by Yves Morieux
As in a poker game, so too in organizations. Often, the most effective way to change people’s goals is not to intervene directly on the goals, but rather to change the resources available to the people. They will then adjust their goals to the new resources and reengage.
Analyzing the Work Context at InterLodge
Now let us try to understand the work context of the receptionists at InterLodge. We got involved with the organization after the failure of the two previous attempts to improve performance. Together with an internal team of salespeople, we spent a month observing and talking with receptionists in several hotels in order to understand the problems they were trying to solve, the goals they were trying to achieve, and their resources and constraints.
The team discovered that by far the most difficult part of the job for the receptionists was dealing with customer complaints. These complaints were usually about maintenance issues such as a broken TV, a faulty bathroom faucet, or a malfunctioning heater. Part of the problem was that although the hotel’s housekeepers were in the rooms to clean them every day, they were so focused on hitting their productivity targets that they either didn’t notice the problem or didn’t report it to maintenance when they did (because it required so much interaction and time that their productivity would diminish). They just kept on cleaning the rooms as if everything were OK. The receptionists had to bear the consequences of this insufficient cooperation between housekeeping and maintenance.
Typically, what would happen is that the guest would discover the problem when he or she checked in (or returned to the room) in the evening, then call reception to complain. But by then, the maintenance office was closed for the day, and it would simply take too long to locate someone to perform an emergency repair. The receptionists had to deal with the angry customers on their own.
Receptionists spend their work lives dealing with customers. When angry customers shout at them, their lives at work become hell. By talking to the receptionists, the team developed an insight that may seem obvious in retrospect, but actually took a lot of work to develop: the goal of the receptionist was not so much to earn a financial incentive by improving the occupancy rate. No, the goal of receptionists was to avoid the unpleasantness of dealing with unhappy customers.
The constraint of the receptionists was that they were dependent on the functions of housekeeping and maintenance. These two functions determined whether the receptionists’ work was hell or not. How did the receptionists behave in this context? They turned to three solutions that allowed them to exploit the resources available to them:
Personal attention. When customers complained, receptionists—especially the younger and more energetic ones—would start by trying to fix the problem themselves, running back and forth between the front desk and the problem rooms. But this behavior only annoyed the other customers who had showed up at the reception desk for check-in in the meantime and had to wait for the receptionist to return. So, in addition to having to compensate for the deficiencies of housekeeping and maintenance, they were also blamed by customers and management for providing poor service. This double bind was a major factor in their high turnover rate.
Keeping rooms in reserve. One way receptionists could calm angry customers was to offer them a new room. Even if the new room wasn’t so much better, upset customers tended to appreciate a receptionist who went out of his or her way to help in this fashion. That was a pretty good solution for the receptionist but not so good for the organization. It was precisely this behavior that was contributing to the low occupancy rate, because the receptionists would hold empty rooms in reserve in anticipation of needing them to mollify unhappy customers.
Adjusting the price. Sometimes, receptionists would also apply their newfound customer-engagement skills to negotiate a refund, rebate, or voucher with an angry customer. This diffused customer anger, but it didn’t improve the guest experience, and it lowered the hotel’s average price point.
(For an illustration of this analysis, see figure 1-2.)
As you can see from this analysis, the young receptionists were forced to bear the adjustment costs caused by the behavior of the back-office functions. They had little choice in the matter; somehow, they had to deal with the angry customers. The adjustment costs they suffered were simultaneously financial (they didn’t achieve their bonus), emotional (they were blamed by both managers and customers), and professional (at a certain point, they would become so burned out that they would quit, sacrificing their tenure at the company in order to start from scratch somewhere else).
FIGURE 1-2
The receptionists’ context
But customers were also bearing adjustment costs in the form of a poor hotel experience. And, of course, so were the company’s shareholders in the form of declining returns, caused by the underutilization of hotel capacity, the lower price point, and increased costs (notably, the cost of recruiting new receptionists). When people avoid cooperation and externalize the adjustment costs to third parties, it is always at the expense of the organization. Receptionists could never fully compensate for what the back-office functions could have achieved had they been cooperating with each other.
As a result of this analysis, InterLodge management finally had an accurate understanding of the (rational, given the context) behaviors that generated the poor performance at the company’s hotels. But before telling you what we and senior managers at the company did to fix the problem, let’s revisit precisely why it took them so long to understand what was really going on.
