October’s Harvard Business Review highlights an organizational issue that impacts a number of our clients.
The article, an outgrowth of a Booz Allen Hamilton survey of 30,000 individuals, states that the healthiest organizations are those that are “resilient, since they can react nimbly to challenges and recover quickly from those they cannot dodge. Unfortunately [both in Booz’s experience and our own], most companies are not resilient.”
Instead, over 25 percent of employees view themselves as part of a “passive aggressive” organization: “The category takes its name from the organization’s quiet but tenacious resistance, in every way but openly, to corporate directives.”
Operating in a Passive Aggressive Organization
A passive aggressive organization is “one in which employees feel free to do as they see fit because there are hardly any unpleasant consequences.” We often work with clients that fail on follow-through. Examples: They may have invested in an expensive and detailed sales management system, or they may have redesigned the branch manager’s job or the relationship manager’s responsibilities. But, old habits die hard and “senior management has left unclear where accountability actually lies, in effect absolving managers of final responsibility for anything they do.” In other words, lack of senior management attention and focus pushes people back into their established patterns. Management’s words and actions do not add up.
The article rightly states that unhealthy companies suffer from “either too much control at the top or too little.” Those with too much control stifle innovation and action. We see managers at these clients reacting to new ideas with skepticism and concern. They do not want to risk themselves because they await top management swooping in with its often heavy-handed view on how things should be done. (And, oftentimes, that is the only way that is truly accepted.) Sadly, we see a few bankers in these companies “demoralized into ineffectuality by the thanklessness and futility of effort.” In other instances, the response is to create internal cultural silos that operate with a substantially different corporate culture.
Conversely, too little control fails to provide direction. Various “dialects” develop in an organization that should be speaking one language. One comment that we have often cited captures this phenomenon. A regional banking head reacting to a centralized initiative was discussing his view of the program he was meant to interpret and lead. His view: “It is whatever I say it is.” In fact, he was on target with his view. The result is that the company heads off boldly into multiple directions, losing the impact of a unified, one-bank approach.
Our observation is that the top managers leading these organizations are doing so with the best possible intentions. Those with a tight leash believe that their people need close feedback and direction to get where they need to go; those managing loosely operate from a culture in which employees are viewed as mature and able to stand on their own. At those organizations, it would be almost unseemly to jump in with opinions and direction.
The Slide into Passive Aggression
The article lists several factors that result in a passive aggressive organization and discusses some steps to counteract it. Factors include:
Unclear scope of authority, meaning “misunderstandings and misrepresentations concerning who really has control over which decisions.” Practically, this often means that decisions go back to the top of the bank rather than regional or line of business management.
Misleading goals that fail to align the incentives and goals of the organization and are often not binding. Management says one thing and punishes and rewards for others.
Agreement without cooperation, whereby managers say they are following a prescribed path (“leaving an impression of compliance with headquarters”) while going their own way. Some bankers are masters at exploiting this passive aggressive approach; they will ‘polite you to death’ while doing what they want to do.
Organizational anatomy. The article goes into significant detail discussing four related dysfunctional elements that “conspire to freeze initiative”: incentives or ineffective motivators, unclear decision rights, focusing on the wrong information (often internally-focused), and a misleading organizational structure (in effect, the organizational chart does not tell the real story).
Changing the Organization
Recognizing the problem is relatively easy, but correcting it…?
The article outlines six steps that can transform the organization. All of them have implementation-related risks.
Recognize the problem. Typically, but certainly not always, a company that is suffering economically is more likely to recognize that it needs to change than one that is performing well. Our experience is that one factor leading to poor performance is traceable to a passive aggressive leadership structure. Frankly, it is asking a lot for senior management to recognize its own failing. That is where an external consultant (who often, once he intercedes, will find himself no longer working for the company) or, more likely, the Board, has to play a critical role.
Bring in new blood. While homegrown leadership is culturally easier, an outsider can send a clear signal that change is on the way.
Leave no building block unturned. The authors suggest changing “everything at once, so that the magnitude of the problem, and of the effort that will be required to fix it, cannot be denied.” This flies in the face of the risk management-oriented culture of a bank. Strong commitment from the top will be required to avoid the incrementalism that usually occurs.
Make decisions and make them stick. Clarifying responsibilities and, then, maintaining the structure send a very strong message that things have changed, what one manager called “The shot heard around the world.” We have worked at a number of clients at which managers constantly look over their shoulders to senior management, expecting them to step in with dictates overruling decisions supposedly already made. This results in time lost, frustration, and, even worse, loss of self-esteem
Spread the work- and the data. Analysis, not whim, should set the priorities.
Match motivators to contribution. Misaligned compensation is a significant and unrecognized issue at many banks. As the article mentions and we see regularly, some employees are not motivated by equity; they want nearer-term compensation. For example, typically, the smart salesperson discounts any longer-term compensation that is part of his package.
Why Care About Passive Aggressiveness?
Over time, a passive aggressive organization will underperform a “healthy” one. Internal focus takes precedence over fully serving the customer and addressing competitive issues. An internal inertia sucks energy and innovation. While senior management may not sense it, the organization breaks down into an “us versus them” mentality, even though it is the same organization.
However, the organizational revolution required to change a company does not emerge from the company’s bottom or middle. One challenge: getting CFOs, CEOs, and the Board to consider the messages in this article. Discretely getting the HRB article into their hands may be an understated but effective way of raising this topic.