Philip Tetlock: Expert Judgment

Philip Tetlock has done more than any other academic to help us understand the process of forecasting and making predictions. He has shown us why experts don’t do well, and, with his latest work, has found the secret sauce of ‘Superforecasting‘.

Philip Tetlock

Philip Tetlock

Short Biography

Philip Tetlock was born in 1954 and grew up in Toronto. He studied psychology, gaining his BA and MA at University of British Columbia, before moving to the US, to research decision-making for his PhD at Yale.

His career has been entirely academic, with posts at University of California, Berkley (Assistant Professor, 1979-1995), Ohio State University (Chair of Psychology and Political Science, 1996-2001), a return to UC Berkley (Chair at the Haas Business School, 2002-2011), and currently, he is Annenberg University Professor at the University of Pennsylvania, where he is jointly appointed between the School of Psychology, Political Science, and the Wharton Business School.

Tetlock’s early books are highly academic, but he started to come to prominence with the publication, in 2005, of ‘Expert Political Judgment: How Good Is It? How Can We Know?‘ This book has become highly influential, by documenting the results of Tetlock’s research into the forecasting and decision making of experts. The bottom line is that the more prominent the expert: the poorer their ability to forecast accurately.

Tetlock’s most recent book, 2015’s ‘Superforecasting: The Art and Science of Prediction‘ is one of those few magic books that can change your view of the world, make you smarter, make you feel wiser, and inspire you at the same time. It is co-written with journalist Dan Gardner (whose earlier books cover Tetlock’s work [Future Babble], and that of Daniel Kahneman [Risk]) and so is also highly readable.

The Tetlock Two-step

In ‘Expert Political Judgment‘, Tetlock is a pessimist. He finds substantial evidence to warn us not to accept the predictions of pundits and experts. They are rarely more accurate than a chimp with a dartboard (okay, he actually compares them to random guessing).

Ten years later, in ‘Superforecasting’, Tetlock is an optimist. He still rejects the predictions of experts, but he has found light at the end of the predictions tunnel. The people he calls ‘Superforecasters’ are good at prediction; far better than experts, far better than chance, and highly consistent too.

If you want to understand how to make accurate predictions and reliable decisions; you need to understand Tetlock’s work.

Hedgehogs and Foxes: The Failure of Experts

In a long series of thorough tests of forecasting ability, Tetlock discovered a startling truth. Experts rarely perform better than chance. Simple computer algorithms that extrapolate the status quo often outperformed them. The best human predictors were those with lesser narrow expertise and a broader base of knowledge. In particular, the higher the public profile of the expert, the poorer their performance as a forecaster.

This led Tetlock to borrow a metaphor from philosopher Isiah Berlin: The fox knows many things but the hedgehog knows one big thing. The experts are hedgehogs: they know one thing very well, but are often outsmarted by the generalists who recognise the limitations of their knowledge and therefore take a more nuanced view. This is often because experts create for themselves a big theory that they are then seduced into thinking will explain everything. Foxes don’t have a grand theory. So they synthesise many different points of view, and therefore see the strengths and weaknesses of each one, better than the hedgehogs.

One result of Tetlock’s work was that the US Government’s Intelligence Advanced Research Projects Activity (IARPA) set up a forecasting tournament. This is an ‘Intelligence Community’ think tank. Eventually, Tetlock moved from helping design and manage the tournament, to participating.

Superforecasting: The Triumph of Collective Reflection

Tetlock, along with his wife (University of Pennsylvania Psychology and Marketing Professor, Barbara Mellers) created and co-led the Good Judgment Project. This was a collaborative team that was able to win the IARPA tournament consistently.

The book, Superforecasting, documents what Tetlock learned about how to forecast well. He identified ‘Superforecasters’ as people who can consistently make better predictions than other pundits. Superforecasters think in a different way. They are more thoughtful, reflective, open-minded and intellectually humble. But despite their humility, they tend to be widely read, hard-working, and highly numerate.

