Click here to watch this episode on our YouTube channel.
Click here to read the companion article.
As part of our ongoing Expert Insight Series, Jon interviews Dain Johnson of Rev 0 Consulting. They discuss change management, especially as it relates to data initiatives.
Blue Margin helps private equity owned and mid-market companies organize their data into dashboards to execute on strategy and create a culture of accountability. We call it The Dashboard Effect, the title of our book and podcast.
Visit Blue Margin's library of additional BI resources here.
For a free, downloadable copy of our book, The Dashboard Effect, click here, or buy a hardcopy or Kindle version on Amazon.
#BI #businessintelligence #reporting #dashboard #datawarehouse #PE #portco
Click here to watch this episode on our YouTube channel.
Click here to read the companion article.
As part of our ongoing Expert Insight Series, Jon interviews Dain Johnson of Rev 0 Consulting. They discuss change management, especially as it relates to data initiatives.
Blue Margin helps private equity owned and mid-market companies organize their data into dashboards to execute on strategy and create a culture of accountability. We call it The Dashboard Effect, the title of our book and podcast.
Visit Blue Margin's library of additional BI resources here.
For a free, downloadable copy of our book, The Dashboard Effect, click here, or buy a hardcopy or Kindle version on Amazon.
#BI #businessintelligence #reporting #dashboard #datawarehouse #PE #portco
Audience, welcome to our Blue Margin Expert Insights Series, we're glad you're here today. This series is for the benefit of mid market executives and private equity firms looking to use data intelligence to increase the culture of accountability, around profitability and growth, and by doing so increase the value of their companies. Today on our show, we have the pleasure of hosting Dane Johnson to discuss the role of change management in data initiatives. Dane is an engineer by trade turned a psychologist by trade. He coaches engineers turned managers. He also facilitates strategic planning workshops and designs changes that stick. Dane worked as a mechanical engineer in the energy industry for a decade before completing a master's degree in industrial and organizational psychology. He holds certifications in project management and change management. And currently Dane leads Rev 0 Consulting, where he and his team provide coaching for technical leaders and provide consulting for organizational change. We're glad to host Dane today to discuss the topic of change management for data initiatives. Welcome, Dane.
Dane Johnson:Thank you. Good to be here.
Jon Thompson:Thanks for coming. So Dane, tell us about your unusual career path. What made you start as an engineer then shift to, or add industrial organizational psychology?
Dane Johnson:Sure. Well, it certainly does sound unusual when you frame it like that. It did not feel unusual. Along the way, every step seemed like a natural progression for me. And it's only in hindsight, looking back on my career that I realize it was all in service of... finding ways to apply knowledge practically to business. So my first job out of school was with the largest publicly traded company in America at the time, the Fortune One Company, and their focus was projects. So as an engineer, I was so focused on how and why things worked, that I often didn't give consideration to the constraints of time and money. And project management certainly introduced those new variables to me, and I had to get very comfortable with working with those. After my time at that large corporation I downsized a bit to a fortune 500 company. And then after a few years, downsized to a startup of four people starting an engineering firm. And through those experiences, I recognized there is a much more significant variable that I was not prepared or educated to work with, and that was people. And so I did some exploration, I explored change management, and read a lot of books. And along the way, I discovered industrial and organizational psychology, which is the psychology of people at work. And for me, that was the missing piece. And so once I discovered that I was all in. And throughout my career, the timing was perfect. I wouldn't change a thing about how I went from mechanical engineering to here, but I would also never go back. I couldn't be an engineer after this. And throughout my career, ironically, what I've seen is that some of the most analytically minded people in the industries still apply their intuition to people decisions. So despite the tools and methods that exist for making better people decisions, they still go with their gut. And that's not always the best way. And so I'm really excited to be talking about change management, and data analytics, because the tools are out there to use to work better with qualitative data. And so I'm looking forward to talking through that.
Jon Thompson:Yeah, good. I mean, you really cover the full spectrum of from technical expertise, where we tend to think of engineers stereotypically and probably unfairly as not being great with people and gravitated or incorporated the full spectrum of the people side of things. That's really fascinating, I look forward to digging in. So over the years in Blue Margin, we have observed that as clients bring on data, data intelligence into their organizations, the culture shifts. In fact, that's what we're after, as I said, in the intro, to get towards more accountability and job ownership and so on. And often that new transparency, that shift, employees can be resistant to as people are resistant to change, at least I am. And yet, it's important that they make that shift or you are stuck being reactive, working on intuition and experience only and not getting that empirical feedback on performance metrics. So we found that for BI dashboards, data, intelligence, etc, to take hold, you need to account for that change management piece, take proactive steps to help employees walk through that, get leaders to incorporate that in their thinking, etc. And there's some foresight required to do that well. We're hoping you can help us think through the fog of where change management fits in to a company looking to use data and shift to a more data driven culture. Could you perhaps provide generally some background on what change management theory is and practical implications for leaders, then we can dig into data more specifically.
