This hack is one of 24 outstanding entries selected as finalists in the Long-Term Capitalism Challenge, the third and final leg of the Harvard Business Review / McKinsey M Prize for Management Innovation.
Each metaphor we use shines light on some parts of an issue while leaving others in the dark. The leading metaphors for developing “good” businesses, “Ethics” and “Responsibility”, shed light on numerous managerial issues, but still leave many other issues in the shadows. We need a different metaphor to light these shadows.
The current framework for analyzing corporate behavior is too narrowly focused by the concepts of “Ethics and Compliance” and “Corporate Social Responsibility”, keeping many corporations from expending energy trying to correct for the actual root causes of poor corporate conduct.
Ethics and Compliance focuses the spotlight on actions; which actions are ethical, which actions are not ethical, and how we enforce compliance with respect to these specifications. Though the metaphor of “ethics” is highly effective for creating rules and guidelines, it is not effective for changing attitude, desire, or behavior on either an individual or an organizational level.
Corporate Social Responsibility shifts the light more towards behavior, but it focuses on corporate behavior rather than individual and organizational behavior. CSR tends to ask: “How can the corporation conduct business in a responsible manner?” focusing our attention on how corporations conduct their business and leading to many fantastic CSR projects and programs. But the problem is that the framework of CSR does little to inform organizations on how to actually become caring corporations. By analogy, teaching a child how to act responsibly is quite different from motivating a child to care.
“In violence, a person is violated—there is harm done to his person, his psyche, his body, his dignity, his ability to govern himself.” (Dr. Alexander Liazos)
Corporate misconduct is almost always a form of violence, as it directly and indirectly violates the lives of many people. Alexander Liazos used this definition of violence to describe what he called Covert Institutional Violence, which he called the “unethical, illegal, and destructive actions of powerful individuals, groups, and institutions in our society”. He was right to be concerned about these actions, but his concern—and his metaphor—focused on the intentional actions of the powerful. Sure, there are major scandals concocted by a few deviants in powerful positions, but I believe a much larger portion of corporate misconduct is perpetrated unintentionally and often completely unconsciously.
By dropping the word covert, I believe the metaphor “Institutional Violence” will shine a brighter light on the root causes of corporate misbehavior. In this HACK, I intend to show the connection between individual violence and “Institutional Violence” by defining some of the theoretical causes of individual violence then assessing how these issues can cause corporate misconduct and destructiveness. The problem is, many of the causes of individual violence have become entrenched in our organizational structures and cultures to the point that we consider them to be the norm. Even more, the effects of institutional violence are hardly ever felt or seen by the perpetrators, creating a perfect storm for escalating destructiveness.
To illustrate the connection between violence and corporate misconduct, I first will bring together some of the major elements from theorists Erich Fromm, Arno Gruen, and Marshall Rosenberg (illustrated in the chart below), and then I will compare these elements to elements within destructive corporate cultures.
In the chart above, the orange elements in the circle make up the basic cycle of violence and the yellow element stands for one of the most common entry points into this cycle: fear. Whether it is a fear of dying, a fear of losing a job, or a fear of looking like a fool, this fear can often make us feel powerless. This powerlessness initiates or magnifies our need to feel like we can control our circumstances. Since we often cannot take direct control of the situation that made us feel powerless (or at least feel like we cannot), we look for other ways to prove to ourselves that we have power in the world. In our quest for power we often attempt to conquer or control other things or other people. We might try to conquer a mountain or control a video game character, but since destructive actions tend to be one of the easiest and most intense ways to feel powerful, they are often the actions we take. However, destructive actions tend not to coincide with our core principles (at least not at the subconscious level), so in order to ease the tension between our wrongful actions and our principles, we disconnect from ourselves, disconnect from those we hurt, and, out of shame and self-hatred, disconnect from those we love. The disconnection from others makes us feel alone, and the disconnection from ourselves makes us feel less than human. Feeling alone and less human leads to even more feelings of powerlessness, and the cycle continues either until we are able to get out of it or until our destructive actions become so violent that someone else stops us.
“Thanks for the lesson Kevin! But, how does this relate to corporations again?” I’m so glad you asked that question! In addition to fear, there are countless other ways in which someone can enter this cycle, many of which have become the cornerstones of corporate policy and organizational design. The chart below shows the same cycle of violence, but this time I added some common entry points found in organizations today.
The chart above is by no means an exhaustive list. It is just a first cut to get you thinking about all the ways in which your organization may be pushing people into this cycle of violence. I believe it would be an inefficient use of space to describe each entry point in detail, but please do not hesitate to comment on this post or email me directly if you have any questions or comments.
