The Business Sensei

The Corporate Culture Conundrum

I get asked a lot about corporate culture. In this case, I ended up responding to a very detailed query at such length that I decided to include it here since I doubt the person interviewing me will be able to use all of what I wrote (I’m also posting this after the article comes out, so I don’t upstage anyone).

Let’s start by defining culture. At root, culture is nothing more than the residue of perceived success. In other words, it is the accumulated knowledge of how to be successful at a particular company and how the company is successful in the marketplace.

Why success and not failure? Simple. We tend to repeat the behaviors that appear to bring us success, and discontinue those that do not. Moreover, cultures based on failure simply do not survive. At some point, there have to be successes in order for the culture to remain viable.

I focus on perceived success because what really matters is not whether a behavior is really successful so much as our belief that it is successful. For example, in the 1990s, Nokia firmly believed that its success was due to its innovative management style. The reality was that they had a hot product, cell phones, in an exploding market. When the market saturated, their revenues dropped off along with every other cell phone provider in 2000. Today, Nokia is increasingly irrelevant. If everyone at the company had come to work wearing Groucho Glasses every day, their product would still have sold and they might very well have ascribed their success to their innovative dress code. The results would have been pretty much the same, although people might have been inspired to tell better jokes.

Because culture contains within it the memory of success, it is very hard to change. No one likes to change what’s working! What’s worse is that a behavior rarely succeeds all the time: when something doesn’t work, we ascribe the failure to “not trying hard enough” and resolve to do better. The resulting semi-randomness to the success produces a response similar to playing a slot machine: random success is highly addicting.

This phenomenon becomes particularly important when we realize that the business environment changes more rapidly than the culture. A once successful behavior gradually stops working. However, because it fades out slowly, intermittent successes along the way serve to make the behavior stronger and stronger even as its usefulness is decreasing. When it comes to not changing a behavior, it takes only the occasional success to make up for an awful lot of getting kicked upside the head.

This also means that there are two key aspects to culture: what we do and why we do it. Most organizations focus purely on the “what” and ignore the “why.” Even when an organization attempts to change culture, they almost always focus on what they are doing. Unfortunately, when you only change the what, you are changing the superficial. The underlying why will rapidly pull the new behavior back into alignment with the original behavior; although cosmetic changes may persist, the new “what” will be fundamentally identical to the old.

The “whys” of culture also interlock: there is rarely one reason for a particular behavior. As a result, attempting to change one “why” can also be quite difficult because a) it’s hard to identify it precisely, and b) the rest of the interlocking structure of beliefs pulls it back. It is quite possible for a CEO or senior management team to simply chop off a piece of a corporate culture, but it can be quite unpredictable what else they’ll lose: for example, when IBM dropped its traditional full-employment policy, they also lost a great deal of employee loyalty and their historic “IBM takes care of me and my family, I take care of IBM” employee mindset.

With that said, let me jump over to your questions:

1. How do you know when there's something wrong with your corporate culture (what are 2-3 signs), or how do you know if things need improving just a bit?

Something is “wrong” with a corporate culture when the culture can no longer obtain resources, that is to say clients and revenue, from its environment. The early symptoms can manifest in several ways before the revenue drop really hits. The most common is a persistent feeling of being stuck: more and more effort is expended for less and less success. Previously successful revenue generating behaviors are losing their effectiveness, but doing so in fits and starts.

Another common symptom is increasing defensiveness on the part of management: executives don’t want to hear why something isn’t working, and attempts to address problems are met with denial. At exactly the point where the executive team should be bringing in outside help, they become increasingly unwilling to do so. An outsider is far too likely to grind the sacred cows into hamburger. IBM’s decision to bring in Lou Gerstner in 1992 is an example of a company overcoming that fear of outsiders and actually addressing their problems.

A third symptom of culture problems is a persistent inability to make and keep decisions. When teams within the company, or the company as whole, continually revisits discussions and can’t seem to follow-through on goals, that’s a major warning sign that you need to take action.

2. Where do generational differences among staff and colleagues come into play?

Let’s start with the elephant in the living room: the Gen Y myth. This whole concept that Gen Y’ers are somehow less dedicated, less motivated, or less <insert here> than Gen X or Boomers is, quite simply, a myth. Indeed, the whole idea that the younger generation is less respectful, dedicated, hard-working, and so forth, than their elders is itself a cultural belief that goes back at least to Socrates.

