Beyond Measure: The Big Impact of Small Changes

Transcript

Rachel Salaman: Welcome to this edition of Expert Interview from Mind Tools, with me, Rachel Salaman.

The culture of organizations is so important. You can feel it the moment you set foot in any office. It's like a pervasive mood that affects the entire workplace, for good or ill. We've all been in places where employees are clearly engaged and excited about their work, and most of us have seen the opposite, too, when people seem grumpy and bored, like they'd rather be anywhere else.

It's not hard to imagine which kind of culture delivers the best results, so how do we go about creating that positive, energized culture? My guest today is business leader Margaret Heffernan, who's the author of several books, including "Willful Blindness." She believes cultures can be changed through small, everyday thoughts and habits. She's given a TED Talk on this topic and has expanded on that in a new TED book, called "Beyond Measure: The Big Impact of Small Changes."

Margaret says her new book is aimed at everyone who wants a better place to work, from the CEO to the janitor, so, when I met her in London recently, I asked her if that means culture change is everyone's responsibility.

Margaret Heffernan: Yes, absolutely. The constant thing I find in organizations, and I have found for as long as I've been working, is the people at the top sit there saying, or at least thinking, "Why aren't people bringing in more ideas? Why aren't my people more creative? Do I have the right people? I'm not getting enough from all of these people that I've employed." The thing you always hear within the workforce is, "Why is stuff so slow? Why can't I do more? Why is it so dull and boring? Why are we so cautious?" So you have this stalemate, where the people at the top want more ideas, which they aren't getting, and you have the workforce that has far more capacity than is being used. And I think that really comes to a head in culture, where culture is on some level the accretion of millions of small acts and therefore susceptible to small acts on anybody's part.

The other thing I feel quite strongly is that companies, any organization, because I'm talking about non-profits as well as for-profits or public service or whatever, organizations are non-linear systems but we manage them as if they were linear systems. So every senior exec I work with talks about cascading information down, like it's a very straight line from the top to the bottom. Well, by the time it gets to the bottom, all of its energy has been dissipated and all of the messages have been mangled beyond all recognition. So this is not an effective way to communicate.

I suppose I share much of the impatience that the workforce shares, that our companies aren't smart enough, energetic enough, creative enough, constructive enough, stretching enough, challenging enough. And I'm really quite passionate about the idea of liberating the ideas, energy and enthusiasm that are locked up inside them.

Rachel Salaman: In your book, you talk about creating a "just culture." Why "just"?

Margaret Heffernan: Well, this is not my phrase; this is a phrase that I learned when I started doing some work with the aviation industry.

When I wrote "Willful Blindness," I was very focused on the mistakes we make that everybody can see but nobody talks about. And I would say that remains a gigantic systemic challenge for every organization I've ever seen. In the course of talking about that book, I encountered some people from aviation, who told me how they had encountered exactly that problem and how they dealt with it. It started with an air crash in 1972, terrible accident where a plane took off from Heathrow, almost instantly crashed, and everybody died.

And when they did the investigation into the crash, it turned out that it was really the concatenation of many small faults, every single one of which many people had known about. They understood that they had not to punish a couple of people, not just to fix one or two things – they needed a fundamentally different approach to truth telling in their organization, and they needed to create an environment in which people would not be punished for drawing attention to things that were sub-par.

They called that "a just culture," and they did so because it worked on the assumption that everybody comes in to work to do a good job, and on the promise that nobody would be punished for speaking out and nobody would be punished for mistakes as long as there was no indication of malice or incompetence. The more work I did with them on this, the more I thought, "Isn't that interesting. In 1972, one industry figured out something that if, for example, the financial services industry had figured out would have saved millions of people a lot of grief."

I wanted to call the book "Just Culture," which lots of people liked, but my American editor did not, so we ended up calling it "Beyond Measure" instead. But I think we need to think hard about how any organization creates and sustains a just culture, because I think there's a huge wasted opportunity if we don't ask and address that question.

