Well the RSA have just produced this video summary in their Animate series from Dan Pink which summarises some of the other problems about paying bonuses, including a study at M.I.T. sponsored apparently by the USA Federal Reserve Bank.

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Math 1.0 can be considered to be a special case of Math 2.0, where certain aspects of reality are ignored for the purpose of making things black and white and therefore easier to manipulate and compute.

Math 1.0 is helpful in specific circumstances like simple counting and manipulation of number, adding, subtracting, multiplying, dividing of pure number, and for making approximations, and is also useful in statistical manipulations where it is valid to manipulate data away from its context. Math 1.0 thinking successfully delivered a rocket to the moon but has failed to deliver insight into most chronic problems affecting humanity today. Math 1.0 thinking is part of the problem!

Math 1.0 is not valid in the domain of measurement nor when ‘counting’ is actually for the purpose of measuring ‘things’. And yet we use Math 1.0 with measurement all the time!

Using Math 1.0 as the ‘logic vehicle’ for interpreting changes in measurement data is a major reason why we have witnessed so many decisions by leaders and politicians in the last few decades that have turned out to be wasteful and that have exacerbated rather than solved ‘problems’. This happens when the Math we learn at school (Math 1.0) is applied into the world of measurements. And a science based around this maths re-inforces it as a science of reduction and ‘ism’ (“ism” happens when a discipline comes to believe its working model of the ‘world’ as true rather than ‘useful in defined situations’). So the belief (as true) in the mechanistic universe and the use of Math 1.0 as a sturdy, reliable and incontrovertible companion has led the traditional Newtonian scientist up the proverbial garden path and is still being led there daily. Multi-billion pound projects based on the assumptions of a reductionist science leading absolutely nowhere, whereas situations that could be drastically improved based on a science thinking in terms of systems and Math 2.0 are not being allocated the same research money.

To fully appreciate the meaning and consequences of data measurements, a good understanding of Math 2.0 and its application is required. If we care to look, we will find that the scientific, political and business literature is littered with examples where statisticians (who we would think would know better) have fallen into the trap of applying the thinking of Math 1.0  to the situations described best by Math 2.0, thereby giving us misleading ‘expert’ information and advice

This venn diagram shows the relationship between Math 1.0 and Math 2.0:

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Now if experience tells us this is so (and certainly Alfie Kohn’s research showed that one thing that bonuses and other rewards don’t do is to lead to long-term improvement) how should we read the statements that have been made by the top British Institutions that if they don’t pay large bonuses their top earners will go and work for European or American Companies.

Put these two ideas together (Greedy People and Go Elsewhere) and a super strategy for British Companies would be to – wait for it – stop paying bonuses.

Bonuses might attract top earners but experience (with the credit crunch etc) is telling us that these top earners do not benefit their organisations  IN THE LONG TERM (and therefore do not benefit any of their stakeholders in the long term either).

So are there some British Companies out there brave enough to stop paying ‘performance related’ bonuses and to see what happens? The consequences could be very good! Not a loss at all but a gain.

All the greedy earners who don’t care a stuff about the customers, will go to the competitors (hooray I hear from all those people who have suffered from all this miss-selling), leaving space for a new type of entrepreneur to take up these jobs within companies – (those with an innerpreneur mindset). Would not it be good for the long-term success of financial institutions for example if all the work was done by employees wanting to do the very best they can to give good service for past, current and future customers. Unfortunately as Kohn showed many years ago, big ‘carrots’ move the focus away from the service. The focus in the bonus culture is “what do I need to do today to make my carrot bigger (and also give me bragging rights to the biggest carrot)”. The focus should be of course be “what do I need to do today to really help my customer?”

So should not our politicians be suggesting that bonuses simply STOP in order to make our Institutions better? This then leaves one question. If such an organisation goes on to make increased profit in a ‘no bonus for performance’ model, how do all the employees get to share in this success as an intended consequence? (Answers not on a postcard, but please post your suggestions here)

What is a fair way to keep the focus on customer service, and to share in the benefits that accrue from being a truly long-term customer-focussed (as opposed to a bonus-focussed) company?

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Here I will touch upon Herbert Benson’ work on the relaxation response and some more research from Csikszentmihalyi.

