Articles
Articles
On this page I publish articles regarding models, insights and material. You're more than welcome to contact me if you have any questions.
Table of contents
Office vs. remote work: Navigating the future of work
2024-09-01, by Johan Hildingson (formerly Lagerström) - Type: Focused insight - Depth and reflection: Medium - Reading time: ~15 min
Background
The COVID-19 pandemic drastically altered the work landscape, making remote work the norm for millions worldwide. This shift brought both expected and unexpected outcomes, prompting companies to rethink traditional models of collaboration and communication. As we gradually return to a more "normal" work environment, a crucial question arises: What is the best work model for the future? Should we return to offices, or should we continue to embrace remote work? This article delves into the pros and cons of these work models and explores how companies can strike a balance that benefits both productivity and employee well-being.
Google admits its mistake
Google, a company that previously pushed for employees to return to the office, has recently admitted that they may have been wrong. Sundar Pichai, Google's CEO, acknowledged that it was premature to assume that a return to traditional office work would boost productivity. This reflection mirrors a broader uncertainty about what truly works best in our new work reality (Google Blog, 2023).
Adding to this, Eric Schmidt, former CEO of Google, recently confessed in an interview with Fortune that he had underestimated the effectiveness of remote work. Schmidt initially doubted that remote work could maintain the same productivity levels as office work, but time has proven him wrong (Fortune, 2024, >>>). This marks a significant shift in how some of the world's most influential tech companies view the workplace and the future of work.
The traditional Communication Model
In organizational communication, the so-called "communication ladder" (Stanford University, 2022) has long been a benchmark. This model emphasizes different levels of communication depending on the need for proximity and directness:
Everyone in the same room with a whiteboard:
For maximum creativity and brainstorming. Ideas can be quickly formed, discussed, and challenged in real-time.Everyone in the same room for discussion:
For direct and dynamic dialogue where misunderstandings can be avoided and nuances quickly captured.Everyone remote but in simultaneous video meetings:
To maintain closeness despite physical distance and ensure everyone is involved in real-time.One-on-one discussions:
For resolving specific problems or handling sensitive issues where larger groups are not needed.Communication via email:
For documentation and more formal communication that needs traceability.Phone calls:
For quick, informal conversations when other methods are unavailable or inappropriate.Some in the room, others remote:
This scenario is particularly challenging as it often creates an "us versus them" feeling. Research shows that this mix of physically present and remote participants can lead to isolated islands where the remote group often feels left out.
Traditionally, this model has been considered the most effective for ensuring clear and efficient communication within organizations. However, in today’s work environment, it may no longer be sufficient. Research suggests that too rigid an application of this ladder can be ineffective and even harmful to creativity and innovation (Harvard Business Review, 2020).
Advantages of remote work
Remote work offers several unique advantages for organizing effective workshops, particularly regarding flexibility and participant engagement. A skilled workshop facilitator can leverage the digital tools that remote meetings provide. Research from MIT Sloan Management Review highlights that remote meetings often offer a fairer representation of participants' contributions since it's easier to identify who is active and who needs encouragement to participate ("Virtual Meetings: A New Tool for Equality" - MIT Sloan Management Review, 2022).
In digital workshops, facilitators can easily create breakout rooms for small group exercises, allowing for agile adjustments based on the situation's needs and the participants' engagement. This is a significant advantage over physical meetings where adjustments can be more time-consuming and logistically complex. Additionally, technical issues commonly associated with physical meetings, such as booking rooms or handling presentation equipment, are minimized. Remote meetings also allow for a smoother transition between different activities and the use of digital tools that can facilitate collaboration (Deloitte Insights, 2023).
Caption: Remote work enhances workshop effectiveness through increased flexibility, improved participant engagement, and efficient use of digital tools. Studies show that remote meetings often result in fairer representation, better meeting efficiency, and the ability to quickly adapt to changes, while minimizing technical issues and logistical challenges. However, the flexibility of remote work also comes with potential downsides, such as last-minute cancellations, which can impact participant respect and engagement.
A study by Gartner showed that 68% of employees feel that remote tools improve meeting efficiency compared to traditional meetings ("Reimagining the Future of Work" - Gartner, 2022). This is partly because digital meetings are often more structured and goal-oriented, leading to fewer interruptions and a clearer agenda.
Remote work also offers the advantage that meetings can be concluded more quickly if they prove unnecessary. This makes it easier to switch between meetings or act swiftly when other tasks demand attention. However, a downside is that this flexibility sometimes leads to last-minute cancellations, which can signal a lack of respect for others' time. Research indicates that this can cause employees to feel undervalued and less engaged (Forbes, 2021).
It’s also important to highlight that remote work can be advantageous in workshops by allowing participants to work both individually and in groups. As discussed in a previous article, it’s crucial that a workshop not only divides participants into groups to work towards a solution but also creates space for individuals to think independently. By combining these two approaches, solutions can be well-founded, and all perspectives considered, reducing the risk that one or a few voices dominate and negatively impact the outcome (David JP Phillips, 2022).
Downsides of remote work
Despite the many advantages of remote work, significant downsides must be considered. One of the most prominent issues is the feeling of isolation and loneliness that can arise when employees work from home for extended periods. A study by the American Psychological Association (APA) found that employees working from home during the pandemic were 30% more likely to develop depression compared to those working in an office ("Remote Work and Mental Health" - APA, 2021). The study, conducted with over 3,000 participants, found that the lack of daily social interaction and support from colleagues was a major cause of these negative effects.
Another study by Microsoft revealed that remote work often leads to longer workdays, with an average increase of 1.5 hours per day ("The Effects of Remote Work on Productivity and Well-being" - Microsoft, 2022). This increase in work time often occurs because the boundary between work and personal life becomes blurred, making it harder for employees to relax and recover. This phenomenon is particularly concerning as it can lead to long-term health problems that negatively affect both the individual’s well-being and the company’s productivity.
Research from Worklytics identifies the top five leading indicators of stress and burnout among remote and hybrid employees. This research underscores the importance of monitoring employee well-being and taking action to prevent burnout, especially when remote work becomes prolonged ("Top 5 Leading Indicators of Stress and Burnout in Remote/Hybrid Employees" - Worklytics, 2024).
Caption: This graph from Worklytics demonstrates the correlation between extended work hours and increased stress levels among remote workers. The left axis represents the average number of hours worked per week, while the right axis shows corresponding stress levels. As remote work environments blur the lines between personal and professional life, employees tend to work longer hours, leading to heightened stress. The graph highlights a critical inflection point where increased work hours directly contribute to rising stress and burnout rates. This visualization underscores the necessity for clear boundaries and proactive employer support to mitigate these risks and foster sustainable work practices in remote settings (Worklytics, 2022, >>>).
From a psychological perspective, the negative effects of remote work can be understood through Maslow's hierarchy of needs. Maslow's theory emphasizes the importance of social relationships and belonging as fundamental human needs. When these needs are not met, which is often the case with prolonged remote work, it can lead to decreased engagement and reduced job performance ("The Theory of Human Motivation" - Maslow, 1943).
Philosophical and psychological perspectives
The debate over whether office work or remote work is superior delves into both practical and philosophical dimensions, with various thinkers shedding light on these complex issues.
In discussing the balance between freedom and structure in remote work, it is crucial to recognize how these concepts apply in this context. Erich Fromm’s ideas on "freedom from" and "freedom to" highlight that while remote work offers freedom from traditional office constraints, it also risks leading to isolation and a sense of meaninglessness if not properly managed ("Escape from Freedom" - Fromm, 1941). This perspective underscores the need for a structured approach to remote work to maintain a sense of purpose and prevent disconnection.
Similarly, the limitations of remote work on learning and development are significant. Albert Bandura’s Social Learning Theory highlights how traditional office environments facilitate learning through everyday interactions with colleagues. Informal conversations at the coffee machine or impromptu problem-solving discussions in the hallway often contribute to skill acquisition and knowledge transfer. Remote work, however, diminishes these spontaneous learning opportunities ("Social Learning Theory" - Bandura, 1977). For instance, a junior employee may miss out on the informal mentoring and immediate feedback that typically occurs in an office setting, which can impact their professional growth and team cohesion. Furthermore, Carl Jung’s theory of individuation emphasizes that personal growth is closely tied to direct engagement with others and the external environment ("The Archetypes and The Collective Unconscious" - Jung, 1954). The physical separation inherent in remote work can disrupt this developmental process. For example, an employee who thrives on face-to-face brainstorming sessions may struggle to achieve the same level of creativity and personal insight in virtual meetings. This underscores the need for strategies that support skill-building and collaboration in remote settings, such as virtual workshops or scheduled team-building activities, to maintain employees' professional identities and foster their personal development.
On the other hand, the advantages of remote work are profound and transformative. Research highlights that remote work dramatically enhances work-life balance by allowing employees to integrate their personal and professional lives more seamlessly ("The Future of Work: Trends and Insights" - Deloitte, 2023). This flexibility not only reduces stress but also significantly boosts job satisfaction and overall well-being, as individuals can tailor their work environment to better suit their needs and preferences.
Moreover, remote work has been shown to significantly boost productivity. Studies reveal that employees often experience fewer distractions and interruptions compared to traditional office settings, leading to heightened focus and efficiency ("Remote Work and Productivity: An Empirical Analysis" - Harvard Business Review, 2022). This environment enables individuals to achieve better performance outcomes and engage more deeply with their tasks, underscoring the substantial benefits of remote work.
Remote work also supports a broader range of talents and skills by removing geographical barriers to employment. This inclusivity not only diversifies teams but also enhances creativity and innovation within organizations. As remote work continues to evolve, companies can leverage this flexibility to attract top talent from across the globe, further enhancing their competitive edge.
These perspectives collectively illustrate that while remote work presents challenges related to social interaction, personal growth, and overall satisfaction, it also offers transformative benefits such as improved work-life balance, increased productivity, and access to a wider talent pool. Balancing these benefits with strategies to maintain meaningful connections and support employee development is essential for creating a sustainable and fulfilling remote work environment.
Personality types and work environments
Different personality types can thrive in various work environments. According to the Myers-Briggs Type Indicator (MBTI), introverts often prefer remote work due to the quieter, less stimulating environment it provides. This setting allows them to concentrate deeply and avoid the stress of constant social interactions, which can be overwhelming (Myers & Briggs Foundation, 2022). Introverts may find that remote work aligns well with their preference for solitude and structured individual tasks.
Extroverts often find office settings more energizing due to the social interactions they facilitate. The collaborative energy of office environments, with opportunities for spontaneous discussions and networking, can be highly motivating for extroverts. This setting supports their need for external stimulation and social engagement, which can enhance their productivity and job satisfaction (Myers & Briggs Foundation, 2022).
The Big Five personality traits provide a comprehensive framework for understanding how different individuals might adapt to various work environments. This model includes five major dimensions: openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism (Costa & McCrae, 1992).
Openness to experience:
Individuals high in openness often thrive in environments that offer flexibility and autonomy. Remote work can cater to their preference for varied and novel experiences, allowing them to explore new ideas and methods without the constraints of a traditional office setting. This trait is linked to creativity and adaptability, making remote work a fitting choice for those who value independence and innovation (McCrae & Costa, 1997).Conscientiousness:
Those high in conscientiousness tend to excel in structured environments where clear schedules and expectations are set. Such individuals are often organized, reliable, and attentive to detail. Office environments, which provide a structured routine and clear organizational frameworks, can help conscientious employees maintain focus and effectively manage their tasks (Barrick & Mount, 1991).Extraversion:
Extraverts, characterized by their sociability and enthusiasm, may find office environments more satisfying due to the constant social interaction and collaborative opportunities. The dynamic nature of office settings aligns with their need for external stimulation and frequent engagement with others (Judge & Bono, 2001).Agreeableness:
Individuals high in agreeableness tend to prefer supportive and cooperative environments. These traits are beneficial in both remote and office settings, as they facilitate teamwork and a positive work atmosphere. A supportive environment, whether remote or in-person, helps agreeable individuals feel valued and engaged (Graziano & Tobin, 2009).Neuroticism:
High neuroticism, associated with emotional instability, might lead individuals to seek out stable and supportive work environments to help manage stress. Remote work can provide a controlled and predictable setting, while a structured office environment might offer additional support through regular interactions and a consistent routine (Costa & McCrae, 1992).
The distribution of the Big Five personality traits varies among individuals, with some traits being more commonly exhibited than others. Neuroticism is notably prevalent, with many individuals demonstrating higher levels of emotional instability compared to other traits; indeed, it is often considered one of the most common traits. Openness and conscientiousness tend to be more evenly distributed, with a broad range of moderate levels observed. Extraversion varies widely, spanning from highly extroverted to introverted individuals. Agreeableness generally follows a normal distribution, with most people displaying moderate levels. This variation influences preferences for different work environments and overall work behavior. (McCrae & Costa, 1997) (Costa & McCrae, 1992)
Caption: The Big Five personality traits model illustrates the five dimensions of personality that influence work preferences and performance. Understanding these traits can help tailor work environments to better suit individual needs and enhance job satisfaction.
Research supports the idea that allowing employees to choose their preferred work environment leads to greater job satisfaction and productivity. A study by Buffer found that employees who could choose between remote and office work were 32% more satisfied with their work arrangements compared to those who were required to follow a set model ("State of Remote Work" - Buffer, 2023). This flexibility allows individuals to work in an environment that best suits their personality and working style, leading to improved well-being and effectiveness.
The evolution of office environments also reflects changing work needs and preferences. Traditionally, offices featured private rooms and fixed desks, but these have evolved to open-plan layouts with flexible seating arrangements. This shift was driven by the need to maximize space and reduce costs. Recent trends have seen a rise in hybrid models, which blend remote work with occasional office use, further highlighting the growing recognition of individual preferences in optimizing work arrangements. Adapting to these changes, while considering personality traits, can enhance both employee satisfaction and organizational efficiency.
Summary
The ideal work environment is one that allows employees to choose the work model that best suits their personal needs and preferences. Remote work offers significant flexibility and the opportunity to create a tailored workspace, while office settings provide valuable face-to-face interactions and immediate problem-solving. Empowering employees to decide between working from home or in the office can lead to increased job satisfaction and productivity. This approach respects individual preferences and allows each person to optimize their work environment for their own effectiveness and well-being ("The Future of Hybrid Work" - McKinsey, 2023).
However, it's important to consider that social interactions and team cohesion remain crucial for a successful work environment. These interactions don’t necessarily have to occur in a physical office but should be incorporated into the work model in ways that foster connection and collaboration. Companies can support this flexibility by investing in technology, establishing clear communication strategies, and being responsive to employee needs. By balancing individual choice with effective virtual social interactions, organizations can enhance overall productivity, improve morale, and promote a healthier work-life balance.
As we navigate the future of work, remember the words of Steve Jobs: "The only way to do great work is to love what you do." By embracing the flexibility to choose the work model that best suits our individual needs, we can create environments where everyone thrives and achieves their highest potential.
