The Might and Myth of Good To Great

I wrote this essay back in 2009 for 800-CEO-READ’s annual publication In The Books and realized recently the piece doesn’t exist anywhere online in its entirety. This post is a remedy to that problem.

2009 WAS A BIG YEAR for Jim Collins. The Boulder-based management guru came out with his new book How The Mighty Fall. This is his first new work in eight years since the release of the four million copy strong bestseller Good To Great.

But that year also marked a turning point in the mood about Collins’ research-based methodology. A growing number of researchers began to question the ability to find “great” companies and assign reasons for their success. What follows a chronicle of the debate.

We start with Drake Bennett wrote a outstanding article “Luck Inc.: The 7 secrets of really, really lucky companies” for The Boston Globe on April 12, 2009 that pulled together all the arguments and got the big players on both sides of the debate in the record.

NOTHING SUCCEEDS LIKE success – and few books succeed like books about success. Since the 1982 publication of “In Search of Excellence,” by the McKinsey consultants Tom Peters and Robert Waterman, the business-success book has grown from a genre into a juggernaut. The most influential among them, like “The Leadership Engine” and “Reengineering the Corporation” and “Built to Last” and “Good to Great,” sell millions of copies, are translated into dozens of languages, and shape the habits of managers from Detroit to Dubai. Their authors launch research firms and leadership education institutes, consult for Fortune 500 companies, and command $50,000 fees to speak at conferences and corporate retreats.

Even those people who haven’t read the books (or listened to the CDs or watched the DVDs) live in their shadow. Working at companies whose executives have embraced the wisdom of one or another success bestseller, many people have their daily lives shaped by its prescriptions, and grow dimly familiar with the catch phrases – like “stick to the knitting” and “level 5 leadership” – that the books have spawned.

While the particulars vary, the basic idea underlying the literature is the same: that the secrets of success can be divined by careful study of the institutional habits of the world’s business all-stars – companies that set the standard for their industries, that thrive in tough times, companies that win the war for talent, companies that are built to last. In the imperturbable focus on core values of Hewlett-Packard or the restless innovativeness of Google or the ruthless accountability of GE, there are lessons for us all.

At their most ambitious, these books purport to elevate the study of excellence to a science, its nuggets culled from exhaustive research and refined by painstaking analysis. Jim Collins, coauthor of “Built to Last” and author of “Good to Great,” likens what he does to physics. Readers of his books, he writes, have their eyes opened to the “immutable laws of organized human performance.”

But a few consultants and business school professors have begun to argue that much of this literature is, in fact, useless. Far from a science, they argue, the success literature is made up of little more than just-so stories in which authors use dramatic anecdotes – often drawn from previously published magazine profiles or interviews with the very executives whose performance is being examined – as evidence for “secrets” that amount to little more than warmed-over homilies. The critics accuse the success gurus of cherry-picking their evidence, of doing little to double-check their results, of circular reasoning, and of making elementary statistical errors.

“These books try to impress you with the massive amounts of data that they gather, but much of the data are not valid,” says Phil Rosenzweig, a professor at Switzerland’s International Institute for Management Development and author of “The Halo Effect,” a 2007 book that set out to debunk much of the business-success literature. “These sorts of data are seen through the lens of the company’s success. They don’t explain the company’s success, they are explained by it.” Along with Rosenzweig’s, the past few years have seen books by Robert Sutton and Jeffrey Pfeffer of Stanford arguing for a more truly evidence-based business-success literature.

And most recently, a team led by Michael Raynor, a researcher and consultant at Deloitte Consulting, has begun to argue that business-success books aren’t even particularly good at spotting success in the first place: When you take a closer look at the companies they study, the accomplishments of the vast majority are just as likely to be due to simple luck. It’s the equivalent of finding someone who flipped a coin seven times and happened to end up with seven heads and asking for her secret.

As a result, these critics argue, we may be learning the wrong lessons from the wrong companies. “When we look at the samples of great companies in most studies, by our measure, the companies that they call great by and large aren’t,” says Raynor. “The conclusions they come to are more a function of the researcher than the company.”

For their part, authors like Collins and Peters see such critiques as caricatures of their work, and defend their methodologies as the best one could hope for in distilling the endlessly complex contingencies of business into digestible lessons for working managers.

“It’s not the same kind of data that you would use to refute or confirm Einstein’s theory of relativity,” says Peters. “It’s exploratory social science research.”

Still, critics like Raynor believe we can do better, and they believe that their work will help pave the way to a more truly scientific study of success. But, at the same time, their critical insights also raise fundamental questions about how possible such a science is, and remind us just how much success – whether in business or in life – can be out of our hands.

It was perhaps inevitable that something like the contemporary business-success book would arise out of the early 1980s, an era defined both by a growing popular interest in the worlds of business and finance and, like today, a deep insecurity in American boardrooms.

“It’s around that time that business pages became more popular,” recalls Jacqueline Murphy, editorial director of Harvard Business School Press, which has published several business-success bestsellers. “People became more interested in investing, in finance, and in management as a topic.”

