While returning from a trip to the Melbourne Gurudwara yesterday (at the invitation of a friend) I stopped by at a second hand book shop and bought a copy of Pfeffer and Sutton's excellent (2006) book, Hard Facts. Some of it is available on google books to read (although there is a limit on the number of pages you can so read).

Two things I really liked about the book. It complements Jim Collins's Good to Great (one of my favourite management books) and it acts as a bridge between the science of liberty (classical liberalism) and management.

It complements Jim Colllins's book because it highlights the fact that (a) individuals matter, and so one must aim to hire or work with good people. But in addition to this, (b) it makes abundantly clear that individuals can only do so much on their own. When it comes to large projects and major organisational efforts, it is the SYSTEM that matters most.

Those who have read BFN will note this theme repeating itself in my book, where I show that India has failed NOT because its people are in any way less intelligent or less talented than anyone else, but because its systems discourage good performance and reward populism, incompetence and corruption.

The second point I make about this book is about its acting as a bridge between the science of liberty (classical liberalism) and management. How so? 

Because this book emphasises the need for WISDOM which is the common theme of classical liberalism – that we don't know much about anything, and must remain constantly open to new learning. A classical liberal is humble about his deep ignorance but he is always KEEN TO LEARN. This theme underpins BFN but is more directly found in Hayek's writings. It is crucial for us to seek evidence, to keep asking questions even about things we may otherwise take for granted. Acceptance of ignorance is good. It keeps the eyes open.

The result of these two themes is this: that when you have finally built a great organisation/team (by having the BEST people and BEST system), then the team members do the work naturally, without any additional 'motivation'. Leaders of the organisation/nation merge seamlessly with the team/citizens. There is no longer any question about succession planning since the system automatically generates great leaders – there is no shortage of successors. Every team member is a great leader. 

The best way to illustrate this is through a few key paragraphs from the book:

Changing CEOs at Toyota is like changing lightbulbs: all are equally good

Toyota … consistently achiev[es] lower cost and higher quality than other companies. Toyota's success stems from its great system, not stunning individual talent. This starts at the top of the organization. One study showed that Toyota was the only major automobile company where a change in CEO had no effect on performance.39 The system is so robust that changing CEOs at Toyota is a lot like changing lightbulbs; there is little noticeable effect between the old one and the new one.

Or consider the NUMMI (New United Motor Manufacturing) plant in Fremont, California, a Toyota–General Motors joint venture. When GM closed its Fremont plant in 1982, it was one of the worst plants in the country, producing cars with more defects and at a higher cost than nearly any other U.S. plant. Daily absenteeism was nearly 20 percent. Wildcat strikes and drug and alcohol abuse were rampant. Following an agreement between GM and Toyota, the plant was reopened by Toyota in 1985; 85 percent of the initial workforce was rehired from a pool of employees who worked at the old, awful plant, and who still belonged to the United Auto Workers union. Before the plant was reopened, workers were given extensive training in the Toyota Production System. Over 400 trainers were sent to NUMMI from Japan and over 600 workers were sent to Japan for training. The year the plant reopened, the 6,500 Novas it produced were among the lowest cost and highest quality cars made in the United States. Absenteeism was less than 3 percent. Toyota took a bunch of F players, retrained them, put them into a great system, and magically they became superstars. A better place made them much better people.

I know that Toyota has dropped the ball a couple of years ago, leading to disastrous shrinkage in its sales, but it seems to have recovered now, and it still shows all signs of a learning organisation.

The law of Crappy Systems

"Bad systems do far more damage than bad people.

A bad system can make a genius look like an idiot."  

BFN explains India's crappy systems. The same Indians do wonderfully well in the West but pathetically in India. Why so? Because systems can convert geniuses into idiots (and vice versa). 

This is something that neither Hazare (a policy innocent and simpleton) nor Kejriwal (who should know better given his intelligence) seem to understand. In their minds, India's problem is Crappy People. They therefore believe that Lokpal (which is supposed to identify Crappy People) will fix India's problems. But they are TOTALLY WRONG. The problem in India is Crappy Systems, not Crappy People. Lokpal will not even remotely fix the systems. Hence it is DESTINED TO FAIL  MISERABLY. 

The attitude of wisdom

Wisdom means “knowing what you know and knowing what you don’t know.”

 

Behaving with an attitude of wisdom means that you act on your present knowledge while doubting what you know. It means that you do things now, as you keep learning along the way. It means that you compensate for your limited knowledge by building on old ideas and joining communities of smart people rather than relying only on your own insights.

 

Unacknowledged ignorance and arrogance stems from an absence of wisdom. 

Articles by Pfeffer for download

Pfeffer has a personal website and blog (I've now subscribed to it) here. Two articles I've downloaded include:

• The Knowing Doing Gap
• Human Resources from an Organizational Behavior Perspective: Some Paradoxes Explained (published in a top economics journal: Journal of Economic Perspectives)

Hack management