A dogma called High performance culture : When stretch tears and differentiation discriminates - Part 2

The key is what is sustainable for the long haul. The argument is not that stretch is damaging. It is more about the appropriate stretch, which makes the system toned and ready for more stretch. This is tough, when at any given point in modern organisations, one-fourth of the employees are new

K. Ramkumar
Updated: Apr 18, 2013 08:24:24 AM UTC

Any modern day cult follower of ‘high performance culture’ will swear by the precepts of stretch and performance differentiation. As we normally do in this blog, let us put these two to test.

Stretch to tone or tear Can we argue against stretching either human ability or muscles? Certainly no! Then the moot question is: Does stretch tear muscles and, for that matter, human confidence or tones and builds it? We know that it does both.

The question always is how much of a stretch. It is also whether the stretch should be the same for everyone. Sports tell us that when stretch is built over time and is customised to the body, it achieves the best tone. When someone attempts it too soon or loads up weights without checking out the capacity, it almost always tears the muscle. The same is true for business. But here it is slightly different.

The stretch that is possible in a start-up is very different from that of a business in mature stage. Any player entering a virgin industry or a market has a fairly big play for aggressive stretch. The consumer electronics, automobiles, retail banking, telecom and branded garments businesses during the last decade are good examples. Here, growth targets of 30% to 40% per year were acceptable stretch in first few years, till competition became crowded and the markets mature.

This, in fact, toned up many organisations and made them world-class and competitive. But to chase even half of this number, when the markets mature and the denominator swells, is asking for trouble. This is when we run the risk of tear.

The same is true with individuals, when target-setting becomes a spreadsheet exercise, with little reference to the market or the ability of the team members and solely driven by the ambition of the senior management. Stretch then leads to tear.

Let us say that in a mature market, when the market is growing at 15%, demanding a stretch of 20% is credible. But before jumping to this the leader should ask where is the team’s ability now. If it has been delivering 8% growth over the last few years, asking them to go for 20% growth injures the organisation. Repeated failure to even get to 12% growth, leave alone 15%, injures the psyche and self-worth of the team. The longer this charade goes on, the more permanent the damage. This frustrates both business leaders and the team members.

Injured sportspersons have told us about the immense crisis of confidence each such serious injury does to them. Every time they stretch the next time, there is this fear in the back of the mind whether they will tear up again. The recovery, physically and mentally, is slow and performance plummets. Hence, it pays to push this up in a calibrated manner.

In 1996, the new chairperson of ICI Plc announced a 5x Vision, which is 5 times growth in 5 years. By 2001, most of its ‘crown jewel’ businesses were sold off to fund this vision. An unsustainable level of debt was raised and the bankers wanted their loans back. By 2005, ICI ceased to exist.

Look at what happened to the retail banking sector in India, which mindlessly went for unsecured loans and the growth of credit cards, without understanding whether there was capacity or capability. During the same period, the mortgage business, which grew rapidly but in an calibrated manner, performed squeaky clean. Bad loans, receivables, unsold stocks are very often not the result of the economy, it almost always is because of ill-timed and uncalibrated stretch.

Turn your lens on the telecom miracle. To meet the volume, organisations systematically destroyed enterprise value by engaging in a mutually destructive price war. Less said the better about the other questionable practices that engulfed the industry.

When the stretch becomes fantastic numbers, people either give up or build poor business; or they plainly adopt questionable practices. All these unravel very quickly.
Many leaders, like a well-intentioned but an impatient coach or an over ambitious parent, excessively stretch businesses and employees to debilitating injuries and long term crisis of confidence. They get carried away and fall prey to their stretch dogma. The larger mass grudgingly complies first, then resigns to the fate of being the walking wounded. Some even learn to game the system.

Leadership, which demands stretch without knowing the “how”, will be seen by the team as being exploitative. Muscles when stretched without nutrition will tear faster. It becomes worse when the leader gets carried away like a coach who demands 3,000 crunches daily from you and me because he heard that Cristiano Ronaldo does it.

