Tuesday, December 9, 2014

The Soft Edge by Rich Karlgaard



This book* presents the author’s model for organizational and managerial success, focusing on “soft” or qualitative factors.  Karlgaard is the publisher of Forbes magazine and had access to many well-known, successful firms and their executives for his research.  The book is aimed at managers in dynamic, highly competitive industries but it contains many observations about successful organizations that can be applied in the nuclear industry and to safety culture (SC).

The Overall Model

Karlgaard’s model of a business is an equilateral triangle—its base is strategy, one edge contains the “hard” factors and the other edge the “soft” factors.  All are necessary to create long-lasting organizational success but the first two are quickly dealt with in this book.

An appropriate and effective strategy is indispensable for survival and success.  Strategy considers markets, customers, competitors, substitutes and disrupters (usually technological).  For nuclear, we should add regulators and the existence and actions of anti-nuclear factions. 

The hard edge is about executing strategy and managing to the numbers.  Hard factors include speed, cost, supply chain, logistics and capital efficiency, all described and measured in the no-nonsense language and metrics of finance and engineering.  The hard edge often gets the lion’s share of resources because it is easier to quantify and has faster, more visible ROI.  Hard edge thinking can lead to a secret belief in top-down management and a slavish focus on KPIs (e.g., the ROP?) and bottom lines. (p. 27)  This chapter closes with a frank warning: “At worst, hard-edge success can also trap you into legacy technology, techniques, and thinking.” (p. 34)

The Soft Edge

The soft edge consists of trust, smarts, teams, taste and story.  A strong soft edge leads to more committed employees and an increased ability to ride out a strategic mistake or major disruption.  Excellence in soft edge performance requires grit, courage, passion and purpose. (p.17)

Trust

The discussion on trust should be familiar to Safetymatters readers.  Following are some of Karlgaard’s key observations: “[T]rust begins with culture and values. . . . underlies effective working relationships . . . [and] underpins innovation by facilitating learning and experimentation. (pp. 11-12)  Trust is “confidence in a person, group, or system when there’s risk and uncertainty.” (p. 39)  Internal trust “is created through management’s credibility and the respect with which employees feel they’re treated.” (p. 40)  Trust creates grit, the willingness to persevere after experiencing failure or hardship.  “[T]rust isn’t based on what the company is doing; it’s based on what its leaders are doing.” (p. 53)  Leaders need to be self-aware of the impact of their actions, demonstrate real concern, be predictable and exhibit integrity.  They need to avoid a fear-based culture and support open, candid communications and tolerance of honest mistakes.  Trust can be improved with visual analytics that create a common language across the company. (p. 64)

Smarts

This is not what you might think it is, viz., a high IQ.  Business smarts are the ability to learn through adaptation, a process that can be accelerated by searching out mentors, seeing failures as learning opportunities and adapting ideas from outside one’s own field. (p. 80)  A culture that punishes people for mistakes and refuses to consider ideas from outside is only making it tougher to succeed in the long-run and avoid surprise disruptions.  Smart companies run a little bit scared, a behavior observed in High Reliability Organizations.

Teams

Most companies use teams to attack major problems or develop initiatives.  The culture must value team members with differing views and divergent perspectives.  Tactics include seeking common ground that all employees share, e.g., the desire to learn more and be better, and promoting “good conflict” that focuses on business issues, not personalities.  Leaders should set clear expectations of high performance for teams, push them hard and keep them slightly scared so they remain alert and avoid complacency.

Taste

Taste is the part of product design and presentation that ties function and form with meaning, i.e., the associations customers experience with a product.  Think how Apple product users feel smarter than the rest of us.  Taste is definitely important for consumer products but I am unable to relate it to SC.

Story

A “story” is how a company or organization describes its past, its current purpose and its future aspirations.  The story can, among other things, strengthen culture by encouraging collective responsibility for organizational performance.  Articulating the story is an essential duty for senior managers, i.e., it is a responsibility of leadership.       

Our Perspective

Soft edge skills are required for creating long-term differentiation in competitive markets; they don’t all have to be razor-sharp to succeed in the nuclear industry.  However, two attributes of the soft edge, trust and story, are essential to building and maintaining a strong SC.

For years, we have been saying that trust is a key input into SC strength.  Trust arises from applying basic management principles articulated by Peter Drucker, viz., meaningful work and respect for the individual.  Trust has to be earned and cannot be demanded.  The tolerance for honest mistakes suggests a “just culture.”  One way to build trust is by publishing reports, e.g., SC assessment findings, in a format that makes them easy to understand and allows performance comparisons across different organizational units.

A credible, understandable story is also essential to build a culture of community and shared responsibility.  And a story is not really optional for an organization.  If top management doesn’t provide one, then other organizational elements (departments and/or members) will.  Most people want to know why their company exists, where it’s going and how they will be affected.

The advice on smarts and teams is also useful if one truly wants to build a learning organization.

Bottom line: You don’t have to run out and buy this book but don’t be surprised if you see on the business bookshelves of colleagues or friends. 

*  R. Karlgaard, The Soft Edge: Where Great Companies Find Lasting Success (San Francisco, CA: Jossey-Bass, 2014).  For more information, see Karlgaard’s website.

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