What is different, however, is that Gen Y’s do not share the cultural belief that you graduate from college, work at one job for 40 years, and retire to enjoy your “golden years.” While this was, or at least appeared to be, a valid cultural belief at one time, it is no longer valid in the current environment and shows no signs of regaining validity. However, for those who grew up with it, it is very difficult to put it aside.

Within an organization, what matters first is not the generational differences but the degree of immersion in the culture of the organization. Younger employees are less deeply immersed in the culture; they’ve had less time to absorb it and to assume its values. Thus, they are more likely to propose ideas and approaches that older employees view as violating cultural values and hence are more likely to reject. Note, by the way, that I’m referring less to chronological age than to amount of time with the company. Since the older employees typically have more authority, younger employees are more likely to be frustrated. How they cope with that will, however, be strongly influenced by their generational cultural values: a Boomer or X’er might decide that if they stick around and pay their dues, they’ll get a voice in due time; a Gen Y’er is probably more likely to go somewhere else. One solution is not inherently better than another.

3. How do you cultivate a creative and collaborative team (what 2-3 three things can really build that team culture)?

Culture is whatever is seen as successful. If you want people to collaborate, reward collaboration. Sounds simple, but it just doesn’t happen. Companies focus on individual performance and individual reward. As a result, they get a bunch of individuals often competing for a limited pie. While it is important to acknowledge and reward individual contributions, that cannot be all that you reward and it should never be set up in a way that creates competition between team members.

4. It's all about innovation, how best to encourage creative brainstorming for service/product innovation (what works and what doesn't and why)?

There are four culture traps to avoid and four cultural beliefs to build. The four traps are:

Perfection — We must make the perfect mousetrap… which works until someone comes along with a cat.

Protection — We must not hurt our existing products. Pity our competitors don’t feel that way…

Identity — We’re an X not a Y. IBM was a serious business company in the 1980s. They didn’t “do games.” Now they’re heavily involved in serious gaming.

Creeping Box — We’re so far outside the box no one can catch us. Just ask Yahoo… Once you move outside the box, the box grows and suddenly you’re just one of the pack.

The cultural values to foster

Continuous education — Keep people learning. Don’t limit people to taking classes in their areas of expertise; rather encourage employees to study whatever interests them. Innovation comes from putting together apparently disparate pieces of information.

Making mistakes — How do you respond to mistakes? Innovation is a messy business. If mistakes are punished, no one will risk making them and innovation will falter. Thomas Edison famously said that he’d learned a thousand ways to not make a light bulb. Easy to say, hard to live.

Strategic breaks — Allow the breakthrough to happen. The “eureka” moment doesn’t happen when we’re exhausted from banging our head against the wall. It comes when we take a break and do something different. Learn how to take breaks strategically.

Patience — Don’t wait for a crisis to force your hand. Necessity may be the mother of invention, but waiting for the last minute to start innovating is the number one cause of premature death amongst new ideas.

5. How do intangibles like volunteerism, office greening, impact corporate culture?

Intangibles matter to the extent that they reflect the corporation’s values, beliefs, and aspirations. Volunteerism can be very important in a company that views itself as a good citizen of the community. However, to be effective, intangibles have to be worth the time and energy expended on them. If employees who volunteer their time end up being paid less or promoted less frequently than those who don’t volunteer their time, volunteerism will fade out. The behavior that is rewarded will become part of the culture, and the culture will attract those who believe in the values manifested through the behavior.

6. What are other intangibles that are important but corporations may not be keen about their importance?

How meetings are conducted, whether employees are permitted to work from home, how much freedom and autonomy versus direction employees are given, how mistakes are handled, how disagreements are managed, how permissible it is to question authority, are just a few of the intangibles that shape cultures.

7. How important is culture today and why?

Organizational culture is probably the most important most powerful force in any corporation. Because culture is the lessons of the past, it provides the template for how to behave in the future. Once a corporation loses sight of its culture, it’s only a matter of time before it slams into a brick wall.

