The Silent Recession

Are we in a recession or not? The S&P just made a new record high. The consultants response is always a handy – it depends.

If you are not paying attention, a recession could pass you by without hope of your own recovery. Even large scale macro-economic contractions spread the pain in different places and exert more pressure at different times. And, the winds could come from both the market side and the supply side.

In the sweltering heat of the summer, you would think a swimming pool would be a good investment. Indeed it was during COVID, when everyone was stuck at home. There were market pressures on other industries, but swimming pools were all the rage. But, now, the winds have shifted. According to a POOL report, the construction cost (materials and labor have risen 72%, from an average of $43k to $72k. In 2023, there was a 23% decline in new pool construction and POOL expects another 20% decline in 2024.

Are we in a recession or not? It depends. What indicators are you looking at, external and internal? When is your turn to go into the tank? Don’t get caught unaware.

Why Do Mission Statements All Sound the Same?

If I broke in and stole all the mission, vision, value statement plaques, mixed them up and replaced them, would anybody notice?

Timespan gives us insight.

We are very good at planning. Planning is temporal, mostly short term, rarely extending out more than 12 months. And, we are good at it. We can imagine the specific requirements, resources, people, interim checkpoints, quality standards, inspections, proofing and format of the final output. All of this is tangible, concrete.

Beyond tangible concrete ideas, are intangible conceptual ideas. Measured in timespan, those ideas are further into the future. And we are not very good at thinking in those terms, much less expressing ourselves in writing.

But, we are told we must. We must think about the future. We must think about the future of our organization and we must do so in the form of organizing documents, mission, vision, values. And, we struggle

Sure, we can dream, but most dreams lack meaning, and it is meaning that drives our organizing documents. Those organizing documents are in the pursuit of meaning. A company can dictate a purpose, well laid out in a plan, but to gain enrollment from our teams, the mission of the company seeks to define its meaning. Without meaning, it all falls apart, eventually.

Meaning is seldom found in a 12 month plan. Meaning requires us to think further into the future. We are mostly ill-equipped to do this. We don’t spend much time thinking conceptually and when we do, we all sound the same. Hence most mission statements sound the same. “To be the premier provider, serving our customer with value add, providing shareholder value for their investment.”

What is meaningful about what your organization does?
What is captivating to your organization’s imagination?
What is helpful to your community?
What will sustain your organization beyond your 12 month plan?

Maslow and Timespan

Abraham Maslow’s pyramid was a hierarchy. He called it the hierarchy of needs (not wants, not desires, not recommendations). Humans have different levels of needs. The dynamics in the hierarchy dictate that when we are threatened at a level below, we must immediately retreat to that level and cannot emerge until that level is satisfied. Pyramids start at the bottom.
V – Self Actualization
IV – Importance
III – Belonging
II – Security
I – Survival
Most people focus on the content of each level, but each is more complex based on timespan.

Survival needs are immediate. Air, water, food, protection from the elements, cold, heat, exposure.

Security needs are identical to survival, but the timespan is longer. We need air, but we need sustained clean air. We need food for today and we need food for tomorrow (enter the refrigerator). We need a blanket today, but we need a condominium for tomorrow. Important to note, if our immediate survival is threatened, we don’t think much about the condo.

Belonging to a group is a basic biologic need. Animals belong to herds or packs as a matter of longer term survival. Wise animals stay to the center of the herd as the periphery gets picked off by predators. Humans belong to conceptual herds. Membership involves rituals to remain in good standing with the conceptual herd. The timespan associated with group belonging is longer than either survival or security.

Importance raises the level of complexity. Passing a membership ritual may allow a person to remain with the conceptual herd, but to cement that relationship requires meaningful contribution. It is a human need to make important contribution to a group that individual holds as meaningful.

Self-actualization is the most complex human need, some never reach this level. The timespan associated with self-actualization is well into the aspirational future. Indeed, some legacies contemplate behavioral impacts beyond death. While the other levels in Maslow’s hierarchy are self-centered, or selfish, this level is selfless, concern for contribution to community, as defined by the individual. Elon Musk wants to go to Mars.

Timespan as a Measure of Capability

There is a famous psychology experiment using marshmallows and children to illustrate delayed gratification. Walter Mischel’s study collected data about participants and their choice to eat one marshmallow now OR wait fifteen minutes for the promise of a second marshmallow. Participants were then assessed years later where stark differences were observed related to academic achievement, health, obesity and SAT scores.

