This is a letter to all managers out there. If you are being paid to manage other people, this one is for you.

Leadership is like baking. It has a lot of ingredients and care means more than measurements.

I bet there is friction in your team. There is friction in all teams, and some of it is healthy. But when it turns into a chronic condition, relentless, abrasive, never taking a break – then you have a problem. And it may very well be that you and your organization is at fault for creating this unhealthy and unproductive environment. For many workers, work no longer feel inspiring and rewarding. Instead, colleagues feel tired, and many feel disengaged at work. This is a big problem. Disengagement is the arch enemy of excellence. And we would all like to be considered centers of excellence, wouldn’t we?

Perhaps there is a narrow focus on performance management through reporting and key performance indicators. This approach resonates well with most engineers and accountants; what is measured gets managed. There is no doubt that we need to measure performance. How else would we know if we are moving in the right direction? And perhaps that is the core of the disengagement problem. Because who knows what future state are we trying to move towards? If there is a lack of a shared and compelling vision, it is hard for people to know what matters, and what is just noise.

Performance management is a double-edged sword. It has downsides that managers need to be aware of and watch closely to avoid the negative effects of management to overtake the good effects. A very high focus on key performance indicators tend to bring out some side effects such as a lack of involvement, tunnel vision and can also exacerbate short-termism. All of this together tends to create disengagement, which again would drive the real key performance indicators in the wrong direction. Successful managers know how to balance focus on results and relationships. Managing based on measurements alone will tip the balance of focus heavily towards results over relationships, but without healthy relationships we cannot reliably drive results over time.

Let us first consider how measurements can help us drive result in a complex system such as a big organization, and then return to how we tie achievement to key management practices.

About measurements

Measurements are critical. But how do we know if what we measure, and the results we infer from our KPI’s, indicate progress? Managing an organization is an optimization problem. To know whether we succeed or not, we need to know what we are aiming for. In mathematical optimization this is called the objective function – a mathematical function that we seek to minimize, typically under a set of constraints. In management, we typically rely on a vision statement to guide our actions. The KPI’s we live and manage by, should have a clear connection to that vision. Without this connection, it is hard to tell whether a change in the KPI is good or bad, or if such a change is important, or merely a weak improvement of the whole system. To make these connections, we need to apply systems thinking. Systems thinking means an approach where we look at the internal and external interactions of a system and try to understand how our actions push this system from one state to another. Is that new state taking us closer to our desired state, as described in our vision?

Let us go back to our mathematical optimization problem as an analogy of what we are trying to do. Let’s say we have a mathematical model describing “the system”. This model describes the interactions internally in the system, as well as how the system responds to external events that we have no control over, and actions we take on purpose to drive our systems towards that optimal state, where an objective function is minimized. This is a very difficult problem; how can we make the best decisions about inputs we can control (let’s call them u), to optimize the state of a system when there is considerable uncertainty (let’s call such signals that we cannot control d).

In most cases we are also not able to observe every state of the system. There are features of our complex system we cannot see. In some cases, we may infer what they are, but very often we have limited observability of the internal state. This is also true of organizations and management; there will always be internal factors we have no way of observing.

When we make decisions about what to do next, we need to rely on things we can see. These are measurement variables, y. This information can be used to drive our system towards our ideal state, but all information is not equally important. Sometimes two different measurements can also give us in essence the same information. Mathematically speaking we say that the measurements are highly correlated. This means that for solving our mathematical optimization problem, it is not arbitrary which measurement variables we use to drive our decisions. We should carefully select measurements that give us the best ability to approach our optimal state or minimizing our objective function. This is the same for management of an organization; we should pick the KPI’s that will help us the most in moving in the direction of our vision.

The actions we take can be viewed as inputs to our system, whether they are variables in a mathematical optimization problem, or actions and tasks to focus on in an organization. Say we have decided some key performance indicators we would like to drive to some target values. We need to choose our actions for doing this. We will typically have many candidates for actions to take, but not all of them are equally effective. We have two decision problems to solve; which knob should I turn, and what value should I set it to? We also have another issue to keep in mind. While turning a certain knob may drive a property of our system in the desired direction as measured by one specific KPI, what if it makes the situation worse as measured by another KPI? Our optimization problem is much more difficult to solve if there is significant interaction between the internal states we change through our inputs. We should thus aim to decouple the input-output structure of our system. We would like to use inputs (actions) that do not cause conflicting outcomes as measured by different outputs (i.e., our KPI’s). This is not always possible, but we should be aware of the possibility of conflicting interactions and strive for more decoupling in the measurements we use.

