The evidence

The article titled “Evidence Based Management” by Pfeffer and Sutton raised an interesting debate about what type of information managers and companies should rely on when they are making decisions.  The article said that oftentimes, managers are more likely to rely on their own personal experience and things they learned in school 30 years ago, then they are to rely on new, cutting edge, research.  Of the debates we’ve read about so far this semester, this may be the most interesting one for me.  Both sides of the argument have valid points, and both sides have some faults.

The authors fall on the side of research and evidence.  They feel that if there is new evidence being prepared by 1000’s of very intelligent, very qualified researchers, than it should really be put to use.  To drive this point home they use the example of a hospital.  Would someone rather have doctors that are using the latest, most advanced procedures, or would they prefer to be treated by someone who hasn’t received any formal medical training since the Nixon administration?

On the flip side of this, I ask you to consider if one might rather have the more experienced doctor running a procedure?  Of course new research is better than old research.  But making this a question of those two things is to over simplify the matter.  Rather, one should ask if more can be learned from articles and textbooks, or from hands-on experience?  Their are pretty substantial arguments for the latter.  For instance, in the article last week about Arrow Logistics, younger, college-aged sales people were referred to as I.R.O.C., or idiots right out of college.  These IROC’s had more education and more up-to-date training than the older sales people, but they still had to be told what to do all the time.   This is because they did not have any experience in the field.  For the managers at Arrow, they would be far better served taking advice based on the experience  of the older sales people than on the book-learned college recruits.

After reviewing both sides, I feel like I come down somewhere in the middle.  In an ideal world it is probably best to have experienced managers who are also open to learning new things.  A company may be able to manufacture managers like this by requiring managers of a certain level to read trade journals and attend managerial conferences.

Gaining this type of knowledge seems much more productive than hiring some big consulting firm.  By getting it straight from the books, a manager gets an uncompromised view of new tactics.  Academics should be writing and researching learn and make breakthroughs in their field.  And while they are paid somewhat by grants from corporations, they are primarily paid by the institution they work for.  Ideally, this would mean that academics are free to research what they want and come to the conclusions that the facts lead them to.  This may be different from some consulting firms where they are paid by corporations.  These companies may feel pressure to present information that their clients want to hear.

But I digress.  Mangers should be able to draw on their old experiences, and absorb new information.  But that is just my opinion. What do you think? Is one side of the argument stronger than the other?  Am I naive to believe they can be combined?


Group Think Cause and Effect

The Wall Street Journal article concentrated on the aftermath of the US invasion of Iraq in 2002.  Specifically in the summer of 2004 when it was discovered that some of the intelligence that was used to justify the invasion of Iraq may not have been up to the highest standards.  In the descriptions of the lead up to war congressmen who have reviewed the CIA, and particularly Director George Tenet’s actions, say that the agency suffered from an occurrence of “group think”.  They say that analysts were not encouraged to question assumptions and that the Director purposely skewed results so they would coincide with what people outside of the CIA wanted to hear.

If one recalls the lead up to Operation Iraqi Freedom, they will remember that it seemed clear the Bush Administration wanted to invade Iraq.  They not only justified the invasion based on the idea that Iraq may have weapons of mass destruction (WMD’s), but also that they were somehow connected to the terrorist attacks of September 11, 2001.  The Director of the CIA is appointed by the President, if he knew that this is what someone who was his “boss” wanted, it makes sense that he might try please him.  Along that same line of thought, it makes sense that the CIA analysts would want to please Tenet, who was their boss.  It seems that the group think in this situation was the result of a managerial mandate.  Here the CIA should have been working towards a conclusion that was the result of the evidence they compiled.  Instead, they worked towards finding evidence that would lead to the result that they had already decided on.  This can be a very dangerous practice for companies.  Had this been a real company and they only used specific market data that led them to justify the release of a manager’s pet product instead of the product the market actually wanted, the results would have been disastrous.  Not only would the company probably have lost a lot of money on the development of an unwarranted product, but the management probably would have been sacked and the R&D regulations re-written to have more checks and balances.

