The Real Options and Collaborative Leadership communities are starting a new series of conferences called "2020 Vision". The idea behind these conferences is that you imagine the world in 2020 and then work out what we need to learn in order to achieve or avoid that vision.
Even before the conferences have started, a new and interesting framework for leadership and management has started to emerge.
What is the role of a leader in today's dynamic environments? Does traditional management provide value in a market that requires agility and adaptability? In this article, we propose a leadership and management framework that fits well with the current need for innovation and distributed decision-making.
As a starting point, let's consider Chris's recent experience.
"I have always avoided the leadership space because I'm not convinced we need leaders. A recent discussion with Sue McKinney and Pollyanna Pixton helped me realize that my problem is with leaders and not with leadership; similarly, managers not management. My problem with managers and leaders is that everyone talks about them making decisions. This is something I'm uncomfortable with because they do not necessarily have the best knowledge or information to make those decisions. Realizing that leadership and management were things that everyone in the organization should be engaged in was the real break though for me."
Using this experience, we propose a framework in which everyone is responsible for different leadership and management responsibilities; different depending on their role in the organization but responsible for leading and managing in their spheres of influence.
How Do Leadership and Management Differ?
At the higher levels in an organization, leadership shows the path, presents the options for direction, and defines the boundaries for the decisions that teams will make at the various spheres of influence. Recent work from Dr. Dachner Keltner at the University of California, Berkeley, "cites research showing that power leads people to process information in shallower ways and to make decisions that are less carefully reasoned" [BusinessWeek, Business@Work: Toxic Bosses, August 14, 2008]. Effective leaders push decision-making to the edges of the organization where there the available information is more relevant, available, and real-time. Such leaders focus their attention on defining the "what" that their teams are to deliver rather than controlling or defining the "how".
Management is the guardian of the process. All organizations need agreed processes to help them function efficiently and effectively. Management facilitates the creation of the agreed processes and then acts as guardian to ensure that they are not broken, either by a change of context or gaming by those operating the processes. In this role, management does not make process decisions but to facilitate the creation of the process and then identify when the process needs to be upgraded. One of the primary roles of management is to avoid failure of the system, in other words, risk management.
Given these roles, how do leadership and management combine to create a culture that unleashes talent and innovation? Using our proposed model, leadership defines the vision for what needs to be delivered and management ensures the capabilities to deliver.
For example, let us consider a critical software development project. Leadership considers the organization's needs and establishes the results the project should achieve. As the project team decides how it will organize and operate to deliver the results, management looks at the prescriptive behaviors of Kanban, Scrum, and Lean and determines how these will be used and improved to facilitate the team's delivery.
Leaders and Managers
In this light, we can look at the functions of leaders and managers in organizations.
Leaders are outward looking. They look beyond the current system.
Leaders facilitate the creation of visions within the global marketplace through collaboration. They bring people together, those with interest and passion around an issue or initiative, create an environment to foster the flow of ideas, inspire the conversation and stand back, letting the group work. The team will make the decisions, set the agenda and pace, as the passion of the group emerges. A leader checks in regularly, NOT to collect status, but to see if there are any obstacles they can remove for the team. Teams own the implementation of the vision and its evolution. Leaders listen and if the path diverges, ask the question: "What is the value of this path to the organization?"
Managers are inward looking. They are studying the current system intently.
Manager of a system cannot be part of the system otherwise they will not have the objectivity to identify a problem. Project managers should be far enough from the project to critically observe it. They cannot do this if they are making decisions within the project. Similarly project managers of projects in the value stream may struggle to observe the value stream from afar and as a result managers are needed for the value stream. Although a project may feel it is performing at the appropriate level, a dispassionate observer of a number of projects may identify performance above or below the others which identifies and opportunity to learn how to improve the process. Rather than a hierarchy of authority, management should consist of an overlapping set of responsibilities.
Risk Management
Managers are like the "Catcher in the Rye." They should stand outside the rye by the edge of the cliff and prevent anyone from running off the edge. Obviously collaborative teams help the manager because they can warn the "Catcher" that someone is running toward the edge.
Managers should observe the process and identify risks and issues inside (endogenous) to the system. Risks are things that might go wrong. For risks, the manager should identify how much warning will be given before the risk materializes, and how long it takes to mitigate the risk. They should also identify the warning signs. If the mitigation takes longer than the warning time, they may want to mitigate that situation by doing enough work to bring the mitigation within the warning period. In order to identify early warning signals, managers will benefit from a proper study of control systems (Butterworth, Chebychev, Nyquist) to identify that the system is becoming unstable. Managers are responsible for the risks internal to the system. When a system is failing, managers should facilitate the creation of new agreed processes.
Leaders are looking at risks that are outside (exogenous) to the system. They are watching for disruptive technologies or waning markets. Rather than deciding whether a risk is significant or not, leaders should make the system aware of them. Leaders may decide to invest in options to allow the system to respond to a risk.
Team Dynamics and Conflict
As teams form, before trust is built between them, it seems people withhold information. This leads to conflict or failure of the team. (Failure is not always a bad thing. Remember that most effective learning is done through failure.) Eventually the team begins to trust each other, constantly sharing what information the other members need. From a game theory perspective, information hiding is the behavior individuals or factions will take to win, it is known as "The Strategy of Conflict." Eventually the system fails and the participants in the game start to share information. As they learn, participants ensure that other members of the team have the information they need. In other words, they collaborate. Collaboration is the emergent behavior of the prisoners' dilemma. This behavior can be summarized as forming, storming, norming and performing. This is the natural life cycle of a system in which participants can chose their own performance.