Obviously, one way to reduce Institutional Violence would be to eliminate, or reduce the impact of these entry points, and I will discuss this approach more in the “First Steps” section of this Hack. What is not quite as obvious is that for every entry point into this cycle there is also an opportunity to exit it! By addressing the elements directly, we can create opportunities to short-circuit the cycle, producing even more profound changes in the corporate culture than simply removing the entry points. Below are some examples of how we can directly address a few of these elements. (if you are interested in hearing ideas for other elements, again, don’t hesitate to ask! J)
DISCONNECTION FROM OTHERS
Perhaps the most basic and well-known theory on violence is that a person must disconnect oneself from others, usually by dehumanizing them, in order to commit violence against them. This can be done intentionally with propaganda, epithets, and other techniques signifying “otherness”, but the problem is that it is also done automatically, in our subconscious, whenever we view people as being outside of our group. For example, engineers will subconsciously think of accountants as less human than other engineers. The further removed a person is from the group, the less human he or she will seem.
This dehumanization can impact a corporation in many ways. If an engineer sees accountants as less than human, they will have a much easier time making decisions destructive to the “Bean Counters”, resulting in anything from “stretching the truth” on expense reports to excessive project plan budgets to sourcing from higher cost suppliers. If the engineer sees the customer as less than human, it could lead to anything from unwanted gimmicks to deadly design flaws. An engineer disconnected from living beings in general could lead to carelessly toxic designs that wreak havoc on entire ecosystems. As noted before, once this engineer starts making destructive decisions, he or she can get stuck in a repetitive cycle continuously increasing in destructiveness. (By the way, I used to be an engineer, so I feel safer picking on them).
Solutions to this issue of disconnection can come in many shapes and sizes. Below are a few examples.
Ask “individuating” questions to create an image of a complex individual. By applying social-psychological theory, a company might create a process to encourage employees to envision humanizing aspects of those in other areas. This could be done with “individuating” questions that help to conjure up an image of a complex human being. These questions often invite you to imagine the other person’s relationships, ambitions, or other situations that require a complex set of emotions. For example, along with a photo (like the one below) a question may ask: “What hopes and aspirations do you think this man has for his oldest daughter?” or “What do you think motivates this man?” or even “Why do you think he is smiling?” The point is to paint a picture of a human with emotions and desires quite similar to the responder. These questions are often successful because, when asked a question about someone that they do not know the answer to, people often project themselves onto others.
Individuating methods, such as this one, should be applied in corporations where dehumanization is most rampant, and most vulnerable to abuse. Thus, whenever decisions are being made that will affect the lives of others those others should first be “humanized” in the eyes of the decision makers by using individuating questions, or other methods with similar intent. Such situations can range anywhere from defining offshore manufacturing strategies to setting H.R. policies to deciding on socially questionable marketing campaigns. Individuating processes can also be used to gain a better understanding of various stakeholders and thus should be used as a first step to build or improve relationships with typically dehumanized stakeholders, such as customers, suppliers, government agencies, protestors, members of the media, or NGOs.
Create a Super-ordinate group mindset. Some solutions can be beautifully simple. Last week I had the opportunity to hear a talk by the former CEO of Wiley and Sons, Will Pesce. He made it a point to always think and speak of each employee as a “colleague”. This simple gesture instantly put the CEO in the same group as everyone in the company, from mail clerks to executive vice presidents, and this mindset became contagious because he made sure to give it the proper emphasis.
Before you go running off and implementing this as a corporate policy, however, it is ABSOLUTELY ESSENTIAL that all employees are authentically thought of as colleagues. First of all, this means that “calling everyone a colleague” will never work as an officially mandated policy. This behavior must become part of the culture naturally, through proper role modeling. From Will Pesce’s demeanor, it was clear that he thought of each employee as a colleague. This is why it worked for him. The first step to implementing this idea would be to become intentionally conscious of how you think of each worker in your daily interactions. Ask yourself: Do I consider her to be my colleague? Do I think he is an important part of this organization? If the answer is “no”, think about how they contribute to the company, or practice some of the individuating exercises mentioned above. No matter what, before you talk about how each worker is your colleague, or call them a colleague, you should actually feel that way. Otherwise, your words will ring hollow, and they will feel even more disconnected from you.
