by Adam Hartung | Jun 7, 2015 | Defend & Extend, In the Swamp, Innovation, Leadership, Transparency
Did you ever notice that Human Resource (HR) practices are designed to lock-in the past rather than grow? A quick tour of what HR does and you quickly see they like to lock-in processes and procedures, insuring consistency but offering no hope of doing something new. And when it comes to hiring, HR is all about finding people that are like existing employees – same school, same degrees, same industry, same background. And HR tries its very hardest to insure conformity amongst employees to historical standard – especially regarding culture.
Several years ago I was leading an innovation workshop for leaders in a company that made nail guns, screw guns, nails and screws. Once a market leader, sales were struggling and profits were nearly nonexistent due to the emergence of competitors from Asia. Some of their biggest distributors were threatening to drop this company’s line altogether unless there were more concessions – which would insure losses.
They liked to call themselves a “fastener company,” which has long been the trend with companies that like to make it sound as if they do more than they actually do.
I asked the simple question “where is the growth in fasteners?” The leaders jumped right in with sales numbers on all their major lines. They were sure that growth was in auto-loading screwguns, and they were hard at work extending this product line. To a person, these folks were sure they new where growth existed.
But I had prepared prior to the meeting. There actually was much higher growth in adhesives. Chemical attachment was more than twice the growth rate of anything in the old nail and screw business. Even loop-and-hook fasteners [popularly referred to by the tradename Velcro(c)] was seeing much greater growth than the old-line mechanical products.
They looked at me blank-faced. “What does that have to do with us?” the head of sales finally asked. The CEO and everyone else nodded in agreement.
I pointed out to them they said they were in the fastener business. Not the nail and screw business. The nail and screw business had become a bloody fight, and it was not going to get any better. Why not move into faster growing, less competitive products?
Competitors were making lots of battery powered and air powered tools beyond nail guns and screw guns, and their much deeper product lines gave them much higher favorability with retail merchandisers and professional tool distributors. Plus, competitor R&D into batteries was already showing they could produce more powerful and longer-lasting tools than my client. In a few major retailers competitors already had earned the position of “category leader” recommending the shelf space and layout for ALL competitors, giving them a distinct advantage.
This company had become myopic, and did not even realize it. The people were so much alike that they could finish each others sentences. They liked working together, and had built a tightly knit culture. The HR head was very proud of his ability to keep the company so harmonious.
Only, it was about to go bankrupt. Lacking diversity in background, they were unable to see beyond their locked-in business model. And there sure wasn’t anyone who would “rock the boat” by admitting competitors were outflanking them, or bringing up “wild ideas” for new markets or products.
According to the New York Times 80% of hiring is done based on “cultural fit.” Which means we hire people we want to hang out with. Which almost always means people that are a lot like ourselves. Regardless of what we really need in our company. Thus companies end up looking, thinking and acting very homogenously.
It is common amongst management authors and keynote speakers to talk about creating “high-performance teams.” The vaunted Jim Collins in “Good to Great” uses the metaphor of a company as a bus. Every company should have a “core” and every employee should be single-mindedly driving that “core.” He says that it is the role of good leaders to get everyone on the bus to “core.” Anyone who isn’t 100% aligned – well, throw them off the bus (literally, fire them.)
We see this phenomenon in nepotism. Where a founder, CEO or Chairperson who succeeds uses their leadership position to promote relatives into high positions.
Wal-Mart’s Board of Directors, for example, recently elected the former Chairman’s son-in-law to the position of Chairman. He appears accomplished, but today Wal-Mart’s problem is Amazon and other on-line retail. Wal-Mart desperately needs outside thinking so it can move beyond its traditional brick-and-mortar business model, not someone who’s indoctrinated in the past.
The Reputation Institute just completed its survey of the most reputable retailers in the USA. Top of the list was Amazon, for the third straight year. Wal-Mart wasn’t even in the top 10, despite being the largest U.S. retailer by a considerable margin. Wal-Mart needs someone at the top much more like Jeff Bezos than someone who comes from the family.
Despite what HR often says, it is incredibly important to have high levels of diversity. It’s the only way to avoid becoming myopic, and finding yourself with “best practices” that don’t matter as competitors overwhelm your market.
Ever wonder why so many CEOs turn to layoffs when competitors cause sales and/or profits to stall? They are trying to preserve the business model, and everyone reporting to them is doing the same thing. Instead of looking for creative ways to grow the business – often requiring a very different business model – everyone is stuck in roles, processes and culture tied to the old model. As everyone talks to each other there is no “outsider” able to point out obvious problems and the need for change.