Running through “In Search of Excellence,” though, is also a note of reassurance for a powerful country that feared it had lost its edge. “There is good news from America. Good management practice today is not resident only in Japan,” Peters and Waterman write early in the book. To back this up, the two authors picked out 43 American companies with especially good reputations in the business world (they determined this, Peters later recounted, simply by asking around the offices of McKinsey) that had also delivered strong long-term financial growth. Among the book’s paragons are Hewlett-Packard, Boeing, Johnson & Johnson, IBM, and Caterpillar. Then Peters and Waterman, sifting newspaper and magazine articles about the companies and talking to the firms’ executives, set out to divine what set those companies apart from the mediocre and the merely adequate.

Their answer was a set of eight “attributes of excellence.” Number one was “a bias for action,” number two was “staying close to the customer,” number eight was “simultaneous loose-tight properties,” which is defined as “fostering a climate where there is dedication to the central values of the company combined with tolerance for all employees who accept those values.”

The book was an immediate sensation and went on to sell more than 6 million copies. But even at the time there were questions raised about its reliability: few of the companies Peters and Waterman showcased kept up their market-beating stock performance in the years after the publication of the book (though a good portion did later return to posting impressive gains). Many of them struggled, and a few, like Atari, Wang, and Data General, collapsed.

And the fact that Peters and Waterman had looked only at companies that they deemed successful – without comparing them with less excellent competitors – meant the authors were in little position to identify what factors mattered and which were irrelevant. They had no way of knowing, in other words, whether 43 utterly dysfunctional companies might be just as likely to be characterized by a “bias for action” and “loose-tight properties.”

Criticisms like these did little to dent the authors’ influence, especially that of Peters, who became the first of the high-profile management gurus and inspired a raft of imitators. The most famous of his heirs has been Collins, also a former McKinsey consultant. Collins’s own books – “Built to Last” was published in 1994, “Good to Great” in 2001 – address some of the criticisms leveled at “In Search of Excellence”; in particular he makes sure to include comparison companies to contrast to the exemplars he lauds in his books.

But he also makes bolder claims for the principles he unearths. In “Good to Great,” he lays out the road map for merely good companies to transform themselves into great ones, using as his case studies companies like Wells Fargo, Philip Morris, and Gillette. The process starts with having leaders with “a paradoxical blend of personal humility and professional will” who get “the right people on the bus,” instill a “culture of discipline,” and apply “technology accelerators.” Such elements, he writes, gain their power from “the enduring physics of great organizations.”

Recent years, however, have seen a proliferation of critiques of books like “Good to Great,” fueled in part by the same quantitative urge behind the push for evidence-based medical care. In last fall’s issue of The Academy of Management Perspectives, two separate articles took issue with “Good to Great.” One of them, by Bruce Resnick and Timothy Smunt, professors at Wake Forest University’s Babcock School of Management, found that if the 15-year window during which Collins looked at each of his “great” companies was moved by as little as a few months, the exceptional stock market performance that distinguished them all but disappeared.

Another line of criticism aims not at the math but at the sort of evidence that success books rely on. Much of that information, argues Rosenzweig, is biased. In many cases researchers rely on newspaper and business magazine articles and business school case studies, as well as internally produced documents and interviews with managers at the companies being evaluated, and the amount of data gathered can be impressive. These sources give the books their breezy, intimate, anecdotal feel.

But Rosenzweig argues that all of these sources can be easily tainted by whether or not a company is understood to be successful or not. The business press, for example, can hail a CEO as a genius when his stock price is up then turn around and assail him as a cretin when it drops. And even the perceptions of company insiders can be sensitive to how someone else tells them the company is doing. A host of psychological studies, for example, have shown the extent to which arbitrarily telling a person they have either excelled or failed at a task shapes their memory of the task: people told they succeeded are far more likely to remember their team as tightknit and their team leader as competent and inspiring. Those told they failed remember team squabbling and ineffectual leadership.

These tendencies, Rosenzweig argues, are only likely to be exacerbated by questions that ask them to explain the success of their company – one of Collins’s interview questions, for example, asks managers, “Can you think of one particularly powerful example or vignette from your experience or observation that, to you, exemplifies the essence of the shift from good to great at [good-to-great company]?”

The newest and perhaps most radical critique, though, comes from Raynor, of Deloitte, along with the Deloitte consultant Mumtaz Ahmed and the University of Texas business school professor Andrew Henderson. In a paper currently under review, the three argue that not only are business gurus bad at identifying the causes of success, they have no way of telling true greatness from mere luck – if enough people are flipping coins, someone is likely to string together an impressive run of heads. According to their analysis of 13 of the most influential business success books, three quarters of the purportedly great companies had track records that could just as easily have been explained by the vicissitudes of random chance – performances that looked impressive on first glance were simply akin to being the lucky person in a stadium full of coin-flippers. And if that’s your data, says Raynor, “you’re not inferring the underlying causes of great performance, you’re basically just imposing patterns on randomness.”

