february 2004 HRMONTHLY 39

Applying anunderstanding of hard-wired humaninstincts has assistedone company in itsbusiness success.

Humans have beenevolving socially forabout 40,000 years butonly working in largecommercial andgovernment

organisations for about 250years. Compared to the manymillennia of genetic andbiological development, life inorganisations is more like ananosecond for humans.

Little wonder thatunderstanding the primitivemake-up of humans helps inmanaging them effectively.

At Sinclair Knight Merz, wefind ‘natural’ ways to managethe organisation and people byaccommodating basic humaninstincts in the evolution of ourpractices. We have tried todevelop an enduring approachto organisational decisions basedon sound human instincts andan assessment of what humansrespond to most.

(Formed in Sydney in 1964,SKM now employs 3,000 peoplein offices in Australasia, Asia,the Pacific, Europe and SouthAmerica. It offers consultingservices in sectors including theenvironment, infrastructure,buildings and property, andpower and mining. Thecompany has a proud record ofgrowth and return toshareholders.)

The principle behind applying

natural management practices isthat, like all animals, humanshave certain behaviours hard-wired into their brains. In anevolutionary sense, we havechanged little since ourancestors lived in hunter-gatherer societies for thousandsof generations, and later inagricultural societies for around300 generations. For only 4–8generations have we worked infactories and large organisations.

Here we outline the keymanagement systems we haveimplemented and how theyalign to the “natural”dimensions of humans and, as a consequence, motivate peopleand lay a sound foundation for a sustainable business.

OwnershipBased on the view that humanscontribute more when theyhave a sense of ownership orattachment, SKM is owned byabout 300 of its employees andtheir families. Ownership isoffered to employees assessed as“builders of the business”through annual nominations.An offer to join the partnershipis a rite of passage conferred byone’s peers. Ownership is not agift, but an invitation to invest asignificant amount of money inthe practice.

Sustainability is assisted byownership being distributedacross a large number ofshareholders where any oneperson, including the foundersand senior executives, is limitedto owning about 1.5 per cent of equity.

Organisation designIn writing about the humanneed for identity, evolutionarypsychologist Nigel Nicholson(see “Campfire managementtips”, right) says humans feel a

natural connection to ‘families’of about 10 people and ‘tribes’ of up to 150. The basic buildingblocks at SKM are sections ofabout 10 staff working in anoperations centre of about 100people. Two distinct benefitsarise from this naturally sizedstructure: people feel a sense ofidentity and belonging, wherethey might feel lost in a largerorganisation unit; and a strongsense of accountability can begenerated in a group of about100 people. Our businesssystems have clearaccountability measures.

StabilityIn its 40 years, SKM has hadonly three chief executives,providing significant stability.The three have taken seriouslytheir obligation to theircolleagues as employees andshareholders, and also theresponsibility of passing ahealthy business to the next generation.

The risk of senior executivesbecoming inwardly focused isavoided by a rich learningculture, leadership programs(such as Harvard, Stanford andINSEAD) and frequent contactwith executives of otherorganisations.

We believe that the desirableleadership model has the chiefsappointed from within the tribe,and not by leaders of other tribes.Our key leaders have workedtogether for a long time and likeand trust each other. They arehappy to socialise together andfeel a sense of mutual obligation.The leadership team is free ofselfish short-term thinking.

Appointments As with chief executives, senioroperational executives areappointed from within the firm.

We don’t demand perfectionfrom them. While expecting acertain level of capability andsound motivation, we try to useour respective strengths and toassist each other withweaknesses.

When we appointed businessunit general managers in 2002in a restructure, our CEO soughtthe input of the team the generalmanager would be leading. Thiswas to ensure the team has amanager it feels will be effectiveand will willingly follow. Knowingthat the followers support theleader seems to us a naturalmethod of making appointments.

AppraisalsAppraisal systems, whileorthodox modern management,are prime examples of methodsforeign to human motivation.Over the centuries, surely fewcommunities have felt a needfor the kind of appraisals mostcompanies have adopted. Onthe plains of Africa, where ourgenetic hard-wiring was fused,it’s unlikely a tribe needed arating system to let membersknow about their contribution.Instead, they probably talked toeach and worked out relativestrengths and weaknesses soeach person could make theirbest contribution.

We believe that such ‘adult-to-adult’ conversations serve the organisation best becausehumans operate best in asupportive and secure

ORGANISATIONALDEVELOPMENT

Basic instinct

38 HRMONTHLY february 2004

� BY ANDREW O’KEEFFE AND PAUL DOUGAS

CA

SEST

UD

Y

…the desirableleadership model has thechiefs appointed fromwithin the tribe, and notby leaders of other tribes.

environment. Feedback on ourappraisal system from managersand staff has been excellent,which is rare in industry becausemost appraisal systems are‘unnatural’. An explanation ofour review system, called“Dialogue” is covered in ‘Positiveappraisals’ on page 44.

