What were they thinking? Unconventional wisdom about management

Dr. Pfeffer (he’s the Thomas D. Dee II Professor of Organizational Behaviour at Stanford) has written an interesting book on management wisdom. Its called ‘What were they thinking? Unconventional wisdom about management.

He refers to an experiment he does on a regular basis with his executive students. He will go up to one & say, “Assume that you work in my company & that you are who you are- a competent, experienced, hardworking, intelligent individual, doing your best to do your job as you think you should. Now I come up to you & say, ‘Our organization has fallen on hard times- which, by the way, may be because of strategic mistakes you had no part in making- and in order to restore profitability & financial viability, we need to cut salaries & other employee benefits, by about 25%.’ How would you feel about this, and what are you going to do in response?”



He says ‘I have never once had an executive respond by thanking me for making the tough decision required to keep the organization economically viable. Instead I get one of the two responses. The first, often communicated with a reasonable amount of anger & emotion, is that the person is immediately going to look for another job & leave. The second response, if I add that general conditions of the job marker preclude such a move, is that he is going to with-hold efforts & ideas, cut back on what he does, & maybe find ways of getting back at management by intentionally messing things up.

Note what cutting salaries does beyond the immediate benefits of reducing the wage expense. First, it drives people to leave. And who is likely to be able to find another job? Usually, the best people- those who have the most skills, experience, and the highest levels of performance. As the best people leave, turning the company around becomes more difficult, because turn-arounds require insight & skill, & both are being lost.

Second, cutting salaries creates a desire of the part of those who remain to passively (by slacking) or actively (by sabotaging) harm the company….

Read the book. Its available in our library!