Dane Johnson:Yeah, certainly. The history of change management is pretty fascinating, but it's also pretty young. You start seeing change management show up in literature in the 1980s, when John Kotter started writing about it. And over the years industrial and organizational psychology and organizational development, those disciplines have really picked it up and ran with it. So a lot more research into a lot more practical application of it, and global research into what change management is, and how to work with it, how to use it well. But it's really only been in the past 10 years that there's been any sort of effort to codify what change management is in some sort of global standard. So since it's so young, you see a lot of grassroots efforts, a lot of disjointed approaches, and people just figuring it out as they go along and reinventing the wheel each time. So some examples of what change management might be. I like to think of a customer service improvement effort by an organization where they have this objective of improving the customer experience. And so they might roll out some new tools for their customer service reps, they might retrain their customer service reps, design some new scripts, but then there's also the piece of providing higher autonomy and higher authority to the customer service reps to solve customer's problems right there without having to go higher levels for permission. And so management of change is much more concerned with that increase of autonomy and authority and that distributed decision making and the new behaviors that go along with it, rather than the management of change of the new technology. So there's on one scale, we're just rolling out a new technology or migrating from Teams to Zoom in, we just need to tell people the change, and they'll adopt it. But we're, if they're expecting them to operate in a whole new way, we're giving them new levels of authority and autonomy, that's change management. And that's what change management is really focused on figuring out how to do well.
Jon Thompson:So there's a distinction, and I don't know if this is codified generally, between change management and management of change. The first being around people and their behaviors and how to get them to adopt new practices and change their thinking on how to do stuff. That would be change management. Management of change typically is more technical, can you give an example of the latter just to help ground that for the audience?
Dane Johnson:Yeah, for management of change, there's a lot of that as an engineer. We were replacing a pump, we were doubling production streams, whatever it was, we were increasing the capacity of a refinery. And so you just notify operators, you go to them with new drawings, with the new manuals with new operating procedures, and you say, here's this new change, we need you to follow. There's not a whole lot of behavioral elements at play there, people are going to adopt as part of their job, because that's what's expected of them. A merger, on the other hand, between two Fortune 500 companies where you've got cross cultural dynamics, different leadership styles at play, interpersonal relationships, that's where change management comes in, and helps you start planning for those sticking points. And it's pretty easy to look up some mergers that went poorly, and almost all of them are attributed to cultural adaptation.
Jon Thompson:So at the core of change management, is it understanding the psychology the headspace of the people you're working with, what they're used to, what their fears are, what their tendencies are, and using methodologies to help shift them to a new way of thinking and doing things, is that right?
Dane Johnson:Some of it is about understanding that, a lot of it is just about communication. Understanding the risks associated with it, where the resistance might come from, you know, "Is senior leadership not aligned?" Well, that's going to be much more significant than those customer service reps not being supportive of the change. So both sources of resistance are important, one much more significant than the other.
Jon Thompson:Yeah, one has a bigger impact for sure. So how does change management work in the mid market, that's where we tend to work. So I hope you don't mind me focusing there. So let's say 50 million to a billion in revenue, versus small companies or enterprises. How important is the risk of not incorporating a formal change management approach, versus the upsides of incorporating that into into your thinking and tactics?
Dane Johnson:Well, I see change management as an opportunity to gift mid market companies the one thing they're lacking most, which is time. So if you do change management well you're buying yourself more time. You're avoiding a lot of those high consequence risks that you might not have even anticipated. So I pull in risk management here, or risk analysis, because I did that a lot in project management. It just helps you start talking about what high consequence, what high probability, what low consequence, low probability risks you have, and getting you comfortable talking about the people risks at play. Let's say you're doing an ERP migration and your IT manager resigns midway through, that can derail the entire change initiative, right. Whereas in a traditional project management risk analysis, you might not start talking about the people at all, you're just going to assume that the people will be there, that the people have the skills, and that the people will just automatically change along the way for the project. A big component here is also the data analytics piece in change management. And thankfully, we're seeing way more data driven businesses than we have in the past, and that's why Blue Margin exists, and the value you add.
Jon Thompson:Thanks for the plug.
Dane Johnson:Oh, definitely. But what's awesome about these data driven businesses, is they're getting much more comfortable with with qualitative data, not just quantitative. So a few years ago, data driven business meant looking at your P&L, your balance sheet and your cash flow statement, and that was the extent of data driven decision making. Now you can start measuring people data, the qualitative stuff. Employees intentions to quit, customer satisfaction. And the idea is that you're shifting your focus as a data driven business from asking, "Where were we yesterday?" to "Where are we going tomorrow?" And change management helps you identify some of those qualitative measurements and prepare you to measure that data, interpret that data, and turn it into useful decisions for tomorrow's progress.
