"Goals Gone Wild" - a bracing indictment of the business objectives culture

"What's your MBO?"

That was a frequent question at one of my past companies. MBO meant management by objective, and was a way of asking someone what their goals were for that year. It's funny, thinking back on it, that the goals culture was so strong that we never gave MBOs a second thought. And who doesn't sit down with her manager at the beginning of each year to set out objectives?

In a new working paper by Max Bazerman, Lisa Ordonez, Maurice Schweitzer, and Adam Galinsky of Harvard Business School ("Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting"), the authors take a fresh look at the goals culture and see that, rather than be a driver of effective performance, "goals gone wild" have caused much damage in the business world. Here are a few examples:

Enron's growth objectives created an out-of-control culture inspiring market manipulation and outright fraud.

Ford's goal to build a small car weighing less than 2000 pounds and costing under $2000 by 1970 caused the Pinto to be rushed to market, with safety checks unperformed or ignored. The car's gas tank was prone to rupture in an accident and, as was learned, the car tended to explode on impact from the rear.

Sears' goal to increase auto service sales in the early 1990's to $147/manhour resulted in overcharging and unnecessary repairs.

Bazerman's work on behavioral effects in negotiation (including one of my favorite books of 2007) and decisionmaking is uniformly excellent and insightful. In this paper, he and his co-authors survey research showing how challenging goals, while creating a powerful incentive, also create significant negative side effects, including:

- focus on short-term results over long-term benefit
- favoring the easy-to-measure over the difficult to measure, independent of importance
- goals creating performance ceilings (e.g., the salesperson who stops selling after reaching her quota)
- reduction in cooperative behavior
- reduction in learning
- unwillingness to experiment and innovate
- decrease in intrinsic motivation ("Show me the money!")

It's not a pretty picture. I doubt after reading this that anyone would be more eager to set goals for their employees. It does a great job in laying out the risks of overreliance on goals. There's more work needed on how to deploy goals effectively, because that's the question that we're left with at the end.

Cognitive bias trumps intelligence

I always felt being smart was one of my major advantages in business--and there's no doubt that being well-informed and full (perhaps over-full?) of ideas helped in getting promotions, raises, etc.

What I've learned in the past couple of years has shaken that belief to the core. In particular, the writings of Dan Gilbert, Malhotra & Bazerman on negotiations, and Dave Snowden et. al. on complexity in management and business, have had a particular impact in revising this viewpoint, to the point that I won't take an important decision without reviewing it, at minimum, with the Vice President of Common Sense.

Central to this thinking is the idea that cognitive biases can cause us to overestimate our ability to make sound decisions, routinize complex situations, fail to see threats and weaknesses in our reasoning, and personalize conflicts. All leading to poor decisions, and sometimes decisionmaking disasters.

The way to overcome these dangers is to work with others, to consult, carefully listen (especially to dissenting viewpoints). In short, to shelve one's own learning and accept others' input with an open mind and heart. And in something that goes against my nature, to slow down and be patient.

For me, serving on a nonprofit's board of directors the past two years or so has been a signal lesson in the benefits of humility and collective thinking. Sharing monthly meetings with people possessing important skills that I lack utterly--knowledge of fundraising, city politics, risk management and others--but yet being able to contribute nonetheless through listening and inquiring has been revelatory. I am still learning, as you might guess, to listen hard to the "non-experts" on our board on subjects I know something about.

(Photo by Max Brown via stock.xchng)

Related posts:
Gilbert
Malhotra & Bazerman
Snowden
Senior Leadership Teams

Tags:
learning, management, psychology, humility, decisionmaking, irrationality, cognitive bias

Follow-up gets results

If you follow this space, you know I talk about books occasionally. Some PR folks have noticed, and now they send me books from time to time which they would like me to talk about. This has led to the happy/sad situation that I have more books in my pile than I can possibly read.

On a couple of occasions, an action has caused me to pull a book from the middle of the pile and read it next. That action was a simple follow-up. "Did you get the book we sent? Will you get a chance to read it soon?"

At that point I felt a little obligation to get to the book quickly. I didn't rearrange my schedule or drop other important things to do it. I just made a note to get to this one as soon as I had a chance. As Bazerman and Malhotra wrote in Negotiation Genius, "Humans tend to reciprocate behavior."