While the study seems to indicate a subject’s willpower or self-control, it can also be seen to illustrate an individuals timespan framework. What sacrifice can be made now for an improved future outcome?

Why organize for a better future outcome? Why not eat the marshmallow, or all the marshmallows now? If the problem is hunger, it certainly seems like a proper solution. Except, at some point, we might get full. And, we might even have some marshmallows left over for later. Boom. Delayed gratification becomes a concept in the scenario “Be kind to your future self.”

It also opens up the possibility of being kind to other people with our leftover marshmallows. In children, we see this as sharing. In adults, we see this as trade. Sharing is not a one-sided transaction, it is sharing now with the promise (at least hope) that at some time in the future, when we are out of marshmallows, that a friend would reciprocate.

This example illustrates short timespan options, but what if the organizational sacrifice is larger? Can we organize more complex sacrifices to solve more complex problems? Can we commit our time in research and study with no near-term payoff to create a technology in the future that will solve more complex problems?

What sacrifice can be made now for an improved future outcome? A bag of marshmallows might satiate immediate hunger, but what about our hunger for tomorrow? And what about next week? It has been said that man cannot live by marshmallows alone, so what of the health impact of a diet of sugar treats? Enlarging the problem of feeding an individual to feeding a family, to feeding a community, to feeding a nation-state, it is not just detail complexity, but complexity defined by the uncertainty of the future.

Would you agree there are some problems in the world that most people can solve?  But, as the complexity of the problem increases, some of those people will struggle. We can measure that complexity in timespan.

Timespan becomes a proxy for problem complexity with a concomitant proxy as a measure of human capability.

Horizontal Accountability and Authority

Organizational structure is the way we define the working relationship between two people with respect to accountability and authority. Vertical relationships are managerial, assumptive in nature, it’s the manager who has both the authority and the accountability for output.

Horizontal relationships, however, are tricky. Two people are required to work together but neither is each other’s manager. Notice the word is required, not recommended, not suggested, but required. In that working relationship, who is accountable and who has the authority? This is the dotted line dilemma.

And this is a dilemma, because most companies fail to define the accountability and authority in horizontal working relationships. Most companies hope the two people will just figure it out and get along. But, they don’t. The trouble presents as a communication problem or a personality conflict, when it is in fact, a structural issue.

My favorite example is the marketing director and the sales director. Neither is each other’s manager, but they are required to coordinate together. We hope they would be able to figure it out, but they don’t, because we failed to define the accountability and the authority in that horizontal working relationship.

The marketing director and the sales director are both accountable to construct their respective annual budgets prior to December of each year. They are also required to meet and coordinate where things require coordination. The marketing director may plan and budget for trade shows, but must coordinate with the sales director to allocate sales people to participate in the trade show booth. The sales director may plan and budget to add additional sales people to the sales team, but must coordinate with the marketing director to add more lead flow from the marketing system.

So, if the marketing director calls a meeting with the sales director, is the sales director obligated to go? Yes, why?  Because we have established an accountability for respective annual budgets and required that they coordinate.

Of course they have to schedule the coordination meeting at a suitable time, but they are required to do so.

Defining the accountability and the authority in these horizontal working relationships is what makes them tick.

Vertical Authority and Accountability

What is the relationship between two people who are required to work together? Organizational structure is the way we define that working relationship with respect to accountability and authority. And, there are two types. One vertical and one horizontal.

Vertical relationships, we understand pretty easily. These are managerial relationships, with a manager and a team member. Between the two, accountability and authority are assumptive. The manager has the authority to determine what work needs to be done, how that work is done, how its output will be measured (pace and quality). The manager has the authority to make decisions and solve problems, simultaneous with the accountability for that output.

This is not a power dynamic based on a power hierarchy. This is a competence dynamic based on a competence hierarchy. It is the intelligent manager, with the authority to make decisions, who has the accountability to determine all the variables around that decision. That includes data collection, asking questions and listening to feedback from the team. Woe is the manager who fails to consider these variables in the face of a decision. For it is the manager who will be held to account for the consequences of that decision.

That’s how competence hierarchies work.

Accountability and Authority

I made sly reference to these two concepts last week. Accountability and authority. These are inseparable.

To be accountable for an output, one must have the authority to determine the variables around that output. Do not hamstring a team member by handing them accountability without the authority to control variables. Bifurcating the two leads to well articulated excuses and blaming behavior.

Simultaneously, do not give someone the authority to control variables without the concomitant accountability. Government oversight committees are famous for wanting to have all the authority without accountability.