Jon Thompson:Yeah, so whereas we typically as humans, and business people say, "We want to incorporate this new process for improving customer satisfaction, or getting people to buy a broader set of our products, or having better collaboration between departments," and we think it's all mechanical, change management is looking very specifically at the people side and making sure that they're brought along in the thinking and the why, and shifting how they approach it. Is that right? Am I over simplifying?
Dane Johnson:No, that's exactly right. And for mid market, you asked, "What are the risks of not applying change management? What are the downsides to not doing it?" I think anyone who's tried to do some sort of organizational change, has recognized the failure of not applying change management. And failure here in change management does not mean complete and utter failure, it just means that you didn't achieve the end goal within the boundaries, or you didn't achieve the business objectives within the time and money constraints that you had. So I mentioned an ERP migration, that is probably one of the more common change initiatives that I see, especially for growing organizations, they start off with one ERP, they ramp up to 1000 employees and multiple facilities, and they have to migrate to a different ERP one that fits their new needs. If you're not applying change management from even before the project kicks off, you're at risk of jumping into it without aligning the leaders of the change with the leaders of the business. And I think we've talked about this before, where every project is a business project, every change is there for a reason. You're either reacting to a change in your environment, a demand of your customers, or just simply to stay alive as a business or to optimize and to improve performance. So if you're not applying change management in this ERP migration, like I mentioned, your IT manager might resign along the way and derail the whole thing, you missed the deadline that you set for yourself, which may have been unrealistic in the first place. But now you have your old ERP operating alongside your new one, there's that overlap, you end up paying for both systems simultaneously. And then on the people side, if there's poor adoption of a new ERP system, you can't trust the data or the reports that are coming out of it. And if you can't trust the data and reports that are coming out of an ERP system, what's the point of having it? And so that's where change management can can guide the training and development of the people. "Who needs to be trained on what, whose job completely changes, and what new jobs have we created that we need to hire for?"
Jon Thompson:And "Where are the risks people wise, who's gonna quit if we don't account for them?"
Dane Johnson:Another piece of this is project management has a end date, there's a go live point. And that's when project management says, "Oh, we succeeded, we're done." Change management exists beyond that. And there's a huge element here, reinforcement. That doesn't necessarily exist in project management, where you just hand things off to operations and say, "It's yours now, run with it." Change management is going to look at those behaviors that you said were so important, and be training managers to reinforce those behaviors. Yeah, and then you get those sort of factions where, "Hey, we did our part, and then it didn't land? That wasn't ours." We see that in dashboards where people think the goal line is deploying the dashboards, you're actually about the 10 yard line. Now you've got to put it in people's hands for user acceptance testing, getting feedback, and hopefully prior to that before launching you've incorporated their perspective so that they have some ownership, things like that. We've learned that sort of just by default, you know, school of hard knocks. There's kind of a three legged stool model here, where you've got your your project management skill set, the tools to deal with scheduling and budgeting and stakeholder management. That's one piece, and then you've got the change, which is the second, and then you've got the leadership of the business. And so if you can align the project management efforts with the change managers who are thinking about the people side of change, and the senior leaders within the business, who are sponsoring the change project to begin with, if all three of those are working in concert, that's really the Holy Grail. So change management does not exist on its own, and it can't. It has to be integrated with the business.
Jon Thompson:Yeah, ERPs must be the ultimate litmus test. You know... someone says, "We're rolling out a new new ERP," and everyone rolls her eyes in the rooms like, "Well, good luck, it'll either really help your business or take it down to your knees." And... we tend to think of "If it doesn't go well, or it gets extended by six or 12 months and another million or two of budget," that it was a technical miss. There was the translation between fields and reports and process from one ERP or lack of ERP to the new one. And hearing you talk, I'm realizing, at the back of all that is "How did the people adopt it, did they understand their role? Was there good communication as to the why we're doing this?" and so on. So what I'm hearing is, if you're taking on a project, ERP or otherwise, you're adding a component to the planning, that's not just time and budgets, and goals and technical pieces, but you're saying,"Let's specifically formally, think about the people and make sure that we get that piece," because without that, you get resistance and you have a ton of problems.
Dane Johnson:And if you're factoring it in from the beginning, you're much more willing to adjust for it along the way. And so if you get to that deadline that you set for yourself with the go live, and the sponsor is able to see that the people aren't ready, that sponsor is going to be much more willing to extend the deadline out and say, "Listen, let's not roll this out until we get to the level of quality that we need."
Jon Thompson:In your experience, or per your expertise is that role of change manager typically the project manager, or someone who's dedicated to that? Or does it depend on the size of the project?
Dane Johnson:Unfortunately, it tends to fall on the project manager.
Jon Thompson:And why is that unfortunate?
