The title of the article the “Sounds of Silence” reminds me of Simon & Garfunkel’s famous song and part of the song’s lyrics, “No one dared disturb the song of silence” really resonates with me.  “Organizational Silence” exists when employees are reluctant to bring up issues and speak up to their managers primarily due to the fear of negative repercussions is present in many organizations due to a variety of reasons that have been described very well in the article. The article also eloquently discusses the origins of this type of behavior and possible methods of ridding the organization of this disease.  What makes it all the more ironic is that most organizations are big on open communications these days.

            The implications of organizational silence are huge.  It can be an impediment to organizational learning, change, decision making and as a result motivation.  Research suggests that organizational silence compromises learning and decision making by limiting the different perspectives on issues that is otherwise available to the decision makers.  Without a thorough critical analysis and discussion of the issues at hand organizational learning gets undermined. It blocks out negative feedback on policies and practices that are not working. Without this feedback, errors tend to get persist and even magnified.  Management may tend to relate silence to consensus and even success.  Employees even when asked directly for feedback may filter out important information. In this environment, employees feel that they have far less control over the issues that affect them directly.  This in turn causes reduced motivation, withdrawal and could even cause sabotage.  At an extreme level, a few employees may even experience cognitive dissonance where behavior and beliefs are out of alignment.

            The origins of organizational silence can b attributed to two main factors – manager’s fears of receiving negative feedback from their subordinates and certain beliefs that managers hold about their employees and about the nature of management.  Negative feedback especially from subordinates can evoke feelings of incompetence, vulnerability and weakness. As a result, managers may tend to discredit the information provided and dismiss it is unreliable or inaccurate. Managers also tend to believe that employees often pursue their own self-interest and are therefore inherently untrustworthy. Further, managers further up in the organization believe that they understand better than those below what is best for the organization.  Also, a third factor that contributes to organizational silence is the belief that agreement on issues and consensus are a sign of unity and dissent or disagreement should be avoided in the interest of organizational health.  These beliefs typically cause managers to ignore communications from the ground up and exclude lower level employees from the decision making process. As a result of these beliefs, well meaning employees may feel shut out of the decision making process.  These employees unable to express their views may be less committed to the organization and less trusting.  This ends up becoming the “self fulfilling prophecy” since it reinforces the beliefs of managers.

            Silence fostering beliefs tend to increase when management is stable and well entrenched.  The longer they have been together, the more they tend to agree upon their shared assumptions.  Lack of diversity within the management team further adds to this belief. Organizational silence is more prevalent within tall and hierarchical organizations.  Also, highly competitive environments or organizations pursuing low-cost strategy invariably end up becoming conducive to silence.

            Breaking out of the culture that fosters organizational silence is difficult.  Managers must work hard to counteract the human tendency to avoid negative feedback and criticism.  Managers must work to create an atmosphere an atmosphere in which employees know that their inputs are valued and that it is safe to voice their opinion without fear of retribution. If the management is well entrenched, it may be necessary to bring in new management.   This would signal to employees that the status quo will not be maintained and that there is a commitment to hear the concerns of employees. Leaders show reward employees that are bold to voice their opinions about sensitive issues affecting the organization, perhaps even anonymously if required. Without these measures, the risk of organizational silence will persist.

ACT

            Advanced Change Theory (ACT) is espoused as a theory or method for bringing about change in every discipline of our lives.  It is based on adaptive change that focuses on changing the entire human system and thinking by mobilizing people to make changes in their work habits, attitudes and lives.  This process requires the surrender of personal control, toleration of uncertainty, development of a new culture, and a new self at the individual level.  Traditional change strategies involve (a) empirical rational strategy that educate others on the logic and benefits of changing.  This method however does not force others to go through the painful process required for adaptive change although they do understand the reason for changing. (b)power coercive strategy that enforces the change through the us of political or economic sanctions.  This method evokes anger or opposition and resistance against those involved in making the change. (c) Normative re-educative strategy where individuals are still guided by rational calculus but this extends beyond self-interest to the common good. The leader typically involves others and an honest dialogue ensues with both parties thinking win-win.

            The principles of ACT includes ideas from all the strategies above but primarily deals with the practitioner/leader aligning his visions towards the greater good with the followers attracting others to change themselves to this new vision. The ACT process is complex and not easily understood. Practitioners of this type of change include Jesus Christ, Martin Luther king an Mahatma Gandhi.  ACT is based on the following principles, (1) Seeks to create an emergent system that can learn, adapt and grow that based on the community’s good and not the self’s. (2) Recognizes patterns of hypocrisy and self-deception. (3) Personal change through value clarification and alignment of behavior (4) Frees oneself from the system of external sanctions. (5) Develops a vision for the common good. (6)  Takes action to the edge of chaos. (7) Maintain reverence for others involved in change (8) Inspires others to enact their best selves (9) Models counterintuitive paradoxical behavior (10) Changes self and the system.

            This case describes the strategies used by Men’s Wearhouse in order to succeed in a difficult retail market that is highly competitive with high employee turnover.  George Zimmer, the CEO for the company embarks on a culture that uses its people as it biggest competitive strength.  Servant leadership is followed at all levels within the company. First and foremost – maximizing an individual’s self-esteem, by providing constructive criticism and helping employees perform better at their jobs. Second, managers listen carefully to their employees and to demonstrate understanding. Third, is for servant leaders to recognize that there are more solutions to problems among people that actually do the work than managers have in their own heads.  Within its stores this means each employee works as a consultant in order to maximize the experience for their customers and as in individual identifying success as not only individual but also the growth and success of peers.

