Bob Sutton

BNET Story On How Tough Financial Times Create Crummy Workplaces

Lindsey Blakely interviewed me a few weeks ago for a BNET article on  "Five Signs That You Have a Crummy Job."  She identifies five ways that downturns can make life worse even for people in organizations who have survived layoffs. Blakely marches through unpleasant changes such as reduced innovation, severed emotional ties, a climate of fear, and the one I talked about -- that the bureaucrats sometimes seize power. The classic effect is that the rest of the organization shrinks, while the number of people who deal with money and enforcing rules increases, leaving fewer people to do the actual work of the organization. And those that remain are subjected to more and more red tape that is instituted in the name of saving money.  So the people doing the real work get less and less efficient, and the rule mongers keep reproducing themselves, and thus write and enforce more rules.

BUT I think that it is important to point out that tough times don't always lead to these and other dysfunctions.  Some of the most effective leaders use financial troubles and other crises as an opportunity to make changes that can strengthen the organization. For example, check out this post at Harvard Business Online on Alan Meyer's classic study that compares the different reactions of hospitals to a crisis.  Those leaders that labeled the crisis as an opportunity-- rather than a threat -- were able to make some impressive changes in their organizations.  Here is the advice I gave in that post last year based on Meyer's study and other research, and I think it holds pretty well for leaders in a variety of settings:

 If you want to make the best out of a good situation, focus on what is going wrong and can go wrong.

If you want to make the best out of a bad situation, focus on what is going right and could go right.

Thanks, and let me know what you think of the crummy job article, including any other crummy things that happen and -- especially -- how to stop crummy things from happening to organizations when the going gets tough.

Gun Racks, Pick-Up Trucks and Aggression on the Road

The recent supreme court ruling, which affirmed the right to bear arms and that interpreted the second amendment in a very pro-NRA kind of way, reminded me of one of my favorite old studies. In this 1975 study by Turner and his colleagues, they manipulated the situation so that a pick-up truck at a stop light was slow to start moving after the light turned green.  They measured aggression by how quickly and how intensely the driver behind the truck started honking.  Turner and his colleagues varied two things about the pick-up truck: a gun rack with or without a gun, and two different bumper stickers. One said "friend" and the other said "vengeance."  It is an interesting study because many people -- including me -- predict in advance that the gun and vengeance stickers would lead to do less honking, as the impatient driver waiting behind the truck might fear getting shot by the aggressive and armed person.  In fact, Turner and his colleagues found the opposite pattern. The drivers stuck behind the truck were more likely to honk when the driver had a gun, and even more likely to honk when he had both a gun and a vengeance bumper sticker!  One explanation is that aggression breeds aggression.

P.S. There are a lot of studies on horn honking -- people honk more when it is hot out, men honk more than women, both men and women honk more at women, and people in low status cars get honked at more than people in high status cars.

P.P.S. Here is the reference: TURNER, C. W., J. J. LAYTON, and L. S. SIMONS (1975) "Naturalistic studies of aggressive behavior: aggressive stimuli, victim visibility and horn honking." J. of Personality and Social Psychology 31 (June): 1098-1107.

Ben Dattner on Credit and Blame at Work

My last post describes how several of us are blogging at BusinessWeek.com on toxic bosses.  As regular readers of this blog will know, I have devoted quite a bit of space here to the issues of credit and blame, and in particular, how leaders deal with failures and setbacks -- this story about Andy Grove has always been one of my favorites, as it shows the complex skill required.  The challenges of dealing with credit and blame go to the heart of being an effective leader: skilled leaders do what is best for their organizations, not best for themselves, when things go wrong (or go right).  Credit and blame also go to the heart of good group dynamics: effective groups share blame and credit fairly, don't become trapped in battles over who is to blame and who is a hero.  And when things go wrong -- rather than going into blamestorming mode -- they join together to solve the problem (a good example is how Southwest Airlines deals with flight delays; teams focus on fixing the problem, not finding a goat). See the cartoon below from The Talent Zoo by Gary Kopervas for a great illustration of blamestorming.

