Jeffrey Saltzman's Blog

Enhancing Organizational Performance

Virtuous and Deleterious Cycles ©

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Here in the northeast the sap is running, and sugaring operations are underway. Maple tree farmers have inserted their taps and are collecting the sap from the Sugar Maple trees which will be condensed into that golden color amber that we all love so on our breakfast treats. For me it is the ultimate signal that spring is just around the corner and a harbinger that I will soon be able to get out into the garden and begin planting for the new season; the beginning of a new cycle.

An article in the local paper last week described how the Sugar Maples may be threatened due to climatic changes, it may become too warm for them to survive in their current locations. While the trees themselves in their current locations may perish, the Sugar Maple may have to retreat across our northern border to Canada in order to survive as a species and hopefully sugaring as an industry.

A common question that I get about employee survey results in organizations revolves around the chicken and the egg question, another kind of cycle. The questions generally goes something like this: “Do you get positive survey results because the business performance is good, or does good business performance lead to good survey results?” Ah causality….it can be a very difficult question to answer, but in many respects it is the wrong question. Correlations, regressions, and other commonly used techniques to analyze employee survey responses simply describe the current state of affairs and do not indicate causality. Without true experimental design, which is very rare in this kind of field work, causality is at best based on assumptions.

It is certainly true that in highly performing organizations that generate lots of profits, it is easier to do things, like providing sizable raises, bonuses, great heath care, or other opportunities that will impact employees perceptions about the place, about being part of a “winning team”, but how did that “winning team” get attracted and begin performing at the level necessary to allow the organization to become highly performing in the first place? Rather than debating that chicken or egg argument, suffice it to say that organizations that can get on that “virtuous cycle”, a self-perpetuating cycle of higher performance, will outperform those that are caught up in a “deleterious cycle”, a downward spiral of performance.

So it isn’t the debate itself that is important, in fact the debate itself is a waste of energy and time, what is important is to get onto that virtuous cycle. There is not one assured way of doing that, but by looking at organizations that seem to be on those cycles a pattern seems to emerge, a pattern that it would behoove others to emulate. Organizations that are on virtuous cycles can be described as having some combination of the following: a brand that others aspire to, that attracts other high quality workers, high quality products, dominant market share, paradigm changing innovations; a work force that feels clear on what the organization is about and their role in it, a work force that is given the tools and resources they need to deliver on organizational goals and a workforce that feels equitably treated given what they put into the organization and that they have a positive, fulfilling future should they stick around with the organization.

Do you create the business performance or the environment that nurtures it first? The answer is both. One does not cause the other, one is not a precursor to the other, but rather putting both of these aspects into place creates the environment that allows for organizations to get on the virtuous cycle.       

Deleterious cycles can kick in at any time in organizational life as well and they need to be scrupulously guarded against. I remember hiring a PR firm a number of years ago that charged what I thought was an outrageously high amount for getting my company publicity in relevant industry and general publications. After about a one year period I expressed my displeasure with their performance. They of course felt they were being fairly compensated for their work but suggested that if I was not happy with their performance that they could charge less per month and unstated but assumed – do a bit less. Rather than accept this, I viewed this as a downward or deleterious cycle. I would pay less because I was unhappy, (I was not unhappy about the amount, I was unhappy about what I was getting for the amount), and because I was paying less I would get less performance, which would likely result in even less success in terms of getting the company into the relevant press. I changed to a different PR firm rather than begin that downward spiral. 

Another type of “self correcting” deleterious cycle can be described by looking at tax codes in developed countries. Over a period of time the tax legislation becomes more and more complex with the only beneficiaries being the tax accountants and lawyers who get to charge more for completing increasingly more complex tax forms. One reaction to these increasingly burdensome tax laws and rates is to look for places where some relief can be obtained. The Economist in a recent edition describes one benefit of tax havens, those small off-shore locations where people and organizations can shelter income, as a correcting mechanism for getting countries off of the deleterious cycle of increasingly onerous tax legislation. They state that when a country feels enough pain from these tax shelters that it will cause them to examine and potentially spur overhauls to their tax codes. (Or is that wishful thinking?) This describes how an external influence, tax havens, becomes a key to getting an organization (a country in this case) off of a deleterious cycle, should they choose to take advantage of it. Similar kinds of pressures, correction mechanisms, were previously felt by the automotive industry as the Japanese developed higher quality and better cars than Detroit. These external influencers, that can be viewed as potentially beneficial, can be seen in numerous kinds of situations.

What is interesting now is that organizations instead of simply adapting to outside pressures to correct deleterious cycles in their performance are able to take advantage of others virtuous cycles in this era of globalization. But it leaves one wondering, if organizations are taking advantage of the virtuous cycles to be found elsewhere, does that mean that they feel less pressure to correct fundamental deleterious cycles that exist internally, is it a way of avoiding dealing with some problems or is this simply a new way of doing business?

Written by Jeffrey M. Saltzman

October 19, 2009 at 10:58 am

One Response

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  1. […] While some organizations hold out the carrot of permanent employment with better wages and potential benefits should the organization’s fortune continue to rise, those promises may not always or often materialize, and these days’ workers have an awful lot to be skeptical about.  “In the past, temps who do well have often been offered regular employment, with higher pay and benefits. Given the uncertainties about this recovery, companies are not doing that now, and temps, as a result, are less likely to spend as freely as regular employees or to qualify for credit, generating less demand than permanent employment would.” (NY Times, December 22, 2009). Sounds like a self-reinforcing negative cycle to me. […]

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