            George Zimmer understood the true potential of its workforce and recognized that the ways to realize the untapped potential of its workforce was by touching its employees, training them, creating incentives for them to drive sales, and by interacting with them in meaningful ways.   He believed in creating true long term shareholder value by creating meaningful relationships with employees, customers, suppliers and communities.  The wardrobe consultant is the most important position in sales operation critical to business success. Wardrobe consultants received a base salary of $5 per hour and 3% to 7% of sales as commission.  Most consultants earned between $25,000 and $30,000.  Aggressive stealing of customers is strictly discouraged and consultants have even been fired for this.  Similarly, Store Managers and sales associates too worked on a base salary plus commissions that are a percentage of sales generated.  The firm’s salary costs about 9% of sales which is higher than the industry average of between 6.5% and 7%.  Promotions at the firm were almost totally from within.  Hiring at the company was mostly the regional manager’s responsibility.  Hiring was based on personality and skills rather than experience.  Firing was also done centrally with the opportunity for the employee to work at an alternative store in case there were performance problems at one store.   Performance appraisals were conducted by providing coaching and behaviorally specific feedback to enhance sales skills and thus the performance of people in its stores.  The monthly newsletter provided news about the company, new markets and employees and tips on becoming a successful sales person. Additionally, six times a year, video’s were distributed to stores on entertaining, educational material illustrating benchmark sales behavior emphasizing the company’s operating goals and results.  The performance metrics on total sales, sales by wardrobe consultant, and other transaction details were shared with store employees.  The company also encouraged employees to socialize with each other.  The company also provided comprehensive training to its employees in store operations, tailoring, managers of sales associates and all management employees in merchandising and buyers.  The training programs were not only educational but mixed in rest and relaxation through entertainment and social programs.  The Suits University provided training on everything from suits ports coats to casual jackets.   Employees learn about the company, its vision and values nd how to be more effective at selling mens clothing.

            By putting all these measures in place, George Zimmer was able to run an organization that was highly successful at its mission. It was already a $500 Million business growing at over 20% a year.

            The Treadwire tire company is a major supplier of tires to OEM’s.  The company employees about 9,000 hourly and salaried staff in North America.  The Lima plant is one of the eight plants that the company runs.  The company has been facing challenges recently due to stiff competition and a rise in raw material costs.  It has also been facing turnover issues with its line-foremen resulting in huge productivity losses.  Employees at the plant worked two 12 hour shifts in order to reduce labor costs.   The foreman essentially supervised all levels of production and quality assurance with the largest number focusing on rubber component preparation, tire assembly and final finish.

            The foremen at the Lima plant were responsible for personnel, resource and administrative issues in a 12 hour shift.   Their main source of frustration was getting pulled in different and conflicting directions by management, the unions and the workers.  The foremen would be chastised if they were unable to meet their daily production numbers.  During the shift they had to handle production and labor shortage issues, maintenance problems with equipment, maintaining the strict safety and health standards, and union related transactions.  At the end of the shift they were responsible for administrative duties like scheduling, timecard and vacation approvals.

            The foremen feel under appreciated for the work that they do.  They are required to discipline the workers but do not have access to union grievance hearings.  Management did not support the foremen to the extent that they could.  The foremen had responsibilities but did not have all the power to conduct them effectively. The selection process for the foremen was fairly elaborate. They had to pass a written test and then an interview process in order to assess their skills.  The hired personnel did not receive much in terms of formal training.  The training was mostly all on-the-job. This contributed to a large amount of the frustration among the foremen since they felt that they were not adequately trained to do their jobs.  Ashley Wall, the director of Human Resources has been advocating for a month long rotational program in which the newly hired foremen would be adequately exposed to all areas of their operation.  The performance evaluation system essentially graded their abilities to meet production targets and their ability to train and manage the line workers.  The ability for foremen to get promoted was reduced because of lack of growth in the company and outside hiring.  Due to the shortage of experienced managers, productivity suffered as did management-union relations. 

            Wall has a difficult situation on her hands.  She needs to be able to convince the management at Treadwire that they need to be able to take a more active role in the development, coaching and mentoring of the foremen.  They need to understand their problems and find solutions to their problems.  Instead of overworking them, the duties of the foremen need to be more spread out.  Training is very important to ensure that the newly hired foremen were adequately familiar with the processes at Treadwire.  Finally, the career growth for the foremen needs to be charted out.  Otherwise, the turnover rate at Treadwire will continue to stay high.

            Astrigo Holdings is facing tough economic conditions and its stock price is facing a major hit. Robin, the CEO for the company is looking for aggressive cost cutting measures through possible layoff scenarios.  The executive team considers all the various options that are discussed below:

1)     First-in First Out – This option targets middle managers that have worked for the company for a while. They comprise employees that have worked for the company for a fairly long period of time and are now looking at retirement.  As a result, although this group of employees has experience and knowledge of the job, their contribution to the company has diminished.  The risk with this strategy is a lawsuit with charges of age discrimination.

2)     Performance based layoff – This option targets the bottom 10% of employees based on performance. Also known as rank-and-yank, this type of layoff was popular at GE under Jack Welch’s leadership. It has been adopted at many technology based companies.

3)     Last In First Out – This is one of the simplest options.  It targets employees that do not have a lot of time invested at the firm. It reduces the amount of severance pay required to be paid.  However, the risk is that strong performers and rising stars could inevitable get cut.  It therefore takes a short term view on cost cutting without considering longer term implications.

Another option to prevent all the negative effects surrounding a layoff is a pay cut across the board, with executive staff making higher salaries taking a higher cut. Sometimes this strategy works, although the risk is that talented employees getting paid below market rates may look at alternative employment.