So, if we now can agree that it is important to carefully select KPI’s, do we have any heuristics or rules that can help us do that? Luckily, we do. This has been extensively studied both from a mathematical point of view, and from a management theory point of view. It is a good thing that the general conclusions from different research areas do align well with each other.

• Select KPI’s that are tightly coupled to the objective function so that a change in the KPI would indicate a change in the closeness to our ideal state
• Select KPI’s that have optimums that are close to invariant under noise and disturbances. This means that if we have small errors in the measurement of our KPI, or external conditions change slightly, we are still operating close to the ideal point of operation.
• Select KPI’s that are not strongly correlated with each other as they would not together provide more information about the internal state of the system than one alone would
• Do not select more KPI’s than you have inputs to manipulate. This is because we cannot independently change more outputs, than we have inputs available.

If we pull this knowledge into the context of managing an organization, we can make some immediate observations. First, it will be very hard to select good KPI’s unless we know where we are heading. We need a clear vision for the organization. This is our objective function. Let us try to define a few possible “visions” to see how they would affect our KPI selection problem.

1. Our vision is to make the CTO happy with the technology department
2. Our vision is to enable the organization to provide services our customers love
3. Our vision is to replace all humans in the company with robots maintained by others

These examples are of course contrived but they are made to illustrate that what we want to achieve will heavily influence what we measure, and how we work towards that ideal state. Let us take the first suggestion – our vision is to make the CTO happy with the technology department. Perhaps the deeper motivation for such a vision could be to secure bonuses for ourselves and our friends, or because we are uncertain about management’s ability to see value in what we do so we would like to keep the CTO happy for the sake of our own job security. Of course, none of these are admirable motives but let us pretend this is the case for a moment and see how we would seek to optimize that problem.

The CTO is happy when:

• We do not ask questions but execute desires from top management quickly
• We report numbers that make the CTO look good to other executives
• We buy products and services from vendors the CTO has a tight relationship with

Our KPI’s should then be on speed of implementation, reporting progress through measurements that are easy to make change a lot but does not necessarily create competitive advantage for the company. Perhaps should a KPI also be number of LinkedIn contacts of the CTO associated with each vendor we choose. Obviously – this would be absurd. We are optimizing for the wrong objective function! We see that this type of opportunism is not only suboptimal, it is bordering on corruption.

If, on the other hand, we want to maximize our customer’s love of the services delivered by our organization, we would likely select other KPI’s. When would customers like our products more than those from our competitors?

• Our products do not have a lot of vulnerabilities and can be trusted
• Our products are reliable and exceed the expectations the customers have
• Our risk mitigations are designed to stop harm to our customers
• Our marketing messages make our customers feel good about our offerings
• Our products and services are easy to use

Say that this is what we believe underpins making the vision of “most loved supplier” reality. What should we measure to help drive results? We need to make sure our products are trustworthy and reliable – so using quality and security metrics will make sense. We need to make sure our products exceed expectations; meaning we need to watch closely the feedback from customers and the market. We need to make our products very easy to use – measuring user behavior to see if actual use of our products match what we intended would be an important part of making up the full picture.

A lot of this cannot be achieved internally by one department or division alone. We need to sell this approach to the entire organization, from top management to marketing and sales, to engineering. Our sphere of influence needs to expand to make our vision reality. Selling does not necessarily come natural to our team members, so focusing on driving activity before driving results can be a reasonable approach. One way to do this is to look at time spent on working with other units to make sure we do not fall into the internal focus trap. So where the manager obsessed with output based KPI’s would see internal socialization as wasted time, the more relationship aware manager understands that this underpins the creation of business value.

Further, as we expect our team members to “sell our vision” to the organization, people will need support, not just performance push. We will get back to that.

The point of this is, we should not try to measure all the things possible, we need to prioritize, and track KPI’s that align closely with our vision for the future. And to do that, we must first define that vision clearly. It must be shared by everyone, understood, and felt to be “right”. To be effective it must align with our values, and it must align with the values of the organization. In that set of values, we find innovation and agility. A practice that causes dissonance between the values we identify with, and our daily work, leads to frustration. And that has unfortunately become very common, and perhaps it has gotten even worse after COVID due to less strategic focus and involvement?

