Available September 17, 2026

Episode 033: Performance Is Lost Before Execution – Why the Conditions Around the Work Decide What Capability Converts

DURATION: 60 minutes
HOST: Kevin Novak
GUEST: David Edward, Founder and Chief Strategist, Strategic Initiatives Group

FORMAT: Guest Conversation

SHOW: The Human Factor Podcast

COLD OPEN

Kevin Novak: Take two organizations in the same industry, similar size, similar products. And if you lined up the resumes, well, nearly identical talent. Same schools, same certifications, same years of experience. One of the organizations performs, the other one doesn’t. So when leaders of the second one sit down to figure out why, they look at the people. They decide they have a talent problem. So they hire, they train, they bring in a leadership program. And well, a year later, the numbers look about the same. They were looking in the wrong place. The capability was always there. What was different was everything around it. Whether priorities were clear and stayed clear, whether decisions closed and held, or quietly reopened the following week, whether people felt able to act on what they knew.

Kevin Novak: Kurt Lewin wrote it down as an equation in 1936. Behavior is a function of the person and the environment. Ninety years later, organizations still spend almost everything on the person, and almost nothing on the environment. Today’s guest has a sentence for all this. I’ve been repeating it to my clients since the first time he said it to me. The capability was always there. The conditions determine how much of it shows up in the work. Which means performance isn’t lost in execution. It’s lost before the execution ever begins.

Kevin Novak: I’m Kevin Novak, CEO of 2040 Digital, professor at the University of Maryland, and author of the book The Truth About Transformation, Leading in the Age of AI, Uncertainty, and Human Complexity, along with the Ideas and Innovations weekly newsletter. Welcome to the Human Factor Podcast, the show that explores the intersection of humanity, technology, and transformation, along with the psychology behind transformation success.

INTRODUCTION

Kevin Novak: This is season three, the season all about practice. What it actually takes to build the human factor into how an organization works. Not as a one-time intervention, but as something that lasts. Durably. Two threads anchor the season, the dynamic between artificial intelligence and human beings, and measurement, because what you measure determines what you manage. Today’s conversation sits on both.

Kevin Novak: David Edward has spent four decades studying why people do what they do. He started at Ogilvy & Mather in 1984. He went on through Saatchi & Saatchi and Grey Canada in advertising. The job was to understand the drivers of human behavior well enough to change it. In 2003, he left to found the Strategic Initiatives Group, and he carried that same question into planning and strategy. Then the 2009 financial crisis handed him the insight that his work has been built on ever since. Leadership teams back then were scenario planning against the markets. But the real story was what the conditions were doing to the behavior of the employees and their customers. That became the performance ecosystem. Talent, culture, and customer, and how each one depends on the other two. And then it became the better growth model, which says growth can’t be only the organization’s. Talent and customers have to grow with it. Otherwise, the model consumes the very people and the relationships it depends on.

Kevin Novak: We’re going to take this in three parts today. What brings out the best in people? How capability becomes performance? And what an organization does with the capacity that AI is now handing back to it. David has brought examples for each from the culture audits and leadership sessions that he has run. That is exactly what this season is built for. David, welcome to the Human Factor Podcast.

David Edward: Thank you, Kevin. Pleasure to be here. Looking forward to this conversation.

SEGMENT 1: WHAT BRINGS OUT THE BEST IN PEOPLE

Kevin Novak: As am I. So, David, I want to start where your work started. A night in Italy in 2009. You got up in the middle of the night at the height of the financial crisis and wrote down two questions. What started the Renaissance and what it would take to start another one. You described the Middle Ages as a thousand years of survival mentality, and the Renaissance as a shift to human nature and the drive for all of us to be better. You said what you saw in 2008 and 2009 was organizations, their employees, and their customers all being pushed back into survival mode. So use the Renaissance as a lens for me, not as a history lesson, but what you were watching happen to people inside organizations in those years. And because I never ask easy questions, why did those two questions become the thing you’ve organized everything around ever since?