Csikszentmihalyi’s earlier work on the psychology of happiness had coined the word “flow” (others refer to this as “being in the zone”) a state of relaxed focus attention when humans can achieve extraordinary results with minimal effort.

In his recent research on creativity Csikszentmihalyi links the conditions for flow to the conditions for creativity.

Some of the conditions for “flow” to occur are in the table below:

Let’s look at these features from the traditional management/business perspective

In the Compliant Company many things are happening to prevent this human condition of “flow”.

• Arbitrary targets destroy (1).
• Annual appraisal is the antithesis of (2).
• Setting challenges to achieve targets without a method for achievement upsets (3).
• Supervision, having your “activity” measured + arbitrary targets are major distractions for (4).
• A Blame culture sabotages (5)
• A reward culture sabotages (6)
• Extrinsic rewards sabotage (7)

The key requirement for attaining a creative or ‘peak’ experience

Herbert Benson has given some great insight here.

Hiss early research was on the “relaxation response” and he was the first western doctor/scientist to study the abilities of eastern yogis.

His recent work has been on what he calls the “breakout principle” – what happens when people get their “ah-ha” moments and make a breakthrough in their thinking.

What he has shown is that in most cases of creative solutions to complex problems there is first a period of intense mental struggle with a task. (Activity and task merge, much like Csikszentmihalyi’s “flow”). Then there is a period of “release”, of deep relaxation, and this release leads to the breakout point or the “peak experience”. (Benson has demonstrated that under these conditions the brain produces “puffs” of nitric oxide. Zohar has shown this is associated with the production of “coherent” brainwaves which correlate with these breakthrough moments)

So this helps to explain why we get our most creative moments when walking, or in the shower, or having a massage etc. Intense activity followed by deep relaxation is a necessary requirement for ‘breakthrough’ moments.

How does your company operate to ensure there are opportunities for lots of creative moments in the workplace?

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Intrinsic motivation is sabotaged by rewards. It’s almost that simple.

With rewards, the focus is on the reward not on the desire to complete a task or to make a difference. People start to do the tasks for the reward rather than the satisfaction of doing something of value.

Old Psychology demonstrated that animals do things for reward or to get away from pain (the carrot or stick approach). Old Psychology holds when the animal has survival needs unsatisfied (the hungry cat can be tempted but the satisfied cat can’t) and the theory of manipulation by carrot or stick holds true (Skinner’s original work with animals actually only worked when they were frightened and half-starved).

New Psychology is different. Creation Companies are those that are becoming more and more tuned in to New Psychology and New Thinking Principles. A Creation Company will recognise that when a human being has most of their basic needs met, carrot and stick is not as effective as Old Psychology predicts (thought those that would say they are ‘hungry’ for success can be tempted by the really big rewards).

But as Alfie Kohn and now Daniel Pink have affirmed there is very little evidence that rewards improve human performance in the long-term. And the main reason is that extrinsic motivators sabotage intrinsic motivation. Linking pay to performance therefore sabotages long-term performance. The Banking Crisis is an example that partially arose when companies, and individuals, focussed on the carrots and not on the service. Lose sight of the task and you lose sight of the potential disastrous consequences of doing things for the wrong reasons. Thus it is not therefore a question of moderating the bonus culture,  with legislation if necessary, (as Politicians and Business Leaders would suggest) rather the question is how can we abolish the bonus culture.

We need to find mechanisms whereby people benefit from the long-term success of an organisation rather than rewarded for the profit they make on behalf of the company as individuals. We need this for companies to become Creation Companies that produce goods and services for the general good and well-being of people, life and the planet. That do things for the seventh-generation long term and not next year’s wage packet.

If you are a leader and you are not convinced by the idea that rewards sabotage intrinsic motivation (and thus also sabotage creativity and creative thought) then read Alfie Kohn’s “Punishment by Reward” or view Dan Pink’s video on the surprising science of motivation here

Now is the time for leaders to wake up to the fact that much of what we do in the guise of ‘management’ is detrimental to improvement (see here the Seven Deadly Diseases of Management)

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We need to understand that we can all be creative and we can all learn to become more creative.

So what can we learn by looking at the background/opportunities of people who have produced some really big creative ideas? What can companies learn in order to ensure that creativity happens in the workplace? I have already discussed some of the factors in a company that allow creativity to happen here.