These two concepts go hand in glove, not either-or, but AND-and.

Fixing Accountability

Elliott Jaques’ framework gets to the heart of work. In the pursuit of any worthy goal, work is – making decisions and solving problems. As time goes by, headcount increases and soon we have an organization, with organizational problems. Who makes the decisions? Who is accountable for those decisions? Who decides methodology, problem solving? Who is accountable for solving the problem?

Finger pointing and blaming behavior are not quirks of personality. They are symptoms of an organization that failed to define accountability and authority. Who is accountable?

I had a client in the carpet cleaning business. Every once in a while, thank goodness only every once in a while, a carpet technician would ruin a customer’s carpet. Who did my client want to choke up against the wall?

Elliott assumed that carpet technician showed up for work that day with the full intention to do their best. It is the manager Elliott would hold accountable for output.

Elliott assumed the manager hired the carpet technician, trained the technician, provided the tools for the technician, coached the technician, selected the project for the technician. The manager controlled all the variables around that technician. It is the manager that Elliott would hold accountable for output.

We typically place accountability one level of work too low in the framework. It’s the manager who is accountable.

The Lynchpin in the Framework

Could it have anything to do with time?

Order is what we know. Chaos is what we don’t know. Most people talk about the past, up to the present time. It is tangible and concrete. By studying the patterns and trends of the past, we can forecast the future, with some reliability. At least for a day. After two days, that reliability begins to break down and by the time a week is passed, reliability becomes a crapshoot with probabilities and margins for error.

The leader is not the person who can best predict. The leader is the person who is comfortable with and can effectively adapt to the uncertainty of the future. The lynchpin in organizational structure is timespan.

Discretion is about decision making. The timespan of discretion defines the uncertainty in a role. We reserve certain decisions for certain roles based on timespan. Timespan helps us understand specific levels of decision making. And there is appropriate decision making at every level of work.

  • S-I – appropriate decision making from 1 day to 3 months
  • S-II – appropriate decision making from 3 months to 12 months
  • S-III – appropriate decision making from 1 year to 2 years
  • S-IV – appropriate decision making from 2 years to 5 years
  • S-V – appropriate decision making from 5 years to 10 years

Timespan helps us understand specific levels of problem solving. And there is appropriate problem solving at every level of work.

  • S-I – effective problem solving using trial and error
  • S-II – effective problem solving using documented processes and best practices
  • S-III – effective problem solving using root cause analysis
  • S-IV – effective problem solving using multi-system analysis
  • S-V – effective problem solving using internal system and external system analysis

Timespan is the lynchpin that defines the framework for organizational structure. It provides guidance to the complexity of the work. It provides guidance on who should make which decisions. Timespan provides guidance of who should be whose manager.

Most importantly, timespan structures the value stream necessary for a hierarchy of competence. This hierarchy of competence defines accountability and authority. Elliott describes this as a management accountability hierarchy (MAH).

After Midnight

Elliott Jaques was a Canadian born psychologist, scientist, researcher, practitioner who focused on organizational structure. Through the course of his research, he discovered the lynchpin. You would think the discovery would have been in the hallowed halls of a research library, or standing beside a chalkboard of mathematical equations. But it had more to do with a knock on the door after midnight with a small group of addled shop stewards who had consumed one too many pints.

Order and chaos. Order is what we know, chaos is what we don’t know. We know the past, at least our perception of the past, all the way up to the present time. But, once we move through the present time into the future, uncertainty creeps in, ambiguity tiptoes in the shadows. Chaos lives in the future. And the further into the future, the more chaos there is, uncertainty, ambiguity.

“Elliott, Elliott. Wake up Elliott. We think we found it.”

“Found what? It’s after midnight and you guys have been drinking.”

“Elliott, Elliott. Could it have anything to do with time?”

“Guys, can’t we pick this up in the morning? It’s late.”

“No, Elliott. Could it have anything to do with time? You know, the guys on the shop floor, they get paid by the hour. Their supervisors, they get paid by the week. And the managers, well, the managers get paid by the month and the vice presidents, their compensation is stated in terms of a year. Could it have anything to do with time?

“The guys on the shop floor, they are accountable for things happening on a day to day basis. Their supervisors are accountable for scheduling and lead times for the next week or a month. Their managers are accountable for annual plans and targets. The vice presidents are accountable for the longest projects, more than a year.  Could the lynchpin we are looking for in organizational structure be all about time?”

And they never looked back.