8. Is your sense that most firms are focused on their culture, why or why not?

While many firms focus on their culture, they focus on the wrong aspects of it. Most companies focus purely on the “what,” those superficial artifacts that are easy to see but which have the least significance. It’s hard to focus on the “why.” Indeed, really delving into the “why” of your culture is rather like performing open heart surgery on yourself. In other words, you need the assistance of a trained outsider who is not immersed in your culture to see the elements you take for granted.

9. Any interesting, stats, surveys or other data about corporate culture?

Let me point you my book, “The 36-Hour Course in Organizational Development.” Chapter one is about culture and the entire book discusses how organizational development shapes and is shaped by culture.

10. If a company can make only one change in it's culture, how to determine what should be that priority?

The biggest priority is changing the belief that you can change only one thing… Seriously, culture change is not a precise, surgical operation. Sure, if you’re only after changing the “what,” you can pick one thing, but for anything non-trivial you have to go after the “why.” That requires taking the time to really understand what values and assumptions that are taken for granted are no longer valid, and then building up a new set of values and assumptions. Most culture change fails because it tries to focus too narrowly on one thing. Corporations go through a lot of pain and spend a lot of money only to experience a fleeting success before the culture reverts back to the way it was: when you seek to change only one thing, everything connected to that one thing acts to pull it back to its original form.

What Big Picture?

As published in The CEO Refresher

Using the Force: What Every Exec Can Learn from Darth Vader

As published in the Worcester Business Journal

My 6-year-old son is seriously into Star Wars. As we were watching the movies recently, he turned to me and asked, “Why is Darth Vader such a mean leader?”

Coming from a kid who thinks the Sith are kind of cool, the question took me by surprise. On the other hand, it’s rather heartening to see that even a small child can recognize bad management. Of course, the real question is not what makes Darth Vader such a bad leader. After all, when you’re the Dark Lord of the Sith, you don’t really need a reason. More aptly, the question is: What does it take to be a good leader?

No Intimidation

First, we have to dispense with the primary weapon of the Sith: fear. Darth Vader rules through terror, but the fact is, you don’t need to have the power to choke people to death using the Force to create a climate of fear. Fear is very effective at getting people to move away from something. In the practice of Jujitsu, fear of injury is often quite sufficient to convince an attacker to dive headfirst into the ground or into the nearest wall. Some mistakes are a natural part of doing business. When people are shamed for making mistakes or threatened with loss of their jobs if they don’t measure up, they become less creative, less dedicated and errors are not corrected.

Team Spirit

To be a positive leader, the first step you need to take is to focus on affiliation. You might also think of it as team spirit. When people come together to form a team, the first thing they do is look for common ground. To really create affiliation, the leader needs to actively get to know his team members and encourage them to get to know one another.

Independence

Next is building autonomy. Perhaps counter-intuitively, autonomy is the result of having structure. Structure lets each team member know what the others are doing well enough to trust them when they aren’t visible. That trust is what permits autonomy.

Lack of structure is chaos. Too much structure is stifling. For example, when an employee comes up with a good idea and your response is to ignore them, that is too little structure. When you say, “Good idea! Here’s how we can make it better!” that’s too much structure. Appropriate structure is to say, “Great idea! How did you come up with it?”

Great Expectations

Competence is not just hiring competent people. It’s creating an atmosphere of competence. Nothing succeeds like the expectation of success.

Managers can motivate employees in one of two ways: you can focus on failures, and make dire predictions about what will happen if employees screw up; or you can focus on success, and remind the employee of the things they did well.

The keys to great leadership are: get away from fear, build affiliation, create structure to enable autonomy, and craft an atmosphere of competence.

The hard part is finding the right balance for your team and your company. Start slowly and let yourself accelerate as you learn to use these techniques effectively. You’ll soon be amazed at how fast you’re going.

Cut Big Problems Into Solvable Pieces and Get Moving

As published in Corp! Magazine

If a tree falls in the driveway and no one is awake to hear it, does it make a sound?

The Efficient Light Bulb

As published in The Imaging Executive

Once upon a time, there was a light bulb. This light bulb was quite a remarkable light bulb: it was praised far and wide for its incredible efficiency. This light bulb gave off no waste heat. This light bulb did not contribute to global warming. It had no carbon footprint.  It did not rely on fossil fuels. Truly, it was an amazing light bulb and visitors came every day to see this remarkable light bulb.

