book reviews

Corporate Culture Books

Corporate Failure By Design
Why Organizations are Built to Fail
by Jonathan I. Klein
Quorum, 2000, 297 pages

A ll organizations, says Jonathan Klein in this important and fascinating book, are undermined by the very things they do in order to exist. Almost no businesses survive more than ten years. Eight out of nine business failures are due to management mistakes. Like newly hatched turtles, says Klein, almost none make it to the sea.

The reason is not that managers are a bunch of incompetent fools, necessarily. But behavior that favors individual survival in an organization very often conflicts with behavior that favors survival of the organization itself. This is as true for ordinary employees as it is for managers. Employees who are treated as incompetent, thieving dolts have no choice but to act that way. Employees who are judged on the basis of annual performance reviews cannot risk making unpopular or long-term decisions. Employees who are treated as expendable tend to leave at the most inopportune time. And a company that fires its most talented staff to save money ends up with neither money nor the means for making it.

As Klein says, bosses view the organization as something to be manipulated for personal gain. In order to maximize self-esteem (which Klein shows is the goal of everyone in every organization), the manipulation is kept unconscious by a process known technically as “lying to oneself.” Thus, the manager convinces himself or herself that he is a saint and a financial and managerial genius. Anyone who fails to support that perception is a threat who must be eliminated.

Most organizations are run by someone like this, and they all are destined to sink without even leaving a bump in the ocean floor. When they do, the former boss, in order to preserve his vast reservoirs of self-esteem, invariably finds a way to avoid facing the fact that he just ran his company into the ground: the employees were all lazy and incompetent; the salesmen didn't advertise enough; the customers were fickle; the board didn't give him enough control; or one of his many enemies sabotaged him. Thus, no insight into the cause of the failure is ever gained.

No doubt you can come up with even better examples. No one can say, for example, that the U.S. auto industry did not get exactly what it deserved when it was squashed like a bug by the Japanese in the 1970s. But it was the American taxpayers who paid the price. Nowadays, thanks largely to an epidemic of bad management, companies are being rammed into the ground so hard you need a prospector's pick to dig them out.

Conversely, a manager who succeeds is one who gives employees the tools they need to do their job as well as they can, and then stays out of the way. Likewise, a government that allows its citizens to make money without interfering or stealing their profits will govern over a population of wealthy, contented taxpayers. But such Shangri-Las are rare.

Corporate Failure by Design is by no means one of those “How To Keep Your Company From Screwing Itself Into the Pavement at 100 Miles an Hour Without Really Trying” books that are so popular. It is an academic treatise based on solid empirical research in social psychology. Klein takes his sociologist colleagues to task for using unfounded assumptions, and his level of insight into the social dynamics in organizations is almost breathtaking. When Klein says that it is in the very nature of organizations to fail, he means all organizations, including corporations, governments, and nonprofits, whether they are run by loonies with MBA degrees, nutbats with law degrees, or dweebs with Ph.Ds (let's see, did I forget to insult anybody?)

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There are many ways in which the employees, trying to survive in the organization, must do things that undermine its survival. For example, Klein says “the most qualified leader is the likeliest source of resistance to external input.” At the same time, most organizations fill up with yes-men, who become managers not because of their intelligence or their people skills, but because their noses are browner than everyone else's. Managers also restrict the flow of vital information to increase their own personal power. At the same time, the hierarchical nature of the organization blocks upward information flow, so these managers are almost always out of touch. At the very top, what the executives think they know has almost no relationship to reality. In fact, Klein describes so many ways things can go wrong that it starts to undermine his case: what, if anything, do all these failures have in common? The reader begins to suspect that some of these forces, if analyzed from a different perspective, or if they existed in a healthy organization (if there is such a thing), might just as easily lead to a different conclusion.

In Chapter 10, Klein suddenly digresses into politics and macroeconomics, presenting some straw man arguments against “free markets.” This section reveals serious misconceptions about how economies work and about the beliefs of free-marketers. But this chapter is mercifully short.

If only there were some way to get managers to read this book ... but most won't, because they would assume that the advice in this book doesn't apply to them. And they'd be right: if the factors that make organizations successful conflict with those for a successful career, they are irrelevant both to employees and managers, whose first priority, after all, is to survive. As Klein says, even if by some miracle the company survives, chances are the only reason is that their competition is even worse.

I made the mistake of loaning my copy of this book to our new CEO. The fact that the book is now, from what I can tell, a pile of ashes in the CEO's fireplace, is proof, if any were needed, that the truth hurts.

 jun 18, 2010

A Sense of Urgency
by John P. Kotter
Harvard Business Press 2008, 196 pages

H ave a sense of “urgency,” but not “false urgency,” says John P. Kotter in this little pop-biz book. Urgency is defined as the opposite of complacency: an attitude to inculcate in your employees to make them get off their toochis and start making changes. The message is: act like the job is important, because that's what happens in successful companies. If you do, you can stop your company from being tossed on the growing pile of corporate wreckage.

But this makes no sense. It's what psychologists call cargo-cult thinking, like painting the walls yellow because successful companies all have yellow paint on their walls. In reality, the employees and managers have to do what the boss wants, no matter how idiotically stupid it is. If the boss wants something stupid, having a sense of urgency about it won't make any difference.

In fact, if your employees act like they don't care, that might just be a hint that they know what you want is stupid--and their sloth might even delay the inevitable corporate crash & burn. Dedication and commitment are the goals of good management, but like love and happiness, they can't be forced from people. Most companies that fail have far more serious problems than “complacency.” And that's the real reason feel-good books like this are so harmful. They convince the boss that there's an easy substitute for insight, skill, work, ruthless self-criticism, absolute intolerance of corruption, the willingness to listen to employees and customers, and the willingness to give people the authority to take action when a problem is found. It's so much easier to tell the employees to “have a sense of urgency.” Be happy ... or else. Yeah, that'll work.

Our new boss gave copies of this book to all the employees, spending hundreds of dollars to give us a free book while telling us about the upcoming budget cuts. Judging from the content of this book, my guess is this is their way of telling us that our situation is hopeless. When they come in and paint all the walls yellow, I'll know for sure.

 jun 30, 2010