In response, Collins points to unpublished work he is doing that shows that luck does not, in fact, explain the difference between the winners and losers in his model. “There is, however, a significant difference in how the winners and losers view the role of luck – and therein will lie an absolutely fascinating chapter!” he writes in an e-mail. On a broader level, he objects to the characterization of his work as “success literature.” It is more concerned, he argues, with discovering why companies do not become great than with why they do.

Raynor and his coauthors, though, are not arguing that luck explains success, but that it masks it. And they’ve set themselves the tricky – and perhaps impossible – task of coming up with a set of metrics that avoid the pitfalls of subjectivity and self-fulfilling prophecy. Some of the factors they’re looking at are the timing of product launches and mergers and acquisitions and the degree of geographical diversity. These are, Raynor admits, measures that don’t yet add up to a rich portrait of an organization, and may not do much to anatomize its excellence or lack thereof.

Ultimately, argues Robert Sutton of Stanford, a lot of what people look for in advice books, whether in business or any other realm, isn’t so much advice as encouragement. And that can have value.

“There’s value in mastering the obvious,” he says. “If Jim Collins’s impact is to get people to do stuff that they know they should do already – facing the hard truths or being selfless or whatever – I certainly don’t think that’s a bad thing.”

There are a number of important responses to Drake’s article. Tom Peters quickly responded on his blog in two separate posts (one and two) with the primary message described in this excerpted paragraph:

The far more important point is—and this has apparently eluded 100% of our critics: Our readers are not idiots! They are pragmatic businesspeople or managers in the public sector or, pastors or priests or football coaches—the essence of the practice of management in all of these disciplines is indeed pragmatism! That is, our book (and others like it) do not appear in the “religion” section of the book store with the Bible on one side and the Koran on the other. Businesspeople, and police chiefs and fire chiefs and public works directors and elementary school principals, are neither looking for Biblical guidance nor full-blown academic theories of the Einsteinian or Darwinian or Newtonian sort. They are looking for … “a couple of good ideas” they can use now. They are far more capable than Bob Waterman or I or Gary Hamel or Warren Bennis or Rosabeth Moss Kanter of deciding what’s worth trying and what’s not in their peculiar context—and when to start trying whatever and when to stop.

Jim Collins talked a bit more about his unpublished turbulence research in the cover story for the 30th anniversary issue of Inc. magazine and in a profile in the New York Times. He said that there were differences between the successful and unsuccessful IPOs of the last forty years and the findings were “so intense”:

I’ve become a total paranoid, neurotic freak. It has shown me the importance of building in big shock absorbers. I keep a year’s operating budget in cash in the bank across the street all the time and run this place so that we could go an entire year without a penny of revenue. I learned that from reading about Bill Gates in the early days of Microsoft. I want to be able to say at any given time, “If we don’t get a penny for three years, we’ll be fine.” So, we can focus on our work.

Stanford Professor Bob Sutton also responded with more thoughts beyond his quote at the end of the article:

I had a pretty detailed conversation with Drake, and although most of it focused on the drawbacks of these kinds of books, he ended-up quoting me as defending these books. I think he was completely fair, and in any case, I am on record many places raising concerns about the suspect methods used in both “In Search of Excellence” and “Good to Great”. But I have an especially ambivalent reaction to Good to Great — let me explain why. There are a lot of things that bother me about the book:

It is a very small and flawed sample. Most notably, we have 11 companies that used the practices that Collins celebrates, but the sampling strategy made it impossible to discover how many companies used these practices yet failed to make the leap to greatness.

The main method was retrospective — they would label a company as “great” and then look for articles and do interviews to determine why it happened. This is a quite biased method — if you ask someone to explain the secrets of their success, you get a certain kind of story that differs from if you ask them to explain why the failed (regardless of actual performance). Winners will report having better leaders, being more focused, and persistent — and trying to untangle what is part of the sensemaking process versus what really happened is tough.

“Good to Great” cites almost no prior research, even though there are literally thousands of more rigorous studies that are pertinent to claims in the book, especially studies of leadership. Indeed, as knowledge accumulates one study at a time, and there are few if any definitive studies. So any author who claims or implies that he or she has done THE definitive study is immediately suspect — indeed, it is something that well-trained researchers never do, even Nobel Prize winners. I think that Collins needs to say — “this is just one study, we learned a lot from it, but it isn’t definitive…and it has flaws.”

Perhaps the biggest problem of all is that Collins makes bold and excessive claims based on the research; ironically, this book about the virtues of modest leaders reveals considerable hubris in its claims. Perhaps that is necessary to get a bestseller — but, as an example, Malcolm Gladwell would never make such claims. BUT despite all these concerns, what if Collins had actually reviewed and integrated rigorous research and had built a book based on that body of evidence? If he had done so, he could have found considerable support for his ideas in published peer-reviewed research. Although there is a good deal of randomness in the process, and Collins probably overstates the wallop packed by leaders, the fact remains that leaders do need help (it is a damn hard job), and the simple and compelling ideas in Collins’ book are probably mostly right and have probably helped a lot of leaders and managers. Spreading the message to leaders that they need to face facts and to be persistent and humble strikes me as a good thing, and also consistent with studies from diverse places.

