The Effective Manager And The Principle Of Sub-Optimization - Part 2

0:00Welcome to Manager Tools. This is Sarah. And I'm Mark. Today's podcast, The Effective Manager and the Principle of Sub-Optimization, Part 2 of 2. As always, this content has been crafted by humans, and we're certified by Proudly Human. The questions this cast answers are, what is the principle of sub-optimization? I've never heard that. Why do I need to understand it? Oh, you'll learn that. and how can it help me as a manager? Well, for one thing, you won't be a jerk. If you want answers to these questions and more, keep listening.

0:41Your natural communication style works for about 25 % of the managers on your team. The other 75 % need you to communicate differently, and they're not going to tell you that because they don't have the framework to explain it. The effective communicator conference teaches you to read behavioral cues and adapt in real time, so every conversation with every member of your team actually lands. For individual managers and full leadership teams, visit manager-tools.com forward slash ECC for more information. I've said this before in front of multiple clients. Consider Apple's 160 ,000 employees. That's the number last time I checked, okay?

1:31If we subtract the roughly 60 ,000 employees working in their retail stores who don't produce product, right? They sell it. And I love Apple stores. It's a great retail experience, but they don't produce it, right? If we subtract that 60, we're left with roughly 100 ,000 people as employees. If we asked 100 ,000 individuals, pick whichever individuals in the world you want. Anyone, the smartest human being in the world. Right, in the world. And you ask them to work independently, could any of them individually on their own produce even one iPhone or iPad? Of course they couldn't. No. No. No human being, no matter how smart, could.

2:17Folks, because organizations expect their individual employees to sub-optimize in order for the organization itself to optimize. And taking this further, what if every organization strove to hire the very best person available for every single role possible? What would happen? Well, we'd suggest if they could, they'd go out of business because the cost of every employee being the very best in every role would be so expensive. The company could never create affordable products. None of us would buy them, even if they were the best products in the world, because they would be so expensive. They'd be out of the reach of any of us.

3:03Yeah. And that even happens with the existing employees. We see this idea for maximized individual compensation problem play out when compensation is reviewed every year. Even if an organization had an excellent performance in a year, companies do not give all profits back to employees in compensation. They don't. The bucket, and if you don't know what we mean by bucket, there's a podcast for that, a manager tools. That might be an executive tools podcast about bucket. Yeah. The bucket of compensation increases given to managers to a portion among their directs is not equal to the profit margin growth of the company.

3:47Why? Because the organization has to hold back some of those monies for investments and for cash reserves in the event of an economic downturn or a poor performing year for the company or a pandemic. The company intentionally sub-optimizes the compensation of all individuals within reason, because if they go too far, they won't be able to hire anybody. They sub-optimize the compensation of all individuals to maximize the future success of the whole organization. Would you rather have your max salary this year, but only for one year because your company goes out of business? Or would you rather have 10 % less for the next 10 years?

4:29Yeah. And have a job for the next 10 years or get it all done in one single year and then have to be looking because human beings are historically abysmal at budgeting their money over the course of time and therefore consistent money versus one big lump sum, which you can blow all at once, tends to be better for the human condition. It is. That is so good. It is. Yeah. How many people have we heard of? I mean, this takes us back to sports analogies, but how many people have we heard of that have been hugely financially successful, But then at some point in time and bankrupt, exactly, because they did things with their money that did not allow for it to last for the long haul.

5:14And folks, we also see this in the concept of things like Team One, again, one of our most popular executive tools, podcasts, effective mid-level managers, senior managers, directors, senior directors, even vice presidents. No, that while their ego encourages them to think of themselves being at the top of their part of the organization, the top of the bottom, if you will, the organization expects them to act like they represent the entire organization and behave less like they are at the top of their organization and more like they are at the bottom of the top of the overall organization. Yes.

5:53Yeah. And these effective middle managers roles are not to primarily speak upward about what their sub organization, the people below them, have in terms of needs and concerns. Rather, they're expected to speak downward into their sub organization to make the entire organization as a whole more effective and make sure everyone, not just their part of the organization, is well served by the organization itself. Yep. You know, listen to the examples. And by the way, I was writing this and I had five or six more examples. I think PSO, principle of self-optimization, is one of the most underapplied and underappreciated systems at work in all human organizations.

6:40You join an organization and by definition, you give up some of your freedoms. Heck, you have to show up for work every day, but you get an incredible output thanks to the massive magnification of human effectiveness when we work together and specialize our labor and so on. Conflicts about resources and individual success are rampant everywhere in every organization. I was the number one person. Why did she get almost as much as me, right? We all want more for ourselves. That's part of the human condition. In fact, we mentioned in John Nash's, in the bar scene in which the five men are about to go over and engage with the five women, John Nash said, Adam Smith is wrong.

