| What Were They Thinking? traces its genesis to a monthly column Jeffrey Pfeffer writes in Business 2.0. For the book, the Stanford professor of organisational behaviour expanded some of those articles and combined others to present his views on how companies err in managing their people and their businesses. The result is a thought-provoking collection of short essays that address issues as diverse as the perils of trimming employee compensation in a bid to cut costs, the trouble with benchmarking and how companies overemphasise strategy. |
| There's a sense of dejá vù in reading this book. You read Pfeffer's comments on a topic, nod your head in agreement and then try to remember where you've read it earlier. Most likely, you've not. But the arguments he makes are so commonsensical, and yet, so rarely followed, that it seems impossible no one has voiced them before. |
| Consider a fairly common practice in Corporate America "" cutting employee pay and benefits to tide over a financial crisis. The best people leave almost immediately for better-paying jobs. Left to the mercy of its second-rung executives, the company struggles even harder to dig itself out of the hole in which it has landed. Meanwhile, those left-behind allow their resentment to spill over "" they either shirk their duties or actively sabotage operations. In short, a really bad idea. But that's just what giants like General Motors, American, Delta, Northwest and Kroger have all done, at various times. And it didn't help "" they still lag behind competitors. So what's the solution, then? Pfeffer suggests companies fix quality and service issues, which offer a better guarantee of success, and identify cost-cutting opportunities in other operation areas. |
| Unfortunately, this is not the only area where companies fumble. They also fall prey to the urge to merge, knowing fully well that about 70 per cent of all mergers fail to create shareholder value. So why do it? For the excitement, to satisfy the CEO's ego and because everybody else is. And why does it fail? Because more energy and resources have been invested in the deal than it deserves, because the best due diligence can't uncover all problems with the company and because of all the turmoil an M&A brings in its wake. |
| Pfeffer offers three reasons why companies make these mistakes. Companies ignore feedback effects. The wage-cut case is a perfect example. Then, they assume the equation between people and what motivates them is linear, but it's never that simple. Third, they overcomplicate issues. That seems inconsistent with the second reason, but it's really not, says the author. Go back to the wage issue. Pay people more than the market rate, invest in them through training and benefits, and they stay on longer and work harder. That's the simple answer, but companies ignore that, instead equating total costs with labour costs. So when they need to bring expenses down, the axe falls first on employee compensation. |
| If I were to nitpick, I would point to Pfeffer's bias towards people issues. Whether they are frankly labelled "people-centred", as the first part of the book is, or couched under more vague titles about effective workplaces and leadership, there's no getting away from the fact that more than half the articles are worker-related. But, in his defence, Pfeffer's magazine column is called "The Human Factor", so the partiality is understandable and, perhaps, to be expected. I could also crib about the jumps in the writing "" even though they've been grouped under common heads, the chapters don't lead seamlessly. That's also easily explained away, though: What Were They Thinking? didn't begin its life as a book and unlike books, it isn't meant to be read in a single, uninterrupted sitting. Read it a chapter or two at a time and the experience will be that much more educational, and entertaining. |
| WHAT WERE THEY THINKING? |
| Jeffrey Pfeffer Harvard Business School Press Price: $25; Pages: 241 |
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