So, although it is mediocre research, I think the message has done a lot of good. I just wish that Collins had shown more modesty…

As I think about this now, perhaps the most important standard for business books is that, whatever basis is used to support the authors advice should be stated clearly and not be overblown. I don’t expect a book by Jack Welch to be based on anything but his experience, and my favorite business book of all time, “Orbiting The Giant Hairball”, is based only on Gordon MacKenzie’s personal experience and opinions — but you know where the claims have come from.

Indeed, as I think of the books I have written, and things I am writing now, the lesson I take away is that my values and biases do affect what I write, but I also draw as heavily as I can on peer reviewed research, as that is so much of a part of my history and identity. So I am going to start making more clear that what I write is best seen as “evidence-based opinion.” I also think that is the most honest way to describe what Gladwell does so well and Dan and Chip Heath do too… management is a craft, requiring a complex mix of experience and evidence. Think of what great doctors do, it is much the same thing. If they ignore the evidence too much, they are making a big mistake, but they also need to take into consideration the particular case, what they and the patient want and value, and their clinical experience. To that end, as Pfeffer and I wrote in Hard Facts, we believe that management will always be a craft, but that evidence needs to play a bigger role in how the craft is practiced — so “evidence-based opinion”” fits that perspective well.

Michael Raynor and his collegues Mumtaz Ahmed and Andrew Henderson published the study “A Random Search for Excellence: Why ‘great company’ research delivers fables no facts” under the Deloitte banner. The 20-page report referred to in Bennett’s piece was published in April 2009. The white paper clearly lays out the methodology of the researchers and from multiple vantage points debunks previous techniques used to determine which companies were outliers from the rest. Raynor and his fellow researchers conclude:

These authors cannot be seen to have achieved what they set out to achieve because they were not studying what they said they were studying. Rather, just as patterns perceived in ink blots are seen by some to reveal underlying character traits, the secrets of success identified in what is in the end, at best, a randomly chosen sample from the right tail of a distribution almost certainly says more about the researcher than it does about the evidence.

This doesn’t mean, however, that you should necessarily dismiss the advice offered in existing success studies. The authors are savvy observers of the business world. Their recommendations can be useful, but more in the manner of fables than evidence-based advice. And we use fables very differently from science. For example, no one reads “The Tortoise and the Hare” and, faced with a chance to bet on such a race, chooses the tortoise. Rather, people take from this tale the idea that there is merit in perseverance while arrogance can lead to a downfall. Similarly, because the prescriptions of most success studies lack an empirical foundation, they should not be treated as how-to manuals, but as a source of inspiration and fuel for introspection. In short, their value is not what you read in them, but what you read into them.

It would be unfair to end this exchange without allowing a rebuttal from Mr. Collins and a counter-argument does exist. Clearly aware of the growing criticism of both technique and result, Collins offers a series of research notes in the beginning pages of How The Might Fall. He mentions a lack of time to properly evaluation the meltdown of Fannie Mae and that an evaluation should be done at a later date. He explains again his use of paired company sets, a hallmark of all of his research studies since Built to Last. He even splits hairs defending his use historical research (a fatal flaw that Phil Rosenweig points out in The Halo Effect) by saying he only uses evidence from the time of the event before the outcome is known to be a success or failure. But the most significant clarification is this:

Correlations, Not Causes: The variables we identify in our research are correlated with the performance patterns we study, but we cannot claim a definitive causal relationship. If we could conduct double-blind, prospective, randomized, placebo-controlled trials, we would be able to create a predictive model of corporate performance. But such experiments simply do not exist in the real world of management, and therefore it’s impossible to claim cause and effect with 100-percent certainty. That said, our contrast method does give us greater confidence in our findings than if we studied only success, or only failure.

This admission is a significant departure from his widely quoted description of his past findings as “organizational physics.”

The bottom line is this: there is enough evidence now to force us to reconsider Good To Great as the pinnacle management book of this decade. As with most business books, we should look to them as a source of inspiration, not how-to manuals. Good to Great is directionally correct, but it is hard to see the book as an organizational GPS for making your company great.

Collins’ Bibliography

Idea Arena Podcast – Practically Radical by William Taylor

In this interview, I talk with Bill Taylor, author of Practically Radical: Not So-Crazy Ways to Transform Your Company, Shake Up Your Industry, And Challenge Yourself.

Taylor is always on the lookout for individuals and organizations who are practicing a better form of business. He is searching for leaders who are taking a different path and finding success.Taylor did the same thing when he was at Harvard Business Review and when he founded Fast Company Magazine with Alan Webber. Practically Radical is full of stories about large organization who are finding ways to reinvent themselves, a kind of journalism that is rare and sorely needed.