Dane Johnson:Because their title is Project Manager, and so their focus is on project performance. And so if their focus is on schedule, and budget performance, they are going to disregard the other pieces that complicate that. And so where I've seen this work really well is a partnership. And a change manager can can be an advisory position, it doesn't need to be a full time position within the project team. But it should be a person distinct from the project manager and distinct from the sponsor, because those three get to kind of hold each other in check.
Jon Thompson:And the project manager would coordinate the recommended changes, if everyone agrees to them, that the change manager brings.
Dane Johnson:Exactly and the project manager is going to have a perspective that the change manager doesn't have. They're going to know that people probably better. And so the change manager is almost a coach, especially in the mid market and smaller projects and the smaller change initiatives. If you're doing a merger, or you're relocating 20,000 employees, you know, that's where you're going to have a dedicated change team.
Jon Thompson:piece?" It's not just a question of "Who has capacity" or Where does it fall into the process?" But really,"Where's their center of gravity? What do they think about and live and breathe every day?" And if it's about budget and schedule, and you say, "Ah, you should also do the people thing," it may just not be the right application of that resource to the thing that needs to be addressed.
Dane Johnson:Right. The favorite phrase I learned in studying psychology was this idea of limited cognitive load. Where previously I would have said, "No, we can figure everything out, we can learn everything, we can multitask." In reality, we can't. We all have limited limited cognitive load. And if we can rely on other people and outsource some of that, where "I don't even need to think about how this is going to impact the customer service reps, we have someone working on that already." It allows you to focus on what's important to you, and not miss what's important to the business.
Jon Thompson:I feel greatly validated by that limited cognitive load. I am going to steal that and say, "Hey, I only have a limited load that I can put on my cognitive resources."
Dane Johnson:Something else I want to add for mid market companies is this idea that you have to apply change management out of the book. That you take the textbook of change management and you adopt everything. You don't do that in project management. You don't apply the same level of project management to a three month$50,000 website redesign that you do to a six year multibillion dollar highway construction project. They're two completely different projects, and so you don't expect a project manager to focus on the same things and use the same tools. One might have a one page project plan, the other 100 page project plan. Change management is scalable as well. And so I've tried to applying change management practices from a four person organization to organizations with 10,000 plus employees. And I don't use the best practices all the time, because they're not the best practices for that situation. And my philosophy and change management, just like project management, is "Use what works and discard the rest."
Jon Thompson:I'm assuming as the project grows in complexity and size, you're bringing in more controls more aspects of formal change management, because you've got more at risk and more variables and so on.
Dane Johnson:Yeah, exactly. It's that piece of risk. You know, "What are the the high consequence risks that exist?" And if they're significant enough to undermine the financial performance of the business, or to totally derail a project, you're going to be proactive about those. It also lets you focus and identify those low consequence risks. We talk about resistance to change and employees resistance to change a lot. And I think we give that way more weight than we should. A lot of that is a low consequence risk. It exists, and some people will be resistant to it but will they be resistant to it to the point that it'll fail? And in general, the answer is no.
Jon Thompson:You've got to quantify those various risks.
Dane Johnson:Yeah, exactly.
Jon Thompson:Right. That makes sense. Is it fair to say or is it oversimplifying to say that change management is all about behavioral change?
Dane Johnson:Oh, it definitely is.
Jon Thompson:Okay. We know that, dashboards, what we do, have a powerful impact on behavior. Specifically, if you give someone a number that they own, and you give them an analysis of how they're trending against that number, and why they are or aren't on track, and other people can see that, you get this scoreboard for a football team. You can't hide. It's it's not a wall of shame, but it's sort of a team accountability, a team effort. So how can dashboards support the change that you're talking about with change managerment and behavioral change? How does visibility, help with ownership, accountability, action, those sorts of things? What's your take on that?
