Motivating Employees (Business Traditions That Have to Stop Now Part 4)

In Episode 89 we "stomped all over" individual incentive plans. In this episode, Tiz, Dave and Derek talk about the real work of helping employees understand the value creation system and wanting to contribute to it.

Full show notes on the Essential Dynamics Wiki.

Tiz, Dave, and Derek are all at Unconstrained.

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Derek: 00:12

Welcome to Essential Dynamics. I'm your host, Derek Hudson. Essential Dynamics is a thinking framework that I've been working on to help us think through tricky situations. And the Essential Dynamics podcast is an opportunity for us to have deep conversations with interesting people on these subjects. I'm Essential Dynamics is brought to you by Unconstrained, my consulting organization.

Derek: 00:34

And today, our guests back with us today are Tiz Benvenuto and Dave Kane from Unconstrained. Tiz and Dave, welcome back.

Tiz: 00:43

Thanks for having me back.

Derek: 00:44

Hey. Hey. You know, last time was your first time. What do you think about podcasting now?

Tiz: 00:49

Fun conversation.

Derek: 00:51

Yeah. It's, I I really appreciate what you said. Dave, I you're willing to do it again.

Dave: 00:55

Absolutely. It's, it's fun to just get a conversation going and see you see where it takes you.

Derek: 01:00

See where it takes you. That's the magic of podcast for sure. So, last time, we talked about in our series on business traditions that must stop now, we talked about this idea that you can use pay as a motivator. You can use incentive pay as a as a way to run your system better, and we've and we've stomped on that pretty hard, I thought. And and we're one of one of the places we ended up with was to say that you gotta pay people to the point where money is not the issue anymore.

Derek: 01:34

You gotta take money off the table, and then you have to design some kind of other way to make the system work. So today's episode, we're gonna talk about that. And like you said, Dave, we'll it'll be interesting to see where it goes because we might learn some things. So if we establish the fact that you can't huddle up in a management room, design the next, super complicated incentive pay system, and then expect that to do your work for you, what's the work that you have to do?

Dave: 02:03

Chair, I was expecting you to have the answer there just to keep going on that one, but, you know, the the the immediate thought is, you know, you you're trying to engage and get the people in the system so that they wanna bring their best and that they are, and and not through your incentive pay system. But my mind kept going to, well, yeah, that works. But people know only if they understand the system, and they know their place in the system, and they know how what they're doing is gonna contribute and add the value, and then actually, you know, see it going off somewhere.

Derek: 02:36

So so I heard two things from that day, which are both critical. One is that people wanna bring their best, and the other is that people know what to do to actually contribute in the system, which sometimes wouldn't necessarily be obvious.

Dave: 02:49

Or to have the visibility in the trans Yeah. To to know where their actions are contributing and how they're affecting the other parts of the system. Yeah.

Tiz: 02:56

So, just to ensure that we aren't necessarily go looking at this from well, let me just bring it back to people. And pea I wanna, sloppily compare it to, the hierarchy of needs. So when you talk about compensation, to me, that speaks to sort of that most fundamental human need, which is part of safety and security. And that's just not enough when you wanna really bring people to the table and do the best that you can within the context of your business system. So so what else is there beyond that?

Tiz: 03:38

Certainly, it's, feeling a part of something. It has to do with connection and relationships and, feeling safe. So it speaks to sort of a trusting kind of environment, in my mind anyway. And and and another element that I think is foundational for beyond that compensation, that safety and security, is having people, feeling a part of something, understanding what the purpose is, what the ultimate goal or objective of all of us coming together collectively for this thing called work. And what's what's my part in it?

Tiz: 04:22

And how is my part important?

Derek: 04:24

Yeah. I would agree to all of that, and then maybe maybe at the peak of that, if I remember my intro to psychology, that's, that's Maslow that you're talking about there. And the peak of that is self actualization, which I think, in some ways, is, is the ability to, I think, maybe do two things. I'm not sure what, what the literature actually, what he put out there is, but it seems to me that you need to, be stretched in your competence. Mhmm.

