Why contemporary HR management needs to head in a new direction
If imitation is the sincerest form of flattery, then there’s a lot of flattery going on in HR. Head off to any HR conference and you’re bound to see a seasoned and insightful senior HR practitioner discussing in detail what’s worked for her organization. And there’ll be a room full of attendees hoping to recreate the speaker’s success, busily making notes about the various things she has done.
But before HR professionals rush off to yet another seminar about how to increase employee engagement or to get the latest book on how to design incentives and recognition, a few words of caution are in order.
There are many problems with seeking to copy “best practices” that ought to give pause to anyone thinking this is the path to success.
The first, and possibly most serious problem, is that a lot of “best practices” are based on success stories and anecdotal evidence rather than the best evidence. Take, for instance, forced-curve performance ranking. There are lots of stories and anecdotes about how wonderful this is, including testimonials from former GE CEO Jack Welch. However, more systematic studies, including surveys conducted by consulting firm Novations Group and peer-reviewed studies of the consequences of pay dispersion in settings ranging from corporations to universities to baseball teams, almost invariably find forced-ranking and the internal competition, resentment and lack of knowledge-sharing that it fosters, are harmful.
Peer-reviewed studies are considered to be the gold standard of mainstream science because the results have been reviewed and critically read by experts. There are many peer reviewed studies that find that creating big differences between the best and worst paid people — a hallmark of forced-ranking — undermines organizational performance, but we can’t find even one peer-reviewed study that finds that this practice enhances performance.
What HR can learn from doctors
In medicine, there is a growing evidence-based medicine movement. This movement wants systematic studies and quantitative summaries of collections of studies that explore the effects of various interventions on patient outcomes to supplement clinical experience, what vendors are pushing and haphazard learning.
The movement seeks to make doctors more informed consumers of medical research and more interested in learning what the latest science shows. There is evidence that physicians are slowly embracing evidence-based medicine and that doctors trained in this approach are more current with the literature even years after attending medical school.
This same sort of evidence-based movement needs to be embraced in HR and in management. HR professionals and general managers are, just like physicians, subjected to vendors peddling their wares and exposed to too much, often conflicting, information, some of which is of dubious quality. They rely too much on their own experience and what they believe to be true about people and organizations.
The problem with learning from experience, either that of ourselves or others, is that people often see what they expect to see so the observations aren’t always reliable or valid. Also, without sufficient time to reflect on and learn from what we are doing, 20 years of experience can easily become one year of experience repeated 20 times.
Without more systematic evidence and studies that control for alternative interpretations for the results, one can’t be sure that observed outcomes aren’t achieved in spite of, rather than because of, what a leader or company did. For instance, Herb Kelleher, the former CEO of Dallas-based Southwest Airlines, is generally considered to be one of America’s best leaders and certainly stands out in the airline industry. Kelleher drank Wild Turkey bourbon and joked about his love for that particular brand of liquor. But it’s unlikely that simply drinking Wild Turkey would make another CEO as good a leader as Kelleher or the company as successful as Southwest.
Even with valid management practices, what might be quite successful and appropriate for one company and product market strategy might not be suitable for another firm facing a different environment with a different product.
If a doctor said, “I’m going to perform an appendectomy” and, when asked why, said, “I did one on the last patient and it made that person much better,” most people would hightail it out of the office. In medicine, the treatment needs to be tailored to both the diagnosis and the patient’s particular situation. Somehow that seemingly obvious insight has failed to penetrate the world of management.
In a study, Stanford University economist Edward Lazaear found individual piecework was effective for Columbus, Ohio-based windshield installer Safelite Glass. However, individual incentives that pay for productivity might not work everywhere.
How well individual financial incentives work to enhance organizational performance depends a lot on the people and the extent to which they are interested in money, the degree of interdependence among tasks, how objectively measurable job performance is, the existing organizational culture and a host of other factors. HR practices need to be aligned with the company’s strategy, its particular work, its culture and the types of people it has attracted. And they also need to be aligned to be consistent with each other. That means just copying some aspect of what others are doing is not a smart approach, because it overlooks whether or not the strategy fits with the copier’s needs, product, strategy or other practices.
