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Hard facts about the soft stuff

Tom peters, co-author of In Search of Excellence once said “it all starts with Doug”. That’s Douglas McGregor of Theory X & Y fame to you and me. Peter’s point about ‘Doug’ was that he was saying that people were the most important part of business, and that was in 1960. Everybody has heard of XY theory and ‘In Search of Excellence’ and so on, but it appears that the ‘soft stuff’ is still too hard.

It is amazing how people gravitate to ideas which they know at heart are wrong, and yet still believe in them even when the facts support the opposite. Likewise, we all know people are the most important part of business, and yet ignore all of the research and data which has been produced to support this view. The number of times we have heard the phrase ‘people are our biggest asset’ far exceeds the number of times we see people being treated as if they were indeed the biggest asset. It’s like a kind of managerial amnesia; you can almost hear someone in the Pentagon every few years saying, ‘I wonder if we could train dolphins for military use’.

Let’s take Business Process Re-engineering for example, one of the early writers on the subject reported on a survey in 1994 of projects and found that two thirds were judged to have not been successful. Another BPR advocate, if not the one, and author who had worked with Davenport in the 1980’s was Mike Hammer (a theory X person if ever there was one). Hammer later said that he and the other leaders of the $4.7 billion re-engineering industry forgot about people saying ‘I wasn’t smart enough about that’.

Here are some interesting research figures, in a 4 year survey of 200 firms in 20 industries it was found that during 1977-88 firms with a strong adaptive culture based on shared values outperformed their competitors:

• Their revenue grew more than four times faster

• Their rate of job creation was seven times higher

• Their stock price grew twelve times faster

• Their profit performance was significantly higher at 1% versus 756% growth in net income

The eighteen ‘visionary’ companies researched by Jim Collins & Jerry Porras in ‘Built to Last’, if taken as a whole, had a total shareholder return of 206% between August 1994 and August 2004, compared with 132% for market as a whole over the same period. Bear in mind that these are companies which do not exist merely to maximise shareholder value or profit, but have core values and a sense of purpose.

So it appears that a strong adaptive culture, core values, and a sense of purpose make for a more successful organisation. That would mean that there should be a very strong drive to work on these areas of the business in order to become more successful, but that does not appear to be the case. Why?

Well, it is because the soft stuff really is hard. Would most executives (Jack Welch excluded) rather put forward a sales plan or get feedback direct from the shop floor? Would they rather negotiate a contact for new equipment or consider the cultural values of the company? Would they rather set goals or win over the hearts and minds of their staff?

Being totally optimistic, the answer is that, just as we all know how important people are, we all want to do the ‘right’ thing, but don’t quite know how to go about it. Well, there is a significant amount of research and insightful writing on the subject, and there now a number of tools which can provide pointers and structure to help assess and develop corporate culture. There are also examples of the success of those who have followed this route (see the ANZ Bank website in case studies). The key thing to understand here is that organisational values are ‘assessed’ and not ‘measured’, for as Tom Peters points out, GE had been picked as one of the ‘excellent’ companies by ‘dumb’ instinct but was dropped as it didn’t fit the ‘smart’ metrics.

So, forget all about managerial amnesia and come on in the ‘cultural’ pool, the water is fine!