I am thinking about credit and blame this morning because I just read Ben Dattner's BusinessWeek post on The Teflon Boss, and how such "unfair blamers" do so much damage.  The post is fantastic, but even better is his powerpoint deck on Credit and Blame in the Workplace.  It provides one of the most complete and integrated treatments of this managment challenge I have ever seen, and is chock-full of specific actions that leaders can take to strike a delicate and effective balance.  And although Ben touches on research lightly in the deck, these ideas are consistent in the best research I know of on leadership, attribution of responsibility, group dynamics, and personality -- which is no surprise as Ben is well-versed in such studies, as he is a research psycholoigst by training. 

Also, don't miss Ben's other posts, especially his earlier one on narcissism.

And more generally, if you have thoughts on managing credit and blame, you might want to add a comment to Ben's inspired post.

Dilbert Explains Perverse Incentives

I am not making this up, "perverse incentives" is how economists describe reward systems that lead to unexpected and unwanted behavior.  Jeff Pfeffer and I devoted quite a bit of attention to this problem in Hard Facts, Dangerous Half-Truths, and Total Nonsense, and you can read about one of my favorite examples in this U.S. News & World Report interview.  But I think Dilbert shows the process best.

Leader's Apologies: Doing it the Right Way

Yesterday, my post on Mea Culpa described how there is some trend in hospitals for doctors to admit and apologize to patients for mistakes. The initial evidence suggests this practice saves money because it reduces litigation costs, and money aside, is a more emotionally constructive process for both doctors who make the mistake and patients and their families who are damaged by such errors.  Unfortunately, whether we are talking about doing surgery or leading an organizations, or just about anything else in life, there is no doing without mistakes, and no learning either.  As Diego and I like to say, failure sucks but instructs.

Continuing this theme, there is also growing evidence that leaders of companies who choose to apologize for mistakes may actually help their careers and their firms by apologizing in the right way.  Although most mistakes and setbacks seem to provoke leaders to cover them-up, claim that it wasn't their fault, to point fingers at others, say"no comment," or perhaps say something mealy-mouth like "I misspoke, but it really wasn't a mistake"  I especially love the term "mistakes were made," as it almost seems to be admission of error, but the leader or politician in question never quite associates the term "mistake" with "I" or "we."  It is as if errors somehow have made themselves, without any human action or involvement.   Consider the story below for a different tactic.

The Chef Executive ran a story in 2003 about a rather nasty statement made by then Goldman Sachs CEO Henry Paulson Jr. (now the U.S. Treasury Secretary). Paulson's error and recovery is instructive, and the plot line is reminiscent of the Hew York Times article on doctors that I wrote about yesterday. I quote:

'Henry Paulson, Jr., chairman and CEO of Goldman Sachs Group, recently demonstrated how an apology from the top can help repair the reputations of both a chief executive and his or her company. During a question-and-answer session at a Salomon Smith Barney conference in January, Paulson seemed to imply that between 80 and 85 percent of Goldman Sachs's employees were irrelevant to the company's success. "I don't want to sound heartless," the CEO said, "but in almost every one of our businesses, there are 15 to 20 percent of the people who really add 80 percent of the value. I think we can cut a fair amount and not get into muscle and still be very well-positioned for the upturn.

Paulson's comments drew an immediate and overwhelmingly negative reaction. Rather than wallow in explanations as to what he really intended, or suggest that the comment was taken out of context, Paulson faced the music. In a voice mail to all of Goldman's 20,000 employees, he acknowledged that his remarks were insensitive" and "glib." In other words, he apologized.'

Stories like these are heartwarming to hear. But there are still plenty of CEOs, lawyers, and PR firms who will advise leaders that that they should never apologize, and also some theory in psychology that suggests self-serving attributions -- taking credit when things go well and blaming others and outside forces when they go badly -- is an effective impression management.  BUT a series of studies by psychologists suggest that managers and leaders who apologize when things go wrong, report what they've learned, and then convey how and in what way the organization's direction will change as a result not only enjoy more favorable reputations than leaders who point fingers at others and external events, there is also evidence that their firms do better over the long haul.  There seems to be two reasons this happens, one more objective the other more subjective.  The more objective part is that by admitting mistakes and updating their behavior, this means the leader and his or her team is learning along the way.  Jeff Pfeffer and I have (borrowing from psychologists and philosophers) called this "the attitude of wisdom," which means have the courage to act on what you know and the humility to change course when new and better information comes along that you are heading in the wrong direction.   The second theme is that one of the main challenges for leaders is to convince insiders and outsiders that they are in control of the organization -- which is a big challenge because -- although there is a lot of evidence that leaders get lots of credit and lots of blame for what happens to their organizations -- there is also a lot of evidence that they have only modest control over organizational processes and performance. As such, one way that leaders fuel the illusion -- and to some extent the reality -- of control is by convincing people that when they do something good, good things happen to the organization and when they do something bad, bad things happen to the organization.   This may all sound a bit weird, but as we show in Hard Facts, there are few situations where leadership actions appear to be able to affect organizational performance by any greater than 10% (small, young companies appear to be an exception in some studies).

