The division was in serious financial trouble. Up until then, it had been coping with its financial problems by cutting positions, which seemed to improve profits temporarily. Now, faced with new pressures, it seemed obvious to the financial group within the division that it was time to cut the workforce again. Others in the division, however, felt that downsizing was exactly what the company did not need to do. This group argued strongly that improving service quality was the solution to their financial woes.

When representatives from these two conflicting groups were brought together, the debate became almost hostile. It was clear that the issue of downsizing was painful to both sides. Because of the need to explore this topic further, our consulting team was invited to work with members of the division using a systems thinking approach.

Fragmented Views

We started the project work with a one-day training session for a cross-functional group of managers from the division. During the segment on systems thinking, we drew causal loops that explored the issues of downsizing and service quality in the Equipment Servicing Division, including a “Fixes that Fail” diagram (see “Downsizing that Failed?”). The central question that emerged from this session was whether the financial gains from downsizing would be offset by a decline in service quality, and ultimately a decline in sales.

To explore this question further, we decided to rake the next step and build a computer model. The first model we created was very simple, and was used in a series of small group sessions to help the managers become comfortable with the modeling software and with the basic dynamics of the system (see “Downsizing and Service Quality Model,” p. 10). The modeling tool we used was ithink’s predecessor, STELLA, which was used without any other interface.

The small group sessions were helpful in clarifying the assumptions behind the two contradictory views of the business. For example, when the VP of Finance — a lead supporter of the downsizing — tested his approach in the model, he was puzzled to see the financial situation continue to slide. When he reflected on this surprising result, he was finally able to articulate his mental model: he believed that he could cut staff and that there would be no ripple effects—that everything would “stay the same.” The data he had previously used to support this position was that downsizing in the past had led to a temporary increase in profits. Although typically there was a later downturn in profits, he attributed this to competitor activity. Our model, however, had no active competition, and the downturn still occurred. Thus the model seemed to suggest that the decline in profitability could be due to the delayed effects of reduced service quality on sales. For the first time, the VP was forced to consider feedback within the system — the potential unintended consequences of a reduction in workforce (see “Unintended Consequences,” p. 11).

The promoters of improved service quality were equally fragmented in their thinking. They believed that if the division just added more people, quality would increase, and that would improve their revenue stream. They also had data to support their view — the company had discovered through market research that its service quality rated poorly compared to its competitors. However, when this group worked with the model, they found that adding people did improve service quality and sales, but with consistently unprofitable results. By ignoring the high cost burden of the increased service force, they too were assuming that you can change one aspect of the system and that “everything else stays the same.”

Downsizing that Failed?

To “fix” its ailing Equipment Servicing Division, COPEX had tried reducing the number of employees in the post, which decreased us personnel costs and improved profits temporarily (B1). But the drop in numbers of service personnel may have led to decreases in service quality, bringing sales and service revenue down and making profits fall even further (R2).

Learning and Leverage

After our small group sessions, we went on to create a second model that incorporated enough detail to represent some of the specific initiatives the division was considering. To work with this larger model, we brought the group together for a one-day session to consider various strategies for improving the business. As the group tested various alternative strategies, their level of understanding deepened. One compelling lesson that emerged was that any proposed initiative would not affect results in the short term, and thus the company would face continued financial pressure for the foreseeable future.

The most important insights, however, were about the fundamental architecture of the business. The reason that the original policies (lay off workers vs. add service capacity) failed to create a sustainable business was that the basic relationship between cost and revenues in this division was unworkable. For example, keeping enough personnel on hand to provide competitive service quality would cause an unprofitable overhead structure, but reducing personnel to a profitable level would yield low service quality and inhibit growth. The lesson was clear: it was impossible to achieve growth without a fundamental restructuring of the business line.

The real leverage for dramatically changing the business line was to modify any one of the basic parameters that determined costs and revenues, such as Revenue per Product, Failures per Product, Time Spent per Service, and Average Salary (see “Critical Business Parameters”). For example, a reduction in breakdowns would require fewer technicians per installed machine, which would decrease overhead and improve profitability while actually increasing service quality.

It is important to recognize that improving the breakdown rate was not the answer — it was only one possible structural change that would bring about the desired results that the group wanted.

Downsizing and Service Quality Model

The initial computer model that was created for the Equipment Servicing Division was designed mainly to help the managers become comfortable with the modelling software and with the basic structure of the system. Although is looks visually complex, this simple STELLA model helped the managers look as their assumptions more explicitly.

Improving the breakdown rate would allow the business to continue to grow and to remain profitable with that growth strategy.

Another critical lesson for the group was that policies across divisions within the company were all interdependent. Before their experience with the model, the managers viewed the company in a highly fragmented way. Even within the Equipment Servicing Division, the financial and quality camps saw the others as “obstacles” to be overcome. As a result of our intervention, the groups saw the need to look more systemically at the issues, and formed cross-division teams to continue the work.

A final realization for this group was that downsizing might be as much the disease as the cure. The group voted to postpone additional downsizing for at least a year.

Epilogue

I wish I could say that they lived happily ever after. The business line is still alive, which was in some doubt at the time, but they continue to have difficulties. I suspect that having cross-divisional teams was a very difficult structure to maintain, given their historical operations. I do feel, however, that our work helped them become more insightful and systemic in their approach.

