I can't say that I'm all that politically active, but occasionally a bill comes along that grabs my interest. This week I heard about a bill that has already passed the Tennessee House and will be voted on soon in the Senate. This bill requires state colleges to develop policies to lower the cost of college textbooks. This bill appears to have good intentions, but I believe it has dangerous implications for our state and perhaps our country.
First let me say that I completely sympathize with students and I agree that textbooks add a substantial burden to the cost of education. I also don't blame those who introduced the bill. They're responding to their constituents. The problem I have with this bill is that it sends the wrong message to our students (and future leaders). This bill suggests that high prices should be dealt with by the government.
If I were an economist, I would argue that lower textbook prices will ultimately lead to fewer incentives for textbook authors and publishers to create quality products. As a professor, I can choose cheaper textbooks now. But you typically get what you pay for.
If I taught personal finance, I might suggest that this problem deals more with student budgeting than with textbooks. I'm not sure if it's still true, but in the late 1990s, a study by the Harvard School of Public Health found that the average college student spent more on alcohol than on textbooks and all other drinks combined.
I know there are a few students who don't buy alcohol, but I'd bet most of my students have cell phone bills that easily surpass their annual textbook budgets. I just got my first cell phone a month ago. And don't get me started about the cars students drive. The difference between a $10,000 car and a $5,000 car will pay for all of your books for your entire collegiate career.
I suppose it's also worth pointing out that, unlike cars, beer, and cell phone use, many textbooks have value that far surpasses their cost. I choose textbooks that I think will help students create value for their organizations after they graduate.
But there's a much bigger point to be made here. The high cost of textbooks is not a new problem and not a problem unique to Tennessee students. I faced the same problem 20 years ago. But instead of asking the government to fix the problem, students at my university came up with an entrepreneurial solution. One of our student organizations began a student book exchange where students could sell books to each other. If eBay had been around, I think I could have paid my entire tuition by buying and selling textbooks.
That's not the only possible solution, but I think this problem offers a tremendous opportunity for students to be creative, innovative, and entrepreneurial. So the question is this: When faced with similar problems, do we want our future leaders to seek government intervention? Or do we want them to see these problems as opportunities for value creation?
I mentioned earlier that this seemingly harmless bill may have national implications. The rest of the world is becoming more entrepreneurial. If we're becoming less so, what will happen to the American economy?
But as long as we're asking our legislators to help lower prices, I wonder if they can do anything about the prices at Outback?
Wednesday, May 23, 2007
How Fair Are You?
Did you know that there are no bad drivers in Cookeville? There are also no bad parents. I know this because whenever I speak in front of groups, I usually ask: Are there any bad drivers in here? What about bad parents? No one ever speaks up.
Maybe they’re just reluctant to confess in front of their peers or co-workers. At least one survey, however, shows that 90% of the population believes they are above average drivers. Statistically, of course, it’s impossible for 90% of the population to be above average.
This kind of overconfidence is not restricted to driving. Research also shows that most people think they are fairer, luckier, and better investors than the average person. I guess that explains why so many people play the lottery.
The larger point here is that most people tend to overestimate their competence in a variety of areas. Most of these areas have profound implications for business management.
A few years ago, a manufacturing company in Ohio lost some key contracts and the CEO decided that a temporary pay cut would be the best way for the company to deal with the lost revenue. The 15 percent pay cut would be applied to everyone at two of the company’s plants and would only last ten weeks.
The CEO was concerned about the possible reactions to the pay cut. He knew that people would probably be unhappy. Would employees quit? Would they slack off? Would they steal from the company? What could he do to minimize the negative reactions?
The CEO contacted Jerald Greenberg, a professor at Ohio State University and an expert in the area of workplace fairness. Greenberg, being an academic, proposed an experiment in which he would write the pay cut announcement for one of the plants. The CEO would write the announcement for the other.
Honestly, the CEO’s announcement sounded like something I would have written. It was simple, straightforward, and conveyed only the necessary information. Greenberg’s announcement, however, was filled with regret, apologies, and detailed financial information justifying the pay cut. So how did people respond?
In the plant that received the professor’s announcement, theft increased by 54% during the ten-week pay cut period. That’s a lot. In the plant that received the CEO’s announcement, theft increased by 141%. That’s a lot more.
With respect to turnover, only one person (out of 64 employees) left the plant that received the professor’s announcement. In the plant that received the CEO’s announcement, 23% of the employees quit.
Without the experiment, we might have concluded that the pay cut was responsible for the huge increases in theft and turnover. The experiment reveals, however, that it wasn’t the pay cut. It was the announcement that produced the biggest effects.
I’ll bet if we asked the CEO if he thought his announcement was as sensitive and informative as it could be, he would say that it was. After all, he wasn’t trying to increase theft and turnover. He was trying to prevent it. But just like the majority of us who think we are above average drivers, most managers believe that they are above average when it comes to fairness and communicating with employees.
The best thing about the professor’s announcement is that it cost absolutely nothing to be more sensitive and provide more information. The financial effects, however, were huge. The only way to reap these benefits is to realize that you might not be as good as you think you are.
