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Lost in Change? When Leaders Focus on Efficiency at the Cost of Effectiveness

Dr. Barbara Covarrubias Venegas

28 March 2019 | Vienna Global Leaders

The 1st VGL Forum, which took place on 31 January 2019, addressed the topic of agility as a desired leadership competence in new working environments and a VUCA world.

While new working environments provide us with more flexibility in dealing with working hours or remote work, we also face challenges of uncertainty, acceleration and constant pressure to change in organizations. In the “Innovator’s Dilemma”, Professor Clayton Christensen from the Harvard Business School demonstrates how successful, outstanding companies can do everything “right” and yet still lose their market leadership – or even fail – while new, unexpected competitors rise and take over the market.

Efficiency vs. effectiveness?

“Most companies do not fail because they are doing the wrong things,
but because they are doing the right things too long.”
– Prof. Yves Doz, INSEAD

With this statement, Yves Doz picks up on the tension between efficiency and effectiveness in day-to-day business, i.e. doing something fast versus doing the right thing. The way most organizations work often results in highly efficient, but ultimately inflexible organizations, whose existing business models are characterized by an internal focus, whilst losing the external perspective – namely client needs and the environment.

Examples of companies that have succeeded in their highly efficient business model, but have not responded to a changing environment such as the digital transformation, are Nokia (see Strategic Decisions That Caused Nokia’s Failure) or Neckermann.

Managers and executives in such business models often follow a traditional management and leadership logic based on planning, control, efficiency and hierarchy. Bernardis et. al (2016) suggest recalibrating this old compass with a new leadership logic based on prototyping (instead of planning), trust and feedback (instead of control), purpose (instead of efficiency), and self-management and distributed authority (instead of hierarchy).

The new compass of leadership, Bernardis et al. (2016)

A new leadership logic

New times call for a new leadership logic as neither senior management nor top executives can make decisions in complex environments that meet all aspects of a dynamic organization. If managers and executives succeed in replacing well-tried control mechanisms with an environment of trust and a feedback culture, this will significantly strengthen self-management and distributed authority within organizations. Hence, the main aim here is to give employees more freedom in decision-making to respond more dynamically to challenges / to become a more agile organization. This approach promotes proactive behaviour and, as a result, strengthens employee satisfaction and commitment.

The new compass of leadership also entails a call for meaningful activities, rather than constantly focusing on efficiency. This is what Simon Sinek calls “The WHY?” in his concept of “The Golden Circle”. Focusing on the purpose encourages employees to contribute with ideas for innovation and change. Of course, fast-paced and complex organizational environments pose special challenges to planning. A rigid adherence to 5- or even 10-year plans is considered almost impossible, whilst an agile process of prototyping and experimenting makes it possible to turn ideas into rapidly realizable and effective product and process innovations.

Together, these four aspects of trust and feedback, self-management and distributed authority, purpose, and prototyping and experimenting, form an essential foundation for a new leadership logic and increased effectiveness as an organization in an agile world.

 

Recommended Readings:

Bernardis, A.; Hochreiter, G.; Lang, M. & Mitterer, G. (2016) #Nextland: Auf zu neuen Ufern. Harvard Business Manager, online here.

Yves Doz (2018) Why Successful Companies Usually Fail, INSEAD Knowledge, online here.

Simon Sinek (2018) The Golden Circle, online here or as a TED Talk here.

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Dr. Barbara Covarrubias Venegas

Barbara is a senior researcher and lecturer at different universities in Austria and abroad and Visiting Professor at the University of Valencia/Spain. Her research and training focus includes New Ways of Working, Flexible Organizations, Organizational Culture and Digital Leadership. These topics also form the focus in her keynotes, workshops and coaching activities. LinkedIn

Dr. Barbara Covarrubias Venegas

Barbara is a senior researcher and lecturer at different universities in Austria and abroad and Visiting Professor at the University of Valencia/Spain. Her research and training focus includes New Ways of Working, Flexible Organizations, Organizational Culture and Digital Leadership. These topics also form the focus in her keynotes, workshops and coaching activities. LinkedIn

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