In a recent (at time of writing – https://twitter.com/PTetlock/status/738667852568350720 – 3 jJune 2016) Tweet, Tetlock said of  Trump University’s ‘Talk Like a winner’ guidelines :

Guidelines for “talking like a winner” are roughly the direct opposite of those for thinking like a superforecaster

The other characteristics that enable superforecasting, which you can implement in your own organisation’s decision-making, are:

  1. Screen forecasters for high levels of open-mindedness, rationality and fluid intelligence (reasoning skills), and low levels of superstitious thinking (Tetlock has developed a ‘Rationality Quotient’ or RQ). Also choose people with a ‘Growth Mindset’ andGrit.
  2. Collect forecasters together to work as a team
  3. Aim to maximise diversity of experiences, backgrounds, and perspectives
  4. Train them in how to work as a team effectively
  5. Good questions get good answers, so focus early effort on framing the question well to reduce bias and increase precision
  6. Understand biases and how to counter them
  7. Embrace and acknowledge uncertainty
  8. Take a subtle approach and use high levels of precision in estimating probabilities of events
  9. Adopt multiple models, and compare the predictions each one offers to gain deeper insights
  10. Start to identify the best performers, and allocate higher weight to their estimates
  11. Reflect on outcomes and draw lessons to help revise your processes and update your forecasts

 

Tetlock Explaining Fox and Hedgehog Theory

Eliyahu Goldratt: Theory of Constraints

Eliyahu Goldratt was an Israeli business thinker, who popularised his approach to transforming the performance of business processes with a novel. Co-written with Jeff Cox, The Goal has been one of the most influential business books of the late Twentieth Century.

Eliyahu Goldratt

Eliyahu Goldratt

Short Biography

Eliyahu Goldratt was born in 1947 and lived his life in Israel. He studies Physics at university, gaining his BSc at Tel Aviv University, and his Masters of Science and Doctorate of Philosophy degrees from Bar-Ilan University. His PhD research was into the physics of fluid flow, and afterwards, he applied this thinking to systems within organisations.

He used an algorithm that he had developed during his doctoral studies as the basis for creating production scheduling software, which he called Optimized Production Technology. In 1975, he founded a company with the same name, to implement the software within Israeli companies.

The company grew, opening subsidiaries in the US (1979) and the UK (1982), changing the business name to Creative Output. It started to provide training alongside software implementation. In 1984, Goldratt published ‘The Goal‘. This was a business book, about process optimizaton, in the form of a novel. Jeff Coz provided the creative writing, while Goldratt set out the principles. The Goal became an international best seller.

The book’ success, and Goldratt’s response, created tensions with the company’s shareholders, and in 1986, he left Creative Output and founded AGI, The Avraham Y Goldratt Institute (named after his father). Through the late 1980s and the 1990s, Goldratt continued to develop his ideas, which became known as The Theory of Constraints (or sometimes just as TOC).

In 1997, Goldratt retired from AGI, but continued to found consulting businesses and write books, applying his Theory of Constraints to arenas like marketing and project management. He died at a relatively young age, in 2011.

The Theory of Constraints

The Theory of Constraints was not new when Goldratt conceived it. There are many antecedents both for its primary application in process engineering and for other applications like the Critical Chain approach to project management, set out in his 1997 book, ‘Critical Chain‘.

Indeed, many of Goldratt’s ideas are applied in Lean Manufacturing, and overlap substantially with those of Taiichi Ohno. The essence of Goldratt’s approach is three questions and a five step process.

The questions are intended to direct changes that will optimise a system. They  are deceptively simple:

  1. What to change?
  2. What to change to?
  3. How to make the change?

The principle that Goldratt based his theory on is also very simple. If there nothing is preventing a system from achieving higher throughput, then its throughput would be unlimited. This is obviously absurd, so there must be constraints. When you find the constraints and lift their capacity, the system’s capacity and productivity (to achieve its goal) will increase. So the steps for doing this are:

  1. Identify the system’s greatest constraint.
  2. Decide how to exploit the system’s constraints.
  3. Subordinate everything else to the above decisions.
  4. Elevate the system’s constraints.
  5. When you have lifted the system’s constraint, go back to step 1.

