Jeffrey Pfeffer's Blog, page 7

Wouldn’t it Be Nice If It Weren’t Always About—and Only About—the Money?

In rapid succession, articles about sports coaches rehired, even after ethical lapses, and hedge funds that keep going, regardless of insider trading allegations and abusive work environments, remind us that there are precious few sanctions for bad behavior. It’s all about the money—the money the sports programs bring in, the money the hedge funds make, the money that retailers like Wal-Mart (WMT) save by purchasing clothes manufactured overseas in dangerous conditions, the size of the fines that banks such as HSBC (HBC) pay for money laundering and that others like Bank of America (BAC) pay for mortgage abuses, compared to their income and assets.

These are all calculations in which ethics and responsibility play an apparently small role. As the late New York Parks Commissioner Robert Moses is reported to have asked, “If the ends don’t justify the means, what does?” But a world in which it is all about the ends—and the only outcome that matters is money—is a spiritually and morally impoverished place.

It would be nice in 2013 to have human values and well-being play more of a role in decisions about business practices, including the choice of suppliers and how far companies will go in their decisions and management practices to save or make money. There must be some limits, some sanctions, some consequences for bad behavior—even if it is profitable behavior.

It would be wonderful if human well-being, including life span, became a focus of both governmental and company decisions—and if it weren’t just about the money. Access to Medicare and Medicaid is about more than budgets—ample research demonstrates that access to health care saves lives. Companies that lay people off affect those individuals’ lifespans and their likelihood of suffering ill health: Suicide, depression, and unhealthy behavior such as smoking and alcohol abuse have been linked to job loss and economic insecurity. Long work hours increase blood pressure. Unemployment and economic insecurity are not just issues of dollars and sense; they profoundly affect physical and mental health and mortality chances.

When and how did human well-being, and indeed human life, come to play such small roles in judgments about how to organize work arrangements and social policies?

If human life is indeed sacred, if we care about people and not just polar bears and endangered species, then we need to “score” governmental and company decisions not just by their monetary effects, but also on their implications for people. If in 2013 we move people more to the center of attention and—for a minute or two de-emphasize the dollars—we will be on our way to creating a more humane and morally enriched world.

(This post was originally published in BloombergBusinessweek on January 2, 2013)

HP’s Lesson: Acquisitions, Outside Hires Rarely Work

Hewlett-Packard (HPQ) just wrote down about 80 percent of its purchase price for software company Autonomy and is now in a nasty PR battle with Autonomy’s founder about the company’s real sales figures. And yes, HP has also written down billions of dollars from its purchase price for EDS, a buy that was supposed to make it more competitive with IBM (IBM)in services.  Having also hired a series of outside chief executive officers—all of whom left under duress—the company offers a cautionary, well-documented, but nonetheless oft-ignored tale for other companies. Intel (INTL), for one, seems to be flirting with the idea of going outside for a successor to CEO Paul Otellini, who has announced he will retire in May.

The fundamental problem is simple: Companies frequently seek outside solutions to their problems in product strategy or leadership. They are making acquisitions to acquire new capabilities and yes, searching for some form of corporate savior to compensate for what seems missing internally. The temptations and pitfalls in both moves are similar. From the outside, technologies and products look glamorous because their defects and difficulties are much less visible. From the outside, the new executive looks intriguing and exciting because the inevitable human foibles and weaknesses aren’t yet evident, because scarcity makes things appear more valuable, and because in the recruiting chase, the excitement builds.

In both instances, there are “matchmakers”—executive search firms in the case of the external hires and investment bankers for the deals—who get paid only if the transaction is consummated. They have every economic interest to not only see the deal close, but close quickly. And then there are the “sellers,” the founders or current executives peddling their company or the outsiders being interviewed for the senior role.  They, too, have little incentive to be fully forthcoming about weaknesses and problems, as well as strengths. Their payoff comes from being seen as attractive; the more attractive, the more market demand and the greater their price.