Social Media and Communication Technology. We can also use various communications technologies to create images of others as complex individuals, as part of our group, or both. According to media theory the printed or written word draws a person inward, separating him from the outside world, while live oral/aural communication unites people in a shared moment. In the 21st century, we have plenty of technology to bring people together. Web-cams and video stations installed in high traffic areas could allow people to interact with each other from far off locations. Or, going a step further, a company could create a video blog social website in which employees post general—or work related—comments, stories, questions, and answers for people in other locations. This option would be beneficial on multiple levels. First, in seeing what others are curious about, and listening to their stories, workers on both sides will begin to see each other in a more human light. Second, these workers will gain a much better appreciation for the challenges faced in other areas of the company and can contribute ideas to help solve them. On top of that, the questions you decide to post on the website could be simultaneously used to pursue, harvest, and store innovative ideas for strategic planning, corporate policies, cost reductions, new products, or even new markets for current products. In many cases, interpreters will be needed, but these expenses could easily be offset by the increased efficiency, productivity, and loyalty created by a more connected corporation.
DISCONNECTION FROM ONESELF
Violent acts also become much easier when one is detached from one’s own needs and emotions. This self-detachment is commonplace in many corporations and other large organizations. Studies have shown that people become detached in a number of common job-related situations, such as strict and controlling hierarchies, mundane and repetitive tasks, and being required to perform ethically questionable duties.
These findings suggest a two-fold approach. First, organizational structures and job-related processes and requirements need to be assessed to reduce or eliminate these factors. However, many of these factors are deeply ingrained within corporate culture and some, such as repetitive and mundane tasks, can be near impossible to eliminate. Thus, corporations should also institute programs to reconnect people with themselves. These programs could take many forms ranging from periodic meditation breaks to pet friendly policies (as pets have been shown to reconnect people with their emotions). Basically, any recurring activity reminding people of their own biological “human-ness” would be beneficial.
APPLYING MORE SPECIFIC THEORIES
Viewing corporate misbehavior from the lens of “Institutional Violence” brings with it a wealth of solutions from much more specifically focused theories as well.
Energy of Tension/Fear. Randall Collins’s micro-situational theory on violence suggests there is an energy of “tension/fear” present during any aggressive and potentially violent exchange. In fact, it is this tension/fear that makes violence so difficult to commit. The energy is directly related to physical closeness, and is greatly intensified by eye contact, which is why “hitmen”, snipers, and even suicide-bombers go through great pains specifically to avoid eye contact.
This theory helps explain why corporate scandals and abuse can become so rampant, for there is little to no physical interaction between a decision-maker in a large organization and those affected by her decisions. In most decision-making situations it would be impractical, or nearly impossible, to require the physical presence of those people who would be affected by the decision. However, a company could provide photographs of these people and require the decision-makers to look into their eyes (via photo)*. Now, there are obviously many difficult yet necessary decisions made by managers that negatively impact other people. I am not saying these photographs would, or even should cause an executive to stop from closing a factory. However, this simple exercise could change how the decision is carried out, ensuring the closing process is done with respect and those being laid-off are treated with dignity.
(*Care should be taken before implementing this policy in other regions of the world, as some cultures may be highly averse to looking others in the eyes)
Neuroscience and Human Reactivity. The vast majority of violence committed in the world is instigated by a perceived sense of threat. The problem is, in modern society this perceived threat is often imagined. Neuroscience has shown that the primitive regions of our brain that react against a threat function much faster than the higher-reasoning regions used to determine whether or not something is actually a threat and, if so, how to proactively avoid it.
The faster-acting reactivity of our brains can cause high-pressure meetings to end in destructive decisions and cause individuals to act irrationally or unethically when faced with the perceived threat of losing their job or a cancellation of their project. To address these situations, we need to slow things down and allow the higher-reasoning portions of the brain to catch up with the reactive and dangerously aggressive portions.
Jeffry Hollender, former CEO of Seventh Generation, did just this by instituting mandatory breaks in his meetings. In these breaks, meeting participants reflected upon who they were being at the meeting and what they were working towards to see if their actions were in alignment with their goals and principles. Similar safeguards could be placed within project schedules. With each major milestone those involved with a project could write a short reflection on whether the project was or was not proceeding in alignment with the goals and principles of the company and that individual.
Other Theories. An exhaustive list of theories and their related applications would be more fitting for a book than a MIX hack. But please feel free to message me if you are interested in hearing about other theories and their possible applications, or if you have a specific issue that you think could be addressed using violence theory.
NEED for ADAPTATION
I must stress that all the examples above tend to be a bit simplistic because they are meant to be generally applicable. Any organization looking to take on the issue of “Institutional Violence” in a more serious manner is likely to want to create specialized programs and policies to most powerfully address its unique set of processes and organizational structures.