So to return to apologies, there are not only sound conceptual reasons for leaders to make them, there is also some interesting evidence to support apologies in this context.  Here is an excerpt from Chapter 8 ofHard Facts that provides a nice summary of major studies -- and also indicates that, although apologizing works for managers and leaders, it may not be effective for politicians, at least if they want to get elected. Here is the excerpt, plus I left in the citations for those who want to dig deeper.

'[R]esearch on winning vs. losing U.S. presidential candidates shows that – in 80% of elections between 1900 and 1984– winners avoided talking about negative events and, when setbacks were raised, winners were more likely than losers to deny blame and point fingers at others and events they couldn’t control.

On the other hand, it turns out that company executives are different than politicians.  Leaders who claim that “it isn’t my fault” and “ I couldn’t have done anything about it” aren’t doing themselves or their organizations any favors over the long haul.  Deflecting blame might help them keep their jobs for a time, enjoy better mental health, and persist in the face of failure.  But ducking the heat shatters the illusion of control.  Investors, customer, employees, and the press conclude that leaders who don’t take responsibility for mistakes and setbacks lack the power to make things better.  Controlled experiments by Fiona Lee and her colleagues show that hypothetical managers who took responsibility for bad events like pay freezes and failed projects were seen as more powerful, competent, and likeable than managers who denied responsibility. 

The wisdom of acknowledging blame is confirmed by two studies that tracked Fortune 500 firms over long periods.  Both were careful studies designed to rule out alternative explanations.  Gerald Salancik and James Meindl examined 18 Fortune 500 firms over 18 years.  They found that, especially in firms with wild swings in performance from year to year, performance was superior down the road when executives attributed both good and bad performance to internal actions.   Similarly, Fiona Lee and her colleagues examined yearly stock price changes in 14 companies over a 21-year stretch.  They found that taking blame for setbacks wasn’t just effective in companies with wild performance swings. In years when senior management blamed their firm’s troubles on internal and controllable factors, stock prices were consistently higher the next year, compared to when executives denied responsibility for setbacks.

What do you think? Should leaders apologize when things go wrong?  If so, what is the most effective way to do it?  

Here are some of the key references:

Lee, Fiona., & Robinson, R. (2000). An attributional analysis of social accounts: Implications of playing the blame game. Journal of Applied Social Psychology;

Lee, F., & Tiedens, Larissa. (2001). Who’s being served? “Self”-serving attributions and their implications for power. Organizational Behavior and Human Decision Processes, 84:254-287.

Salancik, Gerald., & Meindl, James (1984). Corporate attributions as strategic illusions of management control. Administrative Science Quarterly, 29, 238-254.

Lee, Fiona, Peterson, Christopher, & Larissa Z. Tiedens (2004) Mea culpa: Predicting Stock Prices from Organizational Attributions.  Personality and Social Psychology Bulletin. 30:1-14

Mea Culpa: The Virtues of Apologies

The New York Times had an interesting article this Sunday called Doctors Say 'I'm Sorry Before See You in Court, about a movement in some hospitals toward openly admitting mistakes to patients, both as a way to diffuse the tension that often leads to litigation and as way create a more open learning environment.  The early results also suggest that it is one of those instances where the misguided paranoia of the legal profession -- where lawyers have counseled doctors for years to not admit mistakes -- may have done more harm than good. And lawyers are starting to change their tune on this as well.  The Times reports:

At the University of Michigan Health System, one of the first to experiment with full disclosure, existing claims and lawsuits dropped to 83 in August 2007 from 262 in August 2001, said Richard C. Boothman, the medical center’s chief risk officer.