Running through different simulations began to give them an understanding of the delays inherent in their service business — which was half the battle. For the first time, the group was able to test their assumptions about the way their business worked — and when you are caught in a “Fixes that Fail” or other problem-solving dynamic, exploring assumptions is always a good place to start.

Unintended Consequences

The simulation revealed the “better before worse” effects of downsizing on profitability, which may have resulted from the delayed effects of reduced service quality caused by the downsizing. (Note: This diagram is from a HyperCard interface that was developed for the model at a later date, in conjunction with Brian Kreutzer of Gould-Kreutzer Associates.)

Critical Business Parameters

The real leverage for the Equipment Servicing Division was to restructure their business by Editorial support for this article was provided fundamentally changing some of the parameters that were within its control, such as Average by Kellie T. Wardman. Salary, Time Spent per Service, Failures per Product and Revenue per Product (in bold italic).

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Once a system that provided quality medicine in an equitable fee-for-service exchange, the current healthcare system in the U.S. has slowly fallen victim to its own structure. Various players are struggling with one another on an expensive battleground — and patients aren’t the only ones getting stung. Corporate America’s involvement and portion of the bill is at the forefront of discussion.

As cries for a major overhaul of the healthcare system have increased, policymakers have responded with a flood of proposals — over 30 new bills so far this year. An integrated approach to healthcare reform, however, must start with an understanding of the system as a whole.

Multiple Players

The healthcare system is made up of a complex, interconnected network of players. Without a common mission, each group pursues policies that are often at odds with the long-term interests of everyone involved. To understand how the system works (or doesn’t work) we need to see how the various players’ actions play out in the broader system.

Healthcare Providers. Healthcare professionals’ primary concern is that patients receive the best care available. This sets up the system for cost escalation by encouraging doctors and hospitals to provide more tests and procedures in the belief that more is better. Providers’ fear of malpractice suits further exacerbates the problem. In addition, practices such as unbundling (charging separate fees for each part of a treatment) and self-referrals (where doctors send patients to labs or facilities in which they have a personal investment) also contribute to escalating costs.

A surge in hospital construction over the last decade has also contributed to escalating costs, as hospitals scrambled to win healthcare dollars by adding state-of-the-art technology and facilities (see “The Medical Arms Race,” Systems Sleuth, November 1991 for description of escalation dynamics in healthcare). The result is an “Escalation” structure, where one hospital’s expansion efforts are seen by others as a threat to their attractiveness, prompting them in turn to add more services (see “Healthcare Providers: Escalation Dynamics”). The cost of expansion is then passed along to patients and insurers in the form of higher bills — thereby raising the total cost of healthcare.

Consumers. Consumers play into the escalation dynamic through their determination to receive the best treatment, regardless of price. As hospitals add more machines and services, the success rate and public awareness of those services increases (see “Consumer Demand”). Consequently, consumers’ demand for high-tech treatment increases, which gives hospitals further incentive to add more technology. The result a system where supply actually creates demand, rather than balancing it.

Currently, there are few incentives for patients to go to the most efficient, cost-effective providers. As James C. Robinson, a healthcare economist at U.C. Berkeley puts it, “Imagine if we sold auto-purchase insurance and said, ‘Go and buy whatever car you want and we’ll pay 80 percent of it.’ Most people would probably buy a Mercedes” (“Wasted Healthcare Dollars”).

Government. The government is a major player in the healthcare system through Medicare and Medicaid programs. Their goal: to provide the highest-quality health coverage to the poor and elderly at the lowest rate to taxpayers. Efforts to curb Medicare spending, however, have inadvertently increased costs throughout the system (see “Government The Medicare Fix that Failed”). By limiting Medicare coverage, the government reduced its own spending (B4), but increased the share of the cost borne by providers. Providers, in turn, passed those costs on to patients for non-Medicare services. When those to whom the costs are shifted can’t afford to pay, they are left without coverage. This puts pressure on the government to expand its Medicaid program to absorb the additional uninsured people, which increases its healthcare expenditures (R5).

Business. Like the government, businesses have also responded to rising healthcare costs by looking for money-saving opportunities. Many large businesses are cutting costs by enrolling their employees in preferred provider organizations (PPO’s) or health maintenance organizations (HMO’s), which offer low premiums. Such managed-care organizations are designed to reduce costs through methods such as decreasing hospital usage and narrowing provider choices.

But HMO’s, although they are increasing both in membership and revenues from premiums, are hurting financially because of their very attraction — low prices. Despite a 14% increase in premiums, income from HMO’s is expected to drop to $350 million this year, from $850 million in 1991 (“An Operation Fraught With Risks,” Business Week, Jan. 13, 1992). Given this trend, premiums are likely to continue rising until there will no longer be a significant cost differential.

In the meantime, the short-term savings for businesses is increasing long-term costs for everyone in the system. As HMO and PPO membership has increased, enrollment in traditional plans is decreasing (loop B7 in “Businesses: Cost-Cutting Efforts”).