What about due diligence, you might ask? There’s little incentive for the brokers to do anything but close the deal. Once the sellers get bought, they can count on the principle of psychological commitment to enable a purchaser to rationalize how great the transaction was, regardless of how things turn out. That leaves the buyers, who are often motivated as much by hope and the wish for things to work as by the discipline to spend shareholder money wisely. Plus, once the purchasers have invested both effort and their identity and prestige in beginning the transaction, escalating commitment takes over.

As demonstrated by the evidence, including a meta-analysis of studies covering more than 200,000 mergers, technology mergers seldom work out. Indeed, most mergers do not. What happened at HP is quite common. The problems are both legion and foreseeable: Much of the acquisition’s value is in the people, but with few exceptions (Cisco (CSCO) being one) most acquirers do a crummy job of integrating the new folks, so they leave. Note how many Autonomy people, and not just the senior executives, are already gone. The exodus from human capital software companies SuccessFactors (purchased by SAP (SAP)) and Taleo (bought by Oracle (ORCL)) continues the long tradition by which purchased human capital then heads for the door because it has made money from the purchase—and even more because it is clear who the new bosses are. Customers sometimes move with the ex-employees. In any case, integrating new products and technologies requires more skill than most companies seem to have. The evidence on hiring talent is about as bleak. As Harvard Business School professor Boris Grosyberg reported, talent is not as portable as people think it is, and few companies have gotten anything like what they have thought they had hired.

All this “academic” research doesn’t matter much to the boards and companies doing the hires and making the acquisitions. That’s because they are special—above average—and believe the statistics don’t apply to them. Companies would be well-served to avoid the lure of the “outside” deal or person to save them. The temptations are great and the results of such flings seldom work out.

(This post was originally published in BloombergBusinessweek on November 27, 2012)

Petraeus and the Rise of Narcissistic Leaders

What to make of the confluence of General Petraeus resigning as head of the CIA and Christopher Kubasik, vice chairman, president, and COO of Lockheed also resigning — both for having affairs — within days of each other? Certainly not the first men to be brought down by an inability to control their impulses — these recent examples join a long list including John Edwards, Bill Clinton, and Harry Stonecipher of Boeing.

There is a simple power story often told about such behavior: research shows that people with more power tend to pay less attention to others. They are more action-oriented, pursue their own goals, and exhibit disinhibited behavior in part because they believe that rules don’t apply to them; they are special and invulnerable.

All of this is true, but nonetheless leaves at least a couple of questions unanswered. First, as my friend Bob Sutton noted in a conversation, these behaviors seem to be confined mostly to men. We seldom hear of powerful women who can’t control their urges. Second, it at least feels as if this sort of behavior and the career consequences that result seem to be occurring more frequently now. Maybe that is because of more public scrutiny and the operation of social media. But maybe something else is going on — namely we are choosing more narcissistic leaders and the misbehavior is not just the consequence of power but also of excessive narcissism.

First, a definition: narcissistic leaders, as research by Stanford colleague Charles O’Reilly and colleagues notes, are characterized by the traits of dominance, self-confidence, a sense of entitlement, grandiosity, and low empathy. As Michael Maccoby pointed out in The Productive Narcissist, many well-known, even iconic leaders such as Martha Stewart, Jack Welch, and Bill Gates are almost certainly narcissistic personalities, and narcissism is useful for attaining leadership positions, maintaining power, and even stimulating creativity and innovation. O’Reilly’s research on narcissism among Silicon Valley executives shows that narcissistic CEOs earn more, last in their jobs longer, and also have a larger gap between their pay and the pay of their senior team.

Evidence from surveys of college students shows that the level of narcissism has been rising over time — a possible answer for why leaders today are getting into more trouble than in the past. And examinations of the structure of narcissism and how narcissistic behavior differs between men and women helps explain the gender imbalance: “Past research suggests that exploitive tendencies and open displays of feelings of entitlement will be less integral to narcissism for females than for males” simply because women face more social constraints and social sanctions for grandiosity and self-aggrandizement than do men.

And while narcissism and the associated behaviors may indeed help people ascend into leadership roles, as recent experience suggests, narcissistic individuals also contain the seeds of their own (self)-destruction. And leaders’ downfalls are costly — Lockheed now has to find another person to assume the CEO role, and President Obama must find someone to take over the CIA. So while indeed there are productive narcissists, narcissistic behavior can be very unproductive for both the work organizations and the people who experience it.