My top pro tips
Leverage technology wisely:
Use digital tools to enhance communication and collaboration. Communication platforms for meetings (e.g., Slack, Teams, Google Meet, Zoom, etc.) are essential for staying connected with your team. However, it is crucial to use them effectively to avoid over-communication and burnout. Set guidelines for when to use each tool and consider asynchronous communication methods to reduce constant interruptions and allow for more thoughtful responses.Prioritize mental health:
Regularly check in with your team regarding their mental well-being. The flexibility of remote work can contribute positively to mental health by allowing employees to work in environments that best suit their needs.Create social rituals and a coherance:
Even in a remote setting, establishing regular social interactions is key to maintaining team cohesion. Virtual coffee breaks, team lunches, or casual chat channels can help replicate the informal interactions that naturally occur in an office. These rituals foster a sense of belonging and camaraderie among team members, which is important regardless of physical location.
Research underscores the importance of social context in enhancing well-being and job satisfaction. Studies have shown that regular social interactions, even in virtual formats, contribute significantly to a sense of belonging and emotional support (Baumeister & Leary, 1995). Gallup research also emphasizes that employee engagement is closely linked to social interactions and a supportive work environment ("State of the Global Workplace," Gallup, 2022). Furthermore, Antonovsky's Sense of Coherence (SOC) theory, which I have mentioned in previous articles, highlights that a strong sense of coherence—comprising comprehensibility, manageability, and meaningfulness—can significantly influence an individual's ability to cope with stress and maintain well-being, making social interactions and supportive networks crucial for remote workers (Antonovsky, 1987).Adapt communication to the task:
Choose the right communication medium based on the type of task. For in-depth discussions or complex projects, opt for video meetings or in-person sessions when feasible. For quick updates or simple tasks, a message or email might suffice. Tailoring your communication approach ensures clarity and efficiency, reducing misunderstandings and improving workflow.
It’s crucial to recognize that each communication medium serves a distinct purpose, and selecting the appropriate one can significantly enhance the effectiveness of your interactions. Video meetings or in-person sessions are particularly advantageous for complex discussions or projects requiring deep collaboration. These formats facilitate real-time interaction and allow participants to pick up on non-verbal cues like body language and tone, which are essential for nuanced understanding and immediate feedback (Mehrabian, 1971).
On the other hand, asynchronous communication methods such as emails or written messages are well-suited for simpler tasks or updates where immediacy isn’t as critical. Email, for instance, offers a formal record of communication and provides a more extended timeframe for responses, which can be beneficial for thoughtful consideration. This approach contrasts with the immediacy often expected in messaging apps, which are better suited for quick clarifications and real-time collaboration. Understanding and leveraging these differences helps in adapting your communication strategy effectively, ensuring that each method is used to its fullest potential. By aligning the medium with the task, you can enhance workflow and communication efficiency, reflecting the adaptability and benefits of modern remote work environments.Be proactive in professional development:
Encourage continuous learning and development, even in a remote setting. Online courses, webinars, and virtual workshops can help keep skills sharp and allow employees to grow within their roles. This proactive approach not only enhances employee engagement but also ensures that your team remains competitive and adaptable in a rapidly changing work environment. Remote work offers ample opportunities for professional growth through digital learning platforms, aligning with the trend of continuous self-improvement.Embrace digital meetings as a natural extension of your already existing digital workflow:
As we manage most of our work processes through digital tools (e.g., Confluence, Jira, Google Drive, SharePoint, tec.), holding meetings digitally is a natural and efficient extension of this approach. Utilizing communication platforms for meetings (e.g., Slack, Teams, Google Meet, Zoom, etc.) allows for seamless integration with these tools, ensuring that meeting discussions, notes, and action items are directly linked to ongoing projects and documentation. This not only streamlines communication but also ensures that all relevant information is centralized and accessible, reducing the need for additional follow-ups. According to Gartner, integrating digital meetings with other digital workflows enhances efficiency and cohesion in remote and hybrid work environments ("The Future of Work: Remote and Hybrid Work," Gartner, 2023).Leverage the benefits of large remote meetings:
For large, international, or geographically dispersed teams, remote meetings are often more effective than in-person gatherings. Remote platforms allow for better accessibility, enabling participants to join from anywhere in the world. Large meetings can be more efficient remotely, as they offer features like chat functions where participants can ask questions or provide input without interrupting the flow of the meeting—something that can be intimidating in a room with many people. This functionality ensures that everyone has a voice, fostering inclusivity and engagement.Consider the evolving role of physical office space:
Offices have evolved significantly over time, from private rooms to open-plan layouts with fixed desks, to flexible spaces with shared areas, and now to hybrid models incorporating remote work. Office spaces have always represented a significant cost for companies. The shift towards remote work and flexible office solutions reflects a broader trend in reducing these costs while still maintaining essential aspects of team cohesion and productivity. Understanding this evolution helps companies make smarter decisions about their office space and adapt to modern work trends.
AML2024: A compact summary for international banks
2024-08-17, by Johan Hildingson (formerly Lagerström) - Type: Essentials - Depth and reflection: Low - Reading time: ~10 min
Introduction
Anti-money laundering (AML) regulations have always been at the heart of financial security. However, with the rapid advancement of technology and the globalization of financial transactions, new risks have emerged, making it increasingly challenging for institutions to comply with regulatory standards. The European Union’s AML2024 package, which includes the Sixth Anti-Money Laundering Directive (AMLD6) and the establishment of the Anti-Money Laundering Authority (AMLA), represents the latest effort to bring uniformity, transparency, and enhanced scrutiny to banks and other financial institutions across Europe.
This article delves into the key components of AML2024, outlining the critical changes and their implications for international banks. From daily updates to sanctions lists and enhanced customer due diligence (CDD) requirements to 24/7 system availability and external security audits, AML2024 sets a new standard for compliance. Understanding these changes is essential for any financial institution aiming to navigate this new regulatory landscape.
Understanding the AML2024 and the EU AML Directives
The terminology used in Anti-Money Laundering (AML) regulations can sometimes lead to confusion, particularly when distinguishing between various directives and updates within the European Union's framework. AML2024 is often used to describe the latest package of anti-money laundering regulations in the EU, but it is important to note that this is not a specific directive itself. Instead, AML2024 refers to the broader regulatory package, which includes the Sixth Anti-Money Laundering Directive (AMLD6) and the introduction of the Anti-Money Laundering Authority (AMLA).
The EU has introduced several iterations of AML directives over the years, each building upon the last to address new challenges and enhance compliance measures across member states. These directives are typically named AMLD1, AMLD2, etc., indicating their sequential order:
AMLD1 (1991)
The first framework focused primarily on combating drug-related money laundering activities.AMLD2 (2001)
Expanded the scope to cover all serious crimes, not just drug-related offenses, and included legal professionals and accountants under the regulations.AMLD3 (2005)
Introduced a risk-based approach, customer due diligence (CDD) measures, and expanded the regulations to include terrorist financing.AMLD4 (2015)
Made risk-based approaches mandatory, required transparency on beneficial ownership, and set up national registers of Ultimate Beneficial Owners (UBOs) to improve ownership transparency and compliance. For example, in Sweden, this is implemented as Mekanismen, a central register maintained by Skatteverket (Swedish Tax Agency), where companies must disclose their beneficial owners. This allows authorities to monitor and enforce compliance with ownership reporting requirements.AMLD5 (2018)
Addressed new risks from virtual and cryptocurrencies and prepaid cards, enhanced transparency on beneficial ownership, and improved cooperation between Financial Intelligence Units (FIUs).AMLD6 (2024 - part of the AML2024 package)
Introduces tougher penalties for money laundering offenses, extends criminal liability to legal entities, harmonizes the definition of money laundering across member states, and enhances cross-border cooperation. The introduction of AMLA provides a centralized EU authority responsible for supervising high-risk financial institutions and promoting better enforcement across the Union.
AMLD (Anti-Money Laundering Directive) refers to specific iterations of EU regulations introduced over time. These directives progressively introduce new requirements and improvements based on emerging financial threats, international standards (such as those from the Financial Action Task Force (FATF)), and evolving financial technologies.
On the other hand, AML2024 is not an individual directive but rather a reference to the most recent regulatory update package, which includes AMLD6 and the establishment of AMLA. This terminology shift reflects the EU’s focus on broader compliance, not just through individual directives, but also through centralized enforcement and oversight mechanisms.
In short, AMLD1 to AMLD6 refer to specific legislative steps taken by the EU, while AML2024 refers to the overall package, including AMLD6 and new centralized controls, designed to improve the effectiveness and consistency of anti-money laundering measures across Europe.
Caption: AML2024, including the Sixth Anti-Money Laundering Directive and the introduction of the EU's Anti-Money Laundering Authority, brings tougher penalties, harmonized rules, and enhanced oversight for international banks. With mandatory updates, increased transparency on beneficial ownership, and risk-based monitoring, it sets a new standard in combating financial crime across Europe.
New with AML2024
Below are the major updates regarding AML2024.
AMLA (New EU Authority)
AMLA will directly supervise high-risk banks operating across multiple EU member states. AMLA can inspect and impose sanctions, meaning that international banks may now also be directly accountable to this EU authority. Previously, international banks (e.g., those operating in Sweden) reported suspicious transactions to national authorities. In Sweden, this was handled by Finanspolisen (FIPO), and Finansinspektionen (FI) was responsible for monitoring compliance with AML rules.Harmonized rules
AML2024 harmonizes AML rules across all EU countries, ensuring that a bank's AML processes and actions are consistent throughout the EU.Technical upgrades
Banks will need to upgrade their IT systems to better share data between countries and authorities across the EU, improving traceability and speeding up reporting.Enhanced Customer Due Diligence (CDD)
Lower thresholds for when CDD is required (now 10,000 euros, and 3,000 euros for cash transactions). The process remains the same, but banks must be more vigilant regarding a greater number of transactions.Ultimate Beneficial Owners (UBO)
Banks must ensure they can identify and verify the ultimate beneficial owners (UBO), especially in cases involving complex ownership structures.Politically Exposed Persons (PEP)
The definition of a PEP (or more correctly: PEP RCA) has been expanded to include siblings, in addition to spouses, parents, and children.Risk-based measures
Banks are now required to develop more specific measures based on each customer's risk profile. Instead of applying a one-size-fits-all approach, banks need to tailor their AML programs to the risks presented by each customer. For example, if a customer engages in large international transactions in a high-risk country for money laundering, the bank must implement specific measures to monitor those transactions more closely, such as requesting detailed documentation on the source of funds and conducting additional transaction monitoring.*
*Clarification for point 7: AML2024 does not require banks to monitor every customer individually in extreme detail. Instead, it mandates the use of broader and more up-to-date risk scenarios tailored to different risk profiles. Banks are expected to expand their range of monitoring scenarios, focusing on high-risk categories (e.g., high-risk countries or industries) and updating them based on the latest threats. This allows banks to improve their risk assessments without needing to monitor every individual customer in minute detail.
Non-functional requirements under AML2024
AML2024 sets several new specific non-functional requirements that banks must follow to ensure their AML systems are reliable, secure, and performant. These include:
Daily updates to sanctions screening systems
Banks are required to update their sanctions screening systems daily. These lists include individuals, entities, and countries sanctioned by the UN, EU, and OFAC. The lists cover those involved in terrorism, money laundering, drug trafficking, and other illegal activities.
What’s new: The mandatory daily frequency of sanctions list updates is a new requirement in AML2024. Previously, banks were expected to update regularly, but the daily update requirement ensures banks always have the most current data.24/7 system availability
AML systems must now be operational 24 hours a day, seven days a week, ensuring continuous monitoring of transactions. This minimizes the chance of missing suspicious activities during any system downtime.
What’s new: The explicit requirement for 24/7 availability is new in AML2024. While banks have previously been required to monitor transactions, this is the first time continuous availability has been mandated.External security audits
AML2024 now requires external audits by certified third-party auditors, such as Deloitte, PwC, KPMG, or EY. These audits assess the security and compliance of a bank’s AML systems.
What’s new: The mandatory external audit requirement is new. Previously, internal audits were generally sufficient for AML compliance, but AML2024 adds the requirement for independent third-party verification.
Caption: This timeline shows the phased rollout of the AMLA (Anti-Money Laundering Authority). Key milestones include AMLA’s legal establishment in 2024, the opening of its Frankfurt office in 2025, the commencement of operations in 2025, and full operational capability by 2028. By 2027, AMLA will directly supervise 40 high-risk entities across the EU. This timeline highlights AMLA’s evolving role as the central authority to strengthen anti-money laundering oversight and ensure compliance across member states.
Deep-dive: Relevant legal terms
To better understand the hierarchy and role of different legal terms in AML and EU regulations, the following key concepts provide some clarity.
Constitution (Swedish: Grundlag):
The highest form of law in a country, typically setting out the fundamental principles of governance and citizens’ rights. Constitutions are the supreme legal authority, and all other laws and regulations must comply with them.Law (Swedish: Lag):
A legal rule enacted by a country's legislature (e.g., the Riksdag in Sweden) that applies broadly and generally. Laws implement and detail the principles set out by the constitution and are binding for individuals, corporations, and the government.Regulation (Swedish: Förordning):
A regulation is issued by the government or executive branch, providing detailed instructions on how a law should be implemented. Regulations refine laws by specifying how the provisions of a law are to be carried out. They cannot contradict laws or the constitution.Directive (Swedish: Direktiv):
In the EU context, a directive is a legislative act that sets goals for member states to achieve, but it allows each country to decide how to implement those goals in their national legislation. Directives are higher than national laws but must be implemented into national legislation by each member state.Instructions (Swedish: Föreskrifter):
These are legally binding rules issued by administrative authorities (e.g., Swedish authorities like Finansinspektionen) to implement laws and regulations at an operational level. Föreskrifter detail specific processes or obligations that certain sectors or organizations must follow and sit below regulations and laws.Precedent (Swedish: Prejudikat):
Legal decisions made by higher courts that serve as examples for future cases. Precedents provide interpretations of laws and regulations and clarify legal ambiguities. They are based on the decisions made in previous cases and help maintain consistency in judicial rulings.Case law (Swedish: Rättspraxis):
The collective body of previous court decisions that guide the application of the law. Case law shapes how laws and regulations are applied and interpreted by courts and includes precedents as well as general rulings.EU legislation (Swedish: EU-Lagstiftning):
EU legislation includes both directives and regulations. EU regulations are immediately binding across all member states, while directives must be transposed into national law by member states. If there is a conflict between EU law and national law, EU law prevails through the principle of primacy.
The legal hierarchy in most legal systems, particularly within the EU, operates in a structured manner where each level refines or applies the one above it. This ensures that the most important legal principles remain consistent across different types of legal texts:
Constitution (Swedish: Grundlag)
Law (Swedish: Lag)
Regulation (Swedish: Förordning)
Directive (Swedish: Direktiv)
Instructions (Swedish: Föreskrifter)
Precedent (Swedish: Prejudikat)
Case law (Swedish: Rättspraxis)
EU legislation (Swedish: EU-Lagstiftning)
Each level of the legal hierarchy has a specific function and further defines or enforces the previous one. This ensures that the legal system operates smoothly, with clear guidelines and compliance structures for individuals, corporations, and governments:
The constitution is the highest legal authority, and all laws must align with it.
Laws implement constitutional principles and apply broadly across society.
Regulations refine laws by detailing how they should be applied.
Directives set broad goals for member states and must be implemented into national law.