Creating excellence through people

Leadership is about creating results through others. We cannot do that through one-sided focus on “productivity”. It does not matter if you do a lot of things, if those are not the right things to be done, or if the things we do are not done very well. A top-down management approach will often lead us into doing things without putting our hearts in it, without considering if they are the right things to do, if the measured numbers and reports are produced. That is an illusion of effectiveness.

An approach to leadership that seeks to balance organizational performance and human development is “situational leadership”. This term stems from work done in the 1970’s by academics, and has developed significantly since, but the main take-aways are:

• Not every situation is most effectively managed with the same style of leadership
• For long-term organizational performance we need to balance our focus on tasks and relationships

According to this leadership theory, a good leader develops “the competence and commitment of their people so they’re self-motivated rather than dependent on others for direction and guidance”.

It should be clear that an over-focus on task performance will run counter to this principle and can easily lead to micromanagement. Micro management is warranted when competence is very low but enthusiasm to learn is high, but in knowledge organizations primarily employing university graduates this is rarely the situation at hand. Micromanagement in knowledge organizations is counterproductive.

So what should a good leader do?

Ken Blanchard is one of the originators of situational leadership theory, and he has written many books in a semi-fictional style. His most well-known book from the 1980’s is a quick read called “The One-Minute Manager”. It is still a good read about management, for learning about motivation and driving human excellence. In this book he introduces the concept of the serving leader, with the acronym SERVE serving as a reminder of key management practices. The practices are summarized as follows:

• See the future
• Engage and develop others
• Reinvent continuously
• Value results and relationships
• Embody the values of the organization

See the future: develop a compelling shared vision of the future

This is the precursor to strategy. How can we plan what actions to take if the direction is unclear? How can we expect people to pull in the same direction, if they have no shared model of what an ideal future looks like? Therefore, creating a vision needs to be a collaborative experience. It is also necessary that the responsibility for articulating a vision for a business unit, lies clearly with the top leader of that unit.

A good vision, whether for a team or an organization should consider the core values of the organization. The values say something about what the organization sees as important, valuable, worth striving for. All organizations have values, whether articulated or not. If they are not articulated, or they are simply “dormant” – somebody defined them, but they are not widely known or reflected upon, they provide no guidance. Start with the values.

An effective vision sets a clear direction. It describes a future ideal state, somewhere we want to go. That state must be compelling to the team, and something everyone agrees that we would like to achieve.

Having a compelling and shared vision makes everything easier. Prioritizing what is important becomes easier. Motivating both oneself and others is much easier. Seeing if the fruit of our work moves us closer to where we want to be, becomes easier. It is a common saying that visibility is important.

Engage and develop others

To accomplish something great together we need to learn, as an organization, and as individuals. Leaders must support development of people, and of good practice. How do we develop people, so that they feel that work is rewarding, and improve their competence in a way that supports the organization in reaching its goals as well? The first thing we need to do is to acknowledge that development and optimization requires time, trust, acknowledgement, support, and effort.

Excellence does not come from task performance alone, although much can be learned “on the job” as well. A good approach to competence management requires the ability to think about systems. An individual alone is complex, a system. A team adds more complexity, not to speak of a large organization, or our entire market. Even society as a whole is relevant to our development. We need to consider systemic effects if we are going to effectively engage and develop others. That means that we must consider if our result focus is interfering with our ability to drive positive development. We need to align our performance management efforts with our competence goals.

Human performance requires motivation. A large part of “engage and develop others” is thus related to motivational leadership. Research in competence management has taught us about many factors that contribute to the motivation of people at work. Key influencing factors are:

• Task motivation: a desire to solve the problem at hand, intrinsic motivation for the work itself. This is a state we should strive for.
• Confidence in own competence: the individual’s self-esteem as it relates to competence and knowledge at work and in a group
• Perceived autonomy: ability and acceptance of independent influence and decision making
• Perceived use of own competence: that the work to be done requires the skills and abilities of each person to be actively used
• Clear expectations: a clear understanding of what is expected of output, behaviors and social interaction from colleagues, leaders, and other relationships
• Time and resources for competence development and training
• A culture of excellence: where everyone expects the best of everyone, and provides support to achieve that
• Usefulness of the work – a desire to help the wider organization achieve its goals (again pointing back to the vision)

Leaders play a crucial role in optimizing the environment around the factors above. This can be done through organizational design (who do we hire), how we work together, how we select and work on tasks, how we coach and support one another, how we share our own knowledge, and how we provide feedback to each other.

