"In an increasingly crowded, noisy global marketplace, innovation is not optional." Tom Peters
Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business at Stanford. He's been at Stanford since 1979, and he is currently on sabbatical leave. His area of expertise lies in organizational behavior and human resource management. His current research focuses on the barriers to the transfer and use of knowledge and evidence in management practice, managing people for competitive advantage, power and influence in organizations, and leadership. A talented lecturer, Pfeffer has taught executive seminars in 28 countries throughout the world, in addition to lecturing in management development programs for various companies, associations, and universities in the United States.
[The bio paragraph was adapted from the Stanford website.]
tompeters.com asks ...
You've coauthored with Robert Sutton a book called Hard Facts, Dangerous Half Truths & Total Nonsense: Profiting from Evidence-Based Management. What is Evidence-Based Management?
JP: Evidence-Based Management is a way of thinking. It is a commitment to facing the hard facts and the truth in organizations. As we all know, many companies do not do this. It is a commitment to making decisions based upon the best information and the best data, instead of making decisions based upon what other people are doing, or what companies have done in the past, or what their leaders have done in the past and think has worked. None of this engenders good decision making.
Why isn't this already in effect in organizations?
JP: For several reasons. First, just as doctors face a bunch of vendors selling medical equipment and drugs, educating them about the upsides and downsides, managers and leaders of organizations face vendors selling stuff. Only some are vendors of management ideas. They don't talk about any downsides and oftentimes they don't even talk about the evidentiary basis for what they're recommending.
Problem number two, there are thirty-five hundred business books now published each year. There are at least 30,000 business books in print. There are lots of magazines, articles, websites, and blogs. I think managers face almost too much information. Much of the information they get is contradictory. For instance, we have a table in our book called "Warring Book Titles." On one side is Love Is the Killer App [by Cool Friend Tim Sanders], on the other is Business Is Combat. So it's very tough for managers to know what to do.
Finally, I think managers believe that they have experience, and that this experience is very important and valid. The problem, of course, with learning from experience is that we see what we expect to see. In the words of one of our colleagues, "Many managers with 20 years of experience don't have 20 years of experience, they have one year of experience repeated 20 times."
Don't we all learn how to manage from our families?
JP: I don't know how we learn it, but I don't think we're learning it by paying attention to the data and the science. So many managers, after we wrote our last book entitled The Knowing-Doing Gap, said to us, "We're actually turning our knowledge into action." They would tell us stuff that was clearly inconsistent with what people knew about psychology and motivation in the workplace. Some people were doing all kinds of damage to organizations and the people that worked in them, on the basis of casual benchmarking. "GE does it, GE's been successful. So we'll do it." Or, "We've done this in the past and it seemed to work." A lot of superstitious learning is going on.
JP: Why are you laughing?
I'm laughing because it's so sad when you think about it.
JP: But it's true.
I know, but millions of people go to work every day thinking they're actually part of some logical, rational system. What you're saying is "Hey, guess what, folks? That whole system that you're working in is based on half-truths."
JP: In many instances I think that is exactly correct. Also, as Peter Drucker said, "Thinking is very hard work. And management fashions are a wonderful substitute for thinking." Peter was a very wise man. And I think that explains a lot of what goes on.
You make a case for running a lot of little experiments. You give examples of a few internet companies doing it, which is easy at some level, because of all the metrics they can run. But I think some people think, "God, run experiments in my company? I didn't do so well in science in high school. Scientific method is beyond me." Do you think there's any possibility that that's what prevents people from really looking at evidence for why they're doing something?
JP: I think it could be one reason. But I also think there's a tendency in companies to believe that if it's worth doing, we ought to do it for everybody everywhere, all the time, and roll it out in a big Program with a capital "P." The mentality is, "If we're not convinced it's going to work, we might as well not do it anywhere." So you can see in these companies the endless debate, "Should we do A, or should we do B, or should we do C?" When the obvious thing to do is try A, B, and C in different places or at different times, and see which one works best.
Think about it, if medicine was practiced this way, you'd have people sitting around, having endless debates about whether some drug in theory ought to work or not, as opposed to doing trials. Look at the way airplanes are designed. You obviously start with theory and evidence about physics and engineering, but you also design, you build prototypes, or you now build prototypes on the computer. You put them through various exercises and you try different things. This is how architects now design buildings.