Instructions detail specific steps or operational guidelines to comply with laws and regulations.
Precedent and Case law interpret and apply laws, ensuring consistent enforcement and providing clarity.
EU legislation binds all member states and takes precedence over national laws in cases of conflict.
This structure ensures that each legal concept refines or enforces the rules set out at higher levels, ensuring clarity and consistency in the legal framework across different sectors and jurisdictions.
So what is AML then?
Anti-Money Laundering (AML) refers to a set of regulations and frameworks designed to prevent the illegal practice of disguising the origins of illegally obtained money (often from crimes like drug trafficking or terrorism) and integrating it into the legal financial system. AML is not a single law but rather a combination of international guidelines, EU directives, and national laws aimed at combatting money laundering and the financing of terrorism.
At the international level, organizations such as the Financial Action Task Force (FATF) create AML standards that countries adopt. Within the European Union, these standards are turned into AML Directives (e.g., AMLD1 through AMLD6). Directives are legislative tools that require each member state to transpose them into national law, meaning each country adapts these rules into their own legal system, in line with their constitutional and legislative processes.
Once transposed, AML directives are implemented as national laws that bind financial institutions and other sectors, setting out obligations for customer due diligence, transaction monitoring, and reporting suspicious activities. These national AML laws ensure that both businesses and governments actively work to detect and prevent money laundering activities.
In short... AML is a package of directives at the EU level, which sets out rules that each member state must implement through national laws.
Summary
International banks must adapt their risk management strategies, improve their technical systems, and collaborate closely with both AMLA and national authorities like FIPO in Sweden.
The new aspects of AML2024 include the daily updates to sanctions lists, the requirement for 24/7 system availability, and the introduction of external security audits. These measures are designed to ensure that banks' AML systems are constantly up to date, operational at all times, and externally verified for compliance and security.
The new rules will take effect from July 2025, with full implementation by December 2025.
My top pro tips
Leverage compliance as a business advantage:
Compliance doesn’t have to be a burden; it can and often does provide value. By fulfilling AML2024 requirements, financial institutions gain deeper insights into their customers, which can strengthen business relationships and create new opportunities. Although GDPR ensures that personal data collected for AML purposes cannot automatically be used in other areas like sales, having a comprehensive understanding of your clients, within legal boundaries, enables tailored solutions and builds greater trust. Compliance can enhance both security, trust and business value. After all, laws are not inherently negative - they exist to create a fairer and safer environment.Understand the risk-based approach:
Tailor your AML strategy to each customer's risk profile. AML2024 emphasizes risk-based measures, which means that a one-size-fits-all approach is no longer sufficient.Explore the impact of AMLA:
AMLA’s central role in overseeing high-risk financial institutions will bring significant changes. Take the time to explore how this new supervisory authority will impact your bank’s operations and ensure you have the right processes in place for reporting and compliance.Leverage compliance to deepen client relationships:
AML is not just about meeting regulatory requirements; it’s about truly knowing your clients. By implementing robust AML processes, you gain valuable insights into your customers’ activities and behaviors. This deeper understanding not only ensures compliance but also opens opportunities to offer more tailored services, enhancing business value and client trust.
- KPMG, 2024, www.kpmg.com, Overview of AML2024 requirements and system capabilities for compliance.
- Mayer Brown, 2024, www.mayerbrown.com, Details on AMLA’s supervisory powers and system requirements for compliance in high-risk institutions.
- ComplyAdvantage, 2024, www.complyadvantage.com, Insights on non-functional requirements related to sanctions and data protection within AML/CFT frameworks.
- FinCEN, 2024, www.fincen.gov, Overview of the proposed rule changes to strengthen AML/CFT programs in the US.
- AML Intelligence, 2024, www.amlintelligence.com, Information on the EU's new AML2024 laws and AMLA.
- AMLA, https://finance.ec.europa.eu/financial-crime/amla_en, AMLA directives.
- EUR-Lex, 2024, www.eur-lex.europa.eu, Detailed explanation of the hierarchy of norms in EU law, including the classification of primary, secondary, and international agreements within the EU legal system.
- Riksdagen, 2024, www.riksdagen.se, Overview of how EU laws and rules interact with Swedish law, including the precedence of EU law over national legislation and the process for implementing EU directives and regulations in Sweden.
- European Parliament, 2024, www.europarl.europa.eu, Clarification of the sources of EU law, including the role of directives, regulations, decisions, and their impact on national laws.
The power of stable process models: Why Actors outlast Roles and Persons
2024-08-10, by Johan Hildingson (formerly Lagerström) - Type: Essentials - Depth and reflection: Medium - Reading time: ~15 min
Background
Studies show that between 60-80% of BPM (business process management) projects are considered failures by the organizations that initiate them. (Trkman, 2010) (Castro et al., 2020) BPM involves analyzing, designing, and optimizing business workflows to improve efficiency and alignment with organizational goals. But what exactly are these projects failing at? Ironically, many of them struggle with delivering the very outcome they aim for: effective processes.
Organizations frequently end up with workflows that don’t align with strategic goals, become outdated too quickly, or suffer from communication breakdowns across departments. (ShiftX, 2023) (Leopold et al., 2015) These issues point to a common pattern: a failure to create well-designed and managed processes. Whether it’s aligning workflows with objectives, ensuring consistency, or driving adoption, the root cause often lies in gaps in process development and change management. (Castro et al., 2020) (ShiftX, 2023)
In my work as a specialist in enterprise architecture, process management, project leadership, and change management, I’ve identified several factors that contribute to creating more stable processes. In this article, we focus specifically on the concept of Actors to understand how it enhances stability. What are Actors, why do they matter, and how can they bring lasting value to your organization?
Understanding the key concepts: Person, Role, Actor
To fully grasp the importance of Actors in process modeling, it's essential to clarify the difference between Person, Role, and Actor...
Person
Represents the individual or human entity.Example: Johan.
Note: "Person" can also be a specific machine or software, e.g., a certain program or server. Therefore, this entity is sometimes called "Individual".
Role
Represents the formal job title or official position within the organization.Example: Enterprise Architect.
Note: "Role" can also apply to machines, e.g., "Financial System" for software handling accounting tasks.
Actor
Represents the function or responsibility within a specific context, often visualized as the "hat" one wears during a particular task. An Actor can be a person, a machine, or even a system depending on what the Process activity requires.Example: Reviewer.
Note: An Actor can be a human, a machine, or a system depending on what the Process activity requires.
Caption: This diagram illustrates the distinctions and overlaps between the concepts of Actor, Role, and Person in process modeling. An Actor represents the function or responsibility in a specific context (e.g., a reviewer), a Role refers to the official job title (e.g., Enterprise Architect), and a Person is the individual (e.g., Johan) performing the task. The intersections highlight how these concepts interact, showing, for example, that a Role combined with a Person defines an employment relationship, while an Actor combined with a Person describes a specific task assignment. Additional overlaps such as "Responsibility", "Task", and "Assignment" provide deeper insights into how these roles are allocated within organizations.
These three concepts overlap but are distinct. For instance, someone with the role of "EA Architect" may take on the actor function of a "Reviewer" within a specific project, even though the person is technically "Johan". This distinction allows for more flexible and stable process models. (Astrakan, 2017) (UML, 2022) (BPMN, 2023) (Diploma, 2020)
Additional key concepts
To fully understand the relationships illustrated in the Venn diagram, let’s further explore some associated terms...
Responsibility
Specific duties tied to a Role within a particular "hat" or function.Example: Approving technical designs.
Note: This is often described in the Role description, where examples of duties are listed.
Assignment
When an Actor ("wearing a specific hat") is assigned by a Person (that has a specific Role).Example: Actor Alfa is allocated by Johan (who is an Enterprise Architect).
Note: This shows how a specific Person takes on a specific “hat” and becomes engaged in a specific task (i.e., Process activity).
Employment
The formal relationship that ties a Person (or a machine) to their job title or position.Example: Expert EA Architect at company Lorem.
Note: Sometimes referred to as "the contract".
Task
When an Actor (i.e., a Person or system "wearing a specific hat") performs a particular function in a Process.Example: Do initial reviewing of IT solution documents.
Note: -
These additional key concepts provide a clearer understanding of how Actors, Roles, and Persons interact within process models, helping to establish stable, scalable, and adaptable workflows that align with organizational goals.
Why actors provide stability
In process modeling, an Actor refers to the function or responsibility something (or someone) takes on within a specific context. This function remains stable even when the person or system fulfilling it changes. By contrast, roles and individuals are much more dynamic—organizations evolve, people change positions, and job titles are redefined. This makes Actors the key to creating stable and long-lasting process models. In the context of a business model (e.g., UML Process model), Actors are considered the most stable components for several reasons...
Roles and Persons are more dynamic:
Individuals often switch jobs, get assigned new tasks, or leave the organization. Similarly, roles can evolve as companies restructure, redefine responsibilities, or create new titles, making them less reliable as stable process components. (Leopold et al., 2015) (Castro et al., 2020)Actors describe functions rather than individuals:
Actors represent the function needed to complete a task, independent of who or what role fulfills it. For instance, "Reviewer" can be an Actor in a process. Whether it’s an EA Architect or a Project Manager, either can take on the function of "Reviewer" (i.e., the "hat"), adding flexibility and stability.Less sensitivity to organizational changes:
Processes built around Actors don’t need updates when individuals change jobs or roles are redefined. By focusing on stable functions rather than people, processes become less vulnerable to organizational changes.Flexibility in task assignment:
Tasks can be assigned more fluidly since the process only requires the right Actor, regardless of the specific person or role performing the work. This allows for better scalability and more efficient resource utilization.Scalability and reusability:
Processes centered on Actors are scalable and reusable across different contexts. The same process model can be applied in various projects with different people and roles, ensuring consistency and efficiency.Long-lasting processes:
Based on my professional experience (20+ years) and best practices, well-modeled processes using Actors can last between 5-15 years without needing updates, even if they include detailed work steps. This is supported by methodologies like UML and BPMN, which emphasize that processes remain stable over long periods when professionally modeled. (UML, 2022) (BPMN, 2023)
Focusing on Actors allows organizations to design processes that are more adaptable and resilient, even amid significant changes. This approach ensures continuity and efficiency, regardless of staff turnover or evolving business needs. (Leopold et al., 2015) This flexibility is a primary reason why Actor-based models remain favored in enterprise architecture and process management strategies.
Recommended documentation artifacts
When implementing Actor-based process models, effective documentation is crucial for ensuring clarity and consistency across the organization. Well-structured artifacts can streamline communication, support decision-making, and facilitate process improvements over time. Below are my recommended documentation artifacts within this domain, each serving a distinct purpose...
Person-Role matrix
This is best documented in HR systems or an matrix that lists individuals, their Roles, and contact information. The matrix provides an overview of how Roles are allocated to individuals across the organization, making it easier to track responsibility and ensure proper staffing.
Example: An Excel matrix with columns such as "Name", "Role", "Department", and "Contact Info". This document is particularly useful for quickly identifying who holds specific Roles within the organization and for managing changes.
Role descriptions
Role descriptions are often captured in organizational charts or Role-specific documents, typically found on the intranet. These descriptions outline the duties, responsibilities, and mandates associated with each Role. Additionally, they can specify the Processes in which the Role may be active, depending on the "hats" they take on in different contexts.
Example: A Word document that includes the Role’s name, primary duties, key responsibilities, and authority levels. The document might also describe which Processes the Role could engage in, depending on the Actor function they assume.
Actor documentation
Actor documentation is ideally integrated directly within the Process model itself, often through Process diagrams like BPMN or UML. These diagrams could represent Actors as swim-lanes or lanes corresponding to different functions, rather than specific individuals or Roles.
Example: A swim-lane diagram where each lane represents an Actor performing specific tasks. For instance, instead of labeling a lane as "EA Architect", it would be labeled as "Reviewer" or "Approver", reflecting the Actor function. This allows for greater flexibility and consistency across multiple projects.
Actor assignment matrix
This matrix documents which specific individuals or systems are assigned to each Actor within a given context and/or process. It provides a clear view of how Actors are allocated to various roles and responsibilities, ensuring that the right entities are fulfilling the required functions.
Example: An Excel matrix with columns such as "Actor", "Assigned Entity (Person/System)", "Context/Process", and "Responsibilities". This document is useful for tracking who or what is responsible for each Actor in different scenarios, aiding in role clarity and process management.
By establishing and maintaining these documentation artifacts, organizations can achieve better visibility and control over their Processes. Clear documentation not only supports process stability but also helps future-proof operations by enabling smooth transitions during organizational changes. Consistent use of these artifacts ensures that the core functions and responsibilities remain intact, even when Roles or individuals evolve over time.
The everlasting question - Why?
When diving into the world of process modeling and business architecture, one question consistently comes up...
"Do we really need to introduce more concepts, governance documents, etc.?"
It’s a fair concern—when people hear about adding more terminology and concepts, especially in an already complex environment, they often feel frustrated. The suggestion to introduce additional layers of abstraction or governance can seem counterproductive and overwhelming, especially for those already struggling to manage current processes. The confusion usually arises because the distinctions between Actors, Roles, and Persons aren’t immediately obvious, leading to the belief that adding more layers might complicate things rather than simplify them. People frequently ask, "Why make things more complicated? Why can’t we stick with what we already know?".
However, this frustration usually stems from not seeing the bigger picture: how introducing the right level of abstraction can actually simplify processes in the long run. Here’s how these additional concepts will ultimately help:
Simplicity in the long run:
By defining processes based on stable Actors rather than constantly shifting Roles and individuals, you reduce the need for frequent updates. Actors focus on functions rather than specific titles or persons, which provides a more consistent foundation for long-term process stability.Clearer responsibilities:
Using Actors makes it easier to see who or what is responsible for each step in a process, regardless of changes in Roles or staff. This clarity ensures that even if people change jobs or Roles are redefined, the core function remains unchanged.Consistency across projects and organizational units:
Reusable Actor-based process models create consistency and repeatability across different contexts and departments. Whether it’s within a single project or across the entire organization, having stable functions as the foundation ensures uniformity in execution.Future-proofing:
With Actors, processes are more resilient to organizational changes, reducing the need for constant rework. Since Actors describe what needs to be done rather than who does it, the model can adapt more smoothly as people and structures evolve.
Understanding these distinctions may seem complex at first, but they lay the foundation for long-term clarity, stability, and efficiency. This additional layer of abstraction is what ultimately brings clarity and long-term stability. The initial frustration often comes from not recognizing how these concepts actually simplify the overall system, making it more adaptable and sustainable. The key lies in understanding that by introducing the right level of structure and abstraction, processes become clearer, more resilient, and easier to manage. These distinctions aren’t about adding complexity—they’re about organizing it in a way that makes everything more efficient.
“Complexity is your enemy. Any fool can make something complicated. It is hard to make something simple.”
(Branson, 2005)
By embracing clarity through structure, we pave the way for simplicity, resilience, and long-lasting value. It’s not easy, but when done right, it makes everything else easier.
Summary
Creating stable and effective processes is no small task. Many projects fail because they overlook the importance of focusing on stable functions rather than constantly shifting roles or individuals (Castro et al., 2020) (ShiftX, 2023). By anchoring your process models in the concept of Actors, you build a foundation that is flexible, scalable, and resilient to change. This approach not only improves efficiency and alignment but also creates processes that can withstand the test of time. The goal is not to avoid complexity, but to manage it intelligently, ensuring that your organization remains agile and effective, even in a rapidly changing environment.