“Improving patient safety and patient communication is more likely to cure the malpractice crisis than defensiveness and denial,” Mr. Boothman said.

Mr. Boothman emphasized that he could not know whether the decline was due to disclosure or safer medicine, or both. But the hospital’s legal defense costs and the money it must set aside to pay claims have each been cut by two-thirds, he said. The time taken to dispose of cases has been halved.

The number of malpractice filings against the University of Illinois has dropped by half since it started its program just over two years ago, said Dr. Timothy B. McDonald, the hospital’s chief safety and risk officer. In the 37 cases where the hospital acknowledged a preventable error and apologized, only one patient has filed suit. Only six settlements have exceeded the hospital’s medical and related expenses.

The question of when admitting mistakes is a wise idea and how to do it is also an area that leadership researchers have studied in recent years.  My next post will focus on that research, but as frequent readers of this blog know, I've always been fascinated by these issues, and have argued that the best single diagnostic question for determining if an organization is learning and innovating as it moves forward is: What Happens When People Make a Mistake?  

P.S. The best book I know of on medical mistakes is Charles Bosk's Forgive and Remember.  It is fairly academic, but so well-written and compelling that it is hardly dull.

P.P.S. I was reading through old posts on Metacool and came across one that is the same spirit as my diagnostic question (I should say "our" question, as it was developed with Jeff Pfeffer). Check out Diego's post Where's your place for failing?

Fold Your Arms -- You Will Try Harder and Generate More Ideas

This study is courtesy of the BPS Research Digest blog, which as I have written here before, does a lovely job of summarizing psychological research from peer review journals.  They describe an experiment which found that, when people cross their arms, they persisted twice as long when presented with anagrams that were impossible to solve, and when presented with anagrams that had multiple solutions, subjects who crossed their arms generated more solutions than subjects who kept their arms at their sides.  The researchers speculate that this happens because "over many years, the act of crossing our arms comes to be implicitly associated with perseverance, so that adopting that position activates a nonconscious desire to succeed."  The researchers also caution that folding arms can be a sign of social distance (and I would add, a sign that people are uptight or trying to dominate others). 

Next time I am in a group that is facing difficult task, I am going to suggest that we all cross our arms and see if it helps!

The Semmelweis Reflex and Why Being Right Isn’t Enough To Provoke Change

Ronny Kohavi is the General Manager of the Experimentation Platform at Microsoft, his group has developed and is spreading the use of  tools that allow people within Microsoft and external developers to do controlled experiments with users, and that way, potentially develop better and more usable software . You can read about this EXP Platform here. Clearly, Ronny is someone who cares about and understands the power of evidence-based practices, and as such, we have been exchanging emails about the work that Jeff Pfeffer and I have done on evidence-based management in our book and our website. 

Ronny is generally supportive of our approach, but has pushed me to emphasize that controlled experiments are the gold standard of science and that we should have pushed people to use them more, and included more examples. I partly agree with Ronny, as there are times when experiments aren’t used but can yield better practices – as we talk about in the book, Gary Loveman at Harrah’s did use experiments as one of the methods (along with data mining) to overturn deeply held assumptions in the gambling industry. But I argued that there are also times when an experiment wasn’t possible, for example, in the case of the now apparently aborted Microsoft/Yahoo! merger, the only decent evidence I know of that provides guidance are correlational studies, as no one has yet been allowed to do controlled experiments of the conditions under which mergers fail or succeed,

BUT I do agree completely with Ronny that we need more experiments and, as the history of medicine shows, it is important to have the strongest possible data because – even when you have it – convincing people to abandon a bad practice can be remarkably difficult when they believe in its efficacy, are skilled at, and everyone around them has always done and believed in it. We wrote about bloodletting as an example, but Ronny wrote me about an even more interesting and terrifying case:

Dear Bob,

One of the examples was the bloodletting trials by Pierre Louis, but I was reminded of a better example: Semmelweis’s Childbed Fever. The Semmelweis Reflex is the dismissing or rejecting out of hand any information, automatically, without thought, inspection, or experiment. Anyway, here’s a summary.