One day, though, a traveler coming to see the light bulb in action was delayed by an unfortunate flood that closed several roads. He did not arrive until well after night had fallen. Much to his surprise, he found the light bulb sitting in a pitch dark room.

“Why aren’t you giving light?” asked the traveler.

“Give light!” replied the light bulb in shocked tones. “You must be joking. If I did that, I would use fossil fuels. I would have a carbon footprint. I would give off waste heat. I would no longer be efficient.”

“But isn’t the purpose of a light bulb to give light?” asked the traveler.

“I’ve always been told to be efficient,” replied the light bulb with a shrug. If you have never seen a light bulb shrug, it is truly a wonder to behold. The traveler would have been amazed, except, of course, that the room was too dark for him to see the miraculous event.

Once upon a time, there was a software company named “Soak, Inc.” Soak’s product relied upon a very complex database server. One day, the VP of Engineering stormed into the office and declared, “The server is too slow. We need to speed it up.”

From that day forth, every effort was focused on improving the speed of the server. Other issues were deemed insignificant beside the one, critical, goal of performance. Engineers who dared to raise other issues were publically humiliated for wasting the company’s time. Bugs that did not relate to performance issues were deemed “optional.” People who spent time reviewing the optional bugs and trying to fix them were warned that their insubordination would cost them their jobs if it did not cease immediately.

Eventually, Soak developed an amazingly efficient server. It was fast. It was robust. It was ready to demonstrate to potential clients.

The demo started out remarkably well. The server did not crash, causing some to believe that this couldn’t actually be a demonstration of a software product. Indeed, the server performed flawlessly. All would have gone well indeed for Soak had not someone noticed that the data being delivered by the server didn’t make sense. Yes, what the server had gained in performance it had lost in accuracy. In other words, it was incredibly good at very rapidly delivering useless or incorrect information.

When the engineers were questioned about this unfortunate oversight, they shrugged and replied, “We were told to be efficient.”

While it is not nearly as amazing to see an engineer shrug as it is to see a light bulb shrug, the effects are much the same.

Once upon a time, there was a large company called “Red.” Red Inc. had a team of salesmen who were, it seems, not producing the necessary volume of sales.  While this may have gone a long way toward explaining the name of the company, it was not exactly a viable long-term strategy.

One day, the VP of Sales decided that the problem was clearly that the salesmen were not calling enough potential clients. They were wasting their time. They needed to be more efficient with their calls.

Much effort was spent focusing on the calling habits of the salesmen. They were given scripts. They were forced to practice making calls with various managers listening in and rating them on their performance on these practice calls. Those salesmen who demonstrated too great, or at least too obvious, a reluctance to make calls were dismissed. Those who questioned whether this was the right way to approach the problem either learned quickly to shut up or were also dismissed.

The sales team became very efficient at making calls. Sales did not increase. The remaining salesmen shrugged.

It turns out that even the best salesmen are reluctant to make calls. The problem was not with making the calls. The problem was with projecting the necessary confidence and optimism to attract and hold the interest of the client. Clients, it seems, are not all that likely to buy from salesmen who do not appear enthusiastic and confident in what they are selling. It also helps to know how to close the deal.

In each of these situations, a goal was set, a metric for success was defined, and that metric became the sole determinant of progress. Goals are extremely powerful tools: the best thing about them is that you accomplish them. Unfortunately, sometimes the worst thing about goals is that you accomplish them. In each of these examples, they accomplished their goals. A dead light bulb is extremely efficient, but not useful. Similar observations can be made about the server and the sales team.

Before leaping into setting a goal, especially a goal to solve a problem, it helps to understand the actual problem and to understand what the actual symptoms are. At Red, they assumed that an unwillingness or inability to make calls was the cause of the low sales and set their goals accordingly. We’ll never know how many top salesmen they dismissed because they didn’t realize that even the best salesmen suffer from call reluctance. Rather than create useful goals, they fixated on a symptom. That did not, however, actually change anything.

At both Soak and Red, the respective VPs stated that they were trying to solve the problems their companies were facing as rapidly and effectively as possible. They were setting goals. They were Taking Action! Taking action is certainly helpful, but it is even more helpful to be taking the correct action. Since it’s not always possible to determine just what the correct action is, it becomes even more critical to listen to the feedback and questions from the people who are charged with actually executing the action. The engineers and the salesmen knew that something was wrong, but no one was willing to listen to them. Remember, a key aspect of successful goal setting is understanding the feedback you’re getting.