It is the responsibility of management with its inward focus to ensure that the system cycles to the end state of collaboration as soon as possible. In particular, management should ensure that the system does not get stuck in the underperforming "forming" state. Conflict avoidance result in delayed conflict which results in worse conflicts which in turn leads to further conflict. Managers should ensure that the system has effective conflict resolution skills and processes. Conflict resolution leads to more confidence in enter into a conflict sooner, this leads to less serious conflict which leads to more confidence and leads to more healthy conflict. Conflict is effectively information hiding which indicates an adherence to the strategy of conflict.
Leaders with their outward focus will seek to identify unresolved and unnecessary conflict with external agents: customers, suppliers, and partners. Once again, rather than avoid conflict, leaders seek to move the external agent to a collaborative state. Healthy conflict with customers, suppliers, and partners will lead to more healthy relationships with more beneficial information sharing. And will lead to strong collaborations, ensuring 'leading change' results.
Learning
The conscious competence learning model states that a system moves through four states.
- Unconscious Incompetence. You do not know what you do not know.
- Conscious Incompetence. Now you know you do not know something.
- Conscious Competence. You know something but you have to think about it, or "refer to your notes".
- Unconscious Competence. You know something and you do not have to think about it.
Moving from Unconscious to Conscious Incompetence is a revelation and may be quite shocking. The trigger for this tends to come from outside of the system, as such it is the domain of the leaders. The best strategy for handling this is real options because decisions are not made whether is something is going to happen or not, we just prepare for it.
Moving from Conscious Incompetence to Competence is the act of learning. Here the system seeks to find a way to do something. This is an internal process that should be handled by management who will seek guidance from leadership. Shannon information theory tells us that we learn most when the chance of failure is 50%. The best strategy for handling this is an "Agile" culture where failure is tolerated for the sake of learning.
Moving from Conscious to Unconscious Competence is a case of process optimization. Systems improve through repetition and by reducing the variance between the desired and actual outcome. In addition, in knowledge work, another effective strategy to accelerate learning between these states is to help others learn the material. This forces the teacher to find new metaphors for new learners which eventually can lead to a deeper level of knowledge. This deeper knowledge is only achieved if the learning is learner directed and not teacher directed. Teaching the same material with the same metaphors and examples does not improve insight. This aspect of the learning is inward facing and as such is the responsibility of management. This is best facilitated by the "lean" process.
Finally moving from Unconscious Competence to Incompetence is forgetting. Management should seek to avoid this. Knowledge in the Unconscious Competence state is tacit rather than explicit by it very nature. Information is contained within documentation whereas knowledge is contained in the minds of people. Management should ensure more people have that tacit knowledge and that they continually seek to spread the knowledge through collaboration. The ultimate expression of real option based learning is a learning organization. The key success factor for a learning organization is the behavior of management. Management should facilitate a learning process that facilitates a learning culture, one that rewards those who share knowledge and encourages those who hide knowledge to share it.
Dealing with Uncertainty
As leaders drive the innovation within the system, they will constantly push to defer commitments to allow them freedom in their choice of solution. This deferment of commitments causes uncertainty and stress for the management of the organization.
Once again, real options provides the best solution. Real Options provides a number of tools to address this issue. Most notably the last responsible moments which is another way of saying "options expire". Management will need to defer commitments by specifying the conditions upon which a commitment will be made. The will allow the monitoring of decisions to become part of a process that can be automated. This will mean that management will now be faced with bounded uncertainty rather than total uncertainty. Total uncertainty causes the "Must decide now" or "Need to control" behavior that results in management making decisions "Now!" rather than deferring them until more information is available.
Leadership thrives in uncertainly because it enables innovation thus unleashing the talent in the organization. People will innovate at the edges of uncertainly. Innovation is highly restive and not encouraged in repeatable or predictive environments. Thus, leaders must constantly temper chaos by asking questions that do not take ownership (by providing solutions) but keeps the visions connected to the purpose and to the global initiatives. Leaders inspire the possibility of the vision and the discovery of other visions by the teams.
Current Management and Leadership Theory
Much of the current Agile management theory is inspired by manufacturing (Deming, Goldratt, Lean, Theory of Constraints, Toyota). Whilst this addresses the manufacturing aspects of software creation under the observation of managers, it fails to address the information arrival process as guided by the leaders. It fails to define business value, business risk and how to incorporate new information, never mind actively seek new information that "breaks the model." To address this issue, leaders must move away from the questions, "What's the business value?" to the questions, "Do we have enough business value to go to market?" and "Will we ever have enough value at the rate we are generating business value?"
Whilst Reinertson addresses some of these issues, management needs to find new inspiration in Financial Mathematic, Information Theory, Game Theory and Learning.
Whilst Agile feels the bottleneck is learning, the reality is that the bottleneck always moves once the issue is addressed. Leaders and managers who push the decisions down into their organizations create learning and collaboration, the basis for information sharing. By asking the organization for answers, managers unleash the talent. By collaborating with the outward connections to the organizations, leaders unleash innovation in their organizations. Leaders open the many paths before organizations. Managers facilitate the processes to move rapidly down the paths and discover the best solutions within their talented and creative organizations and facilitate the new visions that will arrive.
2020 Conference
The first of the 2020 Vision Conferences will take place in 2010, although a 2020 Vision Summit will convene alongside Agile 2009 in Chicago. The conversation around collaborative leadership and collaborative management will be the focus of these conferences.