Tuesday, May 14, 2013

Strategic Planning Analogy #499: Planning by Intimidation

Back during the middle of the 20th Century, Yugoslavia appeared to be a relatively stable country.  With the exception of the time around World War II, the borders of the country remained relatively constant from about 1918 until around 1990.

Internal strife during most of this time seemed relatively minor to the outside world. In fact, the country seemed so stable that in 1984 the Winter Olympics were held in Sarajevo, Yugoslavia.

Yet it was not many years after the Olympics were held that the nation began to fall apart. Violent warfare and ethnic pride during the 1990s eventually dissolved Yugoslavia into seven separate countries: Croatia, Macedonia, Montenegro, Serbia, Slovenia, Kosovo, and Bosnia & Herzegovina.

So much for what seemed like stability in Yugoslavia. Instead, it became a bloody war zone until the dissolution was complete.

As it turns out, that appearance of stability and unity in Yugoslavia was not a natural condition. It only existed because the people felt forced to get along. First, the nation had been run for generations by a series of strong totalitarian regimes. These leaders used their power to create fear of rebellion or disunity. Whenever small uprisings occurred, these leaders quickly used their power to brutally squash the rebellion (and put fear into anyone considering future rebellion). The strongest of these leaders was Josip Tito, who ran the country with an iron fist from 1963 to 1980.

Second, there was a feeling that if Yugoslavia became too unstable, the Soviet Union would step in to restore stability. And the type of actions anticipated by the USSR to create stability were feared to be even worse than the totalitarianism of their own rulers, like Tito.

Therefore, the people of Yugoslavia held their internal disputes in check, fearing that any attempt to show their true ethnic pride would just make matters worse. It wasn’t that they liked each other during the 20th century—they just felt forced into an undesired tolerance.

After Tito died in 1980 and the Soviet Union dissolved in 1991, the forced pressure to co-exist began to fade away. Without this strong outside pressure to conform, the ethnic pride and hatred of the people was allowed to come to the surface. This lead to the bloody battles of the 1990s. The end result was separation into new nations defined by the more natural ethnic boundaries.

The story of Yugoslavia shows that just because there is an appearance of unity and stability, that does not mean that unity and stability lie in hearts of the people. All that hatred and ethnic pride was still there under the surface.  The only reason it didn’t erupt until the 1990s was because powerful forces had kept it from erupting. The moment those forces disappeared, so did the superficial unity.

This is an important lesson for those in charge of enacting strategy. There are two ways to get employees to comply with a strategy.  The first is to take a Yugoslavian approach. In other words, you use intimidation, power and fear to force people to comply, whether they want to or not. The second approach is to change the hearts of the people so that they voluntarily want to comply. As we will see in this blog, the Yugoslavian approach is usually the less desirable option.

The principle here is that coerced actions are never as effective as actions driven from the heart. Just as a mercenary soldier never fights as hard as a soldier who believes in the cause, an employee complying due to fear is never as productive as one who believes in the cause. As a result, the Yugoslavian approach to strategy implementation tends to be rather unproductive.

High productivity is a result of getting relatively large output from relatively low input. The Yugoslavian approach tends to lose on both fronts; it requires higher input for lower output.

1. The Cost of Gaining Compliance Through Intimidation
In totalitarian dictatorships like Yugoslavia and North Korea, a great deal of time, effort and money has to go into building the force of intimidation.  Large armies and police forces are needed. Spy networks are needed. So much effort has to go into the mechanisms of fear that little is left for growing the economy and benefiting the people.

A similar situation exists in business. The intimidation approach to strategy is very costly.  You have to build a huge infrastructure to manage every little detail to make sure the work gets done. Nothing can be left to chance. Every decision has to come from the top and be constantly monitored for compliance. Systems of punishment are needed when people deviate from plan. It becomes like the top-down communist economies. Everything is planned from the top, yet the people starve from shortages.  It doesn’t work well.

