Why SpaceX Isn’t Just for Gen X

May 282012
 

It was one for the ages.

Last Friday, the International Space Station had a rendezvous with a spacecraft launched by Space Exploration Technologies Corp., a privately owned company better known as SpaceX. Some space exploration enthusiasts say it heralds the birth of an “industry of privately funded space ventures,” according the Wall Street Journal.

What caught our eye, though, was SpaceX founder Elon Musk’s musings about how he hopes to staff up his company going forward. Noting that the average age of today’s SpaceX employees is 30, Musk told reporters that “his management goal is melding ‘the wisdom of age with the vibrancy of youth,’” according to the Journal.

We’re awfully used to saying “yes, but. . . .” here on the Drucker Exchange—and we’ve taken on Musk himself for his narrow view of who has the capacity to be innovative.

But sometimes we have to just say “yes.” And in this case, Peter Drucker, like Musk, believed firmly in a balance of ages.

“Both an age structure that is overbalanced on the side of youth and one overbalanced on the side of age create serious organizational turbulence,” Drucker warned in Management: Tasks, Responsibilities, Practices. “The management structure needs continuity and self-renewal. There must be continuity so that the organization does not have to replace all of a sudden a large number of experienced but old managers with new and untried” personnel.

One way to create a good balance is “to bring into important positions a few seasoned and older outsiders who have made a career elsewhere.” But youth is essential so that “new ideas and new faces can assert themselves.”

All of this sounds simple and obvious, but many a startup has failed to create such a balance, with serious consequences. “A management group that is of the same age,” Drucker wrote, “is a management group headed for crisis.”

What do you consider to be the ideal mix of youth and age when it comes to staffing a company?

Grist for the General Mills

May 232012
 

Every time cereal manufacturers face tough times, headlines say they’re feeling the crunch. We’re not saying that, of course, because we’re better than that.

However, the soggy economy appears to be taking a bite out of General Mills. The cereal maker announced this week that it’s going to eliminate 850 jobs, or about 2.4% of its global workforce. That news came as Hewlett-Packard unveiled details about its own, much steeper job cuts: 27,000 employees, or about 8% of its rolls.

Wise cuts or panicked cuts? We can’t know for sure. But we do know that Peter Drucker supported moves like this under certain conditions. Downsizing can be “a powerful tool,” he wrote in Managing In a Time of Great Change. In the mid-1980s, Drucker found that “middle managements today tend to be overstaffed to the point of obesity.”

At HP, Chief Executive Meg Whitman said that “while some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution” and to “streamline operations.” General Mills sounded a similar theme, as a spokeswoman explained that most of the reductions will come from “administrative and support positions”—an area that Drucker singled out as particularly problematic.

“It isn’t only in the armed forces that ‘support’ has grown to the point that it overshadows the combat troops and employs many more people,” Drucker wrote. “A good many businesses large and small have become equally bureaucratic and equally suffer from gross overweight around the midriff.”

Of course, in a time of high unemployment, like now, it’s harder to argue that too many companies are flabby. And in any case, Drucker also warned against being too hasty in cutting jobs. “Management picks up a meat-axe and lays about indiscriminately,” he observed. “In many if not most cases, downsizing has turned out to be something surgeons have for centuries warned against: amputation before diagnosis. The result is always a casualty.”

Far more successful were the companies that “turn things around, by rethinking themselves,” Drucker wrote. “They did not start out by downsizing.”

What do you think: Is most downsizing today “amputation before diagnosis,” or are companies smarter than that?

The Joy of Management

May 132012
 

A new episode of “Drucker on the Dial” is available today. Host Phalana Tiller talks with hotelier Chip Conley of Joie de Vivre Hospitality about his philosophy on workplace satisfaction and his latest book Emotional Equations: Simple Truths for Creating Happiness and Success. Tiller also chats with the CEO and self-proclaimed Chief Happiness Officer of online retailer Zappos, Tony Hsieh, about the culture at his company and his book Delivering Happiness: A Path to Profits, Passion and Purpose. The conversations explore the notion that work and happiness should be inextricably linked.

And Rick Wartzman delivers a piece about the central challenge facing PepsiCo CEO Indra Nooyi as she seeks to have her company produce more “good for you” snacks and drinks.