While this article focuses specifically on the concept of Actors, it’s important to recognize that there are many other aspects and techniques involved in creating truly robust process models. Exploring these additional dimensions could be a topic for future articles, as understanding the full toolkit is key to achieving long-term success.
By integrating the Actor-based approach into your process management strategy, you lay the groundwork for sustainable growth and lasting organizational resilience. This method ensures that your processes remain adaptable, effective, and ready to meet the challenges of tomorrow, all while keeping complexity under control.
My top pro tips
Focus on functions, not titles:
When modeling processes, think about the function that needs to be fulfilled rather than who specifically is doing it. This creates a more adaptable and lasting process.Keep it reusable:
Design your process models to be applicable across multiple contexts and projects. Reusability is key to long-term success.Communicate the why:
When introducing new concepts, always explain their purpose and the long-term benefits. Understanding the "why" eases the adoption of more complicated (or complex) structures.Don’t fear abstraction:
While more abstract concepts like Actors might seem complex at first, they provide the stability needed in a changing environment."Everything should be made as simple as possible, but not simpler." (Einstein, 1950)
Achieving this balance requires deep knowledge, experience, and the ability to communicate effectively while remaining open to feedback. While consistent practice can certainly improve your skills, true mastery goes beyond just repetition. It requires a continuous commitment to learning and expanding your understanding across various fields like psychology, best practices, frameworks, economics, human drivers, philosophy, medicine, motivation, rhetoric, science, and more. Developing this expertise isn’t easy, which is why only a few truly excel in this area. This level of understanding takes time, effort, and the right competencies. That’s why practice, practice, practice is essential—and don’t hesitate to seek professional help when needed. Ultimately, it’s about securing the success of your work and the sustainable growth of your organization.
By keeping these tips in mind, you can ensure that your process models are not just effective today, but for many years to come.
Business purpose vs. business value – Finding a direction in a complex reality
2023-12-28, by Johan Hildingson (formerly Lagerström) - Type: Focused insight - Depth and reflection: High - Reading time: ~25 min
Background
In a business world characterized by shifting markets and endless possibilities, distinguishing between business purpose and true business value is crucial. However, this distinction is not always clear. Business strategy, tactics, goals, and purpose interact in a complex pyramid structure where boundaries are fluid and often subject to debate. This is where methods (e.g. goal modeling), established models (e.g. UML) and discussions (e.g. workshops) etc. become essential, acting as a compass in a world of relative values and multifaceted ambitions.
Business purpose vs Business value
Let's begin by exploring the definitions of "Business Purpose" and "Business Value". Further, these two words are stipulative definitions, meaning we as humans have assigned them a meaning (i.e. through a biased definition). Nonetheless, among the definitions that exist, the following is a summarized common description:
Business Purpose:
Definition:
The business purpose refers to the fundamental reason for a company's existence beyond just making a profit. It encompasses the organization's mission, the specific needs it seeks to address, and the unique way it aims to benefit its customers, employees, and the broader community. This purpose serves as a guiding principle, influencing the company's strategies, decisions, and overall direction. It answers the question, "Why does this business exist?" and often reflects the company's core values and long-term objectives.Examples:
Providing quality products or services:
A business may have the purpose of delivering high-quality products or services that meet customer needs. For example, a technology company's purpose might be to create innovative software solutions that improve business efficiency.Solving specific problems:
Many businesses are founded to address specific challenges or problems in the market. For example, a healthcare startup might focus on developing treatments for rare diseases.Fulfilling social responsibility:
Some businesses define their purpose in terms of social impact, such as reducing environmental footprint, contributing to community development, or promoting social justice.
Business Value:
Definition:
Business value, on the other hand, encompasses the various forms of worth that a company provides to its stakeholders, including shareholders, employees, customers, and even society at large. It's a broader concept that includes not only financial value, such as revenue and profit, but also other forms of value like customer satisfaction, brand reputation, employee engagement, innovation, and social responsibility. Business value is often used to measure the company's overall health and success, indicating how effectively it is achieving its goals and fulfilling its purpose.Examples:
Revenue growth:
An essential value for most businesses is increasing revenue. This can be achieved through expanding the customer base, entering new markets, or introducing new products or services.Brand recognition and reputation:
Building a strong brand and maintaining a positive reputation can be invaluable. This often leads to customer loyalty and can be a significant competitive advantage.Innovation and market leadership:
Businesses that consistently innovate tend to create significant value. This can be seen in companies that lead in their market segments due to their innovative products or business models.Employee satisfaction and talent attraction:
Companies that invest in their employees often see high levels of staff satisfaction, which can lead to improved productivity and the ability to attract top talent.Employee satisfaction and talent Attraction:
Companies that invest in their employees often see high levels of staff satisfaction, which can lead to improved productivity and the ability to attract top talent.Customer satisfaction:
Ensuring high levels of customer satisfaction is crucial for long-term business success. Satisfied customers often become repeat buyers and brand advocates, leading to increased customer loyalty and positive word-of-mouth referrals. This can result in sustained revenue growth and a solid market position.
The exact delineation between the concepts of business purpose and business value is not always clear, possibly because it's challenging to entirely separate the meanings of the two terms. However, common to the definitions that exist is the following understanding:
Both business purpose and business value are foundational to the strategic and operational direction of a company.
Business purpose tends to focus on the "why" of a business – its reason for existing, its mission, and the broader impact it seeks to make beyond profit.
Business value, meanwhile, encompasses the tangible and intangible benefits the business delivers, including financial performance, customer satisfaction, brand strength, and social contributions.
There is an interplay between these concepts, where a well-articulated business purpose can drive the creation of business value, and in turn, realized business value can reinforce and give credibility to the stated business purpose.
Both concepts are dynamic and may evolve as the business grows and market conditions change.
(Digital Leadership, 2023) (Invensis Learning, 2023) (BVOP, 2023)
Below are some examples based on well-known companies:
Apple Inc.
Description:
Apple Inc. is an American multinational technology company known for its innovative consumer electronics, software, and online services. It achieves its goals through products and services like iPhones, Macs, iPads, Apple Watch, Apple TV, and software applications, along with services like the App Store, Apple Music, and iCloud.Business purpose:
Apple's purpose is to innovate by creating products that combine technology and design, making advanced technology accessible to the average user. Their vision is to create products that enrich people's daily lives, and their mission is to bring the best personal computing experience to students, educators, creative professionals, and consumers around the world through innovative hardware, software, and Internet offerings.Business value:
Apple's true business value lies in its exceptional blend of technology and design, leading to high-quality products that have established a loyal customer base and a strong market presence.How:
Apple achieves this through continuous innovation in design and technology, a focus on user-friendly interfaces, and maintaining a robust ecosystem of software and services that complement their hardware products.
Tesla, Inc.
Description:
Tesla, Inc. is an American electric vehicle and clean energy company founded by Elon Musk. It implements its goals by producing electric vehicles, developing sustainable energy solutions like solar panels and energy storage systems, and building a worldwide network of charging stations.Business purpose:
Tesla's purpose is to accelerate the world's transition to sustainable energy by offering electric vehicles and renewable energy technologies. Their vision is to create a sustainable energy future, and their mission is to ensure electric vehicles become accessible and affordable to as many people as possible.Business value:
Tesla's true business value is evident in its pioneering role in the electric vehicle market, reshaping the automotive industry, and influencing global trends towards sustainable transportation.How:
Tesla achieves this through cutting-edge research and development in electric vehicles, battery technology, and renewable energy solutions, combined with direct-to-consumer sales and a global network of superchargers.
Patagonia
Description:
Patagonia is an American outdoor clothing company known for its commitment to environmental sustainability and ethical manufacturing practices. It implements its goals by creating high-quality outdoor clothing and gear using environmentally friendly materials, engaging in environmental activism, and operating its business in a responsible and transparent manner.Business purpose:
Patagonia's purpose is to use business to inspire and implement solutions to the environmental crisis. Their vision is to build the best product without causing unnecessary harm, and their mission is to implement and advocate for environmental solutions.Business value:
Patagonia's true business value stems from its unwavering commitment to sustainability, fostering a strong brand identity and customer loyalty.How:
Patagonia fulfills this by using sustainable materials, transparent supply chain practices, and dedicating a portion of its profits to environmental causes and conservation efforts.
IKEA
Description:
IKEA is a multinational conglomerate that designs and sells ready-to-assemble furniture, kitchen appliances, and home accessories. It implements its goals by designing cost-effective, functional, and well-designed furniture and home products, offering a unique shopping experience that combines self-service with inspiring showrooms, and maintaining a strong online presence.Business purpose:
IKEA's purpose is to create a better everyday life for many people by offering affordable, well-designed furniture and home decor products. Their vision is to create a better everyday life for the many people, and their mission is to offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.Business value:
IKEA's true business value lies in its innovative approach to design and affordability, revolutionizing the furniture market and resonating with customers globally.How:
IKEA accomplishes this through efficient design and manufacturing processes, a global supply chain, and a unique in-store and online customer experience that emphasizes self-service.
In summary, while the business purpose provides the fundamental reason for a company's existence and guides its mission and values, business value represents the quantifiable and qualitative benefits that a company delivers to its stakeholders, reflecting its overall health and success.
The importance of a coherence
In every business context, there's a diversity of values, often leading to conflicts. A parallel can be drawn to how Quran burnings can lead to riots, illustrating how an action in one context can evoke strong and unpredictable reactions in another. This dynamic is equally relevant in the business world.
In "Existentialism is a Humanism", Jean-Paul Sartre emphasizes that there is no predetermined purpose for humanity, advocating instead that individuals have the responsibility and freedom to choose their own paths, thereby defining what it means to be human through their actions and decisions. Sartres view aligns with Antonovsky's "Sense of Coherence" (SOC) theory. Like Sartre's existentialism, SOC emphasizes the importance of comprehending, managing, and finding meaning in our environment, reinforcing the idea that personal understanding and choice are crucial in defining our existence. This perspective also resonates with the "Johari Window" model. This model highlights the value of open communication (i.e. in the "open window") in establishing common understanding, suggesting that our self-awareness and interactions with others are key in shaping our identity and understanding of the world.
Caption: Jean-Paul Sartre's "Existentialism is a Humanism" highlights existentialism's core principle of individual freedom and responsibility, emphasizing our role in shaping our lives and defining humanity through our choices. Notably, Sartre was awarded the Nobel Prize in Literature in 1964, which he famously declined.
Caption: The image depicts the SOC model. It proposes that we, as humans, need to have the three components to be able to feel a sense of coherence.
Caption: The image shows the "Johari Window". The model suggests that it is in the Open Area where the best communication occurs.
Complicated and complex - Choose your reality
Leadership plays a crucial role in navigating these complex waters. The contrast between strong individual leaders and collective community can be likened to influencers versus traditional TV channels. We choose what to follow and believe in, as somethings is too complicated to explain - that's why we choose based on our feelings.
In this context, the Cynefin (pronounced "kuh-nev-in") framework is relevant. The Cynefin framework is a conceptual framework used to facilitate decision making. It was created in 1999 by Dave Snowden, while working for IBM Global Services, and has been described as a "sense-making device". The framework emphasize the difference between complicated and complex environments. In a complex world, we can't always grasp all aspects; sometimes, we must simply accept certain elements as they are.
Caption: Complicated things can be understood by humans through deduction. However, complex things cannot be fully understood, as they are highly advanced. For instance, we cannot always predict a tsunami, but they have devastating consequences. That is why the Cynefin framework emphasizes the importance of robustness and resilience for complex matters.
The complex world is also discussed in the theory called "the Munchausen trilemma". The theory presents three "deadlocks" in knowledge validation: circular reasoning, infinite regression, and dogmatism.
Circular validation: A is because of B. B is because of A.
Infinite regression: 1 is because of 2. 2 is because of 3. 3 is because of 4. And so on to infinty.
Dogmatism: Something high and ultimate that one chooses to see as a fact, e.g. "God".
These frameworks, models, and theories all emphasize the importance of accepting complex things as they are, because we humans can't fully understand complex reality. This acceptance is crucial, not just in navigating the complexities of the business world but also in recognizing our cognitive limitations.
Caption: The character of Baron von Munchausen first gained fame in the late 18th century through books and comics, which were based on the real-life German baron’s outrageous and exaggerated stories. While the baron entertained people with these tales, such as riding a cannonball or pulling himself out of a swamp by his own hair, they were never meant to be taken seriously. The stories, first published in 1785, were entirely fictional. Over time, Baron von Munchausen's name has come to represent situations where fantasy and reality blur, such as in the Munchausen trilemma and Munchausen syndrome (a psychological disorder where individuals knowingly fabricate illnesses, usually to gain attention), reflecting how his tales were illusory fabrications rather than literal truth. (Encyclopaedia Britannica, 2023)
This understanding of complexity and the limitations in our knowledge resonates deeply with Thomas Kuhn's concept of paradigm shifts in The Structure of Scientific Revolutions (Kuhn, 1962). Kuhn’s theory illustrates that scientific progress is not linear but occurs through revolutionary changes in paradigms—frameworks that dictate the accepted norms and practices within a field. Similarly, businesses must recognize when existing paradigms no longer serve them and be prepared to undergo transformative shifts in thinking. This readiness to embrace new paradigms allows organizations to adapt and thrive in an ever-changing environment, much like how scientific communities evolve through paradigm shifts.
Our failure to fully grasp the complexity of a full reality, shaped by our cognitive limitations, manifests in a tendency to repeat historical mistakes. This cycle of repetition, particularly evident in the persistence of wars, highlights a profound challenge in human society. As discussed in "Global Affairs Explained": "Human nature has not changed. Although civilization has softened some aspects of the human condition... fighting and conflict are still natural ways for people to resolve their differences.". The article underlines the critical need for resilience and adaptability in leadership and societal structures. (GLA, 2020)
But what, then, is the meaning of it all, if we, as humans, cannot fully comprehend the complex reality and are doomed to repeat the same mistakes over and over again? This question leads us to crucial insights from Robert Sapolsky, an American neuroendocrinologist and author, and whom I consider to be one of the most intelligent and motivating individuals I am aware of. Reflecting on life's essence through the lens of dopamine, Robert Sapolsky once shared a thought-provoking insight:
“Be very careful about what you strive for in life. What is realistic, and what are you willing to sacrifice to achieve it? Perhaps this is the key to understanding dopamine. It's about motivated anticipation. It's not about pleasure. It's not about the pursuit of happiness, but about the happiness in the pursuit.”
(Robert Sapolsky, 2021)
Dopamine is one of the brain's most potent neurotransmitters. It activates our drive to accomplish tasks and experience rewards, motivating us in life. Sapolsky encapsulates the concept of a complex world, emphasizing that the journey often holds more value than the actual goal itself. This insight is especially pertinent in the business world, e.g. when considering the interplay between strategy and tactics. The business is a complex phenomena and in this context, each step taken towards a goal can be as crucial and meaningful as the goal itself - if not more.