Ignaz Semmelweis’s Childbed Fever

The story below is mostly from the book Leadership and Self-Deception.  The story is corroborated by multiple sources including Encyclopedia Britannica, Childbed Fever: A Scientific Biography of Ignaz Semmelweis, and Wikipedia.

Semmelweis was a European doctor, an obstetrician, in the mid 1800s.  He worked at Vienna’s General Hospital, an important research hospital.  The mortality rate in the ward where he practiced was one in 10 – one in every ten women giving birth there died!   The reputation of Vienna General was so bad that women preferred to give birth on the street and then went to the hospital.  In the book Childbed Fever, they estimated that 2,000 women died each year from childbed fever in Vienna alone.

The collection of symptoms associated with these deaths was known as “childbed fever” or Puerperal fever.   More than half the women who contracted the disease died within days.  Patients begged to be moved to a second section of the maternity ward where the mortality rate was one in fifty – still horrific, but far better than one-in-ten in Semmelweis’s section.

Semmelweis became obsessed with the problem.   He tried to control for all factors, including birthing positions, ventilation, diet, and even the way laundry was done. The one obvious difference between the sections was that Semmelweis’s section was attended by doctors, while the other section was attended by midwives.

After a four-month leave to visit another hospital, he discovered that the death rate had fallen significantly in his section of the ward in his absence.  His inquiries led him to think about the possible significance of research done by him and the doctors on cadavers.  Yes, cadavers.  Semmelweis spent far more time doing research on cadavers than other doctors.

Vienna General was a teaching and research hospital and many doctors split their time between research on cadavers and treatment of live patients.  The doctors in his section performed autopsies each morning on women who had died the previous day, but the midwives were not required or allowed to perform such autopsies.  They hadn’t seen any problem with that practice because there was as yet no understanding of germs.

Semmelweis concluded that ‘particles’ from cadavers and other diseased patients were being transmitted to healthy patients on the hands of the physicians.  He experimented with various cleansing agents and instituted a policy requiring physicians to wash their hands thoroughly in a chlorine and lime solution before examining any patient.  The death rate fell to one in a hundred!

What is surprising about this story isn’t the discovery through attempts to control for factors, which led to the unthinkable conclusion (at the time) that there was something invisible that was transferred by the doctors.   What is really shocking is how long it took the community of doctors to accept the results.

According to Encyclopedia Britannica, the mortality rate in Semmelweis’s division fell from 18.27% to 1.27% in 1848.  That was not enough to generate sufficient recognition and in 1849 he was dropped from his post at the clinic and turned down for a teaching post.  Semmelweis spent the next six years at a Hospital in Pest, Hungary, where he reduced mortality rate in the obstetrics department to 0.85% while in Prague and Vienna the rate was still about 10% to 15%.   

Vienna continued to ignore his recommendations.   In 1861, he published a book, but the community rejected his doctrine.  In 1865 he suffered a nervous breakdown and was taken to a mental hospital, where he was beaten by asylum personnel and died.  It took another 14 years for the discovery to be accepted, after Louis Pasteur, in 1879, showed the presence of Streptococcus in the blood of women with child fever. Semmelweis is now recognized as a pioneer of antiseptic policy.

This story is instructive on many levels; the first thing that comes to mind is that developing the best evidence and practices is often even less than half the battle. Ideas that spread and stick need to be sold well too. That is the main idea behind our d.school class on Creating Infectious Action, and great books like Influence and Made to Stick.

P.S. Ronny, thanks for all your great ideas and for sharing this story.

WSJ's Carol Hymowitz on the CEO Pay Gap

The Wall Street Journal has a most thoughtful article called Pay Gap Fuels Worker Woes.  It talks about how when there is a huge gap between what the CEO makes and what everyone else makes, it can undermine morale.  And it quotes some accomplished researchers like Wharton's Pater Cappelli and Harvard's Rakesh Khurana.  I want to go a bit beyond this article to show that these concerns about excessive CEO pay aren't just political rhetoric. I went through and reviewed the research on CEO pay (something I have been meaning to do for awhile), and although there are one or two studies that show paying the CEO a lot more than others might increase performance under some conditions, the weight of the evidence looks negative to me (although in the spirit of evidence-based management, this is a tentative conclusion and I need to  read the research I gathered at least once more and search for other published studies might have missed).  Here are some major findings:

1. A 2006 study in the journal Organization Science by James Wade and his colleagues suggests that overpaying the CEO leads to a dilemma: You can overpay other senior executives too and thus entice them to stay; our you can create a big gap between the overpaid CEO and everyone else, which leads other senior executives to jump-ship.  Either way, overpaying the CEO has costs beyond the extra dollars the CEO gets.