Maybe they’re just reluctant to confess in front of their peers or co-workers. At least one survey, however, shows that 90% of the population believes they are above average drivers. Statistically, of course, it’s impossible for 90% of the population to be above average.
This kind of overconfidence is not restricted to driving. Research also shows that most people think they are fairer, luckier, and better investors than the average person. I guess that explains why so many people play the lottery.
The larger point here is that most people tend to overestimate their competence in a variety of areas. Most of these areas have profound implications for business management.
A few years ago, a manufacturing company in Ohio lost some key contracts and the CEO decided that a temporary pay cut would be the best way for the company to deal with the lost revenue. The 15 percent pay cut would be applied to everyone at two of the company’s plants and would only last ten weeks.
The CEO was concerned about the possible reactions to the pay cut. He knew that people would probably be unhappy. Would employees quit? Would they slack off? Would they steal from the company? What could he do to minimize the negative reactions?
The CEO contacted Jerald Greenberg, a professor at Ohio State University and an expert in the area of workplace fairness. Greenberg, being an academic, proposed an experiment in which he would write the pay cut announcement for one of the plants. The CEO would write the announcement for the other.
Honestly, the CEO’s announcement sounded like something I would have written. It was simple, straightforward, and conveyed only the necessary information. Greenberg’s announcement, however, was filled with regret, apologies, and detailed financial information justifying the pay cut. So how did people respond?
In the plant that received the professor’s announcement, theft increased by 54% during the ten-week pay cut period. That’s a lot. In the plant that received the CEO’s announcement, theft increased by 141%. That’s a lot more.
With respect to turnover, only one person (out of 64 employees) left the plant that received the professor’s announcement. In the plant that received the CEO’s announcement, 23% of the employees quit.
Without the experiment, we might have concluded that the pay cut was responsible for the huge increases in theft and turnover. The experiment reveals, however, that it wasn’t the pay cut. It was the announcement that produced the biggest effects.
I’ll bet if we asked the CEO if he thought his announcement was as sensitive and informative as it could be, he would say that it was. After all, he wasn’t trying to increase theft and turnover. He was trying to prevent it. But just like the majority of us who think we are above average drivers, most managers believe that they are above average when it comes to fairness and communicating with employees.
The best thing about the professor’s announcement is that it cost absolutely nothing to be more sensitive and provide more information. The financial effects, however, were huge. The only way to reap these benefits is to realize that you might not be as good as you think you are.
Who's to Blame for Poor Performance
It’s that time of year again. Final exams. Grading. More grading. Some students make me proud of how much I taught them. Those are the ones who convince me that I’m a great teacher. But then there are the others.
Why didn’t they try harder? Why didn’t they pay attention in class? Why did their parents bother sending them to college? Did you notice how I took credit for the successful students and shifted the blame for the others?
I see a lot of this behavior among organizational leaders as well. For that matter, I see a lot of this among parents, students, and politicians too. I think we’re probably born with the tendency to take credit for success and avoid blame for failure.
When teachers abandon all responsibility for student failure, we ignore the possibility that we could have done something differently to motivate more students or inspire greater interest. When students do it, they convince themselves that the teacher was unfair or incompetent. The truth is often somewhere in the middle.
This is a great lesson for managers to learn as well. I once asked one of my professors in graduate school why he did so little management consulting. He told me that he often got calls from managers and business owners asking if he could “fix” their unmotivated employees. My professor’s first response to this question was always: “What will you do if I find out you’re the problem?” This question made him very unpopular as a management consultant.
Anyone who wants to improve their performance as a teacher, as a manager, or as anything else, must be honest with themselves. They must be willing to face the possibility that they need to do something differently.
This possibility is why it’s so important for teachers to give accurate feedback to students throughout the semester. This feedback should help students figure out what they need to change. Likewise, teachers should seek feedback throughout the semester to find out what they might need to change.
The same is true in any organization. In many organizations, feedback is supposed to occur during the performance appraisal process. Unfortunately, performance appraisal is hated by most managers because it is also used to make administrative decisions. Research shows that most managers give employees higher ratings than they deserve. They do this to avoid conflict and avoid acknowledging that their own performance may have been below par. In education we call this grade inflation.
Inaccurate performance feedback, however, helps no one. Inflated feedback perpetuates mediocre or poor performance. It also perpetuates overconfidence that can be dangerous in a variety of ways.
Would you go to a doctor who deserved to fail medical school, but was passed because his professors wanted to avoid conflict? Neither would I. That’s why I don’t pass students who deserve to fail. That’s also why I constantly give and seek feedback to try and keep students from failing.
I wonder what the world would be like if teachers, students, parents, managers, politicians, spouses, and drivers received accurate feedback about their performance and honest advice to help them improve.
Why didn’t they try harder? Why didn’t they pay attention in class? Why did their parents bother sending them to college? Did you notice how I took credit for the successful students and shifted the blame for the others?
I see a lot of this behavior among organizational leaders as well. For that matter, I see a lot of this among parents, students, and politicians too. I think we’re probably born with the tendency to take credit for success and avoid blame for failure.