An example of a complicated model for a complex reality
I was recently at a client meeting with a large insurance company, at the lunch break I discussed models with one of their actuaries. I mentioned that there are no complete models; they are merely simplifications of a complex reality - that's why they are called "models". The actuary quickly countered, citing mathematics as an example of a complete model. To illustrate my point, I brought up the Collatz Conjecture, demonstrating how even fundamental mathematical concepts can embody profound complexity.
The Collatz Conjecture is a mathematical puzzle that starts with any positive integer. If the number is even, it's halved; if odd, it's tripled and one is added. Repeating this process, the conjecture states that you will eventually reach the number 1, regardless of which number you start with.
This simple yet unsolved phenomenon, which cannot be fully explained by scientists, underscores the limitations of our mathematical models in capturing the complexities of reality. As we engage with such challenges to understand complexity, we humans fulfill our need to comprehend and find order, a pursuit that is inherently valuable. Our interpretations of the world are shaped by these models, reflecting our choice of perceived reality.
This quest for knowledge and our desire to make sense of the world is evident in our reliance on models. In exploring puzzles like the Collatz Conjecture or phenomena in physics, we find purpose and a sense of belonging. Models such as Bohr's atomic theory, quantum mechanics, and string theory, each developed from a unique perspective, aim to simplify the complexities of reality but only capture a fraction of it. For example, Bohr's model laid the groundwork, quantum mechanics offered a deeper understanding, and string theory introduced the concept of one-dimensional "strings". Yet, all these models, despite their advancements, are incomplete, illustrating that our understanding of reality, influenced by our perceptions, is an ongoing approximation of a much broader and intricate reality.
In acknowledging that models are not reality but simplifications designed to make complex reality more comprehensible, we recognize their value in our endeavor to understand the world. These models, with their inherent limitations, remind us that our knowledge, while constantly expanding, is shaped by the simplifications we create. The models serve as a tool to help us understand reality a little better. So, does the simplification by the models diminish our drive? Personally, I don't think so. Instead, it motivates us, fueling our enthusiasm for life and prompting us to acknowledge the inherent limitations in our representations of reality.
Caption: The Collatz Conjecture proposes a sequence where any positive integer is eventually reduced to 1, highlighting the complexity hidden within simple mathematical rules.
Exploring the depths of mathematical paradoxes
One might think 0.3333... × 3 should equal 0.9999..., which seems different from 1. This might lead one to believe that 0.9999... is infinitely close to 1 but not quite equal to it. However, let's break it down mathematically:
Let x = 0.3333....
Multiply both sides by 3:
3x = 3 × 0.3333... = 0.9999....Since 0.3333... is 1/3:
3 × 1/3 = 1
Therefore, 0.9999... = 1
To further illustrate, consider the division: 0.3333... / 0.9999... = 1/3 This reinforces that 0.3333... multiplied by 3 equals 1, confirming that 0.9999... is indeed 1. (Tao, 2006)
The equivalence of 0.9999... and 1 shows how different representations can lead to the same value. Decimal representations can be misleading, but mathematically, 0.9999... is exactly 1. This reflects how infinite series operate and challenges our intuitive understanding. (Jones, 2018)
Mathematics, as a formal system, relies on axioms and derivation rules. A key insight into the limits of such systems comes from Gödel's incompleteness theorems, which demonstrate that in any sufficiently powerful formal system, there will always be true statements that cannot be proven within the system itself. Gödel’s work, first introduced in 1931, fundamentally challenged the belief that mathematics could be a complete and consistent system. This highlights not only the inherent complexity in mathematical theories but also the limitations of even the most rigorous logical frameworks. (Gödel, 1931)
Imaginary numbers: Introduced to solve equations like x^2 + 1 = 0, imaginary numbers extend our number system and have practical applications in physics and engineering. They don't indicate "noise" but rather enhance our mathematical framework, allowing for more complex solutions and applications (Brown, 2015).
The Banach-Tarski paradox: This theorem in set-theoretic geometry states that a solid ball can be divided into a finite number of non-overlapping pieces, which can then be reassembled into two identical balls of the same size as the original. The key lies in the use of the Axiom of Choice, which allows for the selection of points in such a way that the pieces are not "constructively" describable. Essentially, the pieces are rearranged using rotations and translations in three-dimensional space. This paradox challenges our intuition about volume and space, demonstrating that our basic concepts of geometry can lead to counterintuitive results when extended to higher dimensions (Wagon, 1993).
The Monty hall problem: A probability puzzle based on a game show scenario, where a contestant is asked to choose one of three doors. Behind one door is a car, and behind the others are goats. After the contestant picks a door, the host, who knows what’s behind each door, opens one of the remaining doors to reveal a goat. The contestant is then given the choice to stick with their original pick or switch to the other unopened door. Counterintuitively, switching doors doubles the probability of winning the car, from 1/3 to 2/3 (vos Savant, 1990).
Collatz conjecture: As discussed in the previous chapter, the Collatz conjecture is a simple-to-state yet unresolved problem in mathematics. Its unpredictable nature illustrates the deep complexity within seemingly straightforward mathematical processes (Lagarias, 2010).
Caption: The paradoxes in mathematics, such as the Banach-Tarski Paradox, the Monty Hall Problem, and the concept of 0.9999... equaling 1, illustrate the intricate complexity within seemingly simple mathematical principles and challenge our understanding of reality.
Mathematical models are abstractions, not reality itself. When a model appears flawed, it often means the model needs refinement or our understanding has reached its limits. The statement 0.9999... = 1 underscores how mathematics uses limits and infinities to represent numbers accurately, emphasizing the necessity of understanding formal definitions to avoid misconceptions (Tao, 2006).
This intricate yet precise nature of mathematical proofs and representations reveals the complexity within our complicated models of a complex reality. Mathematics, while powerful, is an evolving tool that models but does not equate to reality itself. This reminds us that sometimes, we must accept the limits of our understanding.
The complex phenomenon of the coherence "Business"
What does this mean for the business world? Well, it means that there is no absolute right or wrong way to define a company's purpose or value. It's about the choices we make within the frameworks in which we operate. The classic problem of distinguishing between purpose and goal, strategy and tactic, is less about their objective definitions and more about the subjective interpretations and choices made within an organization. The important thing is not what these elements are in themselves, but rather how they are perceived and how they interact to create a common purpose that adds value. A sense of coherence in a complex phenomenon.
This challenge is also reflected in the distinction between concepts like vision and mission, as well as frameworks like Simon Sinek’s "Why, How, and What". Sinek emphasizes that starting with "Why" drives purpose and engagement, but others might propose different orders or interpretations. (Sinek, 2009)
Therefore, it's important to define the purpose based on the value you want to create, making it comprehensible, manageable, and meaningful for all involved. This creates a sense of coherence - essential for all successful businesses. The Munchausen trilemma illustrates the challenges we face in this process, but it's also a reminder of the importance of accepting that some things cannot be "solved" in a traditional way.
Finally, it's important that we as individuals and as organizations acknowledge that our success is not solely defined by external circumstances or concrete goals. It's a continuous process of self-reflection, adaptation, and development. By focusing on our inner value and purpose, we can create a meaningful and sustainable path forward, both for ourselves and for the organizations we are part of.
Embracing the Journey: Extracting Business Insights from "The Boy, the Mole, the Fox, and the Horse"
In Charlie Mackesy's "The Boy, the Mole, the Fox, and the Horse", a profound narrative unfolds within a mysterious forest, where a young boy embarks on an extraordinary journey alongside a wise horse, a curious mole, and a kind-hearted fox. As they navigate through the forest's challenges, the boy grapples with uncertainties about the path ahead.
The transformative moment in this tale arises when, feeling overwhelmed and lost, the boy turns to the horse for guidance. With wisdom and compassion, the horse imparts a valuable lesson:
"Can you see the next step? If you can, then take it."
This statement encourages the boy to shift his focus from the entirety of the unknown journey or the distant destination to the immediate next step. It underscores the courage required to take that step, even when the path ahead seems unclear.
In the business context, where organizations frequently encounter unpredictable challenges and opportunities, this message resonates profoundly. It encourages professionals to shift their perspective and understand that genuine business value isn't exclusively attained by achieving distant objectives or striving to become something they are not. It also involves appreciating and finding value in their present circumstances while focusing on each step of the journey. The forest, symbolizing the ever-evolving business landscape, parallels the experiences of individuals and organizations navigating the intricacies of the corporate world, characterized by moments of uncertainty, wonder, and exploration.
Summary
So, what can we learn from this? Perhaps it's that the relationship between business purpose and true business value, while often viewed as distinct, are actually deeply intertwined. These concepts, shaped by the choices and interpretations within an organization, complement each other in a nuanced interplay. Purpose steers a company's direction, shaping the type of value it aims to create. Yet, the path towards clear goals and purposes is often meandering and influenced by our perceptions.
Embracing these fluctuations, challenges, and shifts is essential for fostering growth, learning, and reevaluation. Ultimately, success in the business world hinges on understanding that it's not just about achieving external milestones, but also about nurturing an internal sense of coherence, adaptability, and sustainable development that aligns purpose with value. And, achieving enduring and meaningful business success hinges on seamlessly integrating purpose and value, recognizing their intrinsic interdependence, while humbly acknowledging the inherent complexity of the reality.
As we navigate this intricate landscape, it often becomes clear that the journey itself is where we find the profound essence of purpose and value. This realization brings to light that, in many cases, the path we tread is even more valuable than the destination we aim for. It's on this journey that we uncover lessons, insights, opportunities, and transformations that are indispensable. These experiences remind us that the process is just as important, if not more so, than the end goal. Perhaps, in this revelation, we discover that the true purpose is embedded not just in reaching our destination (i.e. goals and values), but also in the journey towards it.
My top pro tips
Purpose is essential:
Purpose is crucial as it creates meaningfulness. There's no universal answer to what the purpose is; it's defined by those within the context. Decide based on the value you want to create, making it comprehensible, manageable, and meaningful. This creates a sense of coherence and provides the purpose you need.Embrace humility:
There's no universal answer to what the purpose is. No purpose is better or worse. They simply exist. It's the group that defines and values the purpose. A facilitator's role is to guide people to find this valuable purpose, not to choose it for them.Relinquish credit as a consultant:
As an external consultant or facilitator, be sure to give credit for achievements to the group. If you take credit, the outcome becomes yours, risking its continuity when you leave. Instead, make it the group's victory and step back, letting the group become ambassadors to carry the message forward.There are several good articles in this domain. Below are five specific reports that highlights the importance of balancing business purpose with true business value. These reports and studies highlight the critical importance of integrating purpose and value into business strategy, impacting everything from revenue and market value to employee engagement and customer loyalty.
EY's "Purpose-Led Transformation Report" (2019): This study revealed that companies with a clear purpose experienced higher growth rates. They found that businesses with an "integrated purpose" grew at an annual rate of 9.85%, compared to the average annual growth rate of 2.4% for companies in the S&P 500 during the same period.
Deloitte's "Global Human Capital Trends" (2020): According to this report, 93% of business leaders believed that companies focused on purpose are more successful in recruiting and retaining talent, highlighting the importance of purpose for workforce engagement and loyalty.
Nielsen's "Global Corporate Sustainability Report" (2015): The report showed that 66% of consumers are willing to spend more on a product from a sustainable brand. For Millennials, the figure was even higher, at 73% preferring to shop from companies that demonstrate social responsibility.
McKinsey & Company's Report on "The Business Value of Design" (2018): The research indicated that companies placing design and user experience at the core of their strategy had 32% higher revenue and 56% higher total return to shareholders compared to their competitors.
Harvard Business Review's "The Impact of Corporate Sustainability on Organizational Processes and Performance" (2015): This study found that companies voluntarily adopting sustainability practices were more profitable and had higher market values than those that did not. These firms also saw improvements in operational performance and increased long-term survivability.
Involve customers in your processes:
Numerous reports (e.g. above mentioned) emphasize the significance of involving customers in the process. It's crucial to align your purpose with the needs and preferences of your existing customers, and more importantly, those you aim to attract. Remember, the process doesn't merely begin with receiving an order; it starts much earlier, with understanding and catering to the customer's needs. This customer-centric approach is integral to your strategy, ensuring you attract and retain the clientele you desire.Address perception before facts in your communication:
Ralph Keyes, a respected cultural commentator, shows in The Post-Truth Era (Keyes, 2004) that we now live in a world where emotions and beliefs often override facts. Keyes argues this shift makes it harder for businesses to build trust. Leaders must understand that people tend to believe what feels right, even if it contradicts evidence. Gleb Tsipursky adds that addressing emotions first is key to building trust before introducing facts (Tsipursky, 2019). After all, as discussed earlier in my articles, humans are emotional beings. So, by focusing on clear communication and promoting critical thinking, businesses can better navigate a world where perception often comes before truth.Explore purpose with the "Why?" question:
Yes, I have mentioned the method several times in my articles... To uncover your true purpose, ask "Why?" at least six times in a row. Delve into your motivations and beliefs to reveal a more meaningful purpose at the heart of your actions and ambitions.
Example:
1. Why take this course? Improve my skills.
2. Why is that important? I want to stay competitive.
3. Why competitiveness matters? Career growth.
4. Why value career growth? Financial stability.
5. Why is financial stability significant? Freedom to pursue passions and live life on my terms.
6. Why is that important? I want to find my own meaningfulness.
This method, as advocated by Sir Ken Robinson, often reveals purposes such as:
- Meaningfulness
- Autonomy / Self-governance
- Mastery / Skill enhancement
- Creativity
- Belonging
- Manageability / Comprehensibility
Sir Ken Robinson, an esteemed advocate for creativity in education until his passing in August 2020, emphasized the transformative power of asking "Why?" to uncover deeper motivations and life's purposes. He famously highlighted how many creative individuals underestimate their talents due to societal undervaluation, stressing the importance of recognizing and nurturing individual potential. Awarded a Knighthood in 2003 for his contributions, Sir Ken's legacy continues to inspire a deeper search for meaning in both personal and professional realms. Personally, I'm a big fan of his work and the profound impact he has had on education and creativity.Be authentic about your purpose:
A gap between your stated purpose and actions can be damaging. Customers and employees often see through inauthenticity. Purpose isn’t just about motivating your team – it’s also about creating a real connection with customers who value authenticity. Research shows we’re emotionally driven, so a fake purpose can backfire (Aaker, 2016). Even if your business is seen as profit-driven or controversial, like a fast-food chain criticized for unhealthy products, there’s often a genuine intent, like providing affordable meals that bring people together. Some companies, however, have purposes that are neither ethical nor inspiring. Honesty about your true drive is essential. See also the article where I discuss the "Organizational Needs Ladder".As Albert Camus once wisely wisely said, "Life is the sum of all your choices"...
This is especially true in the business world, where companies are continually shaped by the choices they make, pursuing their defined purposes and values. The importance of setting clear goals is paramount, yet their relevance in day-to-day operations is what truly brings purpose to the business - it’s first then the value is created.
In this way, the essence of a business is not just shaped by its long-term objectives, but also by the meaningfulness found in its daily activities. This principle, while vital in the corporate world, transcends beyond it. The paths we choose in our professional endeavors mirror our broader existence. The true essence of who we become is not only determined by distant goals, but also by the paths we choose and take each day. This isn’t just a perspective in business; it's a fundamental approach to life itself. ♥
Stress – Only evil and bad?
