Performance Is Not Always Transferable

The basic skill of a taxi driver is driving. Taxi driving, though, is not universally applicable, for a London taxi driver will have to learn another type of driving—right-side driving—to earn a living in the United States. Equally, the additional tacit knowledge that makes the cabbie a better driver in London is quite irrelevant in New York. The logic is deafening. A decision maker, however good in one situation or location, is not necessarily of the same quality in another. This conclusion was borne out empirically by three academics from Harvard Business School who were investigating the phenomenon of corporate poaching, which represents a large proportion of executive and vocational churn in the mercurial labor market (Groysberg, Ashish, & Nitin, 2004). Contrary to popular belief, they found that after supposed “stars” moved from their old employers, their performances invariably plunged, as did the effectiveness and market value of their new paymasters. And the reason for this failure? Most companies overlook the fact that executive performance is not entirely transferable, because personal competencies inevitably include company-specific skills, which are left behind. It is a conclusion that undermines the traditional belief of high-flyer infallibility and underlines the importance of institution-specific OM to good decision making.

Source: Proudfoot Consulting, September 2005.

Note: The study’s compilers found that the majority of senior executives—55%—thought that the key to raising productivity was to increase investment. No specific mention is made of doing things more efficiency. In the United Kingdom’s case, it was suggested that the government was aiming very low in its bid to boost productivity growth and that it had its sights on the wrong targets. The mention of government participation in productivity’s achievement is a reference to macrofactors such as the manipulation of interest rates and currency valuation, the use of which affects competitiveness not productivity. This suggests a basic misunderstanding of the role and importance of productivity, a notion explained by Peter Drucker, that it is managers, not nature economic laws or governments, that make resources productive. This idea is confirmed by the McKinsey Global Institute (MGI), whose research into the manufacturing sector shows a strong correlation between national productivity rankings and management practices. To depend on competitiveness without productivity is putting the cart before the horse (Dorgan & Dowdy, 2002; Drucker, 1991). And, as all horses know, pulling is easier than pushing.

OM’s importance also comes in the newly coined ellipsis of Green, the equivocation of sustainable development around the subject of the environment where words like carbon neutral, climate change, and ecology rhyme with cutting out waste, which can potentially be recovered. As already indicated, the U.S. figure for wasted productivity is astronomical, with other countries even more excessive in terms of a percentage of GDP.

In fact there are signs that the huge expense of mistakes repeated, wheels reinvented, and lessons unlearned within government and the civil service is also becoming a political issue in many countries (Dorgan & Dowdy, 2002). In the United Kingdom, for example, anecdotal evidence from press reports suggests high levels of voter anger at the enormous waste of taxpayers’ money in areas such as health, education, civil administration, criminal justice, immigration, computer-based projects, and so on. All of which center on poor decision making and a dearth of experiential learning that, in the contemporary environment of the United Kingdom at least, got little top-down direction from the omnipresent belief system of former Prime Minister Tony Blair who over 10 years dispensed the following “wisdom”: “A study of history provides so little instruction for our present day” (Blair, 2003). His view is “endorsed” further down the public-service food chain by Stuart Bishell—a former chief executive officer of Understanding Industry, a U.K. foundation dedicated to increasing links between business and education—with the following underwhelming viewpoint: “I do not believe that historical context is especially useful to students in understanding wealth creation and the position of industry and commerce in the economy and society of the 21st century” (Bishell, 1994).