Today’s assumption: the whole is equal to the sum of its parts

We treat our organisations like they’re simple sums, or machines with interchangeable parts. If we want to achieve something, we break it into parts and hand them to our subordinates, who then do the same, all the way down to the level where work actually gets done. We do this, not because the change is so complicated that nobody but us can understand it, but because all through school, and most of our work lives, we’re taught to break problems into parts, solve them, and assemble all the parts to get the whole. The only problem is, it doesn’t work with groups of people (ie systems).

Systems are not the sum of their operations. When people interact, they become something more. They become all their parts, combined with all their interrelationships, their interactions, their goals, and their needs. A system cannot be simply broken down. It must be addressed as a whole.

Every human system optimises itself. Your organisation is optimised to get the results it gets today. If you don't like the results, the system has to change. Before the system can be reliably changed, it needs to be understood, as a whole. After all, it’s your job to make the whole system function. Often, the cause of the problems isn't what we expect.

The most frequent cause of problems is incentives. This is because it's really difficult for incentives and goals to be perfectly aligned, across time. Even if you get them right to start with, both the incentives, and the system, drift. Your system has an overall goal. The more you break that goal down into parts, and incentivise people on those parts, the more chance of conflict between incentive and goal, and the more places there are for drift to happen.

An Illustration

Let’s look at an example software product company. Congratulations, you’re the CEO. Your goal is sustainable profitability. You identify different things the business needs to do to achieve it.

Part of profitability is sales. You hire people to sell, and because you’ve always done it this way, you incentivise them to sell. So they sell.

Part of sustained profitability is a product with features people want. You hire people who understand products to ensure your product is coherent, desirable, and usable. They’re incentivised on NPS.

Part of sustained profitability is a sustainable product. So you hire people who understand software development and maintenance. They’re incentivised on performance, security, and bug counts.

You’ve identified all the differerent components you need, and you’ve told people what to focus on. So far, so good.

After 3 months, you notice that you aren’t getting the results you expected. People are arguing and fighting over what to do, and why to do it. And they aren’t delivering a sustainable product that’s enticing to new and existing customers. Why?

You’ve told one group of people to sell to new people. They push for new features, new products, and new widgets, in order to sell to new people. Whether this is right for the business doesn’t matter. They’re being rewarded for sales, so they’re going to find ways to sell.

You’ve told another group to keep existing customers happy. They push for product stability, performance, security, customer service, usability. They’re rewarded for retention, so that’s their focus.

The software development team also has needs. They want an environment that isn’t awful to work in. They push to maintain the product, ensuring it’s clean, simple, and as good as it can be.

“Tell me how you’re going to measure me, and I’ll tell you how I’ll behave.”

(Many/most) People put their own needs and drives over those of their organisation. Now that you’ve incentivised them, the larger goal is irrelevant. Your teams, which you’ve incentivised in order to get them to work toward the long-term goal of the business, are at loggerheads. Why? Because they don’t share the same goal(s). Each area is being measured in its own way, so each area optimises for the way they’re being measured.

If this isn’t what you want, step back and recognise that your product, people, and customers all have different needs. Understanding this, and working with people who understand those needs, is key to making your organisation effective.

Ditch the incentives. Identify the goal and work with your team to figure out how to achieve it, together.

What next?

OK, you’ve gotten rid of the incentives. You’re back to having a single goal, and encourage people to work together. All your incentives are gone. Things should improve, right?

Fast forward 3 months.

Your teams are still in conflict. They talk to each other, they appear to have healthy dialogue, but both your product and development people are unhappy. At your weekly leadership review, you bring it up after you review the latest sales figures. Why aren’t things improving?

It turns out, you haven’t gotten rid of your incentives. You’ve just moved from explicit to implicit incentives.

You don’t capture metrics on retention, bugs found in production, usability, scalability, etc. These are operational metrics, anyway, so aren’t of much interest. The sales numbers, however, are of interest. When those drop, you ask questions. When they go up, you celebrate.

Whether you realise it or not, your actions impact people’s behaviour. You dedicate significant, visible, time to sales. In the eyes of everybody in the organisation, this puts sales at the top of your priorities, no matter what words you use to try to put everybody on equal footing.

The result of your treatment of sales is that the product team focuses on putting out new features. Good product development practices get dropped in favour of new features. The software development team focuses on putting out new features. Maintainability and sustainability take a back seat to the new feature sales are asking for. Your product people and your software people know that this is unsustainable over the long term, but it’s clear what you want, from your actions, so they deliver, against their better judgement, an increasing suite of features that sales pushes.

Over time, more and more problems will crop up in production that never used to be there. Bugs, errors, performance issues, inconsistent user experience, and more. You tell people to focus on fixing these things, every week, after your team reviews the latest sales figures.

What’s going on?

Incentives can destroy your company. Whether they’re implicit or explicit, the result is the same — division and conflict. Your system has a stated goal. If incentives run counter to your explicit goal, then your explicit goal will lose, every time.

If retention and sustainability are as important as sales, give them a voice at the table. Ask your team how to represent those things, and welcome questions about them. Ensure that the things that matter have a share of your attention that puts them on equal footing as the exciting things. It’s OK if you don’t know how to do this.

Let your team involve their teams in figuring it out. Encourage those teams to talk to people in different areas. If they find conflicts, encourage them to resolve them. If they find intractable conflicts, encourage them to come to you. When they come to you, don’t solve the problem for them. Help them see the bigger picture, and how the conflict contributes to it. Help them understand the trade offs of their choices. Help them figure out, for themselves, what to do. Let them make mistakes. We all do, and we all need permission to be imperfect, if we want to get better, take risks, and learn.

Working as a whole, people will surpass anything you could have gotten them to do by treating them, or their teams, as independent components.