David Edward: I’ll start with those two questions: what started the Renaissance and what would it take to start another one today? What started the Renaissance, what I came to believe, was this shift, as you mentioned, from the survivor mentality of the Middle Ages to more of a thriver mentality during the Renaissance. And it was this newfound belief in human capability that had been lost through the Middle Ages. So that’s why I say it was newfound. This belief in human capability really started to drive the Renaissance, but it needed something else. And this became part of the answer for me to what would it take to start another one. Because what got it going was not only the belief; it was the conditions that supported human capability. So when you look at the Medici Court, the city of Urbino, Rome, all the major city-states, it was the conditions that they were able to create that allowed this human capability to flourish. And that’s what sparked the Renaissance as we know it, whether that’s great art or advances in science.

Kevin Novak: So here’s why that matters to this show. And as you know, I bring up a bunch of researchers. Lewin’s equation says behavior comes from the person and the environment together. Organizations invest heavily in the person, whether that be a careful hiring process, training, leadership programs, and then they invest almost nothing in the environment those people walk back into on a Monday. So give me the anatomy of an organization where capability isn’t converting. What does the leader see and what do they conclude? And most importantly, where are they wrong?

David Edward: This underperformance or underutilization of capability really starts with a typical organization. What the CEO sees is investments that they’re making in AI and in people, processes, systems. So it’s all there. They’re making smart investments, but they’re not seeing the return. So those returns on those investments are lagging. Then it might be in a leadership meeting, somebody might be saying, with all these people that we have and all these great products that we have, we should be better than this. So results start to lag the capability of the organization. What leaders typically get wrong in that situation is: we have a capability problem. We need to hire more sales; we need to hire more product development. When what it might be, and it is usually the case, is that it’s not a capability problem; you’ve got an underperformance problem because that capability is not converting. And the reason it’s not converting is the conditions inside the organization are not allowing that capability to truly flourish.

David Edward: So your people are not at their best. You hired them because they are the best, but they are put into systems and processes that do not work for the people. The people end up working for the system. And that’s one of the early tests and one of the questions I ask when we do these audits: is the system working for people, or are your people basically working for the system? Are they doing more reporting? Are they having to do more workarounds because the process isn’t quite right? If that’s the case, you’ve got an underperformance and an underutilization problem. That’s not capability.

Kevin Novak: So there’s research behind this that most leaders probably have never heard of. And one of the purposes of why I bring so much research into the show is because there’s a lot that we forget about, whether we learned it in school or we read an article five years ago and it floats away. So Bryan Weiner, writing in 2009 in the journal Implementation Science, laid out a theory of organizational readiness for change. His point was that readiness isn’t a feeling; it’s a set of conditions. Do people collectively believe the change is worth it? Do they believe they can actually pull it off? And does the organization have the resources and the situation to support them? When those conditions are absent, new capabilities sit unused. No matter how good the people are, right? That capacity issue that you mentioned.

Kevin Novak: So you said something to me that fits right here. We design organizations to make stuff. A legal brief, a widget, it really doesn’t matter. The organization is designed for efficiency. And then leadership expects the humans inside it to work for that system. You see it in law firms, professional services, no matter what industry that you look at, even many of the white-collar industries, it still comes down to write that paper, complete that sales cycle, and so forth. So, what does that design decision do to the people inside an organization? And why don’t leaders see it as a decision at all?

David Edward: I think this is where it first shows up. When you have an organization that’s designed for efficiency and we expect rapid turnaround, lowest-cost producer. That’s what the plan says. What leaders then say is, but in the meantime, we’d like you to come up with the new widget, or we need to make this widget a little bit better than our competition. So what can you add to this? Help me enhance this particular solution. And it’s that dichotomy. That starts to reek of a lack of authenticity. It’s who are we? What is it that we’re trying to do? And what do you expect from me? Without getting into the value of work or what leadership values, when the plan in the organization is designed around tonnage, and we keep heaping more of that tonnage onto people rather than expecting more of them, that creates this gap in the culture. It shows up in attitude; it shows up in loyalty.

