Beware of Experts
These are dangerous fictions. Even management gurus who carefully acknowledge their research teams are suspect. I am a big fan of Jim Collins' Good to Great. Like many readers, I especially like his finding that companies led by humble (but relentless) CEOs outperform firms headed by self-important CEOs who care more about themselves than their companies. Collins describes this finding as a surprise to his team.
My objection is that perhaps his team was surprised by this because team members did not use past research (other than Collins' own Built to Last) to bolster or interpret what they found in their tiny sample of 11 "good to great" companies. If they had checked related research, their findings might not have seemed so surprising, and they could have given managers better ideas about what causes hubris, why it undermines performance and what to do about it.
Especially pertinent is a 1997 study by then Columbia University Management Professor Mathew Hayward and his Ph.D student, Donald Hambrick, at showing that CEO hubris led companies to pay excessive amounts when buying firms, which in turn undermined long-term financial performance. The two examined the "acquisition premiums" (the amount paid above the listed stock price) paid in 106 large acquisitions. After ruling out numerous other competing explanations through multiple regression (a far less biased method than Collins' team used), they found that firms led by "self-important" CEOs consistently paid larger premiums, presumably because they were overconfident in their abilities to transform acquired firms into top performers. This careful study used measures of CEO self-importance or hubris, including media praise, just as Good to Great did.
So what is the harm in pretending that the same old ideas are brand new? After all, it's hard to sell a magazine claiming that "the same old stuff is inside, nothing new here." But if management knowledge is to improve, if we actually want financial performance, innovation and mental health at work to keep getting better, we need to keep building on and refining proven old ideas. By over-glorifying gurus and their breakthroughs, pretending the same old ideas are brand new, we undermine such progress.
My other objection to guru-dom is that, much like cult leaders and the zealots who follow them, gurus often proclaim to have found the magic answer that can help any company succeed. They also say or imply that if you don't use their magic, your company will falter or fail. We are told to "innovate or die," to lead the revolution, to make systemwide changes like Six Sigma and business process reengineering, to adopt balanced scorecards and just-in-time inventory systems and on and onor our competitors will put us out of business. The problem, however, is that gurus and those who hawk their wares rarely talk about drawbacks.
For example, it took years for purveyors of business process reengineering to admit that such projects nearly always involved layoffs, and that the fear, confusion and lost skills caused by poorly implemented layoffs often negated gains from the reengineering process. Similarly, right now, major companiesincluding Sun and 3Mare following GE's lead and are using Six Sigma programs to increase efficiency and quality and to decrease costs. I am a big fan of Six Sigma and related quality programs, but those who press for them rarely mention how hard they might be to implement, or that they might not work for everyone. Consider research by Mary Benner and Michael Tushman, which shows that firms in the photography and paint industries that devoted more resources to improving operational efficiency through efforts like ISO 9000 programs actually became less innovative over time. This finding was especially pronounced for film manufacturers entering the digital camera industry, where the focus on making incremental improvements in efficiency made it harder to implement the sweeping changes required for switching to digital technology.
This article was originally published on 12-01-2002
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