The way people are

One cannot talk sensibly about leadership, or people management, nor design decent management processes, unless we clarify beforehand our beliefs with regards to what people in organizations are like. We have to arrive at a shared understanding of human nature and of the consequences of that for our organizations.

Far too many publications, consulting approaches, tools and HR Managers are not coherent within their statements, because the authors are not aware of their assumptions about human nature.

Two ways of perceiving human nature - but be warned: only one is real!

The intuitive understandings that can be found in practice tend to oscillate between two extremes introduced by Harvard Professor Douglas McGregor more than 40 years ago in his groundbreaking book: “The Human Side of Enterprise” as Theory X and Theory Y.

  • Theory X is based upon the authorian leadership style of the command-and-control management model originated from Frederic Taylor. Theory X is like a constraint regime, in which lazy, unwilling to work, less talented employees are driven by the “fabric of management”. Moreover Theory X assumptions about human nature treat people like children, that have to be taken by the hand and forced to perform through incentives and related control systems.
    The Alpha Codex (tayloristic management) is based upon Theory X.
  • Theory Y is the antitheses to Theory X. According to Theory Y human nature assumptions people are naturally “entrepreneurs” and leaders, who should be treated as adults, who are trustworthy, able to self-control, who are naturally "driven" with the desire to contribute to, who align themselves to organizational goals to the degree that they are committed to those objectives, who are gifted with talents, and who are intrinsically motivated.
    The BetaCodex is based upon Theory Y.

Almost 50 years after Douglas McGregor's groundbreaking book, organizations slowly recognize – at least in theory – that their employees are “Knowledge bearers”, that under the right conditions are the most important source of organizational success. Theory X assumptions about human nature become more and more come obsolete.

All BetaCodex Pioneers have inevitably s developed assumptions about human nature that reflect Theory Y - sometimes by themselves. Some pioneers like W.L. Gore & Associates, AES Corp, Virgin, or Kollmorgen have been directly influenced by Douglas McGregor's “The Human Side of Enterprise”: They created an alternative management model based on Theory Y assumptions about human nature, and succeeded to maintain it over decades.

To conclude, at first there have to be adequate assumptions about human nature, in order to build a post-tayloristic organization without command-and-control culture. It is impossible to envision a highly decentralized, networked BetaCodex organization without those assumptions.

In the knowledge economy, Theory X-based organizations have proven to be out of touch with the people we deal with in our organizations. Theory Y assumptions, on the other hand, allow us to introduce modern leadership and management practices that truly make use of peoples' talents. Assuming that employees are driven by the desire to contribute and are searching for recognition and meaning in their work creates the conditions for more productive performance management systems.

Getting rid of management and performance myths

If we accept this contemporary perception of the people in our organizations, then eight core statements concerning corporate performance can quickly be exposed as myths:

  1. Shareholder Value or EVA (Economic Value Added) is the ultimate reason for doing business. Fact is: EVA is not a reason. It is just a result and a necessary side effect of business activities.
  2. Companies must provide the financial markets with earnings guidance and will be rewarded for this. Fact is: Providing shareholders and analysts with predictions of future results results in a "fixed performance contract" which forces delivery of the promises made at all costs. Companies including UBS, Porsche, Google, Coca Cola, and Citigroup have abandoned this practice.
  3. Growth and profit are the most important measures of success. Growth can in some cases be a good indicator of superior value creation and competitiveness. Often, however, it is not.
  4. It is possible to measure the performance of individual employees. Fact is: It is not. Organizations are "living systems" in which performance always depends on interaction between different players.
  5. It is possible to measure performance objectively. Fact is: Measurement is never objective. It is always based on assumptions previously made either consciously or  nconsciously, and is only an indication of actual performance.
  6. With the right indicators, a good manager can manage the organization. Fact is: Indicators can provide "indications" with regards to performance, but never answers. They are useful if they raise questions in teams and among employees, but can be highly dangerous if interpreted as "objective.
  7. Performance is over-proportionally influenced by top management  Fact is: Heroic management is ineffective in dynamic and complex environments. Decisions cannot be efficiently and effectively be taken at the top of organizations any longer in constantly changing and highly dynamic environments.
  8. The reasons for poor performance can be attributed with individual employees. Fact is: It is more important to ask what inhibits a person or team of performing well. We should focus on how changes in the system would enable teams to perform better.