PayOur pay system is relativelyuncomplicated. Pay levels arelinked to our charge rates, withmanagers deciding levels andreviews. It is amusing that, inmany organisations, managerscan decide on pay for a newhire they don’t know, but haveto go through all sorts of redtape to review the pay of a

loyal, long-serving employeewell known to the manager and company.

We try to keep our pay systemstraightforward while allowingscope for managers to pay peoplefairly and competitively. Anexecutive incentive plan linksearnings of senior people to theperformance of regions andbusiness units, as well asindividual contributions. Staffgenerally are covered by a ‘spotbonus’ plan by which managerscan give timely rewards.

Letters of offerLetters of offer are framed to bewarm and welcoming, not coldand legalistic, but they are stilllegally sound. They are more

like what you might write to acustomer. We want the firstcontact to be positive and in line with the relationship wehope to have with staff.

Freedom Our staff have significantfreedom to operate in ourculture. Provided behaviour is inline with our cultural values andthey deliver quality outcomes forour clients, people have a widedegree of authority to take thebusiness in directions that suit

their areas of interest and expertise.The philosophy is to be ‘tight’ onbusiness performance measuresand behavioural standards, and‘loose’ on the day-to-day decisions.

MergersMergers with like-minded firmsis a major growth strategy. Givenour priority on people and the fitof the organisations, we arecomfortable that a merger mighttake a lengthy timeframe tofinalise. We might talk to theleaders of another organisation

CAMPFIRE MANAGEMENT TIPS

People are hard-wired to:

Use emotions to screen information

Avoid risky situations except when threatened

Gossip

Feel most comfortable in tribes of about 150

Seek superiority or security in hierarchical systems

Follow good leaders.

Message for managers:

People hear bad news first and loudest

People are creative when given security and support

Ensure the grapevine stays healthy

Build strong identity within and across groups

Recognise that hierarchy is natural and people will establish status distinctions

Focus on leadership capability.

Evolutionary psychologist Nigel Nicholson has summarised the ‘hard-wired’ nature of humans, and their implications for managers, in his book Managing the Human Animal and in the Harvard Business Review (1998).

Sinclair Knight Merz Group is aprofessional services consultingfirm working with public andprivate sector clients acrossseveral market areas.

Services include engineering,scientific studies, geotechnicalengineering, planning, economics,logistics, project management,spatial information and architecture.

The firm was recently named asone of the top 10 companies inHewitt Associates’ study of the‘Top Companies for Leaders inAsia Pacific’.

INFO

Humans feel a natural connection to ‘families’ of about 10 people and ‘tribes’ of up to 150.

PH

OT

OLI

BR

AR

Y.C

OM

february 2004 HRMONTHLY 39

Applying anunderstanding of hard-wired humaninstincts has assistedone company in itsbusiness success.

Humans have beenevolving socially forabout 40,000 years butonly working in largecommercial andgovernment

organisations for about 250years. Compared to the manymillennia of genetic andbiological development, life inorganisations is more like ananosecond for humans.

Little wonder thatunderstanding the primitivemake-up of humans helps inmanaging them effectively.

At Sinclair Knight Merz, wefind ‘natural’ ways to managethe organisation and people byaccommodating basic humaninstincts in the evolution of ourpractices. We have tried todevelop an enduring approachto organisational decisions basedon sound human instincts andan assessment of what humansrespond to most.

(Formed in Sydney in 1964,SKM now employs 3,000 peoplein offices in Australasia, Asia,the Pacific, Europe and SouthAmerica. It offers consultingservices in sectors including theenvironment, infrastructure,buildings and property, andpower and mining. Thecompany has a proud record ofgrowth and return toshareholders.)

The principle behind applying

natural management practices isthat, like all animals, humanshave certain behaviours hard-wired into their brains. In anevolutionary sense, we havechanged little since ourancestors lived in hunter-gatherer societies for thousandsof generations, and later inagricultural societies for around300 generations. For only 4–8generations have we worked infactories and large organisations.

Here we outline the keymanagement systems we haveimplemented and how theyalign to the “natural”dimensions of humans and, as a consequence, motivate peopleand lay a sound foundation for a sustainable business.

OwnershipBased on the view that humanscontribute more when theyhave a sense of ownership orattachment, SKM is owned byabout 300 of its employees andtheir families. Ownership isoffered to employees assessed as“builders of the business”through annual nominations.An offer to join the partnershipis a rite of passage conferred byone’s peers. Ownership is not agift, but an invitation to invest asignificant amount of money inthe practice.