Another issue is that what gets copied when companies emulate “best practices” is often the most visible and also the most trivial aspects of the particular management approach. Automobile companies, seeking to emulate Toyota’s persistent success, have sometimes put in pull-cords to stop the assembly line when employees see defects, along with statistical process control charts, just-in-time inventory and supply chain practices and smocks and uniforms for everyone.
But total quality management is not about a set of techniques. It’s a philosophy that is much deeper than the easily observed and imitated set of artifacts. Toyota’s relations with its suppliers, an approach that seeks to make them more effective and build long-term relationships of mutual success, are different in every way from the arms’ length, cost-driven negotiations that characterize much of the auto industry. This helps explain why Toyota’s supply chains are so much more effective.
Similarly, when United Airlines launched the Shuttle to compete with Southwest in the intra-California market in 1994, taking food off the planes, flying only Boeing 737s, putting its people in more casual clothes and increasing the frequency of service and cutting the scheduled time for aircraft turnarounds, it did not enjoy much success. In fact, Southwest had a larger share of the market after United entered. That’s because the success of Southwest is based much more on its philosophy of putting its employees first, customers second and shareholders third. Simply put, it pays more attention to its employees and customers than how people dress or what planes it flies.
Emulate thinking, not practices
As one astute participant in a Stanford executive program said: “We have been benchmarking the wrong things. Instead of copying what other companies do, we should be imitating (and understanding) how they think.”
And there is one other important problem with copying the best practices of others. To earn extraordinary returns, a company must be different in important respects from other competitors. A company that does pretty much what everyone else does will get about the same results. And, copying the best practices of others leaves the company always in the position of following. The automobile industry again provides a nice illustration. As others tried to emulate Toyota, it was already moving on to even better ways of doing things, leaving many of its competitors perpetually playing catch-up.
For HR executives to embrace evidence-based management and promulgate it in their companies, several things are needed. Practising evidence-based management requires being committed to fact-based decision-making. This, in turn, requires two things: wanting to hear the truth and being committed to gathering and acting on data.
As Gary Loveman, CEO of Harrah’s Entertainment in Las Vegas, explained, many senior leaders only want to hear good news. But he has punished people at the company for not telling the truth and rewarded people for admitting there were problems they didn’t know how to solve. As he noted, what’s the point of having a corporate staff and having multiple locations if the resources and learning cannot be brought to bear to fix struggling operations? And if leaders of those operations don’t admit they have a problem, then it’s a lot harder to find the root causes and fix things in a timely fashion.
This is a reminder that a lie often takes two people: the person who tells the lie and the person who signals, in a variety of ways, that she wants to hear it.
Loveman exemplifies an important quality of evidence-based management: acting on data rather than belief and conventional wisdom. It turns out that much of the conventional wisdom in the gaming industry — where the profits came from, how to get people into the casinos, how to market, and even whether the hold on slot machines could be varied — was wrong.
Loveman has built a culture of endless experimentation, of trying things out and seeing if they work. This approach requires more than data warehouses and data mining software. It requires a mindset that appreciates inquiry and trying different things to actually learn what works, instead of spending endless hours in meetings.
Every company is an unfinished prototype
Evidence-based management also entails thinking of the company as an unfinished prototype, as something always under development. Yahoo!, the Sunnyvale, Calif.-based Internet giant, runs lots of experiments on the design of its websites to see what innovations are more effective for driving traffic and sales.
IDEO Product Development in Palo Alto, Calif., not only engages in rapid prototyping of the products it is developing, the company itself is always experimenting with ways to make its own management processes more effective. This all requires an attitude of wisdom — being willing and able to act on the basis of present knowledge while doubting that knowledge enough to keep learning and trying new things.
Evidence-based management is pretty much the opposite of benchmarking and seeking out best practices from others that seems to characterize so much of contemporary HR management. The evidence — so far — suggests that companies where people gather, face and act on the hard facts enjoy better performance over the long haul.
