On ignoring best practices

Photo by Sicamp


Jeffrey Pfeffer has a very interesting article in Newsweek about layoffs and how they are much less effective than people think they are. One of the closing paragraphs caught my eyes:

Despite all the research suggesting downsizing hurts companies, managers everywhere continue to do it. That raises an obvious question: why? Part of the answer lies in the immense pressure corporate leaders feel—from the media, from analysts, from peers—to follow the crowd no matter what. When SAS Institute, the $2 billion software company, considered going public about a decade ago, its potential underwriter told the company to do things that would make it look more like other software companies: pay sales people on commission, offer stock options, and cut back on the lavish benefits that landed SAS at No. 1 on Fortune’s annual Best Places to Work list. (SAS stayed private.) It’s an example of how managerial behavior can be contagious, spreading like the flu across companies. One study of downsizing over a 15-year period found a strong “adoption effect”—companies copied the behavior of other firms to which they had social ties.

That reminded me of a post I wrote about how when we did a case about SAS in our organizational behavior MBA class at AGSM. I was surprised that all three teams in my class suggested to change to a commission based sale force. This is part of what I wrote back then:

This is the reason I was truly surprised to discover that all 3 teams recommended changing the pay system for the sales representatives and adding a commission based system. My simple question is WHY? It seems to work. More important than that, this is what makes SAS unique. You know how I feel about the importance of being remarkable.

You can argue about the question whether the commissions approach is the right approach generally (or maybe argue about using a joint approach), but it seems to work for SAS. So why change it?

You might say that people think that if they are motivated by money than other people are the same. But we know they are not. People are different.

I am not sure how, but this point connected with a point I was reading in a post on the Harvard Business Review blog today, by Dan Pallotta, titled – Real Leaders Don’t Do Focus Groups:

Apple is famous for not engaging in the focus-grouping that defines most business product and marketing strategy. Which is partly why Apples products and advertising are so insanely great. They have the courage of their own convictions, instead of the opinions of everyone else’s whims. On the subject, Steve Jobs loves to quote Henry Ford who once said that if he had asked people what they wanted they would have said “a faster horse.”

And this in turn reminded me of a number of things I wrote about, especially, this post:

If you look at some of the best successes in the last few years, they come from companies that looked at the market and did not ask themselves – how do we compare? How can we do what are competitors are doing, just differently or better?

It came from companies that reinvented the game. That left the confines of the industry and created new industries where they excel. Itunes; Google; Twitter; Iphone; are just some of the examples that spring to my mind.

What are the best practices you should be ignoring but instead are trying to imitate?



Do we really need flamboyant visionaries to run our companies?

Photo by Hamed Saber

The Economist decided to wage an all front attack against humility in leadership and management. One of Its recent columns discusses what kinds of leaders make the best CEOs. The argument?

In general, the corporate world needs its flamboyant visionaries and raging egomaniacs rather more than its humble leaders and corporate civil servants. Think of the people who have shaped the modern business landscape, and “faceless” and “humble” are not the first words that come to mind.

It looks like this claim comes just out of the best management books of the beginning of the last century. As Bill Taylor from Harvard Business Review Blog points out, most of the claims in the column are not only wrong, but plainly misleading:

The crux of The Economist’s argument relies on what’s known as the Great Man Theory of History. After trumpeting the virtues of business geniuses such as Bill Gates, Steve Jobs, Lou Gerstner, and Jack Welch, it then generalizes from this handful of larger-than-life moguls: “The best ambassadors for business are the outsize figures who have changed the world and who feel no need to apologise for themselves or their calling.” It’s an intriguing essay and a good read. It’s also a false choice — and a bad reading of history. For one thing, when it comes to larger-than-life CEOs, I can name as many scoundrels and failures as I can geniuses and world-changers.

My view? Three things are wrong with The Economist’s view.

First, the assumption that there is only one way. Maybe, for some companies and in certain situations, the flamboyant visionaries are the best fit as CEO’s. But not in every situation. Some companies need the quiet leadership behind the scene, the steady hand that improves and creates processes that lead to growth and innovation. Taylor’s choice of the historic Great Man Theory seems appropriate. It too claimed that only certain people are fit for leadership roles. We know today that this attitude was plain wrong.

Second, the assumption that the flamboyant visionaries must be in the top of the pyramid. You can be in a leadership role and create change in your company, without being the CEO, especially if the CEO in that company needs to deal more with management issues, where the “raging egomaniacs” are just not cut out to do the job. Management and leadership are different things that require different talents. The column refers to Bill Gates. We need to remember what Bill Gates is doing today: As Marcus Buckingham and Donald O. Clifton: write in their book Now, Discover Your Strength:

“…[Y]ou will excel only by maximizing your strengths, never by fixing your weaknesses. This is not the same as saying ‘ignore your weakness’. The people we described did not ignore their weakness. Instead, they did something much more effective. They found ways to manage around their weakness, thereby freeing them up to hone their strengths to a sharper point. Each of them did this a little differently. Pam liberated herself by hiring an outside consultant to write the strategic plan. Bill Gates did something similar. He selected a partner, Steve Ballmer, to run the company, allowing him to return to software development and rediscover his strengths’ path…

Third, when you read the column you feel almost like there have never been hugely successful leaders that changed the world while acting humbly. Has humble leaders never brought change and created value to society? Michael Dell comes to mind as someone who succeeded doing both. The research and consulting advice that The Economist is complaining about did not come out of thin air and it is based both on empirical evidence and experience. But what does that have to do with anything. The Economist wants a good story. A flamboyant leader, even if he will be less effective.

I am amazed how even a respected journal like The Economist falls prey to the conventional wisdoms and continues to harbor management principles that are almost a hundred years old, although we have so much research and experience suggesting otherwise.


Shorts: Jim Hart in HBR Blog on communicating with your team

This is a quote from Jim Hart’s post in Harvard Business Review Blog titled In Tough Times, Help Your Team Remember Their Purpose:

In his book, It’s Not What You Sell, It’s What You Stand For, Roy M. Spence Jr. writes something we have been coaching CEOs and executive leaders on for 30 years: “A real purpose can’t just be words on paper. It has to get under the skin of every member of your organization….If you get it right, people will feel great about what they’re doing, clear about their goals, and excited to get to work every morning.” This is especially important in turbulent times…

Very strong statement. Reminds of the idea of Vital Signs I write about a lot. And this:

And I think, this can also teach us a lesson as managers and leaders. There is no doubt that one of the most important things we need to do as managers and leaders is to communicate. But we have so many channels. Just using one of them for all our communications is not enough. We need to create the right mix and to send the right messages using the right tools. We need to remember that some people are listeners and some are readers. We need to remember that some people like to get all the information online (on a computer and all the time) and some prefer to do it offline (not on a computer and postponed to a different time).