I am sitting in cavernous ballroom at the Opryland Hotel in Nashville, Tennessee. A sense of anticipation fills the air. I am about to witness, along with six thousand other members of the audience, the world premiere if a production by theater icon Robert Brustein, former dean of the Yale Drama School and founding director of the Yale Repertory Theater and the American Repertory Theater. The Playbill offers few details about the story, but the cast is impressive: F. Murray Abraham, who won an Academy Award for his role as Salieri, Mozart's archrival, in Amadeus; Emmy winner Tony Shalhoub, best known for the long running, hit television series Monk; and Brooke Adams, who has appeared in countless stage productions and films such as Gas Food Lodging and TV shows such as Thirtysomething and Lace.

What makes the production so intriguingis that it's not some experimental performance at an arts festival or an out-of-town test of a Brodway show. Rather, it's the keynote presentation at the 20th Annual National Forum of the Institute for Healthcare Improvement (IHI)–one of the most impressive professional gatherings I've seen, organized by one of the most unlikely forces for change the medical world has known.

Practically Radical Interview with Bill Taylor

Interview Length: 42 Minutes

Check out my other Idea Arena Podcasts.

Book Review – Influence by Robert Cialdini

The simple act of accepting a flower from a stranger starts a chain reaction. The recipient almost immediately feels compelled to reciprocate in some way. We humans are preprogrammed with a whole set of rules that help us get through life. If we were required to consciously consider every decision we made, we would quickly become paralyzed. As humans have evolved, we have created a set of short cuts to help us deal with this onslaught of choice. Many of these mechanisms are positive and have served to help society function and flourish. However, these mental routines can be used to exploit us.

Social psychologist Robert Cialdini’s deep understanding of persuasion is evident in the wide array of examples he uses through Influence. University research is woven together with well-known, often infamous events in U.S. history. He adds personal anecdotes from field research he did for the book, ranging from busing tables at a high-end restaurant to enrolling as a sales trainee at numerous companies. His research pools together what con men and car dealers have known for a long time.

As a result, Cialdini refuses to sign petitions any more. He walks by musicians who salt their tip jar. He also purchases more flight insurance after a highly publicized suicide.

The Flavors of Persuasion

Let’s return to the acceptance of that flower. This kind of compulsion allowed tribes to divide tasks among members and cultures to trade goods across oceans. Samples at your local supermarket can create the same feeling of indebtedness. The reciprocity rule forces us to accept these acts of kindness. The Hare Krishnas maintain their sect giving flowers to travelers passing through airports; each recipient mechanically returning the favor with a small donation.

Making commitments and staying consistent with those commitments turns out to be very important to us and those around us. Once a person commits to a point of view, he has a very hard time doing a U-turn. As such, Cialdini recommends, for example, that if you are ever elected the foreman to a jury that you require secret ballots when voting. Also, telemarketers have found starting with the question "How are you doing today?" and leading a prospect to a positive response ("Just fine.") doubles the success rate for charity requests. When creating goals, whether they be quitting smoking or starting a business, the act of writing and sharing your dreams activates that dual mechanism of commitment and constituency. Cialdini's fear of signing petitions fails into the same category, based on research which confirmed people will agree to big things (like putting billboards in their front yard) after agreeing to little things (like displaying a small sign in their front window).

Persuasion can come in the form of taking cues from what others are doing. Cialdini labels form social proof and we are most susceptible under two conditions. The first is when there is uncertainty. Laugh tracks on sitcoms use the weakeness. The second is when we take cues from those who are similar to us. The more similar, the more likely we are to follow. Suicides are followed by more suicides as well as jumps in car accidents and plane crashes. Research has shown that most victims are of similar age to the original suicide and that the accidents were copycat suicides. The closer to location, the larger the copycat effect. People who were already considering ending their life received validation to take the final step. In this case, the actions of others, not our own, put us in danger. Cialdini's increase in insurance coverage protects his family from the likelihood he could be affected by someone being swayed by social proof.

Liking someone can turn to be a problem as well. Sales professional are specifically trained on this technique of persuasion. When checking out your trade-in, a bag of golf clubs or baby stroller in the trunk creates a topic of conversation that buyers all too willing fall into. "Consultants" at Tupperware understand and use this a different way, organizing their parties around the host and the bond of friendship shared with the attendees. Research indicates the strength of affection between attendees is a better predictor of purchase than the affection for the product itself. Our best defense is to concentrate back on transaction and not the person presenting it.

Stanley Milgram's research reveals another way our conscious mind can bypassed to do the inexplicable, in this case, through the use of authority. Milgram conducted a set of experiments in response to the Nazi war criminal trials, determining if individuals could be put in a situation where they would willingly following orders knowing they would cause harm to others. Test subjects or "teachers" asked questions to an actor collaborating with Milgram and a laboratory researcher supervised to make sure the test was administered properly. The teacher would press a button to send "a shock" increasing in intensity with each incorrect answer. The final voltage administered 450 volts and about two-thirds of Milgram's subjects flipped all thirty switches needed to reach that point. Milgram concluded the researcher firmly exerting authority created the influence necessary for subjects to proceed. Not limited to the laboratory, a protester lost his legs as a train carrying weapons refused to stop, as the drivers strictly followed orders from superior. These are extreme examples, but things as simple as titles or clothing can put us under their spell.