Jeffrey Pfeffer is a professor of organizational behaviour in the graduate school of business and Robert Sutton is a professor in the management science and engineering department at Stanford University in California. Their latest book is Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management, published by Harvard Business School Press.
But before HR professionals rush off to yet another seminar about how to increase employee engagement or to get the latest book on how to design incentives and recognition, a few words of caution are in order.
There are many problems with seeking to copy “best practices” that ought to give pause to anyone thinking this is the path to success.
The first, and possibly most serious problem, is that a lot of “best practices” are based on success stories and anecdotal evidence rather than the best evidence. Take, for instance, forced-curve performance ranking. There are lots of stories and anecdotes about how wonderful this is, including testimonials from former GE CEO Jack Welch. However, more systematic studies, including surveys conducted by consulting firm Novations Group and peer-reviewed studies of the consequences of pay dispersion in settings ranging from corporations to universities to baseball teams, almost invariably find forced-ranking and the internal competition, resentment and lack of knowledge-sharing that it fosters, are harmful.
Peer-reviewed studies are considered to be the gold standard of mainstream science because the results have been reviewed and critically read by experts. There are many peer reviewed studies that find that creating big differences between the best and worst paid people — a hallmark of forced-ranking — undermines organizational performance, but we can’t find even one peer-reviewed study that finds that this practice enhances performance.
What HR can learn from doctors
In medicine, there is a growing evidence-based medicine movement. This movement wants systematic studies and quantitative summaries of collections of studies that explore the effects of various interventions on patient outcomes to supplement clinical experience, what vendors are pushing and haphazard learning.
The movement seeks to make doctors more informed consumers of medical research and more interested in learning what the latest science shows. There is evidence that physicians are slowly embracing evidence-based medicine and that doctors trained in this approach are more current with the literature even years after attending medical school.
This same sort of evidence-based movement needs to be embraced in HR and in management. HR professionals and general managers are, just like physicians, subjected to vendors peddling their wares and exposed to too much, often conflicting, information, some of which is of dubious quality. They rely too much on their own experience and what they believe to be true about people and organizations.
The problem with learning from experience, either that of ourselves or others, is that people often see what they expect to see so the observations aren’t always reliable or valid. Also, without sufficient time to reflect on and learn from what we are doing, 20 years of experience can easily become one year of experience repeated 20 times.
Without more systematic evidence and studies that control for alternative interpretations for the results, one can’t be sure that observed outcomes aren’t achieved in spite of, rather than because of, what a leader or company did. For instance, Herb Kelleher, the former CEO of Dallas-based Southwest Airlines, is generally considered to be one of America’s best leaders and certainly stands out in the airline industry. Kelleher drank Wild Turkey bourbon and joked about his love for that particular brand of liquor. But it’s unlikely that simply drinking Wild Turkey would make another CEO as good a leader as Kelleher or the company as successful as Southwest.
Even with valid management practices, what might be quite successful and appropriate for one company and product market strategy might not be suitable for another firm facing a different environment with a different product.
If a doctor said, “I’m going to perform an appendectomy” and, when asked why, said, “I did one on the last patient and it made that person much better,” most people would hightail it out of the office. In medicine, the treatment needs to be tailored to both the diagnosis and the patient’s particular situation. Somehow that seemingly obvious insight has failed to penetrate the world of management.
In a study, Stanford University economist Edward Lazaear found individual piecework was effective for Columbus, Ohio-based windshield installer Safelite Glass. However, individual incentives that pay for productivity might not work everywhere.
How well individual financial incentives work to enhance organizational performance depends a lot on the people and the extent to which they are interested in money, the degree of interdependence among tasks, how objectively measurable job performance is, the existing organizational culture and a host of other factors. HR practices need to be aligned with the company’s strategy, its particular work, its culture and the types of people it has attracted. And they also need to be aligned to be consistent with each other. That means just copying some aspect of what others are doing is not a smart approach, because it overlooks whether or not the strategy fits with the copier’s needs, product, strategy or other practices.