I realize that many of you reading this are probably chuckling to yourselves and thinking that this scenario could never happen at your companies. The folks at Soak and Red said the same before, during, and even after it happened to them. The light bulb had no comment.

Setting a goal, for example, to be more efficient , seems like it makes sense and certainly feels good. However, it pays to determine if that goal is actually going to get you what you want. Otherwise, you may just end up with a dead light bulb.

Common Hiring Mistakes

When I spoke at ERE Expo, Todd Raphael, editor of the Journal of Corporate Recruiting Leadership, interviewed me on why companies make hiring mistakes. The interview is now up on YouTube: http://www.youtube.com/watch?v=GUFbWww7Pic.

The Hydrangea Conundrum

As published in The CEO Refresher.

Balance the Individual and the Team for Top Performance

As published in Corp! Magazine

In Monty Python’s classic comedy, “The Life of Brian,” there is a scene fairly early in the movie when the people of Jerusalem have decided that Brian is the Messiah and are standing waiting on the street outside his window. Brian’s mother screams out at the crowd, “You are all individuals.”

The crowd replies: “We are all individuals.”

A pause, and then a lone voice yells, “I’m not.”

This is typical Monty Python absurdist humor, but it makes a very serious point. What is standing outside Brian’s window is not a group of individuals, it’s a mob. A mob is a group in which individuality is lost in the urge to conform to the group. As the movie progresses, we see the mob do various ludicrous things as they follow their unwilling prophet. Brian’s followers are, of course, convinced that they are acting according to his instructions and executing his desires, no matter how much Brian screams to the contrary. This being a Python film, the sequence of events is absolutely hilarious.

In a business, not so much. Unfortunately, the tendency for a group to lose individuality in the service of a charismatic leader or a particularly enticing corporate vision is not restricted to comedy. At one large software company, the dynamic became quite extreme: employees were expected to arrive at a certain time, eat lunch at a certain time, visit a certain set of restaurants, leave at a certain time, and so forth. No deviation was tolerated. The mantra was, “We’re a team. We do everything alike!”

Sound fanciful? I wish it were.

The problem is that a team that loses its individuality is not a team, it’s a mob or a rabble. It can be a very disciplined mob or rabble, sort of like the Storm Troopers in “Star Wars,” but it’s still a mob. Like the Storm Troopers, it’s very good at dealing with routine situations, but isn’t very good at dealing with the unexpected: new tactics from the rebels or, if you prefer, new competitors or existing competitors adopting new strategies. The other problem is that when a group focuses on homogeneity, it loses its ability for the strengths of some to compensate for the weaknesses of others: the Storm Troopers, for example, cannot successfully shoot the broad side of a barn.

At a different high-tech company, the only engineers hired matched a very precise and very limited profile. Not only did you have to solve a certain set of puzzles, you had to solve them in just the right way. Alternate solutions were not tolerated. This created a team that was very good at creating intricate, convoluted algorithms, and a user interface that was equally intricate and convoluted.

None of these situations are as extreme as that portrayed in “The Life of Brian,” but then again, they aren’t as funny either.

Later in the movie, we see the opposite end of the spectrum: the members of the People’s Front of Judea are so busy drawing insignificant distinctions between each of their positions that they are not functioning as a team. Rather, they are a horde. Each person is operating according to their own individual needs and goals, with no actual concern about the goals or strategy of the group. In a horde, everyone is a hero, entitled to his or her share of the plunder and devil take the hindmost. Cooperation is almost accidental, and the group is likely to break apart at the slightest disagreement:  the People’s Front of Judea can’t even quite figure out why the Judean People’s Front broke off, but is quite happy to yell, “Splitters!”

At a certain manufacturing company, each department was totally focused on doing its own job. None of the departments considered how their actions or decisions affected the others. Within each department, much the same thing was happening at an individual level. Rather than figuring out how to work together, they spent their time blaming one another for the inevitable failures. Fixing this issue saved the company in question several hundred thousand dollars a year.

The challenge, of course, is to find the middle ground, where the individual and the team are in balance. While it’s extremely difficult to find the exact middle, anywhere in the general vicinity works pretty well. Peak performance occurs when people are committed to the goals of the company and the team, and are also free to pursue their personal goals and work the way they want to work. Is it easy? No: less than one team in five ever gets there. However, it sure beats a horde or a mob of people chanting, “We are all individuals.”