How the Hard Approach Gets in the Way of Understanding Performance
According to the hard approach, performance is a direct consequence of what an organization’s members are instructed and given incentives to do. This assumption explains why the hard approach insists so much on clarity—in the details, completeness, and accuracy of job and role definitions, process instructions, procedural rules, and so on. Structure defines the role, processes instruct how to perform it, and incentives motivate the right person in the right role to do it. From this perspective, if there is a performance problem, then it must be because some key organizational element is missing or not detailed enough. So companies jump straight from identifying a performance problem to deploying new structures, processes, or systems to resolve it. This error dumps a first layer of complicatedness into the organization.
This is precisely what happened at InterLodge. The management team restructured and reengineered without really understanding what people did and why they did it. Only after a full year of disappointing results did it start to pay attention to the front-line. What did it conclude? Receptionists were not selling rooms to latecomers. They were not engaging the customers in a way that made customers satisfied. They were not charging the right room rate. But this is not what the receptionists were doing; it is what they were not doing.
Too often, diagnostics focus on what people fail to do. Our sales team does not do cross-selling. Our managers are not making decisions. Our engineers are not innovating. Yet, people do not spend their days not cross-selling, not deciding, not innovating. They do things—what and why? We do not focus on what people do, but on what they don’t do. Therefore we cannot understand why they do what they do. So, how can we change it? The hard approach dictates that we just add new incentives, new processes, new structures. In doing so, we complicate matters without tackling the root causes.
When you think about it, to focus on what people fail to do as opposed to what they do is a fundamentally backward way of addressing a performance problem. But given the assumptions embedded in the hard approach, it is really not so surprising. Since what matters in the hard approach are the procedural instructions, then problems must be caused by people who deviate from the formal procedures, in other words, by a gap in what they do. When managers identify such a gap, they assume that it must be due to an equivalent gap in the formal procedures, perhaps a lack of clarity in the instructions or some missing organizational structure or system t
hat needs to be added. At InterLodge for instance, the lack of selling was explained by a lack of incentives to sell.
Diagnoses based on the hard approach are full of similar explanations, what you might call the “root-cause by absence”: “We are not innovative enough because we have no innovation strategy.” Or: “Our trains are late because we have no punctuality function.” Then, the next step is to add a new organizational element to bridge the gap: a team to develop an innovation strategy (with a whole new set of dedicated processes and performance requirements) or a scheduling and punctuality group to make sure the trains run on time. That’s why the hard approach generates complicatedness.
To be clear, we are not saying that organizational elements like structures, processes, and systems are somehow unimportant. Performance is what it is, because people do what they do, not because of what they don’t do. People do what they do precisely because of the organizational elements already in place (not because of the ones that are missing). In contrast to the assumptions of the hard approach, however, these elements do not have a direct and easy-to-anticipate effect on either behavior or performance. The effect they have depends on how they combine to shape the context of goals, resources, and constraints to which people adjust their actions. The issue is not that organizational elements need to be consistent with one another. With this type of structure you need that kind of process. Judgments like these are most often meaningless. Organizational elements do not combine with each other in the abstract, based on their supposed and intrinsic pros and cons. It is impossible to know how they combine by just considering their characteristics. It is only by considering the work context, and their effect in this context, that organizational elements can be appropriately analyzed and designed. The effect of organizational elements on behaviors, thus performance, depends on how people deal with these elements as resources or constraints.
Think back to the situation of the hotel receptionists. The new skills they acquired through the training programs became a resource to cope with their real goal, which was to avoid stressful encounters with angry customers. So they used their skills not to meet the target price point but to proactively offer rebates and refunds. What’s more, their new skills combined with their clarified roles in an unexpected way that also provided new resources to the receptionists, but not in the way that management intended: some receptionists used their newfound interaction skills to explain clearly to guests that their responsibilities stopped at the front desk and did not include back-office activities (which, of course, only angered the customers still further and led to more rebates).
What about the financial incentives to maintain high-capacity utilization? They had little effect on sales because the receptionists’ behavior was not “not to sell rooms to latecomers” but rather to keep rooms in reserve. They were not passively omitting to sell because of a lack of incentives; they were making a choice that provided them with the resource of unoccupied rooms. The incentive scheme—which showed receptionists how much they could have earned—only increased their frustration and turnover.
The actual impact of the training and incentive scheme at InterLodge shows that when it comes to complicatedness, if an organizational mechanism is useless, then it is positively damaging. We sometimes hear managers say, “Well, it may not help much but at least it won’t do any harm.” This is a mistaken belief. All organizational initiatives always have some effect—even if indirect—on the work context, so useless initiatives or mechanisms are actually counterproductive; they do damage. To add something useless is at least as dangerous as removing something that is necessary.