Rachel Salaman: In your book, you say that creative conflict is key to achieving a just culture. The idea of disconfirmation is particularly interesting here. Can you tell us what this is, perhaps using the example of Herb Meyer of the CIA?

Margaret Heffernan: So Herb Meyer is a really interesting guy who I met several years ago, and he was second in charge of intelligence under the Reagan administration. And so he used to go to weekly intelligence briefings and he would always be told the same old thing, which is, "Cold war is going just fine, balance of power is kind of stable, May Day Parade the same this year as last year." And he had a very profound insight, which is he thought, "If that's all we're hearing and seeing and there's no outlying data that's saying anything else, there has to be something wrong because there's always outlying data." So he would say, "I have a hunch this isn't the full picture," and, even if you're second in charge of intelligence in the Reagan administration, having a hunch doesn't get you very far. So he asked a really outstanding question, which was, "Okay, if I were right and you were wrong, if I were right that there were problems inherent in the Soviet system, what would we expect to see?"

So they spent about 10 minutes brainstorming, what would an unstable Soviet Union look like, and he said, "Okay, so send that list out to the spy networks and let's see what happens, because the worst that happens is nobody sees any of it, in which case my hunch is wrong and I'm more comfortable." The first piece of information that came back was a meat train in the Ukraine had been ransacked by peasants. The Red Army had been called out to quell the dispute, but then somebody had called the Red Army and said, "Go home. Let them have the meat."

Now that's not what you see in a really stable economy and, in fact, that whole year they started seeing more and more of the signs that Herb had surfaced.

Now, just yesterday, I was in a board meeting where everybody was insisting there was only one possible strategy. And it's really interesting because the group think was so profound, the range of options was so narrow, the defensiveness was so pervasive, that you weren't really getting any value out of the 15 people who were in the room. Nobody was allowed to challenge, nobody was encouraged to elicit what the trade-offs really were and what the alternatives might be. Now, I've run businesses for the last 20 years. I've never seen a business decision where there was only one possible decision. There are always options and blends and spectrums of choices, and I think a really fundamental job of leadership is to create the environment in which those can and will surface, because, otherwise, you're going to be blindsided.

So seeking disconfirmation is one way of making sure you aren't blindsided, and does that create conflict? Yes, conflict is how organizations think, through argument and debate, and, if you aren't having any argument and debate, then you're not really thinking.

Rachel Salaman: And you made the point that questions are the heart and soul of constructive conflict.

Margaret Heffernan: Right.

Rachel Salaman: You list a few in your book, that you call "perennial," including, I'll just say two of them, "Who needs to benefit from our decision?" and "What else would we need to know to be more confident in this decision?" What are some of the other ones, and what advice would you give leaders who want to make the most of asking questions?

Margaret Heffernan: Well, I think there are a lot of things. I mean, first of all, I think a key job of leaders is to ask great questions. And I think one reason for that is because, very often, what people in the room are doing is trying to second guess what the leader wants to hear. So it's pretty fundamental that the leaders should not give any sense of what answer they want. They should get a sense of exploring, because nobody's going to explore if they don't. I think, in really crucial decisions, it's very fundamental to appoint people to represent certain perspectives. So you might ask somebody to represent customers, somebody to represent distributors, somebody to represent marketers, whatever. You might ask somebody to be the devil's advocate, to give the reasons why not. Quite important to rotate that role so people don't get tuned out. But you want people to get into the habit of imagining the consequences of any decision from 360 degrees, that you want as much perspective-taking as you can muster, and you also want to understand, when you've made the decision, what are the signs going to be if it's working the way you had anticipated or what might the signs be that it's not working.

Now, almost nobody does that last step, but the reason it's valuable is because it's what psychologists call "priming." It makes it more likely you will see the warning signs if they start to emerge. It also makes it more likely that you'll see the confirming signs if they start to emerge, but particularly if you see signs that it's not working out the way you thought, it's much easier to go back and say, "You know those signs we said we'd see if it wasn't working? This is what I've seen." That is a much easier conversation to initiate than, "That decision we took – I think isn't working," which most people don't feel they can say. And even fewer people feel that they can say, "I think I was wrong about that. Let's revisit it." I mean, they ought to be able to but mostly they can't.