David Edward: I’ll talk through an example with you. A client, it was in manufacturing, but it had an interesting creative process attached to the business. The organization and its leadership team was very much focused on the tonnage, the production processes, making them as efficient as possible, and they were in effect, minimizing the creation end of the business. That was in large part because, well, creation- the problem-solving piece- is a bit of a black box. Production I understand. Production I can measure. We can add a machine and we can improve efficiency or we can lower cost. I don’t see that if I add talent. And so I think the default is, well, how do I manage my cost? How do I manage my investments in the production end of the business? When we got to the growth part of the discussion, it was we can’t grow the business on efficiency alone. Right? There has to be a place for this product to go.

David Edward: And this gets to one of the things that I really like talking about with clients. Do you see your customers as receptacles for your product, as basically churn it out, give it to them, or are they receptors? Are they willing acceptors and adapters of your products and services, your solutions and your ideas? For this particular client, what we found was that growth was going to come by treating customers more like receptors, which meant we had to find a way to balance the efficiency of the production end with the effectiveness of the creative and the problem-solving end of the business. We did that. What we also found, and this comes back to your question around capability, was that the talent the organization had was in fact being underutilized. There was more creativity and problem-solving, even on the production side of the business, than the organization realized. And we found that through the skill and the talent audits that we did across the entire organization. So what ended up happening was shifting the conditions. And that came down to who has decision-making authority, psychological safety, all of those important aspects of a culture that thrives on problem solving and creativity. By bringing those conditions forward, we were actually able to unleash a lot of the talent that was already inside the organization.

Kevin Novak: So I want to hit back on the survival instinct. You’ve watched leadership teams and their survival instincts take over more than once. What does a survival mode leadership team look like from the inside? And what’s the first sign that the people below them have gone into the same mode?

David Edward: It’s a narrower form of thinking that usually happens first. You can almost feel the organization start to constrict. And this is the protection, the survivor mentality of let’s protect what we have now. Let’s make sure we can survive through the next quarter, through this year. It’s that survivor mentality, I think, that starts to take over first. When that happens, typically leaders step in more often into the process, into meetings where they really don’t need to be. They want more oversight over certain decisions that, in a better year or if there was a different mentality inside the organization, it would be no, that agency belongs with other members of my team.

David Edward: I would liken what happens when we go into survivor mode to the company starting to reach down. In other words, leaders step into the level below them, forcing the level below them to step into work that the level below them would do. So the organization starts to drop in terms of its capability and its effectiveness. Whereas when you’re in thrive mode, the organization starts to reach up. The individual contributor on your team is actually reaching up and taking something off your plate. This is how I’m going to learn, this is how I’m going to grow. As a leader in the organization, I want to do that, freeing up the leader of the organization to do more and better work as well. You can feel the momentum shift inside the organization as people start to reach down. They start to pull in. Decisions become, I don’t want to say less courageous; I think that’s a bit of an overused word, but they definitely become more conservative. There is less risk, much more risk management. And that starts to affect outlook; it affects attitude, it starts to affect the culture of the organization when it becomes a little bit more restrictive and confined.

SEGMENT 2: HOW CAPABILITY BECOMES PERFORMANCE

Kevin Novak: So I want to hit back on capability and performance. You have capable people. How does that capability then turn into real, tangible performance? And I want to start with the most quoted line in this field, because you have a quarrel with it. The line attributed to Peter Drucker: culture eats strategy for breakfast. Your version is different. Culture doesn’t eat strategy. It converts it or it doesn’t. And in your model, culture is where the organization’s purpose and the customer’s promise meet. It’s more than the values on the wall, it’s the systems people work inside. So your culture audit asks one question I think is close to devastating, if not shocking and surprising. Are the systems designed so that employees work for them? Or so that they support the work of the employees? So tell the audience what happens when you bring the results back to a leadership team. What do leaders expect to find? What do they actually find? And what does that gap look like? Because I expect it to be quite huge.

David Edward: I can’t think of a case right now where there wasn’t this gap, and where there wasn’t this shock and surprise at how employees were interpreting the culture of the organization.

