The root causes of failure are often buried deep within an organization. How does a culture of incompetence come into being?
The usual cause is a combination of inattention on the part of leadership, and the wrong people in the wrong places within the organization. One of the tasks of the leader is to ensure that the organization has a strong culture that enables it to meet its goals. Leaders therefore have to spend a lot of their time monitoring the culture of the organization and influencing it, usually by example. They set the moral tone for the organization, which the rest then follow. But if leaders take their hand off the tiller, the culture will start to drift. Without examples to follow, people care less about the work they do, or their colleagues, and start to think more about themselves.
And when that happens, the door is open for other figures of influence to emerge. People with their own agenda–be it corruption or greed, or just plain laziness and inattention–start to become the dominant influencers, and the rest of the organization takes its cue from them. It is shocking how easy it is for a culture to slide from being progressive and innovative into inertia–this is the way we do things, we are not going to change. And once this happens, it is really hard to turn things around.
How would you explain your concept of ‘wasted opportunity cost’?
Opportunity cost is the comparison of the costs involved in choosing one action over another. But what about the costs that are involved when we are unable or unwilling to choose an option that would have been beneficial to us? Suppose a brilliant strategic option exists that would take a company forward and help it achieve a breakthrough? Then suppose the organization is too blinded by its own path dependence to see this, or sees it but is too timorous to take risks, or figures of power inside it see no advantage to themselves in terms of money or reward? The cost of not taking that option is the wasted opportunity cost.
Leaders influence cultures and leaders are influenced by cultures. How can the potential of this influence be leveraged?
It is one of the key questions leaders have to answer, and to some extent the recipe will be different depending on the organization and its culture. But the two common factors seem to be leading by example, and communication. Leaders must set an example for the rest of the organization. They must not just talk about the values and behavior they expect from others, they must live them. They must walk the talk. Nothing is more degrading to a business culture than a leader who does not practice what he or she preaches. On the other hand, a leader who is seen as upright, ethical, honest, and who lives those values can have an enormous transformative effect.
The other part of the recipe is communication. Leaders must tell their story, repeat their narrative. Leaders are a bit like Scheherazade in the 1001 Nights; they have to keep talking, keep telling their stories, and gradually other people will come around. But they also have to keep listening, engage in dialogue, find out what their followers want, what their hopes and dreams are.
That is why good leaders spend so much of their time on the road, or in the air; because they are constantly meeting people and talking with them. Bad leaders sit in their office and communicate only by email. Very soon, the organization moves on without them.
You have identified the ‘seven sins of management’. How damaging is ‘Olympian arrogance’?
Very damaging. Overconfidence has brought down so many huge companies. Even when one of the other cultures of incompetence I identify is the proximate cause of failure, there is often an element of arrogance there as well. We are the biggest, the best, the most innovative, the smartest, etc. We are bulletproof. Well, in today’s world, no organization is bulletproof. No one is too big to fail.
How does it deepen the fissure between leadership and management?
I think that is just it, the Olympian detachment. When senior management becomes like gods on the mountaintop, ignoring the mortals down below them, that is when the fissure begins. Leaders see themselves as ‘above all that.’ Running the organization is someone else’s responsibility; but if something goes wrong, that is the fault of the managers because they did not execute properly. Managers, not without cause, resent this. They refuse to take responsibility for policies they did not design or approve of. They feel they are powerless, their hands are tied; strategy is what comes down from on high, they just have to get on with it.
Your views on path dependency, linear thinking, and the intellectual straitjacket it entails…
The world is round. In order to survive in a round world, we have to learn to think in the round. The linear, step-by-step, problem-and-solution management processes peddled by Western business schools and Western consultants are not fit for purpose. Management is full of paradoxes that defy linear thinking. The solution to one problem usually contains the seed of the next problem. We have to become better about thinking about things like the consequences of our decisions, both intended and unintended, and thinking laterally as well as down lines or paths. As managers and leaders, we need to become storytellers, not linear problem solvers; we need to think in terms of words, not equations.
Above all, we need more self-awareness. We need to know where we came from, where our businesses came from, what decisions and actions shaped where we stand now. Every past decision constrains future decisions, that is axiomatic. As Tolstoy said, even a king is the slave of history. But if we are aware of those constraints, know how they are formed and how they work, we can break them. We need not be prisoners of linear thinking. The world is spherical, our brains are three-dimensional. We just have to match our thinking to our environment.
Pride without humility leads to arrogance, while humility without pride leads to lack of ambition. Could you elucidate this observation with an example?
Two examples, if I may? When I think of pride without humility I think of Henry Ford: a great entrepreneur, beyond any doubt, but who began to believe his own publicity. In the 1920s and 1930s he drove one of the world’s finest companies to the brink of disaster, because he believed he was all-powerful and could not fail. There have been plenty of others since; I will not name names, as most of them are still alive, but I am sure readers can compile their own lists without difficulty.