Dane Johnson:Yeah, it's probably the most valuable tool
Jon Thompson:Yeah, that's very interesting. So surfacing the for change manager and for a project manager, to be able to gather this data and display it for everyone on the project team to be able to make decisions on their own. So I like data driven discussions, right, where you're talking not from the gut, but you're talking from what everyone sees. And in systems dynamics, there's this idea of reinforcing cycles. We like to think that applying a dashboard or showing people data will create this virtuous cycle of"Oh, if we show them more, their performance will be more positive." Their performance and their behavior will change, but it's not always positive. So in change management, you have to be careful about which things you're measuring and which things you're focused on, because it can reinforce the wrong behaviors. And there are a couple of phrases that I really like, and these are old, but they definitely apply here, of"What gets measured gets managed," and "Not rewarding for a while expecting B." And I've got a couple of examples of those. And just recently, I was reading about pay transparency. And that's a huge deal in in across the US right now, and in states like our home state of Colorado, where companies are now required to post the pay range for jobs. Pay transparency in sports was not that big of a deal until the 1990s when hockey, the NHL, disclosed the pay of athletes. Nowadays, we're so used to talking about athletes contract terms, and we see all the details in every contract. We know how much everyone's getting paid. But back then in 1990, that was uncommon. And just recently, a researcher was looking at the implications of having displayed that data and the implications it had on on athletes and on teams. And what they saw, and you didn't really need a degree in statistical analysis to figure this out, the top paid players, were the top scoring players. And if you're in a business, you're like, "Hey, we want to reward individual performance, lets pay for that performance." And that's exactly what was happening in the NHL. And the impact there was exactly what you would think you want which is those lower paid players started scoring more. And so this researcher was looking at that and seeing that they saw this data, and they said that "The way to get paid more individually for my own benefit is to score more." But then they asked, "Well, what are the implications that? What else happened?," because there's always another piece to the system. And what they found is that team performance decreased at the expense of individual performance. So those low scoring players started scoring more. They quit defending their own goal, and they started scoring more against the other team. Simultaneously, those same teams started losing more games. And so there's this idea that,"Alright, if we reward individual performance, our team will do better," and that was not the case whatsoever. And in business as your hiring, I asked companies as we're going through the hiring process, "Do you want to hire all stars? Or do you want to hire a team that works together well?" Because I would pit the Denver Nuggets against an all star team any day, right? They're a team versus just a collection of individual performers. And in business, it's similar. And so if you have these targets or these performance metrics around profit margin, and you decide that the best way to get there is billable hours, well, pretty soon you start measuring billable hours, you start start displaying that, and that's all you talk about. You reward the employees who have the higher billable hours, you publicly chastise those that have the lower billable hours. But what's happening, when you start doing that is... the employees will start seeing through that. And they might start seeing that as being short sighted. Or worse, you quit adding value to your customers, and then you lose customers, right? So you increase that that metric, that performance target of billable hours at the expense of some much larger issues. And when you're designing dashboards, and change initiatives, showcasing the objective, the business objective, is much larger than individual performance. And I come from the energy industry, where safety was front of mind in everything we did. That was objective number one. We started every day talking about safety, we would shut down at the expense of hundreds of thousands of dollars a day, shut down construction for safety incidents, and that was everyone's focus. And so safety got measured. It also got rewarded, so there were safety bonuses. And when you tie a bonus to performance, people are going to shift their attention there. So as a business leader, as you're designing dashboards, and you know this, that behavioral piece you talked about, what you draw people's attention to is where their effort goes. And so if you're drawing their attention to scoring more goals, they're going to put effort towards that. If you're drawing their attention to winning games, and winning the Stanley Cup, they'll put their attention there. So you have to ask yourself in these change initiatives, where do we want people's attention to go? wrong metrics is not just about exposing data. You could actually get adverse outcomes, you could decrease your business outcomes or hurt them.
Dane Johnson:Yes. And in that example of safety, and there's been multiple social science studies on this in multiple industries (medical, energy, etc.), when you draw attention to these metrics, what happens is, people start performing for the metrics sake, rather than the desired outcome. So if you are rewarding safety performance by giving a bonus, what you're really doing is rewarding that safety metric. And then safety incidents go unreported, or they get misclassified, because people don't want them to be in that higher category. Because then not only does it affect their bonus, but maybe the entire companies, and so there's that peer pressure piece of play.
Jon Thompson:So on that example, what's the right metric, if it's not safety incidents? "Bring it down, keep it under this, you get rewarded," how do you get the more holistic mindset?
Dane Johnson:Yeah, the tool I really liked for that is OKRs, Objectives and Key Results. When we're doing goal setting or strategic planning for an organization, keeping the focus on that objective. "What is that that core objective you're driving for?" And then OKRs, less you ask, "What does that look like?" And higher profitability, what does that look like a key result? Well, maybe it's billable hours, but that's only one piece of it. Is there another way to get there? And OKRs are great because you can stack them. So the objective of the organization has some key results that, say, the senior VPs own. And then those key results for them become their own objectives, and it can you can stack them all the way down the chain. And so you measure, rather than trying to find some universal metric that applies to everybody, like safety performance or billable hours, identifying what's relevant to that employee, and drilling it down. And so if you can stack these OKRs, if you can start narrowing your focus and not measure everyone to the same standard, that's where you see aren't making progress to the end objective.