The ROI on That Sheepskin

May 112012
 

Colleges are a bit like funeral homes. Talking about getting your money’s worth strikes some as a little crass.

But overcharging people is crass, too. College demands an increasingly big chunk of change, and the returns aren’t necessarily there. Writing recently in The Wall Street Journal, Jack Hough lined up a number of experts to dispute a claim by President Obama that college is a great investment. Hough pointed out that “tuition and fees have increased 184% in 20 years after accounting for inflation, but wages for college grads have risen just 9%, according to Labor Department data.” Moreover, sites such as PayScale indicate that some students end up with a flat-out negative return on tuition investment.

“Mr. Obama’s investment tip is well-intentioned,” Hough wrote, “but in college as on Wall Street, returns aren’t guaranteed.”

Peter Drucker thought about education all his life. He also, as we’ve pointed out a number of times, thought a lot about paying for it. One of his most extensive considerations of the topic was in Landmarks of Tomorrow, first published in 1957, at a time when tuition was already on the rise.

“The educator usually distrusts economic discussion of education,” Drucker noted. “He points out with reason that individual excellence, knowledge and responsibility, rather than goods and services, are the ‘products’ of education.”

But Drucker countered that this was not an excuse to stop thinking in terms of return on investment. “We cannot afford education that does not make the individual a bigger, a better, a more dedicated or a more excellent—that means, a more productive—person,” he wrote. “Whatever does not add to the capacity for sustained growth of personality or contribution is impractical—and may indeed be deleterious. That this or that subject adds to a man’s ability to get a job, or to do well on his first job, is not irrelevant.”

Also, while Drucker believed in the value of student loans, calling it “equitable to expect the graduate to repay, in dollars over the years, the cost of his education,” he, too, may have blanched at the debt burden borne by recent college graduates scraping by at or near minimum wage. As he asserted, “A free society will not finance education by indentured labor.”

What do think: Has a college education ceased to provide a reasonable return on investment? Why?

A Curveball for the Bell Curve

May 042012
 

We all know what a bell curve looks like. Many of us also use it when we make decisions. We expect, for instance, that a group of students will be made up of a few geniuses, a few dunces and a lot of pretty average folks who fall in the middle.

But maybe you can’t take that to the bank—or at least not to the office. When it comes to talent or productivity, people often don’t distribute themselves on a bell curve. There are simply superstars and everybody else.

“Rather than describe how humans perform, the bell curve may actually be constraining how people perform,” National Public Radio declared this week, as it reported on the findings of researchers Ernest O’Boyle Jr., of Longwood University’s College of Business and Economics, and Herman Aguinis at Indiana University’s Kelley School of Business.

In their study of productivity in 198 groups of people “ranging from physics professors and Grammy nominees to cricketers and swimming champions,” they found that superstars accounted for most of the success of the group. “The vast majority of the others in the group,” Aguinis explained, “were actually performing below the mathematical average.”

It’s a variation of the Pareto principle, or the 80/20 rule. Peter Drucker wrote about this often, and he observed that measurable phenomena in nature (height of people, temperatures during the year, etc.) tend to distribute themselves along a “normal” bell curve.  But social phenomena, like the things we do for a living, don’t work that way.

“In a social situation a very small number of events—10% to 20% at most—account for 90 percent of all results,” Drucker wrote in On the Profession of Management. “A handful of customers out of many thousands produce the bulk of the orders; a handful of products out of hundreds of items in the line produce the bulk of the volume; and so on. This is true of markets, end uses and distributive channels. It is equally true of sales efforts.”

Image credit: Tang Yau Hoong

There are many implications to this. One, as we’ve pointed out before, is that you should focus on making your stars into superstars, not on making the other 80% better. But another could be that most workers are neither superstars nor cut out to be superstars, and any manager must take that into account when hiring and promoting.

Neither businesses nor service institutions can “depend on superstars to staff their managerial and executive positions,” Drucker wrote in People and Performance. “If . . . we cannot organize the task so that it will be done on a satisfactory level by people who only try hard, it cannot be done at all.”

Does the idea that there are only superstars and below-average players change the way that your organization should be managed—and, if so, how?