Humility without pride reminds me of so many of the small firms I see around me. They have wonderful products, wonderful services, but their ambitions are so limited. They think in terms of their own neighborhood. Their dreams are small, and their potential remains unfulfilled. Of course, no one should try to force any entrepreneur to grow beyond their wishes; but I wish more had the confidence to strike out into the world and do and create something marvelous. The world would benefit; so would they.
How dangerous can contempt be—contempt for customers, employees, as well as other stakeholders?
Very dangerous indeed. This takes us back to arrogance again. Organizations and managers should always be proud of their achievements, but they need also to remember who made those achievements possible. Without dedicated, hard-working employees, nothing would get done. Managers need to remember that they themselves do not make anything; their task is to enable others to make things well. That requires a servant mentality, not a leader mentality. Same goes for customers; without customers, a business will quickly sink. It is the partnership between customers and business, between supply and demand, that makes things happen. It is vitally important for managers to see their relationship with other stakeholders as a partnership. If you think of the rest of the world as just a resource waiting to be exploited, you should not be surprised when the world turns against you and fights back. A partnership relationship, on the other hand, will see both sides get what they want, and will last far longer.
“Don’t just watch the black swans, get out there and fly with them.” What ramifications does this have in a VUCA world?
I have to confess to being a little cynical about the whole VUCA concept. Yes, the world is volatile and uncertain, but it always has been. We have this rose-tinted view of the past as a time when businesses operated in simple markets, when supply and demand were evenly matched, when all you had to do was make stuff and customers snapped it up. That time never existed. For most of human history, businesses have operated in environments far more risky than the present one. Think of the medieval merchants, making their cost calculations on the basis that four out of five of the ships they sent out would never come
And that, to me, is the lesson. The world has always been VUCA, it always will be. Successful management means accepting this, living with it, even trying to turn risk to advantage. Remember Andrew Grove’s famous dictum, ‘only the paranoid survive.’ Expect the unexpected, and you will not be disappointed. But if you set a business strategy based on the elimination of risk and achievement of certainty, then you will fail. Certainty is not possible. Never has been, never will be.
Your views on ‘self-control’ as opposed to ‘bureaucratic lust’.
Power is an essential ingredient of management. Without power, managers cannot get things done, cannot enable employees to make the products and services customers need. The problem comes when power becomes an end in itself. If you acquire power to help you do things that are important for the company and its customers, well and good. If you acquire power to gratify your own desires, to show off or triumph over your colleagues, that is not so good. That is ‘lust’, pure, and simple (well, maybe not so pure) and it distracts you and others from what you really should be doing: creating value for other people.
“Business schools have turned away from the light. They are living in Plato’s cave, studying the shadows on the wall and writing papers about them.” How can management education be brought out of its fragmented and siloed existence and be made more adaptive?
I wish I knew the answer! Without shaking down the entire academic system, I do not know how it will be possible. There have been moves in the UK to reward academics and institutions more for ‘impact’ on the real world, but time will tell whether this will work; I am not optimistic. Elsewhere, attempts to pull down the ivory tower have largely failed. My worry is that business schools will, if they continue down this path, eventually become irrelevant, and that would be a great pity as there is a lot of inherent good in business schools, a lot of vitally necessary learning and knowledge that needs to be squeezed out into businesses. Two decades ago, big companies were setting up their own business schools, but most of those have long since been closed down. I wish I was more optimistic, but after twenty years of business school teaching, I am not.
According to you, a partnership between businesses and academics could create a new generation of managers who have the passion and the purpose to get things done. How best can they engage with each other?
They have to start by each understanding what the other offers. Academics, many of them, are so divorced from reality that they struggle to understand the companies they research; that is what makes their papers often seem so unrealistic. Rather than just observing companies and managers, they need to get inside the mind of the manager, understand the culture of management, the thought patterns, the ways of doing things. They might then be
able to write papers that managers understood and felt were relevant.
Managers, similarly, need to revise their expectations about academia. Academics do not create magic bullets. They do not always have solutions to problems. Nor is their task to teach management skills, which are usually best learned on the job. The purpose of academic management programs like the MBA is to expand mental horizons, to show people new ways of thinking, and enable them to learn better how to learn.
The engagement between management and academia needs to be a continuous one, based on the principle of lifelong learning, with both sides committed to learning and knowledge sharing. MBA programs and case studies are not enough, there need to be genuine links. I would like to see more partnering, more shadowing and mentoring, more job-sharing by individual academics and managers. It would mean resetting priorities, especially for academics, and there are of course cost implications, but I am convinced the learning generated by this would pay back the costs many times over.
Of course, both sides have to want to engage more closely. At present, I see few signs that they do. Unless the mindsets change, they will grow further apart.
As told to Anitha Moosath