Kevin Novak: I am not surprised.

David Edward: Culture doesn’t eat strategy. It converts it or it doesn’t. The reason I believe that to be true is I think there are three components to culture. Typically, we focus on the first layer, which is the value systems, the belief systems. Those are all important. But we tend to figure once we have that sorted, our work around culture is done. It’s just a matter of living it, talking about it, making sure everybody understands it. There is a second level to culture, which is the business systems that we’ve talked about, whether that’s efficiency, making driven, or is it creation-driven? So we’ve got all of those business systems as the second layer, and it’s being informed by that first layer of values and belief systems. Then we’ve got the third layer, which is the conditions. This is decision rights, this is the psychological safety that we’ve been talking about. And it’s those three things that form this dynamic, three-layered approach to culture that creates culture as a system, or as I often think about it, a culture of things, very much like the Internet of things. We tend to view culture a little bit too one-dimensionally.

David Edward: To bring it back to the example, that was the case with this leadership team. They felt their values were in place, they were rock solid, they were unimpeachable, and they were. They were a fantastic set of values. Most of the organization could feel them. They could feel that the owners of the business in particular, not only owned these values but lived them. So there was a great deal of respect. The mistake the leadership team made was that, because they understand them, they see us living them, therefore it must be right. What was happening was layer two and layer three were giving off signals of, this is not what you value.

David Edward: So for instance, when I do a culture audit, we want to measure how the leadership team perceives culture and how the employees, the rest of the organization, view culture. We measure that gap, and then we understand why that gap exists. In this particular organization, the gap existed because the values the leaders were espousing- family values, that we are strategic, that we are very much customer-centric, were being perceived in the organization, based on layers two and three, as: it’s not strategic, it’s somewhat plodding. It seems to take forever while you ponder the strategy. You say we’re customer-centric; however, it’s do whatever you have to do to get that particular order out. So it’s not about serving the customer; it’s about serving the system. And this is where the leadership team was shocked at how this was being perceived. Well, that can’t be the case, because they tell us they appreciate our values, and that’s one of the reasons why they’re here. And while employees were giving the organization full credit for those values, they said you weren’t living them. So what had to happen was a shift in the systems. If you’re going to live your values, you had to get layer two and layer three correct. That was the work that had to be done. But the shock of what do you mean we have to do more than talk about our values was hard to take in some quarters.

Kevin Novak: And it’s actually pretty common. David, what you’re describing has a name in the research, and you alluded to this. Chris Argyris and Donald Schön drew the line between espoused theory and theory in use. Espoused theory is what the organization says it believes: the values, the mission statement, the strategy deck. Theory in use is what behavior reveals that it actually believes. So here’s the finding in that research that matters. The gap between the two is almost always invisible to the people inside. They sincerely believe they’re operating according to the espoused values and vision. That’s why your audit results land the way they do. I have no doubt. The leaders weren’t lying. They just simply couldn’t see it. So you told me that when you talk to employees, most of them either don’t know the purpose, or don’t truly understand it, or can’t say what it means for them. And it doesn’t matter how inspiring the mission statement sounds, right? Employees interpret it or they simply don’t. So give me an example. What did the leadership think it had communicated? Because you hit on that, where the second and third layer don’t get it. And what had people actually heard?

David Edward: It wasn’t so much a problem with what employees heard, because they were hearing leadership when they said we are strategic, we are customer-centric, we are all these values that they had laid out. The problem was what employees were living. Their experience inside the organization, their interaction with the culture, with the systems of the organization, seeing the conditions in which they had to operate, how much of their capability was being called on versus just get it done. So their sense of value wasn’t there. And as much as they were giving the leadership team the benefit of the doubt, it was their lived experience, their working experience, that created this dichotomy and started to create this gap.

