The Problem with Management
Imagine you are part of a senior management meeting of a manufacturing organization. In the meeting there is a heated argument about on-time performance, instigated by a customer’s rather nasty call to the managing director. This is puzzling because the numbers say otherwise. As per the data, the on-time performance levels are consistently above 90%.
The head of sales has a different opinion. He claims the case is one of many!
Amidst the arguments between managers, the managing director speaks.
“I don’t think we are so bad. It is a freak case.”
Others in the room quietly agree or choose to stay quiet.
You are a second-rung manager. You have accompanied your immediate boss, the head of supply chain to this meeting. You feel that the data does not reflect reality. You have first-hand experience of dealing with irate customers. The calls are relentless; they keep you busy almost every day of the week. Sometimes, even on weekends. You remember the call that you answered while in the middle of a movie last Sunday, and the argument with your wife that followed the call.
In your mind, the high on-time performance numbers and frequent calls from angry customers don’t add up. Most of these calls are “managed” by second-rung managers like yourself. However, from time to time, a few go through to higher authorities, and occasionally, a call may go all the way to the top. For people at the top, these few bad calls, only serve as an explanation for why on-time performance numbers don’t touch 100%. The dissonance that is so obvious to you isn’t as evident to the others.
Now, at this meeting, will you speak up? Will you take a stand that’s contrary to that of your immediate boss, the supply chain head, and that of the managing director? Speak up and you might risk making the powerful people in the room look like chumps who are not in touch with reality. Besides, you do not have all the answers for why the data looks good while the reality is not as good. Still, as the on-ground person, someone who is directly involved in managing deliveries (and therefore, delivery performance), your contribution to the discussion, even if it is limited to expressing your intuition, could be important for a reality check.
What will run in your mind at that moment? What will you do?
Anything you do will be based on a careful evaluation of the consequences. You know perceptions matter. So, you will put this dilemma of “should I or shouldn’t I respond” through a filter which quickly does an impact analysis of either action on yourself.
How many people will react in such moments without evaluating the consequences through a lens of self-interest or self-preservation? Not many.
The situation described here is not an isolated one. Most managers face this situation in organizations, especially in those where the power structure is rigidly established.
Opinions of people up in the hierarchy matter a lot in decision making. These people are regular human beings with the common biases. Biases can impact quality of decisions.
Biases and Misalignment in Organizations
Organizations are made up of human beings whose brains are wired for cognitive biases, as behavioral scientists have long established. Different individuals see the same world differently. It is not surprising that our views vary greatly. Consider the following questions:
· Who is the best Prime Minister for our country?
· Which is the ideal schooling system for our kids?
· Who is the culprit in a scam?
· Why are some societies more corrupt than others?
The answers, or opinions, we hold dear as if they were truths. It is not uncommon to find people debating (if not fighting) passionately over these topics. Interestingly, the arguments rise because each side strongly asserts its “objective truth” while, at the same time, insisting that the other side is “biased”!
If people’s world view is influenced by their biases, then imagine the issues that that would cause in the process of decision-making in a social set-up like a business organization, where managers have to make crucial decisions, both for themselves and on behalf of the organization. Not only that, they have to convince peers, seniors, and juniors, who have their own views, biases, to help carry out these decisions.
Managers higher up in the hierarchy, can have a different opinion about a problem than that of the operating team. (Have sales dipped because a new breakthrough competing product has entered the market? Or have the sales fallen because of ‘inefficient’ salespeople who aren’t making enough of an effort?)
Similarly, peers in different departments can have varying and contradicting opinions. (Is quality poorer than usual because analysts in the quality control lab are overworked or is it because of competency issues? Is it both?)
Causal explanations for problems can be all over the place in an organization. Different explanations would mean different approaches or solutions, which, in turn, can lead to misalignment, and therefore, delays in decision-making and execution. Or worse, a bad decision enforced by the biases of the person having power over others may spell calamity for the enterprise, like in the storyline.
Differing opinions can not only lead to poor collaboration and delays, but also create opaqueness in an organization. Senior managers in Nokia and Kodak had disparate views on their market — they could not see the onslaught of disruption from new technology, until it was too late. The operating team in sales had seen it coming much earlier!
The real issue, however, is not differing view-points — they are bound to be there when biases rule the human brain. Managers are aware of the differences in mental models of peers and seniors. This comes out openly in formal and informal meetings!
The real problem is the fact that organizations can’t see the damage caused by contradicting viewpoints. The opposing viewpoints co-exist, for long, in an environment of forced harmony!
(If you doubt this, you can do an experiment to find out for yourself. Pick any chronic unresolved problem in an organization. Ask the top ten managers there what they think are reasons for the said chronic unresolved problem. You will hear a range of responses such as:
· “I don’t think the problem exists”.
· “This is a big problem, and it is because of actions taken in the X department”
· “The problem exists because top management has no understanding of ground realities”)
It is not just men and women in management that operate in this fashion. Scientists in the world of hard sciences like physics or chemistry cling to their biases — many fall in love with their theories and defend them doggedly even when they encounter evidence that contradicts their theories. Mario Livio, in his book, Brilliant Blunders chronicles major events in the history of science when reputed scientists (including Einstein) stayed on with their bad theories longer than they should have. Unlike those in top echelons of organizations, scientists find a way to deal with biases of individuals. Thanks to this, progress of the community or science itself is not impeded.
This is because, differing causal models gives rise to a state of uncertainty which scientists are not comfortable with. This means that theories are always up for scrutiny. Theories are disputed in seminars, experiments are repeated till the inconsistencies are resolved and one harmonious explanation is arrived at.
In the field of hard sciences, if there is a paradox or a conflict, it is never business as usual.
How is it then that in organizations, problems originating from contradicting mental models, are not considered an issue to address?