In 2011, while he was still CEO, I wrote a column titled “Why Steve Jobs Couldn’t Find a Job Today.” The premise was pretty simple. Steve Jobs was not obsessed with “cultural fit,” nor was he a person who shied away from conflict. He obsessed about results. But no HR person would consider a young Steve Jobs as a manager in their company. He would be considered too much trouble.
Yet, Steve Jobs was able to take a nearly dead Macintosh company and turn it into a leader in mobile products. Clearly, a person very talented in market sensing and identifying new solutions that fit trends. And a person willing to move toward the trend, rather than obsess about defending and extending the past.
Does your organization’s HR insure you would seek out, recruit and hire Steve Jobs, or Jeff Bezos? Or are you looking for good “cultural fit” and someone who knows “how to operate within that role.” Do you look for those who spot and respond to trends, or those with a history related to how your industry or business has always operated? Do you seek people who ask uncomfortable questions, and propose uncomfortable solutions – or seek people who won’t make waves?
Too many organizations suffer failure simply because they lack diversity. They lack diversity in geographic sales, markets, products and services – and when competition shifts sales stall and they fall into a slow death spiral.
And this all starts with insufficient diversity amongst the people. Too much “cultural fit” and not enough focus on what’s really needed to keep the organization aligned with customers in a fast-changing world. If you don’t have the right people around you, in the discussion, then you’re highly unlikely to develop the right solution for any problem. In fact, you’re highly unlikely to even ask the right question.
by Adam Hartung | Sep 4, 2010 | Books, Defend & Extend, In the Swamp, Leadership, Lock-in, Religion
Summary:
- When we don’t know what works, we create myths to describe what might work
- Much of business theory is little more than myth
- “Good to Great” has been a best seller, but it is not helpful for good management
- To grow business today requires abandoning management myths and aligning with changing market needs
Good to Great by Jim Collins has been a phenomenal business best seller. Almost 10 years old, it has sold millions of copies. It continues to be featured on end caps in book stores. That it has sold so well, and continues selling, is a testament to a much better book by the legendary newsperson Bill Moyers with Joseph Campbell, “The Power of Myth.” (Original PBS 2001 TV show available on DVD, or get the new release this month.)
When we don’t understand something we develop theories as to how it might work. These theories are based upon what we know, our assumptions, and our biases. They could be right, or they might not. Only testing determines the answer. However, sometimes the theory is so powerfully connected to our beliefs that we don’t want to test it – don’t feel the need to test it. And if the theory hangs around long enough, people forget it wasn’t tested. What easily happens is that “logical” theories (based upon assumptions and beliefs) that don’t explain reality become myth. And the myth becomes very comforting. Over time, the myth becomes part of the assumption set – unchallenged, and actually used as a basis for building new theories.
For example, the founder of modern medicine – Galen – didn’t understand the circulatory system. So he thought blood was oxygenated by invisible pores. As time passed it became impossible to challenge, or even test, this theory. Eventually, blood letting was developed as a medical practice because people thought the blood stored in the affected area had gone bad. It was several hundred years before Harvey, through careful testing, proved there were no invisible pores – and instead blood circulated throughout the body. Millions had perished from blood letting because of a myth. Bad theory allowed to go unchallenged and untested. It just sounded so good, so acceptable, that people followed it. Dangerous practice.
Thomas Thurston now gives us great insight to the popular myth developed by Jim Collins in Good to Great. Published by Growth Science International (http//growthsci.com) “Good to Great: Good, But Not Great” Mr. Thurston puts Mr. Collins thesis to the test. Is it a usable framework for predicting performance, and do followers actually achieve superior performance? In other words, does the advice in Good to Great work?
Mr. Thurston’s conclusions, quoted below, are quite clear, and mirror those of academics and lay people who have studied the storied Mr. Collins’ work:
- Even with the copious guidelines set forth by Collins, sorting CEOs into each category proved a highly subjective process. The classification scheme was ambiguous
- Level 5 leadership was difficult to categorize with reliability and consistency
- Our sample [100 well known firms] did not reveal any statistically significant difference in the performance of firms led by Level 5 and Not-Level 5 leaders. Performance in each category was approximately the same.
- Level 5 leadership classifications were, in practice, highly subjective and not predictive of superior firm performance.
- In other words, our results concluded that one can not predict whether a firm will perform good, great or bad based on its having a Level 5 Leader.
We like myth. It helps us explain what we previously could not explain. Like early Greek gods helped people explain the complex world around them. But, when we build our behaviors on myth it becomes extremely dangerous. We depend upon things that don’t work, and it can have serious repercussions. Mr. Collins glorified Circuit City and Fannie Mae in his book – yet now one is gone and the other in disrepute. Meanwhile his list of “great” companies have been proven to perform no better than average since his publication.
