3 Signs Your Company is Stuck in a Negative Reinforcement Loop from Complex Relationships

Many times, we encounter complex relationships that are substantive, such as marriages, parent-child, siblings, relatives, etc. However, there are also less conspicuous complex relationships, such as mentorship (including employees who started as interns), fellow townsfolk, classmates, former colleagues, and so on.

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The existence of complex relationships has its rationale, especially during the early stages of entrepreneurship when attracting talent is extremely challenging. Only the 3F team (Family + Friends + Fools) wholeheartedly supports and follows along. “Because of trust, we can see,” and by overcoming one obstacle after another, the company manages to survive. During the long-term collaboration in difficult times, deep understanding and trust are established.

However, as a company enters a new stage of development, these close relationships can inadvertently turn into “complex relationships,” hindering the company’s growth, leading to stagnation, or even decline. Some phenomena or signals may include:

  • High tension or too much harmony within the executive team, making it difficult to have timely and quality discussions and decision-making.
  • A few members relying on seniority, becoming obstacles to change without contributing.
  • Loyalty becoming the sole criterion for talent, making it challenging for professionals and career-oriented individuals to integrate.
  • “Nepotism” or “clan-based leadership” beginning to emerge, where not taking sides is seen as opposition.
  • Declining execution efficiency, with middle management spending a lot of time speculating about leadership’s intentions or trying to avoid blame.
  • Former colleagues occasionally or repeatedly staging comebacks.

I’ve conducted interviews with individuals who have encountered complex relationships, and what they worry about and resist isn’t necessarily the existence of “complex relationships” within the company but rather the presence of “incompetent individuals in key positions” who hold these relationships.

The role of such executives is often mediocre, focusing more on avoiding mistakes and believing that “not messing up is an achievement.” If the gap between their abilities and the requirements of their positions is significant, they may manage to “fail abundantly” by relying on the “ignorance is bliss” approach.

Moreover, if these individuals have a strong need for personal recognition, hold power and prestige too tightly, they can inadvertently trigger the “Gresham’s Law of Bad Leadership,” driving away truly capable middle and senior-level employees and leaving behind those who haven’t left, forcing them to take sides to demonstrate loyalty.

Over time, as loyalty and alignment with a particular faction accumulate, they can create a toxic organizational culture and drag down efficiency.

In essence, having “incompetent individuals in key positions with influential relationships” often marks the beginning of many “negative reinforcement loops” within an organization, and it’s crucial to intervene early when recognizing this.

I believe that addressing this issue can be done in three steps:

Step 1: Always Prioritize Competence When Assembling the Executive Team

Unlike values, which tend to remain relatively constant and consistent over time, the competency requirements for an executive team can change with shifts in the internal and external business environment and strategic choices. Therefore, the “competence alignment” of an executive team is not fixed and should be regularly assessed. When evaluating and building the competency of an executive team, both team-level and individual-level considerations should be taken into account:

From a team perspective, an executive team should boldly introduce executives with specific critical competencies. This is because only when the executive team brings in new perspectives and capabilities can the organization prioritize and increase the likelihood of acquiring these capabilities. The process from the executive team taking root to the entire organization blossoming takes time and should be initiated sooner rather than later.

From an individual perspective, the most crucial competency that executives should possess is the “ability to achieve tactical breakthroughs in the right direction.” Executives who possess the ability to make “tactical breakthroughs” are competent executives, while those who lack this ability are not. It’s worth noting that the “tactical breakthrough” capability is a requirement for all executives, not just business executives. Therefore, transitioning from a business role to a functional role may still require this capability, as a lack of professional competence can hinder the achievement of tactical breakthroughs.

Step 2: Establish an Executive Entry and Exit System That Achieves a Balance of Emotion, Logic, and Rules

Just like in product development, where having only positive feedback loops and no negative feedback loops is likely to lead to failure, organizations also need a system that allows both entry and exit. An organization that only focuses on entry without considering exit is overly idealistic and lacks resilience.

I know a founder who is very compassionate and found it difficult to confront an underperforming executive. They even struggled with discussing the issue until it reached a point where the executive sighed and said, “You finally told me. I thought you still had expectations for me, but I know I can’t do it.” Of course, executives who are open and direct in their communication are commendable, as candid and straightforward communication allows both the organization and the individual to better understand each other’s expectations and make more informed and reasonable preparations and responses.

Some founders may have difficulty accepting the exit of senior executives on an emotional level. In such cases, it’s worth considering not only the impact on the individual but also the impact on the entire organization and making a more prudent decision. Additionally, founders can reflect on whether their difficulty in accepting the exit of senior executives is essentially related to their reluctance to accept the entry of new executives.

The entry and exit mechanisms for new executives and the departure of senior executives are crucial for both the individuals and the organization as a whole. Avoiding discussions can turn apparent problems into hidden issues and simple problems into complex ones. Mature leaders and leadership teams continuously learn and refine their approach through what may seem like challenging conversations. They overcome their weaknesses, find a balance of emotion, logic, and rules, and strive to achieve a win-win outcome for both the individual and the organization.

Step 3: Replace “Close Relationships” or “Tense Relationships” with “Professional Relationships”

Having relationships within the executive team that are either too tense or too close can be detrimental. Excessive tension can hinder genuine listening and empathetic thinking, affecting the overall perspective. On the other hand, being overly relationship-focused can lead to unclear responsibilities, vague tasks, excessive caution, and unresolved issues.

To break away from these two relationship dynamics, it might be beneficial for the executive team to undergo some “professionalization training.” Collective learning and practicing “discussion and co-creation skills,” especially in activities with a high leverage effect, can be a valuable approach. There are many aspects to this, and I may write a separate article to elaborate on it. Today, I’ll emphasize one principle: the “weaken implicit understanding and emphasize explicit communication” principle. This principle not only reduces misunderstandings and enhances understanding but also facilitates the documentation and dissemination of knowledge and best practices, effectively transforming individual executive capabilities into organizational capabilities.

By consistently prioritizing “capability matching” in executive team formation, establishing a balanced system for executive entry and exit, and replacing “close relationships” or “tense relationships” with “professional relationships,” you can take these three steps to prevent individuals with connections but lacking competence from remaining in key positions. Building a “career community” on the foundation of a shared interest and destiny and evolving the executive team into an engine for organizational renewal within the framework of a “common cause community.”

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