Tag Archives: Management

To The Barricades

I recently watched the classic 1952 Kurosawa film Ikiru, and have some comments. But those comments include spoilers; you are warned. Continue reading "To The Barricades" »

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Leadership Fantasies

Predictions about leadership in 2030:

The management consulting firm Hay Group worked with the German futurists at Z-Punkt to identify six mega trends such as globalization, technology convergence and the individualization of careers that will shape the kind of leaders companies will need in the future. I spoke with Georg Vielmetter, Hay Group’s regional director of leadership and talent, about the newly released study “Leadership 2030” that he co-authored. …

I think that positional power and hierarchical power will become smaller. Power will shift to stakeholders, reducing the authority of the people who are supposed to lead the organization. … The time of the alpha male — of the dominant, typically male leader who knows everything, who gives direction to everybody and sets the pace, whom everybody follows because this person is so smart and intelligent and clever — this time is over. We need a new kind of leader who focuses much more on relationships and understands that leadership is not about himself. …

Such a leader doesn’t doesn’t put himself at the very center. He knows he needs to listen to other people. He knows he needs to be intellectually curious and emotionally open. He knows that he needs empathy to do the job, not just in order to be a good person. … We will see a significant decline in physical loyalty between people and organizations. It will be very difficult for leaders to formally bind people to their organizations, so they should not try. This is a battle that leaders can only lose. … What is clear is that leaders in the future need to have a full understanding, and also an emotional understanding, of diversity. That’s for sure. (more)

I call bull. Here’s Jeffrey Pfeffer, in Power:

Most books by well-known executives and most lectures and courses about leadership should be stamped CAUTION: THIS MATERIAL CAN BE HAZARDOUS TO YOUR ORGANIZATIONAL SURVIVAL. That’s because leaders touting their own careers as models to be emulated frequently gloss over the power plays they actually used to get to the top. Meanwhile, the teaching on leadership is filled with prescriptions about following an inner compass, being truthful, letting inner feelings show, being modest and self-effacing, not behaving in a bullying or abusive way— in short, prescriptions about how people wish the world and the powerful behaved. There is no doubt that the world would be a much better, more humane place if people were always authentic, modest, truthful, and consistently concerned for the welfare of others instead of pursuing their own aims. But that world doesn’t exist.

More from Pfeffer last November:

Today’s work world is increasingly populated by millennials with values presumably different from more-senior employees—more egalitarian, less competitive, more meritocratic, less accepting of hierarchy, and more tolerant of all forms of diversity. And if that’s true, surely companies are changing, which means we need new theories about power and influence to reflect these new cultural realities. Strategically expressing anger, building a power base, or eliminating rivals are considered outmoded ways of getting ahead. Certainly, the reasoning goes, in a world where reputations get created and transmitted quickly and anonymously through ubiquitous social networks, people who resort to such bad behavior will suffer swift retribution.

The typical Silicon Valley recruitment pitch, or something to this effect, reinforces this view: “We’re not political here. We’re young, cool, socially networked, hip, high-technology people focused on building and selling great products. We’re family-friendly, have fewer management levels and less hierarchy, and make decisions collegially.”

Unfortunately there’s not much evidence of change but plenty of testimony to the contrary: the power struggles that beset the founding of Twitter (TWTR), the turnover among CEOs at Hewlett-Packard (HPQ), and the experiences of former Stanford MBA students working in the supposedly egalitarian world of high tech who have lost their jobs or been thrown out of companies they founded notwithstanding their intelligence and good job performance. Meanwhile, relationships with bosses still go a long way to predict people’s career success; organizational gossip lives on; and career derailment still awaits those who fail to master political dynamics. (more)

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Fail Faster

It looks bad for a manager to have one of his projects fail. So to “cover his ass”, such a manager often tries to prevent any records showing that people saw failure coming. After a failure, he wants to say “this was just random bad luck; no one could have foreseen seen it.” His bosses up the chain of command tend to allow this, because they also want to avoid being held responsible for failures during their watch. So they also prefer the random back luck story.

Unfortunately, this approach tends to prevent organizations from getting signals that would let them mitigate failures, such as by quitting projects earlier. For example, most startup firms don’t fail until they have spent nearly all of the cash they were given. It is rare for a startup to admit it isn’t going to work out, and give some cash back to investors. Similarly, government agencies created to achieve some purpose rarely recommend to legislatures that they be eliminated when their find that they aren’t achieving their intended purposes.