(This post was originally published in the Harvard Business Review Blog Network on November 12, 2012)

Don’t Waste Your Time Telling Employees How to Vote

In every presidential election year, it seems, editors come up with the idea to send reporters out in search of the same story: “Go find corporate bosses out there,” they tell some cub, “who are trying to strong-arm their employees to vote for one candidate or the other.” Unbelievably, every time, they find some. The 2012 batch includes CEOs sending memos explaining whose platform they think will help the organization thrive (and encouraging employees to vote accordingly, lest jobs be lost) and even one who sent his people to a rally. Given the power dynamics involved in the boss/worker relationship, this is a bad idea, and not only because it’s, well, a bad idea. It also makes no sense because …

You probably won’t sway them.



Today’s climate of employee dissatisfaction, distrust, and disengagement, as reported in numerous surveys conducted by organizations ranging from the Conference Board to Gallup and human resource consulting firms, will surely keep Scott Adams in Dilbert ideas for years. However, it is not an environment conducive to employees looking to their bosses for life guidance. Trust is necessary to influence others, and that trust is missing in many workplaces.

If an unpopular boss tells workers what to do, they are likely to do the opposite out of spite. But the theory of psychological reactance suggests that, even when the boss is not otherwise resented, people will react against any perception of a new constraint by rebelling against it. So when employees hear that something is being asked of them that wasn’t required in the past, and seems out of bounds, a good number of them will feel the need to prove their freedom and independence. So bosses’ attempts at influence can easily backfire in the voting booth.

It diminishes your influence in other realms.



To achieve ambitious goals, bosses need to be able to mobilize resources. They need, in a word, power. But power doesn’t come automatically with a promotion and title. It is always a relationship negotiated on some level between two people. And while the idea of workers nullifying a boss’s power might sound extreme — like that memorable scene in the movie Norma Rae when the employees turned off their machines, orders from the boss notwithstanding — defiance can be, in the realm of knowledge work, quite subtle and pervasive.

When workers join an organization, they sign on to accept direction and decisions from a boss who they understand to have more information and expertise in a given area, such as strategy or finance. Bosses who presume to advise their employees on politics are counting on that influence to carry over to the nonwork realm. What they don’t understand is that the process can work the other way. If a boss tries to exert influence in a second area and is unsuccessful (because he or she is not perceived as an authority, or in a legitimate position to advise) the effect is to undermine the boss’s power in the primary area. Telling someone to do something, and having them deliberately do otherwise, costs the boss some degree of both legitimacy and credibility across the board. Again, in an era when bosses are already as likely to be objects of scorn as of admiration, this is a risk few are in a good position to take.



It takes you off-message.



And then there is the issue of focus. Focus is not only part of what makes an individual powerful, it is vital to an organization’s success. Leaders must therefore be masters of focusing their organizations on the goals and activities that will have greatest impact. It isn’t easy to transmit a clear signal through all the noise of the modern enterprise. Employees’ attention is distracted by everything from poorly conceived projects to the office rumor mill—not to mention sports (the famous March Madness basketball pools for instance) and silly internet memes. CEOs have to stay relentlessly on message, and make that message, in A.G. Lafley’s words, ”Sesame Street simple“ to keep everyone pulling together in the same direction.

The last thing a company facing a difficult economy and competitive challenges needs is a CEO that uses communications channels with employees to introduce yet another distraction: Politics.

These three reasons probably go pretty far in explaining why, even with election fever running high, reporters end up finding so few examples of CEOs — especially in public companies — trying to influence the voting behavior of their workforces. What’s important for them, their shareholders, and, by the way, our economy, is keeping the focus on customers, operations, and strategy. They might dearly wish you’d vote for their favorite candidate. But the power they need to preserve is their own.

This post was originally published in the Harvard Business Review Blog Network on November 2, 2012)

Political Skill/Power Test

People like to do self-assessments.  However, people also tend to believe they are "above average" on most positive qualities—the so-called "above average effect."  Consequently, I recommend not only assessing yourself but also getting people you work with to provide their evaluations.  And assessments are only useful if you are going to act on the data—so work on weaknesses to improve yourself. 