When teachers abandon all responsibility for student failure, we ignore the possibility that we could have done something differently to motivate more students or inspire greater interest. When students do it, they convince themselves that the teacher was unfair or incompetent. The truth is often somewhere in the middle.
This is a great lesson for managers to learn as well. I once asked one of my professors in graduate school why he did so little management consulting. He told me that he often got calls from managers and business owners asking if he could “fix” their unmotivated employees. My professor’s first response to this question was always: “What will you do if I find out you’re the problem?” This question made him very unpopular as a management consultant.
Anyone who wants to improve their performance as a teacher, as a manager, or as anything else, must be honest with themselves. They must be willing to face the possibility that they need to do something differently.
This possibility is why it’s so important for teachers to give accurate feedback to students throughout the semester. This feedback should help students figure out what they need to change. Likewise, teachers should seek feedback throughout the semester to find out what they might need to change.
The same is true in any organization. In many organizations, feedback is supposed to occur during the performance appraisal process. Unfortunately, performance appraisal is hated by most managers because it is also used to make administrative decisions. Research shows that most managers give employees higher ratings than they deserve. They do this to avoid conflict and avoid acknowledging that their own performance may have been below par. In education we call this grade inflation.
Inaccurate performance feedback, however, helps no one. Inflated feedback perpetuates mediocre or poor performance. It also perpetuates overconfidence that can be dangerous in a variety of ways.
Would you go to a doctor who deserved to fail medical school, but was passed because his professors wanted to avoid conflict? Neither would I. That’s why I don’t pass students who deserve to fail. That’s also why I constantly give and seek feedback to try and keep students from failing.
I wonder what the world would be like if teachers, students, parents, managers, politicians, spouses, and drivers received accurate feedback about their performance and honest advice to help them improve.
Intrinsic Motivation
I have a confession that might make me seem strange. In fact, it might destroy any credibility I may have. Well, here it is: I like to mow the lawn. That horrible task that most normal people hate doing throughout the spring and summer is one of my favorite things to do.
I’m sure it wouldn’t be as much fun with a push mower, but I have a riding mower and about one acre to mow. Once a week I hop on and take a two-hour ride to happiness.
So why would such a distasteful task be the source of such joy for anyone? The more I think about it, the more I realize that the things that motivate me to mow the grass are the same things that motivate people to enjoy any job.
One great thing about mowing the grass, for example, is that you can easily see yourself making progress. That patch of tall ugly grass gradually becomes smaller and smaller until you make that final pass. Within two hours I’ve converted an unsightly mess into something I’m quite proud of. People enjoy jobs when they can vividly experience a sense of accomplishment.
But there must be more to it than that. After all, many people hate their jobs even though they receive the same type of immediate feedback. There’s one more thing that makes mowing the lawn enjoyable. I’m choosing to do it.
I was never forced to mow the lawn when I was younger. Today, I can afford to pay someone else to do it for me. A huge amount of the enjoyment comes from the fact that I decide if, when and how to mow.
My guess is that most people who hate to mow were forced to when they were younger. Or they may have mowed in order to make money. A fair amount of psychological research shows that people lose their intrinsic motivation for a task when they feel like they are being controlled by external motivators (like money).
You can see the same thing among professional athletes. The game they played for fun as a youngster is less fun when they do it to fulfill a contractual obligation.
These two insights might be pretty useful to business owners and managers. Why do your employees have a hard time making it to work at 8:00am but have no trouble waking up at 4:00am to go hunting? Sitting perfectly still in the cold woods hoping that a deer wanders by sounds about as fun as mowing grass. Yet people pay for the privilege. Why? Because a successful hunting trip inspires a sense of autonomy and accomplishment.
Another reason I like mowing is because it’s appreciated. My wife appreciates it. My kids can find their toys lost in the tall grass. My neighbors probably appreciate it. I probably get more thanks after I mow than at any other time during the week.
The only bad thing is that my eight-year old son has discovered the joys of mowing. It’s as close as he’s going to get to a go-kart for awhile, so he thinks it’s fun too. Maybe I’ll start forcing him to do it, paying him to do it, and then forget to thank him for doing it. Then he’ll start to hate his job like normal people are supposed to! In the process he might even learn how not to manage people.
I’m sure it wouldn’t be as much fun with a push mower, but I have a riding mower and about one acre to mow. Once a week I hop on and take a two-hour ride to happiness.
So why would such a distasteful task be the source of such joy for anyone? The more I think about it, the more I realize that the things that motivate me to mow the grass are the same things that motivate people to enjoy any job.
One great thing about mowing the grass, for example, is that you can easily see yourself making progress. That patch of tall ugly grass gradually becomes smaller and smaller until you make that final pass. Within two hours I’ve converted an unsightly mess into something I’m quite proud of. People enjoy jobs when they can vividly experience a sense of accomplishment.
But there must be more to it than that. After all, many people hate their jobs even though they receive the same type of immediate feedback. There’s one more thing that makes mowing the lawn enjoyable. I’m choosing to do it.