Of course bosses don’t want to be too obvious about silencing possible signals of failure. They find it hard to silence what have become standard signals, like cost accounting measures.

A great application of prediction markets is to give better and clearer warnings of upcoming failure, to enable better mitigation, such as quitting. Of course project bosses anticipate this, and oppose prediction markets on their projects, for exactly this reason. But we can still hope that prediction market warnings may someday become a standard signal, and thus hard to silence:

I hope prediction markets within firms may someday gain a status like cost accounting today. In a world were no one else did cost accounting, proposing that your firm do it would basically suggest that someone was stealing there. Which would look bad. But in a world where everyone else does cost accounting, suggesting that your firm not do it would suggest that you want to steal from it. Which also looks bad.

Similarly, in a world where few other firms use prediction markets, suggesting that your firm use them on your project suggests that your project has an unusual problem in getting people to tell the truth about it via the usual channels. Which looks bad. But in a world where most firms use prediction markets on most projects, suggesting that your project not use prediction markets would suggest you want to hide something. (more)

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Why Broken Evals?

This review article published 36 years ago shows that it was well known back then that teacher evaluations by college students are predictably influenced by time of day, class size, course level, course electively, and more. Thus one could get more reliable teacher evaluations by building a statistical model to predict student evaluations using these features plus who taught what, and then using each teacher coefficient as that teacher’s evaluation. Yet colleges almost never do this. Why?

Actually, most orgs also use known-to-be broken worker evaluation systems:

There is a lot of systematic evidence on the connections between job performance and career outcomes. … The data shows that performance doesn’t matter that much for what happens to most people in most organizations. That includes the effect of your accomplishments on those ubiquitous performance evaluations and even on your job tenure and promotion prospects. …

[For example,] supervisors who were actively involved in hiring people whom they favored rated those subordinates more highly on performance appraisals than they did those employees they inherited or the ones they did not initially support. In fact, whether or not the supervisor had been actively engaged in the selection process had an effect on people’s performance evaluations even when objective measures of job performance were statistically controlled. (more)

So why don’t firms correct employee evaluations for this who-hired-you bias? And it isn’t just this one bias; there are lots:

Extensive research on promotions in organizations, with advancement measured either by changes in position, increases in salary, or both, also reveals the modest contribution of job performance in accounting for the variation in what happens to people. In 1980, economists … observed that salaries in companies were more strongly related to age and organizational tenure than they were to job performance. Ensuing research has confirmed and extended their findings, both in the United States and elsewhere. … One meta-analysis of chief executive compensation found that firm size accounted for more than 40 percent of the variation in pay while performance accounted for less than 5 percent. (more)

An obvious explanation here is that coalition politics dominates worker evaluations. Coalitions like being able to ignore job performance to favor their allies and punish their rivals. Winning coalitions tend to be benefiting from the current broken rules. But, you might ask, why don’t people at the top put a stop to this? Doesn’t allowing politics such free reign hurt overall org performance? This story hints at an answer:

A few years ago, Bob, the CEO of a private, venture-backed human capital software company, invited me to serve on the board of directors as the company began a transition to a new product platform and sought to increase its growth rate and profitability. Not long after I joined the board, in the midst of an upgrading in management talent, the CEO hired a new chief financial officer, Chris. Chris was an ambitious, hardworking, articulate individual who had big plans for the company— and himself. Chris asked Bob to make him chief operating officer. Bob agreed. Chris asked to join the board of directors. Bob agreed. I could see what was coming next, so I called Bob and said, “Chris is after your job.” Bob’s reply was that he was only interested in what was best for the company, would not stoop to playing politics, and thought that the board had seen his level of competence and integrity and would do the right thing. You can guess how this story ended— Bob’s gone, Chris is the CEO. What was interesting was the conference call in which the board discussed the moves. Although there was much agreement that Chris’s behavior had been inappropriate and harmful to the company, there was little support for Bob. If he was not going to put up a fight, no one was going to pick up the cudgel on his behalf. (more)

People at the top play coalition politics as hard as anyone. Rules to limit politics at lower levels can hurt lower level allies of top people, and can set expectations that limit politics at higher levels. When mob bosses who are best at violence rise to the top of a competition for boss-hood, why should they and their allies favor non-violent criteria for how to pick bosses?

