Micro Management, Tough Times, and Trust

Paul McCord has an excellent post at the Sales and Sales Management Blog on the downward spiral micro management creates. Although the focus of his piece is on sales, what Paul has to say applies to the effect of micro management on productivity throughout the organization. An excerpt:

As morale declines and sales lag even further, senior management gives more and more directives, demanding greater control and more ‘accountability’ on each employee’s part.  When today’s demands don’t create the desired result, they’re added to or changed tomorrow, spiraling in a seemingly never-ending series of demands and threats, each more ominous than the last.

And sales plunge even faster than before.

Once management panics it seems impossible to stop the downhill flow of negative consequences.  The more pressure management feels, the more they try to spread the pressure downward, believing they can demand production via force.

The process inevitably produces nothing other than a bigger hole from which the company must emerge.

If micro managing is such a negative force, why do managers resort to it?  The root cause may be panic, but the belief they need to micro manage their team is based squarely in a distrust of their employees-a belief that their salespeople and managers aren’t working hard enough, that the sales team doesn’t care enough, that their team is intrinsically lazy and is only looking for the low hanging fruit, not willing to get dirty and dig for the hard to find business.

I agree that micro management is much more common when there is a lack of trust in the organization. This tendency is especially obvious when new management is brought in to “solve the problem”. By definition the new manager has no history with the existing employees, so the natural tendency is to assume the problem is attributable to them. This is a difficult perception to turn around until successes start happening and the credibility of the existing employees is established. It may never happen if the manager believes the successes are attributable to his or her micro management.

It’s not just an issue of trust, however; micro management can be a problem during hard times even when there is trust in the organization. Demands for information are one form of micro management.  To solve problems information is needed, so during hard times the demand for information from upper management increases. The only way for middle management to satisfy that demand is greater involvement in the work flow. This is not a trust issue; upper management is trying to do their job and solve the problem, and they need information to do it. Unfortunately, an inherent side effect is the time and resources spent gathering and communicating the information are time and resources diverted from other more productivity activities.

Another cause of micro management is the tendency of managers to return to their comfort zone. During tough times, good managers want to contribute to the solution. If a manager has experience doing the work their employees do, it’s very tempting to satisfy the urge to contribute by taking a more active role in that work. For example, if an employee negotiates a deal and the manager tweaks it to make it a little better for the company, the manager feels like he or she has added value. It’s very difficult for managers to stick to their jobs when the pressure is on.

A Modest Proposal to Reform Management Compensation

Nassim Nicholas Taleb has a post on incentive compensation in Financial Times which describes the problem with the typical bonus plan. Here’s an excerpt:

Take two bankers. The first is conservative. He produces one annual dollar of sound returns, with no risk of blow-up. The second looks no less conservative, but makes $2 by making complicated transactions that make a steady income, but are bound to blow up on occasion, losing everything made and more. So while the first banker might end up out of business, under competitive strains, the second is going to do a lot better for himself. Why? Because banking is not about true risks but perceived volatility of returns: you earn a stream of steady bonuses for seven or eight years, then when the losses take place, you are not asked to disburse anything. You might even start again, after blaming a “systemic crisis” or a “black swan” for your losses. As you do not disgorge previous compensation, the incentive is to engage in trades that explode rarely, after a period of steady gains.

Taleb’s solution is radical:

We trust military and homeland security people with our lives, yet they do not get a bonus. They get promotions, the honour of a job well done and the disincentive of shame if they fail. Roman soldiers signed a sacramentum accepting punishment in the event of failure. This is prompting me to call for the nationalisation of the utility part of banking as the only solution in which society does not grant individuals free options to look after its risks.

I like the military analogy, but I think Taleb goes further than needed in eliminating bonuses entirely, and I think he doesn’t go far enough when he limits the proposal only to banking. Here is what I propose for all managers of public companies (or private ones which rely on public support, for example, a privately held bank).