I was never forced to mow the lawn when I was younger. Today, I can afford to pay someone else to do it for me. A huge amount of the enjoyment comes from the fact that I decide if, when and how to mow.
My guess is that most people who hate to mow were forced to when they were younger. Or they may have mowed in order to make money. A fair amount of psychological research shows that people lose their intrinsic motivation for a task when they feel like they are being controlled by external motivators (like money).
You can see the same thing among professional athletes. The game they played for fun as a youngster is less fun when they do it to fulfill a contractual obligation.
These two insights might be pretty useful to business owners and managers. Why do your employees have a hard time making it to work at 8:00am but have no trouble waking up at 4:00am to go hunting? Sitting perfectly still in the cold woods hoping that a deer wanders by sounds about as fun as mowing grass. Yet people pay for the privilege. Why? Because a successful hunting trip inspires a sense of autonomy and accomplishment.
Another reason I like mowing is because it’s appreciated. My wife appreciates it. My kids can find their toys lost in the tall grass. My neighbors probably appreciate it. I probably get more thanks after I mow than at any other time during the week.
The only bad thing is that my eight-year old son has discovered the joys of mowing. It’s as close as he’s going to get to a go-kart for awhile, so he thinks it’s fun too. Maybe I’ll start forcing him to do it, paying him to do it, and then forget to thank him for doing it. Then he’ll start to hate his job like normal people are supposed to! In the process he might even learn how not to manage people.
Investing in Health
Today I faced a tough decision. My employer is having its annual “Health Fair” in April and today I had to decide if I should spend $20 to have my cholesterol checked. My other option was spending that $20 at Outback on a steak and cheese fries. Ultimately I caved in and decided to go for the blood work. That makes two cholesterol checks and four steaks over my six years at TTU.
The last time I participated in the Health Fair, my report told me that I had high cholesterol and I should talk it over with my doctor. Unfortunately, I’ve never met my primary care physician, so it’s never come up. I’ll get around to it some day.
I’m not sure how many TTU employees participate in the health risk assessment offered during the Health Fair. I suppose most of them are like me. I’d prefer to be healthy, but my employer has offered to absorb the cost of my medical treatment. So if I continue eating lots of cheese fries and survive the heart attack, I know that my health insurance will pay the humongous hospital bill. Maybe after that I’ll start taking my health seriously.
If I owned a business and provided health insurance to my employees, attitudes like my own would horrify me. Attitudes like mine contribute to the phenomenal increase in employer health care costs each year. That’s why many organizations are taking drastic steps to force employees to take responsibility for their own health. Johnson & Johnson is a great example.
In 1995, Johnson & Johnson decided to offer the same kind of health risk assessment that many employers (including TTU) offer. They decided, however, to make it available for free. That way, employees did not have to choose between the blood work and the cheese fries. They were slightly disappointed when only 26% of their employees participated.
In 1996, Johnson & Johnson decided to try and increase participation by giving employees a $500 reduction in their health insurance premium if they participated. That year, 90% of their employees participated. With over 40,000 employees, that’s quite an investment. How could it possibly pay off?
The health risk assessment done by Johnson & Johnson identified over 4000 employees who were at risk for developing heart disease, diabetes, cancer, and a variety of other conditions. Those high risk employees were then asked to participate in a program called Pathways to Change. This program provided employees with education and other types of encouragement to improve their health.
Over the first three years of the program, participants in Pathways to Change were more likely to exercise and less likely to have high cholesterol and high blood pressure. For all of their efforts to improve the health of their employees, Johnson & Johnson realized a net savings of $225 per employee per year over the first four years of their health and wellness initiative. That’s $225 after paying the $500 to everyone tested and all other expenses of the program.
To boil it all down, Johnson & Johnson discovered that paying people $500 each to participate in a health risk assessment was cheaper than treating the heart attacks lurking in that group.
For $500 I would show up for the health risk assessment and promise not to eat cheese fries for a whole year!
The last time I participated in the Health Fair, my report told me that I had high cholesterol and I should talk it over with my doctor. Unfortunately, I’ve never met my primary care physician, so it’s never come up. I’ll get around to it some day.
I’m not sure how many TTU employees participate in the health risk assessment offered during the Health Fair. I suppose most of them are like me. I’d prefer to be healthy, but my employer has offered to absorb the cost of my medical treatment. So if I continue eating lots of cheese fries and survive the heart attack, I know that my health insurance will pay the humongous hospital bill. Maybe after that I’ll start taking my health seriously.
If I owned a business and provided health insurance to my employees, attitudes like my own would horrify me. Attitudes like mine contribute to the phenomenal increase in employer health care costs each year. That’s why many organizations are taking drastic steps to force employees to take responsibility for their own health. Johnson & Johnson is a great example.
In 1995, Johnson & Johnson decided to offer the same kind of health risk assessment that many employers (including TTU) offer. They decided, however, to make it available for free. That way, employees did not have to choose between the blood work and the cheese fries. They were slightly disappointed when only 26% of their employees participated.