Another issue is that what gets copied when companies emulate “best practices” is often the most visible and also the most trivial aspects of the particular management approach. Automobile companies, seeking to emulate Toyota’s persistent success, have sometimes put in pull-cords to stop the assembly line when employees see defects, along with statistical process control charts, just-in-time inventory and supply chain practices and smocks and uniforms for everyone.
But total quality management is not about a set of techniques. It’s a philosophy that is much deeper than the easily observed and imitated set of artifacts. Toyota’s relations with its suppliers, an approach that seeks to make them more effective and build long-term relationships of mutual success, are different in every way from the arms’ length, cost-driven negotiations that characterize much of the auto industry. This helps explain why Toyota’s supply chains are so much more effective.
Similarly, when United Airlines launched the Shuttle to compete with Southwest in the intra-California market in 1994, taking food off the planes, flying only Boeing 737s, putting its people in more casual clothes and increasing the frequency of service and cutting the scheduled time for aircraft turnarounds, it did not enjoy much success. In fact, Southwest had a larger share of the market after United entered. That’s because the success of Southwest is based much more on its philosophy of putting its employees first, customers second and shareholders third. Simply put, it pays more attention to its employees and customers than how people dress or what planes it flies.
Emulate thinking, not practices
As one astute participant in a Stanford executive program said: “We have been benchmarking the wrong things. Instead of copying what other companies do, we should be imitating (and understanding) how they think.”
And there is one other important problem with copying the best practices of others. To earn extraordinary returns, a company must be different in important respects from other competitors. A company that does pretty much what everyone else does will get about the same results. And, copying the best practices of others leaves the company always in the position of following. The automobile industry again provides a nice illustration. As others tried to emulate Toyota, it was already moving on to even better ways of doing things, leaving many of its competitors perpetually playing catch-up.
For HR executives to embrace evidence-based management and promulgate it in their companies, several things are needed. Practising evidence-based management requires being committed to fact-based decision-making. This, in turn, requires two things: wanting to hear the truth and being committed to gathering and acting on data.
As Gary Loveman, CEO of Harrah’s Entertainment in Las Vegas, explained, many senior leaders only want to hear good news. But he has punished people at the company for not telling the truth and rewarded people for admitting there were problems they didn’t know how to solve. As he noted, what’s the point of having a corporate staff and having multiple locations if the resources and learning cannot be brought to bear to fix struggling operations? And if leaders of those operations don’t admit they have a problem, then it’s a lot harder to find the root causes and fix things in a timely fashion.
This is a reminder that a lie often takes two people: the person who tells the lie and the person who signals, in a variety of ways, that she wants to hear it.
Loveman exemplifies an important quality of evidence-based management: acting on data rather than belief and conventional wisdom. It turns out that much of the conventional wisdom in the gaming industry — where the profits came from, how to get people into the casinos, how to market, and even whether the hold on slot machines could be varied — was wrong.
Loveman has built a culture of endless experimentation, of trying things out and seeing if they work. This approach requires more than data warehouses and data mining software. It requires a mindset that appreciates inquiry and trying different things to actually learn what works, instead of spending endless hours in meetings.
Every company is an unfinished prototype
Evidence-based management also entails thinking of the company as an unfinished prototype, as something always under development. Yahoo!, the Sunnyvale, Calif.-based Internet giant, runs lots of experiments on the design of its websites to see what innovations are more effective for driving traffic and sales.
IDEO Product Development in Palo Alto, Calif., not only engages in rapid prototyping of the products it is developing, the company itself is always experimenting with ways to make its own management processes more effective. This all requires an attitude of wisdom — being willing and able to act on the basis of present knowledge while doubting that knowledge enough to keep learning and trying new things.
Evidence-based management is pretty much the opposite of benchmarking and seeking out best practices from others that seems to characterize so much of contemporary HR management. The evidence — so far — suggests that companies where people gather, face and act on the hard facts enjoy better performance over the long haul.
Jeffrey Pfeffer is a professor of organizational behaviour in the graduate school of business and Robert Sutton is a professor in the management science and engineering department at Stanford University in California. Their latest book is Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management, published by Harvard Business School Press.