David Edward: So what we wanted to measure and talk about with employees was, well, what would have to change if we were to truly live these values? What has to change? What needs to be different? That sparked the conversation around purpose and getting to this idea of a shared purpose, a shared mission. Not one that simply made sense to employees, but an experience and a mission and purpose that was consistent with how the company was operating, consistent with the values not only of the leadership team, but also the values of the employees. And what we found, and I think this is true in every organization, there are reasons why we choose to work where we do. Once you get past salary, once you get past working conditions, there is that third layer of the values, the conditions inside the organization. This is a place where I think I can thrive. So that’s what we wanted to get this organization’s employees to start to describe. What would it take to have you thrive inside the organization? Because if they’re thriving, the company thrives. If the company’s thriving, then its customers by default should also thrive. And it got us to this concept of better growth for the organization, where everyone, employees and customers, advance as the company does.

Kevin Novak: So you said you can’t engineer a sense of purpose in the boardroom and then deliver it to the organization. Your alternative is what you call harmonized individualism. And it’s really the big tent. People keep their own ideals and still find purpose satisfied inside a larger shared one. And you have to be able to see what’s in it for you. Otherwise, it isn’t a shared purpose. It’s the organization’s purpose. And to the mission statements, right? That runs against decades of mission statement practice. And it lines up with what Edward Deci and Richard Ryan found in self-determination theory. Autonomy isn’t an obstacle to alignment; it’s a precondition of real motivation. So, how does a leader actually build that tent? And how do they tell the difference between shared purpose and compliance that looks great in a picture or on a piece of paper?

David Edward: I’ll start with the purpose statement, because it will often start in the boardroom. And that’s a good place for it to start, but it is not the end game. Our approach to that is: you are leading the organization; you are closer to its ideals, its goals, its vision, than anybody else. So yes, the framework of purpose resides with you, the leadership team. That is the approach that we take. But then get it out of the boardroom to create shared purpose, one the entire organization can engage with and get aligned with. And I’ll come to the difference between alignment and compliance, because I think it’s important. But get it out of the boardroom. The approach that we use is you take that purpose statement and break it down, not as a lovely statement that would go on a plaque, but as a framework. It is perhaps a series of thoughts, because what we’re looking for is for employees to engage with it, to give us their impressions of it, to ask questions around the words’ meaning. And the reason we ask these types of questions is we are looking for employees not to comply with it, but to start to see themselves in this purpose statement. Can they align their own values that they bring to the job every day with the purpose of the organization? And it’s that alignment that starts to create this idea of shared purpose. That’s where the harmony is. If they can see that the work they do can contribute to this purpose of the organization, then we’ve got a fit, we’ve got some alignment, and we can get engagement. So that’s what we’re looking for when we do this kind of work.

David Edward: It’s the difference between expecting more from the individual and expecting more of the individual. The one is the capability, the other one is the tonnage. And that comes down to what does the organization value? If the employee can see what the leadership team and the organization expects of me, rather than from me, you’ve got a much higher chance of alignment to the purpose, the direction, the mission of the organization. Compliance works really well if I’m taking medications. Of course I’m going to comply. No questions asked. But we want those questions. We want employees to engage, to question respectfully where we’re going, what we’re doing, what you expect from me, what I can do, what more can I do? Those are the kinds of questions that we should want from our employees.

David Edward: So to come back to your earlier question around shared purpose, I think in the boardroom, the leadership team creates the tent pole. That’s the purpose framework or the statement. The shared tent is built by the employees, and they need to see themselves in it. It’s not leadership’s role to say, hey, there’s a place for you here. If employees can find their place inside that tent, then you’ve created this shared tent, or shared reality, for the organization. That is the difference between alignment and compliance.

Kevin Novak: Yeah, absolutely. So when I asked you which single condition matters most when we last talked, your answer was that something has to come before any of them. And that is the shared reality inside the leadership team. You described it this way: We have more data than ever, and AI gives us even more. It’s almost as if we’re trying to manufacture a sense of certainty when there really isn’t any. So an executive looks at the dashboard and says that’s what the data says. But that’s not what I’m seeing, and it’s not what I’m feeling. Every member of the team has their own sense of reality, and there’s no shared one, right? Back to the shared purpose. So there’s research on this from the team performance literature. Janis Cannon-Bowers, Eduardo Salas, and their colleagues called it shared mental models. Teams that hold a common picture of the situation coordinate and adapt better under pressure. Teams that don’t simply don’t, no matter how capable the individuals actually are. So you run sessions with leadership teams to build that shared picture. And you’ve told me the first one is usually really painful. What happens in that room?