2023-04-05, by Johan Hildingson (formerly Lagerström) - Type: Focused insight - Depth and reflection: Medium - Reading time: ~10 min
Stress is part of people's everyday lives today. Important and crucial decisions that have to be made, life puzzles that have to be put together, means of transport that are delayed, the presentation tomorrow, what to eat for the weekend and much more... But what is stress, how does it affect us and is all kinds of stress bad? In this article we explore the function of stress for us humans.
The frontal lobes – Consciousness, coherence and rational thinking
The human is descended from the primates. What sets humans apart from the primates is spelled: homo sapiens sapiens – i.e. the specie who is aware of that that she thinks. Humans have a consciousness; she is aware that she is thinking. This consciousness is created in the frontal lobes of the brain. (Hansen et. al., 2022)
The frontal lobes are part of the cerebral cortex and are located behind the frontal bone. They are what enable us to plan for the future, as well as control our impulses when we perceive that there is a future reward to be had (and by that also our pleasure patterns). This is where we get an overview and a perspective of things. (Phillips, 2022)
The frontal lobes aren't fully developed until the age of 20-25. This explains why impulse control is not fully developed amongst younger people. Compassion, empathy and meaningfulness are also qualities that depend on the frontal lobes being well integrated. It is the frontal lobes that create a sense of meaningful coherence. That's why it's important for humans to feel a coherence. (Antonovsky, 1990) (Hansen et. al., 2022)
The coherence is so important that people even become stressed when the context and coherence are missing. As a primate (10,000 years ago) it was dangerous to be alone, you did not have the protection of the herd. Even today, this mechanism still exists. This is why the frontal lobes are extra sensitive to stress. (Hansen et. al., 2022)
Cortisol – Stress and getting ready to fight or flee
When we become stressed, cortisol is secreted from the adrenal glands, which triggers the release of a large amount of glucose. The glucose is energy that are used used in order to deal with the stressful situation. Adrenaline and nor-adrenaline are also secreted during stress. The adrenaline increases the heart rate so that more blood circulates and makes the respiratory tract to relax so that we can breathe in more oxygen. Sweat is secreted so that the warm muscles can cool down and function well. The nor-adrenaline makes the cognitive functions prioritize focus and quick thinking, instead of the more rational and logical thinking of the frontal lobes. In summary: the body gets ready to fight or flee as action is more important than logical thinking. (Phillips, 2022)
Maybe you have felt thirsty when you get stressed? This is because the palate receives less blood and cannot produce saliva as well. Nausea may occur as the body wants to get rid of stomach contents, because we run better on an empty stomach. You get tired because it takes a lot of energy to be on constant alert. This is also why long-term stress makes the body prioritize other vital functions. Digesting food becomes less important (which creates stomach problems), sleep is not a priority, etc. (Phillips, 2022)
A stressful situation creates several signal substances that directly affect the body, but what then causes the body to perceive a situation as stressful?
If you point in towards the head from the top of the ears and straight in from the eyes, the lines meet exactly where the amygdala is located. The amygdala is right at the center of many of our sensory impressions. Maybe it's no coincidence that the amygdala is located there... The amygdala is kind of the body's fire alarm. It takes in sensory input and looks for threats. It works spontaneously and is close to all impressions (sight, hearing, smell, taste, etc.). The amygdala can even sound the alarm before we process the information to the frontal lobe and become aware of the threat, in other words: we act before we become aware. There's a good Dutch saying: "You hear the alarm, but you don't know where the bell is." (>>>). The amygdala controls the more primitive parts of the brain and makes us think instinctively, quickly and decisively. (Hansen et. al., 2022)
So how do you make good decisions in stressful situations?
It is not uncommon for us humans to make decisions under pressure. In emergency healthcare this is everyday life. In emergency healthcare a lot of work is done to enable rational thinking during stressful situations. Some of the methods used there are:
Become aware of the stress.
Understand how stress affects our decision-making.
Collect all opinions within the team. Can be done by asking the question: "Have I missed something?".
Be aware of time. Under stress our perception of time is greatly impaired, because time simply does not matter if it is a question of survival. At the same time, you have to be aware of the time in order to ensure rational thinking.
Continually practice stress management. Stress can be mitigated through practice, as practice enables you to recognize stress and gives you tools to handle it.
(Vardhandboken, 2020) (Hansen et. al., 2022) (Phillips, 2022)
A lot of stress management focus on making yourself aware of that you are stressed and that it can affect your rational thinking and therefore decision-making. With the awareness that you are stressed, you can also give yourself time to relieve the stress and act more rationally. If you know that you are in a stressful situation, you should also take in more perspectives, to compensate for your narrower and less rational thinking.
The feeling of being in control of the stress is especially important. Studies show that if a subject is forewarned of an electric shock, the electric shock hurts less. The person does not need to tense up unnecessarily and feels safer and can adapt. In healthcare, this is handled, among other things, by notifying the emergency hospitals of incoming patients, so that the staff have time to prepare and become aware of what is to come. Communication in the stressful situation also helps, as it creates a sense of joint control of the situation. (Mental health foundation, 2020) (Hansen et. al., 2022)
Stress can be controlled if you practice it, but most scientist agree that it must be done situation by situation - this since stress is the perception of not having control over a specific situation. In fact, the thought of a stressful situation has the same effect as actually being in a stressful situation, this as the amygdala reacts to the parts of the brain that are activated by the thought of a stressful situation. (Hansen et. al., 2022) (Phillips, 2022)
Breathing exercises are effective during a stressful situation. By controlled breathing you reduce cortisol secretion and instead increase serotonin and oxytocin – signaling substances that create the feeling of coherence, control and satisfaction. In fact, in cases of stress the body releases oxytocin after a while, to create the calming effect after the stress. Just the feeling that the stress is an experience that will naturally pass can be calming. (Antonovsky, 1990) (Phillips, 2022)
Also enabling the body do produce dopamine can decrease the cortisol secretion. Dopamine is what motivates us humans to start doing something, e.g. start reading a book, start writing a report or go for a walk - or even better: hit the gym. Dopamine is the body's reward system that makes us want to do something and keep doing it. Dopamine creates more dopamine, so just by starting more motivation will come - in science it's called "momentum of dopamine". (Field et. al., 2015) (Phillips, 2022)
In a stressful situation you can also break down the challenge you are facing into smaller components. The smaller components provide motivation as they feel comprehensible, manageable and meaningful (i.e. "a sense of coherence"). Motivation gets us started and going (i.e. momentum). In addition, the breakdown makes us feel that we are in control of the situation, it may not be as dangerous as our amygdala wants us to think. (Antonovsky, 1990) (Phillips, 2022)
Summary
Cortisol is often called the hormone of death, but that is not entirely fair. Without cortisol, life would be dull and gray. We don't hate stress, we just hate the wrong kind of stress. In fact, we even pay for good stress, such as riding a roller coaster or watching crime series. Stress is good when it is adequate, transitory and when we feel that we have control – in those cases the stress even contributes to euphoria (i.e. endorphins).
Stress makes us focus more, become actionable and gives us the opportunity to feel upcoming reward. It gets us going and ready for action, which can create momentum. Our cortisol levels are high in the morning, because it gets us started and take on the wonderful day.
The important thing is to create healthy stress that motivates and engages us, and minimize stress that makes us act less and less rationally or inclusively. By tapping into this motivation, we open ourselves to new experiences, excitement, challenges, and continuous learning. Stress is not always bad, it's a part of being human and can (!) be vital and good (i.e. in the right doses and situations).
My top pro tips
In the event of a major change, inform the people that's affected by the change of what is to come. It gives them the chance to feel prepared, included and part of the challenge. Challenges motivate us and create a coherence, especially when we handle the challenges together. Stress is especially harmful when we feel we can't handle it, so try to actively prevent such situations. (Hansen et. al., 2022)
A sense of urgency is important according to the change management guru Kotter. And of course he's right... The human alarm system is one of our stronger systems. It creates focus, awareness, action and commitment. However, keep in mind that if the fire alarm goes off too often, people will get tired and stop listening to it. Instead, create a genuine and common commitment through communication that is honest, open and transparent. By including others and create something common you can create something bigger than yourself (i.e. a real and valuable purpose).
Too much bad news under a long period of time can be harmful, as it throws the neurotransmitters out of balance. Humans are not made for constant alertness. Stress is even considered a common disease and a major issue in society. (HBL, 2020) Try to mitigate the stress, e.g. by not to only publishing bad news, big changes and alarming threats, instead also highlight successes, accomplishments and wins. Or as I say: people don't like change, they like improvements. Allow to celebrate what you have done and learnt from the action. If the action was not successful, say: we did our best and now know more about the problem and how to deal with it. And to be honest; the real mistake is if one doesn't learn from the mistake - or as Henry Ford once said: "A failure is simply an opportunity to begin again, this time more intelligently". All these improvements creates oxytocin, testosterone and serotonin – hormones and neurotransmitters that last longer than the alarming threats and short-term rewards.
Make risk assessments in your business. Where do we have risks, how can we manage them, who has what competence for which risks, and how can we prevent or mitigating the risks? Be aware that not all risks can be predicted and all risks are not worth spending time on. The world is both complicated and complex. Complicated things may be predicted and deduced, but complex phenomena cannot be fully understood as humans doesn't have the cognitive capacity for that. Example: we may not be able to foresee a tsunami or a global financial crisis -and afterwards we usually say something like "We didn't expect that". For complex things, robustness and resilience are needed instead – i.e. create the feeling that we can handle an unforeseen situation. See article above, about Cynefin. (Snowden, 1999)
Remember that worrying doesn't take away tomorrow's troubles. It takes away today's peace. So, choose which troubles or risks that you should be focusing on. E.g., this can be done by quantifying the risks with a probability and impact matrix, or using a table with the the labels "Things I can remove", "Things I can solve", "Things I don't know how to handle yet". (Phillips, 2022)
Find the motivation in what you do. Instead of seeing things as threats, see the value and benefits in what is happening. This is easier said than done, I know. But try to find the purpose of what you do and make it a genuine and motivating driving force. Example: instead of seeing a reorganization as big and time-consuming, look at what it is intended to accomplish. If you repeat the negative aspects, it will eventually become a false truth that only steals energy from those who are affected.
But how do you find the true purpose then? Well, as I mentioned in an earlier article: one of the most effective methods of finding the purpose is to ask the question "Why?" at least six times – preferably until some one in the room has had enough and says the true purpose out loud. ;)
In some cases, increase your stress. Yep, you read that right. Stress is useful and healthy in small doses. There is a lot of research about it, e.g. studies shows that depression can be caused by too low levels of cortisol – as too low levels of cortisol makes you feel empty and out of energy. (Dziurkowska et. al., 2021) Stress in the right doses gets you going and makes you feel alive - it can create momentum. Instead of going up on stage and giving the same speech for the 100th time (which probably doesn't motivate you at all), tell yourself that there are many new people who really want to hear what you have to say and that they may have other perspectives than you. Or I as sometimes say: you (i.e. the audience) got 30 minutes of me, I got 100 times 30 (as you were 100 in the audience). Note, however: if you get easily stressed and nervous before giving a speech you should exercising stress reduction instead. It all depends on who you are and what you do.
How do you reduce stress before a speech then? One of the most effective methods are breathing exercises. Here's a good exercise:
1. Sit down. Don't have arms crossed. Close your eyes.
2. Repeat five times times:
- Breathe in through the nose while counting slow to six (i.e. six seconds).
- Breath out through your mouth while counting to three. End with a sigh.
3. Repeat five times:
-Breathe in through the nose while counting slow to six.
-Hold your breath for six seconds.
-Breath out for one to two seconds.
If you feel dizzy during the exercise, then pause.
This exercise stimulates the parasympathetic nervous system, leading to increased serotonin and oxytocin levels, which effectively and quickly reduce cortisol. The deep sigh expels carbon dioxide and activates the vagus nerve, promoting a sense of calm (a technique even monks use). You can practice this exercise ten minutes before your speech, or even the evening before, as research shows that the body retains a physical memory of the activity. (Diploma, 2022) (Phillips et. al., 2022)Studies from Harvard shows that specific body positions affects your stress levels. "Strong positions" like open arms, chest out, feet pointing forward, lend over a desk (fun note: politicians often do this position) etc. creates less stress and increase testosterone by 30% if it's done two minutes before the speech. "Weak positions" like bend back, protecting your throat with your hands, head down and protecting your chest etc. creates more stress levels as it increases cortisol. (Cuddy, 2018)
Avoid making important decisions when your cortisol levels are too high. Decisions under stress are often about mitigating the pain immediately instead of thinking about the long-term consequences. Instead, make important decisions when your dopamine and cortisol are normal.
If you have to make decisions under stress, try to create a controlled situation by:
1. Become aware that you are stressed/nervous - Say it outright, it actually makes it less stressing.
2. Try to activate the frontal lobe and bring about logical and rational thinking. This can be done by e.g. analyzing the causes, effects and consequences of the critical problem.
3. Listen to the opinions of your colleagues and by that confirm that you have thought the situation through. It lowers stress as you feel that you have gained a broader perspective and are in control of the situation. You also feel less alone when you bring more people into the discussion.
4. Communicate. Communication not only gives the opportunity to perceive more perspectives and feel less alone, communication also creates the feeling of coherence and community (oxytocin and serotonin), which directly lowers cortisol levels.
5. Remind yourself that stress isn't just at bad thing. It creates action and enables momentum. And it's a feeling, i.e. a perception of the reality – it isn't always the "common reality". With that said, never ever neglect your feelings, even though they may not be the "common reality", they are the reality that you perceive and therefore defines you as a human. So be proud of your feelings, accept them and cherish them. Your feelings are a part of you. And the beauty with that: by just being aware and proud of your feelings you reduce cortisol levels and increases e.g. testosterone and serotonin (Phillips et. al. 2022). Wow, isn’t the human body just wonderful?Stoicism offers further insight into this discussion. It teaches us that we cannot control everything, and that we should focus on what we can influence and accept what we cannot. This philosophy urges us to focus on the value we want to create and to find the purpose that truly drives us. Below are some of my favorite quotes from Stoicism.
"It's not the things that upset us, it's our opinion about the things. It's not what happens to you, but how you react to it that matters." //Epictetus
"We suffer more often in imagination than in reality. He who suffers before it's necessary suffers more than necessarily."//Seneca
"Today I escaped anxiety. Or no, I discarded it, because it was within me, in my own perceptions - not outside. Things doesn't make us anxious, we make ourself anxious. We have control over it. We can solve it. You have power over your mind – not outside events. Realize this, and you will find strength." //Marcus Aurelius
"Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth. [---] The happiness of your life depends upon the quality of your thoughts." //Marcus Aurelius
The Organizational needs ladder - How to understand the phases of an organization
2022-08-10, by Johan Hildingson (formerly Lagerström) - Type: Focused insight - Depth and reflection: Medium - Reading time: ~10 min
Background
Maslow's hierarchy of needs (Maslow, 1943) is a theory of motivation which states that five categories of human needs dictate an individual's behavior. The theory was published 1943 under the title "A Theory of Human Motivation" in the journal Psychological Review.
