Evil Companies

by Don Harkey

It's on the news. Its heard in the lunchroom. Its heard on the floor of the stock exchange. What does Apple think about this? GE really cares about its people! Wal-Mart is an evil corporation!

This is a mistake!

Organizations do not think. They do not feel. They do not make decisions. They are not ethical or unethical. They do not innovate. They are neither smart nor stupid. These are human traits and comparing organizations to people is like convincing yourself that those cute grizzly bears in the forest really just want a human friend.

Organizations are made up of people working as a part of a system. An efficient system contains components that all work toward the same goal or aim. When organizations have a clear goal and their components are working together toward that goal, the organization appears to be "smart". When organizations don't have a clear goal and people within the organization are working against each other for individual goals, the organization appears to be "stupid".

The mistake that many people make is that they equate a "stupid" organization with "stupid" people. This is not true.

Enron was a very stupid organization with lots of smart people. They entered into bad deal after bad deal in an almost reckless way. This is stupid. However, within the "system" of Enron, this was smart for the individual. Enron executives held the widely held belief that the way to manage people is to set clear and measurable expectations and then hold them accountable for achieving those expectations. This is considered "smart" in many circles and is taught in many business schools. This is the concept behind the "No Child Left Behind" policy from the Bush administration. If you say this at a seminar of business leaders, you will get a lot of nods of silent approval (unless I'm in the seminar!).

In Enron, the "measurable objective" was to close deals. Get as many deals as you can. Another strategy of Enron was to move their employees around to get different experiences. They did this every few years. This is also considered "smart" in many circles, again including business schools. The logic is that people who get more experiences will make better decisions.

Enron must have been pretty "smart" then! In fact, they were named Fortune Magazine's "Most Innovative Company" for 6 consecutive years right up until they collapsed!

The problem was that Enron had smart people. If you are a manager and your boss tells you "close as many deals as you can" and you will get a big raise if you do (or get fired if you don't), what are you going to do? You aren't going to be in that division for very long so by the time the deal is executed and the results are realized, you will be well on your way.

This is exactly what happened... over and over and over again. Yes, there was also corruption from the CFO and yes, their accounting was flawed and even doctored. However, one of the greatest lessons from one of the best case studies in a generation has been almost lost in the business world. Deming warned of this directly. Short-term job positions lead to short-term thinking. As a friend of mine always used to say, "show me how you will measure me and I'll show you how I measure up".

It is too easy to dismiss an organization as being "stupid" or "evil". Organizations are simply systems of individual components working together. The real knowledge comes from looking at how the components are working together and whether the components are working toward the same goal. Understanding the nature of a system leads to "smart" organizations!