The See-Through Organization

May 032012
 

Here’s this month’s piece from neuroeconomist Paul Zak. For those who might dismiss some of our thinking as the “soft side” of management, Paul puts “hard science” behind it.

I read a fascinating interview recently with Rich Barton, the co-founder of several companies that endeavor to make information as widely available as possible: Zillow (on real estate), Expedia (on travel) and Glassdoor (on salaries). Not surprisingly, Barton, who also sits on the board of the lawyer- and doctor-review website Avvo, is a big fan of transparency.

“What I tell people is, if it can be . . . known it will be known,” Barton says.

But Barton’s efforts have been directly largely at the external marketplace. How about internally? How transparent should companies be with their own employees?

My research shows that there are several levels of transparency to consider. The most basic is being clear on the organization’s goals, as well as the goals of each business unit. Greater transparency occurs when the reasons behind these goals are made clear—for example, how they contribute to an organization’s financial health or core purpose.

As Peter Drucker wrote: An “organization has to be transparent. People have to know and have to understand the organization structure they are supposed to work in. This sounds obvious— but it is far too often violated in most institutions (even in the military).”

Radical transparency goes even further; it opens up the financials—everything from profit-and-loss statements to people’s salaries—for everyone, including employees and outsiders, to see.

Few companies have reached the radical transparency level, but those that have swear by it. Whole Foods Market is one. It even pays employees to take a basic accounting course so they can understand the quarterly P&L they receive. Another is the Brazilian machinery maker Semco. The company has few job titles, and everyone sets his or her own salary and knows the salaries of others. Managers are chosen by a vote of the managed, and the role of manager is rotated regularly.

Yet how much transparency should your organization have? Neuroscience can provide a guide. My laboratory experiments show that when intentions are clear and someone is shown trust, the recipient’s brain releases a molecule called oxytocin. And when oxytocin is high, so is the desire to pitch in to help the team.

Distrust, on the other hand, causes the brain to mount a defensive attack—especially in men—that manifests as spiteful and sometimes destructive actions.

These findings indicate that a minimum level of transparency is needed to remove distrust for most employees. From there, you can experiment with going deeper, trusting employees with information once held in private and then gauging their reactions. Think of this as crowd-sourcing your decisions—or just treating your employees as the sentient human beings they are.

Paul Zak is the director of the Center for Neuroeconomics Studies at Claremont Graduate University and the author of  The Moral Molecule.

I Work Next To You. We Should Talk Sometime.

May 022012
 

What do you think, Fred?  Fred?? Fred??

Oh, Fred’s wearing headphones and can’t hear me. This scenario, it seems, is increasingly common in the workplace today. Writing recently for Harvard Business Review, former entertainment executive Anne Kreamer says that today’s brand of technology in the workplace, particularly things like G-chat or headphones or Skype, is connecting us plenty—just not to our colleagues.

Kreamer notes that she consulted a dozen people under 35 and found that most of them wear headphones at work and that nearly all of them have a G-chat window open. “The majority of these young workers said that they felt far more connected moment to moment with people outside their workplaces than with any co-workers,” she writes. The problem, according to Kreamer, is that they miss out on crucial exchanges, become less loyal to the company and one another, and innovate less. As studies on innovation show, physical proximity matters.

Peter Drucker didn’t have to contend with G-chat, but he already saw that creating a productive workplace requires sufficient human contact. For one thing, it’s the reason many people go to work at all. “Work is for most people the one bond outside of their own family—and often more important than the family,” Drucker observed in People and Performance. “The work place becomes their community, their social club, their escape from loneliness.”

Image source: 3dSolutions

More important, such contact influences productivity, and creating satisfying informal work arrangements among co-workers is especially important for good output. Research conducted by General Motors during the 1940s, for example found that “‘good fellowship’ or ‘good relations with fellow workers’ showed as the leading causes of job satisfaction,” Drucker recalled.

But even back then, Drucker added, technology was already intruding on these important connections. “The member’s need for integration with the group, for this relationship to the community of his fellows, is not at present sufficiently satisfied,” Drucker wrote in his 1950 book The New Society. In fact, “mass-production technology tends to isolate man from man.”

Are you seeing more headphones and the like in your office? Is it good or bad for business?

 Older Entries