As we saw in the storyline earlier, hierarchy comes in the way of critical discussions at many levels.
So, the pertinent question is what can help make these discussions more open and fruitful? Would organizations be able to reach a consensus on the right solutions for chronic problems? Will evidence from conclusive experiments help this cause?
While the presence of a pervasive hierarchical culture is an impediment to critical discussion, the absence of effective leadership in the form of strong authority figures, is also a deterrent to progress. Practicing managers are well aware that never-ending and tiresome debates are the staple in meetings where impact of hierarchy is absent.
So, the reason why organizations stay with contradicting mental models, is because, in many situations, there is actually no methodological way to resolve and reach a common and an un-refutable conclusion. So , a hierarchy driven power structure, despite its inherent problems, is the best way to move forward. As they say, let the boss decide!
As a way out of this paradox, we need to understand better how, in the world of hard science, the method of critical argument and testing helps the community overcome biases and reach a conclusion, without an imposing authority in the game.
Advantage of Well-Posed Problems
Alan Lightman, theoretical physicist and author, says, the problems in hard sciences are Well-Posed. This implies that problems have a definitive or a unique solution. In other words, the incorrect solutions are identified and eliminated for good, these can be irrefutably established using the unfailing support of math. A definite answer can be arrived at using the rules of reasoning. This presence of reliable rules helps a scientist pursue a problem with patience and focus because he or she knows that there is a conclusive or definitive answer.
Karl Popper, modern philosopher of science, also said that scientific propositions have to be falsifiable (or can be proven wrong). The necessary condition for falsifiability is clear prediction of what a scientific theory prohibits or the boundary conditions of the theory. For example, the second law of thermodynamics clearly prohibits the creation of a perpetually running machine, without an external energy source. This means that if such a machine is invented, the theory stands falsified.
Scientific theories cannot be vague, all-encompassing or have a varying “curve-fitting” explanation hewn using whatever data is available. For these reasons, as per Popper, the Freudian theory of psychoanalysis, cannot be considered scientific because it cannot be proven wrong — any behavior of a patient can be explained by re-interpreting past information. A theory’s ability to survive rigorous and repeated tests of failure — and not confirmations — gives credence to the theory.
Because problems are well-posed or falsifiable, scientists can argue and conduct tests with the assurance that they will reach a conclusion. Through the process of reasoning and experimentation, scientists uncover the objective world. The entire scientific community collectively labors to dispel the bias of individual scientists.
So, the key question before us is, can problems of management be ‘Well-Posed’ or ‘Falsifiable’ like problems from hard sciences tend to be? If yes, then we can arrive at a reliable method for overcoming biases of individual managers.
Let us try this on the simple problem of on-time performance issue presented earlier in the chapter. Does the company have an issue with on-time performance or not? The problem can be made well-posed by answering the following questions and also by checking what is being measured.
· What does a customer really want, delivery on a particular date, within a week of the said date or sometime during that month?
· Is the customer worried about dispatch date or receipt date?
· Does he/she want all items together in one go or is he/she comfortable with the first item arriving exactly on the committed date and the rest being supplied within a week?
· Does he/she want to change delivery date after placing an order?
· Does he/she want all quantities together in one dispatch?
If making deliveries ‘on time’ is one way of keeping customers happy, and companies have a single, definition of ‘on-time delivery’ then they will also have one, fixed way of measuring on-time deliveries.
Many companies have on-time measures which are “internal organization” focused and not customer focused. For example, some companies compare volume completed in a month as compared to plan as indicator of on-time performance. Some check delivery done in a month instead of a date, while many others compare against a delivery date which is calculated much later than the order receipt date. These measures are far removed from what the customer wants. Companies that go by an “internal” definition of on-time deliveries, a definition that has little to do with customer experience, are left asking ‘What is true?’ What’s on paper or what managers intuit and experience on the ground. As a result, the problem of on-time delivery is open to interpretation. Changing the definition to ‘what customer wants’ exposes the problem and makes it a well-posed one.
However, the next challenge is how to arrive at a conclusive reason for poor on-time-delivery. There can be varying, and at times, contradicting opinions on “reasons” behind delivery problems; departments could resort to blame and denial to support these reasons. To reach a common conclusion, the causal reasoning should also be falsifiable.
Such “falsifiable” causal reasoning is required for many topics in an organization.
· Did the marketing scheme really help us increase sales or would sales have gone up anyways?
· Closing the plant — was it helpful or a mistake?
· Is the current leader delivering? Should we replace him/her?
· Should we increase the product price?
· Did the advertisement really result in improvement in sales?
These are tough questions. Look at question 1. We can decisively answer it if we also know the answer to a counter-factual question. What would have happened if the marketing scheme was not launched? But such a world does not exist!. Firm objective answers to counterfactual questions, which despite being hypothetical, can only help us meet the needs of falsifiability. This will pave the way to making management, as practiced, more scientific.
Conclusion
In order for Management to move closer to being a science, one needs to find ways to convert issues and problems to be well-posed and falsifiable. (We will understand more about it in next chapter.)
This will not only help cure biases of individual managers but also bring better understanding of objective reality facing the organization as a whole.
Once we know how to define problems and solutions in a scientific manner, the need of a power structure of a hierarchical organization , to resolve deadlock of differing opinions, goes away. This paves way for an open culture in an organization. The junior-most guy in a meeting room, unlike one in the storyline, will have the ability to present his contra-view on a topic.
This is the 1st chapter of a series of articles that explores the limitations of management theory and practices as it currently exists in order to propose a radical, new, and structured thought process for bias free decision making in variety of scenarios. These techniques can help companies instill a culture of open dialogue, critical thinking, and innovation — all necessary conditions for developing agility in the current uncertain business environment.
Click here for chapter 2 “Reframing Problems as Well Posed”