To attract healthcare dollars, hospitals will bid against each other to win managed care contracts, while doctors band together to cut deals with HMO’s, and medical supply companies offer cost-saving products to hospitals. Lost revenues from discounting will put pressure on providers to shift additional costs to individuals and small businesses who are not covered by HMO’s or PPO’s. Similar to the Medicare cuts, these higher costs will force more people out, further reducing enrollment in traditional plans (R8).

Insurers. Although healthcare insurance was originally intended to protect against catastrophic illness or accidents, over time coverage has continually expanded to attract more people (see “Insurance: Expanding Coverage”). The ever-expanding coverage gives consumers more financial incentives to seek treatments. In fact, people with health insurance consume up to 60% more physician services and three times as many hospital services than those without coverage (“Business and the Future of American Healthcare,” Business Week, June 22, 1992). As usage increases, costs rise, leading to higher premiums and demand for even more coverage and choices (R9).

PPO’s and HMO’s were designed to stop escalation by providing limited options at lower costs. As discussed above, however, the rise of PPO’s and HMO’s has come at the expense of traditional insurers and creates a “Fixes that Fail” situation.

The Big Picture

The actions taken by each of the players in the healthcare system are all contributing to a “Tragedy of the Commons” scenario, where the attainment of individual goals are at odds with the long-term health of the system. The “commons” in this case is access to healthcare, and the limiting factor is financial resources. If the present situation continues, the healthcare system may collapse because of the financial burden it places on the whole economy. Currently, more than 12 cents out of every dollar is spent on healthcare, and costs are rising at double the rate of inflation. If current trends continue, in 70 years our entire GNP will be spent on healthcare (“The Brave New World of Healthcare,” Richard D. Lamm, University of Denver, 1990).

Insurance: Expanding Coverage

Ever-expanding insurance coverage gives consumers more financial incentives to seek treatments. Higher usage increases costs, leading to higher premiums and more demand for expanded coverage.

Consumer demand for high-tech treatment and government expansion of Medicare and Medicaid play into the “Tragedy of the Commons” structure by contributing to total healthcare expenditures. This raises the cost per treatment and also limits access (loops B10 and B11 in “Healthcare’s Tragedy of the Commons: One Example”). Likewise, consumer demand for high-tech treatment also affects the “Escalation” structure between competing hospitals. As hospitals invest in new equipment and services, the cost per treatment rises, again limiting access.

The shift toward HMO’s and PPO’s plays into the “Tragedy of the Commons” structure as well. As hospitals respond to discounting by shifting costs to small businesses and individuals, the number of people who cannot afford coverage increases. Those individuals must then be covered by government programs (which increases total healthcare expenditures), or simply forego coverage and pay only that portion of their healthcare bills they can afford. The cost of those unpaid bills shows up once again in higher costs per treatment, as providers raise their rates to cover delinquent accounts.

Looking for Leverage

Current proposals for reform center around three critical problems afflicting healthcare: uncontrollable, rising costs; a lack of a long-term healthcare program, and an increasing number of uninsured and under-insured. Although the plans vary widely on details such as eligibility, acute care, preventative care, long-term care, and the role of Medicare and Medicaid, they can be grouped into three broad categories: government-sponsored (single-payer), employer-based (play or pay), and private plans (market-based reform). (See “Healthcare Reform: Evaluating the Proposals” for a discussion of how these proposals affect the dynamics described above).

Perhaps the most important element of any reform is that the recipient and payer of services be more closely linked. One lesson of the “Tragedy of the Commons” archetype is that the problem cannot be addressed at the individual level. Adequate information, however, will help consumers see the “big picture” and judge the value of alternative care. No matter who pays for coverage, some link needs to be made so consumers feel the financial impact of their decisions.

From Disease Treatment to Health Building

One crucial aspect of reform that is absent from most of the current proposals is a deep change in attitudes surrounding the purpose and direction of healthcare. Most Americans believe that access to healthcare is a “right,” no matter what the cost. Not surprisingly, there seems to be more support for universal access programs than for national health insurance. Many people are afraid of non-market-based plans because of they fear a nationalized system would take away the freedom of choice and the ability to receive whatever care one can afford. But as the “Tragedy of the Commons” structure illustrates, consumers will have to learn that there are limits to everything in a finite world. One reality we all may have to face is that we can no longer expect unlimited choice and care.

How we view responsibility for an individual’s health must also change. Over time, the burden of responsibility for one’s health has shifted from the individual to the healthcare system; the implicit message has been, “live your life any way you want and we will take care of you when your body breaks down.” This gradual shift might not have been too damaging if the healthcare system were focused on helping people stay healthy. Instead, it concentrated its efforts on making treatments more effective and convenient. In a way, it is analogous to finding faster, more painless ways to repair wrecked automobiles, rather than teach people how to be safer drivers and designing better highway systems to reduce the likelihood of accidents. The result? Escalating automobile premiums, runaway costs, and a growing pool of uninsured motorists — the same problems currently facing the healthcare system.

of cure” translates into “a dollar spent on health building may be worth thousands in hospitalization and treatment costs.” The challenge is to design a system that gets away from treating symptoms—where there is the least leverage and the highest costs—and focuses instead on efforts to build health.