Goldratt likened the limiting resource or asset, which constrains the rest of the system, to a drum. Its beat determines the rhythm of the system. If you cannot raise its tempo, you must do everything you can to avoid wasting its capacity. To maximise throughput at this constraint, other elements of the process, that feed it, need to have surplus capacity, to create a buffer  and reduce risk that, if they fail, the constraint will kick in.

This is a principle Goldratt applied in a variety of contexts, and there are now a great many of businesses that consult on these applications.

Goldratt’s legacy has been a highly analytical approach to finding cause and effect. Some criticise it for its simplicity and others because it may not produce the most optimal solutions. And of course, others are concerned about the extent to which he did or did not acknowledge his debt to earlier thinkers. His 2006 article, ‘Standing on the Shoulders of Giants‘ does explicitly reference the Toyota Production System very clearly.

For us, however, the message is clear. The Theory of Constraints is widely used and has made a large contribution to the productivity of many businesses. So for that reason, any manager should have at least a passing understanding of its principles.

Amy Edmondson: Teaming

Amy Edmondson is an Engineer turned Management and Leadership Professor, who has made a special study of how to create effective collaboration among small, disparate groups in informal circumstances. This, she believes, is the key to organisational success in a world where innovation is critical.

Amy Edmondson

Amy Edmondson

Very Short Biography

Amy Edmondson grew up in New York, and studied Visual and Environmental Studies and Engineering at Harvard University, graduating in 1981. For a short while, she was Chief Engineer at the Buckminster Fuller Institute. After she left, she published a book, ‘A Fuller Explanation: The Synergetic Geometry of R. Buckminster Fuller’ about Fuller’s ideas.

She then moved to the Pecos River Learning Centers, where she became Director of Research, until starting a PhD in Organisational Behaviour at Harvard in 1991. When she completed it, she joined the staff of Harvard Business School, where she is currently the Novartis Professor of Leadership and Management.

Failure

For many people, Amy Edmondson came to notice with her 2011 Harvard Business Review article ‘Strategies for Learning from Failure‘. In this, she argues the case for ‘intelligent failures’ setting out a neat model of how failure spans a spectrum from blameworthy to praiseworthy.

Reasons for Failure - Amy Edmondson

Reasons for Failure – Amy Edmondson

The abilities to face up to failure, discuss it candidly, and be curious about it lead nicely into the work for which Edmondson is best known…

Teaming

Edmondson distinguishes the concept of ‘Teaming’ from the more familiar idea of teamwork. Teaming is about bringing together a diverse group and rapidly creating the conditions for close collaboration. It bears a close relationship with the idea of Swift Trust, which we discussed in an earlier Pocketblog.

However, whilst swift trust focuses on creating a solid basis for long-term collaboration quickly, Edmondson is more interested in short-term, informal collaboration. For this to happen, she identifies ‘three pillars’.

  1. Curiosity – to learn from the people around you
  2. Passion – so that you care enough to work your hardest
  3. Empathy – so you can see things from other people’s points of view

The role of leadership becomes one of role modelling these three behaviours. You must be driven to achieve the goal, enquire deeply into the situation, and tune into the needs and emotions of the people around you.

Edmondson’s book, Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy is very highly regarded and features a foreword by Edgar Schein.

An important concept that Edmondson introduces in her work on teaming is…

Psychological Safety

Teaming works – and teams work – when participants collectively feel that members can take risks together safely. They can share feelings and disclose actions without fear of recrimination. This creates a climate of openness, which Edmondson calls ‘Psychological Safety’. Again, the leader needs to model appropriate behaviours, acknowledging your own fallibility, and being curious and empathic.

Crucially, when you achieve psychological safety for your team, work becomes a problem of learning, rather than of executing actions. In this, Edmondson’s work complements Schein’s exceptionally well.

Edmondson in her own Words

There are a number of excellent videos available. In this 12 minute TEDx video, Edmondson is talking about Psychological Safety.