Derek: 04:57

And, you know, sort of move towards mastery on the one hand, which is an individual kind of view of it. And then the other is you have to have value to the community. So you have to you have to be helping. You have to be Mhmm. Adding to that.

Derek: 05:09

And so if if we can build a system where people are Yeah. Their basic needs are taken care of, that might be at the bottom. And then somewhere in the middle, they feel like they're a part of a team and they belong. The people have their back. And then you put and and a shared purpose, and then you actually achieve the purpose, but it's a stretch.

Derek: 05:30

And so you're balancing kind of this comfort from I'm here with people that have my back to and now I'm hanging out over the edge because it's hard to deliver the value that we have to deliver. And then it's accepted by the recipient of the value, you know, and someone says, you know, gee, thanks.

Tiz: 05:49

Exactly. I I think it really mirrors, you know, how we speak to, the quest in addition to the quest that the business is on. Every individual has their own quest as well, and I think what you're touching on, in I I think you did a good job with describing the self actualization part. It's also acknowledging, it's giving as opposed to getting, mindset of getting. It's also giving people the opportunity within their context of their of their work life, if you will, to continue their own quest, if you will.

Tiz: 06:31

Being stretched, understanding where they could evolve to and go to and contribute more of. Perhaps picking up a whole bunch of knowledge and learning along the process and and really feeling that the system, the has my back in doing so, values me enough to allow me to explore parts of what I can offer and give that I haven't had the opportunity to do so yet? What do you think about that?

Derek: 07:05

Yes. I do think about that. I I think that's great. And if I'm go back to one element of essential dynamics that that, I didn't talk about in the last episode when we did a mini recap, And that is at every essential element that we talk about, the purpose, the path, and the people, there are these dynamic forces.

Dave: 07:24

Mhmm.

Derek: 07:25

And at the people side, the dynamic tension is between the individual taking care of themselves, wanting to be, true to themselves, and then wanting to be part of the group. So that's on the individual side, and on the group side, it's we want people who buy into our system and do stuff the way we want them to, and we want them to be, creative, and, you know, bring their heart, whole heart and soul into it. So if we can put all that in, if we can get all that, then that's that's when the magic happens. And I think the things that you Tizzy, you just described are, you know, the ways to get that. So one question I have is, is this practical and realistic for just a regular ordinary business that's not out curing cancer?

Tiz: 08:16

Oh, I can jump all over that. I'm gonna let Dave talk. Yeah.

Dave: 08:19

Well, yeah. No. It's cert it it absolutely is. And then just as you're sort of going through it, what reflecting in my mind is having done pulse checks and employee surveys in in all the organizations through the career here. And and you you continue to see that of, you know, the the highest motivators or the biggest contributors are always, you know, the people I'm working with, the quality of the team I'm with, the buy in and the belief in what we're trying to do or the product we're trying to bring out.

Dave: 08:52

And then the ones that, you know, tend to be a bit more of a challenge are the self side of and the enterprises that continue to allow them to grow or to learn or to stretch themselves. Their marks are, you know, usually higher. Compensation is always a grumble down there, but it doesn't, in in my reflection, didn't seem to affect the high performance nearly as much as the ones that were successful at at, you know, allowing their team to grow or have the autonomy to contribute, to those pieces. So it's achievable for all all organizations, both big and small, as long as you're sort of recognizing that they're not just contributing their role and they do have their own needs, and they do want have their to grow or to change or or to do other things. But it's not looking at them as a resource that has to, you know, contribute this productivity and achieve this output all the time, and how do I maximize that?

Dave: 09:50

It's how do you tweak the other levers. And it comes back to the system after that. Right?