In 1996, Johnson & Johnson decided to try and increase participation by giving employees a $500 reduction in their health insurance premium if they participated. That year, 90% of their employees participated. With over 40,000 employees, that’s quite an investment. How could it possibly pay off?
The health risk assessment done by Johnson & Johnson identified over 4000 employees who were at risk for developing heart disease, diabetes, cancer, and a variety of other conditions. Those high risk employees were then asked to participate in a program called Pathways to Change. This program provided employees with education and other types of encouragement to improve their health.
Over the first three years of the program, participants in Pathways to Change were more likely to exercise and less likely to have high cholesterol and high blood pressure. For all of their efforts to improve the health of their employees, Johnson & Johnson realized a net savings of $225 per employee per year over the first four years of their health and wellness initiative. That’s $225 after paying the $500 to everyone tested and all other expenses of the program.
To boil it all down, Johnson & Johnson discovered that paying people $500 each to participate in a health risk assessment was cheaper than treating the heart attacks lurking in that group.
For $500 I would show up for the health risk assessment and promise not to eat cheese fries for a whole year!
Affirmative Action - Part 2
The phrase “affirmative action” evokes strong emotions from supporters and opponents. The 1947 Brooklyn Dodgers, however, provide a perfect example of how affirmative action is supposed to work and how affirmative action helps organizations excel. The president of the Dodgers, Branch Rickey, recognized that he was fishing for employees from the same pond as every other baseball team. The more that pond is fished, the harder it is to find good talent. If you find another pond where no one else is fishing, however, it’s much easier to find talented employees.
If Branch Rickey were alive today and president of any organization, what would he do? First, he would actively pursue talented people from diverse backgrounds. Rickey didn’t wait for Jackie Robinson to beat down his door. Instead, Rickey sent scouts into the Negro Leagues to find the most talented players. I can’t count the number of times I’ve heard someone say “I’m willing to hire minorities, they’re just not applying.” There’s an easy solution to this problem…it’s called recruiting.
If Rickey were alive today, he would also willingly pursue talented people from diverse backgrounds. One of my favorite parts of the Jackie Robinson story is that Rickey voluntarily pursued Robinson. In other words, there was no government intervention requiring Rickey to do so. In fact, I love the freedom most organizations have to not use affirmative action. That makes it easier for companies like the Dodgers to beat companies like the Red Sox (who didn’t integrate until 1959 and never finished above third place during the 1950s).
Branch Rickey also demonstrated the first-mover advantage. By being the first team to integrate, the Dodgers established a reputation as an organization that valued talented employees regardless of their skin color. This reputation allowed them to quickly recruit other talented African-Americans like Roy Campanella and Don Newcombe. If Rickey were alive today, he would love finding untapped pools of talent where he could be the first.
These principles are probably not surprising to anyone. What is surprising, however, is the number of organizations that are not practicing these principles. I wonder what would happen to the U.S. economy if every company actively and willingly recruited, hired, and promoted the most talented individuals instead of friends, relatives, fraternity brothers, and people that make us comfortable. I’m pretty sure we would have fewer companies like Enron and more companies like Southwest Airlines. I’m also pretty sure there would be more than 10 female CEOs leading Fortune 500 companies.
I honestly don’t believe that most companies consciously and willfully exclude females and minorities from leadership positions. Instead, I think the evidence is pretty overwhelming that discrimination can occur accidentally and unconsciously. The assumptions and stereotypes that drive discrimination are so deeply ingrained that even the best of us are not aware when it’s happening. The fact that it can happen accidentally makes it all the more important for leaders to actively and willingly pursue talent in undertapped pools before our competitors do.
If Branch Rickey were alive today and president of any organization, what would he do? First, he would actively pursue talented people from diverse backgrounds. Rickey didn’t wait for Jackie Robinson to beat down his door. Instead, Rickey sent scouts into the Negro Leagues to find the most talented players. I can’t count the number of times I’ve heard someone say “I’m willing to hire minorities, they’re just not applying.” There’s an easy solution to this problem…it’s called recruiting.
If Rickey were alive today, he would also willingly pursue talented people from diverse backgrounds. One of my favorite parts of the Jackie Robinson story is that Rickey voluntarily pursued Robinson. In other words, there was no government intervention requiring Rickey to do so. In fact, I love the freedom most organizations have to not use affirmative action. That makes it easier for companies like the Dodgers to beat companies like the Red Sox (who didn’t integrate until 1959 and never finished above third place during the 1950s).
Branch Rickey also demonstrated the first-mover advantage. By being the first team to integrate, the Dodgers established a reputation as an organization that valued talented employees regardless of their skin color. This reputation allowed them to quickly recruit other talented African-Americans like Roy Campanella and Don Newcombe. If Rickey were alive today, he would love finding untapped pools of talent where he could be the first.
These principles are probably not surprising to anyone. What is surprising, however, is the number of organizations that are not practicing these principles. I wonder what would happen to the U.S. economy if every company actively and willingly recruited, hired, and promoted the most talented individuals instead of friends, relatives, fraternity brothers, and people that make us comfortable. I’m pretty sure we would have fewer companies like Enron and more companies like Southwest Airlines. I’m also pretty sure there would be more than 10 female CEOs leading Fortune 500 companies.