Some more data: Continue reading "Why Broken Evals?" »

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Careers Need Allies

Orgs coordinate activity. And if coordination is hard, we should expect orgs to only barely accomplish this task. That is, we should expect org decisions to be dominated by coalition politics. Orgs that face competitive pressures, like firms, would slowly get more efficient, and thus larger, as we slowly found and spread org innovations to better channel coalition politics efforts in productive directions.

If coalition politics dominates org decisions, then the obvious career strategy advice is to make good alliances. Pick allies valued by strong coalitions who are likely to stay loyal to you, and offer such allies your loyalty as well as efforts and abilities valuable to them. That is, look for pair-wise win-win gains between you and potential allies. You don’t have to like them, and they don’t have to like you.

We often hear other advice, like: seek associates you are comfortable with, or who have things in common with you, or who can give you good advice. Or that you should focus on showing your value to your org as a whole. But these seem to me to be the usual fig leaf excuses. That is, these are things one can admit doing openly without violating the standard forager norms against overt coalition politics.

What smart folks probably really mean when they suggest that you get a mentor, is that you get a powerful ally. And while allies in high places can be especially valuable to you, to make it a win-win relation you are going to have to offer them a lot of value in return. You will even have to figure out how you can help them, and help them first; they don’t have the time, and don’t trust you yet. And when you succeed in finding such a powerful ally, you will submit and they will dominate. That doesn’t sound nearly as nice to say, however.

But sometimes people do say it, out loud and everything: Continue reading "Careers Need Allies" »

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On End Of Period Spending

Last week US federal agencies were in a hurry to spend the last of their annual budget. Agencies that don’t spend all of their budget not only don’t get to save it for next year, next year’s budget will likely be reduced by the unspent amount. And the manager sacked. This last minute burst of spending is usually less carefully considered, and less useful, than other spending. (More about it all here.)

This situation is mildly puzzling. Why is not spending all of a budget such a bad sign? If needs and opportunities vary in time, spending that varies in time seems appropriate. Perhaps incompetent managers who just can’t plan induce more spending fluctuations. But is that really so much more likely than varying needs and opportunities? Some say that spending less than budgeted shows an agency “needs” less overall. But any tendency for agencies that sometimes spend less than budget to be less valuable seems to me much weaker than the tendency of last minute spending to be less valuable. So why aren’t bursts of last minute spending seen as just as bad or worse?

One explanation is that we developed habits of judging organizations and managers based on their budget habits in contexts where it was much harder to observe the time pattern of spending than the total amount spent. We developed the social norm of disapproving of unspent budgets in that context, and have been slow to adapt to a world where the time pattern of spending is visible.

A related explanation is while spending more near period end looks bad, there is a less clear bright line to coordinate on to say which time patterns of spending look bad. So while we each privately know last minute spending bursts look bad, we don’t coordinate to say it together.

Perhaps there are other plausible explanations. But one relatively robust conclusion here I think is that the political process can be pretty terrible at coordinating to react to simple easily visible info. It isn’t enough that we can all know something. We have to all know that we can know and then coordinate to switch new social norms, so that we all know that we all expect us all to actually look at this visible info sometimes, and to react in a certain easily verified way to that info.

Not very encouraging for folks who hope that government will finally sit up and notice other kinds of relevant policy info that it has long neglected.

Added 11Oct:

Spending in the last week of the year is 4.9 times higher than the rest-of-the-year weekly average. … Quality scores for year-end projects are 2.2 to 5.6 times more likely to be below the central value. Allowing agencies to roll over unused funding into the subsequent year can improve efficiency. We calibrate a dynamic model of spending and show that allowing rollover leads to welfare gains of up to 13 percent. … The one federal agency that has the ability to roll over unused funding for I.T. projects does not exhibit a year-end spike in spending or drop-off in quality in this category of spending. (more)

