 Hey, we're on the hour, so let's get started. Thank you for being here. Just a quick check, how many of you were here during Rina's presentation? OK, that's pretty much what I was assuming, so thank you very much for hanging on. I felt a bit daunted as well when I saw the other speakers that Parisa's going to be covering quite some of the topics that are my favorites and Rina as well. And I managed to anticipate that, so I did not intend to just have a placeholder for the away toward and the scarf and we can just move on with those parts. And for those of you who haven't heard of those concepts, please ask and interrupt me if I'm skipping too fast, but I'm kind of assuming that you were there in the morning listening attentively to Parisa's piece. However, what I have to admit I'm a bit daunted about is that most of the good stuff that ever comes to the eastern part of the former Swedish kingdom comes from this direction, meaning Finland. So most of the good stuff we're seeing in leadership development, I just read a really cool article in Harvard Business Review which just came out in this month actually and one about how why leadership development consistently fails and obviously there was a Swedish writer. So have a look at that, it's a good piece of work. But this having been said, I'm hoping we can cover some relevant topics together today. So a couple of words here is the structure to provide some certainty, right? So just a very couple of words who we are as an organization, how is performance management doing? Not very well, we all know that. And how come? So why are companies spending massive amounts of money, time and effort to build systems that nobody basically wants to see exist? There must be some rational reason for that and let's explore that a little bit. And then finally, a couple of reflections about how could we make performance management work a little better. About neural leadership group, the founder is David Rock who was quoted in Rena's talk, so he's come up with the term SCARF, founded in Australia in 98 offices a little bit here and there. We're trying to provide an illusion of broader geographical coverage by talking about Scandinavia, but basically we're located in the Nordic, so it's Helsinki, Finland. The head office is currently in New York because most of the big clients happen to be located on that continent. Here's a few of our clients. You might recognize a few of those, if not quite a few. I'm not quite sure. The cool thing, the brain is so hot that it's fairly easy to get access to most places when you've done a bit of your homework around that topic. So especially tech companies on the west coast of the North American continent, they are really eager on hearing whatever might bring an additional edge to their business. What we're doing, coach training is the foundation. That's what we still do quite a lot of. So professional coach training, we've trained something around 15,000, 1,000 professional coaches worldwide over the years, and then quite a lot of that work within organizations as well. Now what we're seeing is some sort of thread of some understanding of agile in some form, which is taking place in most organizational contexts that we're working with currently. Okay, how's performance management doing? Well, the spoiler, you heard it twice already today. This is a fairly recent study from the Journal of Strategic Human Resource Management, 90% of performance appraisal systems are a failure. They just do not deliver. And there is a massive big question to say the very least and a massive irony in a way that we're actually having systems in place that are supposed to monitor performance, but the performance of those systems has no feedback loop, whether it's working or not. Nobody's actually asking the question. It's the best way to get kicked out of a meeting room with a senior HR executive. Ask them, how do you monitor the efficiency of your performance management system? I've tried that a couple of times and it's a very, very bad business proposition to awkward silence, but nobody wants to use them. And if you start asking whether it works or not, you get a different answer or how should it be improved or whatever, you get a very different answer than just running the system the way competitors or the industry has always done. He has a fairly illustrative, which is just illustrative, but it's a real slide about the engagement levels at a major drug company, Eli Lilly, and they had come to the realization that when they had a consistent set of data over a long time with large numbers of employees and they checked how their engagement levels linked to their annual performance conversation. Typically, performance management obviously takes place once a year and if you really advanced, it's gonna be twice a year. And that's when you get to hear how you're doing. That's the traditional way. So that was the once a year structure where people, managers were delivering ratings to their people doing pay adjustments and deciding on the size of the bonus. Basically, performance management is technically speaking, it's almost synonymous to defining the variable part of the pay. And then there's a lot of sugarcoating around it that it's supposed to do this and that and get talent, join us and retain them and have people engage and do this and that. But very little evidence about that actually working. But when we look at engagement, which