            In general, layoffs are bad for morale, employee engagement productivity and trust.  It should be avoided whenever possible.  There are several studies that suggest that layoffs during times of economic crisis are negatively correlated with return of customers during the upswing and increase in shareholder (stock price) value. The bigger the layoff, the longer it took for customers to return and for its stock price to recover. Companies that announced job cuts during the period 1996-1997 underperformed comparable companies from the S&P 500 by a difference of 0.4% growth versus 29.3%. Of course there could be other factors besides the job cuts to account for that difference, but it suggest that companies that feel the need to make those cuts are also the companies that are not managed as well as their competitors. It is difficult to implement a no-layoff policy if it is not part of a long term strategy. Companies that have no-layoff policies such as Toyota Motors, Southwest Airlines and FedEx all have business plans that enable them to retain valued employees during economic downturns. These include strategies related to retention of cash resources, lean organizations, gradual growth, long term strategy perspectives, continuous improvement strategies, and a commitment to valuing their people. A company committed to these values and strategies is far less likely to use layoffs to cut costs.

Good Leadership

Good governance depends on leaders that put integrity and the interests of their companies ahead of their self interests. The leaders are able to deal with difficult situations when personal sacrifice is involved.  We see examples of this type of behavior all the time is Corporate America and we see and equal number or more of behavior to the contrary.  A few years back, Intel’s CEO Andy Grove had a similar situation in which he had to go public about a flaw in the math co-processor of one of its Pentium processors.  Although the flaw showed up under rare circumstance, going public with it necessitated a forced recall of all the flawed chips costing the company over a half a billion dollars in expenses. Another CEO that comes to mind is Johnson & Johnson’s CEO Jams E Burke who took the lead in the Tylenol crisis, proactively pulling all of the Tylenol supplies from the shelves of its retail suppliers at a significant cost to the company.

Michael Leven demonstrated similar behavior when he publicly announced that the company was going to miss its annual profit forecast – news that generally causes the stock to plummet. Earlier in his career, he chose to resign from Day’s Inn when he found out that the owners of the company were siphoning money out of the operation and not paying suppliers and service providers.  He notified the board of the company of this misappropriation and resigns to take a job that paid significantly less.

He is highly critical of CEO’s and directors that are highly compensated and then tell their employees to take a pay-cut. Ken Freeman of Quest Diagnostics offers a solution to the problem where CEO’s think they are entitled to huge benefits and rights.  He recommends a board of directors where members do not know each other.  As a result, board members are more open to challenging each for their actions and decisions.

Servant Leadership

According to Stephen Covey, Servant leadership is a skill that requires executives to have humility of character. It requires them to build relationship with their employees based on trust, setting up mutually agreed upon performance goals, and then being a resource to employees and helping them with all their needs.  The relationship is horizontal and based on trust and mutual respect.  The dividing line between boss and employee diminishes. The development of trust forms the basis for a truly meaningful performance agreement.  The agreement itself is clear and sets clear expectations for specifying the quality and quantity of desired results, guidelines focusing on principles and not policies and procedures, resources, accountability and consequences for meeting or failing to meet performance goals.  Once the performance goals have been established, the leader takes the position of a servant who no longer directs, judges or controls but that of a coach and resource.  The coach lends his helping hand when difficult decisions need to be made.  The key questions for the servant leader to ask are how’s it going, what’s happening? What are you learning from this situation? What are your goals to be accomplished? How can I as a servant leader help you?

The servant leader is required to provide the vision, the flow of information and his experience. The people working under the servant leader take more responsibility and ownership of their work.  Servant leaders empower their employees resulting in building interdependent relationships in organizations. It fosters a spirit of synergistic teamwork.  Covey provides examples of leaders that have adopted this principle.  Information sharing during both good times and bad is the key to building trustworthy relationships.  Servant leaders typically have a longer tenure with their contributions being more long-term and less dramatic.

Level-5 leadership

Level-5 leadership is based on humility. Leaders of this type credit success on the strength of others, external factors and luck.  They take the blame for failure.  The leaders also demonstrate a strong will to produce great results.  They also select great successors that typically help the company become even more successful.  Level five leaders possess the skills of all the other four levels as well.  For example, level four leaders catalyze commitment in the pursuit of a clear, compelling vision.  To move to level five, its “seed” needs to be nurtured and developed. This principle postulated by Jim Collins is consistently demonstrated by good to great companies.  It involves effort and perseverance similar to pushing against a flywheel in one direction.  It takes effort to get the flywheel moving but once it picks up breakthrough momentum is reached and there is no stopping it thereafter. These companies are not stifled by constant restructuring, reactionary moves or radically changing programs.

Collins compares great companies to a hedgehog that is simple and knows one big thing well as opposed to a fox that is complex and knows a little about many things.  Great companies have a clear understanding of the three intersecting circles – what the company can be best at, how its economics work best, and what ignites the passion of its people, systematically eliminating everything else. Good to great companies are pioneers in the application of carefully selected technologies making far-sighted investments in them. This is linked directly to the hedgehog concept. Technology accelerators create an explosion in flywheel momentum.  Good to great companies also demonstrate disciplined people, disciplined thought and disciplined action.

Colonel Dowdy

This story of Colonel Dowdy is one of leadership in the military, where orders are meant to be followed to the teeth and not deviated from.  Colonel Dowdy made certain decisions in order to ensure the safety of his own personnel.  However, in the military these types of decisions are not acceptable as the battlefield is a strategic field, where lives and ultimately victory depends on enforcement of the plan.  To General Mattis, the speed of movement of the troops was of paramount importance in maneuver warfare; Colonel Dowdy thought that sacrificing everything for speed put his men in danger.