The healthcare system in America is not deteriorating in a vacuum. “Health care, for all its technical genius, has become an economic cancer that is eating into other necessary public functions…Our health care industry is draining resources desperately needed elsewhere to keep America a competitive nation” (“The Brave New World of Health Care”). Not only is the healthcare system destroying itself and the economic position of its players, but it is also affecting quality and efficiency in many other arenas. To be truly effective, reform must take into account not just the roles of the players and the structure of the system, but also how the system affects the economy health of the country as a whole.

References: ‘The Brave New World of Health Care.” Richard D. Gamin, University of Denver, May 1990; “Healthcare Reform: A Closer Look.” Management Accounting, Dec. 1991; “Healthcare Reform Stews in Congressional Pressure Cooker.” Healthcare Financial Management, Jan. 1992; “Wasted Healthcare Dollars.” Consumer Reports, July 1992; “Business and the Future of American Healthcare.” Business Week, June 22, 1992. For other re-sources, call our offices at (617) 576-1231.

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Why has accountability, which is merely a principle of sound managerial practice, gotten such a bad rap? Senior managers have too often invoked it as a way of getting things done that they themselves don’t know how do in our less-than-perfect organizational systems and structures. Sometimes this dubious ploy actually works. After all, when their boss says, “Just get it done!” many people can — through sheer willpower, brute force, and long hours — overcome managerial abdication, systemic dysfunctionality, and structural flaws. But the wear and tear burns people out and suboptimizes the whole.

As a managerial technique, holding people accountable after casually tossing a goal or task to them — without setting the context, securing the necessary resources, and providing the proper structure — is destructive. It generates negative emotions and behaviors and a widespread negative response to the proper and requisite notion of accountability. Nevertheless, accountability leadership is crucial for managers to move forward to more productive ways of doing business.

Rehabilitating Accountability

As a first step in rehabilitating accountability, I give you the following accurate, useful definition of the concept: “Accountability is the obligation of an employee to deliver all elements of the value that he or she is being compensated for delivering, as well as the obligation to deliver on specific output commitments with no surprises.”

The essence of employee accountability becomes clear by comparing the role of an employee with that of an independent contractor. A contractor is accountable for delivering a measurable, usually quantifiable, product, service, or result. Repair the roof. Install a phone system. Collect past due accounts. In the process, the contractor has the absolute right to be paid as long as you receive the value you requested. He is left on his own to create his own processes to secure resources, generate efficiencies, and produce results.

Employees, on the other hand, are accountable for delivering value consistent with the total requirements of their role while coordinating with other company processes and functions. In turn, they have the right to be compensated at a level consistent with the value they contribute. Employees are (by law!) paid every day, come what may. They also typically receive training, development, and benefits. But in order to follow through with their commitments, they need the appropriate resources, support, and guidance about expectations about their performance.

Fixed vs. Relative Accountabilities

Thus, in an organization, the term “accountability” refers to an employee’s obligations, some of which are fixed and some of which are relative. Fixed accountabilities comprise the employee’s obligations to deliver outputs and to use resources and processes precisely as specified by the employer. They are necessary to keep processes in control and can be summarized in two distinct categories:

• Commitment. Employees must fulfill the output commitments exactly, in terms of quantity, quality, and timeparameters, as defined in their assignments, projects, services, and other deliverables — unless the manager agrees to adjust them. Under no circumstances can the employee surprise her manager at the due date with changes.
• Adherence. Employees must simultaneously observe and work within defined resource constraints — that is, the rules and limits established by policies, procedures, contracts, and other managerial guidelines, as well as by law.

Relative accountabilities have to do with the employee’s exercise of judgment to maximize value; they include the following four categories:

• Reach. Employees are expected to add as much value as they can by signing on for ambitious yet achievable targets, rather than hanging back or committing to “low-ball” goals.
• Fit for purpose. Employees must continually strive to ensure the optimal means of producing appropriate outputs that support the purpose for which the outputs were designed in the first place.
• Stewardship. Employees must manage company funds and other resources efficiently and seek ways to continually improve and conserve those resources, wherever possible
• Teamwork. Employees must recognize that it is the concerted effort from and between everyone that generates profit in any organization, rather than isolated efforts to maximize personal output. Therefore, an employee must accommodate other people’s work across the organization to maximize the total organizational value — even if her job becomes more difficult in the process.

Many managers do a poor job of defining, explaining, and gaining commitment to fixed accountabilities with their subordinates and holding them to those commitments (see “Management Terminology”). Even more fail to properly explain relative accountabilities and to accurately assess their subordinates’ effectiveness in delivering on them. For that reason, some managers over-budget expenses so they’ll look good next year; some salespeople sell customers more than they need, just so they’ll reach their sales quota this year; some operating personnel pay too much for materials because it’s easier than shopping around — all are failing to fulfill their relative accountabilities. Clearly articulated relative accountabilities are the antidote to the pursuit of narrow goals, waste of resources, and lack of team play that renders so many employees, and their companies, ineffective.

QQT/R

Managers’ accountabilities include some that are unique to the managerial role. Chief among them is being clear with their subordinates about what (the quantity and quality of output) they are expected to deliver and how much time they have to deliver it. Managers are also accountable for providing the resources employees need to complete their assignments.

