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I have spent the last years

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trying to resolve two enigmas:

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Why is productivity so disappointing

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in all the companies where I work?

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I have worked with more than 500 companies.

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Despite all the technological advances --

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computers, I.T., communications, telecommunications,

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the Internet.

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Enigma number two:

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Why is there so little engagement at work?

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Why do people feel so miserable,

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even actively disengaged?

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Disengaging their colleagues.

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Acting against the interest of their company.

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Despite all the affiliation events,

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the celebration, the people initiatives,

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the leadership development programs to train

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managers on how to better motivate their teams.

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At the beginning, I thought there was

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a chicken and egg issue:

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Because people are less engaged, 
they are less productive.

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Or vice versa, because they are less productive,

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we put more pressure and they are less engaged.

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But as we were doing our analysis

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we realized that there was a common root cause

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to these two issues

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that relates, in fact, to the basic 
pillars of management.

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The way we organize is based on two pillars.

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The hard -- structure, processes, systems.

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The soft --

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feelings, sentiments, interpersonal
relationships, traits, personality.

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And whenever a company

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reorganizes, restructures, reengineers,

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goes through a cultural transformation program,

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it chooses these two pillars.

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Now, we try to refine them,

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we try to combine them.

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The real issue is --

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and this is the answer to the two enigmas --

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these pillars are obsolete.

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Everything you read in business books is based

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either on one or the other

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or their combination.

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They are obsolete.

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How do they work

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when you try to use these approaches

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in front of the new complexity of business?

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The hard approach, basically 
is that you start from strategy,

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requirements, structures, processes, 
systems, KPIs, scorecards,

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committees, headquarters, hubs, clusters,

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you name it.

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I forgot all the metrics, incentives, committees, 
middle offices and interfaces.

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What happens basically on the left,

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you have more complexity, the 
new complexity of business.

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We need quality, cost, reliability, speed.

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And every time there is a new requirement,

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we use the same approach.

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We create dedicated structure processed systems,

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basically to deal with the 
new complexity of business.

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The hard approach creates just complicatedness

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in the organization.

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Let's take an example.

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An automotive company, the engineering division

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is a five-dimensional matrix.

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If you open any cell of the matrix,

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you find another 20-dimensional matrix.

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You have Mr. Noise, Mr. Petrol Consumption,

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Mr. Anti-Collision Properties.

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For any new requirement,

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you have a dedicated function

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in charge of aligning engineers against

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the new requirement.

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What happens when the new 
requirement emerges?

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Some years ago, a new requirement

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appeared on the marketplace:

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the length of the warranty period.

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So therefore the new requirement is repairability,

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making cars easy to repair.

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Otherwise when you bring the car 
to the garage to fix the light,

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if you have to remove the engine

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to access the lights,

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the car will have to stay one week in the garage

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instead of two hours, and the 
warranty budget will explode.

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So, what was the solution using the hard approach?

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If repairability is the new requirement,

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the solution is to create a new function,

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Mr. Repairability.

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And Mr. Repairability creates 
the repairability process.

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With a repairability scorecard, 
with a repairability metric

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and eventually repairability incentive.

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That came on top of 25 other KPIs.

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What percentage of these people is variable compensation?

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Twenty percent at most, divided by 26 KPIs,

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repairability makes a difference of 0.8 percent.

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What difference did it make in their actions,

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their choices to simplify? Zero.

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But what occurs for zero impact? 
Mr. Repairability, process,

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scorecard, evaluation, coordination 
with the 25 other coordinators

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to have zero impact.

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Now, in front of the new complexity of business,

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the only solution is not drawing boxes

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with reporting lines.

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It is basically the interplay.

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How the parts work together.

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The connections, the interactions, the synapses.

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It is not the skeleton of boxes, 
it is the nervous system

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of adaptiveness and intelligence.

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You know, you could call it cooperation, basically.

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Whenever people cooperate,

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they use less resources. In everything.

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You know, the repairability issue

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is a cooperation problem.

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When you design cars, please take into account

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the needs of those who will repair the cars

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in the after sales garages.

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When we don't cooperate we need more time,

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more equipment, more systems, more teams.

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We need -- When procurement, supply 
chain, manufacturing don't cooperate

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we need more stock, more inventories, 
more working capital.

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Who will pay for that?

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Shareholders? Customers?

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No, they will refuse.

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So who is left? 
The employees,

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who have to compensate through their super

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individual efforts for the lack of cooperation.

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Stress, burnout, they are 
overwhelmed, accidents.

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No wonder they disengage.

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How do the hard and the soft
try to foster cooperation?

