Ten years ago, I was hired as a consultant by the top managers of a Fortune 500 firm to advise them how to improve their group dynamics. As an academic who frequently suffers through meetings dominated by pompous speeches that have little effect beyond bolstering professorial egos, I wanted to see how things were done in the real world.
To my dismay, the firm's dynamics were just as dysfunctional. In particular, the team kept making the same decisions again and again, but they never got around to actually implementing them. My report to the CEO concluded, "A decision by itself changes nothing. You actually have to put it into action." Not only did they lack procedures for implementing decisions, but worse, they rewarded smart talk, not smart action. Witty people with exciting ideas got ahead, not those who did the gritty work of implementation.
My colleague Jeffrey Pfeffer and I call this problem "the smart-talk trap." It happens partly because saying intelligent and persuasive things has become central to management work, and there are so many rewards for smart talk. Even the best managers occasionally forget that words aren't of much use if they don't inspire action. Some managers also forget that if their words aren't credible, they will lose their ability to inspire action.
One cause of the current accounting scandals is that, at least for a while, analysts, shareholders and the press unwittingly provided so many rewards for smart-talking, persuasive and upbeat CEOs. In late 1999, a Silicon Valley lawyer told me that most startup companies fit Mark Twain's supposed definition of a gold mine: "a hole in the ground with a liar sitting on top of it." Looking back, this lawyer was right to argue that if these startups didn't start producing and selling some gold, they were doomed.
Worse yet, smart talkers from Enron, WorldCom and the like didn't just exaggerate prospects for the future, they cooked the books to bolster their lies. We now can see how stupid this was, but it wasn't long ago that executives who offered downbeat (or even mildly upbeat) news were routinely denounced. After all, the news was so good everywhere else that if a company wasn't doing spectacularly well, it was seen as a sign of weak management.