Having checks and balances is extremely important to any kind of decision making process.  If the factors that lead up to a decision are subject to checks and re-checks, they are more likely to be confirmed as viable or not.  Also, the fact that the only reports taken into consideration were from Iraqi exiles who had been exiled by the government should have been a huge red flag.  A company would never dream of getting their primary information from a potentially biased source.  And usually, I don’t believe that the CIA would either.  However, because analysts were basically told what to think and find, what choice did they have?  Group think may have been the symptom, but it was not the cause.  The cause was something that could lead to other problems besides group think.  The problem was managerial mandate.

Pickin’ up the trash

The article about the sins of commission was very interesting.  In it, some excellent points were raised about the nature of a commission based system and the problems that are often inherent to it.  The city of Albuquerque had had problems with the rising cost of trash.  To combat this, the city planner of Albuquerque decided to pay garbage men a fixed amount for eight hours of work.  He hoped that this would lead to them working more efficiently so that they could do all their work in the time they were getting paid for.  However, this incentive only motivated the garbage men to go through their routes quickly, not to do them effectively.

Truck drivers began going through their routes too quickly and not unloading their trucks every time they were supposed to.  Furthermore, they took to speeding as that allowed them to get through their routes more quickly.  These behaviors led to higher costs to the city in the form of fines and traffic tickets.

This happened because the city planner did not set up the incentives in the proper way.  The article mentions that it would be difficult to change the incentive structure without making it too complicated.  A possible solution could be to change the incentive structure os that instead of rewarding garbage men for their timeliness, they were instead given a base pay and then fined a small percentage of fines that they incur through their negligence.  One of these fines could be for not finishing the route in time.  This would ensure that the garbage men not only were timely in their pickups, but that they also did them properly.  This strategy is based on the notion that if rewards do not work, then penalties might.  This same train of thought worked when the Chinese government tried to curb birth rates in the 1970’s.

This seems like the best strategy in this situation.  By not pitting the garbage men in direct competition against each other or time, they will ensure that they will do their best work for the team as a whole.  However, it is possible that penalties could drive away some drivers.  But, from a financial perspective it will probably make sense for the city.  As that was the point of these regulations this will likely be the best course of action.

Much more leadery leadership

I thoroughly enjoyed the article about the new product development (NPD) teams.  And the style of leadership that is encouraged for them.  I like that the leaders workto make the teams non-competitive and goal oriented.  This is much better than other cases we have read where every salesman in a company is out for themselves.  By making team goals the priority, team work necessarily becomes a priority as well.  This will build a sense of camaraderie that many companies often struggle for years (and often in vain) to achieve.

I also really like the idea that team members should “own” the process with which they develop products.  In my operations class we often talk about the linear nature of development and how one group may not be able to start their process until another is completely done.  This isolation can also create problems where an unseen error comes up at step six of development, and the problem has to go all the way back to square one.  By having the R&D group work together they can not only expediate the process, but also communicate with one another to hopefully avoid the pitfalls of working in small, isolated, pods.  Secondly, the ownership concept is good because it will lead to the employees caring more about the projects that they are working on.  I they feel that it is “their baby” they are more likely to work harder, and with more care on it, to ensure that it comes out the best that it can.

Of course, none of this is possibile without the concept of the the team leader as a “coach or facilitator”.  This helps because it creates an environment where employees are not afraid of, and do not have to bend to every whim of, the boss.  By letting the employees work to the specifications that they think would be best, the leadership is allowing the engineers and researchers to do what they do best.  By not handing down mandates from on high, the leadership ensures that what the engineers think are the best ideas (and they’re probably right about that, they’re engineers after all) is used.  Furthermore, they allow R&D to take chances and make mistakes.  While it is true that it may be costly for a researcher to make a mistake every once and a while, it is nowhere near the cost of stifled innovation.  Even if it takes five misfires for the R&D team to come up with one breakthrough, the risk is worth it.  Also, it goes a long way to creating an environment where more of the best people want to work.  If most engineers had the choice between working somewhere where they were allowed large amounts of freedom or somewhere where there boss was “the star”, they would choose the former every time.  And if the best work there, than maybe the mistakes won’t roll in so frequently.

It was refreshing to read a case about a company who is doing leadership right.  Especially after the two stinkers we had earlier.

