Preventing Managers from Doing Dumb Things and the Consequences for Others

Following on from the previous posting and from recent events in the news, a timely book has just been published 'Think Again', by and American-Anglo collaboration, Finkelstein, Whitehead and Campbell. Reviewed in the Economist, it is a book about why managers make poor decisions. Coming from a long line of research and writing in this field I wonder what it has to add to previous, scholarly work on the limitations of rational decision-making in the 1970s by March & Simon, and Janis's ideas on 'groupthink' and its derivatives. These ideas were subsequently made more accessible and given a given new twists through the insights of Gareth Morgan on the dark sides of strong cultures and 'psychic prisons', Richard Pascale and 'nothing fails like success' and Pfeffer and Sutton on 'why smart people do dumb things'.

Maybe wanting to appear smart, I'm tempted to ask why smart readers should continue to read the same narrative, albeit using different examples. Perhaps this is something to do with willing consumers looking for 'new' ideas (and silver bullets) and willing producers looking to recycle 'old' ideas (and make quick income), which are good theories of management fads and fashions. However, in a less cynical vein, I'm sure this book will certainly serve a useful purpose in bringing to the fore some modern examples of why trends and history don't contain their own justification, pyschologically-biased 'prejudgement', close friendships with colleagues, self-interest in seeking rewards and power, and so on.

Such a list of reasons, especially when combined with the earlier, more scholarly, works help explain the current financial crises from a micro perpective (for a more macro perspective, have a look at the recent video from MIT featuring two excellent financial economists outdoing each other in pessimism). Knowing a little from the inside about the RBS crisis in my own country and reflecting on the current vilification of its former CEO, Sir Fred Goodwin, who's house has just been vandalised by self-styled 'anti-capitalists', I'm sure we would be able to apply some of these lines of analysis to the failure of one of the world's largest banks, the loss of reputation of its former boss, and the reputation spillover to its former managers, employees and Scottish firms (see earlier posts and 'Security Stepped Up for Senior RBS Staff'). And, surprise, surprise, I note that they do in the excellent little video introduction to the book on the Amazon website and the near full text of the book posted online. I'm also sure we can learn from some of the safeguards proposed by Finkelstein, et al, in testing theories and business models to destruction through the equivalent of courtroom advocacy and defence, the promotion of devils advocates and naysayers (where have I heard this before, Tom Peters?), and checks on the power and narcissism of celebrity CEOs, the subject of the last post.

My point is that the rather indigestable question we really should be asking is: despite managers knowing all about the problems of their less-than-rational behaviour and the above solutions (most will have read some of the books), why do smart people continue to do dumb things (the will and skill problem) and why do we continue to let them do dumb things (the opportunity and regulatory problem)?

I will raise this question tomorrow at the meeting of HR directors in Scotland because it has implications for HR and because it has major implications for the reputations of those people who have been caught up in the collapse of major banks, a small number of which are culpable for not speaking up to power but a large majority who had no access to power. The public feelings over banks and 'bankers', made worse by media interest in bad news, may blight the employment prospects of many ordinary people for some years to come (see CV Harquail's post a few weeks ago on reputation spillover on Authentic Organizations). That is an empirical point we should be taking up. However, we should also be taken up the questions of will, skill and opportunity referred to in the previous paragraph. Do managers actually know about the problems and consequences of irrational decision-making? Are they aware of the trained incapacity problems that socialisation into firms' strong cultures are likely to result in, and are they aware of the benefits of widening minds through a critical management education versus the challenges created by narrowing them through much in-company management training?

And do we need more effective regulation of managers that impose on them certain obligations, not only principles of good corporate governance (the current solution) but also a requirement to actually learn in the true sense of that term from the lessons of the past. By which I mean not just knowing about but knowing how (to learn). In other words, do managers need to become more professional in the widest sense of that term, which is an old but still relevant debate? Easier said than done I suspect. I had better read the book and maybe think again.

