clair015

The experiment involved 5 monkeys, a cage, a banana, a ladder and, crucially, a water hose. The 5 monkeys would be locked in a cage, after which a banana was hung from the ceiling with, fortunately for the monkeys (or so it seemed…), a ladder placed right underneath it. Of course, immediately, one of the monkeys would race towards the ladder, intending to climb it and grab the banana. However, as soon as he would start to climb, the sadist (euphemistically called “scientist”) would spray the monkey with ice-cold water. In addition, however, he would also spray the other four monkeys… When a second monkey was about to climb the ladder, the sadist would, again, spray the monkey with ice-cold water, and apply the same treatment to its four fellow inmates; likewise for the third climber and, if they were particularly persistent (or dumb), the fourth one. Then they would have learned their lesson: they were not going to climb the ladder again – banana or no banana. In order to gain further ...

“Work-family human resource initiatives”; sounds rather soft and fluffy, doesn’t it? Guess it does. It concerns stuff such as on-site childcare centres, flexible work arrangements, family stress initiatives and other such humbug. Which tough, self-respecting corporation would want to be associated with that? Or should they… I guess it might actually help you become a more attractive employer, which should ultimately help your performance. Hey, even the stock market might appreciate such a thing, right? Some time ago, Professor Michelle Arthur , from the University of New Mexico, set out to examine stock market reactions to the announcement of Fortune 500 firms adopting such work-family initiatives, which she collected from the Wall Street Journal. For example, one of them said “IBM began a childcare referral service for its employees” or “Procter & Gamble are broadening the scope of their family-friendly policies”, etc. She found 231 of them and then, for each of them, tested the s...

Whenever I interview people at a particular company regarding their firm’s strategy – for instance because I am writing a business case about them – I try to make a point of not only finding out exactly what their strategy is, and why it works, but also where it came from. That is, how they came up with the strategy in the first place. And usually, I get a perfectly logical and rational answer – at least at first… However, often, when I subsequently “dig deeper” into the organisation, by interviewing middle managers and engineers (who have been there for a long time), by talking to the CEO again, by reading up on some company documentation, etc., it appears that the (wonderful) strategy was not the result of some sort of rational analysis at all. Instead, invariably, it seems, there was some lucky moment or unexpected event which triggered the company to alter its course and move into a new direction. Hornby accidentally saw itself appear in the hobby market (instead of the toy market...

Why do we pay certain employees so much? Duh, because they make us a heck of a lot of money! Sure, that may be true, but I guess that’s not enough. When a team of 5 salespeople earn you 7 million, you might pay them 100k each. But when a team of 5 consultants, attorneys or security analysts makes you 7 million, you often end up paying them 1 million each! And why do we do that!? Perhaps because their skills are more specialised and scarce and if they walk out of the door we’d have a hard time replacing them…? Sure, that may be true, but I guess that’s not enough either. Because if we would have a highly specialised sales team, with technical knowledge perfectly attuned to our particular product range, we would likely still not pay them 1 million each, although we’d have a hard time replacing them if they’d leave. And that’s because they too would not find it easy to find a replacement job. Their skills are so specialised, attuned to our particular product, that they would not be able t...

Innovators are always the heroes of the story. They saw the opportunity when no one else could see it; they persisted stubbornly when everyone said they were a fool; they suffered hardship but eventually defied the odds to make it big, and so on and so forth. And innovation is great. But we hear very little about the (undoubtedly many) poor sods who think they’re seeing something but it really is just their imagination, who persist stubbornly and foolhardily with something that ain’t never going to work, who continue suffering hardship till they vanish. Do innovating firms perform better? Evidence from academic research on the topic is certainly equivocal: it is very hard to find solid evidence that firms that innovate (e.g. obtain more patents) perform better. It so happened that I had a database of about 1300 firms active in some segment of the pharmaceutical industry, and all their innovations. Note, innovations do not all have to be real blockbusters but could just be new types of ...

Herb Kelleher– the founder and former CEO of American icon Southwest Airlines – used to say: “We place our employees first”. That’s a fairly extreme thing to say though, especially in corporate America, that you do not place your shareholders first. Of course he would always be quite quick to continue: “Because if you have happy employees, you will get happy customers, and if you have lots of happy customers, shareholders will inevitably become quite happy to”. Now you could be inclined to say “ah, so it’s all the same; at the end of the day all parties’ interests are aligned”. In the long run that may be true, but in the short run such an “employee orientation” – the choice of who comes first – can lead to rather different decisions than a “shareholder value orientation”. And at Southwest they do put their money where their mouth is; they for instance provide perfect job security. Consider, for example, Southwest’s response to 9/11, which triggered a global airline crisis, prompting m...

Have you heard of Narcissus – the character in Greek mythology? Narcissus was an exceptionally beautiful young man. He was so beautiful (and full of himself) that he fell in love with his own reflection in the water. He could not bring himself to stray from the well and did not even drink the water; fearing he’d disturb the water reflecting his image and would not see himself again. Our word “narcissistic” – to describe someone full of himself – is derived from it. How would you recognise a narcissistic CEO (as certainly not all of them are exceptionally beautiful)? Seriously, think about it, what would you say are signs of a CEO who is narcissistically full of himself…? Someone who always has his photograph displayed very prominently in his firm’s annual report? The CEO’s prominence in the company’s press releases? How often he uses first-person singular pronouns (such as I, me, mine, my, myself) giving interviews to the business press? Or his financial compensation relative to the se...

What is the “strategy process” that I observe in most corporations? Step 1: On the 15th of October (or whatever month), we send a memo to our business unit managing directors that we will need their unit’s strategy input by the 1st of December, including an explicit elaboration of how it fits in with the corporation’s overall strategy. Step 2: BU’s management thinks, “What was the corporate strategy again?” and looks up last year’s document. Step 3: It takes note of what its business unit’s input needs to be – in terms of the guidelines provided by corporate – and, after a week or so, assigns some junior staff members, consultants or interns to provide the numbers about the market, forecasts, benchmarking (in terms of what competitors are doing) and so on. They give them last year’s document and also send round an e-mail to all team leaders urging them to diligently provide the necessary data (“because it is that time of year again” and corporate wants it by the 1st of December). Step ...

It is a well-known aspect of our everyday behaviour: when we perform well, we credit ourselves; when something goes wrong we blame something (or someone) else. This effect – known as attribution bias – has been well-documented by social psychologists, but I guess we didn’t really need their research; it is quite a common phenomenon in everyday life. Professors John Wagner and Richard Gooding, at Michigan State University, examined whether managers suffer from the same bias. They rounded up a 102 executives and subjected them to some lengthy experiment and statistical analysis – the details I won’t bore you with because the answer was (surprise, surprise), yes. When a company’s performance is great, executives claim (and actually believe!) that it is due to their brilliant efforts; when, vice versa, their company’s performance sucks, it’s someone else’s fault and they’re really really not to blame, honoust. Yep, executives are just like humans. Then, however, John and Richard did someth...