If companies successfully marry new digital approaches with what we call “smart simplicity,” they can unleash the latent power of their technology and their people. Smart simplicity is built on the premise that companies are most productive when they harness the intelligence of their employees. Many of today’s most successful digital natives, such as Netflix and Spotify, deploy aspects of smart simplicity in order to run agile and productive businesses.
Smart simplicity is built around six “smart rules” that derive from game theory, sociology, observation, and proven application. They allow employees to make critical judgments, balance complex trade-offs, and come up with creative solutions to new problems. Simply stated, the rules are as follows:
- Understand what your people really do. To respond intelligently to complexity, people must really understand each other’s work: the goals and challenges they have to meet, the resources they can draw on, and their constraints. This kind of information can’t be found in formal job descriptions; you can learn it only by observing and interacting.
- Reinforce integrators. Conflicts between front and back offices and between the corporate center and country operations are common. Often, the response is to create some sort of coordinating unit—a middle office or regional layer. But that just turns one problem into two. A better response is to empower line individuals or groups that work effectively across organizational boundaries. In almost any unit you will find one or two managers—often from a particular function—who already interact with multiple stakeholders. These people can act as integrators, helping teams obtain from others the cooperation needed to deliver more value.
- Increase the total quantity of power. Usually the people with the least power in an organization shoulder most of the burden of cooperation and get the least credit. When they realize this, they often withdraw and hide in their silos. Companies need to give these people more power so they will be willing to take more initiative, but without taking power away from others—which can happen in reorganizations, for example, when one part of the company gains power at the expense of another.
New sources of power can be created around expertise building and knowledge transmission. For example, in a matrix organization of project managers and line managers, project managers can assess and reward project- related performance, while line managers can decide who gets to be trained in advanced management skills.
- Increase reciprocity. A good way to spur productive cooperation is to expand the responsibilities of integrators. Making their goals richer and more complex will drive them to resolve trade-offs. And they won’t necessarily need more resources to go with their new responsibilities. It’s actually often better to take resources away. A family with five television sets, for example, doesn’t have to negotiate over which program to watch because everyone can watch the show that he or she prefers.
- Extend the shadow of the future. The longer it takes for the consequences of a decision to take effect, the more difficult it is to hold a decision maker accountable. For example, by the time a multiyear project is completed, many of those involved at the launch will have moved to another job or location. To paraphrase game theorist Robert Axelrod, the “shadow of the future” does not reach them.
One way companies can extend the shadow of the future is by increasing the frequency of output performance reviews. A telecom systems manufacturer found that cooperation between its hardware and software engineering units increased when it performed compatibility testing every two weeks instead of every six months.
- Reward those who cooperate. In some activities, such as R&D, there is such a long interval between cause and effect that it’s impossible to set up direct feedback loops. In such cases, managers can close the feedback loop by explicitly introducing a penalty for people or units that fail to cooperate and increasing the payoff for all when they do.
Chosen excerpts by Job Market Monitor. Read the whole story at bcg.perspectives – The Smart Solution to the Productivity Paradox