Rachel Salaman: In the book, you talk about how you champion the idea of learning from mistakes. I love the anecdote about the Black Book of Torres, the vineyard.

Margaret Heffernan: Yes.

Rachel Salaman: Now, can you just tell us about that?

Margaret Heffernan: Yes. So Torres is a vineyard and they have this habit, or tradition I guess, of having the Big Black Book of Mistakes, and everybody has to write in it. So, for example, the CFO at one point made a gigantic mistake hedging currencies and he had to write in there. It served several purposes. One is to make sure that the people who made the mistakes remember them, and the other is they make new recruits read the book, which both shares the learning but it also sends a really powerful message, which is that it's okay to make mistakes as long as you learn from them.

When I was running software companies in the States, I had a lead investor who used to say to me something similar, which was, "I don't mind you making mistakes, Margaret, as long as you don't make the same one twice, because that will show you're not paying attention."

The way I think about it is the way we learn to walk was by falling over. If we'd fallen over the first time and thought, "Right, I'm not doing that again," that would be silly. You know, you have to keep trying, you have to keep pushing the envelope, but you also have to keep learning that there are better ways to get started than others.

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Rachel Salaman: Another chapter of your book is about social capital.

Margaret Heffernan: Yes.

Rachel Salaman: What do you mean by that?

Margaret Heffernan: So social capital is a term that was coined by sociologists when they started to identify the characteristics of communities that were particularly resilient in times of stress. And there are all kinds of ingredients to it around trust, around people really knowing each other, around generosity and reciprocity, and I became very interested in the idea that if that was what made communities robust, it might also be what makes companies robust, because companies, organizations, are communities of a kind.

And as I started studying this, sort of using this lens, a whole bunch of things popped out at me. One was, when I started looking for social capital, I found it, and the other was that when you talk about it as social capital, CEOs and boards take it really seriously in a way that, if you start talking about interpersonal relationships between co-workers, they don't.

Perhaps the most interesting thing to me was the second book I ever wrote, which was not published in the U.K., was looking at the rise of women who own businesses in the U.S., which a vast body of data showed tended to be more successful despite less investment than businesses on average, I mean by a staggering margin. And I would say now that, actually, what made the difference was the social capital that those female entrepreneurs built inside their businesses, and I would dare to suggest that social capital may be more productive than financial capital.

So I think social capital is something we have routinely undervalued. We've definitely under-invested in it. Many of the ways we run businesses specifically deplete social capital, and I think we need to sit up and pay attention to what it really can deliver. Fortunately there are some fantastic studies that map this in very granular detail, and that indicate that higher degrees of social capital lead to greater profits and higher degrees of employee engagement.

Rachel Salaman: In your book, you talk about some ways to gain social capital. Can you just share a couple of those now?

Margaret Heffernan: So one of the things, how do you build social capital? People build social capital by having richer relationships with each other. That takes time. It means you need to create the conditions in which that time happens or is allowed. Now, many people, myself included, would say, "Oh come on, that would just happen naturally," and maybe it should, but it doesn't.

When I was running my first software company in the States, I gradually realized that one reason we were stuck was because people in the company didn't know each other. They didn't trust each other. They didn't help each other. They were very individualistic. They were very task oriented. So information didn't flow. And there wasn't any malice, it just wasn't there.

So I'm very interested in companies that I've studied recently where they may synchronize coffee breaks, so people do get together. They're eliminating mugs on desks so that people have to be in the coffee room. They're eliminating eating at desks for exactly the same reason. And they're investing quite heavily in all sorts of whole mechanisms to make sure that people really get to know each other.

This may sound crazy, but the truth of the matter is companies don't have ideas, only people do, and people don't do their best work and learn unless they're in a climate of safety, where they feel they can trust the people around them. That will not happen if you don't help promote it.

Rachel Salaman: And you say that time compounds social capital. What exactly do you mean by that?