1) Your base pay is limited to it’s military equivalent:

2) The rest of your compensation is in the form of whatever bonus your company thinks is appropriate – no mandated limits or performance criteria. However, the bonus must be paid in cash, and it gets paid into a federal trust fund.

3) After five years, the trustees compare the shareholder equity for the year the bonus was paid with current shareholder equity. If equity is the same or has increased, the bonus is paid. If shareholder equity has declined the bonus is forfeited and used to offset costs of administering the trust and then for some good purpose (education, or unemployment benefit funding). You don’t have to stay at the company to get the bonus.

This approach will cause managers to be thinking about values five years out, which should be a long enough horizon to avoid the problem Taleb describes. It also encourages managers to control employees engaging in risky actions (e.g., traders), and to move on if they think the company is taking excessive risks.

There are plenty of potential objections, but I think the most serious one is that some risk taking often produces real long term rewards, and this approach will dampen productive risk taking in public companies. That’s true, but I think it’s mitigated by the fact that private companies and partnerships will still be around to take big risks, and to provide opportunities for those who can’t wait five years for their reward.

Why I Don’t Promise to Keep Secrets

When someone starts off with, “Between you and me…”, “In confidence…”, “Off the record…”, etc., I stop them, immediately, and tell them this story.

Back in 1993 I was a middle manager at Home Savings of America, managing a group of income property workout officers. I was based in Los Angeles, and some of my direct reports were in New York. On one of my trips to New York, a peer manager based in New York who also reported to my boss took me aside and said she would like to talk to me about a problem, but that I had to promise to keep it in confidence.

I agreed. Everybody likes a secret, and being taken into someone’s confidence is flattering. It developed that one of my officers disagreed with her handling of some issues, and the dispute had ended with some very inflammatory comments by my employee which clearly fell in the category of sexual harassment.

If you work for a company of any size you have been through sexual harassment trainings (probably more than once), and pretty much everyone now knows if this sort of thing occurs it gets reported to the Human Resources department, end of story. But, those guidelines were not in place in 1993. I also knew that the proper handling of this would have been for the woman to report it to our boss, but I also knew why she didn’t. Our boss would have handled the problem with a hammer, and the New York manager was hoping I would take a gentler approach to solving the problem.

Which I did, starting with a strong talk with my employee which left him badly shaken and contrite, and an apology from him to the woman he harassed. I followed up a few weeks later with the New York manager, and she was happy with the result. I was feeling good.

Until a week later, when my boss called me into her office and (justifiably) ripped me a new one for leaving her out of the loop. It seems the story was just too good for the New York manager to keep to herself, and the people she told thought it was too good to keep to themselves, and eventually the story made its way to my boss.

If a secret is so compelling it needs to be a secret, it’s so compelling it will eventually come out. Now, when someone starts to tell me a secret, I stop them and tell them that I will act as I see appropriate, which may mean disclosing the secret. I share the above story with them. Almost always they tell me anyway, and I am free to take the appropriate action without tying myself in knots trying to preserve confidentiality.

Lumpers, Splitters, and Decisionmaking

There are two kinds of people; lumpers, and splitters. Lumpers look for commonalities, and lump things into groups. Splitters look for differences between things, and treat each individually.

For example, you, Ernst, and Ralph are looking at a toy poodle, a labrador, a newfoundland, a sharpei, and a mastiff playing in a dog park. You ask them each to break the dogs into groups.

Ernst says there is just one group – they’re all dogs. Ernst is a lumper. You press him, and he comes up with this group:

Color	Dogs
White	Toy Poodle
Black	Labrador
	Newfoundland
Brown	Mastiff
	Sharpei

You press him some more, and Ernst identifies this group:

Size	Dogs
Large	Newfoundland
	Mastiff
Medium	Labrador
Small	Toy Poodle
	Sharpei

Now it’s Ralph’s turn. Ralph says there are no groups, all the dogs are different. You press him, and Ralph comes up with this:

Color, Size	Dogs
White, Small	Toy Poodle
Black, Medium	Labrador
Black, Large	Newfoundland
Brown, Small	Sharpei
Brown, Large	Mastiff

Note that, although Ralph has identified categories, each dog has his own.

