The Peter Principle

In 1968 Lawrence J. Peters, ex-CEO of Avis Corporation, published a humorous book titled "Up the Organization." Research since then has established the theoretical validity of Peters' treatise. His key point was that in a hierarchy every employee tends to rise to his/her level of incompetence. The book created a big buzz amongst the managerial class of the '70s.

The corollary to the Peter Principle (named after the book's author) is that in time every position tends to be occupied by an employee who is incompetent to carry out its duties.  Dynamite statement!

Questions to ponder:

1. Have you observed this phenomenon in your work setting?

2. What are the consequences of the Peter Principle on an organization?

My view is that we tend to select people for promotion based on their current performance or personal connection without examining whether the person in question has the skills, abilities, and horse-power to handle the demands of the new job.

As examples, we take a great salesperson and make him/her a lousy sales manager, a great engineer and make him/her a disaster prone engineering manager. Both are "lose/lose" transactions.

Experience teaches us that by promoting people so long as they work competently in their current job is not sufficient. We need to assess people's potential to succeed in the new job by using valid criteria. A satellite problem that I have seen, time and again, is that once people reach their level of incompetence, they become blockers to those below who have the potential to advance. Blockers tend to push high potential employees out. They unknowngly generate undesirable turnover.

In my view, this is a widespread problem that needs management attention.

After my tour of duty in the Middle East, I came to realize that there are two general approaches to selection:

1. We select people based on their technical skills primarily, only to see them fail because they are interpersonally inept. I call this the US approach.

2, We select people based on their style or personal relationship, only to see them fail because they are technically inept. I call this the Middle East approach.

Arch-types? Sure. Generalizations? Sure. But they can serve us well as illustrations. What is your view?

Healing The Wounds

My good friend and colleague David Noer wrote a breakthrough book on the subject about 25 years ago. I guess not much has changed since then, or has it? His book was inspired by a series of layoffs and redundancies resulting from the many consolidations taking place during the 1980's. It has now become a modus operandi for organizations to periodically reduce their workforce in the face of falling margins and greater shareholder pressure.

Like the wise farmer teaches us, there is a time for everything. There is a time for planting, a time for irrigating, a time for harvesting, and a time for pruning. Pruning at the proper time ensures that the tree grows healthier and gives more fruit in later years. Pruning is not a substitute for sound management. It is a tool for improved performance.

Staff reductions, unless properly done, change the organizational landscape in undesirable ways. Zealous managers can be careless or indeed unscrupulous. People join companies because they are attracted by an employer's reputation, culture, and leadership. There is an implied psychological contract that emerges between the two parties -- the individual and the employer -- and sealed upon joining. Staff reductions often violate or outright break this "contract". The result is the tears that Noer writes about. Lives are disrupted, careers altered, promises broken, trust disappears. The company is not the same again. The romance is over.

Those who remain in the company are forever changed. Their trust is reduced. Their level of engagement becomes more perfunctory. Their view of the leadership becomes more skeptical and critical. Leaders need to heal these wounds as quickly as possible in order to avoid the hardening of the "categories" e.g., lack of trust, cynicism, stress, etc. It requires action, not commiseration.

Good leadership is not a litany of slogans, proclaimed when things are going well. Good leadership is demonstrated under painful conditions. Mediocre leaders will not be up to the challenge because they will be preoccupied with their own survival or are trying to show how good they are at cutting heads.

P.S.: This subject reminds me of the famous article "The Emperor Has No Clothes" -- a subject too important to discuss in this short blog. I suggest we all re-read it.

Let's ponder the question that Noer treated so well in his book.

How do we heal the wounds following a reduction in staff? How do we renew the organization?

In my view, restructuring or downsizing are not strategies for growth but admissions of poor leadership (doing the right things)and inept management (doing the right things correctly). Let's learn from our mistakes.

Know When to Hold Them, Know When to Fold Them

Poker is an interesting game to watch. It requires strategy, skill, and luck. When luck is not there, strategy and skill are essential. Competitors watch carefully your non-verbals. They are keen to identify any clues that will give away a strong hand, a bluff, a lack of concentration, fatigue, hesitation.

Questions: 

Can others "read" your hand? 

What clues do you give away? 

Can others tell when you are bluffing? 

Are you an amateur or a professional player?

Professionals know when to hang on to a dealt hand and when to throw it in. They calculate the odds, they "count" the cards, they watch competitors for clues, they do not give away their hand. They are "poker faced".

