Hard Facts, Dangerous Half-Truths and Total Nonsense: You’ve got to love Pfeffer and Sutton

Being a Stanford graduate, I was already partial to the authors, two Stanford professors, before even starting to read Hard Facts, Dangerous Half-Truths and Total Nonsense: Profiting from Evidence-Based Management. With a title like that? and that cover design? (oh my god, those people at HBS Press have got themselves a mean publishing machine).

Wait. It only gets better. If nothing else, read this book for a benchmark of academic freedom. Few among the Stanford Business School faculty enjoy more of an icon-like status than lecturer – and entrepreneurial legend – Andy Grove. So, in opening the book with an argument about the lack of evidence that stock options enhance organizational performance, they deliver a quick jab to Grove:

“When Andy Grove, former Intel chairman and CEO, got prostate cancer, he assiduously tracked down all the data he could comparing treatment options and their risks and benefits, gathering the best available evidence to guide his medical decisions. That’s what we would expect from a well-trained engineer and scientist. Grove, however, like many of his Silicon Valley friends, continues to insist on the benefits of [stock] options and doesn’t cite evidence for his views – even though with other business decisions, Grove sticks closely to the facts.”

Similar barbs are reserved, later in the book, for Robert Burgelman, whose claim that “strategy is destiny” they quickly proceed to undermine – with a close reading of the Intel story, which Burgelman and Grove have co-taught to generations of students: the key strategic decision in Intel’s story was, apparently, an outsourcing decision made by IBM, which Intel was smart to capitalize on, but which Intel did not influence or even foresee as the lucky break that would build the semiconductor giant. If you ask me, that’s pretty much like pulling the rug from under Burgelman’s feet. Yet, their whole critique seems to be in good faith, extremely civilized, and driven by the authors’ genuine truth-seeking efforts rather than by personal animosity. And I just think that’s very cool.

If you like challenging conventional wisdom, this is a book full of delights and an arsenal of tools for attacking nonsense in your corporate environment whenever you see it:

“Take the case of a senior exceutive from Florida Power and Light, who told us, while attending a Stanfrod executive program, that his compensation was based on the profitability of the utility. The utility’s profitability, since in the short run most of its costs and rates were fixed, depended mostly on the amount of electricity sold, and the amount of electricity sold depended mostly on the temperature. The hotter the summer in Florida, the more power was sold, and the more profitable was the utility. That summer was a particularly hot one in Florida, so the executive got a big boost in pay during the month that he spent at the Stanford Executive Program in california. This executive noted that this incentive system made no sense — unless you believed he could control the weather in Florida”.

The authors handle some big hairy questions (Is work fundamentally different from the rest of life, and should it be? Do the best organizations have the best people? Are great leaders in control of their companies?) In most cases, they don’t have the answers, but they show you under what conditions an answer might be fit for a given situation, and how devilishly difficult it is to get to the answer if you don’t specify those conditions. So, suppose your company spends a lot of time and effort developing and administering a performance management system that ranks people’s performance on a curve or forced ranking, encouraging you as a manager to “use the full curve” in grading your employees, and rewards better performers with monetary bonuses (ever been in one of those companies? :-)). After reviewing decades of experimental research and field studies, Pfeffer and Sutton conclude: “Individual incentives and highly differentiated reward and recognition distributions make more sense when performance can be objectively assessed and when performance is mostly the result of individual effort rather than the product of interdependent activity”. Examples of such jobs are jockeying, cutting trees, and installing windshields. “Similarly, the evidence suggests that more dispersed financial rewards increase the performance (particularly of the highest performers) when tasks entail little or no interdependence and outcomes are clear.” Examples: driving trucks and picking oranges. When was the last time you had a job like that? You probably experienced a fair bit of interdependence even while editing your high school yearbook, didn’t you? “Yet when work settings require even modest interdependence and cooperation, as most do, dispersed rewards have consistently negative consequences on organizations… The negative effect of pay disparity was especially pronounced for high-technology firms, because those firms had the greatest need for collaboration and teamwork.”

Pfeffer and Sutton claim as their practical inspiration Dr. David Sackett’s evidence-based medicine movement: hell, if it works for medicine, let’s try to see if it works for business, too. In the bigger scheme of things (on strategy, organizational change, and leadership), their conclusions remind me of Eric Beinhocker’s The Origin of Wealth, a more theoretical work about contemporary economics which nevertheless seems to me to hint at some of the same truths. And at the end of the day, it’s not about truths, which change anyway: it’s about the method of looking at the facts, applying your brains, and leaving behind those beliefs that happen to be unsupported by evidence. If we all could inject some more of this wisdom into our organizations, we’d probably have earned our salary, and our bonus too.

8 thoughts on “Hard Facts, Dangerous Half-Truths and Total Nonsense: You’ve got to love Pfeffer and Sutton

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  2. Dear Sir:

    Andy Grove drew my attention to your review of Pfeffer and Sutton’s book.
    Your review is unconsciously uncritical and for a Stanford graduate you seem to be remarkably credulous and gullible. In fact, I believe that you have not read my book Strategy is Destiny (Free Press, 2002), and that you simply accept Pfeffer and Sutton’s statements about it without verifying these statements. You should leave behind any claim of being an objective reviewer. You are an easy mark, indeed.

    Here is the sentence in the book on which Pfeffer’s claim rests:

    “Barrett remarked that Intel, having been given a monopoly in the PC microprocessor chip market place by IBM, was clever enough to hold onto its early market-leading position.” (p. 143.