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Boss Hypocrisy

In our culture, we are supposed to resent and dislike bosses. Bosses get paid too much, are mad with power, seek profits over people, etc. In fiction, we are mainly willing to see bosses as good when they run a noble work group, like a police, military, medicine, music, or sport group. In such rare cases, it is ok to submit to boss domination to achieve the noble cause. Or a boss can be good if he helps subordinates fight a higher bad boss. Otherwise, a good person resents and resists boss domination. For example:

The [TV trope of the] Benevolent Boss is that rarity in the Work [Sit]Com: a superior who is actually superior, a nice guy who listens to employee problems and really cares about the issues of those beneath him. … A character that is The Captain is likely, but not required, to be a Benevolent Boss.
Contrast with Bad Boss and Stupid Boss. Compare Reasonable Authority Figure. In more fantastic works, this character usually comes in the form of Big Good. On the other hand, an Affably Evil character can be a benevolent boss with his mooks, as well.
In The Army, he is often The Captain, Majorly Awesome, Colonel Badass, The Brigadier, or even the Four Star Badass and may be A Father to His Men.
For some lucky workers, this is Truth in Television. For a lot of other people, this is some sort of malicious fantasy. (more)

But here is a 2010 (& 2011) survey of 1000 workers (30% bosses, half blue collar):

Agree or completely agree with:

  • You respect your boss 91%
  • You think your boss trusts you 91%
  • You think your boss respects you 91%
  • You trust your boss 86%
  • If your job was on the line, your boss would go to bat for you 78%
  • You consider your boss a friend 61%
  • You would not change a thing about your boss 59%
  • Your boss has more education than you 53%
  • You think you are smarter than your boss 37%
  • You aspire to have the bosses job 30%
  • You work harder than your boss 28%
  • You feel pressure to conform to your bosses hobbies/interests in order to get ahead 20% (more; more; more)

In reality most people respect and trust their bosses, see them as a friend, and so on. Quite a different picture than the one from fiction.

Foragers had strong norms against domination, and bosses regularly violate such norms. We retain a weak allegiance to forager norms in fiction and when we talk politics. But we also have deeper more ancient mammalian instincts to submit to powers above us. And also, our competitive economy probably tends to make real bosses be functional and useful, and we spend enough time on our jobs to see that.

Many other of our cultural presumptions are probably similar. We give lip service to them in the far modes of fiction and politics, but we quickly reject them in the near mode of concrete decisions that matter to us.

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Missing Measurements

Luke Muehlhauser quotes from Douglas Hubbard’s How to Measure Anything:

By 1999, I had completed … analysis on about 20 major [IT] investments. … Each of these business cases had 40 to 80 variables, such as initial development costs, adoption rate, productivity improvement, revenue growth, and so on. For each of these business cases, I ran a macro in Excel that computed the information value for each variable. … [and] I began to see this pattern:

  • The vast majority of variables had an information value of zero. …
  • The variables that had high information values were routinely those that the client had never measured…
  • The variables that clients [spent] the most time measuring were usually those with a very low (even zero) information value. …

Since then, I’ve applied this same test to another 40 projects, and… [I’ve] noticed the same phenomena arise in projects relating to research and development, military logistics, the environment, venture capital, and facilities expansion. (more)

In his book summary at Amazon, Hubbard seems to explain this sort of pattern in terms of misconceptions: read his book to fix the three key misconceptions that keep people from measuring stuff. But the above pattern seems hard to understand as mere random errors in guessing each variable’s info value or measurability.

In my experience trying to sell prediction markets to firms, I’ve noticed that when we suggest they make markets on the specific topics that seem to be of the most info value, they usually express strong reluctance and even hostility. They choose instead to estimate safer safer things, less likely to disrupt the organization.

For example, the most dramatic successes of prediction markets, i.e., where correct market forecasts most differ from official forecasts, are for project deadlines. Yet even hearing this few orgs are interested in starting such markets, and those that do and see dramatic success usually shut them down, and don’t do them again. One plausible explanation is that project managers want the option to say after a failed project “no one could have known about those problems.” Prediction markets instead create a clear record that people did in fact know.

But that is just one reason for one kind of example. It isn’t a general explanation for what seems to be an important general and quite lamentable trend. So why exactly do we spend the most to measure the variables that matter the least, and refuse to even measure the variables that matter most?