This is very hard to do unless we trust each other and know each other more personally than what particular job skills we have or what we can read from a CV. The only way to foster that trust is to care deeply about other people, to care about their success in terms of what is important to them, as well as to care about their value and contributions to the social group at work as a whole.

Culture eats strategy for breakfast is an old saying, and it holds a lot of truth.

Reinvent continuously

We will not achieve our vision in a vacuum. We are exposed to both internal and external competitive pressures. Competition for resources, for relevance, and market forces that decide whether our desired future state is still the right goalpost to aim for. To be successful in moving into our ideal future, even when clouded by uncertainty, we must innovate. Without innovation, the competitive pressures will crush us (external threat) and our internal performance will dwindle due to destruction of motivation and achievability of our goal. Hence, innovation must be on every leader’s agenda.

To reinvent you need to learn. Therefore, every leader should make it a practice to learn new things. Not only about the topic of the work, such as information security for example, or about leadership itself. Leaders should learn about the things that matter to society, to the supply chain, to the organization, and to individuals. A lot of this learning can come from fiction, from cultural experiences and from hobbies. It is through the way we interact with the world we learn to understand the world. That means that to drive effective innovation, we should not be workaholics. System thinking requires system understanding, and that understanding cannot come entirely from an inside perspective.

Innovation means change. We do something new, and we take risks. Innovation means doing things we don’t know will work. If we want others to innovate, to drive practice forward, we need leaders who are brave. Failure must be expected, perhaps even celebrated if we learn from it. Failure is always seen as risky by people in an organization due to perceived expectations being successful, efficient, productive. It is important for leaders to show willingness to take risks, try new things, and fail in a transparent way that others can see when things do not go the way we want.

There are many ways to reinvent or innovate. It can happen at the individual level, as a group in a natural, non-directed way, or as a managed project. It is also important to make innovations visible, no matter what type of innovation we are talking about.

Reinvention can be about processes. It can also be about technologies, products. We should always work to improve our processes and ways of working. This means that people must be able to voice their opinions, as well as to experiment. If we talk about trying new ways of doing things, challenging each other’s thinking along the way, we improve the odds of success. To make this reality, it is important that we create a culture where people will speak their minds, and where those who make decisions think about the suggestions and concerns raised. Involvement only works when it is authentic. Experimentation takes time. If someone wants to try something new, discuss and agree on how much “extra time” is OK to spend on experimentation to drive things forward. Maximize time spent on driving creativity, efforts to create and test, and make evaluation easy. Innovation work is where agile shines, working software above extensive documentation. Or demonstration by “doing” above extensive KPI’s.

Value relationships and results

Results matter. But it is through our relationships we create our best results. Relationships drive improvement, innovation, motivation, and quality.

As a leader, take time to build strong relationships with others. Not only with your own leaders, or with your direct reports. Those are important, but so are other people. Those who use the work produced by your unit. Those who need to support your unit in creating results. For example, for an information security team, it is often necessary to get help from the IT helpdesk in handling security incidents. If you as a leader have a strong relationship with the leader of the helpdesk team, and some of the key helpdesk members, their willingness to help and make a real effort when the security team needs help, will be much higher. The same goes for the relationships between your team members, and people who work in adjacent teams that we interact with. Value your people’s efforts to build relationships within the unit, in the organization, and even externally.  Even if their day-to-day work is not about external contact to vendors or customers. Every employee is a brand ambassador, and a strong brand drives results across the whole organization, even in business support functions.

As a leader, you should try to encourage and support people’s efforts in building relationships. One can provide arenas such as cross-functional knowledge sharing, or break activities. One can think strategically on how we engage with other units through the work we do and choose ways of working that makes it easier to build relationships to other people. Those relationships create trust, and trust is the parent of collaboration. This way – relationships help us drive performance. They create results.

Valuing results is also very important. This often comes more natural to an organization driven by measurements and reporting. Showing acknowledgement of results help us improve motivation, trigger ideas for improvement, and further create a need for more collaboration. Through that result focus creates a need for relationship management.

• Celebrate all wins – big and small
• When things go wrong – appreciate what can be learned. That is a result too.
• Evaluate results based on outcome, expectation, handling of challenges and effort.
• We should value the way a result was achieved as much as the result itself.