If the metaphor of “Institutional Violence” is adopted on a larger scale, it could bring with it other systemic implications. A progressive response to low-level violent crime would be to place the offender in corrective and/or restorative treatment programs (most likely while the person is serving a prison sentence). It is well documented that prisons and judicial systems with these more holistic treatment based programs tend to have much lower recidivism rates than those that do not.
Why not expand this concept into the arena of Institutional Violence? Currently, when a corporation commits a crime, it is often slapped with a fine and possibly audited more meticulously, but that’s about it. Scare tactics are not as effective in preventing repeat crime on an individual level, so why do we think scare tactics alone will prevent many repeat corporate offenders?
Goldman Sachs is a perfect example of this. In July of 2010, the SEC fined Goldman Sachs $550 Million, the largest fine in SEC history, for dishonest business practices. Goldman Sachs was also told to change those dishonest practices. But changing practices did nothing to fix the corporate culture, the true cause of the misconduct. In October of 2011 Rajat K Gupta, former director of Goldman Sachs was arrested for insider trading. So, by the end of 2011 we had plenty of evidence that Goldman Sachs needed to fix its culture, but procedure to force the issue. So, instead, we were once again reminded of their destructive culture on March 14th, when Greg Smith published his letter “Why I am Leaving Goldman Sachs” in the New York Times. (http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs...)
This letter is not only important because it shows that fines and arrests on their own do not work, but it is also important because it begs us to answer some crucial questions with respect to corporate destructiveness. At what point do we intervene? And, how can we intervene? In his letter, Greg stated that he knew of no illegal activities taking place in the firm, but clearly painted a picture of the toxic and contagiously unethical atmosphere promoted throughout all levels of Goldman Sachs. Goldman Sachs is a time bomb, waiting to explode. The warning signs have been clearly laid out in front of us. Do we have a moral obligation to act? If so, what can we do? Why haven’t we done it already?
I believe a major contributor to our inaction is that we are not sure of what action to take. Cue “Institutional Violence”. Just as high-risk individuals are often given access to treatment programs, we could create corrective treatment programs for offending, or high-risk corporations. These programs could include consultants assigned to develop a healthy organizational culture within the company, or they could take the form of something beyond my current imagination. Corporations that violate the law would be forced to both cooperate with and fund these programs, with enough funding included to offer the programs free of charge to other corporations designated as “high-risk”. For “high-risk” corporations the programs would be voluntary with the caveat that if they do not participate, they will face much stiffer fines for any illegal activities discovered in the future.
The establishment of these treatment programs could have other rippling effects. One such effect could be a national (or international?) corporate destructiveness hotline. This hotline could allow for anonymous callers to voice their concerns, ask for advice, or report ethically questionable activity. Details would have to be worked out for when action is taken, and what that action would be, but I imagine that repeatedly named companies would, at the very least, be put on an actively investigated watch-list and sent letters expressing concern.
Restorative treatment programs could also prove effective for corporations. Such a program would find some way to bring the offending decision-makers from a company together with their victims. The end goal of such a program is three-fold. First, all involved would work together to create a plan to restore the community (as much as possible). Second, these discussions will be designed to help members of the community find closure, as is often the case when restorative processes are applied to cases of individual violence. Third, and most important for reducing further incidents, the offending corporate decision-makers will get to see and hear first-hand accounts of how their decisions affected others. Putting faces and names to one’s victims can often have seriously humbling effects.
What I have written in this section should be taken as just the beginning of what this framework of “Institutional Violence” could offer. As more and more people from various disciplines adopt a metaphor, its outer limits are continuously tested. I cannot wait to see all that this metaphor can bring to light.
A MERGING OF THE METAPHORS
I am not espousing we stop using the metaphors of “ethics” or “responsibility”, as each provides a unique set of benefits. Instead, I am arguing that these metaphors can be further elaborated by incorporating notions of violence, which will help us concentrate on the ROOT CAUSE of corporate misbehavior, the organizational cultures within corporations themselves. “Institutional Violence” seems like the right metaphor for the job.
