Fire Beware! and the “R” word

More and more organisations who rely on specialist knowledge on a day to day basis have noticed an unfortunate phenomenon which takes place when cutting costs means the “R” word – rationalisation (er, . . getting rid of people). This trend seems to be prevalent even in high-tech, banking and industries whose employees require specialised knowledge to make the organisation perform. Interestingly enough the phenomenon below applies to organisations who function with unskilled workers as well.

Classic Thinking

To reduce costs in an organisation management start off by using the now classic “rationalization” approach by simply reducing manpower, the big idea behind this is that it will stimulate creativity and get the business motivated toward finding more efficient ways of working. They somehow believe that this leads to a good rise in productivity.

Classic result

But the results seem to indicate that in actuality productivity tends to fall somewhat. When we analyze the data we have been collecting since late 2001, we have noticed that in most successful organizations an informal structure of key operators, often unknown to management, keep the wheels turning. The moment organisations decide to cut staff levels, these key informal organizations immediately slow down. The result; costs fall but then so does productivity leaving everyone worse off than when they started.

Our perspective of the issue.

The adage “you get what you measure for” applies here – because seldom do the two phenomena get compared or measured – the extent of these rationalisation exercises is often measured by costs cut, not overall productivity and efficiency.

To prevent this problem from becoming institutionalised it might help to apply a Systems thinking process to cost reduction. The only successful cost cutting exercises we have come across was when they were attached to a properly though out and well defined process.

Despite the Cartesian dualist legacy that is still influencing people in today’s sophisticated industries, a thinking person is not a machine; emotions affect your work, period. No matter how technically indentured people are, they will tend to reason for themselves and when key people perceive their value being downgraded they will downgrade the motivation to be productive. This is not PhD. level reasoning it is common sense 101. Placing the livelihood of people under authoritarian threat as a motivational approach is pretty much a path to organisational extinction. The cost cutters may carry the authority – but many of the cost cutters lack the sophistication to carry out the rationalisation.

As organisations grow and prosper they naturally increase their organisational learning skills. The informal key person networks described above are a natural occurrence of what Peter Senge termed a learning organization, namely that of a group of people who are continually enhancing their capabilities to create what they want to create in order to be self-efficient and consequently productive.

Deep down it’s about self-worth. This phenomenon occurs naturally and is deeply influential in most really successful organisations and most growing organisations. Unfortunately misplaced authority can destroy this precious asset – destroy the one key asset that good employees provide free of charge! Some global giants like GE have really good processes in place to ensure that the best minds and key informal networks are not just taken care of but actively nurtured.

In verbalising the five disciplines of organisational learning as Peter Senge did in 1990, the concept was considered way ahead of it’s time by the management schools of the era.

Way back then we noticed was that this was natural organic behaviour and championed the concept in our Unplugged team coaching exercises.

To conclude this missive, I think it might be quite fitting to quote Peter Senge.

When you ask people about what it is like being part of a great team, what is most striking is the meaningfulness of the experience. People talk about being part of something larger than themselves, of being connected, of being generative. It become quite clear that, for many, their experiences as part of truly great teams stand out as singular periods of life lived to the fullest. Some spend the rest of their lives looking for ways to recapture that spirit. (Senge 1990: 13)

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