David Edward: The idea of collaboration is not a foreign one to leadership teams, but some of the questions that we need to ask to get to a shared reality can be somewhat painful, particularly that first time around. It’s why I think this idea of shared reality is so important and has to happen before anything else. Because you need to come into those meetings with a sense of empathy. You need to be able to listen to your other leadership peers’ points of view. You need to hear from the sales perspective and the production perspective what seems to be going on. Everybody has their particular reality of the business. It’s only when you understand everyone’s that you can get to this idea of a shared reality. So empathy becomes so important. Curiosity is a critical skill. Learning to ask the questions that will get more and better information from the rest of your leadership team sometimes takes some work, because quite often the default mechanism for leadership teams is to get to compliance fairly quickly. It’s to accept, so that we can agree and move on to a solution, because speed, efficiency, we’ve got one hour in this meeting. How are we going to use it? So trying to break that paradigm and encourage more empathy and curiosity, when you do that, you create a shared experience as well. It starts to get easier to spend more time dwelling on another’s point of view and understanding the value of that perspective and what it brings to a potential solution.

David Edward: There was certainty in the numbers within that leadership team. Okay, so I now have six perspectives, and we have one shared reality. I feel pretty good about that. So when I make decisions now about removing this primary constraint in the business that is holding us back, I can feel a little bit more certain, because we all see one picture for our organization. We all agree that’s the one thing that needs to be fixed. So to answer your other question about, well, what is that one condition? It’s the shared reality of the leadership team. They will determine what that one thing is. That’s the thing we work on in every performance alignment session: identify that primary constraint to your performance. And then we identify the three or four moves we need to make to have it removed in the next 90 days.

SEGMENT 3: WHAT TO DO WITH THE CAPACITY AI HANDS BACK

Kevin Novak: I want to move, David, to the next question. And it’s one that everybody is so much living through right now. Suppose the conditions are right and along comes a technology that hands people back time. And it says something about what we do with it. So you wrote recently that what AI is doing to organizations without the right conditions is creating faster chaos. And I very much agree with you. We get to the problem faster. We don’t get to the solution.

Kevin Novak: So a marketing leader, a CMO, came to me a few months ago, gave me a call, and said, here’s what I’ve done. Her team had quietly used AI to win back five or six hours a week. And it was, in her mind, time to actually, finally think. In a marketing function, where we have done this with organizations, you don’t have time to think. You are executing task after task. In the advertising space, I’m sure you felt the same way. And she was completely afraid to tell anybody. The organizational leadership had not said what tools were allowed in the organization. And so the reward for revealing her efficiency would be a list of other things, in her mind, that they also want her to add on, because now she and her team have all this time. And she was sure at this point, based on some gossip, that the tools her teams were using would be taken away. So she had earned the one thing that she needed most. And the rationale in her mind was to hide it.

Kevin Novak: I hit on this early on. Denise Rousseau’s work on the psychological contract explains that silence. And you hit on this as well. The psychological contract is the unwritten promise about what effort buys. That CMO wasn’t failing to communicate, right? She was making an accurate prediction that the contract would simply be broken. And you frame this as two people measuring two different things. The CEO is measured by a board on results. And therefore, the CEO wants that hard number. More tonnage, one more campaign, one more sales meeting. And the CMO is thinking, my God, I’ve proven myself that I can get the results. I reduced the load on the organization. Now I’d like to spend those hours on positioning and new product development, something that actually advances the organization. So make the case to the leaders. What should they do with the capacity AI returns? And what happens to trust in an organization that answers in the old way?