7:29which Adam Smith was like the greatest economist of the last 200 years in many ways. And his book, The Wealth of Nations, came out in 1776 and said things that simply had never been said before that then were proven over and over again. And what Adam Smith said was each person should have pursued their own individual interests. But what Adam Smith meant in 1776, when all companies were tiny companies for the most part, was each individual architect or cobbler or butcher or baker or candlestick maker can go ahead and do their own thing because they might have one apprentice, but that's it. Yeah.

8:11Right. And so they can pursue their own thing because they what they pursue individually, if you're a one person company is, in fact, in the interest of the organization. What we in the larger organizations of today have to realize, we have to accept less for our individual selves and our part of the organization in order to optimize the entire organization. Yeah. And folks, I mean, you've heard us talk a million times, more than a million times, I'm certainly, about relationships, about trust. This willingness to sub-optimize ourselves and our teams is something that only happens in high-trust organizations.

8:51And many of us have been in not high-trust organizations. So you know this is true. If we don't trust our leaders, we will not accept our own sub-optimization. And a particularly extreme example of this is the soldier who's willing to die for his or her fellow soldiers in the service of the mission, putting themselves on the line in order to save their mission, the other people, above their own life. And in our day-to-day human organizations, it doesn't come to that. So we were never put at this precipice of really, truly thinking about the depth of what you're willing to risk for others. But that's what high trust will do for to an organization, if you will, and the effectiveness of this principle of suboptimization.

9:43Yeah. Look, folks, our guidance on strategy relies on the principle of suboptimization as well. We have an executive tools cast for this, and we encourage you, if you're only a manager of those licensee, to upgrade to executive tools. And the cast is called Mass at the Point of Decision. It comes from Napoleon, history's greatest general, and he was a strategic genius. And for those of you who are not familiar with Napoleon, I'm just going to take my 30 seconds here and give him some more fame. the analogy I would give to how good was Napoleon at being a general? According to a friend of mine who's a military historian, he said, Napoleon is roughly equivalent compared to all the other generals, roughly equivalent to Wayne Gretzky, Michael Jordan, Caitlin Clark, Tom Brady, and Pele.

10:40All together, that's how much better he was than all the others. So how does Napoleon approach strategy? Napoleon was so intent on focusing on what was important for his entire army that when his generals, who were in command but not at the strategic crux of the battlefield, asked for more soldiers because they were losing, because Napoleon had put all of his soldiers at what he believed was the key crux or geographic point or whatever of the battlefield, when they asked for more soldiers because they were losing at their unimportant location, at least in Napoleon's mind, Napoleon took troops from them to feed into a strategic point of decision.

11:29Napoleon's strategic genius caused him to sub-optimize everywhere on the battlefield except where he had decided his total army could win the battle. He was so committed to this. He was famous for nearly losing every battle that he won. He was very close to losing. There were reports saying, we're going to lose, they're going to collapse us, we're going to get around our backside, we're going to be in trouble and so on. But he lost, he was losing, he was being overrun by the enemy at all the places that didn't matter to his strategy. Yeah. And to take it back to folks to the corporate world, strategy in our corporations is all about optimizing for the outcome of the entire organization.

12:18As an aside, if you're doing strategy at your level, your strategy should not be about optimizing for your sub-optimization, but rather optimizing your contribution to the entire organization's strategy. Yeah. We're going to go further here, guys. We find another example of PSO in the corporate political realm. Now, look, as we have said many times before, if you want a job without politics, die. Okay? It's not going to happen. All human organizations have politics because all human organizations rely on trusting relationships and politics are nothing more than the effects of various relationships internally in the organization.

13:07Now, when you look at the top of your organization, you see all kinds of politics, but what you call politics, the people up there call PSO-driven collaboration. Senior leaders know that they must maintain high trust relationship with their peers. So, they often sub-optimize themselves and their divisions or their departments for the benefit of a colleague, even though the perfectly objective and rational solution might be different. In lawmaking, in parliaments and democratic houses all over, it's called log rolling, where I scratch your back and you scratch mine. And you may decry that, but it is a fundamental part of the human condition for thousands of years.

13:56Well, this is, Mark, like the favor economy at place in our organizations. If I'm doing a favor for you, I'm not doing my own work. And I could be doing my own work. I could be getting my own stuff done. So you're sub-optimizing. Yes, myself. I'm sub-optimizing myself for the betterment of the overall organization because you need help and it will take time away from my work, but it's better for all of us if what your task is that needs to get done gets done. I'm going to help you do it. So folks, bringing the political PSO concept downwards into the organization, consider our frequent recommendations that Manager Tools community members embrace that favor economy, leading to trusting relationships, but doing so because you're suboptimizing yourself and your team for the larger organization.