Amateurs ignore or play against the odds. They try to bluff others who are not easiy bluffed. Amateurs can win on luck in the short term but lose over the long haul to skill and better strategy. 

Of course, it is always better to be lucky than a better player. Luck makes everyone look like a genius.

I have observed this phenomenon often in the business word. 

I have seen individuals screw up a great career by being called on their bluff to resign over often a petty subject. I have seen individuals who do not know that they have a winning hand, thus settling for a meager win. 

Bet a strong hand. Throw away a weak one.

What kind of a player are you? 

 What are your strengths? 

 Your track record? 

Careers are more important than poker playing. I am using the analogy to drive a few points across. 

I wish you a great ride along the learning curve. Be a winner! God is on your side.

Organizational Phrogs

Years ago, Jerry Harvey, professor of organization behavior at the George Washington University, wrote a piece in the OD Network newsletter discussing "Organizational Phrogs." Jerry is one my favorite authors. He is well known for the Abiline Paradox, Group Tyranny -- the Gunsmoke Phenomenon, and the Asoh Defense. Jerry's sense of humor has always made learning a lot of fun for me.

Now, what is the topic all about? Jerry chose the ph spelling on purpose. In his view, frogs do not like to be called frogs. They prefer to mask their identity and to blend in the landscape. They are masters of camouflage. They eat insects. Frogs usually come out at night and, although they cannot be seen, their mating calls can be heard. Some frogs come in very unusual colors -- they are few in number -- and use their unique coloring to warn predators that they are poisonous. As amphibians, frogs are equipped with a latex kind of skin to protect them from the water. On a full moon, the reflection can give away their camouflage. They live in ponds or by rivers. They are nocturnal.

I am taking some liberties with Jerry's work to illustrate what I have come to witness inside contemporary organizations.

Organizational phrogs do exist and thrive. As their counterparts in the wild, they like anonymity and they like to blend in the background. They feast on gossip and they augument the organizational chatter by spreading rumors, back biting, and badmouthing their colleagues. They can also be great brown-nosers by charming superiors with their professed loyalty, ideas, and "by-the-way" dialogue. On a bright night, their shiny skin might give them away and make them targets. A few of them can be outright venemous, evil in their intent. Their unique coloring warns others about their letal poison.

In my entire career, I have encountered less than half a dozen of this rare breed. But when I have witnessed them, I have discovered that they can do much damage.

Phrogs do have a place in the organizational ecosystem.

Their whisper fills the night's silence. Their mating call attracts others of the same kind and breaks the daily monotony. Together, they comprise a community of practice -- self serving, often injurious to others' careers. Unchecked, they can become a nuisance and a health hazzard. They feast on "bad" information, and they gain energy from one another's speculations. Containing rather than eliminating them is needed. Exposing them will dimish the harm they might inflict.

Have you seen any phrogs in your organization?
How would you chracterize them?
How do you deal with them?

A Few Comments About Change

Change is the norm in our lives. Economic, political, social, and/or personal factors drive it. One question I am repeatedly asked regarding organizational change is: Is all change good? I welcome your pondering about this question and to share your answers with me.

Now let me share my answer with you. Change is desirable whenever we are dissatisfied with the status quo or when our survival is at stake. In my view, change without improvement is pointless. To give change meaning, it has to improve performance (growth) and/or it has to ensure survival.

Now, change is not easy.

Organizations, just like human beings, prefer predictability and familiarity. Like human beings, organizations can fall into habits and patterns over time that can be hard to change. With change, things tend to become unpredictable and unusual. Scary, if you will. Change requires us, as Bill Bridges teaches us in his book on Transitions, to let go of the status quo (ending) before we can start a new beginning, and in between these two points we have to travel the uncomfortable zone called the "neutral" zone, neither here nor there, so to speak.

In Silicon Valley there is an expression that made quite an impact on me as young professional: To stay still is to fall behind. Meaning, your competitors might overtake you and leave you behind. So if an organization is stuck and unable to change and adapt, it risks the likelihood of losing its competitive edge. This principle applies to our career management process. If we stop growing technically and personally, we risk losing any marketable advantage we might have. Lifelong learning is not just a slogan but a strategy for career advancement.

Organizations also need to always live to fight another day. They need to have the opportunity to renew themselves, to become better. The landscape is full of carcasses where organizations were not able to do so and as a result had run out of time. Change indeed can provide organizations the ability to at least fight another day. It is sad to see the icons GM and Chrysler run out of time, possibly to be rescued by the Federal government.

