Sleepwalking Giants

Sarah is an accounts receivable clerk working for a major medical provider. She will send out about a thousand appeals this month. Her workflow has been optimized and automated with every tool she needs to maximize her appeal output, week after week. She implemented a lot of those automated functions herself. She’s good at her job and the numbers show it. She also knows that each of the appeals she sends will almost certainly be denied.

She is not confused about why. She can name the reporting habit among the physicians that precipitates the denials, and she can tell you that correcting it at the source would stop the overwhelming majority of them before they ever became appeals. She has known this for months. She sends the appeals anyway, because sending appeals is her job and telling doctors how to document is not.

Two floors up, the CFO is preparing to hire a new Director to address the conspicuous hole in revenue numbers.

Miguel is a server at a popular Polynesian restaurant chain. He has heard the same complaint about the mahi thirteen times this week. He does not mention it, because the chef takes recipe feedback from servers as an insult and nothing has ever changed after one of those conversations.

Neither of those people is short on information. Both are holding a diagnosis. Not a symptom, not a complaint, not a hunch: a specific causal account of a problem the organization is paying real money to keep having.

The information exists. It has already been gathered, at no cost, by people who are standing close enough to see it. What it cannot do is travel.

What decides which signals count

Ask why it cannot travel and you get answers about communication, or silos, or people not speaking up. Those describe the outcome rather than the cause.

The cause is a rule almost nobody states out loud, which is why it is so rarely examined. An organization decides how much a person’s input is worth by looking at their title and their pay.

That rule is trained into us. Media, business writing, and the ordinary experience of climbing a ladder all teach the same lesson, which is that compensation is a measure of judgment. If she really understood the revenue cycle, she would not be an entry-level AR clerk. If he had insight into the menu, he would not be waiting tables. It is a damaging prejudice to hold. Ground floor work is replaceable and treated accordingly.

It produces a specific and expensive behavior. Owners and executives buy from outside what they could have had for free months earlier, from people already on payroll who had reached the answer and concluded that carrying it upward was not worth what it would cost them.

This is not theoretical for me. I have worked in retail chains where every sales associate on staff knew that sales struggled in the afternoon. This wasn’t because of a lack of customers or motivation from staff, but because sales quotas and pressure from corporate placed so much emphasis on sales numbers that none of the employees were willing to organize or upkeep the stockroom when the associates that they were competing with were out on the floor making sales. Everyone’s numbers suffered because work that was necessary to keep those sales up for the whole team was not being measured as “performance”. In that instance, some of the associates did report the problem on several occasions, but management did not take the feedback seriously.

I have worked at service providers whose production workers would not take time to report and describe software bugs and performance issues that slowed down the entire team because it would eat away too much of their own production numbers to do so, and management was unlikely to listen and act even if they did.

The creature that rejects its own senses

Consider how strange this arrangement would be in a biological creature.

Imagine a nervous system built on the same principles that govern most organizations. The central nervous system accepts and processes only the information originating from within the first few inches of the brain, itself. Everything arriving from the peripheral nervous system, from the nerve endings at the skin and the sensory organs, gets discounted, because those structures are the smallest and the most easily replaced parts of the system.

That creature would be blind, deaf, and dumb; a meal waiting only for the next predator that knew the value of sight and smell.

The comparison is not decorative. A nervous system is a communication architecture, and so is a company. Both exist to move information from the places where reality is encountered to the places where decisions are made, and both live or die based on the strength and adaptability of that system.

An animal can lose any single nerve ending with almost no effect on its survival. Any one of them can be severed and the creature is fine. The same holds in a company. Front-line workers are paid the least in large part because any one of them can be lost or replaced with limited disruption. That is not a myth, and pretending otherwise is how this argument gets dismissed as sentimental. The same cannot be said of the spinal cord, and it cannot be said of a senior director.

The error is not in valuing one nerve ending modestly. The error is in generalizing this assessment in a way that degrades the entire sensory system.