Neither of these approaches is wrong – you need both approaches to make effective decisions. For example, an extreme lumper will not be effective at working out loans, because he or she will offer the same modification to every borrower, and the same modification will not work for every borrower. An extreme splitter will also be ineffective, because every modification will be customized for each borrower, and the time that takes will result in few modifications being completed.

The error lumpers make is the failure to identify relevant differences. The error splitters make is to identify differences which are not salient, encumbering the decisionmaking process.

Ideally, what you want is to identify the salient differences between borrowers (a splitter skill), and group the borrowers according to their salient differences (a lumper skill) so similar modifications can be offered to the each group.

Obviously, people can put on different hats and function as a splitter some of the time and as a lumper on other occasions. I do believe, however, that people have a preferred mode.

These ideas are drawn from Scott Page’s excellent book, The Difference, which I highly recommend.

Are You Consistent Enough to Manage at Wal-Mart?

From Carpe Diem:

Charles Platt (picture above) is a journalist, computer programmer and author of over 40 fiction and nonfiction books and was a senior writer at Wired magazine. Charles moved recently from being a senior writer at Wired magazine to an entry-level position at Wal-Mart, "a company reviled by almost all living journalists," after he read the book "Nickel and Dimed," in which Atlantic contributor Barbara Ehrenreich denounces the exploitation of minimum-wage workers in America…Here are some excerpts from his BoingBoing blog post "Life at Wal-Mart":

Several of my co-workers had relocated from other areas, where they had worked at other Wal-Marts. They wanted more of the same. Everyone agreed that Wal-Mart was preferable to the local Target, where the hourly pay was lower and workers were said to be treated with less respect (an opinion which I was unable to verify). Most of all, my coworkers wanted to avoid those “mom-and-pop” stores beloved by social commentators where, I was told, employees had to deal with quixotic management policies, while lacking the opportunities for promotion that exist in a large corporation.

No surprise that better pay, being treated with respect, and opportunities for promotion would influence people’s employment choices. But, how often do we inflict quixotic decisions on the people we manage? It’s important to people that management heads consistently in the right direction. If Wal-Mart can get it right, certainly the rest of us can too.

What to Do When You’re Dissatisfied : Part III – Voice and Loyalty

What should you do when you’re unhappy with a situation? You have three options. In previous posts I’ve talked about reframing your attitude so you’re no longer unhappy, and about exiting the situation. Your third option is to try to change the situation by voicing your concerns.

This option comes into play when the problem is bad enough that you can’t change your attitude towards it, but the overall situation is good enough that it’s worth trying to improve it. Also, you need to believe there’s a realistic chance the situation can be changed.

By staying and trying to make things better, you are being loyal to the organization. Too often people who object to the status quo are perceived as being disloyal, when in fact the opposite is true. The most loyal employees are the ones who don’t exit, and who try to make things better by giving voice to the issues.

How to make change happen is a huge topic and way beyond the scope of this post, but if you want to get started a good place to begin is the About.com article, “Disagree Without Being Disagreeable.”

Differentiating Yourself

Almost always when you are trying to reach new ground (obtaining a new client, seeking a promotion or additional responsibilities, getting a better job) you are competing with others. How do you distinguish yourself from the pack?

Here’s a list from Andrew Sobel’s Making Rain: The Secrets of Building Lifelong Client Loyalty:

1. Do It Faster
2. Do It Better
3. Be Different
4. Be Better Prepared
5. Reframe the Problem
6. Provide Unique Information
7. Establish an Emotional Connection
8. Be Readily Accessible
9. Listen and Learn Fast

I think that pretty much covers it. I highly recommend the book. Here are some links to other work by Andrew:

4 Ways to Deliver Value to Your Clients

Fair Game: 8 Principles for Making Your Competitors' Clients Your Own

Winning a New Client When There Is an Incumbent