Why performance evaluations are bad….again

Arrow electronics is having problems because they feel that their performance reviews are not representative of the actual production of their workforce. They think this because of the results of the many reviews they have given.  The first time everyone’s evaluations seemed to be too high.  The second time they were all grouped around 3 (out of 5).  many other problems eventually arose; such as lower performing branches giving themselves higher evaluations, or bosses giving higher scores to workers they knew personally.  This problem was magnified as Arrow grew by leaps and bounds.  Eventually the company grew to a size where it became impossible for management to know every employee and have an idea of their work habits.

This is the same type of problem we have seen so many times in this course.  Companies try to evaluate employees based on one meeting that they have with a supervisor who probably wants to just get through it so that they can go back to their real work.  It seems like they could actually just  base pay raises on group performance.  it is much easier to objectively and accurately track the performance of a branch.  Why not just give the biggest raises to the most successful branch?  If there was some way they could base the raises on merit, and not subjective evaluations, they would certainly be better off.   For example, their sales force is compensated on their value to the company (mostly measure in the amount of commisions they bring in).  It would not be impossible for the company to create a set of metrics with which to measure all employees.

That is not to say that the way they pay their sales force is perfect.  In fact it is quite the opposite.  The problems they have with high turnover and having to pay graduates more to create loyalty are huge problems.  However it seems that it might be worth it for a company to pay to insure that they have and maintain the best employees.  The CEO even admits this later.  What Arrow needs is some new tool with which they can measure the performance, and potential of their employees.  In this way they would be able to identify the best employees early and work hard to keep them.  An incentive to the managers doing the evaluations would be to give them a minimum number of employees that had to succeed and eventually be promoted.  This way the managers would have incentive to give the best employees the best reviews (which would thereby put those employees up for promotion) in order to keep their jobs.

This is not a perfect strategy.  But it seems to me that after eight weeks of this class, when it comes to performance evaluations, there is no perfect strategy.

Foreman of Lima

The plant in Lima, Ohio having problems with rising foreman turnover is a difficult problem to solve.  However, it is not difficult to see why it is a problem that they have.  The article paints the position of foreman as a position that no one would want to hold.  Foreman occupies a sort of odd middle ground.  The unionized workers below the foreman have better health benefits and less responsibility.  The supervisors above the foreman don’t have to deal with the day-to-day pressure of meeting production quotas and dealing with hourly laborer issues.

The real rub of the situation is that it is very difficult for foreman to try and get promoted to supervisor because the company likes to bring them in from the outside.  Also, many of the foreman hired before were not college educated.  The company has been moving away from promoting employees without college degrees to supervisors.  Because of this foreman cannot go up.  And, who would want to take a demotion and a pay cut to go down to the less pressurized job of the hourly laborer?  This puts foreman in a sort of no-win situation.  Many of the foreman at the Lima plant have probably realized this and that is why they are leaving.

The way I see it Treadway only has two options.  The first is to allow foreman without college degrees to somehow get the option to receive proper training and possible promotions.  They could do this by offering scholarship programs to foreman who wish to go back to college and earn a degree.  It would be expensive, but it would not cost as much as retraining half of your lower management every year due to low morale and high turnover.  The other action they could take would be to allow the turnover to continue and only hire college educated foreman as replacements.  This way they could insure that they always had a pool of qualified applicants to choose their supervisors out of.

If Treadway does not adopt one of these courses of action than I do not see how they can avoid these high levels of turnover.  They have created a system where there is very little incentive to be a foreman at their company.  The job is very demanding and there is little chance of advancement.  By remedying the latter of these problems I believe they can not only improve their talent pool, but also give their foremen the incentives to stay on longer.

Sales per Hour per Fairness

In the article about Nordstrom’s, it was revealed that managers would judge salespeople primarily by the number of sales they made per hour (SHP).  Because of this many employees did their non-sales duties off the clock so as to not bring down their average.  This allowed Nordstrom’s to get away with not paying employees for significant hours of work.  The salespeople always had an option to report their hours, but they knew that it would oftentimes be better for them to not.  Salespeople with lower than required SHP’s would get their hours reduced and could sometimes even be fired.  This created a competitive culture among salespeople where they would try to “shark” (steal) each others sales and would do anything they could to make more sales than their fellow employees.  Also, in their attempts to make sales they would go the extra mile for the customer.  Some would drive to other Nordstrom’s to find an item that their store did not  have and then drive it over to the customer’s house.  Others would go as far as to go the parking lot to change customer’s tires!