With those provisos, here is a way of measuring your political skill and power aptitude.  The questions come from Political Skill at Work by Gerald Ferris, Sherry Davidson, and Pamela Perrewe, and are reproduced with the kind permission of Professor Ferris who has conducted years of research on political skill, what it means, and its effect on people's careers.  In other words, unlike the tests you sometimes see in magazines or even online, this assessment has actually been empirically validated by much research!  The authors define political skill "as the ability to understand others at work and to use that knowledge to influence others to act in ways that enhance one's personal or organizational objectives" (p. 7).  Because organizations are political arenas, Ferris and others have found that political skill predicts performance evaluations and career success.  It is something important.   So, take the test, and then work on improving areas of weakness.  You will be better off for the efforts.

On a 7-point scale, where 1=strongly disagree, 2=disagree, 3=slightly disagree; 4=neutral (neither agree nor disagree); 5=slightly agree;  6=agree; and 7=strongly agree, answer the following questions (from pp. 23-25) of Political Skill at Work):

I spend a lot of time and effort at work networking with others ___
I am able to make most people feel comfortable and at ease around me___
I am able to communicate easily and effectively with others___
It is easy for me to develop good rapport with most people___
I understand people very well ___
I am good at building relationships with influential people at work___
I am particularly good at sensing the motivations and hidden agendas of others___
When communicating with others, I try to be genuine in what I say and do___
I have developed a large network of colleagues and associates at work who I can call on for support when I really need to get things done___
At work, I know a lot of important people and am well-connected___
I spend a lot of time at work developing connections with others___
I am good at getting people to like me___
It is important that people believe I am sincere in what I say and do___
I try to show a genuine interest in other people___
I am good at using my connections and network to make things happen at work___
I have good intuition and am savvy about how to present myself to others___
I always seem to instinctively know the right things to say or do to influence others___
I pay close attention to people's facial expressions___

Add up your score (the numbers you wrote after each question) and divide by 18.  You will have a score between 1 and 7.  Higher scores mean you have more political skill, lower scores mean you have less.  You should be above 4—and possibly well above 4—if you have aspirations to reach great heights of power.

The questions measure four dimensions of political skill, so you can also see where you are stronger and weaker. 

Questions 5, 7, 16, 17, and 18 measure social astuteness; 

Questions 2, 3, 4, and 12 measure interpersonal influence; 

Questions 8, 13, and 14 assess your apparent sincerity; 

Questions 1, 6, 9, 10, 11, and 15 measure you networking ability.

Why Do Cars Have Better Insurance Than People?

With our recent auto insurance renewal came the standard paperwork, including the "Auto Body Repair Consumer Bill of Rights" required by California.  If you are in an accident and your car is damaged, by state law, a consumer can select any auto body repair shop and "the insurance company shall not require the repairs to be done at a specific…shop."  But if you are in an accident and you are damaged, you can be required to use doctors in either your preferred provider or health maintenance plan.  You are unlikely to "be informed about where to report suspected fraud," nor are you going to get an estimate for the costs of fixing you.  Sure, you're thinking, people are a lot more complicated than cars, and that is undoubtedly true.  But it is also interesting that you have more consumer rights to get your car fixed than you do your body.

This simple example illustrates a profoundly important truth about the health care marketplace—it mostly doesn't exist.  My employer, Stanford, decides on what insurance options I can choose.  And I am lucky—many employers don't offer any choice at all.  Once I have selected a health plan, in my case, HealthNet, and a physician group, Brown and Toland, then you get to select your primary care physician.  The dirty little secret in the San Francisco Bay Area is that most of the best primary care doctors don't accept new patients (mine stopped more than 20 years ago) and many of the best specialists, particularly the orthopedic surgeons, accept few, if any, insurance plans.  And then you are confined to seeing the doctors in your physician group or in your health plan's network.  Choice is fundamental to the working of markets, and some would say choice is a fundamental consumer right—it certainly is for auto body repair.  But choice is pretty much nonexistent in health care. 

