When the Hewlett-Packard board got rid of former CEO Mark Hurd (using allegations of salacious-sounding but apparently pretty mild impropriety as a cover for pursuing personal feuds), Larry Ellison, founder of Oracle, described it as “the worst personnel decision in Silicon Valley since Apple fired Steve Jobs!” Hurd was well-thought-of outside HP, but a new Fortune Magazine article (May 2012) makes it clear that “the Hurd era’s external success had concealed internal deterioration.”

Hurd was a zealous cost cutter, and in the first two years of his tenure this helped HP to a near-doubling of free cash flow. But the cutting continued too far, to the point where for example facilities managers at one office programmed the lights to go off at 6pm to save energy, forcing people who wanted to continue with their work to go home. Those who brought in their own lamps were quickly stopped (the article doesn’t suggest that Hurd knew about this. It does imply that there were a lot of other things of this nature that he didn’t know either).

It’s easy to say that all these people: Hurd, the HP board, the facilities manager, the head of the office, were stupid, but that’s a lazy and potentially dangerous explanation if it blinds us from considering an alternative: that clever, competent people do sometimes end up doing stupid things. It seems unlikely that these directors would have reached their positions at the 10th biggest company in the Fortune 500 through chance, and we know from research that individually level-headed and accomplished people can do stupid and dangerous things in certain types of social setting (see Chapter 14 of my book: The Performance Papers for more on this).

So how might it be that the organization overshot on the cutting? Well:

  • It’s hard to stop something which has been working for you. It’s like the approach of too many native speakers of English to asking for directions in a foreign country: the words work at home, so if they are not working here, just say them again LOUDER. By similar ‘logic’: cutting is good, so more cutting is better.
  • If your attention is captured by a single metric (e.g. electricity bill savings),  it’s easy to lose the big picture, even at great and obvious potential cost. Dive-bomber pilots have been known to be so fixated on the target that they stopped watching their altitude…
  • Our language and culture encourage linear thinking: we tend to seek to increase or reduce, rather than balance.

What to do?

  • Regularly check that operating metrics remain accurate proxies for your intended results. Is a further cut in the electricity bill now going to conflict with the higher order requirement to be productive and profitable? This needs to happen at a level higher than the one performing the action.
  • Remember what control engineers know: a stable result requires variable action. Even a thermostat ‘knows’ that there’s a time to turn things up, and a time to turn things down.
  • Create multiple monitoring paths so you know what is going on in your organization. It’s very hard for top managers to know what’s really going on, because it’s often against employees’ individual interests to tell them.

For whatever reasons, even clever people sometimes get caught up in doing stupid stuff. Just as good design demands that we build products that can be used by fallible humans, we should design organizations that can be run by them, too.

© 2012. Andrew Bass. All Rights Reserved.

 


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