Scarcity is probably the easiest to understand, and the method of influence we are most exposed to. Misprinted stamps or Brett Favre's rookie card all carry higher value for their limited supply. Objects in short supply carry a higher value and as a shortcut lead us to feeling those things have a higher value. We also hate losing out on things; we think we have lost some freedom to act. We react against the interference wanting more than ever (p246). Children rebel in their two's and teens whether they lose the toy car or car keys. Our desire for free information triggers the same response, but banning newspapers and burning books causes us to trust the information more rather than increase are desire for it.

What We Don't Understand

We don’t appreciate these programmed mental scripts, too often accepting the media generated answer. Cialdini recounts the story of Catherine Genovese. In 1962, she was murdered in Queens as 38 bystanders watched from their apartment windows. The popular view of the case is Americans were becoming callous and indifference. Research done since then has proven a completely different set of factors were at work. Social proof was the culprit. With some uncertainty about the nature of what was going on, a large group of people will look to each other for cues. Our built-in circuitry is what cost this woman her life.

There is protection available from being a victim. At the end of each section, Cialdini offers antidotes for how we can avoid being fooled, tricked, and exploited. If a salesman is trying to employ his charms, remember to focus on merits of the deal and not the person selling it to you. To avoid being exploited by individuals feigning authority, consider this pair of questions – “Is this authority truly an expert?” and “How truthful can we expect the expert to be here?”

In the epilogue, Cialdini makes his most aggressive stance and suggests we should all walk away from those you choose to mislead us by taking advantage of our mental scripts. If an advertiser uses actors in “unrehearsed interviews”, he suggests letters be written to the company demanded their advertiser be dismissed for their misuse of social proof. If a musician salts her tip jar, he demands we walk past. Cialdini believes the reliability of these shortcuts must remain intact for us to function in a world that is growing ever more complicated.

After the fun stories and cautionary tales fade
away, Cialdini leaves us with two insights. Our life would be difficult minus mental shortcuts to influence our decision-making, and those same helps leave us open to being exploited, leaving a blurry line to where we ourselves may be the ones exploiting.

Influence-cover

Links:

(Classroom) Management

Doug Lemov thinks the problem in most classrooms is not dumb students or terrible teachers. He believes the problem is disguised intent – students many times are uncertain what they are suppose to be doing.

“Stand still when you’re giving instructions” is one of Lemov’s pieces of advice for teachers. Do you want the student trying to anticipate where you are going or listening to what you want them to do? Stand still gets rid of noise. Educators call this classroom management.

“Business” management is no different. It is amazing how often our intent as leaders is muddled, how often what we thought we said wasn’t interpreted the way we meant. So, before we start the same sort of name calling of employees and managers, let’s take a moment to make sure we are communicating.

Links For The Week Ahead

Here are three links that you must find time for this week:

  1. Can Ge Still Manage? by Diane Brady (Business Week, 4/15/2010)

    It is important to disclose upfront that I am a GE alum. It’s been almost ten years since my departure, but I still watch the company I grew up in professionally.

    Brady’s thesis is that earnings and stock price have been under pressure for most of CEO Jeff Immelt’s tenure. With a quick acknowledgement of the dismal economics over the last decade, Brady wonders if GE’s storied management can no longer cope with the times.

    Immelt describes the successful managers at GE as overachievers, working-class roots, resilience, the ability to be challenged and to learn, a tendency to be self-reflective, and a desire to grow. But then he adds the most important line from in the piece:

    “[T]here’s always this impediment of ‘Why do we have to change if we’re good?'”

  2. Inside Job from This American Life

    The folks from This American Life teamed up with ProPublica to dig into the subprime mortgage mess. This epsiode rivals their Peabody award winner episode The Giant Pool of Money. This is also important journalism given the suit filed on Friday by the SEC against Goldman Sachs for the same thing that these reporters found hedge fund Magnetar doing: building questionable financial instruments and then betting against them.

  3. Michael Lewis’ Big Short and Our Appetite for Apocalypse – An Interview with Christopher Lydon

    This is one of the most interesting interviews I have listened that Lewis has given on his new book. Lydon is animated and asks insightful questions, but at times, tries to turn the discussion political with using the Iraq War as a comparable metaphor for the economic collapse. The Charlie Rose interview with Michael Lewis is also good.

Where Your Center Lies

Wherever your center lies, know it , name it, stick to it, and believe in it. Everyone who works with you will know what matters to you and will respect and appreciate your unwavering values. Your inner beliefs about business will guide you through the tough times. It’s good to be open to fresh approaches to solving problems. But, when you cede your core values to someone else, it’s time to quit.

-Danny Meyer, Setting The Table.