Frequently, I'm asking people to do things on my behalf. I need to remember that respectful follow-up is not hassling people, and it won't make people do things they don't want to do. It does, however, raise your request, even for a moment, to the top of the pile.


follow-up, psychology, public relations

Top 5 Best Business Books of 2007

(If you'd rather see the 2008 list, you can find it here.)

It's December, and "best of" lists are appearing everywhere. Here, too. So, if you are still searching for great gifts for the business-book reader in your family, you can't go wrong with any of these titles:

5. "Reinventing Project Management," Aaron Shenhar and Dov Dvir. A look at project management that goes way deeper, and is far more useful, than "on time, on budget, to requirements." Here's what I wrote about "RPM" earlier this year: 1, 2.





4. "Smart World," Richard Ogle. Innovative breakthroughs are not created by solitary thinkers toiling in the lab, but by people or groups interacting with their networks and environments. Prior posts on "Smart World": 1, 2.






3. "X-Teams," Deborah Ancona and Henrik Bresman. How great teams orient themselves externally and encourage dissent. Here's what I wrote about it back in May and June: 1, 2, 3, 4.






2. "Negotiation Genius," Deepak Malhotra and Max Bazerman. The best one-volume negotiation book you can buy at any price. Read a fuller review here.






1. "The Future of Management," Gary Hamel. (It's in stock at Amazon.) How to build a change-adaptable business in the 21st century. I did five posts on this book last year: start here.






negotiation, innovation, creativity, project management, organizational behavior, reading list

Innovative companies must excel at partnering

There's a fascinating interview at Harvard Business School Working Knowledge with HBS professor Alan MacCormack, covering innovation and how it's moving away from Corporate R&D and into a collaborative web of partnering & alliances. (You can find a working paper on the subject here.)

According to MacCormack, there are several reasons why this is so:

1. Products are becoming more complex, and therefore it's impossible to retain all the competencies in house to create them.
2. Open standards and architectures help allow work to be more readily distributed to partners.
   
3. The growth of developing economies means that competitive, at times distinctive work is available at lower prices.

The implications of collaborative innovation fascinate me. It means that R&D professionals will need more negotiation and management skills than technical skills, and that the ability to manage internal politics will be less important than the need to bridge corporate & geographic cultures.

I'm not aware of anything in business-school curricula to prepare the next generation of managers for this challenge. (HBS students should seek out courses by Bazerman and Malhotra, as well as MacCormack.) There certainly was nothing of this sort that I learned for my MBA--any learning was entirely OJT.

negotiation, innovation, open innovation, alliances, HBS Working Knowledge

The best negotiating book I've ever read

Am I a good negotiator? I've negotiated several dozen contracts, from short-term consulting agreements to broad, highly-complex strategic alliances. I've done deals in the US, Europe, Latin America and Asia. I feature negotiation on my resume.

But hold on a second. According to Deepak Malhotra and Max Bazerman of Harvard Business School, authors of the book "Negotiation Genius," experience does not equal expertise in negotiation. Through many quirks of human nature, we are capable of making the same mistakes over and over again, even in terribly important efforts. (Click here if you'd like to hear about one of my poorest negotiating efforts.)

If practice doesn't make perfect, what is someone who wants to be a better negotiator to do? Well, read "Negotiation Genius," for one, and apply its lessons. Despite that awkward title, it's a fantastic book on a subject that too rarely gets serious treatment in the business press.

The authors use countless examples and are not afraid to get complicated. As enlightening as it was to read through once, I think "Negotiation Genius" will be a valuable reference that I'll use again and again, whether contemplating, preparing for, or engaging in a business negotiation.

The book covers:

• Getting more than your fair share of the negotiating pie
  
• Increasing the size of the pie
• How to respond when you'd like to immediately agree to an offer
• How to bargain when you have little power
  
• How to deal with lying or deception
• etc.

In other words, "Negotiation Genius" has everything a quick-read, how-to negotiation book has plus an exhaustive explanation of the underlying psychological factors (referencing specific research, especially the behavioral economics work of Daniel Kahneman and others). Finally, there are so many relevant examples, including experiences of the authors, that every assertion in the book feels grounded and reasonable.

And there is humor, too, including how the most difficult negotiating counterpart can be one's own spouse (my Vice President of Common Sense would attest to that).

