Organisations can become more agile, creative and responsive in the context of turbulent business environments through creating and utilising feedback loops, writes Wayne Brockbank
This is the first of a two-part article that addresses how to establish learning and feedback loops in the context of fast moving, uncertain, morphing and complex business environments. In this Inside HR article, we will examine the implications of this issue at a system-wide level. In the next issue, we will address the implications of learning and feedback loops for HR in balancing its legacy of inflexible institutionalised processes against the mandate for speed and agility.
The reality of turbulence in the competitive business environment has been extensively discussed. Contributors to this turbulence include:
- The amount of information that is currently available and that is being daily generated (e.g. Facebook);
- The rapid emergence of competing analytical algorithms (e.g. Palantir);
- The convergence of heretofore non-competing institutions into direct competition (e.g. Apple and Disney);
- The geographical expansion of some countries (e.g. China);
- The geographical withdrawal of other countries (e.g. United Kingdom);
- The automation of work (e.g. Amazon);
- Political turmoil in almost every major country (e.g. Russia);
- Demographic shifts (e.g. Japan);
- Currency fluctuations (e.g. Argentina);
- Trade rebalancing (e.g. USA); and
- Climate change (e.g. everywhere).
When confronted with such environments, companies must develop and sustain the capabilities of speed, agility, creativity and responsiveness. A major capability that supports such institutional attributes is ability to build and leverage multiple, concurrent and rapid feedback loops. Such feedback loops facilitate the flow of relevant information that enables speed, flexibility, innovation, and responsiveness and that encourage urgency of action.
“Organisations must build systems that facilitate feedback loops within and across multiple levels”
Many companies effectively create a limited number of feedback loops but fail to build an integrated system of mutually reinforcing feedback cycles. To optimally effective, organisations must build systems that facilitate feedback loops within and across multiple levels.
5 critical feedback loop levels
Level 1: within and across individuals. Work can be designed to give individuals feedback on their individual performance. This is the most basic feedback loop. This kind feedback loop has been heavily emphasised in the extensive literature on job design. In addition individuals can give feedback to other individuals based on pre-set performance expectations. Such information can come from peers, subordinates or supervisors and may take the form of 360s, 720s, or direct feedback.
Level 2: within and across teams. Teams can gather, document and utilise information performance and behavioural data within themselves and about themselves. This helps to create seamless integration across horizontal processes. We see this most effectively occurring within quality and efficiency driven teams; such is the case within the Toyota Production System and Southwest Airlines.
Level 3: within and across departments. Within and across departments is similar to within and across teams but occurs at higher level of analysis. Does the accounting department track its own performance in terms of transactional efficiency and institutional effectiveness? Does the accounting department go a step further by regularly receiving feedback from other departments about its effectiveness and efficiency? Does it meet its agreed upon standards for timeliness, accuracy and responsiveness based on feedback from other departments?
“Much of the information and insights that are required for institutional agility and creativity is likely to emanate from lower levels”
Level 4: within and across divisions or business units. A major challenge of multiple division companies is making the corporate whole greater than the sum of the parts. If such cannot be achieved, the logical outcome is to break the company into legally independent units. We have seen this recently happen with GE and HP. In the pharmaceutical industry, costs of fundamental molecule discovery are rising dramatically. The sharing of information across divisions about existing molecules in order to create new molecules speeds innovation and optimally leverages existing information.
Level 5: within and across hierarchical levels. Horizontal feedback loops within teams, departments and individuals are covered above. Effective feedback loops across hierarchical levels is mandatory to create fast, responsive and innovative organisations. Direction and feedback from the top of the organisation is the legacy of hierarchal structures. However in today’s turbulent environments, much of the information and insights that are required for institutional agility and creativity is likely to emanate from lower levels (e.g. Unilever).
The issue is not to rely on excellence in any one feedback loop. Rather, the key issue is to create an integrated system of multiple, concurrent and rapid feedback loops. By tightening the flow of horizontal and vertical feedback, organisations may become more agile, creative, and responsive in the context of turbulent business environments.
4 key steps to utilising feedback loops
- Identify your company’s currently effective feedback loops.
- Identify the feedback loops that either do not currently exist or that are in need of substantial improvement.
- Prioritise the feedback loops that you will create or strengthen.
- Ensure that your firm integrates its feedback loops into a comprehensive system.