There's this idea of prototyping, which IDEO is famous for in the product development world. But I think the genius of IDEO is that they've actually carried it over into how they manage their company, too. It's something that everybody can do. You don't have to have a degree in statistics to try different stuff and see what stuff seems to work better.
One of your concluding items in the last chapter is the suggestion to think of your organization as basically an ongoing prototype. What does that mean?
JP: That means that you should never think that you're finished. It means that you should always be interested in continuous improvement, just like Toyota is. It means that you should always be trying out different things. I think Tom has talked about this for years, about not being content and set in your ways. Be willing to learn by trying different things as opposed to making organizational change some rare, earthquake-like event that occurs very infrequently with huge and oftentimes horrendous consequences; you ought to be trying different little things all the time to see what works, and how you can continuously get better.
I think of it as the equivalent of what a lot of human beings do with their self-help regimen, trying different things to supposedly lead a better life.
JP: That's exactly correct. It's certainly consistent with medical practice's idea of acting today on the basis of the best information you have. But you also presume that that information, although it is the best that you can do today, is not the best that you're going to be able to do tomorrow or the day after tomorrow. So you do the best you can at the moment, while keeping yourself open to learning.
One of the things that I think we see is that companies and their leaders are oftentimes extremely defensive. They're unwilling to admit that they've made mistakes. They're unwilling to admit that they have problems. If you're unwilling to admit that anything is wrong, or that anything is less than perfect, it's almost impossible to be into this mode of continually making things better.
Why is this negative reaction to making a mistake so ingrained in corporate America? God bless you if you should ever make a mistake and let anybody else know about it!
JP: Your statement is so important. People make mistakes all the time. So the question is not, "Do people make mistakes?" Human beings are fallible. You're obviously going to make mistakes. The only way to avoid making a mistake is to do nothing. The question becomes, "How fast are you going to recognize and learn from your mistakes?" In order to learn from your mistakes, you have to admit that you're fallible. In order to do that, you have to go back to the basic principle that W. Edwards Deming talked about a long time ago: You have to drive fear out of the organization.
People are afraid to tell the truth. People are afraid to admit mistakes, because they're afraid they're going to have career-ending or career-limiting consequences as a result.
I think you mention in the book that the best way to get a quick glimpse into an organization's dynamics is to look at what happens when people fail.
JP: That's exactly right. Going back to IDEO, which is an example, but it's not the only example, David Kelley [also a Cool Friend] has this model, "We like our people to fail early and fail often." Which he thinks is way better than failing once, failing at the end, and failing big. I mean, you do not want to be flying in an airplane and learn that it's been mis-designed for a certain level of turbulence.
I still remember years ago with Genentech, a wonderful company, the CEO said, "We're not having enough failures." Everybody looked at him like he was crazy. And he said, "Look, if you're doing advanced, state-of-the-art biotechnology stuff, and all your projects are working, you're not pushing the boundaries of your knowledge."
It's the same thing in golf. If every time you hit the ball, the ball goes in the cup, you're either Tiger Woods or you're standing too close to the cup. The only way you can actually learn is to "stress the system." It again goes back to something you see in the quality movement, and that Toyota does so well. Think about how you learn math. Think about how you learn to play the piano. Think about how you learn something in school. If every time you took a test, you got 100, you would know that either you were a genius, or else that you weren't really pushing yourself to really learn as much as you could possibly learn. It's the same with companies.
Or the tests were too easy.
JP: Or the tests were too easy. By the way, this is all common sense, which is completely uncommon, if you know what I mean.
You seem to take to task Ed Michaels' The War for Talent. Can you talk about what your issues are with it? You seem to make a good case that this war for talent isn't everything it's cracked up to be. Or, do the best organizations have the best people?
JP: One of the things that we try to do in the book, and who knows if it will work, is to have people, when they see some idea, like "the best organizations have the best people," unpack the underlying assumptions that would have to be true to make that statement completely true all the time.