David Edward: I think your story is such a good example of, what does the organization expect from me? So, more tonnage. But why did we hire this CMO? It’s the expectations of her that she has so much more to contribute, and I think she’s feeling that broken contract of, hey, I’ve proven the tonnage piece. I’d now like to show you where my real value is, why you’ve really hired me. And it comes down to what does the organization value? Do you want tonnage? Do you want efficiency? Or is there a balance between efficiency and cost containment, that’s always going to be important, but where are you adding value? Where are you adding growth, better growth, to the organization? And this is where I think AI can serve a positive role. I don’t think it has to be strictly cost containment. It certainly shouldn’t be job elimination.

David Edward: The question I would pose for leadership teams is, is that a race to the bottom? Or is there a way to use AI to actually enhance job quality and enhance the human capability of the organization? And if we get those conditions right, what else are we capable of? So I’ve got the tonnage part of the business down. I’ve got the efficiency part down. We can only get our business so efficient without starting to cut into bone, or the brainpower of the organization. So what can we do looking at the capability of the organization? We’ve adjusted the capacity, and AI has added so much great capacity. What are we doing about the human capability piece? I think that’s the contract that has to be made now between organizations, AI, and its employees.

Kevin Novak: With all the potential effectiveness that AI is offering us, do you think we’ll compromise ourselves because we are more comfortable with efficiency?

David Edward: That is a huge question. If leaders default to their instincts of survival and protectionism, then yes, it will be a lowest-cost-sum game for AI. If leadership teams listen to their nature, and human nature is to want to be better, to leave this world in a better place for people who follow, I think then we’ll figure out how AI is an enhancement. It’s not a reducer. It’s in fact an enhancer of human capability. And that I think is the wonder and the possibility of AI. What can it do to advance me as an individual, as a professional? What can it do, to bring it back to the Renaissance, to unleash my inner Galileo? Can I become the individual that I think I could be? And can it help? Or is it going to be that barrier? Am I going to be using AI? Is it going to be supporting me? Or am I fighting with it? Am I competing with it? I think those are some of the fundamental questions that leadership teams have to wrestle with. What is the role of AI? Is it a competitor for jobs, or is it an enhancer of the people that we have?

REFLECTION: THE PRIMARY CONSTRAINT AND THE BETTER NATURE

Kevin Novak: So I want to close with the question that I ask every guest. The question in the brief was this: if a leader could repair only one condition in their organization this year, looking at this from a prioritization perspective, which one converts the most? And you’ve already told me the honest answer is that it isn’t one thing. What has to happen first is the shared reality that we talked about. Once a leadership team has that, they can answer the question that you ask in your sessions. What’s the primary constraint? The one thing that has to be fixed to get the organization moving, but not before. So take the audience through that sequence. A leadership team that has built a shared reality sits down to name its primary constraint. What tends to come out? And how often is it the thing they walked in believing?

David Edward: The preconceived notion or perception that an individual leader would have, based on their own experience and the department perhaps they’re working in, they would say, this must be it, right? This is the core of the issue. So let’s solve this one. It’s the debate, I think, that provides a sense of surprise, or that sense of, hey, now we’re getting to it. Now we’re getting beyond the superficiality of some of these issues. It’s then what? Well, why? You keep asking those questions, and we get it down to a core issue. And that is usually not where we started, or where each individual started. We end up in a place that is richer. But we do get to that one thing that has to happen first. Which is why I say the shared reality is so important, because out of that shared reality, you’re going to find that one shared primary constraint.

David Edward: Because I think what happens so often in change management is we’ve got to fix this thing in sales, we need to fix this thing in production. But there isn’t agency, there isn’t commitment from marketing or HR, because that’s a sales issue. But when you work from a shared reality and you identify a primary constraint that you have all contributed to, that changes the dynamic of what is required to fix it. There is full commitment to that. So it’s no longer a sales issue. This is a company issue. This is a performance issue that we have identified and scoped together. So the commitment to it, the passion to fix that, is far more obvious and apparent in the work, the projects that have been created to solve that. That, I think, is the secret to change management.

