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Management

Is the impact of Agile just a Hawthorne Effect ?

By | Agile, Communication, Strategy | One Comment

L1001888The Hawthorne Effect is a human behavioural theory drawn by various social scientists from trials undertaken between 1927 and 1932 at Western Electric’s Hawthorne Works.

The trials found that improvements in behaviour, and productivity changes observed after adjusting a workplace, were in fact largely just the results of a placebo-type effect – any change seemed to cause improvement.

There were many changes trialled – the first (and possibly most important) were changes in lighting levels (‘the illumination experiment’) in a factory environment. The objective of the experiment was to find the optimum lighting level for productivity – the results showed that more was at work than just changing lumens, every change (up or down in brightness) caused an increase in performance.

Most theorists since have concluded that the improvements are caused by the act of measuring and engaging subjects.  If you missed studying this in your management 101 course, then read this article or take the slightly incomplete wikipedia catch up lesson and then continue reading.  Lets deconstruct the impact of this theory into its parts:

Measurement

We’ve already written about the impact of measurement before.  It’s also pretty well understood that humans perform against whatever KPI you give them, the way they do it may however be surprising or unintended.

Confirmation Bias

Then there is Confirmation Bias, basically the likelihood that you will both find what you’re looking for, and ignore stuff that you’re not.  Elegantly illustrated by this group of Radiologists who can’t find a Gorilla in their scans.  If a team expects a new process to be better, then their perception will likely match their expectation.

Empowered Staff

Finally the staff in the later trials, more focused on workplace layout and reward were engaged, they were part of the process.  They were made to feel special.  We’ve talked about this a fair bit too – though Dan Pink is more fun. Smart people are motivated by Autonomy, Mastery and Purpose. Pink was not the first to the conclusion that money was directly linked to productivity.

In summary, if you measure stuff, look for a change, and then make people feel special – surprise, surprise, you’re going to see a change!  Does this mean that some of the impact of Agile, the dramatic increase in staff engagement and useful productivity are perhaps just caused by the visual changes in the offices and agile rituals, but, in fact are just a ‘Hawthorne Effect’ ? In my heart, I have to say nervously, yes, at least to some extent.

Is this bad ? No.

Ok, but is the change real and sustainable? Yes, the changes and improvement in your team’s performance and culture are real.  Like all placebos, the source of the change might not be real, but the impact is.  If we can come up with better or different ways to achieve the same improvement then we should try them… any good agilista will tell you that anyway.

In the mean time I’ll leave you thinking about a sobering equation Nigel sent me as we’ve been debating this recently.

Hawthorne > Maslow + Deming

hawthorne effect workplace

LUNA CASE STUDY: A health insurance start-up.

By | Agile, Development, Disruption, Lean, People | 3 Comments

Luna Tractor has had the great pleasure of working with a small health insurance start-up here in Melbourne this year. This is their story.

The competitive landscape for health insurance in Australia is dominated by a small number of large incumbents that have been in business for many years. Below that are about 30 smaller players who have as little as <1% market share. Many of the business practices of these players are rusted on through highly proscriptive regulation, legacy systems that are common across players, and old mindsets. New brands pop up now and then, but they are bolt-ons to older players and typically somewhat contained by old practices. Even when new products come out, the bulk of an insurer’s book remains “old school” on the former products. There has not been a material new entrant since Medibank spun out of the HIC in 1975.

A small team of innovators came together in 2011 to break into this oligopoly. Setting themselves a tough deadline to be in the market in 2012, the main business challenge that emerged was to develop an effective operating model – a way for a group of seasoned insurance executives and subject matter experts to collaborate at high speed to reach their goal.

We set the company to work using the principles of Agile and Systems Thinking from the start. Instead of each subject matter expert retreating to their office to write board-level strategy papers to present to VCs and partners, they settled into their future headquarters around large Ikea tables with laptops and built a war-room. They defined themselves by this highly collaborative, communications-heavy set of business practices.

The rhythms of Agile serve them well. Daily conversations about everyone’s work-list (from CEO to office support) help avert risk and surprises. Weekly demonstrations of achievements, most of them not software at all but related to building online distribution, new products and governance, get everyone on the same page, and are platforms for the one-hour retrospectives and planning that follow every Friday.

Everyone has cards on the wall, separated into swim-lanes that reflect the key business objectives such as license approval and product development. The board is constructed using a customised ‘Hurricane’ model, ranging from 6 months out to today, in ever increasing levels of certainty and detail.

There were initial doubts about the suitability of Agile from some of the seasoned professionals on the team – having only ever worked in command and control businesses at senior levels, some perceived they were being asked to trivialise their work with index cards, scissors and coloured dots. There was a strong desire to see Gantt charts and more traditional sources of comfort. These concerns soon vanished when the blunt accountability of speaking to their peers every morning about their achievements and work for the day became apparent as the main purpose of the system.

Any concerns that the new way of working was ‘soft’ were dispelled in the many tough discussions about progress at stand-ups. As the team often reflected, it was far better to have many smaller moments of debate, receive timely feedback and correct their course than have a big ‘oh shit’ moment a month later.

In no time new boards sprang up around the walls, developing products in a shared way, and to the team’s delight their distribution partners, new IT team, Board of Directors and the industry regulators expressed their support for this ultra-transparent and interactive way of working.

With time pressure obvious, everyone focuses on delivering the minimal viable product that can be brought to the table for discussion, or validated with customers and experts. That ‘product’ might range from an actuarial analysis, to a regulatory document, competitive information, or a set of accounts – a desire to boil the ocean and deliver a gold-plated answer when 80% would enable an informed decision has long gone from the culture.

The whole business is now being built on this foundation, to be customer-focused and fast-moving. The team’s ability to collaborate, solve problems and correct their course in short cycles is a major competitive advantage they will never lose – and it is clear they will take these into the operational phase of the business in 2012.

Time to competency at working this way? Eight weeks, with one Luna Tractor Partner coaching four mornings a week initially, eventually only dropping by on Fridays for demo, retro and planning sessions.

The new company estimates their return on the investment in Luna Tractor’s executive coaching to be at least 10x.

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