There are a set of assumptions embedded in "the best organizations have the best people." First, it assumes that you can identify the best people. The War for Talent talks about an A, B, C rating system. But look at sports. In every sport there are stars with amazing careers who early on had been identified as not good enough. There's Steve Young, who was a quarterback for the San Francisco 49ers for many years. Kurt Warner, MVP for St. Louis Rams. These are star quarterbacks who early in their careers were available to be drafted or weren't playing in the National Football League, because nobody thought they had enough skill to be National Football League quarterbacks.
Well, my goodness, if that is the case for an activity like being a National Football League quarterback, you can picture the measurement error associated with identifying talent. So this idea that I can unambiguously go into an organization and separate the A's from the B's from the C's is kind of goofy, to put it mildly.
The second problem is, we know from lots of research, including research done by Carol Dweck, who's now at Stanford, a very excellent social psychologist, that if you believe talent is fixed, it becomes fixed. If you believe that everybody has the opportunity to improve and get better, in fact people can improve and get better. It really becomes a self-fulfilling prophecy.
So if I believe that you're just a C, I'm not going to invest in training you. You're going to give up on yourself and you'll probably go from a C to a D. If on the other hand, I say that when you do poorly in some activity, it doesn't mean you're incompetent; what it means is you need to expend more effort, get more training, get more practice, or all of the above, you in fact can get better at things over time.
The studies of genius reveal that the difference between genius and less than genius is not so much that the geniuses are better, though they are a little bit better, but mostly that they try more and take more shots at the goal, if you will. So when you have this kind of grading system, which says people are A, B, or C, people give up.
By the way, if you look at the evidence from the world of educational research, it shows quite clearly that the worst way to get kids to learn is to put them in these forced ranking systems, and to give them grades. Kids learn much better without grades.
We spoke with Ben Zander of The Art of Possibility. One of his concepts is to hand out the highest grade, give an A, to all his students on the first day they come to the New England Conservatory. He requires them to write a letter within two weeks, but dated at the close of the course, explaining in the past tense why they deserved that grade. He asks them to imagine what amazing things they'd do to achieve it and describe them as if they had already happened.
JP: I remember the example well. It's completely consistent with what we're talking about, and it's completely correct. What Ben is trying to do is to have people think of themselves as stars, or at least as having the potential to reach that as opposed to on the first day giving tests and saying, "By the way, you're a C." His idea relates to a phrase which my friend, George Zimmer, CEO of Men's Wearhouse, uses, "Do you believe that talent is scarce, and that only certain people have it? Or, do you believe that everybody is filled with untapped human potential? It is the job of a great leader in an organization to tap that untapped human potential."
Then how do you feel about Forced Curve Ranking, the A, B, C's that Jack Welch is famous for? You have the top 20 percent, the middle 70, the bottom 10; and you get rid of the bottom 10. What do you make of that?
JP: I'm not a big fan. I can find no systematic, documented, or empirical research, as opposed to stories, which indicates that that works. One of Welchâ€™s responses when challenged on forced ranking was, "Well, this is exactly what goes on in school." That's exactly right. If you look at virtually all the educational research on learning in school, you will find that forced curve grading is the worst way to have people learn or improve.
And yet these systems all persist.
JP: Yup. Because of the casual benchmarking. "GE did it. GE is successful. Therefore, we should do it." Lousy reasoning. I point out to people all the time that Southwest Airlines is clearly the most successful airline in the history of the United States and that Herb Kelleher was clearly an outstanding CEO. Herb Kelleher drinks a lot of Wild Turkey. He talks about his love for Wild Turkey and that the man who invented Wild Turkey is like one of his gods. If your CEO drinks a lot of Wild Turkey, will you be as successful as Southwest?
[Laughter] Maybe if it loosens him up enough.
JP: Well, you know my point. It's the sloppiest form of analogical reasoning that you could possibly imagine. It's disgraceful.
Do you believe in any management books that have been put out in the last 10 or 20 years?
JP: Oh I believe in many management books that have been put out in the last 10 or 20 years; at least elements out of them, or some wisdom from them. I certainly think that the idea from Good to Great by Jim Collins and Searching for a Corporate Savior by Rakesh Khurana that better leaders are less ego-maniacal, that the search for the corporate savior has gotten so many companies into trouble is clearly right.
