power out of all proportion to their importance to the organization, to the point that they can undermine and render ineffective their line managers, thus creating chaos and ruining governability.
Hidden rocks can lie in many places. Product development processes get derailed, with budgets and deadlines blown, feature sets drowning in maelstroms of over-engineering and product specs diverging far from market fit. Sales efforts and conversions fall behind projections or event begin shrinking. Scarce talent might start running for the exits, or else cease to be productive. Some of the signs of trouble brewing are easier to spot than others, so that corrective action can be taken relatively early - for example, missed product milestones or subpar revenue. Others show up when it might be too late for easy fixes.
Morale issues are some of the most insidious examples of the latter, and often stem from serious leadership failure. When your top talent is suddenly found to be frantically sending out resumes, and formerly high performers begin slacking, the company may well be in extremis. Morale issues on their own are rarely the cause of problems - more often they are a symptom: a symptom of a failure in the leadership, poor management or even lost competitiveness. Fundamentally, people tend to give up trying when they cease believing that their efforts make a difference.
A number of technological solutions have emerged to assess morale: tools like social media and Glassdoor monitoring, for example. Anonymous gossip tools can be used to gather actionable intelligence, even as they come and go, as well as monitoring employee LinkedIn accounts for avalanches of job-search related updates. Exit interviews can provide sporadic insights into morale issues, provided that the departing employees are sufficiently angry to burn bridges through excessive frankness. Buyout shops are notorious, before they consummate their deals, for planting "cafeteria ears": spies who gather gossip in company mess halls and nearby bars and coffee houses. They also like to interview ex-employees, from whom they often get more candor than HR staffs can. The issue, however, is that once morale has sagged so low, the problem is probably already out of hand.
I will discuss some solutions to clearing some of the fog in the next article in this series.
Cross-posted to LinkedIn Pulse
The situation is even more pronounced at board level. Investors and outside directors are not involved in daily operations. Instead, they parachute in every few weeks to speak to management, who can well deliver a rather self-serving version of reality.
A great apprehension that managements and boards always share is that of the negative surprise. Despite the billions of dollars and countless hours spent each year on business intelligence software, leadership training, performance review processes and status meetings, surprises keep recurring. When they do happen recriminations often start to fly, with managers and directors pointing fingers at whomever they can blame for not doing their job properly in allowing the surprise to happen. The fact is, oftentimes it is indeed the failure of some managers to pay attention or report trouble early that leads to preventable surprises. The question, however, is not in how to find the culprits ex post facto but in how to prevent surprises in the first place. To borrow a simile from sailors, you cannot avoid the underwater rocks if you don't know where they might be hiding.
Few CEOs running companies with over 100 headcount can know everything going on inside the company, much less everything happening out in the marketplace or with every customer and sales process. At board level, the fog gathers that much sooner, often from the earliest beginnings. The deeper the layers of organization between the observer and the front line, the murkier the picture. The reasons for the fog are partly structural and partly psychological. Communications from the CEO are often parsed by managers and staff for narrow advantage, misunderstood or simply blown off as unimportant. Both managers and individual contributors have a very human tendency to hide problems from superiors, hoping that they will get resolved in time or simply to avoid a confrontation. Consequently, communications about priorities both up and down the line can become garbled or ignored entirely. What are CEOs and boards to do to spot emerging trouble before it metastases?
The tools in common use all have their benefits and limitations. The old Tom Peters classic of management by walking around, for example, has much to recommend it, even if it is honored more in the breach than the observance. The top manager can sometimes glean information from the rank-and-file in informal conversation that he would have trouble gathering through channels. However, the randomness of such encounters and the natural wariness that employees often have in the presence of the Big Boss all work to undermine its efficacy.
A variation on the random walk around is placement of trusted resources down in the hierarchy who can be relied on to pass on unvarnished information. These people, however, often lose effectiveness when they are inevitably discovered to have the CEO's or owner's ear. Moreover, they tend to amass power out of all proportion to their importance to the organization, to the point that they can undermine and render ineffective their line managers, thus creating chaos and ruining governability.
Hidden rocks can lie in many places. Product development processes get derailed, with budgets and deadlines blown, feature sets drowning in maelstroms of over-engineering and product specs diverging far from market fit. Sales efforts and conversions fall behind projections or event begin shrinking. Scarce talent might start running for the exits, or else cease to be productive. Some of the signs of trouble brewing are easier to spot than others, so that corrective action can be taken relatively early - for example, missed product milestones or subpar revenue. Others show up when it might be too late for easy fixes.
Morale issues are some of the most insidious examples of the latter, and often stem from serious leadership failure. When your top talent is suddenly found to be frantically sending out resumes, and formerly high performers begin slacking, the company may well be in extremis. Morale issues on their own are rarely the cause of problems - more often they are a symptom: a symptom of a failure in the leadership, poor management or even lost competitiveness. Fundamentally, people tend to give up trying when they cease believing that their efforts make a difference.
A number of technological solutions have emerged to assess morale: tools like social media and Glassdoor monitoring, for example. Anonymous gossip tools can be used to gather actionable intelligence, even as they come and go, as well as monitoring employee LinkedIn accounts for avalanches of job-search related updates. Exit interviews can provide sporadic insights into morale issues, provided that the departing employees are sufficiently angry to burn bridges through excessive frankness. Buyout shops are notorious, before they consummate their deals, for planting "cafeteria ears": spies who gather gossip in company mess halls and nearby bars and coffee houses. They also like to interview ex-employees, from whom they often get more candor than HR staffs can. The issue, however, is that once morale has sagged so low, the problem is probably already out of hand.
I will discuss some solutions to clearing some of the fog in the next article in this series.
Cross-posted to LinkedIn Pulse
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