Sustainability is assisted byownership being distributedacross a large number ofshareholders where any oneperson, including the foundersand senior executives, is limitedto owning about 1.5 per cent of equity.

Organisation designIn writing about the humanneed for identity, evolutionarypsychologist Nigel Nicholson(see “Campfire managementtips”, right) says humans feel a

natural connection to ‘families’of about 10 people and ‘tribes’ of up to 150. The basic buildingblocks at SKM are sections ofabout 10 staff working in anoperations centre of about 100people. Two distinct benefitsarise from this naturally sizedstructure: people feel a sense ofidentity and belonging, wherethey might feel lost in a largerorganisation unit; and a strongsense of accountability can begenerated in a group of about100 people. Our businesssystems have clearaccountability measures.

StabilityIn its 40 years, SKM has hadonly three chief executives,providing significant stability.The three have taken seriouslytheir obligation to theircolleagues as employees andshareholders, and also theresponsibility of passing ahealthy business to the next generation.

The risk of senior executivesbecoming inwardly focused isavoided by a rich learningculture, leadership programs(such as Harvard, Stanford andINSEAD) and frequent contactwith executives of otherorganisations.

We believe that the desirableleadership model has the chiefsappointed from within the tribe,and not by leaders of other tribes.Our key leaders have workedtogether for a long time and likeand trust each other. They arehappy to socialise together andfeel a sense of mutual obligation.The leadership team is free ofselfish short-term thinking.

Appointments As with chief executives, senioroperational executives areappointed from within the firm.

We don’t demand perfectionfrom them. While expecting acertain level of capability andsound motivation, we try to useour respective strengths and toassist each other withweaknesses.

When we appointed businessunit general managers in 2002in a restructure, our CEO soughtthe input of the team the generalmanager would be leading. Thiswas to ensure the team has amanager it feels will be effectiveand will willingly follow. Knowingthat the followers support theleader seems to us a naturalmethod of making appointments.

AppraisalsAppraisal systems, whileorthodox modern management,are prime examples of methodsforeign to human motivation.Over the centuries, surely fewcommunities have felt a needfor the kind of appraisals mostcompanies have adopted. Onthe plains of Africa, where ourgenetic hard-wiring was fused,it’s unlikely a tribe needed arating system to let membersknow about their contribution.Instead, they probably talked toeach and worked out relativestrengths and weaknesses soeach person could make theirbest contribution.

We believe that such ‘adult-to-adult’ conversations serve the organisation best becausehumans operate best in asupportive and secure

ORGANISATIONALDEVELOPMENT

Basic instinct

38 HRMONTHLY february 2004

� BY ANDREW O’KEEFFE AND PAUL DOUGAS

CA

SEST

UD

Y

…the desirableleadership model has thechiefs appointed fromwithin the tribe, and notby leaders of other tribes.

environment. Feedback on ourappraisal system from managersand staff has been excellent,which is rare in industry becausemost appraisal systems are‘unnatural’. An explanation ofour review system, called“Dialogue” is covered in ‘Positiveappraisals’ on page 44.

PayOur pay system is relativelyuncomplicated. Pay levels arelinked to our charge rates, withmanagers deciding levels andreviews. It is amusing that, inmany organisations, managerscan decide on pay for a newhire they don’t know, but haveto go through all sorts of redtape to review the pay of a

loyal, long-serving employeewell known to the manager and company.

We try to keep our pay systemstraightforward while allowingscope for managers to pay peoplefairly and competitively. Anexecutive incentive plan linksearnings of senior people to theperformance of regions andbusiness units, as well asindividual contributions. Staffgenerally are covered by a ‘spotbonus’ plan by which managerscan give timely rewards.

Letters of offerLetters of offer are framed to bewarm and welcoming, not coldand legalistic, but they are stilllegally sound. They are more

like what you might write to acustomer. We want the firstcontact to be positive and in line with the relationship wehope to have with staff.

Freedom Our staff have significantfreedom to operate in ourculture. Provided behaviour is inline with our cultural values andthey deliver quality outcomes forour clients, people have a widedegree of authority to take thebusiness in directions that suit

their areas of interest and expertise.The philosophy is to be ‘tight’ onbusiness performance measuresand behavioural standards, and‘loose’ on the day-to-day decisions.

MergersMergers with like-minded firmsis a major growth strategy. Givenour priority on people and the fitof the organisations, we arecomfortable that a merger mighttake a lengthy timeframe tofinalise. We might talk to theleaders of another organisation

CAMPFIRE MANAGEMENT TIPS

People are hard-wired to:

Use emotions to screen information

Avoid risky situations except when threatened

Gossip

Feel most comfortable in tribes of about 150

Seek superiority or security in hierarchical systems

Follow good leaders.