Embody the values of the organization

Authenticity is key to trust. The actions of an organizations leaders is very visible to that leader’s direct reports, but also to others. A leader who acts in a way that does not harmonize with the organization’s values does not support achieving the vision.

Unauthenticity will drive mistrust. Nobody is willing to go beyond the bare minimum to follow a leader who acts as if he or she does not actually believe in the vision, in the agreed values. This boils down to “walk the way you talk”. If you talk about agility, but opt for micromanagement, this creates dissonance. If you say you want to empower people to innovate but discourage taking risks, little innovation will occur. Authenticity matters. This means not only trying to behave in accordance with the values of the organization superficially, but actively working to bring the system forward just as you expect others to.

Do you want people to innovate? Then you must innovate. Do you want people to share your vision? Then you must invite participation in its creation and how to articulate it. Do you want people to learn and develop? Then you must learn and develop. There is no better way to portray authenticity than letting people see the things you do. Actions reinforce words.

To embody the values of the organization is not only about the actions you take, but also about the expectations you set. If we want to build excellence, we should not tolerate long-term underperformance. But more importantly, we should not tolerate systematic behaviors that go contrary to our values. When underperformance manifests itself, or behaviors that go contrary to our vision, to our stated values, show up repeated, we must act.

In a culture where tasks are valued above relationships, where measurements count more than progress, underperformance is often met with punishment. No bonus, lower salary adjustments. Or firing the individual. While such measures have their place, they should not be the start of improvement. For a situation where people act differently than we would expect with a set vision, with our defined values, we must ask ourselves what the cause of this behavior is. For a leader the first question should be “is there something in the way I lead that would make people believe those undesired behaviors are tolerated, or even encouraged?”. Sometimes our actions have unintended consequences when interpreted by others.

The next question we should ask is if there are misaligned incentives driving the behaviors we see. Do we reward results in a way that practically force people to take shortcuts or actions we do not actually want to make our measurements hit target? This type of opportunism will often manifest itself when motivation is entirely extrinsic, and there is a mismatch in the interests between the agent (the employee) and the principal (the leader, or the organization).

If we want to identify the cause of the performance slip, or the non-productive behaviors, we can only achieve this through dialog. You as a leader must have a conversation with the person displaying these behaviors. This is a great opportunity for situational leadership. What approach is appropriate and effective in the current situation? Is it a directive style, where you tell the other person what to do? Is it a coaching and participating style, where you support self-reflection to enable the desired change? Warnings and disciplinary actions tend to be an extreme variant of directive leadership style, and if the lack of harmony with expected behavioral standards this can be necessary. We are then often talking about serious violations of norms, or code of conduct. Most often this is not the case, and a very directive approach can be counterproductive, especially if there is not a high level of trust already in the relationship between you and the person you are trying to help change his or her ways. The conclusion of this is that leadership is complex and more about people than it is about measurements. Using the SERVE principle as a guideline for how you think about leadership can be very helpful as it helps you balance focus between driving results and creating strong relationships to underpin the results.

Who supports the leader?

Being a leader can feel very lonely. That is not a good situation and is completely unnecessary. Leaders need support structures. Sometimes you will need to think about complex dilemmas, involving people you care about. Leaders must often make trade-offs between conflicting goals, desires and needs. To do this effectively we need support from those around us. The organization should provide some of that support, through leadership training, mentorship, management systems and through contact with other managers. Your own line manager should be available for discussing such issues. It can also be a very good idea to have a strong mentor to help you reflect on challenging situations.

You should pull necessary support from many sources. Leaders often try to portray themselves as someone with the answer to every question. They often keep the dilemmas hidden and deliver directives for execution. This can easily lead to micromanagement and suboptimal solutions. In many cases you can share the dilemma and have your people help sort out what should be done next instead of presenting them with a directive to execute. Remember – people have been hired for their talents, not as cogs in a wheel.

Another source of support is your friends and family. That support does not have to be “task related”. Simply taking time to have a good life and feel appreciated will make you a better leader. That helps you create results, both on your own, and through others.

Value work-life balance for yourself, and others. Long-term growth depends on it.

The take-away

• It is your job to make sure there is a compelling vision articulated, shared by everyone
• Hire the right people and support their development – professionally and as individuals
• Improve things every day – innovation applies to processes, products and who we involve
• Appreciate and support relationships at work, and make networking part of what you do
• Live by the values you and your organization believe in. Be authentic, and build trust.
• Take care of your mental and physical health – and help others do the same. This is work-life balance in practice.