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Machiavelli On Listening

In 1505, Machiavelli advised leaders to let a few trusted advisors tell them the truth when answering specific questions in private, but to never let anyone advise them in public, especially at those people’s own initiative:

There is no other way of guarding oneself from flatterers except letting men understand that to tell you the truth does not offend you; but when every one may tell you the truth, respect for you abates.

Therefore a wise prince ought to hold a third course by choosing the wise men in his state, and giving to them only the liberty of speaking the truth to him, and then only of those things of which he inquires, and of none others; but he ought to question them upon everything, and listen to their opinions, and afterwards form his own conclusions. With these councillors, separately and collectively, he ought to carry himself in such a way that each of them should know that, the more freely he shall speak, the more he shall be preferred; outside of these, he should listen to no one, pursue the thing resolved on, and be steadfast in his resolutions. He who does otherwise is either overthrown by flatterers, or is so often changed by varying opinions that he falls into contempt. (more)

Machiavelli was very smart and insightful on such subjects. So I’m reluctant to disagree with him. But his advice seems to tell leaders never to listen to prediction markets, and I’m not quite ready to give up on that idea yet. So what I want now is to better understand Machiavelli’s advice: why exactly should leaders not let themselves be seen as listening to public advice others initiate?

Some possible theories:

  1. Advice givers are higher status that advice receivers, and leaders must seek maximal status.
  2. There are standard embarrassing truths and audiences take one’s ability to keep people from voicing them as a costly signal of dominance.
  3. If people can influence you by telling you things, they will spend too much effort trying to do so, at the expense of other useful activities.
  4. What else?
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Freakonomics On Consulting

Me in January on Too Much Consulting?:

Last night I discussed the popularity of law, finance, and management consulting with Tyler and many somewhat-libertarian-leaning others. I was surprised that most were skeptical that firms get their money’s worth from consulting, more skeptical than for law or finance. I was also surprised that most focused on explaining why kids from elite schools work at such firms, rather than on why firms pay so much for this consulting.

My explanation:

The CEO often understands what needs to be done, but does not have the resources to fight this blocking coalition. But if a prestigious outside consulting firm weighs in, that can turn the status tide.

Freakonomics Radio interviewed me about it a bit later, and they’ve just put up a podcast they say was “inspired in part” by my post. In addition to me, they talk to Keith Yost, a former consultant:

Fellow consultants and associates … [said] fifty percent of the job is nodding your head at whatever’s being said, thirty percent of it is just sort of looking good, and the other twenty percent is raising an objection but then if you meet resistance, then dropping it.

and Christopher McKenna, Oxford business historian:

They divide the roles into two parts. The first part is the one that we tend to understand the best and the one that we tend to think of in the most positive terms, and that is that they bring advice to a firm that doesn’t otherwise have it. … The second thing that they provide is legitimacy, and that’s the one that seems a little bit strange. So you’ve made a decision or you think you might know what you’d like to do about entering those markets or making a new product. And instead of just going ahead and doing it, you hire the consultants to confirm what you already thought. And those consultants come in and they say yes you’re right, or even imagine you’re having a political fight within the firm and both sides hire consultants and in effect they both produce reports, and somebody wins that fight with the help of that extra amount of knowledge from outside.

and Nick Bloom, Stanford economist:

So there are really two types of consulting. There’s operational consulting, you know, down on the factory floor, in the shop type improvements. That’s probably ninety-five percent of the industry. Most of it is done by firms you’ve never heard of. And those guys are very much like seasoned, gnarly, ex-manufacturing managers that have spent twenty years working in Ford and are real experts, and are now getting paid as consultants to hand out advice. That stuff typically has pretty big impact because you’re paying someone to give them long-earned advice. And then there’s the very small elite end, strategy consulting, about five percent. And that’s much more helping CEOs make big decisions.

Bloom did a randomized trial in India of the first type of consulting, and found that it gave great value. But on the other type, which is what I think Yost, McKenna, I, and my dinner companions were discussing, the only positive evidence the show offers is cohost Steve Levitt saying that as a consultant he sure felt he added value:

My own experience has been that even though I know nothing about an industry, if you give me a week, and you get a bunch of really smart people to explain the industry to me, and to tell me what they do, a lot of times what I’ve learned in economics, what I’ve learned in other places can actually be really helpful in changing the way that they see the world.

And how can you argue with data like that?

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