Unfortunately, in the vast majority of companies and professional societies, Compliance and CSR are treated as completely separate entities. Rather than solving problems together, they focus only on what they can see with their own metaphors. For example, I recently had a discussion with a compliance officer working in California about the state’s now operative Transparency in Supply Chains Act, which requires companies to publicly state what they are doing to avoid supporting slave-labor and sweatshops in their supply chains. The law does not require that companies actually do anything to avoid such practices in their supply chain; it only requires that they report what they are doing, if anything, in hopes that public pressure will force them to take action. In our discussion, I learned that the compliance officer recently argued with the company’s chief compliance officer that the spirit of the law calls for the company to take action to reduce destructive actions in the supply chain. The chief replied that since the law did not require any such action, the company would simply state their current policy on their website.
One could argue that the Chief Compliance Officer was in the wrong, but I disagree. Compliance departments are filled with attorneys. Attorneys are not trained to develop socially responsible organizations, they are trained to interpret and comply with the law. Requiring them to do anything else would be a waste of their education. The problem is that either the executive management of this company does not take responsibility seriously enough or there is no communication between those responsible for CSR and those responsible for compliance. A cursory read of most California based company statements with respect to this law shows that these issues seem to be endemic in our corporate cultures. Most of these statements discuss how the company does not approve of slavery or sweatshops, but few give concrete examples of actions they are taking to reduce or eliminate such activities.
Not surprisingly, I see many parallels between the CSR / Compliance disconnect and our heavily disconnected justice system. It is rare to find court systems (paralleled with: Compliance) that are well connected with community programs (paralleled with: CSR) or treatment programs (paralleled with: Institutional Violence). However, when these three are connected, the results can be mind-blowing! Recently, I had the pleasure of visiting one such justice system in the Red Hook community of New York City. In the late 80’s and early 90’s Red Hook was one of New York’s most violent communities. In 1992 the school principle was killed in the crossfire as he was trying to break up a fight. Out of this tragedy came the Red Hook Community Justice Center. The first of its kind, this community center houses a court (think: compliance), presiding over all misdemeanor cases for the community of over 200,000; Community outreach programs (think: CSR) including the local housing authority, GED prep classes, mediation services, a little league team, and a youth court; and treatment programs (think: “Institutional Violence”) for problems such as drugs and anger management.
The Honorable Judge Alex Calabrese described how the key to the community center’s success was that all these programs worked together to find the best solution for each case. Before he hears any case, he is given information about the offender’s background and the underlying context of the offense. Using this information, and the unique power the community has bestowed on him, he is able to order much more than just prison sentences or community service. In fact, prison sentences tend to be used only if he thinks the offender is still a threat, or if he thinks a few days in prison will get them to snap out of their current destructive behavior by seeing where it will take them. Thanks to the work of its community justice center, Red Hook is now a vibrant community. In fact, the program has become so successful it has an unending list of communities asking for (and receiving) help to create similar programs in their areas.
To deal with corporate misconduct, we do not have to reinvent the wheel. If we are serious about reducing corporate destructiveness and increasing corporate responsibility and compliance, we should take lessons from systems currently successful in similar endeavors. Two lessons we can learn right off from the Red Hook system is that we MUST combine these programs in order for them to be successful, and there must be leadership at the most senior level to direct these programs. Compliance, CSR, and Institutional Violence should be one tight-knit organization led by an executive reporting straight to either the CEO or, even better, the Board of Directors itself. In addition, a specific board position should be created to focus on corporate behavior. Only then will we be able shine a light on all the issues related corporate misconduct as a whole.
Beyond reducing the risks of corporate scandals, this strategy would share many of the benefits noted by scholars in the field of Positive Organizational Psychology, as both have many common end goals: increased compassion, connectivity, authenticity, and resilience.
The potential advantages are many. Some likely possibilities include: higher job satisfaction, lower turnover, increased productivity and efficiency, better brand image, higher customer satisfaction and retention, more cooperative partnerships with suppliers, more collaborative relationships between internal departments, and a happier healthier planet.
Many of these advantages come from a happier, more energetic, and more connected workforce, stemming from the fact that their actions will be in much closer alignment with their principles; creating ease of mind, and probably even allowing employees to sleep better at night.
Since I am discussing such a wide-ranging subject, there are many ways in which one could go about applying the framework of violent theory. However, to get things kicked off without spinning your wheels too much, below are some suggestions to harvest effective, custom-fit solutions for your organization. For simplicity’s sake, I will be applying the elements from the cycle of violence discussed earlier, shown again below:
SURVEYS & INTERVIEWS
Perhaps the easiest and most powerful way to begin your assessment is by conducting short and simple anonymous surveys and/or independently administered interviews based on violence theories. For example, using the theoretical elements from the chart above, you could create a quick short answer survey similar to the following:
Sample Survey Questions
1) Have you ever felt powerless with respect to your job or the company in general? If so, how often, and what were the circumstances?
