10/27/99

Kathleen O'Toole, News Service (650) 725-1939; e-mail: kathleen.otoole@stanford.edu

Smart talk, too little action plagues firms, researchers say

Make no mistake ­ reading this alone won't solve your problems. That's the underlying message of a new business book on the "knowing-doing gap" by Stanford Professors Jeffrey Pfeffer and Robert Sutton.

Why would you read a book that doesn't promise overnight wealth, beauty or fame? Because Pfeffer and Sutton explain five brick walls that many firms fail to break through when they try to learn from other firms' successes. Well-known researchers of organizations, the authors spent four years comparing successful and not-so-successful companies to find out what keeps many business executives from moving beyond reading, thinking and talking about good ideas to actually implementing them. The book, published this month by Harvard Business School Press, is titled The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action.

Pfeffer, an organizational researcher in the Graduate School of Business, and Sutton, who does similar research in the School of Engineering, argue that the gap between knowing and doing is actually greater than the gap between knowledge and ignorance in companies today. American workers and managers consume large amounts of knowledge annually about how to do their jobs better. In 1996, for example, 1,700 business books were published, $60 billion was spent on company training, and at least $43 billion on management consultants. American business schools also turned out 80,000 new MBAs. The knowledge conveyed by these methods isn't always consistent, but a large chunk of it is based on systematic research, and the authors say they find that business people often agree on what are good practices. In interviews and surveys, business people often admit, however, that they don't follow those good practices.

The authors, in part, blame higher education and the consulting industry for this gap in knowing and doing.

"Business schools and consulting firms do play an important role in teaching and spreading knowledge about what ought to be done," Pfeffer says. "The problem is that for MBA students and management consultants there is a strong premium placed on saying smart things and so little emphasis placed on sticking around to make sure that organizations actually do smart things. MBA education, especially at top schools, focuses on case discussions where students gain status and get good grades for making pithy statements, which are almost never longer than one minute."

Management consultants may talk a little longer, Sutton says, but they mainly produce "written reports or a stack of PowerPoint slides, not the actual implementation of management practices or systems."

Talk also is overestimated because it is human nature for people to quickly categorize each other, the authors say. The person who sounds smartest in a meeting is likely to get a high rating because it takes much longer to find out if his or her actions are also smart. People also change jobs so quickly that it is hard to know what they have accomplished. This has led to the "unstated but widely followed belief that talk is something that happens now, and action is something that happens later," Sutton and Pfeffer write.

For instance, managers often make decisions and talk about them to employees but have no implementation strategy or way of monitoring progress.

Besides hollow talk, the authors list four other sources of inertia: debilitating fear; destructive internal competition; poorly designed, complex measurement systems; and mindless reliance on precedent. They point to companies such as IDEO Product Development, The Men's Wearhouse, SAS Institute, Barclays Global Investors, Fresh Choice and others to illustrate how some companies are able to avoid or overcome these action inhibitors.

The Men's Wearhouse, for example, is a clothing chain where executives stay in touch by waiting on customers when they are in the stores. They also emphasize their core values about how people should relate to one another by giving employees who are caught shoplifting a second chance and by monitoring sales transactions and reprimanding those who hog all the walk-in traffic for themselves.

A strong organizational memory also can undermine performance, the authors say. People need to make some activities automatic in order to be efficient, but following tradition also leads to mindlessness. "Experiments by behavioral scientists show that when people do something even a single time, this past action often becomes an automatic, or mindless, guide for future action, even when the action undermines a person's performance."

When people's theories aren't articulated, the authors say, "they can't be refuted with data or logic." One group of employees tackled this problem by spending three days identifying "sacred cows." "Every participant had to identify two 'personal cows' and to devise a plan for attacking them the following Monday morning."

The information revolution has enlarged two other roadblocks to action, the authors say. Information technology has made it possible for companies to collect all sorts of data, and many are overusing measurements to try to judge performance and confusing themselves in the process. The other problem is thinking of "knowledge" as a tangible asset, rather than of "knowing" as a process that people undertake.

In a 1997 Ernst & Young survey about "knowledge management" systems, firm respondents reported investing in knowledge repositories such as intranets and data warehouses. The systems "rarely reflect that crucial knowledge, including technical knowledge, is often transferred between people by stories, gossip and by watching one another work," Sutton says. "This is a process in which social interaction is often crucial and is impossible to capture on a web page, a spreadsheet, drawing or photograph."

The more successful firms have inexperienced people watch the more experienced and the latter constantly coaching the former, which is the learning-by-doing way that people are trained for in professions involving life and death, such as surgeons, airplane pilots and U.S. soldiers.

Implementing new business practices also requires measuring progress, but too many firms use data to judge the performance of individuals and work units that accountants developed for stockholders. People who compete with each other to meet budget targets often neglect other aspects of the company and its future development. "As long as accountants have control of internal measurements, not much will change," the authors advise.

In addition, some firms measure workers on too many dimensions. Quoting research by others, the authors say that "human beings can keep only about seven things in their heads at any one time. Having more than 20 indicators of performance in six categories dilutes the attention employees can pay to any single issue."

Sutton and Pfeffer sharply disagree with executives and business reporters who are enamored of so-called tough bosses who inspire fear in the workplace. "There is a mistaken idea that because competition has apparently triumphed as an economic system, competition within organizations is a similarly superior way of managing. This is not just a sloppy use of analogies but has real consequences that hurt real people and real organizations." Competition against other companies can build teamwork, they say, but internal competition undermines teamwork and makes people afraid to learn from trial and error.

Sutton and Pfeffer finish with a point-blank reminder that their book is just "a lot of talk. Now it is up to you and your colleagues to turn this knowledge into action ­ to not just read, think about and discuss the interesting issues involved in the difference between knowing and doing."

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By Kathleen O'Toole