Stephen Balzac is an expert on leadership and organizational development. A consultant, author, and professional speaker, he is president of 7 Steps Ahead, an organizational development firm focused on helping businesses get unstuck. Steve is the author of “The 36-Hour Course in Organizational Development,” published by McGraw-Hill, and a contributing author to volume one of “Ethics and Game Design: Teaching Values Through Play.” For more information, contact steve@7stepsahead.com.

Make a New Plan, Stan

As published in Corp! Magazine

Jesse Livermore, the legendary stock trader of the early twentieth century, was famed for his ability to keep his cool no matter what the market was doing. He neither became discouraged when he lost money or exhilarated when he made money, and he made a lot of money. His greatest triumph was making $100 million (no, that’s not an error) on Oct. 29, 1929, the day of the market crash that preceded the Great Depression. He was one of only two people to make money that day. As people were panicking around him, he calmly covered his short positions into the chaos. What was his secret?

It was simple: Jesse Livermore had a plan. Over the course of his trading career, he developed a plan for when to buy and when to sell. When the plan didn’t work, he stepped back, analyzed the failure, and adjusted his plan. Jesse Livermore’s plan failed many times, especially during his early days as a trader. He went broke more than once and, in 1915, was a million dollars in debt. But Jesse Livermore never failed.

Now this may look like sophistry: he created the plan and the plan led him into bankruptcy. Isn’t that a failure? Sure: it was a failure of the plan. By creating an external construct, a plan, Livermore was able to prevent his emotions from dominating his trading. More broadly, he was able to place the failure outside himself. It’s much easier to change one’s plan than it is to change oneself. On the flip side, when things went well, he could enjoy the fruits of victory without allowing the excitement to color his perceptions and cost him his profits. Each day, he knew that he had followed his plan.

This lesson can be easily applied to the business world, especially today. The news is a steady drumbeat of economic disaster after economic disaster, bankruptcies, shrinking sales, and so forth. It’s extremely difficult to not become discouraged; I regularly hear from business owners that they are no longer listening to the news. It’s simply too depressing. Unfortunately, restricting information only reduces a business’s ability to act when the opportunity presents itself; you won’t even know that the opportunity is there! Tom Watson, the founder of IBM, was reputed to read the papers every day all through the Great Depression. He had a plan, and part of his plan involved staying aware of what was happening around him. He was waiting and watching for his moment of opportunity. That moment came, and the rest, as they say, is history.

So how do you go about making a plan?

• Start by defining a broad vision of what your business wants to accomplish. What will the world look like if you’re successful?
• Identify the steps needed to bring that vision into reality.
• For each step, identify how you will recognize whether or not it is working. It pays to decide upon your metrics before the pressure is on, and to identify the signs of trouble as early as possible. Jesse Livermore never bought a stock without deciding in advance the conditions under which he’d sell it, whether for a profit or a loss. As a result, his losses were small and his profits large.
• Break those steps down into activities that can be done on a daily, weekly, and monthly basis.
• Define appropriate checkpoints where you can evaluate progress and determine whether or not your plan is working. Remember to allow sufficient time to collect enough data to make a good decision. Evaluating before you have enough information is an excellent way to abandon a successful plan before it has time to pay off.
• Execute your plan, day in and day out. You measure your own success or failure by whether or not you stuck to the plan.
• Constantly review and revise your plan as you learn more. Failures of the plan are simply an opportunity to evaluate and adjust.

When we fail, it can be difficult indeed to get up and try again. But when the plan fails, it’s relatively simple to modify it and keep going.

What’s your plan?

Stephen Balzac is an expert on leadership and organizational development. A consultant, author, and professional speaker, he is president of 7 Steps Ahead, an organizational development firm focused on helping businesses get unstuck. Steve is the author of “The 36-Hour Course in Organizational Development,” published by McGraw-Hill, and a contributing author to volume one of “Ethics and Game Design: Teaching Values Through Play.” For more information, visit www.7stepsahead.com or contact steve@7stepsahead.com.

