Digital transformation is producing numerous changes in how we’ve always viewed management and organizations. I work in a global organization that is undergoing transformation while also helping customers with their digital transformation. Cloud, mobility, and Big Data enable rapid and disruptive business change, but to fully reap the benefits we also need to look at how we design our organizations and what mechanisms we put in place to foster a given culture to help accelerate our business strategy. Trust is the ultimate currency here.
The hierarchical organization
To exploit new technological opportunities, companies have to open up for innovation and stimulate creativity. The speed of change and the growing unpredictability implies, in my view, the final showdown with the classic military organizational design principles that we still see in the vast majority of major corporate organizations. We see time and again that, in only a few years, small and fast startup companies create much higher value than the annual five percent many big companies are satisfied with.
Followship is not a matter of course
What does it mean to a leader? First and foremost, it means that a leadership position in itself is not the ticket to deliver great leadership. The job gives the position holder the opportunity to get “followship,” but credibility, reliability, and humanity are the way a leader can develop authority, and that authority is volatile, unpredictable, and context-dependent. For example, today there is room for the youngest employees to mentor executive board members in using social media like Instagram and Snapchat. Leadership and followship will continuously change if an organization is to get the best of the people in its value chain. The purpose and the task – the real value creation – must be brought into focus to create followship.
Trust brings speed
About 10 years ago, Stephen R. Covey wrote about the speed of trust. Since then, digitalization – and all the associated changes – have further stressed the importance of a company’s ability to change, and to do so with speed. Trust is in focus because the psychological contract between manager and employee – and between all involved in a given task – is infinitely more important than the legal contract. When we trust each other, we can much better exchange ideas, take risks, and excel. If you trust your leader’s ability to genuinely care and understand (which is not the same as agreeing, of course), then you have the courage to say yes and no. If the anxiety level is too high, you will get suboptimal and alibi communication instead of long-term value creation.
In practice, companies embracing the digital age are increasingly establishing new formats for “check-ins” between manager and employee. What is important here is that the format is flexible and that the talks are happening on a continuous basis – and not tied to certain templates or certain times during the year (e.g., midyear and end of year). Only then can we make sure that we are in sync with the changing requirements and needs of the company – and that we are aligned on the priorities and needs, that we trust and feel trusted!
This year, SAP launched SAP Talk, our new approach to performance management. We will no longer run an annual process with ratings and performance reviews, but shift to more frequent, meaningful conversations between employees and managers where the focus will be on personal development, tasks, projects, goals, and working conditions, and allow for constructive feedback and opportunities to learn more from experiences. Our focus is on employee growth and development, not on performance ratings and calibrations.
When you have continuous dialogue with your manager, you are more likely to feel confident and clear on your task. In other words, you feel psychologically secure, which is what we need when going through major changes. Innovation and creativity do not flourish well in a brutal environment where the order is more important than the conversation.
Trust is the ultimate design parameter
This entire development takes place in professional environments, where digitization in itself increases the amount of information available – and where the digital pulse puts pressure on the individual. We must tackle this pressure if we want to promote new ideas, challenge the “status quo,” and create real innovation. I believe that a creative development process, where a group of people creates something together, requires some detachment from daily operations and pressure to deliver – and it must take place in a psychologically safe space. It cannot be dictated and it cannot be forced with hard-reward methods. You can leverage great methods such as design thinking to take that important first step. But in the end, the ultimate design parameter in today’s organizations is trust!
If you’ve been in business for a while, Everything You Know About Leadership Is Wrong.