14:51Yeah. To me, the favor economy... There's a podcast for that. Will it be linked to this podcast page, Mark? Yeah. We have several links. We have Team One. We have Masked the Point of Decision. We're going to talk about Trash Can Fires. We have Bucket, Trash Can Fires. Yeah, absolutely. To me, the favor economy is very similar to, it's in a different realm, but it's very similar to asking me to report on my work. Yeah. Taking the time away from working. Literally. Literally. I have stuff to do. Yeah. And if I do a favor to somebody else, that's exactly right. Or do you want me to report about the work?

15:30Both of those things are me making the individual decision to sub-optimize myself for the benefit of the organization as best as I can understand the organization, even though you might say, I'm just doing a favor for a friend. Well, because you trust that friend, she's actually asking you because she's suggesting that the outcome she needs is worthy of bringing somebody else into it than the resources she has. So you're essentially sacrificing for the organization. That's how I see it. We'll say it plainly, the virtual effective manager conference is not a recording. It's not a self-paced module.

16:09It's a live, facilitated, practice-heavy day where you learn one-on-ones, feedback, coaching, and delegation, and practice each one before you log off. Virtual does not mean less. It means no travel. Register now at manager-tools.com forward slash EMC. Okay, now I want to get to my favorite outline title of the year, Pigs and Hogs and Budgets. Corporate budgeting is a great example of the principle of suboptimization. every individual manager typically works exceptionally hard to maximize her own organization's budget. Makes sense, right? Everybody does this every year. But if every sub-organizational budget is maximized, PSO teaches us that the corporate budget will be sub-optimal.

17:14And I'm just going to continue. There's a phrase, which I love, and I learned it on Wall Street, which actually comes from agriculture, as you'll see, but has come to be popular among Wall Street financial investment community. And it is this, pigs get fat, but hogs get slaughtered. In agriculture, this means that only the fattest hogs are the ones that are slaughtered for the profit they can bring to the farmer. Farmers don't slaughter pigs who are still growing. They slaughter the fattest, obviously, the hogs. If they started to slaughter all the pigs, their stock of pigs will be gone, and so will future profits.

17:56And the investment world likes this phrase because while it is good to get fat as a pig, if you get too greedy and too selfish, and you become a hog, and you think it's all about you and you want all of the food and you want to grow as fat as possible, you will be slaughtered by your greed. Your colleagues simply won't come and help. You'll be the boy who cried wolf. Absolutely. So folks, when managers are attempting to maximize their own budgets, they're of course taking away resources from other departments to do it. And what's more, they gain the reputation of not being a team player. It breeds distrust among their colleagues, and they get a reputation for selfishness, which causes leaders to lose respect for their ability to act as a leader and optimize for the company, as opposed to optimizing only for themselves.

18:52Yeah. So be careful in your budget budgeting process, folks, regardless of what others are doing, because they in fact lacked understanding of the principle of sub optimization. organization, be careful of becoming a hog and getting slaughtered. Recognize that there's probably a way you can achieve your mission, your goals, your objectives, without taking all the possible resources you can take. And yeah, we admit it, folks, this takes trust. And it's probably somewhat of a flippant answer, but it's still fundamentally true. Folks, if you don't trust your organization or the people around you, it's time to find another organization.

19:34Yeah, I mean, we've given you all the tools and manager tools, peer one-on-ones and favor economy and all the things that you need to try and build that trust. But if you've tried, honestly tried, and you can't build it, then sometimes finding a better organization is the only answer you've got. Which takes us then to the last part of our guidance, which is perfectionists beware. Many managers, particularly high C's, those are our reserved and task-focused people. We think of them as being the perfectionists, the individuals that are in the weeds, that want everything to be precise and accurate.

20:09They wish the world was binary and logical and rational and there were only straight lines and it went exactly as it should, if you will. These individuals are driven to constantly improve their own part of the organization. They want an efficient system. They want no errors with nothing out of line, nothing not correct, everything perfect. But this is effort spent on optimizing their own sub part of the organization as opposed to optimizing the whole of the organization itself. You know, Sarah, it occurred to me just now that I'm going to get emails from people saying, hey, really love the PSOCast, Principle of Suboptimization.

21:00were you really thinking about that when you put out mask the point of decision and trash can fires and i'll be like yes is this a trick question this is kind of always the deal i know that sounds silly i mean i can't believe it took you so long to do this mark where's it like really disappointed i cannot believe you said that just now we have been putting out a cast every week for 21 years, and people still ask me, why is it taking you so long? I mean, I'm like, well, I mean, I suppose I could do three casts a week. Well, that brings up Mike's comment. Yeah. Well, speaking of sleeping, if people wonder why we only put out a podcast a week, I'll give you an example.