In virtually any environment, when I ask employees how clear their managers are about what they are accountable for getting done, most will say, “Not very.” In manufacturing, for instance, a supervisor may specify an increase in quantity but not the acceptable reduction, if any, in quality. Yet statistical process control and just-in-time working require unambiguous clarity about accountabilities and the interaction between quantity, quality, time, and resources.

Many managers assume their subordinates know what they are accountable for, not realizing the tension and anxiety they inadvertently cause by failing to be clear. Typically, a highly responsible subordinate will make her best guess at reading her boss’s mind, hoping to be in the right ballpark. Then, a few months later when she gives him a progress report and he says, “That’s not at all what I wanted,” she ends up feeling frustrated and distrustful.

Management scientist Elliott Jaques has developed a small but powerful tool that can be useful for clarifying fixed accountabilities: QQT/R. The slash in QQT/R does not indicate arithmetic division; it merely separates employees’ output accountabilities (quantity, quality, and time frame) from their resource constraints (see “QQT/R”). This expression is the simplest way for managers to accurately define assignments that they are delegating to their subordinates.

QQT/R creates unequivocal clarity regarding obligations. The formula puts all four variables on the table so managers and subordinates can examine, discuss, adjust, and commit to each one explicitly. The variables are both independent and interdependent, summing up real-world constraints and possibilities and exposing potential tradeoffs among them.

With the tradeoffs out in the open, managers and their subordinates are positioned for a hard-hitting, objective conversation about the manager’s goals and resources and the employee’s ability to meet those goals given current conditions. When this process is ignored or done haphazardly, employees are saddled with their managers’ unrealistic or unfair expectations, and managers delude themselves with their employees’ acquiescent or deceptive commitments to fulfill those expectations. When managers extract so-called stretch commitments from employees that are obviously unobtainable, or when they fail to provide adequate resources for an effort, employees know what’s happening and feel they’ve been taken. Similarly, when employees won’t commit to challenging goals, they are sabotaging their managers and their company.

Some managers fear that tools such as QQT/R inhibit initiative and creativity. But QQT/R does just the opposite, because it inspires employees to figure out how best to deliver on their commitments — not to decide what they are to deliver. The best employees delight in improving processes and conserving resources while hitting their QQT objectives. QQT/R should not be construed as top-down either. It should be the outcome of active, vigorous, two-way discussion between managers and their subordinates.

Other managers initially believe that QQT/R cannot be applied to people in analytical or research positions or other areas of knowledge work. Our clients involved in research, product, technology, and market development, as well as similar functions, don’t use QQT/R just to define results per se. They also use it to mutually define the processes, steps, and resources that must be developed in order to yield the intended results (see “A Technology QQT/R” on page 4).

QQT/R is not meant to be a straightjacket or a rigid set of rules. Rather, it is a useful tool for managers and employees to use in developing clearly articulated, mutually agreed upon commitments. It is the most efficient means of ensuring that the output delivered to managers is really the output they wanted. Significantly, QQT/R captures some of the managers’ accountabilities as well as those of employees by defining the resources the manager commits to deliver.

Yet being clear about the QQT/R does not capture all managerial accountabilities. In addition, managers must provide their subordinates the support and working conditions they need to deliver on their accountabilities. This support may include coaching subordinates to enhance their effectiveness and providing constructive feedback. The bottom line is that a manager is accountable for her subordinates’ outputs. She cannot blame her inability to deliver her commitments on her subordinates’ failure to meet their targets. You might say the manager’s credo for the 21st century must be: No excuses about your subordinates’ QQT/Rs! No surprises about your own!

Accountability and Authority

Managers must also be accountable for giving subordinates the authority they need in order to deliver on their obligations. Holding employees accountable for achieving a goal that they haven’t been given the authority to achieve is what I call “managing for fantasy.” Invariably, doing so generates stress, frustration, and resentment in employees. Even when the result is obtained, it is usually at the cost of suboptimizing overall organizational results (see “Managing for Fantasy”).

The reverse of this problem authority without accountability — is also prevalent. For example, an employee may be given authority over processes, people, or other resources but not held accountable for how well he or she manages or what results are achieved. When that happens, the employee eventually becomes self-absorbed and develops a sense of entitlement. In this fantasy culture of undisciplined performance and variable teamwork, one’s attitude is always “me first, productivity second.”

Accountability vs. Responsibility

Another common mistake is confusing accountability with responsibility. In the purest sense, responsibility is what an individual demands of himself or herself. It has to do with one’s conscience, aspirations, and internal standards. Accountability has to do with specific obligations one has to another individual based on mutual commitments each has made to the other. Unfortunately, most organizations use these words interchangeably as a way to make people feel accountable when they don’t actually have the necessary authority.

When employees are unclear about or lack the authority they need to deliver on their accountabilities, they fall back on their own sense of personal responsibility. Because most companies have highly responsible employees, those employees take it upon themselves to get the job done, usually at considerable cost to themselves and their coworkers. As a consequence, they always end up suboptimizing overall organizational effectiveness.

