The Structure-Conduct-Performance Paradigm Unleashed!

There is a framework dating back to early in the last century generally known as the Structure-Conduct-Performance paradigm to guide assessment and analysis of industrial economics.¹ The key assumption is that player (company) performance is determined largely by its conduct which, in turn, is shaped in no small part by situational (industry) structure. It is soundly backed and I’ve found the logic profitable in all kinds of analyses for decades. In this paper, let’s consider how the change leader can use it.

Structure-Conduct-Performance Framework Generalized

     First, a bit more about the framework, starting with its constituent parts.

• Structure – Construct, form, and makeup of a player and the (competitive) environment in which the player (organization) acts: environment, competitors, rules, etc.
• Conduct – Behaviour or comportment of players to the environmental structure—how players interact with and behave toward each other—within the rules, ideally.
• Performance – Achievement or accomplishment of results within the environment, typically attributable to players’ (competitive) conduct.

SCP and Hockey – an example

     The logic of this approach is straight-forward and robust. Let’s apply it to a decidedly non-industrial situation using a hockey analog. Performance is the result of the league’s and the teams’ conduct. Perhaps all games are high-scoring, which would be a league matter. Individual teams do better/worse based on their own behaviour. Team conduct is itself dependent on both skills of players and coaches as well as the structures set forth by the league: rules and such. A wider/larger ice surface lends itself to more passing and skating; smaller areas to more clutch and grab. Lots of teams and a heavy playing schedule will affect how deep teams/players dig in each game; maybe it would result in more players being active on the roster. And so forth.

Understanding the SCP Dynamic

     It should be evident in the example that organizational conduct is shaped as a response to environmental structures. This holds in economies, city planning, and even for flora/fauna husbandry. It should be second nature to anyone engaged in any sort of leadership role—or an engineer: structure determines conduct if not performance. Set things up well and they ought to run predictably, even smoothly.

     It’s true that player conduct is contingent on strategy, capability, skill, resources, ethics, and so on. Holding steady for those, as they are the essence of competition, it must be true that in a competitive environment, players will conduct themselves as best they can to take advantage of the structures in place. Why they do this is pure Darwinian imperative: fitness for purpose. Players and teams evolve just as plants and animals to suit the conditions needed to flourish.

     The success of player efforts gets captured as performance metrics. Performance is the only valid gauge by which players assess their conduct and stakeholders collectively assess the structures and rules—particularly in a competitive environment. Score keeping is important but not especially valuable to this particular discussion, however. So we’ll leave it as is.

SCP as a Leadership Paradigm

     As stated, SCP was devised by economists to analyse and understand industries and their players. It was (and is still) used primarily as post hoc clarification. It typically works in reverse: based on given performance, where in the conduct and the structure can one attribute causality? Where can given conduct be attributed back to structure? Can those causal links be generalized broadly enough to suggest behavioural adjustment or structural remedy?²

     But it can also easily be a sensible and effective way to think through and lead an organization (or industry or nation or Pop Warner football team/league…) to specific goals. Here’s how easily: Assume goals/objectives and desired performance. Quickly work backward through the hypothetical conduct that would achieve those goals and the (optimal) structures to inspire or compel that behaviour. If (some of) the structures are immovable, thus forming a constraint, that will force focus on conduct alternatives.³

     Does any of that line up to today’s reality for you as a leader? If so, you’re in luck. If (probably) not, what then needs to change?

• How does behaviour (conduct) need to change (i.e., what needs to be done differently)?
• Is this behaviour a viable alternative within current structure(s)?
• Is the concern about conduct strictly with skills or methods (i.e., “try harder”)?
• Would alternative structures better support needed behaviours?
• What environmental structures implicitly lead to the desired or necessary conduct?

     These are merely a few obvious questions, without mitigating nuance let alone circumstantial detail. While incomplete, they ought to evidently express how the leader uses SCP to reverse-engineer a path of action that not only includes adjusting and enhancing workforce capability and behaviour, but altering environmental structures to facilitate and ease any such transition.

SCP-Aware Change Leadership

     There is not a lot beyond the previous section to elaborate SCP as used for change leadership specifically. The earlier descriptions assume change is involved or required. What is or ought to be categorically clear, however, is that SCP-aware (change) leadership is holistic. It cannot successfully limit itself to only one perspective (conduct or structure) and must start with performance objectives. SCP-aware change leadership is complex and forces “outside the box,” second order thinking.

     Second order thinking is not the reserve of chess grand masters and Mensa members. It is—or can be—fairly pedestrian, in fact. In this case, start with the desired outcome being performance.

• First order thinking is: “What conduct changes will affect performance?” Conduct –> performance is direct, there being only one order of separation.
• Second order thinking is, as described, “What structure change will affect or shape conduct to a manner that will achieve desired performance?” This has two steps—orders—of separation between action and outcome as expressed in structure –> conduct –> performance.

     The thoughtful finesse and risk for second order thinking is, of course, that it requires being “right,” serially, two out of two times, which is inherently less probable than one time out of one.

