Tuesday, 3 July 2012

T-shaped managers, T-shaped incentives

No people with outstretched arms I blogged yesterday on a series of "Knowledge management value" stories from the T-shaped manager paper.

The concept of the T-shaped manager is that a manager should not just look downwards at the performance of their own unit, but also horizontally, across the organisation, at how they can collaborate with and learn from other parts of the business. The article describes the T-shaped behaviours, particularly in BP in the late 1990s, and contains many stories of the value that was delivered.

There is no doubt in my mind that the T-shaped management behaviours presented in the paper were a major driving force behind Knowledge management in the pre-merger days at BP. The interest that managers had in the performance of other business units, allowed them, or drove them, to prioritise sharing and learning across the organisation. They set an expectation within their own performance units, that people would learn from, and share with, their peers in other parts of the company. As a result, knowledge management became an expected and normal part of business.

But what drove those T-shaped managerial behaviours?

The answer is that T-shaped behaviours were driven by T-shaped incentives. As the article says "Business unit managers at BP are judged on their ability  to meet specific performance targets for their units. But they also are rewarded and promoted according  to how effectively  they - and their staff - share knowledge with others outside their units". This was done by linking managers' performance-related pay partly to the performance of their own business, and partly to the collective performance of their peer group (a group of similar business units, who were selected on their ability to learn from each other). And this performance-related element was a BIG element of the managers' pay, and two elements were roughly equal. So if they delivered excellent performance within their own unit, but the performance of their peers suffered, they would earn less than if they helped their peers so that all succeeded.

This was really smart business. Suddenly the managers had a significant personal stake in the success of other parts of the business, and the paper tells the story of the benefits that accrued.

Not only was this T-shaped behaviour embedded into personal rewards, it was also reinforced at a high level. As the paper says -

Such behavior "is a key test of a manager's performance and potential," says Nick Butler, the main policy adviser to CEO Browne. "Lone stars " - those who deliver outstanding business unit performance but engage in little cross-unit collaboration-can survive within BP, but their careers typically plateau. 
Knowledge-sharing contributions are by their nature more difficult to measure than success at meeting specific unit performance targets. But executives throughout the company say that bosses are generally well aware of the level of their subordinates' cross-unit contributions. And the policy of promoting T-shaped behavior is reinforced by BP's corporate culture. David Nagel recalls his exposure to this shortly after the Amoco merger: "Early on, people on the BP side made it quite clear [to legacy Amoco managers] that you might have spectacular individual business unit performance, but if you weren't seen to be making contributions beyond your own unit, you wouldn't be viewed favorably."
So the behaviours are reinforced through reward, through recognition, through CEO expectation, and through Peer Pressure. As a result, this drove the culture of learning and helping, throughout the entire organisation.

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