For example, a client of ours in the metal fabricating business asked me to talk with their newly promoted assistant superintendent Sam Travers, a 12-year veteran. Since the promotion, Sam had grown irritable and disruptive. His leadership style included yelling, threatening, cursing, and even kicking cans around. After talking with Sam, I found him to be courteous, reasonable, intelligent, and mature. If anything, he was fully aware of his so-called accountabilities — and chief among them was keeping his area’s machines operating at 80 percent of capacity, or more. However, the machine operators were subordinate to their shift supervisors, not to Sam, and they feared their supervisors would dock their pay, write them up, suspend them, or fire them if a machine broke from being cranked too high. The supervisors, busy fighting fires elsewhere, told Sam to handle the problem himself. Only by screaming at the operators could Sam get them to work faster. He had no managerial authority over the operators yet he felt responsible for getting those machines running at 80 percent or better.

An employee who is working hard but not getting the intended results, or who is achieving results only at considerable cost to coworkers, subordinates, or the larger organization, is probably acting responsibly. With such individuals, you must first review their accountabilities and set them in the context of overall company goals. The next crucial step is to ascertain whether the person has both the commensurate authority and the resources to get the job done. Gaps in the accountability-authority equation may be resolved simply or may require rethinking the alignments in your structures and processes.

LEAD People to Accountability

So what is the solution to this accountability crisis? How can we build accountability leadership in our organizations? The four cornerstones of accountability leadership are “LEAD” — leverage, engagement, alignment, and development. LEAD represents a systemic way of thinking and acting that greatly increases a manager’s effectiveness. It starts with the concept that managers exist to leverage people’s potential so that they can achieve more than they could alone. To get this leverage, managers must engage their employees’ enthusiastic commitment and ensure that they are in alignment with the organization and one another. To maintain leverage over the long term, managers must develop their people’s capabilities so they can apply their full potential to the work of the organization.

Let’s look more closely at each element of the system:

Leverage. In an accountability framework, managers are hired to leverage the creative capabilities of their people to make the total result of their contributions greater than the sum of the parts. A lever is a simple tool that enables someone to lift a heavy object higher than he could on his own. Similarly, leadership, when properly practiced using the levers of engagement, alignment, and development, enables people in a company, department, or team to accomplish something that would not otherwise be possible.

To help employees exercise judgment, the most important leadership practice a manager can deploy is setting context.

The key for managers to become effective leaders is to understand what they are leveraging. They’re not leveraging employees’ fixed accountabilities — the defined assignments and the rules of engagement surrounding the assignment — but rather their relative accountabilities — the value added by their application of judgment and discretion. In other words, managers must fully leverage the collective mental force of their people in order to elevate the whole organization’s ability to deliver value to the customer and, ultimately, to the shareholder.

To help their employees exercise their judgment, the most important leadership practice a manager can deploy is setting context. Doing so consists of including your subordinate in your own thinking and in your manager’s thinking, and then incorporating your subordinate’s thinking into your own. This approach improves upon the quality of a manager’s plan and it helps a subordinate to think, plan, and make adjustments intelligently — that is, in a way that best supports the bigger picture.

Engagement. Effective managers engage commitment by understanding what goes into a healthy “psychological contract,” a term coined by Harry Levinson in the 1950s to describe how managers understand and create the conditions necessary for people to feel supported and successful. This contract represents an implicit — often unspoken — understanding and agreement on what the company will provide, and what the employee will provide, to make the relationship work. It is not to be confused with an employment contract, a legal device detailing what employers and employees owe each other. Rather, the psychological contract rests upon a foundation of mutual commitment to each other’s success.

Negotiating strong, mutual, and reciprocal contracts requires that managers attend to what their employees value, how they define success, and what demonstrates to them that the organization supports their pursuit of success. As a general rule, employees perceive their companies as being committed to their success when they provide:

• A safe, healthy work environment
• Respectful, trustworthy relationships
• Regular opportunities for providing input to the organization, its goals, and one’s own assignments
• Valuable, personally meaningful, and challenging work
• The resources and authorities necessary to meet accountabilities
• Assistance in reaching one’s full potential within the organization
• Recognition and appreciation of one’s contribution
• Fair compensation
• A commitment to organizational success and perpetuation

If an employee — or your entire workforce — fails to demonstrate the level of engagement sought, use the preceding list as a diagnostic checklist. Invariably, at least one and usually more of these elements will be missing. This shortcoming is your clue to remedial actions that you might take.

Finally, it’s worth mentioning that context setting and QQT/Rs are part of the psychological contract. Employees prefer clarity, not vagueness. The very process of jointly defining intentions and ambitious and attainable QQT/Rs creates engagement.

Alignment. Employees are aligned when they understand the relationship between their activities and goals and those of their organization, managers, and coworkers — and then act on that understanding. Alignment enables employees to best use their judgment to craft, with others, the day-to-day, often minute-to-minute adjustments that will best support management’s thinking in light of changing conditions.

Alignment ensures that employees are not only accountable for accomplishing their own individual missions — the QQT/Rs — but that they deliver their accountabilities in such a way that ensures they fit into, and support, the whole. With that framework, employees can be expected to chart and continually adjust a course to reach optimal solutions — together. So by setting context, a manager brightens the light on the areas where employees should focus and dims it on areas where they do not need to do so.