Has Anything Changed?

Our prevailing system of management has destroyed our people. People are born with intrinsic motivation, self-respect, dignity, curiosity to learn, joy in learning. The forces of destruction begin with toddlers–a prize for the best Halloween costume, grades in school, gold stars–and on up through university. On the job, people, teams, and divisions are ranked, reward for the top, punishment for the bottom. Management by Objectives, quotas, incentive pay, business plans, put together separately, division by division, cause further loss, unknown and unknowable.

From a letter Edward Deming wrote Peter Senge when The Fifth Discipline was published in 1995. Senge talks about the letter in the introduction to the new edition.

Ariely’s April HBR Column

There are an incredible number of insights tucked inside Dan Ariely's column in the April 2010 issue of Harvard Business Review this month.

Ariely manages to squeeze into 500 words how free is scary, that experiments mean someone is going to get short changed, short term myopia, and the illusion of expert advice.

Take clinical medical trials, I said to the team. When testing chemotherapy treatments, some patients suffer more so that, down the road, others might suffer less. I hoped this put it in perspective. Fortunately, I said, price testing household products requires far less suffering than chemo trials.

Still liking the new approach at HBR.

Book Review – The Little Big Things by Tom Peters

When 800-CEO-READ took over the stewardship of ChangeThis, our first order of business was to boost the profile of the site and we immediately contacted Tom Peters to see if he would contribute a new manifesto.

Tom had been working on a series of blog posts under the 100 Ways to Succeed banner and in 2005 we published the first 50 tips in a compilation manifesto and published the next 50 in a 2008 manifesto.

Tom kept writing, topping out at 176 tips, when Harper Studio contacted him about taking the tips and turning them into a book. The Little Big Things: 163 Ways to Pursue Excellence is the fruit of that effort.

To describe Little Big Things as collection of blog posts would be a terrible misnomer. The titling on each tip may, at one time, have resembled something else, but all of these were rewritten and edited and written again and edited some more.

I go through all of this trouble of explaining, because many are going to say that this is just a rehash of things they have heard from Tom before.

“Excellence is the subtitle for gosh sake!”

And the answer is yes. This is going to sound familiar.
The crazy acronyms are stamped throughout the book.
Exclamation marks abound.
That big chunky bold font appears on almost every page.
The book is classic Tom Peters.

“But is there anything new?”

No, and there doesn’t need to be.

“Why?”

Because we don’t listen…no, we don’t act, we don’t do anything differently than yesterday or last month or three years ago when everything was going fine.

We don’t hire the S.W.P.s (seriously weird people).
We don’t read enough.
We don’t serve people.
We don’t do enough WOW.
We don’t do enough NOW.
And there is always some lame reason why.

Tom has been always been about getting past the lame reason. If you don’t think there is anything holding back and you are only doing really cool stuff that everyone on the planet loves, Little Big Things is not for you.

If on the slightest chance, you could use someone to give you a little push, or you think reading something inspirational might help, then this book is for you.

My experience is that people fall into one of those two camps.
Find your camp.
You’ll know what to do.

Cool Tools Reviews The 100 Best

Cool Tools is an awesome site for finding things to help get jobs done, whether silicone spatulas, a map of world history, or the lightest items for backpacking.

Today site founder Kevin Kelly reviewed The 100 Best Business Books of All Time. Here is a small excerpt from the review:

[T]heir book is much better than a simple list, and their list is better than most. The two have reviewed, abstracted, and compared all the best 100 in the context of thousands of similar books, unlike say your average Amazon reviewer who may have only read one other business book in his or her life. You get context instead of content. Reading Covert and Sattersten’s summaries of these classics is often better than reading the book itself, and the review is always useful in pointing you to the few books or authors you might actually want to read in full.

The sales of The 100 Best have been up the last couple of weeks, and that doesn’t include all the remaindered/discount copies that were cleared off Amazon when Fixed To Flexible was released.

It is just great to see continued interest in the book over a year later.

P.S. As Kelly points out in his review, we included his 1995 book Out of Control just to make clear any conflicts of interest.

P.P.S. I just posted these additional links on the Hacker News thread:

  1. Here is a bonus chapter about industry books that wasn’t included in the book.
  2. There is also a website where you can submit your favorite business book whether it was included in The 100 Best or not.

Idea Arena Podcast – Priceless Interview with William Poundstone

In this interview, I talk with Bill Poundstone, author of Priceless: The Myth of Fair Value (and How to Take Advantage of It).

Poundstone says he started researching a book about Daniel Kahneman and Amos Tversky, two of the most important researchers in the area of decision making over the last fifty years. What he found was that pricing was a good point around which to tell their story and Poundstone covers much more than that Priceless. The narrative takes us from the field of psychophysics to a $72 steak in Amarillo, Texas, all along the way teaching us how easily we can be swayed one way or another.

Supermarket consultants leave few stones unturned in determining what boosts consumers' willingness to pay. One of the more intriguing of recent findings is that shoppers open their wallets wider when moving through a store in a counterclockwise direction. On average, these shoppers spend $2 more a trip than clockwise shoppers.