However are there any personal characteristics that a Creation Company should look for when they employ new personnel? Well it’s not necessarily what we have been led to believe. And this also means that personality type profiles with an ‘either-or’ questioning approach can mislead.

In a landmark study on this subject, Csikszentmihalyi looked at the personality characteristics of ninety-one exceptional people (each of whom had made a difference to a major domain of culture). What he found (here) was that the creative people in his study had complex personalities. ((4) (Csikszentmihalyi   Creativity. Flow and the Psychology of Discovery and Invention  ISBN 0-06-092820-4)

So if the question was “are they introvert or extravert” the answer was both (so this has implications for “old science” personality questionnaires that assumes an either/or approach to personality). What he found was that creative people could be both energetic and restful; smart and naïve; playful and disciplined; fantasy oriented and reality grounded; extrovert and introvert; humble and proud; masculine side and feminine side; conservative and rebellious; passionate and objective and could “suffer” yet enjoy what they did.

Thus for creativity to blossom in the workplace, we need to value complex personality, not expect people to fit into neat boxes. Indeed we need to allow people to “be themselves” and to honour the uniqueness in everyone.

So maybe, upon reflection you have a complex personality. Your ‘personality’ is not the box that some survey or ‘expert’ put you in. Maybe also you are fortunate to work in a ‘creation company’ (ie one that is or is becoming). Then what other factors appear to be important for each individuals creativity to emerge?

Coming Next: The Circumstances for Creativity

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The concepts and research from the “new sciences” challenge our current thinking (theories-in-use) and challenge some sacred beliefs and ethos about how best to do good business. Creation companies (whether they realise it or not) embrace new psychology and new science ideas. This thinking is in line with other iconoclast thinkers of our time such as, Russell Ackoff (Systems Thinking), Edward de Bono (Design Thinking), Mihaly Csikszentmihalyi Flow Thinking), and Eric Jensen (Brain-Based Thinking)

Let’s look at some of the major differences between  Compliant and Creation Companies:

COMPLIANT Companies tend to have the following characteristics:

• Leadership Style that is Command and Control
• Order maintained by Policies and Rules
• Competitive Internal Departments leading to sub-optimisation
• Focus on Activity and the need to work faster, and measuring the things that can be easily measured but may not be that important
• Asking people to improve but not giving them the method or means by which to do so (carrots and sticks offered rather than a method for improvement)
• Lack of Trust (Old Psychology suggests that people cannot be trusted -extrapolated from the 1% or less who can never be trusted)
• A Blame (and Fear) Culture. Asking, “who went wrong”  (If things are not working, look for what the people are doing wrong and then give them a rollicking). Little opportunity to learn in a Blame Culture
• People (particularly the leaders) confuse models with reality
• The valued thinking is “Expert Mind”
• Risk Avoidance
• Black and White Thinking (shades of grey are discouraged)

The focus of Compliant Companies is on “conformance”. Compliance is maintained through the rules and structures, the management mechanism is mainly command and control, there is a blame culture for mistakes. Conformance (to standards and best practice) is a cultural principle.

The focus of Creation Companies differs, in that the people have guiding principles rather than rules, there is a noticeable freedom from command-and-control mechanisms, there is a no-blame culture, and there is continuing positive change and joy in the work.

End Piece: And of course Creation Companies will know about and understand the factors that encourage humans to be creative. The next posts in this series look at some additional to creativity ‘Identifying and Nurturing Personal Creativity’ and ‘The Circumstances for Creativity’. The real Creation Companies are also likely to be very aware that the reward culture sabotages creativity and also the consequences of paying large bonuses to make things happen (unfortunately they make the wrong things happen and select the wrong people to best do the intended work)

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Both New Psychology and New Science are underlying themes in this Superblog. Let’s just take a first brief look at what we mean by the terms New Psychology and Old Psychology and next time we’ll look at “New Science”.

The following is adapted from a Paper presented by Barry Mapp in 1994 at the ERIK Network European Conference “Regional Successes in Creating and Connecting Companies – European Union Perspectives”

Psychology has always been important in Business

In Business, psychology (i.e. our understanding of, or beliefs about, human behaviour) has always been an important factor in “how we do things around here”. Psychology thus underpins the workings of both the old and new style company paradigms.

The Psychology of Compliant Companies is “Old Psychology” (behaviour that is predicted primarily from studies on starving animals or unhappy or sick human beings).