Instead of spending time on the large, critical issues for success, management gets bogged down into the minute details. Nothing can be delegated, because the people cannot be trusted to voluntarily comply.  So much time is wasted monitoring incremental changes in performance that little time is left for discovering the large innovative transformations needed to stay relevant in a changing marketplace. You end up perfecting the obsolete.

2. The Lowered Response Due to Intimidation
There was an old saying by the people in the old communist countries: “You pretend to pay us and we pretend to work.” The idea was that the local currencies were worthless, so the people did not work hard to earn it.

That’s what happens when people are compelled to comply with something they do not believe in their heart. Sure, they will stay the course so as not to be punished. But they will not work hard at it. They will not go the extra mile. Instead, you will get the bare minimum effort. And that is no way to win the battle in the marketplace.

When people believe deeply in the strategy, the effort level skyrockets. You don’t have to force people to do well—they WANT to do well. They will work longer and harder for a cause they believe in. And best of all, they will volunteer innovative ways to get things done—far better than that which is dreamed up in the ivory towers at headquarters.

I worked with a company that went through a transition from having employees who deeply believed in the strategy to one where they felt compelled to do that which they did not believe. The employees started going home earlier and worked less while in the office. Productivity dropped dramatically.

3. The Inevitable Breakdown
As we saw in the case of Yugoslavia, eventually the pressure to hold down rebellion becomes too great and the instant there is weakness at the top, the rebellion will occur. The nation of Yugoslavia was quickly destroyed at a very high human cost. 

The same thing can happen in business. As soon as there is a slip in the oppressive power and control, rebellion will occur and everything can become lost very quickly.

A lot of strategic initiates look great at first, when top management is watching it closely. However, if compliance is only by intimidation, those results will quickly go away once top management’s attention moves on to something else. It won’t be sustainable.

4. The Better Approach
Rather than rely on intimidation, a better approach is to get people to want to naturally comply with the strategy. This is easier to administer, creates greater output, and gains from the insights and innovation of the entire organization.

How do you do this? First, have a compelling strategy which makes sense and leads to victory. Don’t expect employees to buy into hollow platitudes. They know a lie or deception or hollow wish when they hear it. Instead, create a position and plan that really can win in the marketplace…something worth believing in.

Second, relate the company goals to individual goals. Show how the path for the company to win will also be beneficial to the individuals who make it happen. Create a win-win scenario where compliance is the best path for everyone. Share the wealth.

Third, don’t micromanage. Allow people to internalize the strategy and make it their own. Then they will come up with creative ways to move the mission forward which far exceed what would come out of micromanaging.

Finally, don’t choke on excessive monitoring of minutia. KPIs (key performance indicators, or whatever 3 letter acronym you use for measurement metrics) are an important part of a strategic process. But that doesn’t mean that ever more KPIs are better. At some point, you can have so many KPIs that you choke on the specifics and lose sight of the big picture.

This is especially true in a Yugoslavian environment. There can be so much fear and intimidation put behind hitting the numbers, that people will do anything to hit the numbers. Unfortunately, numbers can be achieved by both doing the right behaviors and the wrong behaviors. Often times it is easier to hit the numbers with wrong behaviors that are contrary to the plan. So the intimidating process encourages wrong behaviors.

It reminds me of an old process used at a company which prided itself on innovation. To measure innovation, they used the KPI of “% of sales from products introduced in the last five years.” The pressure was so great to hit this number, that managers started achieving it by discontinuing perfectly good older products from the mix. This got them the desired number, but it hurt sales and did not promote innovation.

Spend less time ruthlessly enforcing KPIs which can be hit via bad behavior and more time encouraging people to do what’s right because they believe good will come from doing what’s right.

Intimidation and fear may create strategy compliance for a short time, but eventually rebellion will occur. And even during the period of coerced compliance, performance is sub-optimal because it typically requires extra management effort and achieves only bare minimum performance. To get optimal productivity, it is better to convince people believe in the strategy in their heart. Then they will work harder with less supervision and add ideas of their own to make it even better.

Next time someone tries the fear and intimidation approach to strategy, remember the fate of Yugoslavia.

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