2) In what aspects of your job and your relationship with the company do you wish you had more control?
3) Realizing that power can come in many forms (money, authority, politics, information, etc.), do you think any of your coworkers abuse their power? If so, how? What power(s) do they abuse?
4) Can you think of any aspects of the company (policies, procedures, relationships, etc.), or lack thereof, that make it vulnerable to potential abuses of power? If so, please explain.
5) What parts of your job do you feel the least comfortable performing? Do you ever feel like you have to compromise your own principles to do your work? (if so, when).
6) Are there any actions this company performs that you think could be unethical, or ethically questionable? (if so, can you describe these actions?)
7) Do you ever feel that you are treated like a machine or like a number? If so, please explain in detail.
8) Do you ever feel that you treat others, or think of others as machines or numbers? If so, please explain in detail.
9) Have you ever made a decision at work that impacted other people without considering the impact it would have on them? If so, please explain.
10) What aspects of your job do you consider to be mundane, or lacking in challenge?
11) Do you feel there are any areas in which you frequently lack support? If so, please explain.
12) (Optional) If you are comfortable with doing so, please provide any general (or specific) information about your job that could help us pinpoint issues within the company that should be addressed. (location/division/job-grade/job function/etc).
You could mix in some positive questions as well to keep the mood more even keel, like “what inspires you about your job? Or the company?”
If you, or your employees, tend to be less than enthusiastic about formal surveys, you could post one or two weekly or monthly questions in the cafeteria and other gathering areas, with drop boxes for replies. Or, post questions online and make them accessible by walk up computer kiosks placed in community areas (for anonymity).
If these surveys (or interviews) are answered thoughtfully, you should be able to identify numerous “entry points” into the cycle of violence within your organization. You can then create your own chart showing these entry points along with other entry points that you think of or intuit yourself. Every human being, including you, has felt powerless, a need for control, and all the rest of these elements at some point, so trust your instincts. Next assemble teams to brainstorm ways in which to eliminate these points of entry. For example, one issue noted on the “Entry Points” chart from earlier is that drab, toxic, or sterile feeling work atmospheres can cause people to feel detached. With this in mind, your team could assess the work atmospheres in various areas of the company for these qualities and make recommendations, such as improving light quality, adding plant life or a pond, or just throwing some color into an overbearingly gray or beige mass of cubicles.
I had originally promoted creating a matrix in which a company’s processes are analyzed through the framework of various theories on violence. Though matrices will work, I have become convinced that it is much more powerful to map out the process visually. Mapping out the process can provide insights into the timing and interconnected relationships of a process that disappear when listed in matrix form. Below is an example of a typical Performance Management Process mapped out and analyzed. (If you have questions about this analysis, or questions about analyzing any other processes, please contact me.)
Example: Mapping and Analyzing the Performance Management Process.
The first step of analyzing a process is to map it out. Below is a generic map I created of a typical Performance Management Process, which includes goal setting, performance reviews, rewards & promotions, and career development.
It is important to represent both the official process and the variants of how the process is actually executed. For example, most companies’ performance management processes would ideally include a discussion of an employee’s performance prior to making a decision on the employee’s compensation adjustments, but in many cases this does not happen. Sometimes compensation decisions are made even before all the performance reviews are in. Another common variation noted on this map is the common occurrence in which an employee’s roles and responsibilities change during the year without adjusting the employee’s goals. As we will see, noting typical breaks in the process is just as important, if not more important than mapping the process out as it is stated in company policy.
It would be better to analyze the process as a whole, on one graph, but to make this HACK legible I have broken the process into three parts. In the analysis below, I noted issues that are inherent in the system as well as potential issues dependent on the way in which the process is actually executed.
I will not go into detail about this analysis here, but would like to point out that the major themes in the goal setting process is power and control. The overall goals set by executive management often become sources of power and control for those who feel otherwise powerless. For example, if cost reduction is the company’s highest priority, a manager fearful of losing her job will likely cling to this goal, pursuing cost reduction anywhere she can find it. Upon finding a low cost supplier that could save the company noteworthy sums of money, she may choose to ignore her instincts to investigate how the supplier delivers such savings. Is it a sweatshop? Is it ignoring health, safety, or environmental rules? Is the raw material extracted using slave labor? Part of her wants to know, but that part is outweighed by the part that craves job security, and in her mind, the only power she has to get that security is by cutting costs. To avoid a major conflict of interest, she forgoes examining the supplier, yet she is not able to completely eliminate her ethical strain, which will lead her to disconnect from herself and from the workers at the supplier.