Mindless and spreadsheet stretch shows up as spurts of stunning performance and periods of below par performance, requiring long periods of convalescence and recovery. Apart from damaging the morale of the team, it has a contra impact on the investors as well.

The key, therefore, is what is sustainable for the long haul. The argument is not that stretch is damaging. It is more about the appropriate stretch, which makes the system toned and ready for more stretch. This is tough, when at any given point in modern organisations, one-fourth of the employees are new.

Stretch the experienced and the seniors more than the debutants. The stretch for different muscle group has to be different, so too for different businesses, markets and individuals. Stretch works when the coach is focussed on technique and method and not on numbers.
Stretch in tailwind is different to that in head wind.

The tailwind in the economy during the early part of this decade lulled everyone into a false sense of comfort with ridiculous growth numbers for businesses and consequently for individuals. The risk is when someone unaware of the change in the wind fails to rig the mast and trim the sails appropriately. The ship capsizes.

The proof of the pudding is when stretch tones and not tears. Every person who experiences tone stretches more confidently and others watching, stretch too, feeling encouraged. This will also establish that a muscle, which is not appropriately stretched, will stiffen and tear, so one may as well stretch, tone, strengthen and feel confident. The beauty about the human body and ability is that when stretched appropriately, it expands and surprises you well beyond your own imagination.

Differentiate but not discriminate
Is ability, focus and delivery different for different persons and does the same person exhibit variance year to year on these? So should we differentiate performance?
We agree that each person is unique in his ability. We also agree that this ability expresses itself differently depending on the performer’s focus and context. Will we disagree that human performance is both absolute and relative? Absolute when performed as an individual but relative in a team. In the absence of this being explained this way, we will use various erroneous terms such as forced distribution or normal distribution.

Even nature distributes its functionality relatively. Observe the colours, sounds and the features of everything around us. Relativity in hues, tones and sizes will dance before our eyes. Einstein presented energy, mass and even the universe in relativity. So performance cannot be but relative when more than one person is involved. We accept this in school rankings, sports rankings and podium placements, yet fight it in our organisations.

Now this takes us to the controversial issue of whether performance is relative only at the junior level or is it relative across all management levels. A close examination of the performance distribution of most organisations will shock us. The highest and sharpest level of relativity is reserved for the juniors. As one traverses up the hierarchy, any semblance of relativity disappears. At the very highest level, in fact, the virtue of team work gets speciously justified. Strangely, the impact it has on distribution of rewards and wealth does not ever seem to bother most board governance committees.

So is it the “vitality curve”, as we have been told by GE? Vitality for whom and at whose cost? If we examine this curve, for most organisations the best rated personnel at the junior levels will be somewhere around 20%. As you move up, it will swell to almost 60% at the most senior levels. Let us say the average wage increase is 10%. If we examine closely, we will find the payout for the juniors will be around 8% and at the senior levels it will tend to be around 15%. On a cursory glance, this will not appear to be a lot. But the key question is whether this distorts differentiation and becomes discrimination.

The standard retort is that the seniors add greater value; the cost of losing them is severe and that they have reached there having proven themselves. Can we buy this argument? This is akin to arguing that the level of differentiated rankings in colleges should be lesser than that of schools. Or in Olympics and international sports, all participants should be placed together as they have reached there with proven championship track record. If we cannot buy this, then how could we buy the other argument?

When this is seen in the context of stretch, consequence management and rewards, the gross nature of discrimination will be evident. A positive tool called differentiation should not be misused for quietly discriminating the young and junior staff. If the privileged few who make policies exempt the tougher aspects for themselves, then governance suffers.
There is a saying in Tamil that means ‘you get rice and I will get husk, we can jointly eat, after blowing out the husk’. Stretch and performance differentiation should not become like this saying. Until we bell this cat, most seniors will not have any moral authority to demand stretch or performance differentiation from the rest of their organisation.

The thoughts and opinions shared here are of the author.

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