2. A 2001 study by Donald Hambrick and Phyllis Siegel in the Academy of Management Proceedings of 64 firms showed that when there are bigger pay differences between the CEO and other members of the top management team, organizational  performance tends to suffer -- and the negative effects of such pay dispersion is most pronounced in high-technology firms.

3.  A 2002 study of 199 firms in the S&P 500  by  Mason Carpenter and WM. Gerard Sanders in the Strategic Management Journal suggested that firms that had a bigger gap between CEO and the other members of the top management team performed less well in subsequent years.

4. Finally, to preview a study I will likely be talking about more in the future, Arijit Chatterjee and Donald Hambrick published a paper on CEO narcissism in the Administrative Science Quarterly called "It is all about me."  They develop an inspired six-item narcissism measure: 1. CEO cash compensation relative to the second highest paid executive; 2. CEO non-cash compensation relative to the second highest paid executive; 3. length of the CEOs Who's Who entry;  4. CEO prominence in company press releases;  5. CEOs use of personal pronouns during press interviews ("I" and "me" versus "us" and "we"); and (I love this one) 6. prominence of the CEO's photograph in the annual report (maximum score if there was a picture of the CEO alone in the annual report and it took up more than half a page in the annual report).  The intercorrelation among these six items was .76, which is well-within the range for an acceptable index.  So these index suggests that -- performance issues aside -- when the CEO is getting a lot more money than the next executive,  he or she will likely be afflicted with other signs of narcissism.  The firm performance effects in this study are complicated, and I will talk about them at later point.  But here is a post with a link to the whole paper -- in unpublished form -- if you want to read it.   

I want to end by saying again that, although the message in this research so far seems to be that paying the CEO a lot more than others isn't a good thing for the company, there are some studies that suggest this isn't always the case.  I also find that one of the most interesting studies is the one by James Wade and his colleagues, which suggests that if the CEO is overpaid, the decision to overpay the rest of the top team isn't a purely good thing -- reducing pay dispersion when the CEO is overpaid can cause a company to waste even more money.

Changethis: More Interesting than Harvard Business Review?

A new round of essays were just published at Changethis, the online magazine of edgy essays published by the folks at 800CEOread. I just read through the titles and started reading the essays.  Is it just me, or do these looking more interesting than the typical Harvard Business Review? Note this isn't a bash on HBR, they do great stuff and it remains one of the most influential business publications in the world.  And note I've published in both places and hope to publish in each again.  But check out these titles and read the articles, and tell me what you think!

09-April | Strive For Minimal Achievement
Barry J. Moltz | “Failure is valuable only when we realize it is a normal part of the business process even when t... more »

09-April | The Freak Factor: Discovering Uniqueness by Flaunting Weakness
David Rendall | "My experience as an individual, consultant, parent and leader indicates that efforts to fix weak... more »

09-April | The New Rules of Viral Marketing: How Word-of-Mouse Spreads Your Ideas for Free
David Meerman Scott | “You and I are incredibly lucky.

For decades, the only way to spread our ideas was to buy ... more »

09-April | The New Time Management: Simply Focus on the Fundamentals, and Toss Away the Tips
Francis Wade | "As working professionals across the world, we all want the same things when it comes to time man... more »

09-April | It’s Time to Evolve: Leading with Just Enough Anxiety in the 21st Century
Robert Rosen | "In Prehistoric times, saber-toothed tigers and other wild animals tried to make primitive man th... more »

07-March | A Creative Manifesto: Why the Place You Choose to Live is the Most Important Decision of Your Life
Richard Florida | “Increasingly, the place you choose to live will help determine your success in business, in find... more »

07-March | The Megacommunity Manifesto
Mark Gerencser, Reginald Van Lee, Fernando Napolitano, and Christopher Kelly | “Public, private, and civil leaders should confront together the problems that none can solve. ... more »