is one of the key purposes of a well-function in performance management system, we notice that those, even the people who are ranked at their highest level are less engaged a couple of months. They simply stress too much and after Rina's talk about this scarf thing, we just hate being evaluated. We don't like that. People might even answer that they basically, they want to hear how they are doing in comparison with others if you ask it that way. But when you change the system and then ask them whether you'd rather not be compared to others, nobody wants to turn to the former version. So that was messy. It's really difficult to obtain data from people whether they like system, this system or that system because they don't have experience of the hypothetical system. But once they've tried it, they never want to go back for instance to forced ranking, which was a big hit a few years ago. Do you guys know what forced ranking is? Okay, I see some nodding. All right, so even the high performance are disappointed typically because they think their bonus isn't large enough. And then what's happening, we're supposed to drive performance and drive engagement. And we notice that those who are ranked from two to four have a six month dip in their level of engagement. So it's not performance management, it's damagement to play with words. And the ones actually, they're lost in the US system. Typically, you can't get to consecutive ones. So you're out of there by that time. But their engagement is not going to get any better. Okay, what are the reasons? Obviously, well, we just heard about the organizing principle about the brand, the massive negativity bias. So a way and potential threat is so much stronger than anything positive. That when you start ranking, measuring people, they want to look smart, they want to play it safe and there's nothing better to have people play it safe. Playing not to lose instead of playing to win is what happens with the traditional way of evaluating people which is intimately linked with performance management in more established companies. So that's one of the key reasons that people start optimizing their own part so that if something goes wrong, nobody can blame me. I won't be the one who's gonna get sacked for underperforming. Okay, so that's one massive reason. And Kahneman, I would warmly recommend Daniel Kahneman's book. By the way, the only psychologist who's ever won the Nobel Prize in economics, which is kind of cool. So his book, it's a pretty tough read but it's really useful for understanding, among many other things, the negativity bias we have. So that's one key reason why it's simply is really difficult to make performance management work in complex environments. All right, let's then have a look at where do leadership practices come from? Who knows, I'm assuming quite a few people know who's Frederic Lalou. Okay, 10 hands or so and then a bunch of lazy people if you didn't raise your hands, so okay. Or then you just haven't heard of it. Now there's a session this afternoon if we're actually about how to go till which is the highest level of human consciousness which would allow for a very advanced way of getting organized like a living organism. There's a bunch of metaphors. I'll walk you through this model just as a reminder for those of you who know this already and then maybe some news for those who don't. But you should definitely Google if you haven't heard of this guy, he's a former McKinsey consultant, a strategic consultant been advising top executives in large corporations and now he's a thought leader. He's left his former employer and he's done a beautiful study about organizations and he has a reinventing organization. You Google that, you're gonna find it inevitably. And there's one particularly good piece is a video on YouTube. It's one hour and 40 minutes might sound like long but it's worth every second. So if you haven't heard of Freiland Claloo you definitely should Google that and find time to watch that video. It's amazing stuff. Okay, he's building on a metaphor that's been around for a while but talking about metaphors in terms of color, a color code and then a metaphor that goes along with that. So the lowest level would be a wolf pack which doesn't really do justice to those beautiful animals because they're actually much more loyal than the human versions of red organizations so to say but it's the imminent threat of physical violence that is actually the leadership number one principle. Then we have old school version of an army which is, if you think back way back to the Romans or the First World War or that type of some more modern ways of fighting wars might look very different of what Lalu is talking about but still the traditional view of an army where there's a very clear hierarchical structure. Then the third level of metaphor which is the dominant one in most organizations currently especially large ones which is a machine. So it's a mechanistic view of the world that we can fix this part and identify this gap and train for it and build the machinery and optimize its functioning. Then comes the next step when we've done with the machine thing people start to get alienated of that mechanistic approach. Then comes the happy family metaphor and finally after the happy family comes the living organism that the organization has a reason of existing and it wants to fulfill its core reason of existing