Priceless Interview with William Poundstone

Download Idea Arena Podcast – Priceless Interview

Related:

Idea Arena Podcast – Drive Interview with Dan Pink

In this interview, I talk with Dan Pink, author of Drive: The Surprising Truth About What Motivates Us.

Pink says the conversation about motivation has either been about survival (eat, sleep, sex) or sticks and carrots (rewards and punishments). The trouble is that most work today involves creativity and creativity suffers when we use sticks and carrots. Motivation 3.0 is about autonomy, mastery, and purpose. If you don’t know the work of Edward Deci or Carol Dweck, you should definitely check this one out.

This is the nature of mastery: Mastery is an asymptote.

You can approach it. You can hone it. You can get really, really, really close to it. But…, you can never touch it. Mastery is impossible to realize fully. (p117-118)

Drive Interview with Dan Pink

Other highlighted books:

Book Review – The Four Conversations by Jeffery Ford and Laurie Ford

Lately, I have become fascinated with the questions words:

Who?
What?
When?
Where?
Why?
How?

We use those queries to navigate the world. Dan Roam showed us a great example of that in The Back of the Napkin by connecting those questions with natural pictures you should draw to answer them (page 141 is worth the entire price of his book and there is a new, expanded edition of TBotN coming out this week).

Jeffrey and Laurie Ford did the same thing in The Four Conversations but through the lens of management and with the interchanges that should be taking place in the workplace.

The Fords believe conversation can be classified into four types. Initiative conversations set the vision and direction, like John F. Kennedy’s 1961 speech that committed putting men on the moon. If initiative conversations are about what, when, and why, understanding discussions answer the who and the how. These conversations ground individuals at the start of a project by laying out the roles they will play, and reinforce the value of the initiative. Understanding conversations do not create action, however; that’s the purpose of performance conversations: ask that something be done and obtain a promise for completion. Closure conversations mark an ending and create the opportunity for new beginnings.

The authors also point out that we favor some kinds of discussion. Most of us overuse understanding conversation thinking we need to spend extra time getting buying, when managers would get better results with a balanced and intentional approach to the conversations we use with reports.

Reducing tardiness on projects comes from using all four types of conversation effectively. Closure conversations heal wounds. Interrogating excuses through performance discussions can reveal whether individuals did everything they could. Altering the rate of progress toward a goal is as simple as increasing the frequency and the magnitude of what you ask for.

“Of course.” is what I kept thinking as I read the book. The Four Conversations is a good book for new managers and even better book for long time managers, as they’ll easily recognize the power of the conversations prescribed.

The 11 Problems That Kill Organizations

Or The Eleven Focus Areas for Consultants to Sell Services.

This list is from Alan Weiss’ Million Dollar Consulting. The fourth edition of the book was released in July and about half way through the book, Weiss says that he got out of organizational consulting because all the problems started to look the same.

  1. Leadership is inept in that key people are not serving as avatars of the behavior they are seeking in others.
  2. Team building is sought when, in actuality, the organization has committees and needs committees, not teams.
  3. There are silos headed by powerful people who are defending their turf.
  4. Problem solving is prized over innovation, and “black belt nine delta” nonsense takes over people’s minds like a bad science fiction movie from the 1950’s
  5. There is excessive staff interference instead of support, typically from HR, finance, IT, and/or legal.
  6. There are too many meetings that take too long and are overwhelmingly focused on sharing information—the worst possible reason to have a meeting. The organization’s talent and energy are being squandered internally instead of being applied externally
  7. The customer’s perceptions of the organization’s products, services, and relationships are different from the organization’s perception.
  8. The reward and feedback systems are not aligned with strategy and are not encouraging the appropriate behaviors and discouraging the inappropriate.
  9. Strategy and planning are mistaken for each other.
  10. Career development and succession planning are not wedded.
  11. The organization is bureaucratic , in that it focus on means and not ends.

So, do these look like the same problems that you over and over again in the companies that you work for and with?

Precendents

“That’s not fair.”

I have been hearing that phrase more and more lately with my two boys. In most cases, what they really mean is “I don’t like that,” but there are some cases when my treatment of two similar situations is inconsistent and I am happy to entertain that challenge. Being fair as a parent (or a manager) is important.

Someone used a similar line on me recently, “Well, that’s what others do.” This may not sound the same at first, but it is the other side of the coin – “See, I am being fair.” The statement was meant to reinforce consistency.

Nine out of ten teenagers like to use this kind of social proof. “Billy’s mom is letting him juggle chainsaws in the talent show. Why can’t I?”

These all involve a code of common law. “Look at the common facts in this case as compared to these other similar cases. You can clearly see, your honor, that in all fairness, we must treat these same.” Agreeing on the facts is what courts spend the majority of time doing.

My point: Make sure the facts and the other cases are really the same. And if they are, be sure to clearly explain that to the opposing counsel. It’s only fair.