In Good to Great Mr. Collins offers a theory for business success that is very appealing. Be focused on your strengths. Get everybody on the bus to doing the same thing. Make sure you know your core, and protect it like a hedgehog protects its home. And make sure all leaders follow a Christ-like approach of humbleness, and leader servitude. It sounds very appealing – in an Horatio Alger sort of way. Work hard, be humble and good things will happen. We want to believe.
But it just doesn’t produce superior performance. There are no theories that have identified “great” leaders. Success has come from all kinds of personalities. And, despite our love for being “passionate” and “focused” on doing something really “great” there is no correlation between long-term success and the ability to understand your core and focus the organization upon it. Thousands of businesses have been focused on their core, yet failed.
What we need is a new theory of management. As the Assistant Managing Editor of the Wall Street Journal, Alan Murray, wrote in “The End of Management,” industrial era management theories about optimization and increased production do not help companies deal with an information era competitiveness fraught with rapid change and keen demands for flexibility.
Increased flexibility and success can be assured. If companies make some critical changes
- Plan for the future, not from the past. Do more scenario planning and less “core” planning
- Obsess about competition – and listen less to customers
- Be disruptive. Don’t focus on optimization and continuous improvement
- Embrace White Space to develop new solutions linked to changing market needs
This does work. Every time.
update links on Thomas Thurston 5/2014:
http://startupreport.com/thomas-thurston-on-innovation-malpractice-and-the-dangers-of-theory-via-startupreport-com/
http://newsle.com/person/thomasthurston/2870934#reloaded
http://thomasthurston.com/
by Adam Hartung | Aug 12, 2010 | Defend & Extend, General, Leadership, Openness
Summary:
- Your view of today will be determined by your future success
- Conventional wisdom – often called “best practices” – will lead businesses to cut costs in today’s economy, leading to a vicious cycle of reductions and value destruction. “Best Practice” application does not improve results
- Winning companies don’t focus on past behavior, but instead seek out new markets where they can grow – Apple, Google, Virgin, etc.
To paraphrase Charles Dickens (A Tale of Two Cities) are these “the best of times” or “the worst of times?” Few new jobs are being created in the USA, its hard to obtain credit if you’re a borrower, but there’s very little return to saving, the stock market has been sideways for a decade, asset values (in particular real estate) have plummeted while health care costs are skyrocketing. Look in the rear view mirror at the last decade and you could say it is the worst of times.
But the answer doesn’t lie in the rear view mirror – the answer lies in the future. If you succeed in the next 2 years at achieving your goals, you’ll look back and say this was the best of times.
In “Do You Have the Postrecession Blues” at Harvard Business Review blogs the author tells of two shoe salespeople that show up in a remote African village. The first sends back the message “No one here wears shoes, will return shortly.” The second sends the message “No one here wears shoes, send inventory!”
The history of business education has been to teach managers, usually by studying historical case experiences, the “best practices” employed by previous managers. But BPlans.com tells us in an article headlined “The Bad News About Best Practices” that this is a lousy way to make decisions. “..most of the time, they won’t work for you or me. They worked for somebody, some time, in some situation, in the past.”
The New York Times deals with fallacious best practices recommendations in “From Good to Great… to Below Average.” Best selling Freakonomics author Steven Levitt points out that most business authors try to push somebody else’s Success Formula as the road to success. However, the most popular of these are really very inapplicable. Those held up as “the best practice” have most often ended up with quite poor results. So why should someone else follow them? Nine of eleven of Collins’ “great” companies did worse than average!
Best practices has led businesses to cut heads, slash costs, sell assets and in general weaken their businesses the last few years. Most leaders would prefer to believe that they have somehow improved the business by eliminating workers, the skills they bring and the function they perform. But the result is less marketing, sales, R&D, etc. How this ever became “best practice” is now a very good question. What company can you think about that “saved its way to success?” The cost cutters I think about – Sears, Scott Paper, Fannie Mae Candies, etc. – ended up a lot worse for their efforts.
These can be the best of times. Just ask the people at Apple Cisco Systems, Virgin and Google. These businesses are growing as if there’s no recession. Instead of “focusing on their core” business with defend & extend efforts to cut costs, they are entering new markets. They are going to where growth is. Amidst all the cost-cutting, best practice applying grief these are examples of success.
So will you continue to operate as if these are the worst of times, are are you willing to make these the best of times? You can grow if you use scenarios and competitor analysis to find new markets, embrace disruptions to attack Lock-ins that block innovation, and implement White Space teams that learn how to develop new markets for revenue and profit growth.