Jon Thompson:We've seen that at Blue Margin. We've made this mistake countless times in the past, but companies have set out to make data more valuable to use it better, the common approach is send out an analyst or report writer to the subject matter expert, to the sales manager, and ask them what they want to see. And they say, "I want this metric, that metric and so on." And they say, "Okay, we'll put that together." And no analysis around "Does this actually achieve the business outcome? Are we potentially creating unintended behaviors and focus?" Those sorts of things. Is it over simplified to say, when you're looking at a key metrics for a role, even call it a technician and a truck or whatever the case is, if you go too far upstream, not close enough to the business outcome, you get people myopic on the wrong focus? Or is it both? How do you think about that, do they need to see the end goal and
Dane Johnson:Yeah, people want to know why they want to know their piece? what they're working towards, and they also want to know what they're accountable for. And so when you're identifying what it is you're measuring for them, do they have control over that? If you're giving them a report of all these areas where performance is poor or good, but they have no control over that? If they can't do something with the data, then what's the point? And so whenever we're creating reports, or data dashboards, I always ask managers before we even start publishing this,"What are you going to do, if it shows you this? If it shows you that you've met your target? What are you going to do with that information? If it shows you're not going to meet meet your target? What are you going to do?" And if your answer is,"Well, nothing," I would say don't measure that.
Jon Thompson:Wrong metric.
Dane Johnson:Right, wrong metric. Measure what you're going to act on.
Jon Thompson:There are some things so far upstream, you have perfect control. Let's take a salesperson's number of dials, they can crank them out all day long. But they're not very predictive of outcomes. And then there's a little further down having conversations a little further down presenting proposals, to try to find that point where they have enough control and there's enough predictability on outcomes. Is that something you think about in metric definition?
Dane Johnson:Yeah, I also wouldn't be too stringent on it. I would try something and see the the impact of it, and be willing to adjust next. And companies that do this, well, they just have a culture of change. They have a culture of trying things, seeing how it goes and adjusting. Instead of trying to design the perfect metric that we're going to use for the next 10 years, it's"Let's measure what's important right now and see how our objectives, the key results, have shifted in our business." Because business is changing so fast, that if you're measuring what was important 10 years ago, just as you are now today, then you're going to miss some really big things.
Jon Thompson:That's a point well taken. That you can't spend forever in analysis. You can't tell until you put it in the wild, right? The example that I'm thinking of, and we can stop this sidetrack whenever, but it's particularly difficult thinking about commissions for salespeople, because you say we're going to try this. And then you look, step back and say, "Wow, they're getting rewarded for things they don't actually do. They're not getting rewarded properly for the things they do do. They're focusing on the wrong things, and so the clients unhappy, but they're getting their metric met and getting paid. Now we got to pull it back and pay him less," which people hate, turns out. I don't know if you've ever dealt with that area, or if you ever do figure it out, please call me first.
Dane Johnson:Will do. Okay. Thank
Jon Thompson:Appreciate it. Great. Thanks so much for that. Let's talk about corporate culture a little bit. Where does it come into play? And I know, corporate culture is a big term, so maybe you can help us with that a bit. But how can leaders create an organizational culture that embraces change, where they're thinking about this and incorporating it consistently?
Dane Johnson:Yeah, well, probably time for a good story on this. Believe it or not, the military, the US Army, does a phenomenal job with change management. And when you read some of the examples of leadership, and change management and organizational development, and how agile the military is, it's surprising. And there's this book written by Army General Stanley McChrystal, a few years back, Team of Teams. And, here's a guy who's a career Army General, he's come up through the ranks of a organization that was based on"command and control." But he was fighting a war, where the predictability of the enemy was much different than what he was trained on in school and throughout his career. And what he saw was that the speed of decision making was too slow. And what he could have done and what might be a natural response of anyone who's been in the same job for 30 years, in the same career for 30 years, is to try to increase the speed at which he gets data so that he can make better decisions
Jon Thompson:More command more control. Similar to what you said about trying to figure
Dane Johnson:More command and more control, just faster. But that's not what he did, because he knew that wouldn't actually work. Rather, he used data analytics, and ramped up the level of communication to the point where they were talking daily throughout the organization. And the idea here was not to increase the speed of information flowing upwards, but to increase the flow of information everywhere, so that there could be this distributed decision making. And the cultures that are most adept at change management are those ones that rather than trying to control the change, they distribute information so that the right people have the right information at the right time to make the right decision. And that's where I love dashboards and data analytics, is it gets that information in the right hands, instead of just taking it up the chain so that directions can flow back down. And we talked a little bit about resistance to change already, but it seems like a lot of change management practices exist to overcome complacency or routine or some comfort level with status quo. But if the organization is just in constant state of flux and change, people are just used to it. You don't have to overcome resistance to change because it's accepted as a normal part of business. So I see cultures that embrace change management well, they already have a history of doing it well. They start small, and they never stop. And another parallel to project management here. There's four types of projects, there's predictive, which is you plan it perfectly, and you execute the plan. That's where you might spend years developing your your construction plan and all your detailed drawings. Then there's iterative, which is an aerospace, but modern day where you're maybe doing some additive manufacturing on a thruster valve body, where you can design this extremely complex component, have it 3D printed, put it on the test stand, get real data from it, and then iterate again, change the design and do that all within weeks. So that's iterative project management. The next is incremental, where you're going to roll out one piece at a time. So this might be your website development, you don't need to have your entire website built out, you could roll out your Homepage, roll out the About page a little bit later, and just keep building upon it. And then the fourth is agile, and agile project management has taken on its own life, but the goal of Agile is to add value to the customer, fast. And so that's why you get app updates on your phone every other day of"Here's a new version of the app, we took your feedback, we've incorporated it, and we've worked out some bugs." And what I've seen is that predictive change management projects fail. We cannot predict how humans are going to behave, we can't even predict state of the business a year from now, let alone what we need people to do in the business a year from now. out the perfect metric. Exactly. And so in change management, I've been adopting agile project management methods and incremental. Iterative is where quality is critical, but in change management quality usually isn't. It's just getting people to change a little bit at a time. So if you can break down your large change initiative into incremental pieces and say,"Here's our next week target, here's our next month target," instead of "We're going to plan for eight months how to do this merger perfectly," or, "We're going to plan for a year how to do layoffs". That's another big change initiative when you're reducing staffing. If you can be more iterative and move people around or design new roles and train people for those new roles that's a much better approach and much more likely to be successful.