In closing, my premise is that organizations who know how to manage change have a competitive advantage because they know how to do it well. A subject I will discuss in a future blog.

Let me hear from you.

Resizing the Workforce

In the July 1, 2002 issue of the Journal of Business Strategy, Barbara Davison wrote the article "The Difference between Rightsizing and Wrongsizing." She goes on to quote me: "Cutting staff is a common response during economic downturns, but if staffing plans are not linked to the business strategy, rightsizing can go badly wrong."

I had forgotten this interview. So here are some questions for you to ponder:

What are the best ways to right size an organization? Why are they best?
What are the worst ways to right size an organization? Why are they the worst?

During the current economic downturn, to stay financially viable, organizations will surely need to get on the treadmill. It is a time to shed the fat organizations accumulate during the glory years. It is a time to confront performance issues ignored for a long while. It is a time to optimize resources, to get the biggest bang for the money. Getting on the treadmill should improve the organization's cardio-vascular system. You get in shape. You get healthier, and you feel better. You also can run faster and for a longer period of time. You are not only leaner but also more agile.

So managers are told to review their headcount and make adjustments. Often managers have little or no experience in rightsizing. The focus on headcount rather than skills or dollars and cents does not help either. Instructions from upper management might be sketchy.

Righsizing involves redesigning the organization for a variety of reasons: (1) improving profit margins, (2) in anticipating lower demand, (3) capitalizing on technological innovations, (4) streamling operations, and/or (5) eliminating duplication or non-value added activities.

Redesign should start with the end in mind, and that end must be clearly and properly communicated throughout the hierarchy. Sound change management processes must be in place too.

Some indicators of poorly executed resizing:

• The little guy gets the ax ... the driver, the office assistant, the mail clerk, the person at the bottom of the totem pole.
• Personal scores are settled ... when managers release people with whom they might have "bad blood" or with whom they have unfinished business.
• Those with different views get "purged" or sent to the "gulag", e.g., given undesirable assignments intended to drive them out of the company.
• The "untouchables" stay, even though they are not performing. Favoritism. Nepotism. Nationalism. Racism. Outright discrimination.
• The dollars saved are miniscule. the cost of acting is greater than the cost of not acting.
• Firing on one end while hiring the same people on the other end.
• Lack of focus on the core skills needed to run the business successfully.
• No clear appeal system in place to ensure due (fair and consistent) process.
• Outsourcing to partners who cannot do it better and at a higher cost to boot.
• Empires seem to be protected.

What are some other indicators that possibly are more important than those listed above? Your experience with this process?

An Important HR Dilemma

The very first principle of HR that I was exposed to in my junior year at the university when I decided to major in human resources has been with me for over 47 years. I have never forgotten it. It has always accompanied me when pondering or deliberating HR policy choices. Good HR decisions must meet the test of consistency, fairness and competitiveness.

So here is one dilemma.

Is it more important to be consistent rather than fair? Or, is it more important to be fair even though you cannot be consistent?

What are the consequences of chosing one over the other, if you have to?

I speculate that most line managers, especially those trained in the physical sciences, will tend to choose consistency over fairness. To them, consistency rules. Others, especially those trained in social sciences, might go in the other direction. I think that I am one of them. Why?

We say and believe that no two human beings are alike. We do know that people differ in their needs. We all accept that. But for one reason or another, possibly administrative expediency, we have adopted policies over the years that ignore individual differences and try to fit everyone in the same box. The famous Dilbert cartoon series has made its author rich. His cartoons often depict the evil HR Director in less than positive light. An artistic distortion? Perhaps!

One pay system for everyone, a travel policy by job role, the same benefits for everyone. There are exceptions, of course. We have special pay schemes for sales people. We have cafeteria plans that permit employees to configure their own benefit plan. We have flexible hours to accommodate family needs. And so on. But when it comes to issues of employee relations, we often try to solve an individual problem with a common solution. One size fits all?

I advance the unorthodox notion that fairness should trump consistency in employee relations matters. Fairness originates in our heart, in our emotional side, it is part of our soul, while consistency comes from our rational side. This side has no feelings. It operates like a machine without a soul. What good does it do us if our actions are perceived to be unfair but consistent? What deficits do we accrue if we choose to be fair but not necessarily consistent? Are all situations the same? Does the same medicine cure all ills? Is the world black and white or are there shades of grey?

I welcome your thoughts on this subject.