Colonel Dowdy was highly respected by his regiment.   Several of his peers thought he “walked on water” and would have won a general’s star after the Iraq war. However, in course of the assault on Baghdad, Dowdy’s regiment gets halted outside Nasiriyah much to the annoyance of General Mattis.  Some time later, during the battle, Dowdy falls asleep in the middle of a gun fight. To top it all off, General Mattis sees Dowdy reading a book while waiting for supplies to arrive on a cratered runway.  Several other incidents follow that virtually seal Dowdy’s military career.  Eventually General Mattis strips Dowdy of his command and is dismissed.  It isn’t very clear as to the reasons for his dismissal but one thing is clear.  Unlike the corporate environment, there isn’t as much leeway for individual strategic-decision making in the military.

Lt. Withers

This is a story about an officer in the US army that has compassion on two Jewish boys and rescues them by letting them stay with his convoy in violation of code.  

            Loveman renewed the energy within the company.  He was able to translate some of his lessons learnt in academia especially in leadership into reality at Harrahs.  He energized the company into being more competitive, instilling a sense of accountability and rigor.  By applying quantitative analysis of the data, he introduced evidence based management to beat the competition by gaining market share.  He made organizational changes to centralize and introduce uniformity and consistency in the operations of all its properties. He also brought in talent from outside especially skilled MBA talent in order to bring in new perspectives into the operation of the business.  However his biggest contribution by far was in enhancing the marketing program and customer loyalty programs.

            Loveman applied principles that he had learnt in the consumer retail business and applied them to the gaming industry.  Most of Harrahs properties were only moderately attractive as opposed to the mega resorts that its competitors like MGM, Mirage and Mandalay Bay could boast about. As a result, the average players at its properties were locals and not tourists.  By specifically targeting its clientele and specifically catering to their needs, Loveman was able to steadily grow Harrah’s customer base. He revamped Harrah’s loyalty program and made it tiered instead hoping customers would be motivated to move up the pyramid of rewards. He used direct mail, phone calls and trained telemarketers to offer incentives to lure back customers that had not visited their properties in a while.  By introducing a data analysis program called Revenue management System, Harrahs was able to tailor its offerings specifically based on the loyalty of the customer.  Employee rewards and bonuses were directly tied to customer satisfaction. The screening, hiring and retention of employees were made a priority.  Harrahs was able to reduce annual turnover from 48% to 24 % which is considered a good number for a service industry. Within five years of joining, Loveman was able to boost annual revenues at the company by more than 4 Billion and profits by more than 325 million.  In Loveman’s own words, this success was achieved by a die-hard focus on delivering outstanding customer service accompanied by effective marketing to the customer by understanding his specific needs.

Dean’s Disease

            Dean’s Disease, according to the author Arthur Bedeian relates to the strong psychological changes that are brought about in dean’s in particular when they assume the position in which they are able to exercise power.  Being in the top position of a college, influences the way others relate to power holders and that in turn affects their thinking and behavior. For a dean, the absence of immediate objectives and performance metrics contributes to their entrenchment of power and a thorough disliking for anybody that challenges their power and authority.  An inner circle forms around the dean that communicate to the dean the things he wants to hear about, insulating him/her from the rest of the immediate organization below.  The author refers to this inner circle as “doppelgangers” (carbon copies) – folks that tell the dean what he wants to hear and in the process protect his own power and authority.  In exercising power, the dean tends to use coercive power and reward power far more than referent power. This inner circle ends up capturing all the important positions in the college, and the deans office moves from being a bastion of characters to one of personality.  It fosters “group thinking” accompanied by a false sense of unanimity and cohesiveness. Thus deans with a penchant for self-delusion tell outsiders how everything is splendid within their college, an idea that would be deemed as fantasy outside the deans inner circle. To be truly successful and effective the dean needs to surround himself with critical thinkers that challenge his decisions and encourage conflict in order to keep a steady flow of new ideas.

            Strategic Praise is the second reason dean’s disease occurs.  As a result of the lavish praise and flattery from subservient associates, deans develop an over inflated sense of self as they come to believe that they are really as gifted and intelligent as others tell him they are.  This results in dean the believing only in his own ideas and systematically cutting down the ideas of others that challenge his own ideas, authority or power. The dean actually believes that his and only his ideas are the very best and those critical of his ideas are rejected. 

The dean actually believes that his and only his ideas are the very best and old ideas and implementations are defended and protected at all cost.  The third reason for the disease is the control of resources that the power and authority at their disposal. The preservation of this power usually comes at a cost of compromising morality and integrity.  Deans usually do not believe that their ethical integrity is under compromise. This belief allows then to ignore the ethical consequences of their actions and relieves them of the responsibility for justifying their decisions.  It helps them avoid feelings of shame or guilt and protects their self-esteem.

            Dean’s disease can be prevented by looking for evidence of it during the selection process.  Applicants that are screened for the position must be thoroughly examined for evidence of the dean’s disease. The author mentions that these applicants usually display a great deal of personal charm that masks the egotism, lack of insight and the need to dominate.  The author recommends that the search committee interview the faculty and staff at previous institution.  If a great deal of accolades and praise is lavished such as “the best thing that happened to the university since the winning football team”, it usually means that the institution is trying to solve its own dean disease problem by sending him to another place.  Also, past evidence of abuse of power or reliance of coercive and reward power may point to evidence of the disease.

This is a great article by Jeff Pfeffer and Bob Sutton from Stanford University on the importance for managers to determine the facts about what works in their organizations and utilizing that knowledge towards improving the ‘system’. The authors make comparisons to the medical field where successful medical professionals keep tabs on the latest research in the field of medicine and apply it to their practice leaving behind old methods that are either obsolete or impractical based on the new evidence. Evidence based management becomes difficult because organizations vary widely on account of their size, age, dynamics and culture.  As a result, what works in one organization need not necessarily work in others.  Besides, managers sometimes neglect to seek out new evidence because they trust their own experience more than they trust new research.  Also, very frequently, half-baked practices and policies get implemented that are really not backed up by research but is popular because similar organizations or competitors have jumped on the bandwagon. We recently read about this with the way consultants measured ‘employee-engagement’ as is the popular Silicon Valley fad of compensating employees with stock-options.  It is also extremely difficult to cull the good and relevant information from the mountain of evidence that is out their in journals and publications.  Managers also tend to ignore evidence that contradict their own beliefs and ideologies and their own observations are contaminated by what they expect to see.