The Psychology that underpins successful Creation Companies is “New Psychology” where people behaviour is predicted from the studies of animals that were happy and cared for, or from research on human beings that are living happy and fulfilled lives.

Note that nearly all textbook psychology is “Old Psychology” – so you won’t find much about new psychology from standard psychology books.

It is interesting to note that most of our business advisory groups (like Business Link in the UK) still promote business systems based on old psychology and indeed their own organisational structures and processes are rooted in old psychology.

Most Government strategy around influencing business and services is based on old psychology and even most business consultants (including those who profess to be thinking outside the box) are often using “old psychology” techniques and theories.

The following table shows some of the fundamental differences between Old Psychology and New Psychology approaches.

Old Psychology Principles (this includes):

• (extensive use of) Extrinsic Motivators (Carrot and Stick)
• People Treated like children (heavy on rules and regulations)
• External Targets set from above (nearly all are arbitrary!)
• Blame culture. Whose fault?  Whose head must roll?
• Visible are many of the Seven Deadly Diseases of Management

The New Psychologies embrace ideas like those of Glasser (Choice Theory), Kelly (Constructive Alternativism) and Griffin and Tyrell (Human Givens approach). New Psychology is congruent with Kohn’s research on Co-operation and Motivation, with Dweck’s research on “Self-Theories” and with Deming’s ideas on the transformation of management. (More about each of these Psychologies in later blogs)

Coming Next: New Science, New Thinking and Creation Companies

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The first three principles mentioned in Tom McGehee’s book Whoosh are:

1) a leadership style free from command-and-control principles

2) a corporate culture that values individual expression and collaborative work

3) An understanding that success means creating the new not replicating the old

The two additional principles of those Creation Companies that will survive for the Long-term is that they learn to:

4) Inoculate themselves from the seven deadly diseases of management which are endemic “diseases” in ‘Compliance Companies’.

5) Apply the principles of “New Psychology” and “New Science” to “how we do things around here”. This includes continually applying new knowledge (as it is acquired) about the brain, the human spirit, learning, and human potential etc

Let’s look at these last two principles in more detail

First, the seven deadly diseases of management? (as outlined by W Edwards Deming)

• There is a Lack of constancy of purpose.
• There is an Emphasis on short-term profits.
• There is Evaluation by performance, merit rating, or annual review of performance.
• There is Mobility of management (resulting in high staff turnover)
• There is Running a company on visible figures alone.
• There is Excessive medical costs (this point is related more to the American Market, but we could reframe this as the cost high costs that companies bare of early retirements and redunduncies)
• There are Excessive costs of warranty and Litigation, fuelled by lawyers who work for contingency fees.

There are these Lesser Category of Obstacles also mentioned by Deming:

• Neglect of long-range planning.
• Relying on technology to solve problems.
• Seeking examples to follow rather than developing solutions.
• Excuses such as “Our problems are different”.

Here are three different perspectives on these seven deadly diseases:

1. csqa
2. riskmanagementinsight
3. curiouscat

Coming next: The final principle of Creation Companies: Applying “New Psychology” and “New Science” to the Business

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A Creation Company can be thought of as a place (business) where the work systems, work processes, work culture, work management and work leadership are aligned with people and how people work best.

Where such alignment occurs this can lead to extraordinary results.

When the systems do not get in the way of the work, human spirit and human joy and passion unfold.

When alignment happens between people and systems, the work can “flow”, unimpeded by artificial constraints, boundaries, controls or hierarchy.

When the work is aligned with how people like to work, then every person in the business is able to perform at their very best, such that everyone has the opportunity to produce extraordinary results.

When there is such alignment, individuals have a sense of control or influence over the work and a sense of responsible for their own work

The Fundamental Principles for creating a Creation Company

Tom McGehee says there are three fundamental principles for a Creation Company (and ANY company can generate the excitement, energy, confidence, and audacity of the “whoosh” of a Creation Company by subscribing to these fundamental principles):

1)     A  leadership style free from command-and-control principles

2)     A corporate culture that values individual expression and collaborative work

3)     An understanding that success means creating the new not replicating the old

From my personal experience, I would also add two additional principles required for (long-term) Creation Company performance (this makes it five principles in all) and these will be discussed in the next blog

Coming next:  Five Working Principles of Creation Companies

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