This led to Nordstrom’s being revered for their high quality customer service.  It seems that this customer service was a direct result of their competitive sales system.  If this is the case, than might Nordstrom’s actually be doing the right thing?  They have found a way to cut costs and provide a better product at the same time.  Furthermore, by showing that they care more for customers, they are making inroads into increasing brand loyalty and efficacy among consumers.  Nordstrom’s may have looked at the situation and decided that it was far more valuable to please customers than to try and please employees.  This actually makes sense.  The case said that Nordstrom’s was widely known in the retail sales world as a high paying employer.  Because of this, they probably thought that they could always draw more potential salespeople (whereas drawing more customers is not such a sure thing).

Also, Nordstrom’s probably think that by making there structure so competitive, they will eventually weed out all of the employees who are not willing to come in and work weekends and work for free.  Again, their relatively high wages give them an advantage here.  If employees think there is a good incentive to work hard, they probably will (especially those more ambitious employees).  Also, the managers probably aren’t too sensitive to people who whine about these practices as they probably went through it themselves (since Nordstrom’s only promotes within the company).

All that being said.  It is still probably not totally ethical.  Nordstrom’s should set up a structure that rewards employees for all their work, not just a specific part of it.  It would not be too difficult for Nordstrom’s to figure out a way to count the time that employees spend doing non-sale activities.  They could file those differently and employees would still have incentive to work hard.  Another approach they could take would be to take the SHP not for single employees, but for the whole sales team.  If all of the sales people could work in concert to contribute to total sales (with some out front selling and others taking care of everything behind the scenes) they could have a less cutthroat environment.  Even if they only worked with two-person teams they could probably accomplish this.

Production, Not Profiles

I think the case of Specialty Medical Chemicals (SMC) bringing in Laura Wells to evaluate the management team is a classic example of a firm putting too much stock in a consultant.  Carl Burke using so much of her input when deciding who to fire and who to keep seems inadvisable.  It seems like Mr. Burke, who works with these people every day, should know better than anyone if someone works in the company culture or not.  Testing managers psychologically will not paint as a picture of their value as their past accomplishments would.

Also, Ms. Wells’ psychological tests can only measure the personalities of the people who take them.  Personalities cannot be changed.  However, behavior can be changed.  This is because behavior is not driven by personality; rather, it is driven by structure.  What Mr. Burke should have done was take the information Laura provided him, and then change SMC’s structure so he could best utilize the talents and personalities of all of his managers.  He could have done this in many ways.  For example, if he had a more analytical, structured manager, he could have increased the structure in that manager’s job, giving them tangible, short-term goals and rigid time frames to complete them.  For the more creative managers, he could have given them more broad goals, allowing them to utilize their creativity.

Unfortunately, Mr. Burke did not try to change his structure to fit his people.  Instead he changed his people to fit his structure.  I’m not sure if this is a good way to approach a business.  If managers know that they can be let go because they do not fit with the predetermined mold of what a SMC manager should be, they will try to conform and fit into the same cookie-cutter mold as everyone else.  This could stifle both the creativity and the diversity of thought that a business needs to move forward and grow.  This may also lead to managers being more careful about what the say and do around Mr. Burke.  This can lead to a decreased level of trust between the two parties, thereby damaging the working relationship.  Another factor in the decreased trust between managers and Mr. Burke is that he brought in an outsider to do tests that have a large impact in the manager’s lives (whether they kept their jobs or were fired).  Seeing that Mr. Burke apparently values the words of an outsider over their own could make them feel the Burke does not value them or their opinions very highly.  I think that the next time SMC evaluates their top executives, they should go about it in a different way.

Evaluating Evaluations.

The article about the performance reviews raised some interesting points.  The author believes that performance evaluations are pointless for a number of reasons.  He says that bosses and employees go into those meetings with different objectives.  He says that the boss wants to talk about how the employee  needs to improve.  Meanwhile, the employee is more concerned with proving what a good worker they are so that they can get a raise or a promotion.  The author believes that this leads to unproductive meetings where neither one is really benefited as much as they should be.  this to me seems like an easy fix.  It seems as though the boss and subordinate could decide going in that they were going to talk about both of these things in separate parts of the meeting.  If they knew this going in they could first concentrate on what the employee thinks they have done well to deserve a good review, and then move on to the part where the boss says what they would like to see the employee do better.  After this they could have a third conversation where they set new goals for the employee, based around the strengths that they talked about earlier in the meeting.  This would also eliminate another problem the author points out later.  this problem would be the issue of employees not going to their bosses for help because they don’t feel like they are on the same page as them.  In many ways, this article seemed like an over reaction to a few problems that may haunt performance evaluations.  It seems like were someone to think about the system and make a few adjustments, most of the problems here could be eliminated.