The preceding discussion doesn't even consider the situation facing those on public assistance, where the payment rates are so low that few doctors or hospitals want to see them, or even Medicare, where increasingly the same situation holds.  Now you might be asking, how can it be that a price is set that doesn't result in an equilibrium, market-clearing solution?  The answer:  prices are set for about half the population directly through legislative fiat, a process not typically covered in standard economics treatments of markets. 

The fact is that the health care marketplace isn't and hasn't been a true market for decades.  Consumer rights, including the rights to seek legal redress, are limited by Federal preemption under ERISA, something that doesn't affect your rights in getting your car fixed and holding your insurance company responsible for honoring their contract. 

So the next time you're in a car accident, you better hope you fare better than the car.  That's because the car has a lot more rights and protections than you do.

Learning versus Punishment and Accountability

People seem to love to exact retribution on those who screw up—it satisfies some primitive sense of justice.  For instance, research in experimental economics shows that people will voluntarily give up resources to punish others who have acted unfairly or inappropriately, even though such behavior costs those doing it and even in circumstances where there is going to be no future interaction to be affected by the signal sent through the punishment. In other words, people will mete out retribution even when such behavior is economically irrational.

All of this would be of only academic interest except it plays out in the organizational world in ways that often inhibit learning from mistakes and preventing future mishaps.  Consider, for instance, the horrendous BP oil spill in the Gulf of Mexico.  There were many entities involved on the oil rig and drilling in deep water is a complex engineering task.  As BP CEO Tony Hayward repeatedly stated during his ill-starred congressional testimony, the cause, or more likely, the causes (plural) of the accident remain to be fully understood.  And, of course, in order to learn from this disaster to help prevent future ones, understanding what went wrong, and why, is essential.  However, the BP oil spill is embroiled in both civil and criminal litigation and investigations.  So—big surprise—many of the individuals who could shed the most light on what happened are clamming up.  As reported in an article in the New York Times, some people are taking the Fifth Amendment (against self-incrimination), some have cancelled their appearances before investigators, and others are asking for more documentation as a way of delaying their appearance.

In her book, The Southwest Airlines Way, Jody Hoffer Gittell describes why Southwest Airlines outperforms its peers in the airline industry.  One interesting contrast was with American under Robert Crandall.  Crandall believed in individual accountability and in the power of competition—so when flights were delayed, the question was who (which individual, which function) was to blame?  Southwest recognized that assigning blame was complicated and, in any event, caused cover-ups and created fear that retarded making things better.  Southwest implemented the idea of a team delay—collective responsibility—and instead of trying to find who had just suffered a career-ending event, sought to figure out the root cause of the problem so it could be prevented.  In other words, Southwest had a learning goal, American had a goal of assigning blame so that punishment could be delivered.  Gittell shows how this difference in dealing with problems after they occurred helped Southwest become much more productive than its airline industry peers.

Although the motivation to seek retribution seems strong, it can, and often does, get in the way of another valued objective—learning.  We as individuals and companies would be well served to understand the trade-offs between learning and punishment and make wiser decisions that help us learn from our mistakes.  After all, mistakes are in the past, and the past can not be changed.  What we can do is to learn and thereby create a better future.

Let’s Get “Health” Back Into Healthcare

Recently I was teaching in a Sutter Health leadership development program when the nice Sacramento State professor who organizes the program fainted while asking me a question.  With lots of caring, compassionate doctors in the room, soon an ambulance was on its way so he could be checked out.  Fortunately, nothing serious, but he needed to go to a hospital for evaluation.  And then, the “discussion:”  what insurance did he have, which hospitals accepted which insurance, could he use a Sutter facility—in short, precisely the health-irrelevant discussion that health systems and their clients must engage in everyday given our current screwed up system.

When my wife had ear trouble a few years ago in Spain, she saw two different doctors in two different facilities, including an internationally-famous ear specialist.  Believe it or not, the conversations were about—her ear, possible medications, treatment options, and recovery time. 

Although doctors for the most part remain committed to their patients’ health, the language of health care is now increasingly more like accounting than medicine—costs, efficiency, contracting, access—in short, everything except compassion, patients, and care.