To avoid issues like this, management must continuously promote ethics and responsibility as a top priority. In addition, projects and plans aimed at aggressively achieving the company’s highest priority goals should be scrutinized carefully. The high priority status of these goals makes achieving them a source of power, which is often sought after by those caught in the cycle of violence. I am not saying that all, or even most people aggressively working toward the company’s goals are destructive. That is far from true. However, the risk of, and vulnerability to destructive decisions is much greater in these cases, so they should be monitored closely.
The main takeaway from this portion of the process is to see the destructive power of attempting to quantify the unquantifiable. This obsession to quantify our performance starts in our schools’ grading systems, and becomes deeply entrenched in us by the time we reach the work environment. However, as we transform our thoughts, actions, skills, and accomplishments into quantifiable objects we become quantifiable objects ourselves. The craziest part of this is that we are dehumanizing ourselves just to get bogus data. Not only am I likely to rate your work differently than another person would rate it, but my ratings will also change as my mood changes or as the context from which I’m assessing your work changes. So, we turn people into numbers so we can compare them, but the joke is on us, because the numbers we are using are barely comparable to themselves. Which brings us to the rewards process:
Not all companies perform “Rack and Stacks”, but the ones that do probably do not realize the dehumanization involved in it. Allow me to give a personal example. A company I used to work for created a “Rack and Stack” system in which all employees within the same grade-level and division were compared with each other. The company went to great lengths to ensure that the process was as fair and transparent as possible. We were told everything that would happen. The managers would gather together in a conference room where, one-by-one, a picture of each employee to be ranked would be shown on a screen, and the managers would discuss where within the rankings that employee belonged. These rankings were then plugged into an algorithm, along with current salary, years of service, and the high and low-end salaries for that grade-level. The algorithm then created a chart displaying, in rank order, a dot signifying each employee’s current salary with a vertical line drawn from it to signify that employee’s raise, calculated for fairness based on the data given. An anonymized chart was then shown to each employee during his or her review.
When the company first described this new system, I was impressed. It was obvious that a lot of thought and work had gone into making the process as straightforward and fair as possible. In fact, I cannot think of a better way to do a “Rack and Stack,” which is also why I now believe the “Rack and Stack” system is fundamentally flawed. I say this because of the unexpected reaction I had during my review. My boss started my review by assessing my strengths and weaknesses, discussed opportunities for grow my abilities and my career, told me I did a fantastic job, complimented me on some of my achievements, and gave me my raise. If the review had ended at that moment, it would have been fantastic. But then, he pulled out the chart. He pointed to my dot, which was ranked somewhere near the top, and showed me that I had received the highest raise of anyone in my pay grade. Logically, this should have made me even happier, and it may even have at that moment, but in the long run, it didn’t. Instead, I was periodically needled by the idea that all my accomplishments for the year had been reduced to a dot on a graph. My dot looked no different from the other dots. Even worse, I struggled with how the managers could even compare my work with the work of others, when each of us had completely different job functions and were working on a wide range of programs. Would one of those dots ahead of me have done my job better? Could I have done their’s better? How did the managers decide all this? In the end, the one thin I do know is that, more than any time before, I felt that management saw me as a measurable and exchangeable thing... a dot to be precise.
Fixes. The performance management process, as described above, is in need of a major overhaul beyond this HACK’s scope, but below are a few thoughts based on this analysis for consideration in such an overhaul:
Stop quantifying the unquantifiable. I believe this issue is ingrained in many different management practices. We are addicted to numbers. We pretend that the reason we quantify unquantifiable things is because it makes for more robust analyses and more solid business judgment, but the truth is, we quantify things to make our life, and the decisions in it, easier. Without numbers we feel less informed, making us unsure of our decisions and our solutions and less confident when fighting for them. As a former engineer, I know quite well the addictive attraction of numbers. Their seemingly precise and predictable nature gives us a feeling of power. But when we quantify the unquantifiable, we do not actually become more informed, we become misinformed, and we set ourselves up to make decisions based on inherently bogus information. Even worse, when we turn people, or their contributions, skills, or potential into numbers we are dehumanizing them, and setting ourselves up to make destructive decisions that could negatively impact them. It is time we stopped using numbers. Take a moment to envision a review process that does not rank an employee on a numerical scale. It’s not what we are used to, but it seems pretty plausible to me.