and organizing principles obviously look very different depending on where you happen to be on that continue. Okay, this is a bit of a mouthful but I'm assuming the slide set will be made available so it's a summary of all of those things. The important part is that each of these ways of organizing is optimal for a certain set of external conditions. So we might argue that we are actually two meals away of a red society. It's highly unlikely in this part of the world but if you look at some other parts of the world it's the stuff that's happening that you need to be really, really ready to fight to help your closest people survive. So in that sense it's a dynamic construct but nevertheless so it's a predatory approach it was based the leadership innovation in a way was division of labor and command authority. Currently we do see mafia organizations organized crime, street gangs, tribal militia that type of organizations who are thriving when there's utter chaos. So that violent approach of leading is quite suitable in some circumstances or effective. Obviously when things get a little bit more stable and there's a little bit more structure it's possible to come up with some more hierarchical approach which would be amber which would be the army thing. So what happened when the Romans invaded half of the by then known world is that they simply were more organized. So they had tribes 50 or 200 people and smashed them with 20,000 legion year so what's gonna happen obviously these guys win. So getting organized in a hierarchical manner was pretty effective by the time. It made also possible very long-term processes, long-term perspective for instance the Catholic church spreading all over the globe over millennia having building projects that may last for centuries. So these guys would never be able to accomplish something like that. Well hierarchy at some stage becomes a little bit rigid and since there was a too much hierarchy in a paternalistic manner. For instance in the Catholic church if you were not from a noble family you could not become a bishop. So it was like predetermined before you were even born what you could become. Well then comes the orange way of organizing. So innovation was made by this. These are not very good at innovating if the world changes you might be needing this account. It wasn't that much anymore whose son or daughter you happen to be. It was more about how effective you were at your work. You hit your goals and targets. You get a promotion and you get further up the organizational ladder. So meritocracy accountability big, big themes there and really clear and effective at setting goals following up on them and so on and so forth. Most multinational companies all of them back home in Finland are leaving the orange realm now. Someone might dislike this statement but it's pretty easy to show them the opposite. So if I'm insulting someone I'm not even sorry. All right, what happens? This is alienating. People keep running like hell and then they get tired, burned out. Da, da, da, you know all this stuff. 70% of people in the US would quit their job now if they could, 70, okay. It's pretty huge and it's pretty much all of the result of this type of thinking. Then comes green, okay, we can't go on this way and this is not right and there must be other values than just shareholder value. We need to take care of our people and also if and when the customer expectations keep changing, more agility is required and this thing will never be agile no matter how much internal startups they try to launch. So here comes then the happy family. Most of agile software companies, I know they are located in this area, do have a lot of this next level as well but they still have some type of hierarchy. It's typical there's the founders are still the bosses even if they're not called bosses and they make the big decisions. So that would be the distinction line between these two. Value is driven shareholder model so this should be right for our people. Once it's right for our people it's gonna be good for our clients. It's gotta be right for the planet. So it's gotta be sustainable. It's gotta be ecological, that sort of things. All right, finally comes steel which is fully self-organized and there's a bunch of great examples in Lalu's book if you wanna dig deeper. Company having a reason of existing basing every single decision made on this reason of existing and anyone in the organization based on a certain logic can make decisions. So no need for, for instance, managers which as Rina just covered, it's not very much fun. Burzorg which is a healthcare company in the Netherlands they have something in the range of 9,000 employees this day and their company headquarters employ something in the range of 30. People and most of them are actually coaches who help teams get along and solve conflicts. So that's their headquarters staff, three people in the financial administration if I remember right. And they have a 80% market share of the home healthcare business in the Netherlands. It's pretty cool stuff, it can scale. That's the big question we keep hearing if it's scalable or not. So there are a bunch of examples. All right, what do we want to achieve whatever we're doing when we're getting organized? So this is the ideal picture. This is big thanks to Niklas Moody. You might know this guy is from this city. Luckily he's using the metaphor with football and not