To be most useful, context must be translated into a fully articulated decision-making framework within which subordinates can make optimal trade-offs. This framework guides subordinates when they must make decisions involving key dimensions such as revenue, costs, profits, quality, quantity, timeliness, customer satisfaction, or an objective such as winning a new market. Within such a framework, employees not only understand the context in terms of their manager’s thinking and intentions, but they also understand the umbrella of alternative logic within which they must operate.

Development. Employee development, as a continual, career long process, represents the surest path to a workforce that functions with enthusiastic commitment at its full potential. If there truly is a talent gap and companies cannot find and retain enough high performers, then senior executives need to start taking employee development seriously. This means understanding what development entails, creating a talent-pool development system, and holding each manager accountable for effectively developing her own employees — both in role and in careers.

To fully develop an employee’s potential, you need to have a good idea of what that potential is. The purest handle you can get on an employee’s potential involves assessing his ability to handle complexity. This point is quite important, because position levels in organizations are closely related to the complexity of the tasks and the kind of judgment involved in the work of those positions.

Broadly, the tasks of employee development fall into two areas: developing subordinates in their current positions (through coaching) and developing subordinates to improve their fit for higher-level positions in the future (through mentoring). In other words, managers must be accountable for coaching their immediate subordinates and for mentoring their subordinates’ subordinates.

What It Takes to LEAD

The system that I have labeled LEAD lacks the iron-fist approach of the old command-and-control style of management, as well as its paternalism and its limited view of employee potential. LEAD also eschews the passive approach associated with employee empowerment, self-directed work groups, and similar laissez-faire reactions to command and control.

Instead, LEAD begins with a clear mandate for managers to leverage their people to their highest levels of achievement, as individuals and as a group. LEAD recognizes that managers will draw forth employees’ best efforts not by the unilateral issuing of orders, but by enthusiastically engaging their employees’ commitment in their work. Furthermore, LEAD aligns those efforts when managers construct with their subordinates a powerful context — conveying management’s thinking and intentions — as well as practical decision-making frameworks. And finally, LEAD looks to the long-term value of the individual and the organization by holding managers accountable for effectively developing their employees to their fullest potential.

To implement LEAD, you need a clear view of your managerial role, the flexibility to adopt new viewpoints, and the patience and intelligence to learn new skills. You also need the energy and commitment to work with yourself and your people, to try and fail and try again until the system becomes part of your everyday managerial-leadership practice. In addition, you need the courage to establish LEAD as an accountability for every manager and to assess each manager’s value — and right to remain a manager — against this standard. Implementing accountability leadership does require hard work, but I fervently believe that business leaders and managers who undertake it can use LEAD to their competitive advantage.

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How did the country’s citizens manage to solve this almost impossibly complex problem? And what lessons can the rest of us learn from this brave process and others like it around the world? According to Adam Kahane in Solving Tough Problems: An Open Way of Talking, Listening, and Creating New Realities (Berrett-Koehler, 2004), the key to forging a better future in our personal lives, organizations, and world is talking and listening openly.

An Alternative to Force

Although this approach may sound simplistic or naïve, Kahane has stories from some of the world’s most charged conflicts to show that it is neither. In Guatemala, home to a brutal civil war that left more than 200,000 people dead, representatives from all facets began to mend the tattered social fabric through devastatingly honest yet respectful conversation. In Argentina, a country that has been buffeted by economic woes and social chaos, leaders from the legal system engaged in a series of frank dialogue sessions that opened the door to judicial reform. And in South Africa, rather than remaining entrenched in fear or resorting to violence, white and black, right-wing and left-wing, jailers and jailed joined together to listen and be heard in the service of national reconciliation.

People typically approach complex problems either by maintaining the status quo or by trying to force a solution on others.

This approach to tough challenges is unusual, because it involves lowering defenses at a time when participants are most inclined to raise them. It requires openness in settings that have thrived on secrecy and silence. And it demands mutual trust from victims as well as from perpetrators.

But the reality is that, in every setting—international, community, organizational, family—people typically approach complex problems either by maintaining the status quo (that is, by doing nothing) or by trying to force a solution on others. In the latter case, those with more power generally prevail, at least in the short run. Kahane says, “Families replay the same argument over and over, or a parent lays down the law. Organizations keep returning to a familiar crisis, or a boss declares a new strategy. Communities split over a controversial issue, or a politician dictates the answer. Countries negotiate to a stalemate, or they go to war.”

Using force is problematic, in that it leaves behind a swath of physical and psychic damage, perpetuates fear, and sows the seeds of rebellion. Rather than drawing people together, it drives them apart. In imposing their will, those in power shut down all other approaches, options, and possibilities, relying solely on their own judgment.

Kahane points out that this approach might work for straightforward issues, but it is woefully inadequate for dealing with today’s intricate problems. He defines these as situations that are:

Dynamically complex—Causes and their effects are separated by space and time, making the links between them difficult for any one person or group to identify.

Generatively complex—They are unpredictable and unfold in unfamiliar ways.

Socially complex—The people involved are extremely diverse and have very different perspectives.

Based on this definition, solving tough problems requires input from a wide range of stakeholders. Without the open and honest involvement of people from throughout the system, any resolution will be at best short-lived and at worst brutal.