I honestly don’t believe that most companies consciously and willfully exclude females and minorities from leadership positions. Instead, I think the evidence is pretty overwhelming that discrimination can occur accidentally and unconsciously. The assumptions and stereotypes that drive discrimination are so deeply ingrained that even the best of us are not aware when it’s happening. The fact that it can happen accidentally makes it all the more important for leaders to actively and willingly pursue talent in undertapped pools before our competitors do.
Victims of Affirmative Action - Part 1
Most people don’t recognize the names of Ed Stevens or Sid Gordon. These were two of the first victims of affirmative action in the United States. The saddest of these might be Gordon. He had 11 years of experience when he was replaced with a less-experienced minority. Most people, however, do recognize the names of those who replaced Stevens and Gordon. Sid Gordon lost his job to Hank Aaron. Stevens lost his job to Jackie Robinson. For those who don’t recognize Aaron or Robinson, they are two of the greatest baseball players who ever played and both are enshrined in the Baseball Hall of Fame.
In 1947, Branch Rickey (president of the Brooklyn Dodgers) discovered an amazing truth. A vast pool of talent was not being tapped. Rickey realized that the best players in the Negro Leagues were certainly better than the worst players in the Major Leagues. Any team willing to recruit the most talented players from the Negro Leagues would certainly improve the team’s talent level. The rest, as they say, is history. Over the next ten years, the Dodgers made it to the World Series six times.
It may seem hard to believe, but some teams were reluctant to pursue African-Americans players. They had perfectly “rational” explanations for their reluctance. Some teams thought that attendance would fall when they added African-Americans to their teams. Other teams did not want to disturb team “chemistry”. All of these strawmen eventually fell and other teams began to pursue talented African-Americans.
The story in Boston, however, is a bit more complicated. The Red Sox were unable to find an African-American good enough for their team until 1959. By that time, there was a tremendous amount of social and political pressure for the Red Sox to integrate. Finally, the team caved in and signed Pumpsie Green to play second base. Never heard of Pumpsie? That’s because the Red Sox did affirmative action the wrong way. They decided to pursue diversity instead of pursuing talent in diverse pools.
So what lesson does this story have for modern organizations? Surely we’re more enlightened today. Sadly, there’s a great deal of evidence this isn’t true. In 2001, researchers Marianne Bertrand and Sendhil Mullainathan mailed 5,000 resumes to companies advertising entry-level jobs in Chicago and Boston. Half of the resumes were labeled with African-American names (Tyrone or Latoya). The other half received names that are more common among Whites (Emily or Matthew). The researchers set up voice mail accounts to find out which names were more likely to receive invitations for interviews. Sadly, resumes with White names were 50 percent more likely to receive interviews than resumes with African-American names and the same qualifications.
Even more disturbing about this study is the fact that some of the resumes were written to be a good fit for the advertised position. Others were designed to be a poor fit. Resumes from unqualified Whites were 26 percent more likely to receive interviews than highly qualified African-Americans. In other words, even today Ed Stevens is more likely to get an interview than Hank Aaron.
In 1947, Branch Rickey (president of the Brooklyn Dodgers) discovered an amazing truth. A vast pool of talent was not being tapped. Rickey realized that the best players in the Negro Leagues were certainly better than the worst players in the Major Leagues. Any team willing to recruit the most talented players from the Negro Leagues would certainly improve the team’s talent level. The rest, as they say, is history. Over the next ten years, the Dodgers made it to the World Series six times.
It may seem hard to believe, but some teams were reluctant to pursue African-Americans players. They had perfectly “rational” explanations for their reluctance. Some teams thought that attendance would fall when they added African-Americans to their teams. Other teams did not want to disturb team “chemistry”. All of these strawmen eventually fell and other teams began to pursue talented African-Americans.
The story in Boston, however, is a bit more complicated. The Red Sox were unable to find an African-American good enough for their team until 1959. By that time, there was a tremendous amount of social and political pressure for the Red Sox to integrate. Finally, the team caved in and signed Pumpsie Green to play second base. Never heard of Pumpsie? That’s because the Red Sox did affirmative action the wrong way. They decided to pursue diversity instead of pursuing talent in diverse pools.
So what lesson does this story have for modern organizations? Surely we’re more enlightened today. Sadly, there’s a great deal of evidence this isn’t true. In 2001, researchers Marianne Bertrand and Sendhil Mullainathan mailed 5,000 resumes to companies advertising entry-level jobs in Chicago and Boston. Half of the resumes were labeled with African-American names (Tyrone or Latoya). The other half received names that are more common among Whites (Emily or Matthew). The researchers set up voice mail accounts to find out which names were more likely to receive invitations for interviews. Sadly, resumes with White names were 50 percent more likely to receive interviews than resumes with African-American names and the same qualifications.