Becoming a company of evidence based managers is inherently difficult but not impossible.  Managers need to put aside conventional wisdom and belief and replace them with an unrelenting commitment to gather the necessary facts to make informed and intelligent decisions.  The evidence based approach can be nurtured by treating the organization as an unfinished prototype and encourage trial programs, pilot studies and experiments that it draws knowledge from. These trail and error programs are the keys to evidence based management. Evidence based decision making needs to become part of the culture of the organization.  This happens only when middle management sees the senior organization spending time unraveling the assumptions behind proposed policy, practice or intervention.  The collective wisdom and experience of the organization needs to be tapped into to verify if an idea is going to be effective.  The authors provide an example of how Gary Loveman implemented successful marketing campaigns at Harrah’s by experimenting with programs and eventually finding the winner by trial-and-error. It is easier to quickly experiment with a small sized program and learn from it, rather than to perfect it in the lab expending a great deal of time.  Besides, the support may not always come from the top and it may not be possible to adopt an all-or-nothing practice.  Managers also need to appreciate the fact that they are not know-it-alls and cultivating the right balance of humility and decisiveness is the key.  Evidence based management does have a side-effect in that it could undermine the power and he influence of leaders practicing them.  Formal authority is replaced by evidence based practice.  Evidence based management changes how a manager thinks and acts. The application of data and logic permits managers to be more effective at their jobs.

Good to Great – is it Evidence based?

The conclusions made by Jim Collins’s best seller “Good to Great” (GTG) have been challenged by authors Bruce Niendorf and Kristene Beck.  Collins and his team of researchers began with a large sample of Fortune 5000 companies and identified those that had delivered fifteen years of above than average stock market returns. Jim Collins narrowed his search down to eleven companies that from 1965 to 2000 had delivered far superior financial results. A single dollar invested in any of these companies with dividends reinvested would have grown to $471 compared to $56 for the overall market.  He then found five operating principles that were common to these eleven companies and concluded that any company that needed to become “great” only needed to follow these principles.

            The authors conclude that Collins’s work to be fundamentally flawed in two ways – data mining and mistaking association for causation. Data mining is the process of collecting and searching for patterns in data and then formulating explanations that are treated as underlying causes.  The theory in GTG has been built from the evidence. The authors point out that the theory put forward by Collins is more a random pattern of data collection as opposed to a cause-effect relationship. For Collins’s research to be valid, he would have to determine the patterns, formulate explanations for patterns and then statistically test the explanations for its applicability outside the sample firms over a period of time. The second problem is mistaking association for causation.  He identified five characteristics that were common to the eleven companies and then conclude that the principles could be applied to any company in general. GTG does not provide evidence for the cause-effect only claims. The statistical backing that Collins has in his book is flawed.  The authors finally provide a description of how Collins’s methodology ought to be modified in order to demonstrate that his research is truly backed by evidence.

Senate Intelligence Committee

            This article flaws the conclusions drawn from the intelligence data collected from Iraq prior to the invasion in 2003.  It concludes that “group think” was one of the reasons that the conclusions drawn from the data was flawed.  Group think is a dysfunctional process that causes a deterioration of mental efficiency, reality testing and moral judgment resulting from pressures within the group. One of the main reasons for groupthink is high cohesiveness within the group.  Cohesive groups tend to favor solidarity because members tend to identify strongly with the group.  High ranking teams that make decisions without outside help are especially prone to groupthink because they are likely to have shared mental models and hence more likely to think alike.  Groups lacking diversity among members are likely to suffer from groupthink as well.  Two other reasons that can cause groupthink are pressures on the group to make a highly consequential decision and time constraints.

            Group think can be prevented by asking each member to assume the role of the critical evaluator who actively voices objections or doubts. Also, the leader should state his position on the issue only after the rest of the group has stated its.  Creating several groups that work on the decision simultaneously helps prevent group think.  Outside consultants or experts are frequently brought in to evaluate the group process. Also, once a consensus has been reached, the group should rethink its position by reexamining the alternatives.   

SAS institute is a privately owned software company with a net worth of about 3 Bill.  It was started in Cary, NC by Jim Goodnight and three of his partners.  The company has virtually been profitable since its first year in business and with positive cash-flows it has been able to exist without taking on any debt or through venture capital funding and has not gone public. The company is very customer focused and incorporates feedback that it receives from user conferences to develop insight into its product development process. It has also embarked upon developing software outside its realm of experience like video games and educational software. SAS also has a unique business model in that its revenues are recurring as it licenses its products that are renewable annually instead of selling them outright.  SAS sells software ranging from statistical data packages, graphics packages and databases.  With all this, what makes SAS unique is that it is a people’s based company and it uses its knowledge to enhance its products and sustain its business.

            SAS believes in treating its people well and fairly. It has gained the trust and respect of its employees.  It believes strongly in intrinsic motivation and has more or less abandoned the performance evaluation and process.  It has also used the bottom-up decision making as a result of which innovation and have come from not only customer feedback but from initiatives from the people themselves.  SAS has been nominated by Fortune magazine as one of the top places to work at.  As a result, they receive a great deal of local applicants for open positions.  The company places emphasis on cultural fit into its hiring and retention process. The culture is one that promotes teamwork, cooperation, mutual respect and fun loving people.  It also uses the state of the art equipment, thereby helping in the retention of talented employees.   The compensation policy of the company deemphasizes financial incentives as a source of motivation.  Salaries are competitive with the rest of the industry. Employees receive annual salary raises, bonus based on the financial profitability of the company and 15% contributions in to profit sharing retirement plans. Even the sales staff is paid a regular salary as opposed to the commission based structure that many other in the industry have adopted. This helps the sales staff to be customer focused and customer driven instead of chasing short term results.  The company also has a very enjoyable and comfortable setting to create a fun and healthy work environment.  Company picnics are frequently organized with the employees and their families participating.  The company has on-site day care facilities, gymnasium, and laundry facilities that are available to employees at highly subsidized rates. It has also refrained from hiring contract workers or outsourcing work that would otherwise have displaced jobs within the company. Additionally it has a slew of other benefits, however, its performance management system is the most unique.