The wonderful irony is that human psychology matters for human health.  There is no substitute in the diagnostic process for doctors listening to patients describe their symptoms.  There is no replacing compassion and care in helping patients deal with the psychological stress of disease.  There is, in short, no replacing the humane treatment that people used to receive in the U.S. and still do in many other countries.

No wonder we spend so much on health care with such poor results—we talk about the wrong things in the wrong way.  This is a point Tom Peters made years ago when he noted that oil companies that talked about oil exploration actually found more oil and car companies that talked about cars enjoyed more success than companies that were fixated on financial numbers to the exclusion of what they were in the business of doing.

It would be nice to put health back into the language of health care, so that while on a stretcher, people don’t need to have memorized their insurance rules.

Let's Get "Health" Back Into Healthcare

Recently I was teaching in a Sutter Health leadership development program when the nice Sacramento State professor who organizes the program fainted while asking me a question.  With lots of caring, compassionate doctors in the room, soon an ambulance was on its way so he could be checked out.  Fortunately, nothing serious, but he needed to go to a hospital for evaluation.  And then, the "discussion:"  what insurance did he have, which hospitals accepted which insurance, could he use a Sutter facility—in short, precisely the health-irrelevant discussion that health systems and their clients must engage in everyday given our current screwed up system.

When my wife had ear trouble a few years ago in Spain, she saw two different doctors in two different facilities, including an internationally-famous ear specialist.  Believe it or not, the conversations were about—her ear, possible medications, treatment options, and recovery time. 

Although doctors for the most part remain committed to their patients' health, the language of health care is now increasingly more like accounting than medicine—costs, efficiency, contracting, access—in short, everything except compassion, patients, and care.

The wonderful irony is that human psychology matters for human health.  There is no substitute in the diagnostic process for doctors listening to patients describe their symptoms.  There is no replacing compassion and care in helping patients deal with the psychological stress of disease.  There is, in short, no replacing the humane treatment that people used to receive in the U.S. and still do in many other countries.

No wonder we spend so much on health care with such poor results—we talk about the wrong things in the wrong way.  This is a point Tom Peters made years ago when he noted that oil companies that talked about oil exploration actually found more oil and car companies that talked about cars enjoyed more success than companies that were fixated on financial numbers to the exclusion of what they were in the business of doing.

It would be nice to put health back into the language of health care, so that while on a stretcher, people don't need to have memorized their insurance rules.

The New Generation & Power

Over the years it has gotten more challenging to teach organizational power and politics to my Stanford students.  Acquiring power means getting ahead, and they now grow up in a world that seemingly eschews competition.  A student last year told me she had quit her swim team and instead played water polo because at swim meets, everyone got a ribbon no matter where they finished.

And now comes Winnie Hu's article in The New York Times noting that in high schools, the days of the valedictory speech, given by the top graduating student, seem to be coming to an end.  At Jericho High School on Long Island, there will be 7 valedictorians because, as the principal noted, "When did we start saying that we should limit honors so that only one person gets the glory?"  Of course, if everyone gets an award, the value of the honor goes down—something many of the high school administrators recognize.  But it is something schools are willing to do to reduce "pressure and competition among students."

The problem is that in the world after high school, or maybe after college with the inflated grades, competition is, for better or worse, a fact of life.  There is only one CEO, one managing partner in a law or consulting firm, one President, one school superintendent, one commanding general—you get the point.  It is not at all evident to me that we do our students any favors by shielding them from the psychological rigors and stresses of competition until they are playing for the highest possible stakes—their careers.

Last year I had students sort of thank me for helping them redevelop their competitive edge and hone their influence skills.  Some, who did their undergraduate degrees at Harvard, had once lived in a more competitive environment but were getting "soft" (their word, not mine) in the California sun.

We should teach our students to be decent, kind, generous people who care for others.  But we also have a responsibility to get them prepared for an ever more competitive world—the competition is now truly global.  Making everyone a "winner"—or almost everyone a valedictorian—may be temporarily good for their self-esteem, but it doesn't constitute much sound preparation for the world they are all going to face.