Even more disturbing about this study is the fact that some of the resumes were written to be a good fit for the advertised position. Others were designed to be a poor fit. Resumes from unqualified Whites were 26 percent more likely to receive interviews than highly qualified African-Americans. In other words, even today Ed Stevens is more likely to get an interview than Hank Aaron.
Evidence-Based Management
The field of medicine may have a cure for business ills. In 2003, the Midwest Business Group on Health (MBGH) published a report estimating that 30% of the $1.4 trillion spent on health care in the U.S. was wasted. So where does $420 billion go? The report argues that providers overuse some procedures and treatments, underuse others, and misuse still more. The total cost of overtreating, undertreating, and mistreating is somewhere around $420 billion. An underlying theme in the report is that billions of dollars could be saved if health care providers relied more on evidence-based medicine. Evidence-based medicine is medical care that relies on the best available evidence for diagnosis and treatment.
This may sound like a condemnation of the medical profession. On the contrary, I believe that the vast majority of health-care providers are truly well-intentioned. I also believe that they’re a pretty smart bunch. After all, they passed organic chemistry (unlike yours truly). The opening paragraph may also sound like I’m about to argue that evidence-based care can cut the cost of health care paid by employers. That may be true (and it’s certainly the argument made in the MBGH report), but I think evidence-based medicine has even greater lessons for the business world.
How much money are companies losing by not using evidence-based management? What’s the total cost of overmanaging, undermanaging, and mismanaging? This figure may be impossible to calculate, but it has to be in the billions if not trillions of dollars. Is there even any such thing as “evidence-based management”? That’s the same question asked by Carnegie Mellon professor Denise Rousseau in her presidential address to the Academy of Management in 2005. She argued that evidence-based management does exist and evidence-based medicine provides a good role model for the field of business management.
There are many reasons that health care providers may not provide evidence-based care. The biggest reason is probably the fact that it is physically impossible for providers to keep up with the enormous amount of medical research being published on a daily basis. The same thing happens in management. Managers are further disadvantaged, however, by the fact that most health care providers are trained (at some point in their education) to find, read, and evaluate new scientific evidence. In other words, they learn how to learn. Business managers, unfortunately, rarely receive this training. As a result, managers often rely on their “gut”, “instinct”, or “experience”.
Here’s a simple example. We’ve known for decades that hiring managers make better hiring decisions when they use structured interviews instead of unstructured interviews. Unstructured interviews, however, remain more popular. That’s why you might be asked during an interview: “If you were a tree, what kind of tree would you be?” This interviewer has no evidence that “oaks” make better employees than “willows”. Instead, the interviewer thinks they have some sort of super-power that allows them to derive meaning from the answer. How many good employees are lost through this type of decision-making?
The evidence-based medicine movement is nearly 30 years old, but only beginning to have a major impact. Management education and training need a major overhaul that encourages managers to value evidence and learn where to find it. A recent book by Stanford professors Jeffrey Pfeffer and Robert Sutton (Hard Facts, Dangerous Half-Truths and Total Nonsense: Profiting from Evidence-Based Management) is a good place to start.
Personally, I think I would be a St. Helena Gumwood.
This may sound like a condemnation of the medical profession. On the contrary, I believe that the vast majority of health-care providers are truly well-intentioned. I also believe that they’re a pretty smart bunch. After all, they passed organic chemistry (unlike yours truly). The opening paragraph may also sound like I’m about to argue that evidence-based care can cut the cost of health care paid by employers. That may be true (and it’s certainly the argument made in the MBGH report), but I think evidence-based medicine has even greater lessons for the business world.
How much money are companies losing by not using evidence-based management? What’s the total cost of overmanaging, undermanaging, and mismanaging? This figure may be impossible to calculate, but it has to be in the billions if not trillions of dollars. Is there even any such thing as “evidence-based management”? That’s the same question asked by Carnegie Mellon professor Denise Rousseau in her presidential address to the Academy of Management in 2005. She argued that evidence-based management does exist and evidence-based medicine provides a good role model for the field of business management.
There are many reasons that health care providers may not provide evidence-based care. The biggest reason is probably the fact that it is physically impossible for providers to keep up with the enormous amount of medical research being published on a daily basis. The same thing happens in management. Managers are further disadvantaged, however, by the fact that most health care providers are trained (at some point in their education) to find, read, and evaluate new scientific evidence. In other words, they learn how to learn. Business managers, unfortunately, rarely receive this training. As a result, managers often rely on their “gut”, “instinct”, or “experience”.
Here’s a simple example. We’ve known for decades that hiring managers make better hiring decisions when they use structured interviews instead of unstructured interviews. Unstructured interviews, however, remain more popular. That’s why you might be asked during an interview: “If you were a tree, what kind of tree would you be?” This interviewer has no evidence that “oaks” make better employees than “willows”. Instead, the interviewer thinks they have some sort of super-power that allows them to derive meaning from the answer. How many good employees are lost through this type of decision-making?
The evidence-based medicine movement is nearly 30 years old, but only beginning to have a major impact. Management education and training need a major overhaul that encourages managers to value evidence and learn where to find it. A recent book by Stanford professors Jeffrey Pfeffer and Robert Sutton (Hard Facts, Dangerous Half-Truths and Total Nonsense: Profiting from Evidence-Based Management) is a good place to start.