            Russo the VP for HR recognized that traditional performance management systems did not work.  Instead he believed in arming employees with the tools to do their jobs and then tracking performance through periodic conversations over the course of the year instead of the documentation based process.  Measurement is made on the financial changes to the business with metrics applied to revenues, profits, and expenses.  Software development and customer service are areas in which measurement is difficult to apply.  Also, great emphasis is put on training at all levels.  New employees are taught about the company history, business model, its customer base, and the company’s current business status. Comprehensive training at functional levels like sales, technical disciplines, management and leadership is conducted.  The organizational structure is very flat.  The CEO, Goodnight keeps close contact with his people. A very hands-on approach is utilized at all functional levels with managers rolling up their sleeves to do work done by the rank and file. Internal transfers to different functional areas within the organization is encouraged to ensure that employees can freely switch careers without the company losing talent and skills acquired within the company.

Nordstrom

Nordstrom had created an incentive system for its sales staff that was proving to be counter productive. The incentive system was originally created to encourage customer support and add value to the staff’s job of going beyond and above the call of duty in providing the customer experience and earning loyalty.  Sales per hour (SPH is the effective sales made divided by the hours worked in two weeks) was the metric used to measure the effectiveness of the sales staff.  This metric was effective in driving performance when the company was small; however, as it grew large problems began to emerge. A higher SPH achievement meant better and longer working hours and possible promotions, and a lower achievement resulted in not so good working hours with possible termination if SPH performance did not improve.  This resulted in sales staff not recording time spent on the floor providing the customer service and time outside of active sales.  As a result, the staff was working a lot of hours but selectively recording time to obtain a higher SPH.  This extrinsic motivator created peer pressure among the sales staff. Also when the company grew larger, the sales force management system had to be decentralized in order to provide the front-line sales staff and their managers the autonomy to make decisions.  Nordstrom truly believed that their policy of creating competition among their sales staff promoted performance and the opportunity for the staff to make incentive based commissions that also resulted in greater profits for the company. It seemed like a win-win situation for everybody.

 This controversial policy that encouraged the sales staff to not record all their working hours on the timecards backfired.  Employee complaints, union accusations, class action lawsuits and regulatory orders began to affect the company and its financial performance.  Nordstrom’s incentive system was challenged by the unions and the courts. The labor department investigated its operation and ruled that the practice was illegal and violated labor laws.  Employees had to be paid back pay for hours worked that were not recorded.  The company received a lot of bad press and its stock price tanked.  The employees of Nordstrom themselves had mixed opinions about the incentive plan.  Some of them felt that the plan worked while others felt that the competition it stirred up was unhealthy.

My opinion is that extrinsic motivation does not work very well.  Designing a system for a large organization that works well under a lot of different operating conditions is inherently very difficult.  If flaws exist in a system, then it gets gamed and some employees begin to have an unfair advantage.  The solution is to keep employees intrinsically motivated to perform at their best.  This would be along the lines of the environment created by Southwest Airlines and the SAS Institute.  Most companies these days still use some form of a commission structure for their sales staff.  I just hope their structure is simple and not like the one Nordstrom had adopted.

Specialty Medical Chemicals is a medium sized chemical company that specialized in the manufacturing of “fine chemicals” for the pharmaceutical industry. Barry Tomkins – the CEO for the firm who was instrumental in growing and stabilizing the firm was leaving. The firm had become fairly mature and was not experiencing the type of growth that Barry was seeking.  The board decides to hire an outside executive search firm to find an outside replacement – somebody that could rekindle growth within the company without compromising the stability it had gained with Barry’s leadership.  The company hires Carl Burke – an executive with over 10 years pf sales, marketing and new product development experience at Merck.  He also had over 6 years of marketing experience with a bio-tech start-up.  As CEO of SMC, Carl spent the first 3 months understanding the business, assessing its strengths and the weakness and the people in-charge of the organization.

            Carl is particularly frustrated with his immediate management team.  He feels that they don’t engage and debate in areas outside their immediate realm of responsibility. This lack of participation frustrates Carl and he decides that organizational changes need to be made.  The company hires Laura Wells to evaluate the management team for Carl to make an informed decision on how best to restructure the firm.  Laura is an expert in organizational and industrial psychology with a great deal of experience in leadership assessment.  Based on information from Carl, she goes about assessing members of her team through a combination of psychological tests, interviews and observation.  Eventually, she provides Carl with a detailed analysis of the strengths and weakness of each member of the management team. Based on the feedback from Laura and the need to grow the business, Carl decides to reorganize the organization by splitting up the organization into three business verticals, Pharmaceuticals, Generics and Bio-Tech.

            I have mixed opinions about the strategy adopted by Carl in assessing is organization and re-structuring it.  The decision to organize into 3 business verticals is a great way to change the system in order to achieve business goals. By having its own sales, marketing and product development departments, each group is now dedicated to its products and markets required to grow the business.  Carl, however, is a bit too focused on his management team.  While it is extremely important to have the right management team in place, it is equally important to fix the system to ensure that the right processes are in place to guarantee success with the organizational changes that he has embarked upon.  Carl probably assumes that once he has the right business heads in place, the process related changes would automatically follow.  Carl needs to put Laura’s assessments together with his knowledge about the business related strengths and expertise of management team in order to reach an informed decision on the organizational changes he is about to make.