Napoleon Hill: Positive Mental Attitude

Napoleon Hill has a lot to answer for. As if the 1980s’ and 1990s’ surge in the self-help book market wasn’t enough, you can now hardly move around the internet without the offer of a get rich quick scheme or the opportunity to build an amazing lifestyle with barely four hours of work a week. That isn’t to say, that Hill was the first into the market, but he was, perhaps, the first and most important contributor to our literature on personal success.

Napoleon Hill

Napoleon Hill

Short Biography

Napoleon Hill was born into a fairly impoverished Virginia family, in 1883. He was 10 when his mother died, and quickly became something of a local menace, roaming the locality with a six-shooter, trying to emulate his then hero Jesse James. It was his stepmother who pointed him in a new direction. He was to find new heroes in America’s great industrialists, and to learn that the typewriter is mightier than the handgun.

At 15, he started a journalistic career, writing articles for local papers, which led, in 1908, to his first big interview, with ageing steel magnate Andrew Carnegie. Over a couple of days, Carnegie shared his philosophy on how he became successful, while Hill sat rapt. At the end, so the mythology goes, Carnegie challenges Hill: if Hill would dedicate himself, unpaid, to researching a philosophy of success, Carnegie would get him started with letters of introduction. Hill accepted and got a personal introduction to Henry Ford. This led to further introductions that allowed Hill to interview such ‘great men’ as Alexander Graham Bell, Woodrow Wilson, Thomas Edison, and Elmer Gates.

In a short biography, we don’t have time to detail the many achievements and setbacks that Hill encountered in his life, including his work as PR advisor to US President Woodrow Wilson. But lasting success appeared to have arrived when, in 1928, Hill was able to publish his eight-volume analysis of everything he had learned on the quest Carnegie had set him. With the proceeds of The Law of Success, Hill bought an impressive new family home. Sadly, another reversal came in 1929, when the Wall Street crash took book sales with it. The Hills were destitute.

There followed a series of ventures and adventures in a colourful life that saw Hill working for another US President, FD Roosevelt (and, it is claimed, penning the famous ‘we have nothing to fear but fear itself’ line), launching several magazines (that all folded in a variety of circumstances) and surviving, by pure good fortune, an attempted assassination attempt by prohibition era gangsters.

But let’s cut to the chase. In another attempt to revive his fortunes, Hill re-wrote and shortened his Law of Success ideas into a new book. Hill did this at the prompting of his second wife, who also suggested the (early 2000s -sounding) title ‘The Thirteen Steps to Riches’. His publisher rejected this with a suggestion of his own – which was mercifully abandoned. The book we now know of as Think and Grow Rich, was very nearly titled: ‘Use Your Noodle to Win More Boodle’.

More good fortune and ill were to follow, as were more magazines and more books. Perhaps the most significant of these reads a little like a summing up. Teaming up with businessman W Clement Stone from the early 1950s, the two men taught his philosophy of personal achievement. In 1960, they co-wrote Success Through a Positive Mental Attitude. More books were to follow – including some finished and published posthumously.

In 1970, Napoleon Hill died. He had arguably achieved even more than his mentor. Whilst Hill was never remotely as rich as Carnegie, it is Hill’s book that is constantly re-issued and labelled as a classic.

The Cores to Hill’s Philosophy of Wealth and Success

At different times, Hill appears to have had a different ‘secret’ in mind. There are a thousand self-help volumes that repeat much of what Hill has said, but often, he did say it first. He has also spawned an industry of internet memes – lush pictures with Napoleon Hill quotes attached. Among my favourites are:

Strength and growth come only through continuous effort and struggle.

Patience, persistence and perspiration make an unbeatable combination for success

Think twice before you speak, because your words and influence will plant the seed of either success or failure in the mind of another.

Every adversity, every failure, every heartache carries with it the seed of an equal or greater benefit.

and, of course, the most famous may well be

What the mind can conceive and believe, it can achieve

But there is more to Hill than pithy quotes. In his evocation of ‘brain capital’ in Think and Grow Rich, Hill arguably foresaw the growth of Charles Handy’s Triple-i Company.