Jon Thompson:Help me understand the difference between incremental versus agile because I think of agile as sprints and incremental as sprints, but sort of modules of the project. What's the difference between those two, as you see it?
Dane Johnson:It would be the types of projects, if you can roll out a fully featured part of the product, that would be incremental. Where you're just rolling out a piece of it. Like that website build out. An app, you can't roll out one piece of an app at a time, so you roll out the whole thing full of bugs, you get customer feedback, and you refine it. And so I imagine as you as you're designing dashboards, you could approach either one, you could start with one core metric, and then a month later, you'll add another one. So you start to add value to the customer right away, incrementally.
Jon Thompson:Yeah. That's not a bad way to go. Was there another approach beyond the start small and then add?
Dane Johnson:No, that would be the iterative
Jon Thompson:Okay. And then the agile, in the case of dashboards?
Dane Johnson:information to them right now? What decisions do they need to be making in the next month? And focus on those decisions rather than, "Hey, it'd be nice if we also could see this..."
Jon Thompson:You're sort of echoing our 11 years of experience where it was waterfall projects, you know, multi $100,000, 1000 plus hours. And those are the riskiest. You've basically taken eight scopes and mashed them together, creating compound risk and craziness. And so we have consistently migrated to shorter and shorter sprints, and still one of our greatest risks is, the client says, "Okay, we're doing this, let's nail it. Let's get all of sales and every metric and all of our data out of our CRM and our ERP and combine it together." And we have to convince them, "Let's start small, get a win that has standalone value, learn a bunch of stuff, and then we can get multiple streams going if we need to." But you go big like that, and we almost want to walk away because we're going to end up with an unhappy customer, and working late nights for free. I mean, it just doesn't go.
Dane Johnson:Well, and you also know the requirements are going to change along the way.
Jon Thompson:Yeah. I'm detecting a theme around change management and tell me if this is overstating it, if there was one thing you could do to improve change management, it sounds like communication down through the organization. If you just have more transparency about "Here's what we're doing, and here's your role, and here's how it's going." Is that overstating it?
Dane Johnson:No, I would focus on the distributed decision making though, rather than trying to get information to senior leadership for them to make better decisions. They need data to, to make decisions, but think about how it will impact every employee.
Jon Thompson:Yeah. And that's a big burden to executives. Being, you know, eight layers away from the line worker and trying to figure it out, and being held accountable to make these dictatorial changes. That's why large organizations struggle. I think it is that approach. It's amazing that the army is overcoming. Talk about large organizations, talk about bureaucratic organizations, $800 hammers and so on. Who is best suited to help businesses gather and interpret people data, when an organization is looking to be more qualitative, or take on some of those qualitative numbers? Can you talk about that a bit?
Dane Johnson:Sure. Well, within the realm of industrial and organizational psychology, there's two branches, industrial and organizational. And I tend to focus on the organizational and that's more change management, leadership development, and a few other domains. The industrial side is much more focused on statistical analysis, multivariate statistics, surveys, and gathering that qualitative data and turning it into useful information. And so that is the branch to explore if you're looking for help with gathering data, and building out multivariate statistical dashboards. That would be those industrial psychologists, and even behavioral scientists, they know how to measure what you want. The other piece of this is, you gotta be careful with the amateur statisticians in your organization. Because at the most basic as you're designing dashboards, you're just going to design to the average, or you're going to measure averages. And when you're talking about human behaviors, you really can't design to the average. And so you need you need someone who's comfortable with those qualitative multivariate behavioral statistics.
Jon Thompson:Yeah, I'm sure you've heard the phrase that"Culture eats strategy for lunch," is change management the core of culture, or just a very important ingredient?