The Peter Principle of the Thing

As published in Corp! Magazine

A good many years ago, I was working at a small software company. For various personal reasons, the VP of Engineering abruptly left the company and one of the senior engineers was promptly promoted to take this place. Now, this guy was an excellent engineer and I learned a great deal from him. He was a fun person to work with and someone who was always enthusiastic. He was picked for the job exactly because of those qualities and because of his engineering prowess. However, as a manager of engineering, he never appeared to have the same joy and excitement about his job. Indeed, he often gave the impression that he’d rather be writing code than managing other people who were writing the code. After the company folded, as far as I know, he went back to engineering.

At another company, Jim was a star researcher. He was brilliant. He was the person who came up with idea after idea. He did so well that eventually he was put in charge of the lab. At that point, things went downhill. Working through other people drove Jim up the wall. He wanted to be in the lab, not arguing about the best way to do things. He couldn’t go back, though, without being viewed as a failure. At the same time, he couldn’t get promoted until he “shaped up” and “made his lab more productive.” He was trapped doing a job he didn’t particularly enjoy and wasn’t particularly good at.

Both of these stories are examples of a hypothesis first proposed in the 1960s by psychologist Lawrence J. Peter. Today, the “Peter Principle” is spoken about with a certain amusement and a smug “yeah right” attitude. Unfortunately, “yeah right” is the only construction in the English language in which a double positive makes a negative. In other words, the Peter Principle is popularly seen as a joke. In fact, it’s not. Moreover, it turns out that when you have an environment in which someone can be promoted into a job that is significantly different from what they’ve been doing, the Peter Principle is virtually inevitable. The key point lies in recognizing what constitutes “significantly different.”

Well, as it happens, managing engineers is significantly different from being an excellent engineer. Managing researchers is significantly different from being a top researcher. Managing salesmen is significantly different from being a top salesman. However, being a top engineer, researcher, salesman, or whatever is exactly what brings that person to the attention of senior management. If this isn’t disturbing enough, in the study confirming this phenomenon, authors Pluchino, Rapisarda, and Garofalo also found that the best way to avoid it was to either promote people randomly or promote the best and the worst performers equally.

As Monty Python might say, “This is getting silly!” After all, how can it possibly be true that random promotion would work better than promoting the best performers into management?

Consider how much time, effort, and training is required to become a top engineer, researcher, salesman, doctor, or just about anything else. Nothing in the training these people receive prepares them to manage others. In fact, good management is, in many ways, the antithesis of being a successful solo performer: instead of doing the work yourself, you are now doing it through others. Motivating others is a different experience than motivating yourself. Helping others stay focused and on track is different from keeping yourself focused and on track.

So, without resorting to promoting people randomly, what could be done to prevent the Peter Principle from taking over in your company?

Well, if it were possible for someone to both be a manager and not be a manager at the same time, you would be able to see if they could do the job, and allow them to continue along the track they’re on if they don’t shape up. Unfortunately, literally attempting this is pretty hard on the person and the business; someone who tries to be both a manager and an individual contributor at the same time usually ends up doing one, or usually both, badly.

An alternative, though, is to take a page from sports and provide practice space for people. Just as a sports team might rotate players through different roles before figuring out what each one is best at, companies can use predictive scenario leadership games and exercises not just to train existing leaders, but to find leaders. Quite simply, when people don’t know what to do, they do what they are most comfortable doing. In predictive scenarios, people have the opportunity to demonstrate talents that might not be obvious or which may never come up in their regular jobs. For example, the best managers create order in chaotic or ambiguous situations and know how to build employees’ confidence. When you enable an entire department to participate in a predictive scenario, you can see who is actually doing those things. Rather than promote randomly, you can pick the people who most strongly demonstrate the desired skill set for the position you are looking to fill!

Is this easy? Not necessarily. It takes some serious effort to avoid the Peter Principle. I suspect that many of you reading this are thinking that you simply can’t afford do anything about it. The real question is, can you afford not to?

Stephen Balzac is an expert on leadership and organizational development. A consultant, author, and professional speaker, he is president of 7 Steps Ahead (www.7stepsahead.com), an organizational development firm focused on helping businesses get unstuck. Steve is the author of “The 36-Hour Course in Organizational Development,” published by McGraw-Hill, and a contributing author to volume one of “Ethics and Game Design: Teaching Values Through Play.” Contact him at steve@7stepsahead.com.