When Systems Don’t Match Goals

It was in 2017 when I had the opportunity to visit Cuba. In my travels around the world I prefer to visit places with beautiful nature, or sites that are in some way unique. Not that Cuba wouldn’t have a beautiful landscape, lovely beaches, and excellent diving. It does. However, the reason I wanted to visit was to experience the culture and get a bit better understanding of the unique social system.

I traveled with a small group of people, and we landed in Havana in late October. As we got out of the airport, we were immediately confronted with one unique feature of the Cuban system. As a tourist, you can convert your US dollars or preferably Euros to Cuban Convertible Pesos (CUC). So far so good. Then you learn that it is a currency created specifically for tourists. The locals use a different one, Cuban Pesos (CUP).

The dual currency system began in 1994 as a way for the government to deal with a weak economy. The Cuban Convertible Peso was initially created to be used in the tourism industry and for luxury goods. It was to take out all foreign currencies from circulation, and offer an alternative that is in almost all senses equal to US dollars.

You can use CUC in places like hotels, restaurants, tourist attractions or for luxury goods. In fact, you would often be surprised by what is considered a luxury item. In short, it is anything that is non-essential, even things like cosmetics, anything imported, and generally anything intended for consumption by foreigners.

Most Cuban workers receive their wages in the Cuban Peso, sometimes with bonuses in Convertible Peso. Shops that sell basics like fruit and vegetables accept only the regular peso. Since goods sold for CUP often have government-controlled prices, they are significantly cheaper than products sold for CUC.

I guess it made some sense to the creators of the system when being confronted with a weak economy and the lack of goods on the market. It seemed like a sensible way to remove some of the demand.

So how does it work today? We spent a couple of days around Havana and then traveled south through Cienfuegos, Santa Clara Trinidad, Sancti Spiritus, Bayamo, Camaguey, all the way to Santiago de Cuba. We would stay at so-called casas particulares (essentially private accommodation or homestays). Cuban families are allowed basic entrepreneurship, and some use the opportunity and rent a room to tourists.

It is a great way to learn about the culture as it gives you an opportunity to see the life of ordinary people. That is until you realized that they are not that ordinary as the farmers you see working in their fields.

The fact that you rent a room to a tourist who pays in CUC immediately elevates you above your peers. You are now getting a significant income. You are also getting access to a currency designed for luxury goods. And it shows.

In a communist country where one of the tenets of the society is that everyone is equal, the system allowed the creation of a new wealthier class. There are those who work in the tourism and have access to Convertible Pesos, and those who don’t. It also encourages corruption.

The system of dual currency is effectively creating the exact opposite of what you want to have in a socialist country. People are not equal anymore.

So how does this apply to your professional life?

Cuba is a beautiful country, with warm and welcoming people, not to mention the best rum you ever tasted, and I truly enjoyed the visit. However, it also opened my eyes to the fact that you need to design your systems, so they truly support the culture you are trying to build and don’t work against your efforts.

Understand the principles you will hold dear – having the core values or tenets upon which you build your teams well understood by the team is a must. Otherwise you run a danger of having processes and systems working against each other.

For example, if one of your tenets is that you believe in building collocated teams for better communication and camaraderie, you can’t keep breaking this principle by hiring remote workers when it suits you. It goes against what you set to build.

Understand the natural laws – your values need to be aligned with natural laws. You need to understand that for some actions there are natural consequences and you need to build them into your plans.

For example, if you set the performance bar so high that it is unachievable in the hope of building a high-performance culture and dismiss the pushback from the team saying, “just figure it out.” They will. They will figure out workarounds and cheat the system. On the surface, you have succeeded. Deep down you have a rotten system where people are cutting corners and may even resort to unethical or illegal behavior to achieve the goal.

Let the principles guide your decisions – design your systems with your core values and natural laws in mind. If every decision you make, and every process you set up is aligned with your guiding principles, it will make your life much easier.

By default, you are removing friction from the system. You are removing any confusion the employees may have when working in your team. You are driving in one direction, and you do it effectively and with high efficiency.

If the principles are clear, then decisions make themselves – the great thing about having a couple of guiding principles is that they make it easy for you to make decisions.

For example, if your business model is built around selling high volume goods for a lower price you optimize all your sales, marketing even R&D processes for that business model. Now imagine that a big potential customer comes and offers you a million dollars if you sell them a customized product and build an exclusive technical support team for them.

Will you do it? You may go to your CFO and start crunching numbers to figure out whether you should do it or not. Alternatively, you can go back to your guiding principles and say “no” without a second thought. It would break your model. Even though you could make a profit from it, it is a distraction for the whole organization and a slippery slope that could have long-term negative consequences.

Make sure you measure the right things – measuring performance makes sense. Not only it allows you to know how the company and individual people are doing, but it is also motivating. If employees can measure how well they are doing, they will know what to improve and ultimately will be more satisfied with the work as they will see results and progress. However, you need to measure the right thing.

To continue the example of the high-volume business model. If your salespeople are rewarded only for the dollar amount they bring in, then they will push for the customization and the one million dollar deal. They will essentially work against the guiding principles regardless of how many times you told them. They will optimize their efforts and behavior according to what is rewarded, not what is being said.

What if you reward equally the dollar amount and consistency? What if one million in one deal is rewarded less than one million in hundred deals? That would be aligned with your business model of high-velocity low-price and drive behavior supporting these principles.

As you can see adhering to your core values and natural laws, having a clear, easy to understand explanation of your business model, knowing how the company operates, and what makes you and the team successful can be an incredibly powerful way to align the whole organization.

Every time you make a decision or introduce a new process ask yourself a simple question, “is this aligned with our business model and our values and principles, or would it create friction and distract the organization? Aren’t we building a dual currency system where only tourists can buy a bar of soap?”

 

Photo: Mich52413 / Pixabay.com

What are your thoughts on how the systems and tools used can help building the right culture? Do you have examples when a wrong system caused significant harm to the culture of the company?

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