Derek: 09:58

I I think I wanna, interject here, Dave, because I feel like we've talked about the system for a couple episodes, and maybe I can just lay out, we can we can all, add to this. What we're talking about when we're talking about a system, so it's a little more concrete. So in my mind, what we're we call this a value creation system, because for whatever we describe, the purpose of an organization is to create value. And typically, that value is recognized when a product lands in the hands of a customer and the customer's, you know, existence is better. And that holds up for not for profits as as well as for profit businesses.

Derek: 10:39

So, there's there's some kind of need that's being met and that's the ultimate, result of the value creation system. And the value creation system is where we take the raw materials that enter the organization, whatever those might be, they might not be physical. And then you you do the process steps that add value to the point where it's a value to a customer. So so that could be a mortgage application to somebody moving into their first home, and it could be making a physical product, which saves labor in in the home, or it could be, while we were talking before we got on about a physiotherapist to, their the raw material is your aching joints, and their product is that, you can walk without pain. And those are all those are all valuable in society.

Derek: 11:29

And so, the first thing we'll go into the purpose side of that is, ultimately, someone has to care about the purpose of an organization or it won't exist. And so everyone can identify what that, what that product is that, the customers is able to get. And then you understand the steps that go flow through the organization to create value. And then the other thing that's really important in the organization is the areas that support those who are taking the steps that add value. And I've always worked on that, except for when I was a consultant as part of the sort of that value creation system as a as a executive administrator.

Derek: 12:10

I've always been on the the administrative corporate or finance side where we're not in the factory making the widgets, but the widgets can't get made if the raw materials don't flow in and the employees don't get paid and and things like that. Anyway, so that's the value creation system the way I see it. Every step of the value of the value creation system, you know, depends on the step before it and supports the step after it. And if you try to make those all operate in isolation, you spend all your time doing what managers typically do all the time, which is trying to stitch it back together. But when people understand the system, then that's when we get flow, which is the way we talk about a system that's functioning well, and people can identify their contribution, and maybe some other ways they can contribute to flow and to value going to the customers.

Dave: 13:01

I I think the the key piece in there is, within the value creation system, it's understanding at first at the the leadership level and having that that clarity of of where is value getting added and where the leverage points. But when we bring it back down to the conversation of the, you know, the employees and the the resources the human resource in the company, it's making sure they also see that. So it's not just creating an understanding system at a leadership level. It's then allowing that to sort of filter through the organization so that each person contributing to it sees and understands that as well.

Derek: 13:40

Yeah. And then we go back to what you said earlier, Dave, that we need two things. We need people to be engaged and then know how they how they can contribute. And sometimes you get super exuberant engaged people who get in the way of the system because they don't understand it. And other times, you get people who aren't engaged, and, maybe even purposely drag the system down.

Derek: 14:00

So they both have to be there, but they can't be there if you if you don't if you can't explain to people what the system's trying to accomplish and where they where they fit in the system.

Dave: 14:10

Where to focus. I mean, I I think in in in another podcast, you get into the whole low hanging fruit one, but like you say, if you get super exuberant people, you want them focusing that energy on the right leverage points, not the ones that they think are gonna be the best.

Derek: 14:26

Yeah. And I think that's one of the the the power, that essential dynamics has, in in this modern environment that we have where it's very, very challenging, all kinds of distraction and essential dynamics takes from the, the very useful body of work called the theory of constraints and says, let's design our system so that we can understand where to focus. And typically, you focus on the the sort of chosen constraint, the one that adds the most value, that's the most difficult or most scarce, and you build your system around being able to deliver that value. And if you're if you're working someplace else, you might not, be doing anything that's gonna improve or increase the flow of value in your organization. And that shouldn't be a secret.

Derek: 15:19

Like everyone in the organization should understand, you know, where the critical points are and support them. And, you know, sometimes you see that, like for example, I don't think any of us have ever been there with our eyes open, but in the surgical suite, you know, and it's open heart surgery, the surgeon who does the most fine and delicate work, they don't even make them open up the chest cavity or sew up the stuff later. They are, there's not very many of them, and it takes forever to train them, and so they do the tricky heart valve stuff all day, every day. I have a friend who's a pilot, and, one of the key things about the pilot is they need to be rested. And so you don't run your pilots overtime.

