Exploring the hidden forces that shape organisational alignment

How do you align human beings? How do you bring diverse people together and mobilise them to work collectively towards shared goals? It is a challenge that is shared by managers in every type of organisation, every function, sector and industry across the globe.

Galvanising people such that they pull together in the same direction is difficult – notoriously so, says Assistant Professor of Strategy and Entrepreneurship, Francisco Brahm. People have vastly different motivations, concerns or beliefs that they bring into the workplace; they respond to incentives in diverse ways, collaborate selectively and typically resist change. It can be hard to forge the trust across teams, groups, functions or layers of management that sustains collaboration and coordination – two critical levers of productivity.

These challenges sit at the heart of Francisco’s work – as both a former CFO within a multinational building materials firm, and in the field-based research that he is pursuing as an academic; research that is yielding exciting results and quantifiable impact for organisations.

Formal mechanisms: incentives and goal setting

Francisco’s research explores how different mechanisms or tools work to create – or undermine – trust, and to align and mobilise collective effort in organisations. Specifically, he looks at how these tools work in action: the real-world dynamics at play, the concrete outcomes they achieve, intended and unintended consequences, and practical takeaways for managers and organisations operating in today’s high stakes, disrupted and competitive business environment.

Two recent, large-scale field studies in Chile have unearthed compelling new insights into different approaches that organisations can adopt to drive strategic alignment.

The first looks at formal mechanisms, specifically the use of structured incentives and target setting to focus, channel and motivate employees’ efforts towards organisational objectives.

“The logic is simple and effective. Give someone a monetary reward for reaching a goal that matters to the organisation, and the chances are they will exert greater effort to achieve that goal,” says Francisco. “The problem is that incentive setting can be prone to certain managerial behaviours that undermine their effectiveness and even lead to unintended outcomes.”

To explore this, Francisco and colleagues from Pontificia Universidad Católica de Chile, collaborated with a large Chilean beverages company that was actively pursuing a salesforce restructuring project which involved standardising its incentive and target setting practices for staff. Specifically, the researchers were looking for evidence of ratcheting – the practice of increasing future targets when an employee meets or exceeds their current goal – and its impact on alignment, motivation and performance.

Ratcheting and unintended outcomes

Ratcheting is fairly common, says Francisco. But there’s a problem.

“If you’re a worker with a sales target of 100 and you achieve 120 you’re going to be thrilled that you’ve exceeded your goals and earned your bonus. But if your manager looks at that, figures you’re capable of more and now sets you a monthly target of 120 instead of 100 -  just imagine what it might do to your motivation."

When Francisco and his colleagues looked at the sales data provided by the firm before, during and after it standardised its goal setting, they found evidence of unintended outcomes on performance. Those employees whose targets were adjusted in a “reasonable” way performed well over time, whereas those whose future goals became ever more aggressive in response to past performance reduced their performance over time. Using this data to estimate the overall sales impact of ratcheting, Francisco and his co-authors found that if the firm were to avoid ratcheting—and thus stop adjusting future goals based on past performance aggressively—their sales productivity would increase significantly, by at least 10 percent.

The insights for this and other organisations should be clear, he says. Formal mechanisms like incentive setting, KPIs and structured rewards systems need to be well designed and implemented with care. In particular, how you update the parameters of these systems over time, such as goals and rewards, matter a lot. Managers should remember that when updating these parameters, they should be fair: allow for the company to profit, but also leave enough on the table for workers to keep them motivated.

“Employees are quick to learn. When things like goal setting become too aggressive or seem unfair, instead of striving to exceed expectations, people may well limit their efforts to simply meeting them, and this is precisely what we observed and were able to communicate back to the beverages company.”

A pivotal issue here is trust, says Francisco: trust in the equity and fairness of formal systems used to drive performance. But alignment is also shaped by informal mechanisms. And a second field study explores how micro-shifts in transparency, relational dynamics and communication can directly shape collaboration – with significant impact for organisational alignment.

 

Informal mechanisms

Workplace safety is a critical priority for most companies and getting it right depends on collaboration. Protocols only work when managers and employees are willing to work with one another and share the same understanding of risks and responsibilities. This is a more general phenomenon; many well-intentioned practices do not take off because managers and workers do not work together.

To examine how informal mechanisms can build this kind of alignment, Francisco and colleagues devised a massive-scale field experiment involving 12,500+ SME firms and in partnership with Chile’s largest occupational safety and health services organisation, the Asociación Chilena de Seguridad (ACHS).

“The ACHS routinely inspects premises for safety resources and procedures, but one of the biggest challenges they face is that detailed prevention plans are not shared across the workforce. Typically, they are only seen by managers and written in technical language or legalese, making them even less accessible. The result is weaker coordination and collaboration between leadership and employees that can have very real consequences.”

Little things, outsized impact

Working with the ACHS, Francisco and colleagues orchestrated a set of “remarkably simple” interventions. A letter was sent to managers in one group of firms outlining the shared responsibility of workplace safety, the importance of teamwork and the need to share an ACHS safety pamphlet with all employees. The employee pamphlet gave clear information about safety protocols, any risks that had been identified in the workplace and a reminder that management had received a detailed prevention plan.

“Going into the experiment, we knew that just 20% or so of these firms were actively sharing safety protocols with workers. The letters and pamphlets were designed to improve communication, transparency and relational accountability between managers and employees. And we were keen to see what impact they would have.”

As it turns out, that impact has been outsized. Following the experiment, workplace accidents in the treatment group have fallen by roughly 15 percent with a significant reduction in severity. Meanwhile, employee participation in safety training has increased by around 30 percent – a result that has been warmly welcomed by the participating organisations, says Francisco.

 

 

Research rooted in the real world

Francisco’s studies shed new light on how formal and informal levers and dynamics can build alignment. Managers frequently focus on the former, he says, because they can feel easier to implement, measure and calibrate. His research nonetheless points to the risks of opportunistic or exploitative practices and the pivotal importance of fairness.

Francisco’s work explores one of the most acute management challenges faced by organisations – in their natural settings and at exceptional scale. As such, he is producing evidence with practical implications for managers and decisionmakers everywhere.

“Many studies focus on theory, and others on large patterns. I’m fascinated by the actual mechanisms at play in situ – how formal and informal forces can be influenced and shaped by decisions, behaviours and actions in the real world, and how they can influence the way we bring people together and galvanise them around the outcomes we actually want.”