(Side note: Since our addiction to quantifying things is engrained from a young age, you will likely face resistance from many employees when you remove the number ranking system from their performance reviews. However, I believe this resistance will slowly subside, as they start to feel a bit more like a human, and bit less like a number.)
Inclusion. Another issue that became apparent during this analysis is the need for allowing input from the employees when developing corporate goals. This is because when an employee has their goals given to them, they feel a loss of control. Allowing employees to co-create company goals, or at least give input would not only improve their sense of control, but the increased inclusion felt by employees will also drive them to take more ownership in their job and the company as a whole.
To assess you’re the relationships among your stakeholders using a matrix, start by listing all your stakeholders vertically then listing those same stakeholders horizontally. This matrix (see chart below) is set up so that we can assess each relationship in both directions, taking the perspective from the stakeholders on the left and assessing their relationship with the stakeholders listed on the top. So, in the chart below, the cell labeled “A” is for assessing how Executive Management relates to Shareholders, while cell “B” is for assessing how Shareholders relate to Executive Management.
In each cell we want to assess the relationship with respect to theories on violence. In case you are wondering, this matrix will become way too large to print out and look at it in one glance. It may be more suitable to think of it as a database. To show you what I mean, below is a blown up version of what just cells “A” and “B” might look like:
*Note: Assessing relationships with the earth in this manner may at first seem strange or “unnatural”, but if you take the time, I think you will find these relationships to be quite insightful.
Since I have not been in either of these roles, the information on this chart is purely speculative. I suggest working through this chart with representatives from each stakeholder group. It will take more time, but your information will be much more robust. After filling out information for each element, I color coded the information such that the cells in orange represent parts of the relationship that are at most risk for setting off destructive decisions and the cells in blue represent the elements that have the most potential for addressing these issues. So, according to this example, the executives often feel like slaves to their quarterly earning statements often leading to actions they would probably otherwise not take when planning for long-term success. They also end up placing much more weight on instant profitability than on sustainable or responsible business decisions. On the other side, investors want their money to produce more money, but often feel powerless and worried because they cannot see what is going on inside the company, and have no guarantee that the company will continue to grow in the long term. Thus, many focus on the short term, which is a bit more certain. To counteract the powerlessness they feel with respect to the strategic decisions of executive management, they use the one power they have: Money.
To address these issues, we need to focus on the power that executive management holds in the relationship: information (and possibly dividend payments). This is quite a complex problem, since any information given to investors must be made public, and once information is public it is in the hands of competitors. This makes it difficult to ease shareholder fear without helping one’s competitors at the same time. It may be worth the risk, just to get out of living quarter by quarter, to reassess your relationship with your competitors. How could you change those relationships such that you can share enough information about future goals to ease the minds of your shareholders without risking competitive advantage?
Another avenue worth pursuing is creative use of dividends, or some other source of funding to overcome potential fallout from shareholders leery of sacrificing a few quarters for longer-term goals. Can companies issue bonds? I am not an expert in corporate finance, so I will leave these Hacks to more qualified people (such as Alex Edmans, whose executive compensation Hack seems like an innovative start to the problem on the other side of this short-term management problem).
Filling out the entire chart may take quote a bit of time, so you might be tempted to start this exercise assessing just a few of your most essential stakeholders. Instead, I suggest making a more comprehensive matrix, but prioritize the relationships you want to assess. For example, you could color code your matrix by priority like the chart below. Just in doing this exercise, you may discover some relationships you have been ignoring that you would not have seen otherwise.
Having people from various functions fill this chart out could lead to some interesting insights into how people view the importance of their relationships with various stakeholders, possibly leading you to develop needed relationships that do not currently exist.
After you’ve filled out a number of the cells, you will probably want a to be able to check the status of all your relationships at a glance. To do this, and to make storing the data much easier, I suggest developing a small database with the capability of creating color-coded status matrices that would look similar the chart above. A database will also make adding, deleting, and modifying relationship information much easier than excel, as excel charts of this magnitude can become unwieldy in a hurry.
OTHER METHODS FOR ASSESSMENT
The “First Steps” mentioned above are meant purely as suggestions. Hopefully you will find them useful, but please do not limit yourself to them. There are many other ways to assess corporate culture, policies, and procedures with respect to human destructiveness. If you have any questions about developing your own methods, please feel free to contact me, and if you develop other methods that you find useful, I would love to hear bout them.
Prioritize, Prepare, and Implement
Harvest your ideas, prioritize, and prepare the most promising ideas for implementation. Go crazy!*
(*Warning: Some change-resistant people may actually think you have gone crazy)