07-March | The 10 1/2 Commandments of Visual Thinking: The "Lost Chapter" from The Back of the Napkin
Dan Roam | “Visual thinking is the future of business problem solving. Using our innate ability to see—both ... more »

07-March | Trust Economies: Investigation into the New ROI of the Web
Julien Smith and Chris Brogan | “If You Build It, They Won't Come What happened to the early days? You built a baseball stadiu... more »

07-March | Manners Matter: The Commonsense Approach to Business Etiquette
Joel D Canfield | “Manners matter, not just socially; we all know manners matter socially. Manners matter in busine... more »

07-March | The Connection Culture: A New Source of Competitive Advantage
Michael Lee Stallard | “I want to share something with you I’ve learned over the last decade of my life that I believe c... more »

Predictably Irrational: Great Book By Dan Ariely

There have been a lot of books written since Daniel Kahneman and Amos Tversky's Nobel Prize winning work on the limits of human decision-making, the problems such drawbacks cause, and the steps that people can take to overcome such limits.  Max Bazerman's  Judgment in Managerial  Decision Making is still among the best, and although it is textbook-like, I find it engaging and useful. But there is a new champ in this space. I am just about done with Dan Ariely's Predictably Irrational: Hidden Forces The Shape Our Decisions.  Ariely not leads us through one fascinating study after another -- such as research that shows why a 1 cent aspirin won't get rid of a headache but a 50 cent aspirin will and a host of other studies that show why we waste money, underestimate risks, and procrastinate.  He also shows throughout the book how to overcome or avoid these biases, and for me, the real clincher is that his writing style and charming personality kept me turning pages quickly and smiling throughout.  He takes study after study and translates them in an engaging manner, but never distorts the message.  This is one of those books that is on par with the Heath Brothers Made to Stick, Robert Cialdini's Influence, and Malcolm Gladwell's Tipping Point.  If you want to learn about behavioral economics, Predictably Irrational is the best place I know to start -- although Bazerman's book is a more useful reference it is more systematic and comprehensive (and it is well-written).

P.S. A lot of people seem to have a similar opinion of Ariely's new book -- it is currently #13 overall at Amazon.

Performance Evaluations: Do They Do More Harm Than Good?

A young head of HR at a small firm I know just had his first experience with managing and implementing the employee performance evaluation process.  He is a very smart guy and carefully implemented the process in a way that was consistent with "best practices" suggested by leading HR professionals.  I guess things did not come out as well as he hoped.  He wrote me yesterday: "I’m getting very close to finishing up our performance reviews for 07.  I’m having some questions as to how helpful the process is for companies.  .... I am wondering if the process does more harm than good." 

I forwarded this email to My co-author Jeff Pfeffer and he reminded me that there is a lot of theory and evidence out there suggesting that many companies might be better off not doing performance evaluations at all, as this young head of HR seems to be learning. Although there is so much faith in the importance of doing performance evaluations, most companies implement them badly enough that (applying the "first do no harm" standard to management), and doing them well is expensive enough and time consuming enough, that having no process, or an extremely simple and quick one (e.g., one company I know used to have employees pick three peers or subordinates, and those three alone decided the size of the raise and bonus within a preset range). 

Then there is another, more extreme argument, that the performance evaluation process is fundamentally flawed.  That doing it well is like doing blood-letting well -- it is a bad practice that does more harm than good in all or nearly all cases.  This is the position taken by the famous quality guru W. Edwards Deming -- he was vehemently opposed to using them at all.  As Jeff Pfeffer and I wrote on page 193 of The Knowing-Doing Gap:

Deming emphasized that forced rankings and other merit ratings that breed internal competition are bad management because they undermine motivation and breed contempt for management among people who, at least at first, were doing good work. He argued that these systems require leaders to label many people as poor performers even though their work is well within the range of high quality. Deming maintained that when people get unfair negative evaluations, it can leave them "bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of the rating, unable to comprehend why they are inferior." 

I would be curious to hear from people out there who have a lot of experience giving or getting performance evaluations.  Do they do so much damage that the best performance evaluation might be none at all?   

To make an extreme and probably over cynical argument: Do organization just do them because they have always done them, because there is excessive and irrational faith in them, and perhaps because a whole bunch of vendors, consultants, and HR professionals benefit financially (in fact, you could argue that because so many things go wrong with evalua