chapter
1
Management happens
Forced to be stupid
J
essica Nolan, a researcher at the University of Arkansas,
was interested in persuading residents of a particular
California community to conserve more energy at home.
For this purpose, she designed four types of notes, to be
delivered to people’s homes. These notes (roughly) said the
following:
1 Do it because it helps the environment
2 Do it because it benets society
3 Do it because it saves you money
4 Do it because everybody else is already doing it.
Before using the notes, she knocked on a number of residents’
doors and asked them which of the four arguments would most
likely persuade them. Pretty much everybody said, “Not the
fourth! (I care about the environment, I care about society, I
certainly care about money, but I couldn’t care less about what
everybody else is doing)”. But did they?
Subsequently, Jessica sneaked out at night and hammered one of
the four notes on each door in the community.
Some time after that, she went back to check people’s meter
readings. And guess what: households that had received the
fourth note (“Everybody else is doing it”) had by far the biggest
reduction in energy consumption.
Business Exposed2
We are hugely affected in our decision-making and behavior by
our notion of what others are doing, although we usually don’t
quite realize it (and deny it vigorously!). We might think that we
don’t care what others are doing but the reality is: we do. It is
only human.
Even top managers can be almost human (or at least some of
them). For example, there is a lot of research on what inuences
managers’ strategic decisions (e.g., whether
to choose strategic option A or B). And guess
what, it’s imitation.
There is research on where rms choose to
locate their new plants, whether or not they
enter a particular market, adopt a new type
of organizational structure, a governance
instrument, etc, etc. Consistently, results
show that managers are led by one simple
question: “What are my competitors doing?” And then they just
do the same thing.
The problem is, sometimes what your competitors are doing
is stupid. For example, research has indicated that (in certain
industries) ISO 9000 quality norms are counter-productive. Yet,
throughout the 1990s rms imitated each other anyway and
adopted the system.
And it gets worse. Sometimes, if you’re the only one that
does not adopt the new practice, you start to look “illegit-
imate”. Analysts, shareholders, customers, and so on start asking
questions: “Everybody else is doing it; shouldn’t you?” “Surely,
everybody else cannot be wrong”. But they can!
In this case – because customers start to shun them, investors
criticize them, analysts downgrade them, etc. – rms may
actually start to suffer from not having adopted the silly practice.
This places pressure on the rm to also act stupid, just to t in,
and be accepted. It takes a brave rm to stop such a vicious cycle
of imitation.
‘‘
Even top
managers can be
almost human (or
at least some of
them).
’’
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