Today the model is often used when describing the current state of humans in different society contexts. The hierarchy of needs is a psychological idea and also an assessment tool, particularly used in education, healthcare and social work (Poston, 2009). The hierarchy is also a popular framework in sociology research, including management training and higher education (Freitas et. al., 2011). Even though psychology isn't a science subject, this model is well-established and widely accepted.
The Organizational needs ladder
In the model below, which I call the "Organizational needs ladder", I have interpreted Maslow's hierarchy of needs and translated it into the corporate world. The purpose of this model is to describe the typical phases an organization can go through. I often use the model when I quickly try to familiarize myself with an organization and its situation, and by doing so, roughly understand what their needs may be. It also gives me a hint of what challenges the organization faces and what they want to strive for and move towards.
Profitability focused organization (Basic needs/survival)
Money. Everything does not have to be perfect, the important thing is that the business works. Often small or young companies that try several different product ideas in order to find where they are needed and how can make money.Solution focused organization (Up and running/safe)
We have solutions (often IT), some of which the customer uses. Errors and problems are handled, it must work and feel safe in terms of operation. Our service must work. Often small to medium-sized businesses that are about to grow and scale up.Manageability focused organization (Business development/efficiency)
Our core business and operations must work. Therefore, we have to make the processes of our work good and efficient. Our collaboration within the company must work well. Often medium-sized to large companies with ingrained, undocumented or inadequate processes, rule sets and routines that want to change their focus to this step.Customer focused organization (Business needs/benefits)
The customer must appreciate what we do and get value from it. We must know that we are doing the right things that brings real value to our customers. Often large companies with a large legacy of old systems, deeply ingrained old processes and inadequate routines that want to change their focus to this step.Commonality focused organization (area: Self-fulfillment/socially important)
If "customer-focused" is about giving the customer the value she is asking for, then the "commonality focused" is about giving the customer what she really needs. The customer doesn't always know what she needs, here the company can help her. In addition, we should not know everything about our customer, we should only know what concerns us in the relation to the customer - we have nothing to do with her private sphere. The customer doesn't always even know that she is a customer, and we as organization can have several customers - we can even be each other's customers and have different roles in different situations. We (WE = organization + customer) can instead contribute to something bigger and more important in a common arena (what we have a common interest in). A purpose with real value, e.g. societal value. The value is often harvested where the service or product is used, therefore our processes are bigger than just between the interfaces to the "customer" (e.g. not only between orders coming in ---> handing over to "customer"). The process must also include what the "customer" does with our product and how she uses it and not least how her initial needs arise. Here the boundaries between customer, company and organization are blurred, we create a chain with shared and real value. Solutions, organization units, stake holders are just different phases, resources or parts in a chain - a chain that jointly creates real value for everyone. Here we have the example of the difference between, what I call, "digitization" (e.g. cassette tape to CD) and "digification" (e.g. CD to Spotify).
When you are about to shop at your grocery store, you probably write a shopping list (a todo list) and you say "I have an errand in town". But the shopping list is not the valuable thing, you can write it on a post-it, you can write in a notes app of your mobile phone, or you can memorize it... The real value is what the written words means (i.e. the information) and that you buy it (i.e. process and actors), with the goal of being able cook dinner at home (i.e. goals) and by that fulfilling the purpose of being able to survive (i.e. the purpose). If you were to say to your partner that "I have an errand" and wave the note, she/he may be annoyed...
- Well, what errand?!
- Yes, an errand!
- Yeah?!
Instead, you probably usually say something like...
- I was thinking of buying food for tonight at the grocery store, I was thinking Swedish meatballs - what do you think? Do we need anything else?
So, in our private life we are often (not always!) at step 4 or 5, trying to fulfill ourselves in a coherence and take care of our joint values.
Summary
In closing, in this article I try to put forward the idea that organizations may progress much like individuals, evolving from focusing on basic survival to ultimately contributing to society. This concept invites reflection on the broader role of businesses in our communities. How does your organization, or one you're familiar with, navigate this journey? Where does it currently stand on this "ladder", and what steps could it take towards greater societal impact? Your insights and experiences are valuable in enriching this discussion and understanding the diverse paths organizations take in their quest for growth and purpose. Consider sharing your thoughts and observations with others, fostering a wider dialogue about the transformative journey of organizations.
My top pro tips
Dare to ask the question "why" at least six times, preferably until someone has had enough. Then you know you've found the real value (i.e. the true purpose).
In your organization, look at whole process and see if there are several actors in it that jointly create value - who are they (the actors - not the roles!) and what do you do (the activities), as well as how (the work steps), to achieve which value (purpose and goal)? Is it valuable to say "customer" then, or is it the case that we all actually receive value and are "customers" - this as we are all part of a common chain that creates value together?
Is it the "case" in "case management" that is the valuable bringing thing, or is it just a means/medium/tool to deal with a need? Is it perhaps more valuable to focus on the joint value (i.e. the goals and purposes) and then see how we achieve these (through actors, processes, information, governance, tools, etc.)?
Remember that you can be at different steps in the ladder depending on situation, contexts or time. Just because you have reached step five once in one given context, it doesn't mean that you going to stay there forever or by default reach that level in all contexts. The work of contentious improvements and reflection is always needed - it is by that we enrich and develop ourselves, and create a valuable purpose.
In short: dare to skip words like customer, case, order, organization unit etc... Because it is not always valuable to scratch your head baldly at these phenomena in the hope of reaching a clear definition (because the concepts often lack process value in themselves), it is (in my opinion) only valuable in cases where you are too solution-focused (step 2) and need to move towards the next step in the ladder. So always find out where you are at the ladder and where you want to go…
Bonus - The consultant ladder
And yes... Of course, I have a model that explains the consulting world as well. After all, I've been working as a consultant for 20 years. This article introduces the Trust-Driven Consultant Ladder, a conceptual framework drawing upon Maslow's Hierarchy of Needs and the insights of David H. Maister, Charles H. Green, and Robert M. Galford in "The Trusted Advisor" (Maslow, 1943) (Maister, Green, & Galford, 2000). The model synthesizes these profound insights with my two decades of professional experience, offering a unique perspective on the evolution of client-consultant relationships.
Foundational trust-building
At this stage, the consulting firm focuses on establishing a stable financial base and a reliable market presence. Consultants prioritize job security while providing fundamental services to address basic operational needsConsultant's Perspective: Consultants are primarily concerned with job security and meeting basic job requirements.
Client's Perspective: Clients receive essential services to address their fundamental operational needs.
Consulting Firm's Perspective: The firm's primary focus is on building financial stability and market presence.
Reliability and assurance
In this stage, the consulting firm's objective is to create a safe and dependable operational environment, fostering trust in the market. Individual consultants emphasize reliability and trustworthiness, resulting in clients benefiting from consistent and dependable services that contribute to operational stability.Consultant's Perspective: Consultants emphasize reliability and trustworthiness in their work.
Client's Perspective: Clients value the consistency and dependability of the services provided, enhancing their operational stability.
Consulting Firm's Perspective: The firm works diligently to create a secure and reliable operational environment, reinforcing trust within the market.
Collaborative synergy
At this stage, the consulting firm optimizes internal processes and nurtures a collaborative culture, with a focus on collective success. Consultants actively work towards aligning with the client’s goals, fostering a partnership approach, and providing collaborative solutions. Clients benefit from solutions closely aligned with their objectives, enhancing business efficiency and success.Consultant's Perspective: Consultants strive to align their work with the client's goals and foster a partnership approach.
Client's Perspective: Clients appreciate collaborative solutions that enhance their business efficiency.
Consulting Firm's Perspective: The firm fosters a collaborative culture, streamlining internal processes for collective success.
Client-centric excellence
In this stage, the consulting firm becomes deeply client-centric, with a strong focus on delivering significant value and building a distinguished reputation. Consultants are highly engaged in making meaningful contributions to clients, striving to inspire and elevate the client's business. Clients receive high-value, strategic insights, and services that are pivotal to their growth and success.Consultant's Perspective: Consultants aim to inspire and uplift the client's business, delivering high-value services.
Client's Perspective: Clients receive high-value strategic insights, crucial to their growth.
Consulting Firm's Perspective: The firm is committed to delivering significant value and building a distinguished reputation.
Transformative partnership
In this apex stage, the consulting firm transcends conventional business objectives, striving for significant societal impact. The individual consultant assumes the role of a catalyst and partner, deeply integrated within the client's organization. They collaborate closely with clients to co-create solutions that advance not only business goals but also contribute meaningfully to societal challenges. This stage embodies a shared vision of achieving a higher purpose – one that goes beyond immediate business concerns and addresses broader societal needs. At this pinnacle, the value delivered to the client is transformative, combining business success with a tangible contribution to societal well-being. This holistic approach defines the essence of contemporary consultancy, where the goal is not only to succeed in business but also to make a lasting, positive mark on the world.Consultant's Perspective: Consultants become catalysts for positive change, aiming for significant societal impact.
Client's Perspective: Clients collaborate on solutions that contribute to both business and societal well-being.
Consulting Firm's Perspective: The firm focuses on achieving a higher purpose and making a lasting, positive societal impact.
The Consultant Ladder", informed by insights from "The trusted advisor" and my own consulting experiences, is designed to offer guidance and reflection in the consulting field. It integrates essential aspects such as credibility, reliability, intimacy, and a balanced self-orientation, presenting them as key components for a consultant's journey rather than strict rules.
Credibility: This aspect underscores the importance of a consultant's knowledge and expertise, aiming to bolster the client's trust in their advice.
Reliability: It emphasizes the need for consultants to align their actions with their words, thus building a reputation of dependability.
Intimacy: This factor focuses on creating a safe environment for clients to share information, essential for deepening personal connections.
Self-orientation: Aimed at ensuring the consultant prioritizes the client's interests, this element enhances trust by showcasing genuine care and attention.
By sharing this ladder I hope to contribute to the broader dialogue in the consulting industry. This model is a personal narrative, combining foundational trust principles with practical experiences, and is shared with the aspiration of encouraging others in the field to find their unique paths and create significant, positive change in their professional and broader community engagements.
And remember... The true measure of any model's worth is its ability to resonate with and enrich your personal experiences and aspirations. Ultimately, it's about discovering your unique contribution, that intersection where your skills and passions align with the world's needs (i.e. "Ikigai") - a powerful insight that can redefine not just your career, but your impact on the world around you.
The Corporate triangle - Navigating perspectives and why people prefer improvements over change
2022-07-22, by Johan Hildingson (formerly Lagerström) - Type: Focused insight - Depth and reflection: High - Reading time: ~15 min
Introduction
It's often said that people of a business are the business itself. The problem with that statement is that people are individuals that need a coherence. According to Dunbar (Dunbar, 1992) a human can handle a coherence of maximum 150 relations. This implies that the number of perceptions of the world is as many as the people living in it. Therefore, there isn't one world, there are many.
In this article, we delve into the complex interplay of individual perspectives within the corporate world, and we explore how these varied viewpoints shape the business landscape.
The reality of diverse perspectives
In science the philosophical discussion of what is true science and what isn't (i.e. pseudo-science) is in fact a part of being a scientist. In each research the scientist defines the problem she wants to investigate and then operationalize it. The operationalization implies that you as a scientist have to define the problem in measurable terms.
For example, you as a scientist want to understand how many people in the world that have access to clean water. In order to research this, you as a scientist need to define what e.g. "clean", "access" and "water" is. One scientist may say it's 3 liters a day of water from a local well that doesn't cause illness within 7 days. Another scientist may say the access to water also includes the water we get from eating food. A third scientist may say it's the ability to take a bath in a river within a walk of 10 km.
It is the scientist that decides how to operationalize the problem definition, with her perception and knowledge of the world and the hypothesis of the problem she is interested in. She can't know everything, that's why she has to scope it by operationalizing it by her hypothesis and means.
Is this a problem that we humans can't perceive the full facts? No, according to Richard Haier (professor, scientist and psychologist at Irvine School of Medicine) the worst thing that can happen is that you prove that your hypothesis is wrong. And if you're biased and your results aren't fully true, then future studies will show other results than yours. A failure is just an opportunity to begin again more intelligently. The fact is that the results are just simplified versions of the world/reality, they are models. Models are simplifications of the reality so that we humans can understand it a bit better. So, the models aren't the reality. (See also the article above, regarding business purpose and business value).
In line with this idea, Alfred Korzybski famously articulated the concept that "the map is not the territory" (Korzybski, 1933). This principle reminds us that our representations of reality—be they business models, process diagrams, or strategic frameworks—are inherently limited. They serve as abstractions that allow us to navigate complex realities, but they are never fully comprehensive. While maps, both literal and figurative, help us understand and act within our environment, they are merely tools. The reality they attempt to represent is always richer and more complex than the model itself. By keeping this in mind, businesses can remain adaptable and avoid the pitfalls of over-reliance on any single model or strategy.
The exploration of diverse perspectives in science, particularly the philosophical debate around true science versus pseudo-science, is a crucial element of being a scientist.
Caption: Multiple perspectives may each hold a fragment of truth, offering valid insights within their scope yet representing only a piece of the larger and complex reality. Our understanding is shaped by these perspectives, which, like puzzle pieces, create a complex mosaic of the corporate world and beyond, inviting us to seek a more holistic comprehension. The model is inspired by discussions on relativism and perception theory, often explored in philosophy and cognitive science. This visual metaphor is commonly referenced in contexts exploring subjectivity, truth, and perspective, including works like "The Structure of Scientific Revolutions" (Kuhn, 1962) and "The Interpretation of Cultures" (Geertz, 1973).
Implications for business
In business, similar to science, we must recognize that individuals have diverse perceptions of a context. A business exists both as an entity and as a multitude of perceptions shaped by the coherence of these perspectives. There is a "business" as well as there are several perceptions of it, and it depends of the coherence.
A business strategy from one coherence (e.g. the vision of the board) isn't always the same thing as the culture (i.e. a group of people and their actions). And the culture may vary depending on the individual people in it, in fact – some people may not be a part of one "culture". And all these factors together result in how our business execution is working.
Caption: It's not always that people in a company are a part of a company culture. And it's not always that the culture is aligned with the company strategy.
So, in a business we have to be humble to that there are many perceptions of what our business is. One perception doesn't need to be more "correct" than the other, they just exist and are. It is by continuous work, communication (i.e. inclusion) and improvements we set a common direction and create a coherence. When individuals are included in the decision-making process, they have the opportunity to contribute their unique perspectives, thus becoming integral contributors to valuable improvements. This collaborative approach not only enhances the quality of the changes implemented but also ensures a more inclusive and representative outcome, resonating with a broader range of experiences and insights within the organization. Because in the end: people don't like change, they like improvements.
This understanding aligns with the reality of diverse perspectives, which is fundamental in both science and business. Embracing these diverse viewpoints is key to advancing our knowledge and achieving success, demonstrating the significance of multiple perspectives in understanding and navigating the complexities of the world. (See more about this in the article about business purpose and value)
Layers of human coherences - Understanding the complexity of individual perspectives
Caption: People are individuals in different levels of context.