When companies select organizational elements according to their supposed effects on performance requirements, without paying attention to people’s rationality in between, it is a bit like spinning an organizational roulette wheel. The more requirements there are, the more costly the roulette becomes for employees, customers, and shareholders.
How the Soft Approach Gets in the Way of Understanding Performance
In contrast to the hard approach, the soft approach views performance as a by-product of good interpersonal relationships. But this view confuses people getting along with genuinely productive cooperation. Real cooperation is not all fun and games. As we said earlier, it always involves adjustment costs. To be sure, when people hate each other, they tend not to cooperate. But, beyond a certain threshold, good feelings don’t help either.
Indeed, the better the feelings among individuals in a group, the more people are likely to avoid straining the relationship by bearing adjustment costs themselves or by imposing them on others within the group. So, they will avoid cooperation and make third parties bear the consequences, or they will compensate with extra resources that remove interdependencies. (Think how convenient it is to have multiple TVs at home: that way, family members don’t have to do the hard work of cooperating over what show to watch at a given time.) In the workplace, the extra resources take the form, not of TVs, but of excess inventory stocks, time delays, interfaces and committees, and customer requirements unmet.
The other feature of the soft approach is that behaviors are assumed to be driven by people’s personal traits and mind-sets. This belief is inspired by an overreliance on psychology typical of the soft approach. “To change behaviors, you must first change the mind-set” is the mantra. When this doesn’t work, diagnoses based on the soft approach end up putting the blame on people’s personality and values. At InterLodge for example, both management and some work groups (like the sales teams) initially assumed that receptionists were somehow inherently disengaged and irresponsible because of their relative youth. We’ve seen similar kinds of stereotyping at other companies. But the high turnover rate at InterLodge was not caused by psychological factors or stereotypical behaviors, such as a supposed lack of loyalty on the part of the younger generation. On the contrary, the oldest and longest-serving receptionists were the ones who cared the least about the hotel and customer satisfaction. They had started their careers when customer satisfaction was less of a concern (because there was less competitive pressure). As the competitive pressure increased, these longer-serving receptionists had been able to learn the tricks (resources) to protect themselves from customer pressure.
Much like the hard approach, the soft approach has it backwards. To change behavior, it is more effective to change the context instead of trying to change people’s mind-sets. When the context changes, behaviors adjust, and when people behave the way they do, their values, feelings, and mentalities evolve accordingly. These psychological factors do not drive change; they are consequences. Think about the implications for cooperation. We often hear that to get people to cooperate, we first need to instill trust. This never works because change goes the other way round. When the goals, resources, and constraints are changed for some people, cooperation may become an individually useful behavior for them. As they start to cooperate, with more or less success depending on how the context of others has also changed, trust in these others will eventually evolve, creating a self-reinforcing loop when outcomes match expectations. By the way, even modern psychology has come to recognize the decisive importance of the context. As Eldar Shafir, professor of psychology and public policy at Princeton University, has recently put it, “Human behavior tends to be heavily context dependent. One of the major lessons of modern psychological research is the impressive power that the situation exerts, along with a persistent tendency on our part to underestimate this power relative to the presumed influence of personal intentions and traits.”4 The decisive role of the context does not contradict the notion of autonomy. Far from it. Taking into account people’s autonomy matters precisely because behaviors are intelligent—strategic and adaptive—ways to adjust to a context, rather than the automatic and passive implementation of supposedly predefined responses.
Of course, sometimes managers do pay attention to people’s behavior. We hear executives say, “We’ve created a new organizational structur
e, but in order for it to deliver, people need to behave differently.” Perspectives like this are probably the most pernicious of all. The hard approach defines the new organizational structure, and the soft approach defines the behavior necessary to function effectively within that structure. But behaviors do not come on top of or in addition to organizational elements. They are consequences—even if indirect and often surprising—of these elements. If the context is in contradiction with the behaviors advertised on corporate posters, people become distrustful, even cynical, of the planned changes.
The Result at InterLodge
So what happened at InterLodge? Once the management team took the time to understand the context of the work in its hotels, it came to realize that the problem was not that the receptionists were badly trained, or had some psychological issue or attitude problem, or needed more incentives. Rather, their behaviors were rational solutions to the problems they faced. (See the sidebar “Behaviors Are Rational Solutions in a Particular Context.”)
The management team took three steps to create a new work context both for the receptionists and for the back-office housekeeping and maintenance functions. (Here, we will focus on the high level of what the senior executives did. In the next chapter, we will get into more detail about precisely how it did it because the how depended on the use of simple rule two.)
KEEP IN MIND
Behaviors Are Rational Solutions in a Particular Context
People always have reasons for the things they do, even if those things are not always reasonable from the perspective of others.