Beyond the Comfort Zone

What kind of magic lies in talking and listening? After all, we talk continually, even when we’re disagreeing. Kahane shows that the quality of our interactions can make a major difference in the outcomes we achieve. Most of the time, when we talk, we’re asserting one point of view—our own—as being the truth. And when we listen, it’s generally to ourselves, as we prepare to refute something someone else has said.

TWO APPROACHES TO COMPLEX PROBLEMS

People typically approach complex problems either by doing nothing or by imposing a solution (R1). But without input from others, the quality of the intervention is generally poor, and the problem reappears. With each turn of the cycle, the severity of the problem grows, and the evel of force required to implement a solution rises. A more sustainable approach is for stakeholders to talk and listen openly, which can lead to the emergence of new strategies and high-quality actions (B2).

To avoid becoming mired in conflict, we need to transcend our typical modes of talking and listening (see “Two Approaches to Complex Problems”). Based on his experiences, Kahane observes, “When someone speaks personally, passionately, and from the heart, the conversation deepens. When a team develops a habit of speaking openly, then the problem they are working on begins to shift.” But he adds, “Often this is extremely difficult. People hesitate to say what they are thinking for many reasons, not only extraordinary but also ordinary: fear of being killed or jailed or fired, or fear of being disliked or considered impolite or stupid or not being a team player.” Nevertheless, if we want to create a new reality, we need to find the courage to speak up.

Listening in new ways means stretching beyond our comfort zone and being willing to be influenced and changed by others. It entails noticing and questioning our thinking and letting go of our attachment to our own ideas. Finally, open listening requires empathy and a genuine interest in other people, their experiences, and their perspectives. As Kahane quotes a South African bishop as saying, “We must listen to the sacred within each of us.”

Our Role in the Problem and Solution

But talking and listening aren’t enough—to create something new rather than merely re-create the past, we need to be able to translate novel forms of conversation into innovative modes of action. Central to this process is being able to see ourselves as part of both the problem and the emerging solution.

To illustrate this point, Kahane describes what happened during a series of workshops that he facilitated in South Africa, known as the Mont Fleur scenario project:, “A small group of leaders, representing a cross-section of a society that the whole world considered irretrievably stuck, had sat down together to talk broadly and profoundly about what was going on and what should be done. More than that, they had not talked about what other people—some faceless authorities or decision makers—should do to advance some parochial agenda, but what they and their colleagues and their fellow citizens had to do in order to create a better future for everybody.” They recognized that, just as they and their fellow citizens and their forebears had created the past, their collective actions would shape the nation’s future. That awareness opened up the possibilities for people to address the problems at a fundamental level.

For most of us, the consequences of continuing to rely on old ways of talking and listening are less dire than for the people whose stories are recounted in this book. But over the long run, we all face extraordinary challenges, including global climate change, the disparity between the wealthy and the poor, growing political instability around the world, and falling resource levels, among other growing crises.

These kinds of complex problems require people of courage to join together and forge peaceful, sustainable solutions. As Kahane concludes, “Every one of us gets to choose, in every encounter every day, which world we will contribute to bringing into reality. When we choose the closed way, we participate in creating a world filled with force and fear. When we choose an open way, we participate in creating another, better world.”

Janice Molloy is content director at Pegasus Communications and managing editor of The Systems Thinker.

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Below are summaries of these archetypes, including a description of the structure, the mental model that drives it, and a key strategy for dealing with it.

The “Positive” Archetypes

In 2000, we were testing our systems thinking approach with a group of people when Esther Wilcox Hudson, one of our colleagues, questioned the perspective from which the 10 archetypes operated. Esther noticed that they described a complex system from the perspective of what was not working—a pessimistic or negative focus. She felt that there was an important part of the system that was not being analyzed: the aspects of the system that were working —an optimistic or positive focus. From Esther’s idea, we created a set of 10 positive archetypes that are counterparts to the original archetypes.

Archetypes are not actually negative or positive. The results that these archetypes produce are what you may define as either negative or positive. We use the terms negative and positive because that is what people in organizations are comfortable using. You can think of the negative and positive aspects of the archetypes as if they are two sides of a coin: one side is the positive form of the archetype and the other side is the negative form. Every system is in constant change. The system you are experiencing sometimes manifests its positive nature and sometimes manifests its negative nature.

For example, consider the “Tragedy of the Commons” systems archetype. In this structure, a common resource is being overused or depleted. In an organization, this resource might be the IT department. When people from throughout the company call on IT to drop everything to help them with their computer problems, the IT staff ends up overworked and overstressed. Staff members may begin to leave the organization, making the problem even worse for those who remain.

The flip side of “Tragedy of the Commons” is “Collective Agreement.” In this form of the archetype, people understand what it means to use a common resource. Access to the common resource is regulated in some way, so that all parties benefit and the common resource is sustained.

The 10 positive archetypes and their underlying mental models are described below.

Marilyn Herasymowych, a senior consultant with more than 17 years of experience, is the founder and a managing partner of MHA Institute Inc. (www.mhainstitute.com). For the past 10 years, she has focused on learning in the workplace, consulting with individuals, teams, and organizations in both the public and private sectors. Henry Senko, a manager and senior consultant with more than 20 years of experience, is a managing partner of MHA Institute Inc. His specialty is working with managers and teams to design work processes that incorporate learning as a part of daily work routines.

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