Branding and Reputations: the Needs for Equivocality, Flexibility and Adaptability

It’s been my week for working on reputation management and employer branding. Along with colleagues in the Centre, I’ve just finished off a couple of draft reports on employer branding and reputation management for two of the largest health boards in Scotland, given a presentation on the topic to the senior executive team of another health board, and about to give a presentation on corporate reputations to a specialist conference on the subject in Rome in a few hours. So it was extremely helpful to have received a mail from a good colleague of mine, Kerry Griggs, from Charles Sturt University in Australia, who is working with me in this field. Kerry pointed me in the direction of an insightful academic piece in the Journal of Management Inquiry by Kirstin Price, Dennis Gioia and Kevin Corley from the USA entitled ‘Reconciling Scattered Images’, which has helped me make sense of the scattered images we have unearthed in our own health service research and revise some of our model building on employer branding, coming out in two books early next year by Ron Burke and Cary Cooper and by Paul Sparrow.

Price et al discuss organizational images from three perspectives. These are projected organizational images (self presentation), refracted images (how outsiders read specific aspects of an organizational image) and intercepted images (how particular employees and leaders interpret images, often based on the way insiders think outsiders see them). So far, nothing much new here, aside from new terms. However, it is what they make of these, often competing, images that help me make sense of organizations such as the NHS. They argue that these images are ‘best seen as ‘virtual commodities modified and exchanged’ in a marketplace for ideas about an organisation. Thus people hold multiple images of organisations, often at odds with the official one that organisations such as the NHS would like to dominate the marketplace for ideas about health providers. As an example, our research (on, in their terms, projected, refracted and intercepted images) has unearthed four competing and complementary images among health service employees in rank order of the 'volume' (a measure of frequency and intensity with which they were expressed during group interviews): as organisations dominated by financial governance, power and politics; as professional bureaucracies structured along strong clinical identities, as employers of choice; and as a patient-centred, caring organisations. Interestingly, while the first two images dominated, the last two were not widely held or consistently expressed during our interviews.

Price et al's key insight is that organisations such as the NHS need to be flexible and adaptable in identity management to cope with the dynamic environments in which they operate. In this way they become sustainable in the long run – the dynamic capabilities argument. Organisational image architects (and academics) need to think in terms of ‘image equivocality’ to mitigate the scattered images problem. Roughly translated this means they need to build in flexibility (relevant to time and context), consistency (non-contradictory images) and inclusivity (relevant and authentic to most employees and users). How organisations such as specific health care providers achieve this is dependent on their ability to create images that maintain employees’ appreciation of its needs for adaptability (say in moving care towards the community and away from hospitals, and in meeting ever stringent financial resourcing) while not producing cynicism and mistrust through projected duplicitous images (e.g. those emphasising patient care that health service workers sometimes find difficulty in buying into, given their perceptions of senior management's main concerns). Such projections have an awful tendency to come back to haunt them.

Political science tells us this is best achieved by creating images that constituents can write what they want into them, while still remaining consistent with their overall mission and values. Which is why we are advocating public value as a equivocal image for health services providers. This notion, part of another of our research programmes on healthcare discussed on this blog, seems to fulfil the criteria of flexibility, consistency and inclusivity because it is ‘what the public values’, an idea broad enough to be flexible,consistent and inclusive but also a compelling one. What the public values may change over time with ratcheted expectations of healthcare providers; it may also change over time to incorporate an economic as well as caring mission. However, it remains a consistent goal for many healthcare employees seeking to gain meaning from their work while being fairly rewarded and provided for, and being allowed to hone and utilise their professional skills. For example, new public sector financial stringencies will lead to investment problems for all healthcare providers in the UK, while demographic trends point to major problems in recruiting clinical and non-clinical staff from traditional labour markets. A public value image allows healthcare to reflect these environmental changes by being at the heart of economic development as well as a caring society - providing good knowledge-intensive jobs in regions that need them and in providing employment for disadvantaged groups who are often those most in need to healthcare as a consequence of their marginalisation (see the results between unemployment and health). These economic goals are easily reconcilable with a healthcare and prevention mission, and place Scotland’s healthcare providers at the heart of economic growth.

Is this a projected image that we can all write into it what we want to, while remaining consistent with the traditional values of the NHS?