ice hockey, that would be traumatizing. But still, hey, what can we see here if we were to speculate or what can you observe in this type of... What's going on there? What are those people? Do they like what they do? What's going on for them? Just some popcorning. I heard you guys are really active. Yeah? Yeah, so there's some level of collaboration taking place. Yeah, what else? They're having fun, yeah. Do you need to motivate these guys to play football? Print some type of... Have PowerPoint shows twice a year. Football is great. No, they know it already, right? They're probably respecting each other. They probably have some clarity about their individual roles, but the roles are massively overlapping in the way that if somebody is not able to stumble or something, so somebody else is gonna help them. And they might be even passionate about what they're doing. So the assumption is that these guys basically and gals have always wanted to play football, because otherwise they probably would not be on that field in the first place. And that makes perfect sense. And that's what typically you hear in the first sentence of the annual reviews of larger companies that the people we employ are our greatest asset. You don't very often hear sports teams saying that our players are our most important asset. It's so bloody imminent, you don't even need to say it. Obviously there's a lot going on around to make all this happen, get sponsors and da-da-da, and fill the audience and all sorts of other things than just apply, but you get the picture. So these are willing-enabled people who have basically always wanted to play football and they are fully able to develop their game as a team. That's the basic assumption in the background. Obviously there are support structures, but nevertheless, so that's the assumption of what they are and what motivates them. All right, our take on that type of collaboration is golf. So we need to know, we need to be respected, significant, we need to know what's going on. To some extent, we need to have a say to what's going on. We need to be in the same team with the people we're working with or dealing with. And finally, we actually do want it to be fair for all involved parties. So that's one way of summarizing in scarf terms what's going on. Then we come to large corporations. What do we see happening? First of all, we need massive amount of some kind of mechanisms to stay in control. That's the basic assumption. And how is this being done? We need structure, we need tools, and there's a lot to manage. And this also comes from the assumption that people are fully rational. Like Parisa started this morning, we're not that rational actually. We might have an illusion of being rational. And then we're really good at rationalizing or for instance, basically emotional, emotion-based decisions so that we can explain why we did something. But the decision as such can't be rational. But this worldview kind of assumes that we're fully rational. Then we need to employ tools to motivate people. And this is how you do it. Basically, the original way of managing which came in the early 1900s, something. The overall idea is that you need to have somebody tell what other people are supposed to do and then reward them or make them hurt in some way or another. And the classic idea is that somebody else knows better. And it's the division of thinking, planning and executing. So that's a really big theme. And all orange organizations, even if they don't necessarily admit it, are basing their leadership practices and performance management on this story, more or less, which is based on studies by this gentleman, B.F. Skinner, the father of behaviorism. What did Skinner do back in the 30s until the 50s? So it's not like yesterday. It's pretty old technology. He took rats and pigeons. So birds and rodents. And he separated them from their fellow rats and pigeons. So they took a social animal alone. They close the animal, first they starve the animal significantly so that it's really, really, really hungry. Then they close it in a box and then they show some typically visual cues to the animal and it's supposed to do something. When it says turn, the animal turns and obviously it can't read, but it can figure out what the scheme is and then it gets food. And here comes classic conditioning, which is the core theory behind this. If you do this, you're gonna get that. If he hadn't isolated the animals, which are social to their nature, it would not have worked. If he had not closed them in a box, it would not have worked. Okay, and if they hadn't been really hungry, it would not have worked. It's not a very strong study, especially when you start applying that to humans because what he says in his infamous work, Science and Human Behavior, that free will is a myth. Okay, good and fine. It would be really fun to kind of laugh at this, but the bad news is that it's the dominant thinking behind the orange way of organizing and it's really prevalent, it's all over us. What this does, then it's gonna create some friction. So again, since people are lazy, they need to be monitored, they need to be punished and or incentivized. And if not, they're gonna start sitting on their hands. That's the bunch of assumptions about human nature that comes along with behaviorist psychology, which dates back to the 30s. So that we can monitor people effectively, we need to be identifying every