All constituents need to understand that they have a crucial role to play to help drive occupational safety or product quality in a business. That the envisioned outcome can only be achieved if each process, tool, or action aligns with plan and work instruction at every step of the way. Every tiny mistake at any of the steps tears a hole into the screen that protects quality or people. To illustrate that, process improvement experts often resort to the "Swiss Cheese Model."
If every of the cheese slices has some holes – meaning defect - somewhere, the chance is that a failure punctures all the way through. And that would mean a quality defect or a safety incident. Today I would like to introduce my concept, which I call the "Inverse Swiss Cheese Model™ of Ambiguity."
When analyzing the success of organizations – whether corporations or institutions – we observe significant performance differences. Regardless of how such performance is measured, it could be by looking at profitability, stability, valuation, or even reputation; it makes us marvel from where these pronounced differences stem. When companies run portfolio analysis, they often gravitate towards market intelligence to determine which businesses address the most attractive markets. Porter Forces are being analyzed; growth potentials quantified. Since that alone does not explain the stark contrasts between winners and losers among business areas, a potential next step is to look at operational excellence. In other words, how well do the different activities execute their processes? With both aspects combined into one view, there is a bit more clarity to gauge the performance and the underlying causes.
The larger the company and the more diversified, the more likely it is that still some businesses, despite a good position in a promising market and convincing efforts on the side of operational excellence, do not rise and shine. In the many cases where I was part of dissecting such situations, the critical reason for underperformance was often hidden in the economic engine of that particular business. Or to be precise in the lack of tuning the economic engine. Different portfolio elements in a diversified portfolio should be based on their specific engines. But often, that is not the case. Instead, corporate or a layer below demands homogenous and standardized ways to operate. While that does service to those businesses that happen to have an economic engine that is close enough to fit that "corporate way," other – often most other – activities are being mistreated and hobbled by that. For example, a classical "wear & tear" business gets forced to deliver a high sales margin for new sales to be on par with "make to shelf" businesses in the group that happen to operate with high gross margins. That kills the wear & tear activity, which needs the installed base to reap superior life cycle profits.
Let us assume that a company gets all the above three main drivers for performance right. They operate in attractive markets from a position of strength, execute professionally, and have the suitable economic engines assigned to each business and tuned accordingly. In other words, strategy and operations are running on all cylinders. This enterprise will perform – guaranteed – and deliver stable financial results. But to also outperform competitors or alternative investments in terms of stock price, another factor is often overlooked.
It is a factor that is deeply rooted in human behavior and cognitive capacity. Since most players in the market are constantly competing, improving themselves, driving innovation or even disruption, introducing new tools and methodologies, standing still means falling back. Thus the entire organization needs to evolve, grow, and sharpen its skills continuously. To make that happen, all parts of the company, down to the level of the individual employee, need to function like one giant organism. For that, companies define values, vision, and often a mission. The entire corporate strategy is poised to identify the general course of action. The organizational setup needs to reflect that strategy, and the process organization, in turn, supports its implementation. To ensure that the organization is fully motivated to excel, the proper measurements and rewards need to be put in place. Finally, the organization's talent needs to develop, adapt, and new resources from the outside need to be onboarded and aligned quickly.
But, as a matter of fact, between each of the above steps, some of the essence, a bit of the message, or the meaning gets lost. Like in a game of Chinese Whispers, the input from the executive level traveling all the way to an individual contributor at the coal face deteriorates and becomes diluted. It is a good idea to emphasize internal communication, having townhall speeches, fireplace chats, blogs, company TV, chatrooms, and even a dreaded intranet. But that is mere cosmetics if the actual illness is not cured. And that illness is ambiguity.
Let us talk a bit about what ambiguity means. In a linguistic sense, it means that an expression or a sentence has not one concise meaning but can be interpreted differently. For example, the sentence "Last night I shot an elephant in my pajamas" can be understood in various ways. Philosophers have pointed out that influential people often deliberately infuse ambiguity into their statements. A top manager confronting a group of employees during a Q&A session might say something like this: "I oppose cost-cutting which hinders our growth amibitions." Now, what does that mean? During a board of directors meeting, it means, "We will rigorously cut cost, to achieve competitiveness that allows us to grow as planned." While during a review session with business line managers, it could mean, "You have to cut cost unless it is an area where we expect superior growth." Well, and during the all-employee session, it is meant to calm people down by implying that cost-cutting is not on the agenda at this time but rather growth. It all depends on where one would set the invisible commas.
And that is precisely the problem with ambiguity. It can and will be used by the respective other side to distort, alter, or even reverse the actual meaning behind a statement. The more frequently such misalignments pop up within an organization, the more detrimental they become. Employees and other stakeholders have sensors for such inconsistencies or equivocalities. That also applies to implicit messages or the meaning of rules, regulations, and directives in an organization. If, for example, the strategic direction and the organizational setup are not matching, employees start to doubt whether the strategy is sound. Or if the reward system demands personal engagement, but the measurement system does not foresee capturing that on an individual level, then the motivation will plunge. All spheres of the organization and all steps in the value creation process are, in an ideal case, transparent, somewhat like clear window panes. They let the original purpose and meaning of the enterprise through like rays of the Sun. But ambiguity makes blotches of "cheese" grow on these window panes, blocking the rays. The more ambiguity, the more shade. The further away from the top, the easier these stains spring up. The longer the ambiguity runs unchecked, the more the overall deterioration of purpose and cohesion advances, like cancer.
In the end, it looks like an Inversed Swiss Cheese Modelâ„¢. The difference between two equal-sized companies operating in equally attractive markets, on a similar level of operational excellence, with their economic engines tuned on the same level but having a different rate of value appreciation lies in the degree of unification of staff and identification with the entire narrative of the company. And that is an inversely proportional function of the prevalent ambiguity. Reducing ambiguity by driving perfect alignment from values via strategy, organization, processes, measurements, reward systems to talent development is the medicine that fosters organizational, human effectiveness. That effectiveness is the fuel for superior shareholder value.
But why is ambiguity a growing issue? It is, of course, not only, maybe not even that often driven by deliberate top-down messaging flaws. There are instead several trends that amplify ambiguity. Companies are often assembled by M & A, thus bringing populations together who are used to alternative narratives, vocabulary, and beliefs. Similarly, when a company grows across generations, these different age groups differ in decoding situations or instructions. Millennials compare company values with societal belief systems and detect deviations. If top management appears greenwashing these rifts, the reaction will be pretty adverse. And finally, the pace of change has picked up speed. While 50 years ago, companies had an entire generation time to adapt to paradigm changes, today, constant overhauls and modifications are needed. As a result, narratives and trending themes at the top have already changed before the last wave has reached distant corners of the business. All of those internal realities are then superimposed by the current external situation. Once more, we are at a point of massive paradigm change driven by the Fourth Industrial Revolution and the underlying technology innovations that have the force to change entire industries ultimately. That is like fuel to the fire for the noise and confusion that internal ambiguity causes. Today, more than for the last century, clarity, alignment, and synchronization are needed to fight the disease we call ambiguity. It often takes the support of a neutral perspective from the outside to thoroughly pinpoint the major sources of noise and ineffectiveness.