Lean production, high performance work systems, virtual communications, and collaboration applications are all examples of the latest tools, technology, and processes executives are encouraged to implement in efforts to improve productivity and efficiency. But why are there more useful tools and processes out there than there are organizations that use them?
Most organizations fail to see the desired performance results despite investing significant time and resources. When it comes to new tools and processes in complex organizations, useful does not always mean used. There are obstacles that prevent organizations from embedding a new system in such a way that it improves the way core work is done.
Nelson Repenning, Professor of Business Dynamics and Organizational Behavior at MIT Sloan, speaks to how organizations should best seek out and leverage new tools and processes in his recent webinar, "Useful Does Not Always Mean Used," and in his upcoming MIT Sloan Executive Education programs, Business Dynamics: MIT's Approach to Diagnosing and Solving Complex Business Problems and Implementing Improvement Strategies: Practical Tools and Methods.
Capability Investments Must Be Balanced Against Performance
As Repenning explains, in any organization where capability matters, you face a basic tradeoff between time spent doing actual work, and time and resources devoted to implementing new tools and technology. Most organizations fail to successfully implement new tools and processes because they place a heavier investment into work activities than improvement activities.
“Work activities usually have more clear and tangible outcomes than implementation and improvement techniques,” says Repenning. “Most people are ambiguity and risk-averse and our brains are hardwired to choose work activities because they offer the most immediate and tangible result with less risk.”
When organizations choose work activities over improvement activities, the result is a spike in performance, followed by a huge crash. Even worse, it is a “sneak attack” degradation—performance declines, but not right away. The severity of performance degradation increases with the size of the organization. Skimping on improvement activities will result in a worse outcome than choosing the path that balances improvement activities with work tasks.
On the opposite side of the coin, when organizations invest more time in improvement activities than in work activities, performance declines initially, and then it begins to increase. The rate of performance decline is directly proportional to how many new tools and processes organizations try and change at once. The more improvement activities added, the steeper the initial decline. Nonetheless, says Repenning, once the initial decline in performance is over, all organizations see an improvement in performance that gets better with time.
“When you do something new, performance gets worse before it gets better. If you don’t understand the dynamics, the negative feedback shocks executives, and many give up too early in the improvement process in reaction to this decline.”
Exceptional organizations balance their capability and productivity to successfully achieve performance results. There is no “one size fits all” solution or standard best practice that works for everyone. Bottom line: for long-term success, it’s wise for each organization to customize the balance between their work and improvement processes formula to find the sweet spot where productivity, progression, and business goals meet.
Nelson Repenning is School of Management Distinguished Professor of System Dynamics and Organization Studies at MIT Sloan and Faculty Director, MIT Executive MBA Program. He teaches in Business Dynamics: MIT's Approach to Diagnosing and Solving Complex Business Problems and Implementing Improvement Strategies: Practical Tools and Methods at MIT Sloan Executive Education.