Margaret Heffernan: Well, there's a fantastic study that shows that how you use time in business is really powerful. And I'm always really struck, you know, we have CFOs and we have gigantic financial offices and stuff. We're really careful how we spend money, we're really sloppy how we spend time, which is interesting because we can make more money but you can't make more time. But we manage time very poorly.

Anyway, the experiment identified something I think we all know intuitively, which is there are two kinds of work. There's what we think of as real work, which is head down, hard thinking, hard writing, working spreadsheets or Slidex or text or whatever, but really hard thinking work, which is mostly quiet. And then there's everything else, which is meetings, phone calls, email, texting, and all that jazz. All that other stuff, of course, is hugely involved in the building of social capital, but what we tend to do is rather thoughtlessly mess this all up.

So there's a fantastic academic at Harvard named Leslie Perlow who did a really interesting study, where she said, "Look, what would happen if we separated them and we put rules in place about when quiet time work could be done and when all the other stuff could be done?" Several fantastically interesting things came out of this. First of all, in one version of the experiment, productivity increased by 65 percent. Now I can't think of anything you could do in most businesses that would improve productivity by 65 percent that didn't cost a penny. People also became very much more helpful to each other, and I think this is really profound, that once they knew the time they needed to do the quiet-time work was protected, they were much more generous the rest of the time. They felt less frantic and less harried and more able to think, and so they were willing to invest in and get a return from social capital in a way that, when all of this stuff is jumbled together, they felt they couldn't afford.

There are very few companies I know that would conduct an experiment as extreme as Perlow's, but I have run into a lot of companies that have rules, for example no meetings before 10am. So if you have a big chunk of work you want to do, you might get in early and feel confident you weren't going to get interrupted until 10. I know of other companies that have said, "No meetings on Friday afternoon" or "No meetings past 4pm."

So there are lots of different ways you can manage time, but I think the identification of two different kinds of work and synchronizing them for people is astonishingly powerful. Now, even Perlow had noted that the people most resistant to this were managers, who deeply resented losing their power to interrupt. But I think it's also fair to say they had not appreciated how destructive that was.

Rachel Salaman: In your book, you also point out the benefits of working only 35-40 hours a week. How open do you find companies are to this idea, particularly when sometimes people's commitment is measured by how long they spend in the office?

Margaret Heffernan: Well, I think people are willing to pay lip service to the data that shows that, after about 40 hours a week, people aren't productive, but many, many corporate cultures still think if you're not here at 6 o'clock at night, you obviously aren't serious. I hope when they read the data about the long-term effects of a 55 hour week, in terms of cognitive loss, vocabulary loss, early onset dementia, depression, loss of creativity, I hope they'll start taking it more seriously.

I mean, we work people as though they are discardable and then we wonder why they're not more creative. Thinking is a physical act, we do it with a physical organ called the brain and, like all other physical organs, if you don't look after it, it will break. And many, many companies just break the machinery on a routine basis.

Now everybody thinks, you can't see your brain thinking so we think it's just an abstract thing. We know we can't run a marathon without practice but we think we can do marathon thinking, and it just can't be done.

Rachel Salaman: You talk about forced ranking in the book. What is this and why is it a bad idea?

Margaret Heffernan: Right, so forced ranking is a process that assesses all your employees, in most cases annually, in some cases twice a year, and forces you to rank them according to the top 10 percent, the bottom 10 percent, and everybody in between. The idea is the bottom 10 percent you encourage to find an alternative career quickly, the top 10 percent you give lots of leadership programs and opportunities and mentors and coaches and so on and so forth, and the middle majority you just kind of leave to get on with things.

This was a process hugely popularized by Jack Welch at GE and profoundly evangelized extensively by McKinsey, and probably practiced at its most extraordinary degree at Enron, where it was called "rank and yank." And the idea was that you created a Darwinian fight for survival, which would make everybody do their best and the best would rise to the top.

