Why Smart People do Stupid Things

by Don Harkey

This week, I have had a lot of discussion about some decisions some organizations are making (or have already made) during this economic downturn. Many of the decisions appear to have an overall negative impact on the company and won't produce the desired results. Furthermore, the analysis that they won't produce the desired results is not difficult and is generally accepted by anyone willing to talk about it.

Have you ever experienced this? One company I used to work for uses a system where employees are rated on a scale in order to determine their pay increase for the year. The ratings are determined using a rough "bell curve" where 80% of employees (give or take) receive an "average" rating. What do you think the impact is on an organization where 80% of the employees are regularly told that they are average? As I have written, there are many other problems with this system as well.

Being the questioning person I am, I asked around and found something interesting. I couldn't find a single manager or executive in the company that was really willing to defend the system. Most of them actually recognized the problems with it and a few of them admitted to hating it. Most of these conversations ended with, "well, we don't have a better idea".

Why would an organization do something that most people think is a bad idea? The issue is a concept called "alignment". Is the individual person "aligned" with the core purpose of the organization? In many cases, the answer is "absolutely not".

I'll give a generalized example. Imagine a division manager of a corporation who is heavily judged on growing their division. Imagine as well that the company tends to move their division managers around quite a bit. (I think I picked 2 pretty common situations for this example!) One way the division manager can "grow" the division is by acquiring smaller companies.

The purpose of acquiring a smaller company is that it adds value to the larger company. However, the division manager is only concerned about growth. In fact, because the person knows they will be switching jobs in 2-3 years, they are only worried about short term growth. An acquisition is a very safe move for this manager because they take years to complete and the manager can report significant growth under their tenure.

The only thing missing here is the quality of the acquisition! The employees of both companies might be asking each other "why did they do this?". To a majority of people, the acquisition might seem like a stupid decision. However, to the manager, it was a career advancing move. Is the manager being unethical? That is another article, but they surely justify it by simply pointing out that they are doing what was asked of them (even though their bosses surely didn't mean for them to make bad acquisitions).

The key point here is that when a company or organization is making a lot of "stupid" decisions, it is really worth looking at why the individuals are doing what they are doing. What is their incentive? Is it aligned with the core purpose of the company? Do the people even know what that core purpose is? It all comes back to poor leadership, which is the failure to communicate a vision to the masses.

So don't make the mistake that management is "stupid". They are just not pulling in the same direction!