    This “evidence” is factually false (IBM required Intel to cross-license their technology) and for that reason alone highly unlikely to have been uttered by Barrett. There are legal reasons for why it is virtually certain that he did not utter those words.

    Upon my request for validation Pfeffer only offered “just so” evidence and “trust my recollection.”

    I asked the participants in the Stanford Executive Program (senior executives from all over the world) whether they believed that Barrett would make the sort of statement that Pfeffer claims he made in public – the response was derisive laughter.

    More to the point, I asked Barrett directly whether he did say this. He claims no recollection of having said it and he also pointed out that IBM does not give out “monopolies,” only the Patent Office can do that.

    When I wrote to the President of Harvard Business School Publishing to complain about this unethical reporting of “evidence” that was not triangulated nor verified with the source (I think I could have gotten – and may still do if the conditions warrant it – Pfeffer to have to respond to the University’s Committee on Research on Human Subjects to account for this violation of research ethics), his answer was that Pfeffer did not really mean to say that IBM granted Intel a “monopoly,” but that Pfeffer had used that term in the vernacular meaning only. So here is your case of utter and “total nonsense.”

    In conclusion, unfortunately, you have been snookered by Pfeffer and Sutton who have transformed themselves over the years from scholars into media attention hounds. I nevertheless trust that you have still higher standards than the authors of the loathsome drivel that you so enthusiastically endorse, and that you will let your readers have access to my complete response. including the material shown below.

    PFEFFER’S RESPONSES TO MY DEMAND THAT HE PROVIDE CORROBORATION FOR THE STATEMENT HE CLAIMS BARRETT MADE:

    From: Jeffrey Pfeffer [mailto:Pfeffer_Jeffrey@gsb.stanford.edu]
    Sent: Wednesday, July 19, 2006 3:46 PM
    To: Burgelman, Robert A
    Subject: RE: Evidence-based management and Intel

    It was sort of an “off-the-record” meeting of CEO’s (run by a guy named Sanjay Vaswami for an organization that is essentially a front for McKinsey) and it was about 10 years ago (I could get you the exact date if you wanted)–but it does pre-date the government’s antitrust case against Intel and the AMD suits, so perhaps Barrett (who was COO at the time, not CEO) was not as “careful” as they currently are. But trust me, my recollection is correct.

    And, by the way, increasing returns to adoption and strategic recognition are actually not at all inconsistent with what he said or the point we made. The point was that when IBM decided to use outside suppliers for their chips and chose Intel, Intel had been “handed” an opportunity–but in order to take advantage of that opportunity and to maintain that “position” (or “monopoly” to use Barrett’s term), Intel had to do a number of things–including recognize the opportunity (strategic recognition) it had been given and also to do things in order to take advantage to build a market leading position because of the increasing returns factor. So, in the end, there is probably less inconsistency in the accounts than you at first might have thought.

    But the point still stands that a lot of Intel’s success came from being both lucky and smart–and that IBM’s decision helped the company immensely, although that decision, by itself, would not have guaranteed success.

    Jeff

    Jeffrey Pfeffer [mailto:Pfeffer_Jeffrey@gsb.stanford.edu]
    Sent: Tuesday, July 18, 2006 1:47 PM
    To: Burgelman, Robert A
    Subject: Re: Evidence-based management and Intel

    Robert,

    At a CEO meeting sponsored by McKinsey some years ago that I spoke at, the comment I attributed to Barrett is essentially precisely what he said. He argued that IBM could have (and still probably could) have gone into the memory chip business itself, but “gave” Intel the opportunity that Intel then was smart enough to seize upon.

    We can talk about this if you want.

    Jeff

    So much for “evidence-based management.” I trust the irony will not escape you, Sir.

    Sincerely,

    Robert A. Burgelman
    Edmund W. Littlefield Professor of Management and Director of the Stanford Executive Program
    Graduate School of Business
    Stanford University

  3. Well, what should I say?
    (1) I am flattered that Grove and Burgelman read my blog, even if I’m not so sure they actually do – it’s probably one of their assistants sending out comments (most likely I’ve received the same letter as other reviewers, as shown by the opening and closing with “Sir”, even if I do appreciate the attempt at customization for Stanford graduates).
    (2) So the whole discussion was not in good cheer at all and has turned vicious: tough luck. Stuff happens. It is a typical illustration of the Internet reputation dilemma: are you generous, forgiving and trying to build a dialogue with your critics, or are you set on defending your reputation for posterity in writing at all costs?

  4. Dear Sir (I assume),

    Not surpringly, the quality of your response to my comments is entirely in line with the quality of your review of Pfeffer and Sutton’s book.

    Fortunately, some of us in academia are still simply interested in seaching for the truth and defending it.

    So without illusions, I nevertheless hav a faint hope that my comments might encourage perhaps a few of your readers to take the time to read the field research-based account – spanning a research period of more than 10 years – of Intel’s evolution discussed in my book (Strategy is Destiny) and compare it to the cursory, and actually quite vulgar, “debunking” effort by Pfeffer and Sutton. If only one of your readers did this, I would consider it worthwhile having taken the time to respond to your “review.” If none does, I will at least feel that I did my duty as a scholar who couldn’t care less about “defending a reputation” on your blog.

    Good luck!

    Robert A. Burgelman

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