The Economist was angry. Rarely have I seen an article as inflammatory as Schumpeter: The three habits ... of highly irritating management gurus. Usually subdued and intellectual, the Economist apparently had had about enough of the non-accountable tomes from consultants like Stephen Covey, author of The 7 Habits of Highly Effective People, which provide prescriptions for business success using a combination of the latest management fads and self-help formulas.
Acknowledging that he indeed has management consultant credentials, the Economist nevertheless notes three particularly annoying habits Covey brings to his craft. “The first is presenting stale ideas as breathtaking breakthroughs.” An illustration is a recent speech in which Covey proclaimed “capitalism to be in the middle of a paradigm shift from industrial management to knowledge-age management.” Ya think?
The second irritating habit is identifying model firms. What's a positive model for one guru in a particular time period might be a negative for a second at a different point in time. Covey notes the outstanding management of General Motor's Saturn division, which is now on its way out of business. Almost comically, Campbell Soup is extolled as a winner in What Really Works, which assessed company performance in 1986-1996, while disparaged as a loser in Big Winners and Big Losers, when an overlapping 1992-2002 time frame was the baseline. “The gurus routinely ignore such basic precautions as providing a control group.” They also forget that good (or bad) performance is not timeless. The three habits mentions the rigorous statistical research of Andrew Henderson to distinguish truly great performance from simple good luck. I discussed the driving article behind this splendid work by Henderson and Deloitte Consulting in Random Business Performance. Indeed, the comparative business performance measurement methodology outlined there should be a point of departure for all business performance research.
The third annoying behavior is the touting of numbered lists of facile principals to success – and diagnostic tools to assess, packaged with performance tools to improve. “Consultancies like to tell their clients that the key to success lies in customer relationship management and then sell tools to improve it... But most of these rules are nothing more than wet fingers in the wind.”
Perhaps no one has a better handle on the dubious workings of management gurus in the business press than Phil Rosenzweig, author of the insightful, highly-entertaining and critically-important book: The Halo Effect...and the Eight Other Business Delusions That Deceive Managers. In Rozenzweig's analyses, one of the main reasons managers are deceived is because they listen to gurus! Principal among the delusions Rozenzeig articulates is The Halo Effect, wherein company financial performance colors attributions about leadership, culture and values. When a company's doing well, those attributions are positive; when it's not, the perceptions turn ugly. Rozenzweig's chronicle of the rise and fall of Cisco's halo in the business press is nothing short of brilliant. I often think of the halo effect when I listen to ESPN sportscasters rant and rave about professional sports teams, radically changing their management “theories” day to day, a function solely of the latest wins and losses.
The Delusion of Lasting Success could describe most of the major best sellers, including In Search of Excellence, Built to Last and Good to Great. In reality though, the “research findings” that designate the best companies often change drastically over time – as the great become mediocre and laggards improve (see Campbell Soup above). Anyone ever heard of regression to the mean? Finally, The Delusion of Rigorous Research plagues the analyses of most gurus who are plenty quick to over-interpret their data. What is viewed as top performance is often just the tailwind of the market – random good luck. The related Delusion of Connecting the Winning Dots studies performant companies looking for common factors behind their success, with no consideration of less-than-successful or control group firms for comparison. Indeed, the methodologies behind the guru “studies” generally fall far short of acceptable scientific rigor.
Alas, BI practitioners can analyze, critique and debunk the works of popular management gurus till the cows come home, but the demand for expert wisdom grows unabated. The gurus fill a need of business leaders to provide the magic formulas for management. Much as we critique the hokum they often deliver “...their failures only serve to stoke the demand for their services....the very fact than (management) defies easy solutions, leaving managers in a perpetual state of angst, means there will always be demand...”
Steve Miller's blog can also be found at miller.openbi.com.
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