Postscript – entire Dickens’ quote: It was the best of times, it was the worst of times, it was the age of
wisdom, it was the age of foolishness, it was the epoch of belief, it
was the epoch of incredulity, it was the season of Light, it was the
season of Darkness, it was the spring of hope, it was the winter of
despair, we had everything before us, we had nothing before us, we were
all going direct to heaven, we were all going direct the other way – in
short, the period was so far like the present period, that some of its
noisiest authorities insisted on its being received, for good or for
evil, in the superlative degree of comparison only.
Post-postcript – I am trying a new format for the blog. Please provide your feedback. I’m dropping the bold enhancements, and replacing their intent with an introductory summary. Let me know if you like this better. And thanks to reader Jon Wolf for his specific recommendations for improvement.
by Adam Hartung | Jan 25, 2010 | Current Affairs, Leadership, Lifecycle
We all love awards and lists. Who doesn't like being rewarded for their accomplishments. At the same time, we have acquired a strong taste for lists "The best…" Another verification of success. But both can be harbingers of potential problems – and even destruction.
Ben Bernanke became Time magazine's "Man of the Year" and now he's at some risk of losing his job (see 24/7WallStreet.com "In Not Bernanke, Who?" Think about the list of Great Companies that appear in books, like Good to Great, only to end up in big trouble – like Circuit City and Fannie Mae. Why does it seem those who top awards and lists end up shortly struggling?
Too often businesses, and business people, "win" by doing more of the same. They work hard to optimize their Success Formula. They get really committed to practicing what they do (remember Outliers by Malcolm Glaldwell and his recommendation to practice, practice, practice?) They get better and better. And in fields like sports and music, where the rules are well understood and the approach is clear, this often works. And as long as they keep practicing top athletes and musicians often remain near the top of competitors.
But we have to recognize that most of the time those "at the top" in business have emerged within a given market. Then they are knocked off by a shift. Like Ed Zander of Motorola being named #1 CEO in 2004, only to be fired within 2 years as RAZR sales toppled. Like Sun Microsystems perfecting Unix servers for an emerging client/server technology market that became saturated and shifted to PC servers. Like Michael Dell (and Dell Corporation) which emerged when lower cost made supply chain efficiencies critical for PCs, before the PC market became saturated and iPhones plus Blackberries started dominating the landscape. Or WalMart which also used a new supply chain to grow the emerging discount retailing sector, only now it is laying off 10,000 employees as it shuts Sam's stores across the country. These companies created a Success Formula and honed it quarter after quarter to maximize performance in a high growth environment. But the market shifted.
In business the rules are not "set". There is no written music to
perform. Instead, the market is highly dynamic. New competitors
emerge, new ways of competing emerge, new technologies emerge and new
solutions emerge. The market keeps changing. Suddenly, what worked last year isn't successful any more. When the market shifts, the previous winner becomes the new goat. That optimized business starts to look like the world's best wrestler, only to be obsolete when a flood occurs making swimming the new, necessary skill. Being last year's best is impossible to repeat because the market shift makes the old approach less valuable – possibly obsolete.
"Best practices" are usually little more than copying last year's list topper. In the 1990s everyone wanted to copy product development practices at Sun, and supply chain practices at Dell. But both led to horrible returns when demand for servers and PCs diminished. Best practices are almost guaranteed to be a solution developed to late, and applied even later, to solve previous years' problems. They aren't forward looking, and not designed to meet the needs 2 years into the future.
Business success isn't about topping a list. And, to a great degree, the Outlier approach (as is a hedgehog concept) is very risky. If you spend 10,000 hours doing something, only to see the value for that something go away, what good was it? Remember when Cobol writers were in demand? Being the world's best at something in business can cause you to be optimized on the past and inflexible to market change.
Business success requires adaptability. And that requires a focus on future markets. It requires the ability to constantly Disrupt your approach, to build capability in many different areas and markets. It requires skill at establishing and operating White Space projects to learn about new markets and shifts – the ability to know how to test and then understand the results of those tests. In business adaptability trumps optimization, because you can be sure that things will change – markets will shift – and the highly optimized find themselves behind the shift and struggling.
Does your organization’s HR insure you would seek out, recruit and hire Steve Jobs, or Jeff Bezos? Or are you looking for good “cultural fit” and someone who knows “how to operate within that role.” Do you look for those who spot and respond to trends, or those with a history related to how your industry or business has always operated? Do you seek people who ask uncomfortable questions, and propose uncomfortable solutions – or seek people who won’t make waves?