Derek: 16:09

You know, you know, they don't burn the midnight oil and do three twelves in a row, and then get back in the cockpit the next day. That's that's not the way we wanna operate that system. Tiz, are we missing anything on this, this idea, first of all, of kind of defining what we mean by the value creation system?

Tiz: 16:27

I don't I don't think so. I I agree with with what you've both said. Certainly the point that it really starts with that clarity at the top, that really understanding what your value creation system, is, what will help reduce those distractions. I completely agree with that. And that as part of that value creation system, having a clear awareness of your people, and let's call it culture, and, a deep enough understanding to be able to narrow that gap, that gap you mentioned before, in the dynamic forces of individual needs and journeys and the group's need and journeys.

Tiz: 17:11

So I think when you've got clarity on your value creation system and your finger is on the pulse with respect to the narrowing of that gap, you are a well greased machine.

Derek: 17:25

And and if you're not, you've taken the the most critical first first step. Right. So last episode, we were critical, and we said, why does this business tradition of trying to tweak the incentive system, why does it why does this persist? And you said, well, because it's easier than under understanding the system. And so I've had all kinds of conversations, with business leaders trying to get them to explain to me what their value creation system is.

Derek: 17:55

And that's not how we start. Like, I don't I don't say, hey, tell me about your value creation system. So they look at me like, you know, I don't know what that is. But when you in conversation, it it's a fair bit of work, but eventually you get to a simple explanation of the business. And and so it's not a simplistic explanation of the business, but it's simple, and that only comes through kind of working through what is really our purpose, how do we really accomplish a purpose.

Derek: 18:28

And now sometimes in those conversations we reveal that it's actually not there, that there's, you know, a laundry list of possible purposes and a spaghetti of, you know, steps that might be a system that's very hard to discern. And other times it's there, but we just need to step back enough to think about it. Have you experienced that as well in this people don't know the system they're working in, or they couldn't describe it if they tried?

Tiz: 18:55

I I think I have an example a a recent example of that. I will admit, we didn't spend a lot of time on value creation system. The the purpose of that particular work was defined differently. But because of the confusion that was at the very top about where this particular leader's attention needed to be, and things were a bit chaotic and frantic, if not within the work organization, also within his mind of where he needed to focus and what was the next thing to do. That's where we did spend some time on going, okay.

Tiz: 19:36

Look. Let's talk about what's important here. What is your you know, what are you really here to do? So I'd I'd I'd I don't believe those words were used, value creation system. But what are you here to do, and what are the components that get you there?

Tiz: 19:52

And that immediately surfaced to the top for him some painful, critical decisions he had to make, had to make fast, had to move on quickly before the entire system fell apart. Dave, any examples?

Dave: 20:08

Not not examples coming to mind. But as as you're sort of going through this, what I'm trying to process is I mean, so many times I've I've heard you sort of say on this podcast that, you know, the biggest constraint is management attention. And when we sort of brought in the idea of, you know, designing compensation systems to bring people out their best, how much of that is is, you know, focusing management attention on on things that aren't going to be the most important pieces. So now you've got every employee who has to have an incentive plan, and we need to work with every one of them to make sure that they maximize these sort of things and focus on the right pieces. Whereas, previously, we just said, if you understand your system and you have specific sort of leverage points of where to start first because they're gonna get you the biggest return, that's where attention should be focused as opposed to, you know, bringing the the high water markup on everybody when that same attention put elsewhere would get a bigger return.

Derek: 21:07

Absolutely. Absolutely. So there's there's so much to that. Management can't be everywhere, but somebody's you know, the employees are everywhere.

Dave: 21:15

Whereas if you could just have them engaged in all understanding and sort of self directing themselves rather than worrying about the metric they need to hit in order to get their compensation bonus, then management attention can be elsewhere.