When the replaceability of the individual AR clerk gets read as a statement about the importance of the role AR clerks play in the company, an entire limb goes numb. When a leader treats an individual worker as replaceable because they are, that treatment is repeated across every interaction with every AR clerk in the company. You then do not end up with one worker feeling devalued and demotivated. You end up with all employees at that level feeling devalued and demotivated. Suddenly, every limb has gone numb, and every sensory organ has flickered off. The organization becomes a sleepwalking giant. Still enormous, still strong, still moving, but no longer able to feel where it is standing.

Reading worth off replaceability is not only invalid, it is invalid in a way worth naming precisely. Substitutability of a unit and importance of a function are different properties. Nerve endings are individually expendable because there are millions of them, and there are millions of them precisely because the sensory system cannot be allowed to fail. The cheapness of each one is a consequence of how indispensable the class is, not a counterweight to it. An executive reading low replacement cost as evidence of low value has the design backwards.

Where the comparison breaks

A nerve ending has one great virtue that no employee has. It communicates to its fullest capacity until it dies.

It does not evaluate whether the brain deserves the information. It has no view on whether previous signals were acted upon. It cannot be discouraged, and it does not go quiet because of how it was spoken to last Tuesday.

People are not like that, and the difference runs in both directions at once.

A person can transmit information orders of magnitude more complex and more valuable than a nerve ending ever could. Sarah is not reporting a sensation, she is delivering a causal analysis with a proposed intervention and an estimate of its effect. No sensory neuron in any organism has ever done anything remotely that useful.

A person can also simply decide to stop. She stops the moment she feels ignored or disrespected, and she needs no better reason than not liking the way somebody spoke to her. That decision costs her nothing, it takes effect immediately, and nobody has to be told.

So an organization runs on a sensory system that has opinions about management. That is the whole problem, and every leader is responsible for responding to it whether they wanted it or not.

Three consequences follow, and they get worse in order.

The first is that the loss is invisible. Numbness in a body can be tested and mapped, because absent sensation is itself detectable. Numbness in an organization presents as good news. A quiet team looks like a healthy team. No complaints reads as satisfaction. The organism loses the signal and then loses the ability to notice that it has lost the signal, which is why the same executive can hear yes at every meeting and still be surprised every quarter.

There is not a single medical provider in the country that knows how much revenue they lose each year from billing problems their accounting department thought about fixing, but didn’t.

The second is that the damage compounds before it is felt. In diabetic peripheral neuropathy the danger is not the numbness itself. It is that a person injures a foot, does not feel it, and keeps walking, so a small wound becomes an ulcer and the ulcer costs them the limb. The loss of sensation is not the worst of it. The unnoticed damage is. An organization with numb peripheries does not feel a problem while it is small and cheap. Every problem arrives at the executive floor already expensive, which is exactly when another six-figure executive gets added to the payroll, while the next raft of undetected problems is already accumulating.

The number of companies suffering the organizational equivalent of chronic peripheral neuropathy is astounding.

The signal fails where it matters most

The third is the one that should keep a leader up. The pain signal from a nerve ending does not become less intense as the injury grows more serious. The signal from a person does. The situations that generate the most valuable information, where something is going badly wrong, where a corner is being cut, where a process is broken in a way that will eventually be costly, are the same situations that carry the most personal risk to whoever reports them.

Sarah is the case in point. Sending a thousand appeals a month is safe, because it is her job and nobody is troubled by it. Telling a physician how to document is not safe, and she has no way to know in advance how it will be received. The company is paying her to do the harmless thing and has arranged matters so that the useful thing feels costly and dangerous.

In that kind of environment, reliability runs inversely to importance. Evolution never had to solve for a nerve ending that was afraid of its manager.

Two objections

The first objection is that people should speak up regardless, that this is a matter of professionalism, and that an employee who goes silent because someone was short with them has a responsibility problem.

Notice what has happened in that sentence. A leader has appealed to personal responsibility, which means they have already conceded that responsibility is a real and binding moral obligation. The question is only whose.

Responsibility is power and power is responsibility. Sarah had no power over whether her information would be heard or punished, and holding a person accountable for a result they do not control produces anxiety and workaround rather than performance. Whoever built the environment that answered her question for her had that power. Using an appeal to an employee’s responsibility to deflect your own is not an argument about responsibility at all. It is keeping the power and outsourcing the accountability.