Another way of looking at the phenomenon is to understand that in each given context, humans are involved in different degrees of human contexts. People themselves have a context. Everyone is an individual and each individual has their specific context. (Antonovsky, 1990)
Adam likes sailing, Frank likes cycling. The individual is part of a larger context than just himself, in a group of people - a team. Team Alfa is interested in AI, team Beta is interested in football and Chelsy league. And the team is a part of a context that is bigger than just the team. Team Alfa is part of a development organization at a company, team Beta is part of a football fan club. And you can extend this view of different degrees of context all the way up to e.g. context of a society or even human kind.
“Coming together is a beginning. Keeping together is progress. Working together is success. If everyone is moving forward together, then success takes care of itself.”
(Henry Ford, 1903)
What can we learn from this? People have different contexts and that the contexts exist at different levels. When we try to solve a problem at the company level, we must understand that teams and individuals are some of the context that must be included and taken into account. And to be sure that the problem the company tries to solve is a problem worth spending time on, we need to ensure that solving problem brings value to different levels of contexts. This enables the individuals to become part of the company's change executed by the teams.
Antonovsky's concept of Sense of Coherence (SOC) highlights the importance of cohesiveness within these contexts. SOC is not an individual attribute but a group phenomenon, exemplified by the various groups within a company.
The crucial interplay - Understanding perception of perspective
So, each person has their unique perception of reality, shaping the business environment with a mosaic of perceptions. But how do these insights extend beyond the corporate realm? To answer this question, let's examine an intriguing interview conducted by Lex Friedman, shedding light on the significance of perception and perspective in leadership, teamwork, and even espionage. In a compelling interview from 2020, Lex Friedman spoke with Jason Hanson, a former CIA officer who shared invaluable insights from the world of espionage. During this interview, Hanson conveyed a critical lesson applicable not only to spies but also to leaders and team members – the differentiation between perception and perspective.
Hanson explained that perception is an individual's personal viewpoint and understanding of a situation, while perspective encompasses the ability to understand and consider others' perceptions as well as one's own. This understanding is foundational in effective espionage, enabling spies to navigate complex scenarios, anticipate potential pitfalls, and maintain credibility and trust in their covert operations.
Crucially, Hanson emphasized that this perspective-perception dynamic reaches beyond espionage. It holds significant implications for leadership and collaboration. Leaders who are mindful of how their actions and decisions are perceived by their teams and organizations can cultivate trust, facilitate effective communication, and foster productive teamwork. This awareness empowers leaders to make informed choices that resonate positively with their colleagues, leading to better outcomes and stronger relationships. Hanson emphasizes the importance of both perception and perspective in becoming not only a skilled spy but also a proficient and empathetic colleague and leader.
Caption: Human beings cannot grasp the full extent of reality; we possess a perception of what we observe. However, even this perception may not align with the impartial facts of reality. In the checkerboard image, squares labeled "A" and "B" seem to be of different shades because of the shadow cast by another object, yet they are indeed the same color. This illusion, known as the Checkerboard Illusion, was highlighted by Edward H. Adelson in the 1990s and swiftly became a pivotal example in the study of visual perception. It was widely published and discussed, particularly in academic and psychological circles. In the image our perception is deceived by the chess square's surroundings and our preconceived notions about how the square should appear.
Caption: In the image above is yet another example of our perception being misled; two squares seem to differ in color because of surrounding visual cues, when they are in fact the same. Don't believe me? Cover the middle of the cube with your fingers, and you'll see. It's a vivid demonstration of how context shapes our perception, offering a glimpse into the subjective nature of our view of reality.
The images above illustrate that our perception of reality is not only shaped by our experiences, but also influenced by our senses (i.e. sight, hearing, smell, taste, and touch). As humans, we assimilate these diverse sensory inputs and experiences to form our understanding of the world. Is this notion disconcerting? Well, maybe not... I would say that this is the beauty of being human - we do not apprehend the complete complexity of reality, but rather the biased portion of reality that we perceive. This leaves us with the understanding that there is always another perspective to explore.
Is there a "correct perspective"?
So let's engage in a bit of philosophical pondering within this domain... The concept of perspective is a fundamental aspect of human perception and understanding of reality. In this article we have explored the intricate interplay of diverse perspectives within the corporate world and beyond. It becomes apparent that there is no single "correct" perspective when it comes to comprehending the complexities of our reality. But maybe, the more perspectives we consider, the closer we may come to a little bit more comprehensive understanding of reality. (Hansen, 2023)
In scientific research, this multiplicity of perspectives plays a central role. Researchers spend a significant amount of their time reading reports and articles within their respective fields. Why? Well, the primary goal is to gather a multitude of perspectives to contribute to a broader and more nuanced understanding of the chosen subject matter. However, it's crucial to recognize that even the choice of the specific subject matter (and the data and understanding you collect) is inherently biased and part of a particular perspective. This realization leads us to a profound observation taught in higher education and science theory: all research can be perceived as somewhat pseudoscientific. (KTH, 2017)
Consider the varying attitudes toward natural medicine across cultures. In some societies, herbal remedies and natural treatments are regarded as scientifically validated methods of healing, deeply rooted in tradition and supported by local research. In other cultures, however, these same practices may be viewed with skepticism, seen more as pseudoscience than legitimate medicine. This divergence illustrates how our context and cultural background shape our understanding of what constitutes "scientifically proven" knowledge. Historically, scientific consensus has often shifted. For instance, the once widely accepted belief that the Earth was flat is a prime example of how scientific 'facts' can change over time. Current scientific debates, like those surrounding climate change or nutrition science, further showcase this plurality of perspectives. Even within a shared field of study, researchers may arrive at different conclusions, underscoring the multifaceted nature of scientific inquiry. Therefore no perspective is universally "correct"; they are shaped by the subjectively chosen context and the limited prevailing understanding of the time. (IPCC, 2019) (KTH, 2017)
As Steven Pinker notes, "We are capable of exploring many different kinds of ideas, and among those ideas are the solutions to our problems". This exploration is pivotal in understanding the multifaceted nature of knowledge. Michael Gazzaniga also emphasizes our narrative nature, "We are a story-based creature, constantly constructing narratives". Our perspectives are the stories we create, evolving with new information and insights.
The existence of reality itself is a matter of perspective. While we define reality within our human terms, the truth is that reality simply "is", indifferent to our categorizations of real or unreal. This concept is illustrated by the idea that understanding our current dimension might require experiencing the next. For instance, an ant on a leaf is unaware of the world beyond, just as humans, with our limited perceptions, cannot grasp the entirety of 'reality'. Those who have experienced spiritual encounters might argue they've glimpsed another dimension, reshaping their understanding of reality and humanity's role in it. (Hansen, 2023) (Harper, 2015)
In conclusion, probably there isn't a singular "right" perspective. Perspectives exist within their contexts and are shaped by individual subjective starting points. What's essential is finding value in relevant (i.e. subjective) perspectives and a sense of coherence in them, e.g. in a business. It's through diverse perspectives that we engage in meaningful discussions, enhancing our collective understanding. The goal isn't to converge on a single truth, but to find valuable and meaningful coherence (e.g. for our business) in the myriad viewpoints that make up our complex reality - that's where you find your subjectively "correct" perspective. (Harari, 2017)
Summary
In this article we have delved into the multifaceted nature of individual perspectives within the business environment. We see how each person in an organization contributes their own unique perspective, creating a complex and varied landscape of perceptions that influence business dynamics. The concept of scientific operationalization serves as a notable illustration, demonstrating how different interpretations can have a significant impact on our approach to problem-solving. This exploration underlines the importance of recognizing and valuing diverse perspectives, as each provides essential insights that contribute to the overall understanding and success of the business.
What can we learn from this exploration then? Fundamentally, it's the crucial importance of acknowledging and embracing these diverse perspectives. In the realm of business, strategy and culture might not always be perfectly aligned due to these individual differences. Yet, by fostering inclusive communication and actively involving people in the process of change, we can shift from merely imposing change to genuinely facilitating meaningful improvements. This approach reframes change as an opportunity, not a hurdle.
In drawing conclusions, it appears beneficial to emphasize empathy, understanding, and inclusivity in the business sector. Recognizing and valuing the variety of individual differences could lead to a more unified and dynamic environment, enhancing both business dynamics and workplace harmony.
My top pro tips
Be brave enough to question your perspective and explore others. How is your perception of the business? How are others perception of the business? What differs and why?
Be sure to have a communication plan regarding the change. Should it be top-down, or bottom-up? Should it be information meetings (i.e. one way) or workshops (i.e. multi way)? Plan accordingly to the purpose and roadmap of the change. Dare to ask yourself "Why should the audience listen to me?", as this defines the value of what you are giving them.
Reflect on how your decision making is done in the company. Is your company good at using the knowledge of the people in the company and its business when it comes to decision making? Or do you suffer from the HiPPO ("Highest Paid Person's Opinion") - or by some referred to as "Rockstar" - syndrome (i.e. a manager that impeding the business doing the work they are best at)?
Dare to use different leadership styles depending on the teams needs (i.e. the maturity of the team and the team's task). Instructing, coaching, supporting or delegating – which style fits the best?
Always understand the problem you're trying to solve and in which different levels of context it may be relevant in. E.g., do not just have a workshop where you divide everyone into teams and let the team work towards the solution. Instead, have a workshop where you have moments that both allow the individuals to think individually, but also moments where the individuals are part of teams that think together. And allow the teams understand the context of the problem, so that the teams can think from the best interests of the company. The lack of this (i.e. allowing both individuals and teams think) is the most common mistake I see when it comes to workshop facilitation. The risk is that the solution to the problem may be developed based on whoever speaks the loudest (and only his/her perspective), or that the solution only suits a specific part of the business. We must understand that people do not make rational decisions, but emotional decisions. (David JP Phillips, 2022) This as a person does not have the cognitive capacity to perceive the whole reality. (Dunbar, 2015) So, in order to make good decisions, we need to collect and try relevant (i.e. not necessarily all) perspectives.
In this article, we have observed that the dynamics of perception and perspective are not limited to the corporate world but extend into various aspects of our lives, e.g. including the intriguing world of espionage. By recognizing and valuing diverse perceptions and being mindful of how our actions are perceived, we can cultivate a more inclusive, productive, and innovative environment, driving success in our personal and professional endeavors. So, value the ability to take on different perspectives and observe (i.e. perceive) them - an ability that is honed in practices like observational meditation.
Ask yourself:
Are your company strategies just words?
Is the strategy and execution connected?
Do you measure the right results?
Does it take long time to execute the strategy?
Are you innovate? Do you create innovation with new and higher customer values? Or do you just fix what you have?
Data governance - To see data as a valuable asset
2022-01-12, by Johan Hildingson (formerly Lagerström) - Type: Essentials - Depth and reflection: Low - Reading time: ~5 min
There are many different definitions of what DG (data governance) is, but the common goal of among all definitions (regarding governance, management and ownership) is:
"Using data to better manage the company's operations"
This is mainly done by defining and manage policies, processes (routines) and systems in order to ensure that people have safe access to high quality, correct and valuable information. Information that they need in order to make good business decisions and to lead the company towards success. Furthermore, this implies that DG controls how people in the company use data and technology, to add value to the company and its operations.
Caption: Summary of DG aspects and deliverables.
DG is thus not an IT-only function. It is an operational responsibility that requires cross-functional cooperation and stewardship. In other words: people and ownership, processes and policies / requirements. IT solutions is often needed to enable compliance/controls.
Summary of requirement deliverables of DG:
Ownership (people, operations, etc.):
Manage and control different types of information/data.Rules (regulations, policies, instructions, etc.):
Rules for behavior and data / information areas.Processes (business requirements, processes, instructions, etc.):
How the work should be conducted and the rules implemented.IT solution (functional and non-functional requirements, tools, etc.):
How the process is made possible with IT tools.
Caption: Summary of DG aspects, requirement deliveries and business context.
What about the term Data management (DM) then? DM is often interpreted as the same thing as DG. Data Governance (DG) and Data Management (DM) are intertwined yet distinct concepts in handling data within an organization, each serving specific roles:
Data Governance (DG):
Definition: It involves the establishment of organizational structures, data owners, policies, rules, processes, business conditions, and metrics.
Focus: DG focuses on the entire lifecycle of data, including collection, storage, use, protection, archiving, and deletion.
Purpose: The primary goal is to set the requirements and framework to ensure data accuracy, reliability, security, and compliance with ethical and legal standards.
Implementation Aspect: DG is more about the "what" and "why" - setting the rules and guidelines for data handling within the organization.
Data Management (DM):
Definition: DM is the technical implementation or solution aspect of DG. This encompasses the technical and operational aspects of collecting, storing, organizing, and maintaining data.
Focus: It involves adding technical functions to ensure that data in company systems is correct, accessible, and available. It deals with practical data handling, including data architecture, modeling, database design, integration, storage, and quality improvement.
Purpose: The aim is to ensure data is accessible, usable, and manageable for those who need it in their daily tasks. This includes implement the requirements set by DG through practical, technical means.
Implementation Aspect: DM is more about the "how" - carrying out the guidelines and requirements set by DG in a practical, operational manner.
In summary, DG sets the strategic framework and requirements for data handling. DG revolves around policies, regulations, and oversight of data usage, focusing on aspects like data ownership and compliance. DM is the technical execution that ensures these requirements are met by focusing on the practical handling and maintenance of data. DG defines the what, why, and who of data handling, and DM is about how these are technically implemented. Both are critical for maintaining the integrity and efficacy of data within an organization.
Summary
Data Governance (DG) is essential for managing a company's operations using data as a key asset. It involves defining and managing policies, processes, and systems to ensure access to high-quality, relevant, and valuable information for sound business decisions. DG isn't just an IT function; it requires cross-functional collaboration and ownership, encompassing people, processes, and IT solutions. DG sets the organizational framework for the entire data lifecycle, while Data Management (DM) handles the technical implementation. Effective DG necessitates ongoing communication, education, and adherence to set rules and processes. It's crucial to continuously update DG practices in response to new data, laws, and business changes, recognizing data as a central and significant asset.
So in summary... DG is about understanding the goals, requirements and processes around the data and its use. In BD (business development), this way of looking at needs is not new. What is new is the context (including the requirements, solutions and processes) this entails; the context of seeing data as an asset.
My top pro tips
Communicate and educate:
The new rules and policies must be communicated and taught. What does that mean for each role? What are their needs? What is DG and how does it affect whom?Inform that DG is "processes with rule sets":
DG sets rules and processes to...:Ensure that data is used correctly and efficiently.
Protect privacy and security.
Manage ownership, inputs, uses and sharing of data.
It's all about seeing data as an asset...
Yes, DG is much about data and information. For each data/information part ask:Where: Where is the data stored?
Who: Who should have access to it?
What: What is the data (i.e. the definition of the data)?
How: How is the data structured today?
Quality: Current and desired data quality?
Goals: What will we use the data for? What do we want to do with it? What can (and can't / shouldn't) we do with it?
Purpose: What do we want to achieve with the data usage? Why and how does it help us achieving our strategy? How is data an asset in our company?
Requirements: What do we have to do in order to achieve the goals?
Understand that the work does not end here...
DG is a work that must continue on an ongoing basis. New data comes, changes happen, data becomes obsolete etc. New laws and regulations come. Business changes take place. People come and go. Let's face it: data has become an central and highly important part of our lives. It's an asset.