When organizations fall on hard times, as many do in our volatile market, the way they
deal with the performance gap typically involves either working harder or working smarter. When organizations take the “work harder” path, they cut staff, increase hours and productivity, and push their constituents to do more with less. If this doesn’t pay off, then wages are frozen or cut and more layoffs ensue. Other work-harder measures typically involve eliminating training and HR budgets, delaying building maintenance, and minimizing retirement funds. Working harder can result in short-term gains, but in the long run, it can lead to long-term deficiencies in lost talent, mistrust, worker burnout, and low morale. Eventually, those working harder either move out or burn out. This leads to what Repenning and Sterman (2001) call the capability trap.
To escape the capability trap, organizations must view serious shortfalls as indicators of inadequate capability and instead of taking a work harder approach, take a work smarter approach to address the performance gap in a systematic manner. By first identifying the root cause of the deficit and defining best practices, organizations can then invest in developing the knowledge, skills, and abilities of its constituents to work smarter and turn things around.
Lyneis and Sterman (2016) offer a series of strategies that organizations can take to escape the capability trap and find win-win solutions to complex organization problems. Although the authors apply the strategy to physical plant issues, I believe they are equally relevant to issues of human capital and performance. Here is my take on the five principles that contribute to working smarter:
- Don’t expect a quick turnaround. When organizations implement Performance improvement strategies take time and when resources are diverted to investigating and solving root problems, performance indicators may get worse before they get better.
- Metrics are important. Take stock of a variety of capabilities throughout all areas of the organization and honestly and openly communicate the results to bring deficiencies into the open.
- Avoid silos of improvement and instead, focus on the organization system as a whole. Often in hard times, small pockets of excellence will rise to the top, while others continue to decompensate. Sustainable improvement involves addressing systemic, organization-wide improvement.
- Invest in capabilities, even when times are tough. Most organizations are so lean, they have few reserves of ‘fat’ to rely on when they fall on difficult times. Investments in human capital in the form of skill development, reward systems, work-life balance, and career planning can create a reserve of capability and loyalty to draw on during the salad days.
- Invest in capabilities, even when times are good. The best time to build reserves of human capital (performance management, rewards, development, and morale) is during a boom. Reinvest in the organization to both prevent future difficulties and to have a strong reserve to address even the most unexpected challenges.
Lyneis, J., & Sterman, J. (2015). How to Save a Leaky Ship: Capability Traps and the Failure of Win-Win Investments in Sustainability and Social Responsibility. Academy of Management Discoveries, amd-2015.
Repenning, N. P., & Sterman, J. D. (2002). Capability traps and self-confirming attribution errors in the dynamics of process improvement.Administrative Science Quarterly, 47(2), 265-295.
Questions for Discussion
How does your organization deal difficult times? Does it take a “work harder” or “work smarter” approach? What are the long term effects on morale, capability, performance, and retention?