21:46I was in Washington, D.C. this week, Tuesday and Wednesday. I flew home Wednesday night and landed in San Francisco at 1 a.m. I got car service to our house, and I got in at 3.30 a.m. and at 4 a.m. was on the phone with client. And then again at 5 and then again at 6 and 6.30 and 7 and 7.30 and 8. And then the next morning you might think, well, I'll sleep in next morning. No, I had another call 4 a.m. So yeah, I'm plenty busy. But the answer to the question of, did I know that the principle of suboptimization related to things like trash can fires, which we're about to talk about, or mask the point of decision?

22:23I said, Yeah. In fact, the reason why this cast exists was when I first started writing about trash can fires, which, again, is an executive who's cast, which we encourage you to subscribe to if you're not, or become a licensee of if you're not already. I realized that that cast would be like six parts. Uh-huh. And I was afraid that people would focus on the trash can fire, which I think is a very good analogy and helpful, a good reminder for people. And they'd miss the underlying principle of self-optimization. And I did this as its own cast so that they would be looking for it. So it would be in their reticular activating system.

23:00And they would suddenly discover it, as you and I did driving through Pacific Grove this morning. Uh-huh. The guy turning left. Dude, embarrassing. The principle of self-optimization is all the way around you. I didn't want the theory to get in the way of the tactic or the tactic to get in the way of the theory. So we do have executive tools guidance, which is skewed toward those high C's you mentioned, the logical, linear, factual, rational, dot the I's, cross the T's, look at your paper and dot your I's and cross their T's, and then tell you you had things wrong. And it's called don't put out the trash can fire.

23:38Um, look guys, remember this, please. Every human organization always has raggedy edges because it's human, because we ourselves have raggedy edges. We have raggedy edges. Yeah. There are always problems. Always. There will always be problems. This is the nature of all human things, imperfection. Mm-hmm. And folks, we say this because it feels really good to fix problems. It does. In your part of the organization. I mean, you have got the power, the ability, the resources. When it's fixed, it feels like you got something accomplished. Yeah. You crossed it off your list. Yes, it's fulfilling. It's that little endorphin rush that comes from another thing.

24:28Every single time. Exactly. Every single time. But, folks, PSO teaches you that applying resources to these small problems in your suborganization takes those resources away from doing the strategic tasks that support the entire organization itself. Yeah. I'll tell you, I'm going to say this again. Well, here, let me sum up because I would try to explain, but there's too much. The principle of sub-optimization, which at this gasp, Sarah, you and I are the inventors of the acronym PSO. Yes, we are. I think it's pretty clear, yeah. The principle of sub-optimization plays out every day in thousands of ways in every organization in the world and including yours.

25:15If you're not seeing it, it's your fault because it's happening. When we think only of ourselves or only of our sub-organization, our team, our department, our division, our group, whatever, we are working against the optimization of the entire organization. look please start looking for opportunities to sub-optimize yourself and your team for the benefit of the entire organization by the way this this clues other people in that you think like an executive for those of you who are in the middle and wondering once you start looking you're going to see this stuff everywhere and you get to strengthen your mental muscle about what am I going to do about that?

25:59Am I going to sub-optimize or am I going to optimize? And optimize, particularly if you're a senior manager above, optimization means corporate level optimization, not what you want. Look, we've said this before recently, Sarah. We said, you don't get paid. I've said this many times in executives. You don't get paid to do what you like. You don't get paid to do what you're good at. You get paid to do what the organization expects of you in that role, regardless of whether you're good at it or you want to do it or you need to do it or you like to do it. And if you're going to optimize for yourself, for your own desires, you need to start your own company and keep its employee count at one for the entire time until you retire.

26:37The moment you get a second person, there's going to be sub-optimization handling. Just the fact that you'd have to train an assistant, you'd have to train an apprentice, you'd have to train your executive assistant and so on. But you know, it's over and over and over. Kind of funny about that, Mark. If you're a company of one and you're training your own assistant, you are training them to sub-optimize themselves in order to optimize you, which just feeds right back into the law of sub-optimization, folks. The moment there's a second person, someone is sub-optimizing for the optimization of the whole.

27:10Yeah, there you go. Thanks, folks. We hope this one helped you. Now, help us, help others, and tell your friends. And of course, follow, rate, and review our podcast. And remember, five stars only, please. and if you don't want to spend the time on giving us a five star rating just think about sub optimizing yourself for just a minute to optimize all of the manager tools community and the professional community beyond you bye guys

27:53Thank you.