Dane Johnson:It's a collection of tools and processes. And just like any tool, it's got to be in the right hands. And so if you have a culture of fear and control, change management probably won't add all that much value. It's those cultures of autonomy and ownership, if they adopt some of these practices, it just takes them to the next level.
Jon Thompson:And as companies are moving into more progressive and cutting edge approaches to gain advantage over the market and their competitors and so on, we look through a data lens, which again, is a piece of change management, how important is how important is change management? Are we seeing that the most successful companies are really embracing it and the less successful companies aren't? Is it that big a variable in impact to the market and to companies specifically?
Dane Johnson:I mean, that's hard to say, but you can still read articles every other week about how 70% of digital transformations fail. And what do they mean by that? They failed to achieve the business objective
Jon Thompson:It wasn't technical. It wasn't a technical problem, usually.
Dane Johnson:They may have solved the technical problem, but it didn't aid the business. And it's the organizations that align all their efforts to the objective of the business. Why does the business exist? Where is adding value? Every business exists to add value to someone and if you lose sight of that, then you won't get to exist much longer.
Jon Thompson:Yeah, I think of our audience of PE partners and mid market executives, often PE sponsored, which means high pressure gauntlet to build value in, say, five years.
Dane Johnson:Oh the competitive advantage these days is change. How quickly can you change? How quickly can you adapt to the changes around you? Because we don't exist in closed systems. And as an engineer, I always operated within closed systems. But that's not life, you're working, you're impacted by changes in regulation, changes in politics, hostile takeovers, changes in employee behaviors and preferences. How you lead an organization 30 years ago, is a lot different than how you need to lead one now, because employees expect different things.
Jon Thompson:Yeah, so I think those listening in those roles probably agree with you, as you've convinced me of the importance of this. And it's easy to overlook, I don't know why. I guess it's because it's a more current way of viewing things, but clever and necessary, especially if you recognize that so many failures and risks come down to people and how they're acting and thinking. But at the same time, these folks are busy, and they got a lot on their desk and thinking, "Oh gosh, I got to add another category of my job." How do they get started? What are some resources to begin to get some wins without creating the overhead that breaks the camel's back?
Dane Johnson:Sure. Well, there's a lot more consultants doing change management these days. And if they can come in just in an advisory capacity, sometimes just early on in the project and show you things that you can incorporate that are the right fit for the change you have. Now if you're talking to multi year change, that's where you want to go out and find a specialist. Find that large group that specializes in change management, and there's plenty of great ones out there depending on what you're doing, whether it's a merger, or restructuring, or just going through growth. If you're really small business, you know, there's the Entrepreneurial Operating System, EOS, where you just take this framework off the shelf, and you start applying this. And the focus of EOS and some of these other off the shelf management processes is communication. That's the core of it, ramp up your level of communication throughout your organization. So you can start there. Just communicating more. You can get a change management expert, just to start a conversation in an advisory kind of capacity. If you're looking to develop this skill in house sending people to certification programs like Prosci, that do some of these change management certifications where you can give them a jumpstart.
Jon Thompson:And if an executive just wants to be able to be in the conversation and include this in their thinking, there's some books that are good primers?
Dane Johnson:I love that one Team of Teams from General Stanley McChrystal, just because it starts getting you thinking about distributed decision making. It has some great stories in there. I really liked that the book No Ego by Cy Wakeman. It talks a lot about employee accountability, and if there's this idea of resistance to change, well, if you're an organization to change, why do you have people that are resistant in your organization? And so no ego is a great approach both from a leadership perspective and an HR perspective. Like we're not going to put up with, with all these egos at play, we got to check it at the door, and let's figure out what's best for the business.
Jon Thompson:That's great. Thanks so much for this it has been fantastic. What is next on the horizon for you?
Dane Johnson:Focusing on coaching. I'm finding thats where I add the most value. Coaching engineers turned managers, working more within an organization to coach the director and every manager on their team, so that all the managers, all the leaders are aligned, they're speaking the same language, and they're working together to move their business in the right direction. So for me and Rev 0, it's coaching. But I'm partnering a lot with other consulting groups to take on larger change projects and larger leadership development initiatives.
Jon Thompson:I imagine that coaching piece comes from the gap that happens, we all make this mistake, "Oh, that person is a great engineer, they should manage engineers," or "There's a good salesperson, they should be the sales manager," and you fail to recognize it's a whole different skill set.
Dane Johnson:It is and you can short circuit that development, because no engineer takes a leadership training course in college, and they don't get a chance to lead until they're put into management. And so if I can give them the fundamentals in three months, so that they don't have to learn about it five years over making mistakes.
Jon Thompson:Yeah. For folks who want to connect with you, what's the best way?
Dane Johnson:LinkedIn and my website rev0.org.
Jon Thompson:Okay, great. Thank you so much for your time. This has been fascinating. I look forward to further conversations and appreciate it. Thanks for having me.