Learning and Performance Management

Employees learn from the consequences of their actions.  Every employee has a responsibility to learn from their experiences and apply the correct behavior on their jobs in order to be successful at what they do. Behavior is usually modified through feedback, either positive or negative.  In organizations the feedback or reinforcement are financial, non-financial or social.  Punishment is the attempt to eliminate or weaken undesirable behavior.  The experience of punishment may elicit negative psychological, emotional or behavioral consequences.  As a result, it is important for organizations to build trusting relationships and reduce the risks of these unintended consequences.  Companies should use performance management systems that emphasize positive relationships.

            One of the ways this is achieved is through goal setting that emphasizes a linear, positive relationship with task performance. Establishing SMART goals is a very popular and effective goal setting criteria. It has been shown to improve work motivation and performance due to employee participation, supervisory commitment, and feedback.  It is also important for training/coaching to be built into the performance management system.  Training is required whenever the employee lacks skill and needs to be developed to meet expected performance standards.  Coaching is involved when performance standards are not being met for reasons other than skill, mostly related to attitude.  Goal setting also reduces stress associated with conflicting and confusing expectations.  The improved role clarity resulting from goal setting is attributed to improved communication between managers and employees.

Get Rid of Performance Reviews

Dr. Culbert is very critical of performance reviews and its negative impact on morale, teamwork and communications.  The discussion is quite controversial and I do agree with some of his arguments. However, the performance review discussion can be extremely fruitful if the reasons for which it is treated as bogus and ill-advised are understood by both parties involved and the alternatives suggested applied.  Typically, the performance evaluation process is perceived as a very subjective opinion on the accomplishments of his or her subordinate.  Without established performance standards, it is extremely difficult to judge performance.  This is the fundamental flaw in most performance analysis systems.  Employees are judged based on overall opinion that tends to become tainted due to the ‘halo effect’.  Ones that are perceived to perform well on a couple of key criteria for performance automatically get scored highly on all the other ones as well.  Also in some instances, the boss scores everybody highly, in order to prevent conflict or a very argumentative performance discussion.  Personal development is impeded since subordinates do not want to admit their failures, shortcomings or lack of knowledge in certain areas.

            The performance evaluation process also need not be as one-sided as the author makes it out to be. If conducted properly, with both sides understanding the need for discussion and goal alignment, the process can actually be quite healthy. The performance evaluation process and the annual raise should definitely be two separate discussions although performance is usually tied to the raise.  With budget restrictions and cuts, raises these days are quite limited if any at all.  Also, performance evaluations should never be an annual event but should be a process where subordinates are regularly coached and mentored for performance. The focus should definitely be on learning from the past and adapting it on future activities. Accountability for failure lies not only with the subordinate but also with the manager.  Every manager should realize that their most important responsibility lies in ensuring the success of their subordinates.  The annual performance review is usually a HR mandated event, so even if managers want to get rid of it, their hands are tied. Employees do need to realize that continuous improvement is the key to success for any organization.  In my opinion, if a system is in place to ensure continuous improvement both of the processes and its people, then performance reviews can be done away with completely.

I’ve had to deal with tough screaming managers early on in my career.  Initially, it did bother me to get yelled at and embarrassed in front of co-workers.  It certainly didn’t feel good, but it did keep me on my toes all the time. I was terrorized by the boss’s ire.   The screaming boss usually wants to demonstrate that he is in charge. And while I could take the screaming in the privacy of my boss’s office, public ridiculing and insult really bothered me.   I did not want to go to work the next day.  Now that I look back, the conclusion that I have made is that it is usually the technically incompetent boss that tends to scream more so than the savvy ones.  They seem to want to make up for their lack of technical prowess by instilling fear.  And fear to some extent can be a motivator but I don’t think it is the right one.  Talented employees will leave if they don’t have an atmosphere that is devoid of tension and fear.

Many managers want us to make our jobs the number one priority in our lives. Many of them in communication meetings will publicly express how it is important to keep the family first and strike the right balance between work and the family.  However, in reality, when it comes to practicing these principles, the project deadlines, the monetary losses from a delayed time-to-market and the business metrices are always at the forefront.  Also, when the rank and file employee is burning the midnight oil, very rarely does the screaming business unit head visit to find out how the project is progressing just to show that they really care.

Both Tony Dungy and Lovie Smith are great football coaches.  They have instilled in their players the passion to play as a team to the best of their abilities and to succeed at their endeavors.  Winning is important but you cannot win at any cost all the time.

Get Healthy or Else

I read an article today of a company that has decided to pass on a fairly substantial portion of increased health care costs to its employees. The company cited data that indicated that about 15% of its employees were responsible for over 75% of medical expenses.  I was quite astounded by this piece of data.  The company is putting in measures for the unheathy few to bear an increased share of the expenses they incur. About a 25% increase in health insurance premium payments for employees is a huge morale deflater especially when pay raises across most organizations have been very flat.  It was also a revelation to find out that the comany was spending upwards of $8000 per employee for health insurance coverage. The increased cost of health care is beginning to substantially eat into company profits.  It is not surprising to hear about CEO’s that are making the health of its employees a prerogative in order to cut down on health care related expenses. Companies are building exercise facilities on-site and the ones that cannot afford it are subsidizing gymnasium membership fees. A healthy worker is viewed as a productive worker.