Actually that isn't how it works. First of all, you can rank any group of people and you're always going to find some are at the top and some are at the bottom, surprise, surprise. You don't have to be a genius to figure out that the safest place in this system is in the middle, so, if you do a good enough job, you'll be fine. So actually what you're promoting is really a pretty large amount of mediocrity. But, I think, in particular where it goes spectacularly wrong is in the top 10 percent; what it means is, if you need help, I have no motivation to help you, because if we're both in the top 10 percent and I help you, you might do better and I might get pushed down. So there's no way I'm going to help you and there's no way you're going to help me.

So, instead of increasing productivity, it actually makes more rigid the silos that already exist in organizations, and it absolutely destroys social capital because it means I can only look after myself, so I am motivated to adopt full time a "what's in it for me?" mentality. Now, at the same time, we do almost all of our work in teams and we talk about the value of creative collaboration, and yet we're doing that within a system that specifically militates against it.

Now, when I explained forced ranking to popular audiences, ie non-business audiences, people look amazed and just think, "My god, how can anybody run a company like that?" but the truth is about half of the Fortune 500 businesses do, more than half of the FTSE 500 run their businesses that way. I mean, McKinsey did a heck of a job persuading people that this nonsense was valid. Now, to be fair, a lot of companies are throwing it overboard, Microsoft did that about a year ago, after years of people saying it was the heart and soul of their creativity problem and their failure to innovate.

So forced ranking is one of those ideas that hugely appealed to the top 10 percent, because of course everybody believes in systems that glorify them, at the cost of demotivating everybody else.

Rachel Salaman: One of your sub-headings in the section on leadership is "Lead from where you are." What do you mean by that?

Margaret Heffernan: I was working with a senior team at a big bank last week and I was really struck that they all have ideas. Of course these are really bright, well educated, smart, energetic people, of course they have great ideas, but they were waiting for permission. And I would say, although they were quite high ranking executives, their relationship to the CEO was they were waiting for their homework to be marked, and I think that's preposterous. These are senior people in senior positions, they should just get on with it and wait to be told if they're doing something wrong. That's what leadership is about.

I define leaders, I guess, as people who think for themselves, and I think you can do that anywhere. You can do that in the post room. You can do it in your first job. You can do it as a mid-level executive. You can do it anywhere.

I'm really shocked by the degree to which most people in organizations don't think for themselves. I'm shocked by the degree to which really senior people wait for permission to do what they think needs doing. And I think that most of our organizations would be hugely enhanced if, when people had good ideas, instead of waiting for permission or politicking like mad to see if they might get it through some Heath Robinson system, they just took responsibility for their own actions.

Now Deming, the great quality guru, used to say the holy grail of accountability is a culture in which nobody has to ask permission to take responsibility, and I think we're a very long way off from that but I think we can get there when we create the kind of cultures in which people feel, as they do in a just culture, "If something's not working, I'll fix it" or "If something's not working, I'll tell someone, but it's my responsibility in every single job description, from the janitor to the CEO, to say if I see something wrong I'll try to make it better."

Now imagine the creative energy that would be released if people felt that way. But they don't. They mostly feel, "It's not my job. It's not my place. Someone will do something," and that's how you end up with this stalemate we discussed at the beginning, where people have ideas they don't act on and leaders are wondering what all those smart, expensive people out there do all day.

Rachel Salaman: So what would the first steps be, then, for people who want to change the culture of their organization for the better, whether that's senior leaders or a regular employee?

Margaret Heffernan: Well, I think it depends on what they see and where they are, but I think the first thing is build social capital. Be a network node. Build relationships, because that's how you know what's going on and knowing what is going on is where you get ideas from. Try stuff – don't be afraid, you can do all sorts of low-level experiments. Look after your brain so you come into work refreshed, and keep filling it up with ideas and influences from other industries, from other walks of life. You know, we need well stocked minds which spend time in the world, because that's where great business ideas come from. So give yourself permission to let your mind wander, to let your creative instincts blossom. Find the allies with whom you can refine those good ideas, and give it a shot. And don't wait to be asked to do something which nobody knows is even in your head.

Rachel Salaman: Margaret Heffernan, talking to me in London. The name of Margaret's book again is "Beyond Measure: The Big Impact of Small Changes." I'll be back in a few weeks with another Expert Interview. Until then, goodbye.