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The hard: In banks, when there is a problem

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between the back office and the front office,

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they don't cooperate. What is the solution?

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They create a middle office.

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What happens one year later?

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Instead of one problem 
between the back and the front,

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now I have two problems.

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Between the back and the middle

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and between the middle and the front.

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Plus I have to pay for the middle office.

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The hard approach is unable to foster cooperation.

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It can only add new boxes, 
new bones in the skeleton.

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The soft approach:

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To make people cooperate, we need 
to make them like each other.

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Improve interpersonal feelings,

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the more people like each other, 
the more they will cooperate.

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It is totally wrong.

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It is even counterproductive.

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Look, at home I have two TVs. Why?

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Precisely not to have to cooperate with my wife.

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(Laughter)

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Not to have to impose tradeoffs to my wife.

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And why I try not to impose tradeoffs to my wife

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is precisely because I love my wife.

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If I didn't love my wife, one TV would be enough:

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You will watch my favorite football game,

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if you are not happy, how is the book or the door?

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(Laughter)

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The more we like each other,

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the more we avoid the real cooperation

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that would strain our relationships 
by imposing tough tradeoffs.

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And we go for a second TV or we escalate

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the decision above for arbitration.

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Definitely, these approaches are obsolete.

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To deal with complexity, to enhance the nervous system,

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we have created what we call 
the smart simplicity approach

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based on simple rules.

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Simple rule number one:

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Understand what others do.

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What is their real work?

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We need to go beyond the boxes,

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the job descriptions, beyond the surface

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of the container, to understand the real content.

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Me, designer, if I put a wire here,

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I know that it will mean that we will have to

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remove the engine to access the lights.

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Second, you need to reenforce integrators.

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Integrators are not middle 
offices, they are managers,

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existing managers that you reinforce

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so that they have power and interest

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to make others cooperate.

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How can you reinforce your 
managers as integrators?

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By removing layers.

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When there are too many layers

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people are too far from the action,

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therefore they need KPIs, metrics,

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they need poor proxies for reality.

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They don't understand reality

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and they add the complicatedness of metrics, KPIs.

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By removing rules -- the bigger we are,

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the more we need integrators,

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therefore the less rules we must have,

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to give discretionary power to managers.

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And we do the opposite --

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the bigger we are, the more rules we create.

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And we end up with the Encyclopedia 
Britannica of rules.

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You need to increase the quanitity of power

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so that you can empower everybody

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to use their judgment, their intelligence.

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You must give more cards to people

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so that they have the critical mass of cards

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to take the risk to cooperate,

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to move out of insulation.

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Otherwise, they will withdraw. They will disengage.

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These rules, they come from game theory

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and organizational sociology.

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You can increase the shadow of the future.

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Create feedback loops that expose people

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to the consequences of their actions.

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This is what the automotive company did

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when they saw that Mr. Repairability had no impact.

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They said to the design engineers:

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Now, in three years, when the new 
car is launched on the market,

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you will move to the after sales 
network, and become in charge

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of the warranty budget,

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and if the warranty budget explodes,

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it will explode in your face. (Laughter)

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Much more powerful than 0.8 
percent variable compensation.

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You need also to increase reciprocity,

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by removing the buffers that make us self-sufficient.

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When you remove these buffers,

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you hold me by the nose, I hold you by the ear.

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We will cooperate.

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Remove the second TV.

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There are many second TVs at work

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that don't create value,

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they just provide dysfunctional self-sufficiency.

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You need to reward those who cooperate

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and blame those who don't cooperate.

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The CEO of The Lego Group,

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Jorgen Vig Knudstorp, has a great way to use it.

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He says, blame is not for failure,

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it is for failing to help or ask for help.

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It changes everything.

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Suddenly it becomes in my
interest to be transparent

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on my real weaknesses, my real forecast,

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because I know I will not be blamed if I fail,

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but if I fail to help or ask for help.

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When you do this, it has a lot of implications

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on organizational design.

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You stop drawing boxes, dotted lines, full lines;

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you look at their interplay.

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It has a lot of implications on financial policies

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that we use.

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On human resource management practices.

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When you do that, you can manage complexity,

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the new complexity of business,

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without getting complicated.

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You create more value with lower cost.

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You simultaneously improve 
performance and satisfaction at work

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because you have removed the common root cause

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that hinders both.

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Complicatedness: This is your 
battle, business leaders.

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The real battle is not against competitors.

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This is rubbish, very abstract.

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When do we meet competitors to fight them?

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The real battle is against ourselves,

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against our bureaucracy, our complicatedness.

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Only you can fight, can do it.

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Thank you.

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(Applause)