What that said, for companies to get directly involved in the personal health issues of its employees including banning smoking completely and going after obesity is highly controversial. It does seem like it violates constitutional rights and federal laws. Besides, increasing their insurance premiums based on health assessments would not seem to be fair.  People make a lot of personal choices like drinking, mountain climbing, flying and skiing.  It would be extremely ‘intrusive’ for companies to ban these activities because they were deemed to be too dangerous.  It is not surprising that Scots wellness program has run into legal tangles.  However, if it is able to successfully negotiate its legal hurdles, a lot of other companies would very quickly jump on to the bandwagon. 

Southwest Airlines

Southwest Airlines – the low cost airliner has had a business advantage over the rest of the airline companies for quite sometime. They have achieved this by systematically beating their competition by offering low fares without any attached frills, great customer support marked by on-time arrivals and departures by avoiding the hub and spoke system and avoiding major airports. By being responsive to customer needs, it has focused on enhancing the overall customer experience. It also flies only 737′s making the maintenance of its fleet easier since the ground crew now needs to maintain spare parts and accessories for only one type of aircraft.  Also by offering low fares on relatively short routes, it has managed to attract passengers that might otherwise have preferred to drive. A great deal of this success has been attributed to the strength of the workforce at Southwest Airlines. 

The leadership at Southwest has been primarily responsible for instilling the customer-driven culture. Herb Kelleher – the ex-CEO was responsible for starting the airliner in the early 70’s and growing it to a fleet of over 200 airliners. He is very visible, hands-on and talking and communicating with employees and customers gives him an immediate feel for operational problems being encountered.  This easy laid-back culture pervades throughout the company.  The employees with their families have parties together to celebrate major achievements, milestones and holidays, often with senior management participating.  The hiring process at SWA is very elaborate.  This ensures that they only hire those that fit the creative spirit, teamwork and positive attitude that it symbolizes. These qualities are further emphasized during training that most new hires have to go through.

Southwest does not believe in paying its employees top of the industry salaries.  Instead, it pays for performance and provides much greater work hour flexibility. It believes strongly in its employees investing in company stock that is then provided to them at a discount. It also distributes its profits among the workforce.  The family spirit pervades through out the company.  Besides, although it is unionized, it has had very few problems with its unions and almost no loss in productivity due to strikes. Many other airlines like United, Continental and Delta have tried to model after the Southwest operation but have failed miserably. This is mostly attributable to the culture within organizations that is very difficult to change within a short period of time.  

These facts are further corroborated after the roadtrip to Southwest by the HREP class. The main takeaway points from the roadtrip were:

1) Southwest is successful because its culture extends throughout the entire organization.  The entire foodchain is fully immersed in its culture and its vision for the comapany.  This in itself is no mean achievement and explains why other airliners that tried to mimic the Southwest business model failed miserably at it.

2) The outstanding customer service that the company exemplifies is possible only because of its training methods, hiring procedures and reward systems that aligns the functioning of the company with its goals and values.

3) Organizational culture can be used as a lever for strategic advantage. However, the difficult task is articulating the values, practicing them and then reinforcing them across the organization. Giving employees the freedom to do their jobs and the ability to freely communicate organizational goals, speaks for a hiring and training process that is highly sophisticated.

Jessica’s Story

The article describes the case of a Hispanic teenager died due to gross dereliction of duty and medical procedures and checks.  The heart and lung transplant that was performed had a mismatch in the blood types of the donor and the recipient.  A mistake of this type is unforgivable considering the checks that should be in place to validate a match for an organ transplant.  However, in every step of the process, the mismatch was never caught and the poor girl ended up with a mismatched set of organs.  How the entire systems could have failed to detect this fundamental criterion is unfathomable.  The hospitals involved in the process are very well known is organ transplant procedures, Duke University Medical Center that performed the transplant surgery, Children’s Hospital of Boston that had obtained to donor’s organs, United Network for Organ Sharing, New England Donor Bank and Carolina Donor Services that serves transplants for hospitals in North Carolina. None of these five entities detected the mismatch which points to a gross failure of the system that is in place for such procedures.

            As the article describes, incidents like this probably occur a lot more than get reported in the media.  Hospitals are known to cover up such cases for fear of bad publicity and lawsuits. Besides, many states are now considering putting a cap on medical malpractice liability.  After a case like this, putting a realistic cap on malpractice liability is questionable.  How much is a life really worth?  And when the whole system failed the way it did, shouldn’t all the players take responsibility? Questions like this never really have good answers.  At this point, all that can be done is to ensure that the system is fixed and a case like this does not reoccur.

            Every organization yearns for more Captain Flanagan’s but such folks who go beyond their call of duty are a very rare breed.  The onus however lies with the leadership in organizations to create an environment where employees across the board are empowered to become customer oriented and are rewarded when they go over and above their normal duties to make the ‘customer first’.  When systems are created that teaches the organization to be more creative and employees are motivated to take personal ownership for the success of the business, the customer gets taken care of automatically.

Employee Engagement

I saw an interview with Jack Welch on Bloomberg TV where he indicated that 3 key measures of success in any organization would be its cashflows, innovaation, and employee engagement. Employee engagement is essentially workplace optimism which if nurtured can definitely become a competitive advantage. However, the trouble is that employee engagement is not measured properly at most organizations.  Also many of the so called consultants and experts that companies use to measure engagement, do a very poor job at it. Also, employee engagement does definitely affect the bottom-line, but it is extremely difficult to determine in isolation. The set of organizational dynamics that affect the bottom-line are highly complex and to measure the effects of each in isolation is not trivial.

As I noted in the earlier article on customer service, employee engagement results when the organization creates systems that are always learning and employees are motivated to take ownership for the success of the business. In the present economic environment, rampant layoffs do not contribute to employee engagement. It instead stokes pessimism.  Managers need to determine ways of cutting costs by partnering across departments to find creative ways to save jobs.  This type of committment from managers would go a long way towards fostering employee engagement.