I would also like to say that I think in general the idea of a performance review is a good idea.  I personally do my best work when I know that I am going to be held accountable fo rit later on with a superior.  It makes me work harder and more efficiently.  It may be true that this causes you to work more towards the company’s goals and less towards your own, but one would hope that management sets goals in a way that inspire the employees to meet them.  there by making the company’s goals and the employees goals one and the same.

However I did like the part about the two way liability.  Ideally a boss and a subordinate would have an open relationship where they could talk to each other openly about reasons for missing things or being late on assignments.  But beyond that I feel that it would improve the working relationship in general if the employee felt like they were the boss’ friend and they had each other in their confidence.  At the same time,  I prefer a little bit of space between myself and a boss.  I don’t think it is a bad idea for a boss to be able to strike a little bit of the fear of God in their employees.  While I agree it is good to be friends with the boss, it is important to not let the personal relationship get in the way of the professional one.

Performance evaluations may be inefficient and slightly antiquated, but I feel that there is definitely still some value to them.  If they are simply changed to make both parties feel comfortable to improve ideas and their relationship to help the company move forward, then it seems to me that they are definitely worth having.

The first article in this week’s readings addressed yelling in the work place and how CEO’s might take a piece of advice from NFL head coaches.  The article spotlights Chicago Bear’s coach Lovie Smith and former Indianapolis Colts’ Coach Tony Dungy.  Both of these coaches are NFL success stories under under Dungy the Colts became the first team to win the Superbowl under the guidance of an African America head coach.  The Bears under Smith have been a perennial contender and would have been the first team to win the Superbowl with an African American head coach had the beaten the Colts in Superbowl XLI.  Their method of motivating never includes yelling or belittling a player, something that is rare in football coaches (this by the way, I can attest to. I played football all four years in high school and got yelled at all the time, though to be fair I did fumble a few times).  The article asks if CEOs can emulate this tactic to similar success.  The writer of the article certainly thinks that yelling at employees is not a a good strategy, relating multiple horror stories of abusive bosses and workers quitting as results of low morale.  I think that it is very possible that this can happen.  The blog I posted earlier today, about Southwest Airlines’ continued success and the familial corporate culture behind it, stands as living proof of the success possibilities of this type of system.  It is possible that manager’s continue to yell at employees because that is what worked on managers before they were managers.  It is likely that someone who is in a position of authority now got yelled at all the time by their bosses.  The ones who advanced to become managers were those that could take it and compartmentalize it, or possibly who could use it for motivation.  However, they must be aware that not everyone responds the same to every type of feedback.  They need to consider all of their former colleagues who did not advance to the management level and why, I believe that the they will see why yelling may not be the best motivational tool.  And if it takes the Superbowl to show that than so be it.

The next article addressed bosses mandating employees to live healthier lives.  Managers are doing this because healthcare costs have rocketed out of control; also one hopes that they are doing this at least partially because they care about their employees.  I think that managers forcing employees to quit smoking and to eat healthier is totally justified.  While it is true that every US citizen has a right to the pursuit of happiness and the liberty to do whatever they want, that is most certainly not written into the bylaws of most companies (Wal-Mart for instance).  It is a privilege to work at a firm, and one should be expected to follow their rules.  To look again into the sports world for similarities, George Steinbrenner of the New York Yankees will not allow players to have any facial hair beyond a mustache, and will not let them have hair that goes to their shoulders.  Players could choose to go to other teams where this is not the case, but they choose to go to the Yankees because it is a proven winner and they pay well.  If the Yankees are allowed to make employees follow these types of life style rules than I don’t see why a lawn care conglomerate couldn’t do the same.  All they are doing is protecting their investment, I for one think that the investments should be okay with that.

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