Which brings me to the second objection, and this one is both harder and more useful, because it comes from the leader who is nodding along while locating the problem one level below themselves.

The manager who deflects is usually not a hypocrite by disposition. That manager is measured on outcomes and never once on whether their team tells them things. Absorbing responsibility for a problem they did not create is expensive to them. Deflecting it is free. Their silence about their own silence is the same rational calculation Sarah made, one floor up, in a nicer chair.

So, the analysis climbs. It does not stop at the manager, and it does not stop until it reaches whoever designed a structure in which responsibility flows downward while power stays put. That is an uncomfortable place for the argument to land, and it is the only honest destination, because a leader cannot fix a numb limb by initiating another round of layoffs for the recalcitrant nerve endings.

What a nervous system is for

A learning organization is not a culture, an attitude, or a set of values posted on a wall. It is an anatomy.

It is a set of communication pathways that mirror what biology settled on a very long time ago: information gets collected where reality is actually encountered, it moves toward decision-making without being filtered by the status of its source, and a great deal of it never needs to reach the top at all, because a reflex arc exists precisely so that some signals can produce action without a trip to the brain.

None of that makes a company bigger or smarter than it already is. It makes it awake. A creature that can feel where it is standing does not have to wait for conscious deliberation before jumping back from a fire. Sarah shouldn’t have to wait for direction from the CFO before alerting physicians on staff to the reporting change necessary to patch the hole of lost revenue. Miguel should not need to send a memo out to corporate before talking to his kitchen about the sauce they pair with the mahi.

That is also what changes for the person at the top. A leader who carries every problem personally is rarely doing it by preference. They do it because nothing in the structure can act without them, so every decision routes through them and every problem lands on their desk already expensive. A structure that lets a signal act where it is felt does not add to what a leader can see. It subtracts from what a leader has to hold. At that provider, the new Director was never the missing piece. The missing piece was a path from Sarah’s desk to the treating rooms where the reporting is generated.

Building that means asking a different set of questions than most leaders are asking. Which of your people know something you do not, and what happened the last time one of them said so? What does a person actually risk here by naming a problem, and what have they watched happen to the last three who did? Which decisions on your desk should have been resolved at the point of contact? When a limb has gone numb, what was the specific event that taught it to stop signaling?

Those questions have answers, and the answers are already in your building. What makes them hard to reach is that a structure is close to invisible from inside it, because everyone inside it was trained by it. Bringing that structure into view, and rebuilding it so a company’s own capability can reach the problems it was always able to solve, is the aspect of that work I love to be a part of.

Sarah is still sending a thousand appeals a month. She still knows how to stop them. Nothing about her has to change for that information to arrive where you need it. She has been awake the whole time.

References and what each one carries

Kept short on purpose. The argument above stands on reasoning and on observation, and these support specific claims rather than supply the authority for the piece.

The nervous system frame is an analogy used for design, not a research finding. It is offered as a way to reason about communication architecture, and it should not be read as a claim that organizations are literally organisms.

1. On holding people accountable for what they do not control. Robert Austin on measurement dysfunction, and W. Edwards Deming on system causes against special causes. The claim that accountability without control produces anxiety and gaming rather than performance rests here.
2. On the three questions underneath a decision to speak or stay silent. Expectancy theory (Vroom) for whether an action is seen as achievable and worth it, and self-determination theory (Deci and Ryan) for the autonomy leg. Treated more fully in Three Questions at the Heart of Human Behavior.
3. On decisions belonging at the point of contact. Bloom, Sadun and Van Reenen (2012), Quarterly Journal of Economics 127(4), found that conditions permitting a chief executive to delegate are associated with substantially larger firms. Association with suggestive causal identification, not an experiment.
4. On peripheral neuropathy. The clinical detail is accurate: in diabetic peripheral neuropathy, unnoticed foot injury progressing to ulceration is a leading pathway to lower-limb amputation.

Related: Your Influence Is Never Neutral