Think — and think again: The Jeffrey Pfeffer interview

Jeffrey Pfeffer can make you uncomfortable: He’ll take your preconceived notions and new-found knowledge and smash them against the rocks. He makes you think – and think again.

Pfeffer will be a featured speaker at Business of Software 2007 (, October 29 and 30 in San Jose. He is the Thomas D. Dee II Professor of Organizational Behavior in the Graduate School of Business at Stanford University, and author or co-author of 12 books, including The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action; Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management; and the most recent, What Were They Thinking? Unconventional Wisdom About Management . He also writes a monthly column called “The Human Factor” for Business 2.0 magazine.

Fellow Business of Software speaker Dan Nunan talked with Pfeffer recently about a wide range of management topics, from the contempt that software companies show for their customers, to the need to treat employees like adults.

Nunan: In your Business 2.0 column, you’ve written both in defense of bosses from hell, and on the value of retaining good talent. How do you determine whether or not the bosses from hell are hurting the company by chasing away good talent?

Pfeffer: I don’t think you got the point. Bosses from hell, like Steve Jobs, invariably drive talent away. And talent is inevitably important. But it’s a matter of balancing costs and benefits. All medicines, even aspirin, have side effects. So, what do you do? You balance costs and benefits. What I said in the article is that there are some fields, including software and entertainment, where the contributions of an individual creative talent may be so large that you need to put up with some personal idiosyncrasies. I never suggested that one should not try coaching or other things to reduce those personal foibles. But I just recognized that no one is perfect, and hiring and retention decisions need to balance gains and losses.

Nunan: What causes the knowledge-doing gap and how does it affect the way companies conduct business?

Pfeffer: There are numerous causes of the knowing-doing gap; among them are a climate of fear and a tendency to take what was done in the past into the future without much thought or reflection. Companies continually search for "new knowledge" and have spent a fortune on intranets and other devices for knowledge sharing. That is all well and good. But knowledge that is not turned into action – into everyday practice – isn’t worth a thing. And the research suggests that this is a big problem; that companies are not acting on the basis of what their people know.

Nunan: Can you give any examples of technology firms that have breached the gap and how have they done it?

Pfeffer: None come to mind, although I am sure there are many.

Nunan: Do you think that Alfred Sloan’s book My Years with General Motors is less relevant today than it was when it was written?

Pfeffer: It is as relevant now as it was decades ago. The basic, fundamental bases of business – for instance, Peter Drucker’s common sense insight that there is no business without a customer, so take care of your customers – and the fundamentals of human psychology have not changed. The continual search for new and trendy ideas has created more harm and havoc than anything else, although it has probably moved a lot of books and magazines.

Nunan: You’re stuck in an elevator with someone about to start a business. They bought your latest book, paid full price, and think you owe them advice. You can’t escape for a minute, so what would you tell them about starting a business?

Pfeffer: The first thing I would tell them is that buying my book doesn’t entitle them to advice. The second thing I would tell them is that they ought to ask someone who actually has experience starting a business. The third thing I would tell them I heard from one of the co-founders of SAS Institute, the largest privately owned software company in the world: "Listen to your employees, listen to your customers. Do what they tell you."

Nunan: Are managers less deluded now than they were when you started studying business?

Pfeffer: Not that I can tell. Things seem to be getting worse in some places, better in others.

Nunan: Have the management theories you elegantly lampoon in Hard Facts (such as sacking 10% of your workforce annually) ever worked?

Pfeffer: Not that I can find any evidence of.

Nunan: How would you quantify the intelligence of the great leaders that you’ve encountered?

Pfeffer: Leaders have many forms of intelligence. I think Sternberg’s research, made popular in books like Goleman’s Emotional Intelligence, is important and correct. There are many ways of assessing these other forms of intelligence, many valid and reliable measures.

Nunan: Working where you do in Silicon Valley, you must have seen your fair share of technology firms come and go over the years. Are the challenges facing the software industry any different from those in other industries?

Pfeffer: No. I think the problem in the software industry is one that many high technology and, for that matter, low technology, companies share: contempt for the customer. In what other industry do you purchase a product that is a "license" so you are forced to purchase upgrades that offer features you don’t want or need; do you get to help with the product testing; and do the vendors sell you "upgrades" that fix their mistakes?