Personally, I think I would be a St. Helena Gumwood.
Best Companies to Work For
One of the few things I look forward to in January is Fortune magazine’s list of the “100 Best Companies to Work For.” As someone who teaches human resource management, I’m always relieved to see that Catbert is not the role model for all human resource managers. This year’s winner is Google, Inc. The work environment at Google is becoming legendary as the source of creativity and productivity that has propelled Google to its current market value of nearly $150 billion.
The perks of being a Googler are beyond amazing. Need to see a doctor or dentist? They’re available onsite along with the carwash, gyms, free laundry machines, and masseur. Hungry? Breakfast, lunch, and dinner are available in eleven cafeterias. But it will be tough to find a bacon cheeseburger at Google. You’re more likely to find shrimp scampi, steak Milanese, or fresh sushi. Did I mention that all of the food is free?
It’s tempting to think that Google makes these perks available because they have nearly $4 billion in cash sitting around. Founders Larry Page and Sergey Brin, however, will argue that the work environment is the reason they’ve been able to accumulate this stash. Google and other companies on Fortune’s list support the idea that an employee-friendly work environment is a sound investment. So how can expenses like blackened sea bass and ping pong tables produce a positive return-on-investment?
One advantage of such a culture is the recruitment value. Google received over 1,000,000 applications last year for less than 3,000 openings. With more than 300 applicants for each opening, Google can choose talented trustworthy employees. Google then sets them free to use their brains and do their jobs with little interference. In fact, Google expects engineers to spend 20% of their time on projects of their own interest.
Another common element among the companies on Fortune’s list is that they all try to make it as easy as possible for employees to be productive and successful. The carwash, food, and easily-accessible childcare relieve employees of daily burdens that distract employees from their work. Eighty-two of the companies on this year’s list allow employees the flexibility of working from home at least 20% of the time.
A final common element among the Best Companies is that they share the fruit with the farmers. Thousands of Googlers are millionaires because the company rewards employees with stock options. The employees who make the company valuable are able to share in the bounty.
Is this type of culture possible only in internet companies? The best thing about Fortune’s list is the diversity of industries represented. Number 3 on this year’s list (and former Number 1) is Wegmans Food Markets, a supermarket chain concentrated in Pennsylvania and New York. QuikTrip (the convenience store chain) is Number 20 this year. All full-time QuikTrip employees are eligible for monthly bonuses based on store profitability and customer-service ratings. South Carolina-based Milliken provides an excellent example of a textile manufacturer determined to stay in the United States. They’re cutting costs by investing in training that will make employees more productive and competitive with international labor.
The Best Companies to Work For have discovered an amazing principle. Employees will do unto the company as the company does unto them.
The perks of being a Googler are beyond amazing. Need to see a doctor or dentist? They’re available onsite along with the carwash, gyms, free laundry machines, and masseur. Hungry? Breakfast, lunch, and dinner are available in eleven cafeterias. But it will be tough to find a bacon cheeseburger at Google. You’re more likely to find shrimp scampi, steak Milanese, or fresh sushi. Did I mention that all of the food is free?
It’s tempting to think that Google makes these perks available because they have nearly $4 billion in cash sitting around. Founders Larry Page and Sergey Brin, however, will argue that the work environment is the reason they’ve been able to accumulate this stash. Google and other companies on Fortune’s list support the idea that an employee-friendly work environment is a sound investment. So how can expenses like blackened sea bass and ping pong tables produce a positive return-on-investment?
One advantage of such a culture is the recruitment value. Google received over 1,000,000 applications last year for less than 3,000 openings. With more than 300 applicants for each opening, Google can choose talented trustworthy employees. Google then sets them free to use their brains and do their jobs with little interference. In fact, Google expects engineers to spend 20% of their time on projects of their own interest.
Another common element among the companies on Fortune’s list is that they all try to make it as easy as possible for employees to be productive and successful. The carwash, food, and easily-accessible childcare relieve employees of daily burdens that distract employees from their work. Eighty-two of the companies on this year’s list allow employees the flexibility of working from home at least 20% of the time.
A final common element among the Best Companies is that they share the fruit with the farmers. Thousands of Googlers are millionaires because the company rewards employees with stock options. The employees who make the company valuable are able to share in the bounty.
Is this type of culture possible only in internet companies? The best thing about Fortune’s list is the diversity of industries represented. Number 3 on this year’s list (and former Number 1) is Wegmans Food Markets, a supermarket chain concentrated in Pennsylvania and New York. QuikTrip (the convenience store chain) is Number 20 this year. All full-time QuikTrip employees are eligible for monthly bonuses based on store profitability and customer-service ratings. South Carolina-based Milliken provides an excellent example of a textile manufacturer determined to stay in the United States. They’re cutting costs by investing in training that will make employees more productive and competitive with international labor.
The Best Companies to Work For have discovered an amazing principle. Employees will do unto the company as the company does unto them.
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