It is also important to acknowledge that Hill’s philosophy (like many of the men he interviewed) was rooted in an early twentieth century Judeo-Christian tradition of hard work, male dominance, and biblical foundation. Some of his writing may seem ahead of its time, but other aspects are very definitely of the past. His focus on a will to succeed (compare this to Nietzsche’s ‘will to power’) as a transmutation of male sexual energy reads as nothing more than bizarre to a modern reader.

But his concept of a group of intelligent, challenging individuals surrounding you as a means of accessing knowledge and wisdom, which he called a Master Mind, is probably the origin of modern Mastermind groups, which doubtless are responsible for much business success today.

Napoleon Hill’s Secret(s) to Success

In Think and Grow Rich, Hill alludes to his secret of success, without making it explicit. Most people therefore infer it to be some variant of a passionate, almost ungovernable urge to succeed. This is certainly a theme that recurs. It is also worth mentioning that Hill defined wealth far more widely than financial success, but as the quality of your friendships, the harmony of your family life (coming from a man twice divorced), and good working relationships. This last point is vital.

In the Law of Success – actually, 16 lessons – he argues that:

Only by working harmoniously in co-operation with other individuals or groups of individuals and thus creating value and benefit for them will one create sustainable achievement for oneself.’

This is a variant, of course, on the oft-cited and truly multi-cultural Golden rule: that you should treat others as you would wish them to treat you.

But it was in the 1950s and with the publication of Success through a Positive Mental Attitude that Hill described his settled opinion. People who succeed tend to be those who view setbacks as nothing more than a step on the road to success. A positive mental attitude, which finds its modern form in Positive Psychology, Learned Optimism, and a Growth Mindset is Hill’s final secret to success. And it seems a fitting one. Because few people in our Great Thinkers and Doers series have suffered so many setbacks, and mounted as many comebacks as Hill. His final success serves as one data point in the anecdotal confirmation of Hill’s self-help secret.

You may like The Growth Mindset Pocketbook and The Positive Mental Attitude Pocketbook.

James Caan: People Business

James Caan is a serial investor who builds or buys businesses… and then sells them and moves on. He is one of the UK’s most successful and prominent entrepreneurs, with a nice-guy image. This image reflects his underlying business philosophy.

James Caan

James Caan

Short Biography

James Caan was born as Nazim Khan in Lahore, Pakistan, in 1960. Two years later, his family moved to the United Kingdom and, like so many immigrant families over the last few hundred years, they settled down and built a business in London’s East End – not far from where Lord Sugar grew up and got started.

Although his father wanted Caan to join the garment business he had started, Caan had other ideas. He left school, left home, and split with his father at the age of 16, and went west, to live in a flat in Kensington.

After a series of job placements made by a recruiting company, he decided he wanted to start his own business. But this was after helping his then future wife start her own fashion shop. He met her, interviewing her while working for a fashion recruitment agency, and promised to invest in her business, because he was attracted to her – not, I suspect he would now argue, the shrewdest of business justifications. With little capital of his own, he borrowed heavily, and luckily she made the business work.

Having worked for several recruitment businesses, he started his own in 1985: Alexander Mann.  This was followed by others, as he started, expanded and sold businesses largely in the recruitment sector. Most notable were Alexander Mann (founded 1985, sold 2002) and Humana International (founded 1993, sold 1999). His LinkedIn profile will give you a sense of his energy.

In 2003, he returned to formal education for a year, joining Harvard Business School’s Advanced Management Program. On his return, he founded what is now his primary business, Hamilton Bradshaw. This is an equity investment business that specialises in the UK recruitment industry. Its portfolio currently (Summer 2016) consists of four recruitment businesses (with 9 others sold) and five other professional services businesses (with 1 other sold).

Between 2007 and 2011, Caan was a panelist on the successful BBC television series Dragon’s Den, alongside entrepreneurs including Deborah Meaden, Theo Paphitis, Peter Jones and Duncan Bannatyne. He left the series after frequent collaborator Bannatyne and he got into a dispute about the corporate structure of Hamilton Bradshaw and whether its funds are held off-shore.