As Walter Mossberg pointed out in a column in the Wall Street Journal years ago, if your toaster had the reliability of most software, you would throw it out. The problem now is that customers don’t trust the vendors – for good reason – so the sales cycle has gotten longer and more expensive. And the real problem is that the good companies suffer from the behavior of the less-than-good, a contagion effect that bedevils business generally and that my colleagues in leadership positions often don’t seem to pay enough attention to.

Nunan: Is this still true? Google, Yahoo, Apple,, Facebook, etc., all produce software that people and businesses love, and seem to trust with incredible amounts of personal data.

Pfeffer: It may not be as bad as it once was, but it’s still true. Most of the companies you list, such as Facebook and YouTube, aren’t generating much revenue. The software industry is mostly IBM, Accenture, SAP, Oracle and Microsoft, whose revenues dwarf a lot of companies that get more ink. If you talk to people who sell business software, they will tell you they deal on a daily basis with the residue of products that don’t work and installations that are bungled.

Want an illustration? Go to Stanford’s website, go to the news archives, and type in “Oracle financials.” You will see stories in which Stanford administrators apologized to the staff for the hassle they were put through, and this for a system that cost about $50 million and won’t save the university a cent. Search out the websites that describe the PeopleSoft implementation in a university in Ohio – Cleveland State if my memory serves. The horror stories abound, and by the way, are quite current. That seems to be contempt for the customer, and is behavior that would drive companies in almost any other industry out of business.

Nunan: A big problem in the software business is the war for talent, particularly for developers. This is compounded by the very low (and shrinking) numbers of women studying computer science at university level. Given this is a problem as much for the software industry as it is for educational institutions, what should the industry do about it?

Pfeffer: That’s simple: have workplaces where women want to work. The U.S. is a laggard: the only country in the world that has no mandatory vacations or sick days – all are offered at the discretion of employers; the only country where even unpaid maternity or family leave seems to leave employers feeling that this is all just too much. I could go on. The younger generation wants flexibility and the ability to have a job and a life. Those employers that offer great places to work, in any industry, even software, don’t have a shortage of employees. Those employers who offer toxic workplaces because they mistakenly believe this is the only way to succeed deserve the employee problems they have.

Nunan: European managers are frequently told to behave more like American managers. In the tech industry, governments are encouraging the building of technology parks in the hope they can copy a little bit of Silicon Valley. Is European management really that much worse than U.S. management?

Pfeffer: I don’t know who is telling them this, but it isn’t me. A lot of people have confused economic performance (which depends on government policies such as interest rates, trade policies, etc.) with the performance of companies. Moreover, according to a detailed analysis in The Economist, European productivity growth and other measures of economic performance, including return on capital, have generally matched the U.S. – even as Europeans get more vacation and more healthcare, among other things. Europe now has a burgeoning venture capital industry and Eastern Europe is drawing a lot of investment in both technology and manufacturing.

There is no American or European management in any event. There is too much variation to speak of a dominant style. Is American management that of the companies on Fortune‘s Best Places to Work list, or is it the approach used at United Airlines?

Nunan: What do you think of the principles behind Ricardo Semler’s industrial democracy? Do we even need managers?

Pfeffer: Semler’s books aren’t followed even in Brazil, which is too bad. The evidence on the usefulness of self-managed teams is pretty compelling. We don’t need as many managers as we have, mostly because we don’t need as much control as the typical organization has. We need people to architect a culture that permits people to use their skills and abilities to make decisions. It is pretty clear that without people to protect and develop that culture, it won’t last under the pressures of investment bankers and business journalists. But beyond that, we ought to treat employees like adults.

Nunan: Why are so many managers so bad? Evidence-based management is all very well, but most managers still screw up the basics. In medicine, there are well-defined procedures for weighing up and defining what counts as evidence, but in management a lot of evidence is really just personal experience. How can managers actually get hold of quality evidence that they can trust to make decisions with?

Pfeffer: I’m not sure managers are bad. I think many companies are led by people who have more political skills than leadership skills, and I think a lot of companies are run by people who have very mistaken ideas about human motivation and the sources of company, and country, success.

The evidence is all around them. Many companies have invested fortunes in business systems that capture information but then don’t use it for decision making. To many CEOs, evidence and analysis is something for the IT department or IBM. Just as most companies don’t recognize the strategic value of their people, they don’t recognize the strategic value of better decisions based on facts, not experience or wishful thinking. But all the better for those that do it. After all, competitive advantage comes from things that not everyone is doing.

3 responses to “Think — and think again: The Jeffrey Pfeffer interview”

  1. Joao Pedrosa says:

    Nice one! Thanks for it.

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