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Old Ideas for a New Economy
on 10 November 2009
I was introduced to Jeffrey Pfeffer's work at a management course in 2008. Thereafter, I read and reviewed his book, Managing with Power, and was impressed by his analysis of power in organisations. It was with this in mind that I bought Hard Facts, Dangerous Half-Truths and Total Nonsense. My my! I was not disappointed.
We have all heard the phrases, "war for talent", "keep work separate from life", "getting financial incentives right", "strategy is destiny", and "we need more leadership". We often latch on to these snippets of conventional wisdom, translating them into organisational policy, yet seldom stop to question the assumptions behind conventional wisdom.
In this brilliant book, authors, Jeffrey Pfeffer and Robert Sutton, remind us to practice evidence-based management. They show how surprisingly many management decisions are driven by the ideology and charisma of managers, and not necessarily by the evidence. They tackle some `conventional wisdoms' of the management literature. I'll rehash some of the more important of these `wisdoms' here:
1. GREAT LEADERS ARE IN CONTROL OF THEIR COMPANIES
The business press and our contemporary culture are obsessed with leadership; therefore, we lionise corporate leaders like Jack Welch and Lee Iacocca. Pfeffer and Sutton emphasise that leaders do make a difference. Indeed, some of the defining social changes of the last century may not have occurred without the leadership of people like Gandhi, Martin Luther-King and Mother Theresa.
While leadership matters (as a Nigerian, I have seen my fair share of questionable political leaders), Pfeffer and Sutton suggest that the myth of leadership is a half-truth, especially in large organisations. Citing research on human psychology, they (Pfeffer and Sutton) put it down to human nature: "when we look at organisations, we see people who are in charge; we don't see the constraints that affect their behaviour and company performance". We tend to attribute to much blame for mistake--and credit for success--to leader. One GE executive interviewed in the book joked, "Jack [Welch] did a good job, but everyone seems to forget that the company has been around for over 100 years...and he had 70,000 other people to help him".
2. FINANCIAL INCENTIVES DRIVE COMPANY PERFORMANCE
Citing recent research, the authors show that financial incentives are used to drive performance because individuals believe that other are motivated by money, even as they (the individuals) know that they are much less so. Often, financial incentives are overused and tend to attract the wrong kind of talent: people only interested in making a buck. Pfeffer and Sutton show that there are cases in which financial incentives work well: where work is mostly done by single individuals, who do not work in interdependent settings. Once people work in large interdependent settings, then financial incentives alone are not the key drivers of company performance (see for example, Amazon, SouthWest Airlines and CostCo).
3. STRATEGY IS DESTINY
Business schools, governments, the military and corporations are fixated on strategy (defined as what the organisation does based on its competences and where it can add value). The authors question the logic and evidence for why conventional wisdom states that strategy is destiny.
Using examples of successful companies like Dell, Intel and Amazon, the authors show that these companies did not succeed by having proprietary (secret) strategies; if anything, their strategies were public knowledge. Dell's strategy, for example, was to bypass the wholesalers and sell directly to the consumer using just-in-time inventories. Even though Dell's competitors knew this strategy, they could not replicate Dell's success. What made the difference then? The authors stress that implementation of Dell's strategy was the key to delivering the goods. No, strategy is not destiny. While a company will benefit from good strategic planning (what business to be in and how to compete with other firms), it will almost certainly benefit from the less glamorous details of implementation (keeping it simple, learning as you do etc).
In the words of John Maxwell, conventional wisdom is borne of "lazy thinking". Pfeffer and Sutton's Hard Facts is a reminder to challenge this lazy thinking and to practice evidence-based management, a commitment to using the facts--and only the facts--to inform the management of organisations. This means that management should be based on the best available evidence of what works in a given organisational setting. Pfeffer and Sutton make their case with clarity, wit, healthy skepticism and conviction. It is a message that every senior executive should hear. Pfeffer and Sutton's Hard Facts deserve five glittering stars.