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more formalized than they once were. We grow up in families and then start our own. We work for business, government, or nonpro!ts. We learn in schools and universities. We worship in churches, mosques, and synagogues. We play sports in teams, franchises, and leagues. We join clubs and associations. Many of us will grow old and die in hospitals or nursing homes. We build these enterprises because of what they can do for us. They offer goods, entertainment, social services, health care, and almost everything else that we use or consume.
All too often, however, we experience a darker side of these enterprises. Organizations can frustrate and exploit people. Too often, products are “awed, families are dysfunctional, students fail to learn, patients get worse, and policies back!re. Work often has so little meaning that jobs offer nothing beyond a paycheck. If we believe mission statements and public pronouncements, almost every organization these days aims to nurture its employees and delight its customers. But manymiss the mark. Schools are blamed for “mis-educating,” universities are said to close more minds than they open, and government is criticized for corruption, red tape, and rigidity.
The private sector has its own problems. Manufacturers recall faulty cars or in”ammable cellphones. Producers of food and pharmaceuticals make people sick with tainted products. Software companies deliver bugs and “vaporware.” Industrial accidents dump chemicals, oil, toxic gas, and radioactive materials into the air and water. Too often, corporate greed, incompetence, and insensitivity create havoc for communities and individuals. The bottom line: We seem hard-pressed to manage organizations so that their virtues exceed their vices. The big question: Why?
Management’s Track Record Year after year, the best and brightest managers maneuver or meander their way to the apex of enterprises great and small. Then they do really dumb things. How do bright people turn out so dim? One theory is that they’re too smart for their own good. Feinberg and Tarrant (1995) label it the “self-destructive intelligence syndrome.” They argue that smart people act stupid because of personality “aws—things like pride, arrogance, and an unconscious desire to fail. It’s true that psychological “aws have been apparent in brilliant, self-destructive individuals such as Adolf Hitler, Richard Nixon, and Bill Clinton. But on the whole, the best and brightest have no more psychological problems than everyone else. The primary source of cluelessness is not personality or IQ but a failure to make sense of complex situations. If we misread a situation, we’ll do the wrong thing. But if we don’t know we’re seeing things inaccurately, we won’t understand why we’re not getting the results we want. So we insist we’re right even when we’re off track.
Reframing Organizations8
89pings company, firm
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Vaughan (1995), in trying to unravel the causes of the 1986 disaster that destroyed the Challenger space shuttle and its crew, underscored how hard it is for people to surrender their entrenched conceptions of reality:
They puzzle over contradictory evidence, but usually succeed in pushing it aside—until they come across a piece of evidence too fascinating to ignore, too clear to misperceive, too painful to deny, which makes vivid still other signals they do not want to see, forcing them to alter and surrender the world-view they have so meticulously constructed (p. 235).
So when we don’t know what to do, we domore of what we know.We construct our own psychic prisons and then lock ourselves in and throw away the key. This helps explain a number of unsettling reports from the managerial front lines:
• Hogan, Curphy, and Hogan (1994) estimate that the skills of one half to three quarters of American managers are inadequate for the demands of their jobs. Gallup (2015) puts the number even higher, estimating that more than 80 percent of American managers lack the talent they need. But most probably don’t realize it: Kruger and Dunning (1999) found that the less competent people are, the more they overestimate their performance, partly because they don’t know good performance when they see it.
• About half of the high-pro!le senior executives that companies hire fail within two years, according to a 2006 study (Burns and Kiley, 2007).
• The annual value of corporate mergers has grown more than a hundredfold since 1980, yet evidence suggests that 70 to 90 percent “are unsuccessful in producing any business bene!t as regards shareholder value” (KPMG, 2000; Christensen, Alton, Rising, and Waldeck, 2011). Mergers typically bene!t shareholders of the acquired !rm but hurt almost everyone else—customers, employees, and, ironically, the buyers who initiated the deal (King et al., 2004). Stockholders in the acquiring !rm typically suffer a 10 percent loss on their investment (Agrawal, Jaffe, andMandelker, 1992), while consumers feel that they’re paying more and getting less. Despite this dismal record, the vast majority of the managers who engineered mergers insisted they were successful (KPMG, 2000; Graf!n, Haleblian, and Kiley, 2016).
• Year after year, management miscues cause once highly successful companies to skid into bankruptcy. In just the !rst quarter of 2015, for example, 26 companies went under, including six with claimed assets of more than $1 billion. (Among the biggest were the casino giant, Caesars Entertainment, and the venerable electronics retailer, RadioShack.)
Introduction 9
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Small wonder that so many organizational veterans nod in assent to Scott Adams’s admittedly unscienti!c “Dilbert principle”: “the most ineffective workers are systematically moved to the place where they can do the least damage—management” (1996, p. 14).
Strategies for Improving Organizations We have certainly made a noble effort to improve organizations despite our limited ability to understand them. Legions of managers report to work each day with hope for a better future in mind. Authors and consultants spin out a torrent of new answers and promising solutions. Policymakers develop laws and regulations to guide or shove organizations on the right path.
The most universal improvement strategy is upgrading management talent. Modern mythology promises that organizations will work splendidly if well managed. Managers are supposed to see the big picture and look out for their organization’s overall well-being. They have not always been equal to the task, even when armed with the full array of modern tools and techniques. They go forth with this rational arsenal to try to tame our wild and primitive workplaces. Yet in the end, irrational forces too often prevail.
When managers !nd problems too hard to solve, they hire consultants. The number and variety of advice givers keeps growing. Most have a specialty: strategy, technology, quality, !nance, marketing, mergers, human resource management, executive search, outplacement, coaching, organization development, andmanymore. For every managerial challenge, there is a consultant willing to offer assistance—at a price.
For all their sage advice and remarkable fees, consultants often make little dent in persistent problems plaguing organizations, though they may blame the clients for failing to implement their profound insights. McKinsey & Co., “the high priest of high-level consulting” (Byrne, 2002a, p. 66), worked so closely with Enron that its managing partner (Rajat Gupta, who eventually went to jail for insider trading) sent his chief lawyer to Houston after Enron’s collapse to see if his !rm might be in legal trouble.2 The lawyer reported that McKinsey was safe, and a relieved Gupta insisted bravely, “We stand by all the work we did. Beyond that, we can only empathize with the trouble they are going through. It’s a sad thing to see” (p. 68).
When managers and consultants fail, government recurrently responds with legislation, policies, and regulations. Constituents badger elected of!cials to “do something” about a variety of ills: pollution, dangerous products, hazardous working conditions, discrimina- tion, and low performing schools, to name a few. Governing bodies respond by making “policy.” But policymakers don’t always understand the problem well enough to get the solution right, and a sizable body of research records a continuing saga of perverse ways in
10 Reframing Organizations