Derek: 21:30

That's right. And and, you know, one of the ways they like to think about it is if you have a system, then you can then you can perceive the system separately from yourself. You can step outside the system. You can look at that critical constraint and see how it's doing. That saves a lot of time in terms of, like, not looking at all the pieces at once.

Derek: 21:51

But if you can step outside the system, you can also teach other people, teach other people what to watch for. And so for example, a lot of businesses, they want a dashboard. If you don't understand your value creation system and what what, limits your output, you don't know what to put on the dashboard. So now I have a dashboard that has way more things on it that I can that I can keep track of that's not helping the focus of management attention. But if if you have a system where you understand where to focus, that helps management.

Derek: 22:23

And then you also that helps you be a better leader because you pull up to the job site or wander walk through the plant and say, how's this thing going? And people, first of all, they know that's what you're gonna ask, and, and then they've got they've got an answer because they track that too. And then you're actually running the business as opposed to, right trying to run this Rube Goldberg machine of individual incentives, where you never really can tell what's gonna make a difference to the output that you that you make. I think the other thing is is that, if we go back to 'tis your hierarchy we talked about at the beginning, if it's really clear what your goal is, and it's really clear what performance towards that goal looks like, then as employees, you can be all in even if your job is a support job.

Tiz: 23:16

Absolutely.

Derek: 23:17

And, you can understand that, you know, some someone else is on the front line with the customer, but they couldn't be there without your particular contribution. And then, when you understand what you could do to help that operate even better, that's where you can get that sense of shared purpose, the stretch that I think is is vital to, you know, individual development and growth, and then to see the rewards in the hands of the customer. Those those are all things that contribute to that sort of actualization. I'm I'm gonna have to podcast podcast on this another another time, but one of the ways I see this is there's the the value creation system is the value flow, but there's also, an energy flow. And one of the ways that employees, pick up the energy is when they see the value in the hands of the customer.

Derek: 24:22

And then another flow, which I like to talk about, I'm learning about is the information flow, which is kind of the feedback loop. So how do employees get to see the impact of the work the organization does to the point where they identify and feel value in it? And I think if you spent the time that you're trying to tweak your, incentive plan and your compensation system, you took that plan helping people understand and and to operate those flows, and so people were getting feedback about the system and a connection to the actual value that was delivered. I think there's a lot to that. So I'm still working on that one, but teaser.

Derek: 24:59

Put it up there right now. Awesome. Any other final thoughts? We've we've used up our time. It just goes so fast.

Tiz: 25:05

So so what if let's let's, so what what's the circle we went through here? We we we talked about incentive plans, throwing them at, a problem and and having hoping it will fix something, but that really that kinda comes from a perspective of forcing change, and that sort of forces short term and maybe relationally harmful. And, and then what what what else? We we we basically took that and and and moved away from these forced changes. And I think, did we not focus more on basically clarity?

Tiz: 25:44

Clarity of understanding both the the value creation system of the business and that energy flow that you talk about in the people element of, of these of the essential elements of that system sort of thing. And understanding that there is two sides to that too. There's what the individual, needs are and what the group needs are, the organizational needs are, and minimizing that gap. And that's where the gold is.

Derek: 26:19

So that's our system's view of the system. Yeah. Yeah. Well, Tiz, Dave, thanks very much for, this conversation. Dave, did you get what you wanted in terms of we didn't know where we were gonna go and we went someplace.

Dave: 26:31

We went all over the place. It was terrific.

Derek: 26:34

That's awesome. Well, thanks very much for for your involvement. So we all are from Unconstrained. You can find us at getunconstrained.com. And the work that we do really is working with leaders to help see their value creation systems and to then help their team see and operate in those value creation systems.

Derek: 26:53

And it's, it's tremendously rewarding when we get a chance to do that. So thanks very much for, for listeners for listening. Bryn, thanks for running the running the show here. And until next time, consider your quest.