Message for managers:

People hear bad news first and loudest

People are creative when given security and support

Ensure the grapevine stays healthy

Build strong identity within and across groups

Recognise that hierarchy is natural and people will establish status distinctions

Focus on leadership capability.

Evolutionary psychologist Nigel Nicholson has summarised the ‘hard-wired’ nature of humans, and their implications for managers, in his book Managing the Human Animal and in the Harvard Business Review (1998).

Sinclair Knight Merz Group is aprofessional services consultingfirm working with public andprivate sector clients acrossseveral market areas.

Services include engineering,scientific studies, geotechnicalengineering, planning, economics,logistics, project management,spatial information and architecture.

The firm was recently named asone of the top 10 companies inHewitt Associates’ study of the‘Top Companies for Leaders inAsia Pacific’.

INFO

Humans feel a natural connection to ‘families’ of about 10 people and ‘tribes’ of up to 150.

PH

OT

OLI

BR

AR

Y.C

OM

40 HRMONTHLY february 2004

ORGANISATIONALDEVELOPMENT

Quantum Management ad

for several years before anagreement is completed. It demonstrates our long-termcommitment, and the staff of both organisations over-whelmingly choose to remainafter a merger.

We believe a mutually desiredmerger is more effective than atakeover, the corporateequivalent of conquering whichhas been a behavioural trait ofhumans over the centuries.

Healthy signsManagement systems designed tofit naturally with the way peoplethink and behave are more likelyto motivate and assist in effectiveorganisational outcomes. Wecontend that when systems aredesigned correctly:• Managers do not ignore or

fight the systems.• Conversations about the

systems are positive.• Use of the systems is

voluntary and popular.• Managers don’t blame

systems, or HR, for somethingthey want to do but can’t, or need to do but won’t.

• Managers make the decisionsthat are theirs to make.

� ANDREW O’KEEFFE is SinclairKnight Merz’s employee develop-ment and services group manager E-mail: aokeeffe@skm.com.au� PAUL DOUGAS is CEO andmanaging director.

The philosophy is to be ‘tight’ on businessperformance measures andbehavioural standards, and‘loose’ on the day-to-daydecisions.

LanguageWe call our system “Dialogue”.Language is very important tohumans. It is emotional. Ourpeople do not feel uplifted by theword “appraisal” or the phrase“performance review”.“Dialogue” has a more positivemeaning and reflects ourintention of an adult-to-adultconversation.

Significant topicsDialogue is designed for opendiscussion on subjects importantto the employee and manager, inkeeping with the principle thatpeople do their best work in asecure and supportiveenvironment. Topics include jobobjectives, performance, careergoals, learning and developmentneeds, and life balance.

A close relationship betweenmanagers and staff is encouraged,as it is the biggest driver ofemployee satisfaction andretention.

Employee-drivenThe person most energised tomake the Dialogue happen is theemployee. Managers areencouraged to create theenvironment for a constructiveDialogue. Being employee-drivenreduces the appraisal system’sorientation as a managementpower tool.

Without ratingsCritically, while we have aperformance culture, we do nothave performance ratings. Theydistract from discussion and aidand abet managers attracted tothe exercise of power. Themanagement communitygenerally has been misled intobelieving that ratings are goodand necessary.

Typically in organisations usingratings, about 15 per cent of staffare rated highly, about 80 per cent

are in the middle ratings andabout 5 per cent rate lowly and in need of improvement. Thetrouble is that, in the middle ofthe system, the great majority ofpeople are told, in effect, at leastonce a year, “You are an averageperformer”. A curious design.Why would any intelligentorganisation design a system thatregularly suppresses people byinforming them that they are average?

Humans work out the system.For people to achieve a highrating they need to appearstronger than their teammembers, so competition andpolitics is established within theteam. The rating becomes theonly important thing in thediscussion. Every other part of the discussion is leading to therating and the possible value ofthe discussion is diminished.

No copiesWhile managers and staff retain a copy of the Dialogue, we do not keep copies of Dialogues in HR. We are concerned that if Dialogues were reported tohigher, “corporate” levels ofmanagement, staff and managers might be guarded in their discussion.

Closing the loopStaff log the completion of theirDialogue and their degree ofsatisfaction with the discussion. In the three years since Dialoguewas introduced, the completionrate is about 70–80 per cent andsatisfaction at about 4.5 out of 5, meaning staff are overall either ‘very satisfied’ or ‘satisfied’with the discussion with theirmanager. Although we would like 100 per cent completion, we are prepared to allow peopletime to become volunteer users of the program.

Sinclair Knight Merz’s appraisal system differs greatly from those of most other organisations. The key elements are:

POSITIVE APPRAISALS

Drake AD