individual's part of the game, so to say. There's nothing wrong with measuring, but this type of measuring will lead to massive suboptimization. So the overall idea is that this would be my tent and Arto will be there and if the ball comes into my tent, I'm supposed to kick it out. That's it and then I'm measured when I do it effectively, I get a bonus. What's gonna happen? Inevitably, the ball will be landing at some stage to nowhere, there's a gray zone always. Well, you're gonna be needing a boss, a manager who's gonna come occasionally with a megaphone Arto get out of your tent, the ball is behind your tent and take three steps and kick it to the left because all I'm gonna be seeing is other tents. So no clear line of sight. And that's the shift from orange to green actually in La Luce terms. Do we trust that people are willing and able to do their job properly? And now comes the empathy part and the compassion part that Rina was talking about. People who set up these structures, it's all they know about and basically they've studied that stuff. There are seminars who are actually kind of, studying, incentivizing in this skinner old school psychology manner. It's robust science. And take any seminar that's looking at performance management or most of them, they're basically trying to have control structures to make this thing work. And what they end up with is this. So you go ask manager in any large organization which HR typically does, they go human resource people, what do you need? We need stronger tools for providing corrective feedback. It's the number one thing that managers in orange organizations need because obviously there's a lot of friction and the default approach will be to go to their toolbox and pick up a bigger hammer. Then if you really advanced, you might have some mindfulness training for these guys so that they can manage their minds and tell them that now you've been trained in emotional regulation. So you're in charge of your mental wellbeing. This might hurt a bit, but... Yeah, it's quite unfortunate, but that's what keeps happening. Pretty obviously it's hard to solve the problems that these tents are causing in the same paradigm. You need to step higher up and look at the bigger picture somehow. A quick quote from Edward Stemming, the father of Lee in more or less and the Toyota manufacturing of actually the whole Japanese miracle after World War II, saying that the system is responsible for 94% of the problems. In this world, what's causing the problems is obviously people's attitude. They're not executing, they're not being accountable. So we need closer monitoring to keep people accountable. And a more systemic approach might be assuming that if we have a goldfish that starts swimming upside down, is it useful to blame its attitude? It must be doing it on purpose. Okay, you remove the goldfish with the bad attitude and replace with a fresh goldfish and then it starts swimming on its back again, you see a pattern there already. And if you're a really advanced systems thinker, you might think of some aquarium level thing causing that behavior instead of the fish's attitude. But it's somehow in an orange paradigm, it's a lot about fixing the deficiencies of the players that are acting in various ways because of the system we've put together. Obviously there's a lot of sub-optimizing going on in this tent. We have a beautiful example in Finland, you might have heard of a telecommunications company a few years back that was pretty big. And in 2004, when they still had a massive market share, their R&D team suggested their management that we have this thing that's touch screen. Let us explain to you how it works instead of having physical buttons on the mobile phone to click on them, you might have a screen, okay? 2004, they went through all the product lines and they were kicked out because the managers could not or the higher up they went, they said that it's all good and fine but I don't really have time for any new stuff because I would be missing my release date for the products that were already in the pipeline. And then somebody else came up with a touch screen a few years later and it was first that they were laughed at and now nobody's laughing. So it's really effective to some extent if the level of complexity is low enough it's this might work to some extent. Okay, so what should we be doing then with the performance management? It's blatantly simple, stop doing it. You need to replace it with something and that's the question where we typically bang our heads against the wall that are you telling that in the middle all this turbulence we should let go of all monitoring? No, who said that? You're replacing control with transparency, that's the outrageous simplicity and the beauty of it. And there's a bunch of examples where it has been done really successfully. There's a pharmaceuticals company in Switzerland who for instance decided to let people decide whether they fly in business class or economic class depending on what they should be attending the next day. Instead of saying that this is your level of management hierarchy so you'll be allowed to fly business once you are exceeding a certain level. What happened when they let people make that decision instead of having an administration layer on top of it? Their overall costs of flight tickets went down and replaced control with transparency. You had top leaders who decide