Here's an excerpt on how our emotions can harm us in negotiations:

If you are angry with a negotiating counterpart, you may want to do or say something that you know will harm you in the long run.... Still, in the heat of the moment, it can be difficult to resist the urge to lash out or to retaliate. Similarly, if the other side makes you an attractive offer, you may be so excited that you are tempted to accept right away, though you know it would be smart to try to negotiate a better deal.... Note that you would not advise a friend to act rashly in either of these two situations--yet, at the same time, you might find it hard to do otherwise. (P. 127)

Wise words. "Negotiation Genius" is full of them. Read it if you want to be a better negotiator. There's no other book on the subject I can recommend more highly.

Further Information:

Here is a Shop Talk Podcast on one of the concepts Malhotra and Bazerman discuss, the BATNA, or Best Alternative To A Negotiated Agreement.

negotiation, psychology, dealmaking, reading list

Fearful of negotiating? Better get over it

Time was, we used to be product developers and manufacturers. We created designs for products, manufacturing groups figured out how to produce them, and we built them in our own factories.

Those days might as well be a million years ago. Now we are systems integrators. We create designs (or concepts we send to ODMs to flesh out), then hire companies to build components, assemble, ship and even service them.

The upshot is that we need a new skillset in this new world. Instead of design skills, we need partnership skills. Instead of building, we are buying. And instead of demanding or ordering, we are negotiating.

It's a much more uncertain world as a result. Outside parties don't necessarily see things our way, and we have limited tools to force them to see our point of view (read this recent Wall Street Journal article to learn more). Instead, we need to understand, to cajole, to threaten when necessary, but most of all to create scenarios where when our partners do what's in their interest, it helps us too.

As a result, I'm very interested in reading "Negotiation Genius" from Deepak Malhotra and Max Bazerman of Harvard Business School. I've discussed some of their work in a previous post. (And here's a recent reference in HBS Working Knowledge.) The book just came across my desk. I'll provide a full report after I'm finished with it.

(Photo from just4you via stock.xchng)

negotiation alliances purchasing HBS Working Knowledge

Effective negotiation sometimes means staying with it even after you've lost

Negotiating skill is partly personality, mostly hard-won experience. There are a few good books on the subject (I've found "Game, Set, Match: Winning The Negotiations Game," by Henry Kramer pretty useful, despite the silly title), but they don't substitute for getting in there across from the other party and trying to work a deal.

This is because negotiating is all about psychology--yours, of course, and the other guy's. And information is hard to come by. Negotiators hold lots of information close to the vest, and release it only when they feel it's in their interest to do so. This leaves the other party guessing about the motivations and constraints of the counterpart. All in all, it's a highly complex situation, and optimal results are rare. The best you can do is a deal you both can live with.

Skillful negotiation is the subject of "Investigative Negotiation" by Deepak Malhotra and Max Bazerman of Harvard Business School, which appears in the September Harvard Business Review (link - $$). Malhotra and Bazerman point out several skills of good negotiators--mainly their ability to probe and ask questions that illuminate areas of conflict and expose possible solutions.

I was most interested in one principle they stated: "Continue to investigate even after the deal appears to be lost." The authors write:

After being rejected, an investigative negotiator should immediately ask, “What would it have taken for us to reach agreement?” Though it may appear costly to continue negotiating when a “no deal” response appears certain, if you’re confused about the reason your deal fell through in the first place, it could be even more costly to abandon the discussion.

Even if you find that you cannot win the deal, you may still acquire important information that will help in future negotiations. By staying at the table, you can learn about this customer’s future needs, the interests and concerns of similar customers, or the strategies of other players in the industry. Keep in mind that it is often easier to get candid information from the other side when you are not in selling mode and there is little reason to distrust your motives. Next time you’ve lost the deal and been asked to leave the room, see if you can stick around and investigate further. You may be surprised by what you find out.

Good advice, though staying at the table can be difficult. If the client has made the emotional commitment to go elsewhere, they may not want to spend any more time with you, especially if they feel you're still selling them. Many clients also don't want to make losing salespeople feel bad, so their instinct is to stop talking. It takes a real professional to be able to convince the client to open up after they've already decided.

If you're interested in negotiating and haven't listened to our podcast with Barbara McFadden on the topic, please check it out.

(Photo by adamci via stock.xchng)

negotiation sales psychology Harvard Business Review