Kevin Novak: So now my last question. You’ve watched the alternative up close, and I’ve surely seen this time and again as well. An owner who reaches the richest position in his organization, and then changes it back to something that’s more familiar, because he was shaping the organization’s future to fit his own comfort. So here’s the reflection. You’ve spent four decades watching leaders pulled between survival instinct and the drive to be better. In your Renaissance terms, what would it take for this generation of leaders to choose the better nature over the familiar one?

David Edward: I think leaders, we have to change our approach and attitude to business. That attitude needs to shift from surviving the quarter and treating our customers like receptacles to much more of a: What is it that we do? How do we serve? And how is that furthering me, my customer, and the organization? We have to be thinking about all three at once. If we’re only thinking about growth of the company, you run the risk, and this was the case with one client, of being seen as a taker organization. This is what I expect from you. I’ve hired you, I expect you to do the job. And it’s that tonnage mentality. I think that needs to change. I think in these never-normal conditions, the efficiency model doesn’t hold. The old business models don’t hold. And I don’t think traditional leadership thinking around their role, the roles of employees, can remain fixed as well. That needs to change, needs to evolve. And do that in real time, by the way. While dealing with AI and all these other issues. It’s a lot.

Kevin Novak: It is a lot. And I think that’s the significant challenge in today’s terms. It is a lot. It’s the cognitive load, or the lack of capacity for it, because there is so much to ingest, so much to internalize, and then consider in addressing the dynamics that are out there in the marketplace, the dynamics that are in society, and now introducing a huge transformative technology. Even if it only meets half of its expectations, it’s still going to fundamentally change things.

David Edward: Yes.

Kevin Novak: Thank you for being on the Human Factor Podcast. This is definitely the conversation that I wanted to have. It was great. So before we wrap, anything that you want to leave the audience with, and where can people find you and your work?

David Edward: You can find me on the web at sigunlimited.com. I post regularly on LinkedIn, so you can find me there. I’ve got a fair number of articles on the performance ecosystem and how leaders are looking at their organizations as systems rather than siloed departments. I’ll share with your audience a discussion guide. We talked earlier, right at the beginning of this podcast, about asking different types of questions. I’ve put together a guide that your audience could use and take into their next leadership meeting to start these discussions, engender more curiosity, more empathy, and get to these shared reality pictures.

Kevin Novak: Excellent. And I’ll have all that in the show notes on the website, as well as anywhere the podcast is available. David, thank you again for a great conversation.

David Edward: Thank you, Kevin. Thank you. It’s been a pleasure.

CLOSE

Kevin Novak: I want to close by connecting what David has shared to the arc of this season. We opened season three asking what organizations count, who decided, and whether anyone still has the standing to stop. David has shown us the same question from the other side of the ledger. Before you measure performance, look at the conditions that decide how much of it was ever available. Lewin gave us the equation 90 years ago. Argyris and Schön showed us why leaders can’t see the gap between what they say and what their systems do. Rousseau explained why a capable person hides the very capacity her organization needs. And David has spent four decades in the rooms where those findings play out, watching leadership teams discover that the people were never the problem. And that the first thing they had to fix was the picture they shared of what was actually going on. If your organization is investing in talent and wondering why performance isn’t following, the conditions David described are operating right now. The question is whether your leadership team shares a reality clear enough to see them.

Kevin Novak: David has put together a set of questions leaders can take into their next leadership meeting. You’ll find it on the episode page at 2040digital.com. If you found today’s episode valuable, subscribe to the Human Factor Podcast wherever you watch or listen. Leave a rating and a comment, and share this episode with your leadership team. Subscribe to the Ideas and Innovations newsletter at 2040digital.com, or on Substack, for weekly frameworks and research on why change succeeds or fails. And connect with me on LinkedIn, where I post regularly about the psychology of transformation. Until next time, remember, it is never the technology, the market conditions, or the strategy that makes change and transformation successful. It’s the people. And the more deeply you understand the human factor, the more likely your transformation is to succeed. This is the Human Factor Podcast. I’m Kevin Novak. Thank you for watching or listening.

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