I think virtually everything that Deming has written is completely correct; certainly the idea of driving fear out of the organization. If you read Deming you see that we have to keep rediscovering the same things over and over again, which is completely depressing. Deming went on and on about the problems with Forced Curve Rankings and how you should not blame individuals for problems of the system. If you have a faulty system, giving people more rewards or more punishments will not really improve things, because the problem is the system, not the individuals and what they're trying to do.
Those would be two examples that come immediately to mind. But there are many. I believe in Tom's stuff about the need for innovation, and the need to un-freeze the organization, and to be a little bit more experimental, of course.
He also says, "Innovate or die" and you claim that that's one of the half truths.
JP: It is. Well, there's a lot of research that shows that if you innovate you'll probably also die. Innovation is risky, and change is certainly risky.
The top buzz word of the last few years in corporate America is innovation. Are you saying it's over-rated?
JP: Well, first of all, it's a buzz word, which means many more organizations talked about it than did it.
JP: I think that you need to be very thoughtful about how you go into your organizational change efforts. You need to understand the risks. If, heaven forbid, you have some serious form of cancer, I'm going to give you some cancer drugs. This, I think, makes a very important point, by the way. All cancer drugs are poison. Radiation is a poison. You're going to say, "Well, it works, so should we do more of it?" If a little is good, is more better?
I think what we have completely lost in our management thinking is the idea that sometimes there's a curvilinear relationship; there's an optimum amount of innovation, of decentralization, of individual incentives.
Instead of thinking, maybe a little is good and more is worse, we tend to think, if we're doing a little, we ought to do a lot. I think that's how a lot of companies have come to think about innovation.
But we like really big hamburgers here. That's part of the American ethos, isn't it? If a little bit is good, you can't have too much.
JP: But, again, go back to medicine: Any drug taken in excess will kill you, including aspirin. I don't understand why we can understand the idea of dosage in some things but not in others. If we were building a bridge, we'd need some structural reinforcements in order to keep the bridge up. You wouldn't say, "Well, let's have as many structural reinforcements as we can possibly get up there. You know, steel is great. Let's put as much steel on the bridge as we can."
In every field other than management, we do understand the concept of design, or ...
Elegance. I remember reading about a civil engineer who said, "Any decent civil engineer can put a bridge across the river but, it's the elegance of the design that distinguishes one from another."
In a way, what you're talking about is just understanding human-ness, understanding the individual, their talent. The underlying sentiment is that workers have always been treated as one large block of things, in a way, rather than as humans.
JP: I think that's correct. The other thing that we're trying to say in this book is be thoughtful. Be much more thoughtful about the assumptions that you're making. Be more thoughtful about what you're doing instead of using simple models like "more is better."
We have forced ranking in schools. We have forced ranking in the workplace. People are not very thoughtful. Frankly, I don't particularly care about the companies that do the wrong thing and go out of business; that's their problem. But meanwhile, innocent people are being hurt by this.
I just read about a new book, The Disposable American: Layoffs and Their Consequences by Louis Uchitelle. You know him, I take it.
The name of the book alone refers to the societal impact of this issue, rather than just the individual jobs, though that's bad enough.
JP: Yes, that's exactly right. It's really an interesting contrast. You have to understand, we're in a competition now with a bunch of other places, and a bunch of other countries, and a bunch of other cultures, some of which are not as a-scientific, or unscientific as we are. They try to be much more thoughtful about what they're doing and how they're doing it.
So if our organizations don't get a little more, you know, with it, and careful about what we do, a little more strategic or systematic, call it what you will, I think we're going to have big troubles.
I love going through the footnotes of a book because I think you learn more about the authors there than you do in the book. You have a footnote that details you and Mr. Sutton, your coauthor, getting in trouble because you were laughing too much in the halls of Stanford University.
JP: Stanford Business School, not Stanford University. Might as well put the onus where it belongs. I have a colleague across the hall who's a finance professor. He is a lovely and wonderful human being, but he thinks we're too loud. It reminds me of the story that we tell about Libby Sartain. Early in her career, people said, "Libby, you're too boisterous, you're too effervescent." So she found a different place. I told this guy he should move out of the hallway if he thinks we're too loud.
JP: He's still here.
So we end up on a slightly more upbeat note. It's been a pleasure talking with you. We wish you great success with your book.
JP: Thank you so much.
Email: pfeffer_jeffrey (at) - gsb.stanford.edu