WEBVTT 00:00:00.000 --> 00:00:05.640 You've mentioned a few times the management systems, and you both argue, actually, in the book, 00:00:05.640 --> 00:00:12.240 that leaders must also act as chief system designers and not just stay at that higher level 00:00:12.240 --> 00:00:19.120 of strategy. But what does that actually mean in practice, and how can we get more of the CEOs to 00:00:19.160 --> 00:00:25.919 actually actively embrace that role? The basic theory is, in every organization, the things that 00:00:25.920 --> 00:00:32.080 cause the human beings inside that organization to behave are what we refer to as management 00:00:32.080 --> 00:00:38.320 systems. It's the fifth box of the Strategic Choice cascade. And there are things like formal 00:00:38.360 --> 00:00:44.880 evaluation systems. They may be budgets, they may be operating models, but they're also informal, 00:00:44.880 --> 00:00:50.600 cultural things about that promote behavior, like what gets you promoted and what you believe your 00:00:50.600 --> 00:00:56.640 managers want and the questions they ask—all kinds of things that collectively promote the 00:00:56.640 --> 00:01:03.140 behavior inside the organization. We think that CEOs, ultimately, because they're responsible for 00:01:03.140 --> 00:01:08.940 the actions of the organization, need to be also responsible for the things that promote the 00:01:08.940 --> 00:01:15.300 behavior inside the organization. And what we find, again, consistent with the focus on transformation, 00:01:15.300 --> 00:01:22.260 is that too many times, CEOs make very high-level decisions and then effectively 00:01:22.260 --> 00:01:28.339 outsource the quote unquote, implementation of those decisions to someone else. And the 00:01:28.339 --> 00:01:33.060 implementation is often the design of these management systems, and then they get designed 00:01:33.100 --> 00:01:39.099 very much in silos, and they find that these systems tend to create conflict, and, therefore, 00:01:39.100 --> 00:01:44.980 overall, the system isn't promoting the behavior consistent with the direction that the CEO wants 00:01:44.980 --> 00:01:49.179 to take. But I know Geoff had a perfect example from earlier this week, so I'll set him up 00:01:49.180 --> 00:01:55.419 for that. Well, yeah, and it's—I will admit it's a little bit apocryphal, but so give me 00:01:55.419 --> 00:02:02.180 that license and,I'll try to play it out. So, I was I was visiting a renewables developer— 00:02:02.180 --> 00:02:08.960 so a company that had, uh, responsibility for, uh, essentially doing all the 00:02:08.960 --> 00:02:12.560 project development in a certain category of renewables. It doesn't really matter which one 00:02:12.560 --> 00:02:18.799 right now. And I was speaking with our executive team, and they were reflecting on just how hard it 00:02:18.800 --> 00:02:25.039 is to build momentum in the work that they do, because they're still at an early stage of 00:02:25.039 --> 00:02:30.520 development. I mean, generally, renewable energy is, while it's taken hold in many parts of the world, 00:02:30.520 --> 00:02:36.520 we're still early in the, in the, um, in the stages of it, getting to a scale enough where it's cost 00:02:36.520 --> 00:02:39.760 competitive with every other source of energy in the world, etc. And they said it's really 00:02:39.760 --> 00:02:45.480 hard in those early stages of development because the thing that takes you down, and that makes it 00:02:45.480 --> 00:02:50.560 almost unfinancable, is when you have some project delays in what you're developing. You have to—you 00:02:50.560 --> 00:02:56.159 absolutely have to—deliver on time, on budget, in order to meet the covenants of the financing 00:02:56.160 --> 00:03:02.960 rules that you have. And so, they had a, um, they had a theory coming into 00:03:03.000 --> 00:03:07.990 developing this company and the executive team built up over a number of years. But they said, 00:03:07.990 --> 00:03:12.990 look, let's just let's run with a radical sense of transparency in this company. And if everyone 00:03:12.990 --> 00:03:16.989 understands that we're on the same page, that everyone's on the same page, that we're all trying 00:03:16.990 --> 00:03:21.149 to reach the same goal, and we're just all very transparent, then that will increase—that will 00:03:21.149 --> 00:03:25.830 create a culture where people raise their hands if anything is going to arise that may knock a 00:03:25.830 --> 00:03:30.629 project off, off track, off the timeline. That really was the critical thing they were 00:03:30.630 --> 00:03:35.269 trying to solve for. And so when I was hearing this, what I heard was a senior executive team 00:03:35.270 --> 00:03:40.750 that was trying to directly influence culture by telling people, we're going to have a culture of 00:03:40.750 --> 00:03:46.789 transparency, and the reflection that I had in the room for them is, that's it's interesting, but, you 00:03:46.789 --> 00:03:53.749 know, with a radical transparency, if everyone can see the consequence of what they do and 00:03:53.749 --> 00:03:59.029 the result, and if the result is slowing down a project—so, if someone were to raise a hand with a 00:03:59.029 --> 00:04:03.309 concern about a project and they saw the knock-on effects of what that is going to be, then that 00:04:03.310 --> 00:04:09.809 might actually discourage people raising an issue at the right time. And so, instead, if we had if we 00:04:09.809 --> 00:04:14.369 had senior executives intervened in a different way, which is by rewarding people who 00:04:14.369 --> 00:04:17.649 raised their hand early on when they saw a problem that was going to knock a project off 00:04:17.649 --> 00:04:21.489 track, that might actually create the types of outcomes that we're trying to achieve a lot more 00:04:21.489 --> 00:04:26.369 than simply declaring that we're going to have transparency. And so, it was a I'd like to think it 00:04:26.369 --> 00:04:30.489 was a bit of a light-bulb situation for this executive team, because they they recognized at 00:04:30.489 --> 00:04:35.769 that time that, while they were trying to achieve the right thing, going about it by just 00:04:35.769 --> 00:04:41.089 implementing a culture, as opposed to directly impacting a management system that more directly 00:04:41.089 --> 00:04:45.368 achieved the behavior that they were trying to accomplish, was actually leading them a bit astray. 00:04:45.369 --> 00:04:49.649 So, that I'm not sure, Paul, if that helps illuminate things, but I think it was really 00:04:49.649 --> 00:04:54.890 interesting conversation. A great example. You know. what I found that the best leaders, also, that I've 00:04:54.890 --> 00:05:00.969 come across—and that's why this, um, thinking that you put on management systems and taking care 00:05:00.970 --> 00:05:07.029 of that resonates—are people that are, can be, operating up there and and are wide, but can also 00:05:07.029 --> 00:05:13.670 go deep into the organization. I've seen too many—even former bosses I had in organizations, 00:05:13.670 --> 00:05:19.709 where complexity was delegated down. Somehow, you had arrived at the higher levels, you didn't have 00:05:19.710 --> 00:05:25.230 to deal with it anymore. But I think great organizations have that capability to delegate 00:05:25.230 --> 00:05:30.230 some of that complexity upwards without feeling bad about it and having management really be 00:05:30.230 --> 00:05:37.189 involved to fine-tune or to own, as you say, these systems at all different levels. I 00:05:37.189 --> 00:05:43.070 also like the concept in your book when you talk about the dopamine of of good behavior. When you 00:05:43.070 --> 00:05:47.949 get this right and you're in the groove, and you adjust the sails, that you rightfully say, it's 00:05:47.989 --> 00:05:52.350 actually fun to do because you become more agile and you start sailing.