Culture: how do you handle paradox?
Humanocracy, the book by Gary Hamel and Michele Zanini, presents the research and the practices that help build organizations that foster freedom and responsibility. Here’s part 4 on how to deal well with paradox and develop a resilient culture.
It’s an advantage to deal well with paradox. As you may know, the Competing Values Framework (CVF) by Cameron & Quinn is one of my favorite tools. This framework helps leaders and organizations handle opposites, deal with dilemmas and adopt an “and-and” mindset instead of the narrow either/or thinking.
The paradoxes in the CVF are internal versus external orientation and stability versus flexibility. An internal orientation entails focusing inward on development, collaboration, integration of activities, coordination. An external orientation means looking at the market, what’s possible with the latest technology, what competitors are doing, what customers want, and it could diversify activities as a result.
Then there are organizations that prefer stability value clear structures, planning, budgets, and reliability. Organizations that organize with flexibility assume you can never predict and control everything. They prefer a flexible attitude and adapt quickly to changing circumstances - focusing more on people and activities than on structure, procedures, and plans.
Mapping those two paradoxes you get four culture types: the dynamic, entrepreneurial Create Culture, the people-oriented, friendly Collaborate Culture, the process-oriented, structured Control Culture and the results-oriented, competitive Compete Culture. Also known as Adhocracy, Clan, Hierarchy and Market culture (Cameron & Quinn).
The “competing values” nature prevents you from doing everything for 100% at the same time. Yet, Quinn and Cameron found that effective organizations sometimes use contradictory behavior. The “best” organizations use all four value sets when necessary, in other words: they handle paradox very well. This aligns with Hamel’s observation that a basic tension in every organization is exploit versus explore. In the CVF: the Control culture exploits, the Create culture explores.
Organizations must have enough exploitation to ensure the organization’s viability and at the same time enough exploration to ensure the viability for the future.
Hamels and Zanini observe that large organizations are filled with accountants, lawyers, and professional managers. By inclination and training, they value stability and security over dynamism and daring. It’s also easier to gather data on operational efficiency than to capture the cost of untapped creativity and the initiative not-taken, the forgone opportunities, strategic inertia and fear of failure. This drives organizations to focus on stability.
Explore versus Exploit - Control versus Freedom
A great example of having both “freedom and control” is Handelsbanken, a Swedish bank with international branches. Their CEO Jan Wallander noticed that over-centralization became a problem. Senior executives lacked the context to make smart decisions as they were too far from the frontline and the local customers. This traditionally happens in pyramid organization with many layers.
Thus, Wallander decided to give local branches more autonomy. They had the best local information and could anticipate who would be safe to loan money to, and so on. It also helped to build great long-term customer relations.
Handelsbanken became decentralized and very disciplined at the same time. Each location has their own Profit and Loss report and they were accountable for their results. At the same time, they have the freedom to customize their marketing, to make decisions on how to invest, how to grow, and so on.
“We get pride in getting things cheaper”, explained one employee. “It’s what you do at home, so why not buy services and products as cheap as possible for our location?”
Another thing to stimulate discupline is transparency. All the numbers and P&L reports are accessible to all at Handelsbanken. This spurs friendly competition between locations.
Hamel and Zanini write: “In a humanocracy, control comes from a shared commitment to excellence, from accountability to peers and customers, and from loyalty to an organization that treats you with dignity.” High autonomy and high accountability will produce stellar results.
How to increase Paradox potential?
Their observations resonate with my client work based on the CVF. When you’re able to hold contradictory goals and ideas at the same time (and-and thinking) you can make smarter decisions. It helps to enlarge the organization’s repertory of responses and behaviors. Some tips to increase the power of paradox in the organizational culture are:
- Include people with different ideas
- Get a better idea of the hidden costs of trade-offs (no data doesn’t mean there’s no cost)
- Sacrifice some uniformity for more smart local decisions
- Never accept either/or: think and/and
- Equip people with information and skills for smart trade-offs
- Give frontline teams a P&L and inspiring goals, no detailed KPIs (KPIs tend to favor sub optimization)
- Which of these suggestions appeals to you most?
- What’s a dilemma that needs attention in your organization?
© Marcella Bremer, 2021. All rights reserved.
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