bloody hell it's a one hour flight why the hell heck should I be spending a zillion euros for a short flight? Just because we're smart, you know, once we are given the opportunity. So it's about, and it's the really tough topic obviously for people who've been building those, they've been educated, it's all they know about is the orange thing that you should be trying to climb the ladders and then go tell them that actually most of the stuff you're doing is actually harming your business. That why don't you stop stealing from your shareholders? If that's the thing they believe in, right? That they should add a shareholder value and a couple of takeaways. Key thing is that all the different levels of Lalu's organizing principles, they have their virtues in a certain environment and we should be respecting the people who've been who are the products of that worldview because it's all they know about and excluding ourselves. And I can tell you we've done that a couple of myself and a few colleagues as well done that a couple of times telling to bluntly, you know, it comes from a top down. Hey, what the hell are you doing this? Already questioning the efficiency of performance management is a sure way to get kicked out of the company because they love the system. They have applied, the top leaders have applied the same system they had in their former workplace. That's what typically happens. So we should be respecting their difficulties and Rina covered that beautifully in the scarf piece. But a couple of really nice takeaways and these are actually landing pretty well once you have the level of permission to suggest this sort of thought experiments to people. If you don't know them, this is probably too much but once you have a little bit of better relationship and some trust established, so it might work. How can we tell if we're trying to get better at something that shouldn't be done in the first place? Look for instance, the traditional performance management, the amount of calibration of training and monitoring that's required for all sorts of things. For instance, ranking people, which is basically against our foundational biology. It's never gonna work. And once you try to make it work, you're gonna be needing a lot of bigger hammers to try to keep the thing together because it's against nature. So how could you identify the times and places where you're trying to do something better that shouldn't be done in the first place? And then the other questions, when we're dealing with problems, what is it in our way of getting organized that creates this type of behavior or this type of outcomes? And this like semi-closed system like an aquarium, it's I think it's a really well-functioning metaphor because we can so clearly see the boundaries of the system when you look at organizational structures, it's much harder to see those things. But those would be my suggestions once you have established a sufficient level of trust with the people you're working with, be it with your own company or with some external companies or clients or whoever we're dealing with. So try to adopt a more systemic view because in our gut we know whether something is going to create friction or is it going to create some type of flowing energy with more light and nimble way of getting stuff done. So just pausing and trying to think about those types of questions. All right, we have one and a half minutes to go. Thank you very much at the back of the room for taking such good care of and I'm done. So this is my last slide. Thank you very much for being here. One minute for questions, right? If any or lunch or comments. I think what's taken in with delight is when the language is translated into the language of orange that this is the way of getting better control or better visibility or better predictability. But having a clearer picture or then another thing which works is when there's less admin because it's a cost. And I quite deliberately used the flight ticket example but for instance most of managers in most companies what they are spending a lot of time is accepting other people's travel expense bills. You need university trained people to click on some system that allows me to take a taxi from the airport to home. Of course you do because if that system wasn't in place I would probably take the taxi somewhere else and eat a pizza and then go home in the middle of the night and try to charge my company for it, right? Depending on your world view. So that's one of the examples that works pretty beautifully that having less control and more transparency. For instance, having everybody's travel expenses fully visible in the company internet. It's gonna do wonders to wasting company money. And of course then what if somebody buys a Ferrari with the company credit card kind of questions? You will need some system in place to identify the outliers that are really unlikely to ever take place because we want people to be treated fairly. It's built in our biology. So even if I had unlimited budget to use company money, which we do have some examples about that, it never happens. It just doesn't happen because people do not behave that way unless you have a different world view. But that's one way. So cost savings with less admin and more visibility under the umbrella of better overall control. So that would be a good combination to start with. Thank you very much. I'm glad you're joining. Thank you.