     Logically, for the change leader: SCP adds valuable colour to assessment of and preparation for the inevitable behaviour change that marks and makes change management activity required. SCP is of considerably less use, in the moment, as a persuasive or charismatic change management technique to effect desired behaviour change.

Understanding and Targeting (and Manipulating) SCP

     Let’s assume that we’re starting at ground on a project that will require people to behave differently. What do we know?

• We know the project objective, specifically as it relates to people change. So we have and can elaborate desired performance.
• We know the status quo situation in the form of what people do now (conduct)—in the context of the project. Unless there is no change needed, we know what they do “wrong” for the future.
• We know the current conditions in the organization and its environment that apply to the stakeholders (e.g., organization structure, RACI, technology supports, personnel, processes, policies (rules)) comprising existing structures.

     Things we might know but more likely have to infer or deduce could include:

• What behaviour (conduct) would be most likely to result in desired performance? Is that current behaviour? If not, what would inhibit or prevent that behaviour from happening?

This question can lead to a simple or to a more complex resolution. For instance, if the only thing inhibiting the behaviour is ability, the solution is straight-forward and obvious. If, however, the necessary behaviour depends on certain tools or communication paths, or—worse—more complex structural changes, this forces a deeper or broader exploration.

• Holding all else equal, what other structures or structural elements would be suitable to arouse and galvanize the type of conduct we expect and need?

This obviously builds upon the previous question, assuming a complex answer is required. Here we step back one order of causality to identify and create the winning conditions for the achieving desired conduct. Structural elements, as noted above, can be direct and proximate: these are relatively simple. Ferreting out more opaque (non-monetary) reward structures or oblique organizational misalignments for the future/goal can take added effort not merely to identify and solve, but then to lead to fruition.

• Particularly regarding some of the more substantial structures, are the necessary implementations, changes, adjustments, etc. even feasible? That is, for cost, culture, union, policy, regulation/legislation, etc. reasons are any of these needs likely to be unresolved?

This moves from optimality theory to practical reality. It’s all good and well to say, “This will work if the Earth’s rotation reverses…,” but it’s not going to happen. So, reevaluation is in order. Is there another structure that would work? What might that imply? No? Can the performance goal be altered?⁴

• What’s the timeframe to make these change?

Let’s agree that everything is possible… in the fulness of time. Great. But if IT is needed in 90-days, it’s as good as impossible. Back to reevaluation. Do not pass Go. Do not collect $200.

Benefits to the Change Leader from SCP

     Very briefly and superficially—because there are many other benefits and values to the approach and thinking discipline—here are the big three benefits of an SCP mindset for the change leader.

Effectiveness

     Effectiveness is not necessarily about action. It is about doing the right thing: the thing that will have valuable effect. SCP benefits the leader in this respect because, when used as described, it methodically moves from objective to first and then on to second order cause/action/implication. It may ultimately be infrequent, but in those times when the “obvious” right answer begs excavating deeper dependencies, the SCP method reveals and does it. Moreover and perhaps most importantly, it glides progressively from easier to more difficult options/needs (from conduct to structure), identifying then isolating the easiest and most effective solution in the circumstance.­

Speed/pace

     The SCP paradigm is simple and easy to understand. Adding lists of elements to consider for any given part would be only modestly more valuable to understanding. The sharpness and economy of focus inherently accelerate evaluations using this framework. In addition, because of the serial causality nature of the paradigm, evaluations can be methodically extended, curtailed, and even abandoned quickly. For example, if x is an optional conduct solution, but is quickly established as dependent on a structural change y that is infeasible, even if x could be done quickly/excellently, it can be safely and immediately ignored. No extra time allotted.

Results

     The coup de grâce for SCP in this usage is that it is explicitly and expressly results-oriented. Everything begins with performance. That ruthless focus can be fuzzied by only three things: (1) misstated performance goals, (2) poor understanding of the conduct <—> performance relationship, and (3) egregious lack of discipline in application.⁵ All three, it could easily be argued, are “user error,” and readily corrected.

Summary

     There is much more depth and detail to be brought to bear on this method: detail, technique, tricks, tips, and so forth. The point of this essay was merely to introduce the approach and its value in a change leadership context. If there is interest, that introduction can be augmented.

     In any case, it is a good approach. It is and has been my standby for three decades. I recommend it unreservedly.Institute X is a transformation leadership consultancy and transformation/change leader coaching firm. One of its online presences is The Change Playbook. Be sure to check out the abundance of practical and pragmatic guidance for all aspects of making change happen. Subscribe to be notified of new, fresh content.

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1. E. Chamberlin, J. Robinson, and J.S. Bain are commonly associated with development of the idea. ↩︎
2. It is here that performance, which we set aside earlier, rears up valuably for the analyst. ↩︎
3. Desired performance is actually a type of constraint. ↩︎
4. Recall that earlier I noted desired performance as a constraint. Here it is. ↩︎
5. Extrapolating, obviously poor understanding of the structure  conduct relationship would have similar bad effect. ↩︎