In 2012, Caan was appointed Chairman of the Government’s Start-up Loans company, and in 2015, he was made CBE (Commander of the Order of the British Empire). He has written several books (including a best-selling autobiography, The Real Deal: My Story from Brick Lane to Dragons’ Den) and published a top-selling smart-phone App.

James Caan’s Business Philosophy

Caan became successful in his late 20s and has maintained a high work rate and exceptional success record ever since. His philosophy is simple:

Business is about people.

This is reflected by the overwhelming focus of his business investments; in people-focused businesses. This was also true in his investment choices in the Dragon’s Den series, although he did make a number of investments in product based businesses too.

He takes this further and says that good business is not about the quality of your transactions, but the quality of your relationships. We can see a reconciliation of relationship and transaction in one of the two pieces of advice he claims to have had from his father that influenced him significantly:

‘Always look for opportunities where both parties benefit.’

This very much matches a piece of advice in Fisher and Ury’s classic book on negotiation, ‘Getting to Yes‘:

‘Invent options for mutual gain.’

We have a blog about another key insight from that book, ‘Going round in circles: Problem Solving Simplicity

The other piece of advice Caan’s father gave him is also instructive:

‘Observe the masses and do the opposite.’

This seems to be a quintessential entrepreneurial attitude. However, I am not sure it is really at the heart of what has made Caan so spectacularly successful. For me, his formula seems equally simple. Looking at a succession of similar businesses that he has started, made profitable, and then sold on, I wonder if his philosophy s not something like this:

‘Observe what works and replicate it.’

 

Jennifer Aaker: Story Power

Jennifer Aaker wants you to get your message across. And her conclusion is that the best way you can do it is by telling a story. Stories are powerful, memorable, and impactful.

Jennifer Aaker

Jennifer Aaker

Short Biography

Jennifer Aaker was born in 1967 and grew up in California. She studied psychology at UC California, Berkeley, under Daniel Kahneman and Philip Tetlock, graduating in 1989. She went on to win a PhD at Stanford University’s Graduate School of Business in 1995.

She went straight into an academic role as Assistant Professor in the School of Management at UCLA Anderson. She then returned to The Stanford Graduate School of Business in 1999, becoming a full professor in 2004, and General Atlantic Professor of Marketing in 2005.

We try to avoid framing our management thinkers in terms of their family members, but it is relevant to note in passing that Jennifer Aaker’s father is David Aaker – now an emeritus professor of advertising. Clearly he was influential in Aaker’s interest in branding and you can watch the two Aakers in conversation about brand and marketing.

However, she has moved away from that as her primary interest, focusing on two areas:

  1. the psychology of happiness, and how it relates to our perceptions of time and money
  2. how we can communicate via social media, using the power of storytelling

The two link together, because small acts, often mediated by social media messaging, can have an effect on our happiness.

In 2010, Aaker co-wrote The Dragonfly Effect with her husband, Andy Smith.

Brand Personalities

Jennifer Aakers came to prominence researching the personalities we associate with brands. Her idea was to see if there are a small subset of ‘personality types’ that consumers associate with brands. These would be like the ‘Big Five’ personality factors* in people. Each one is clearly distinct from the others and together, they account for a large proportion of personality traits.

Her assessment was that bands do have ‘personalities’ and that consumers make consistent interpretations. So her research set out to narrow the number of different personality types down to five. In her paper**, she shows how she reduced brand personality labels down to:

  • Sincerity
  • Excitement
  • Competence
  • Sophistication
  • Ruggedness

The personality dimension that a brand chooses to emphasise will influence consumer buying and loyalty choices. She advocated that brands can select a dominant personality type to emphasise, and present related characteristics to its audience. This creates a way to communicate brand identity and values.

Interestingly, subsequent work show that her five dimensions are far more parochial than the true Big Five Personality Factors. Outside the US, where she conducted her work, other brand personality dimensions are dominant, including Peacefulness in Japan, and Passion in Spain.

The Dragonfly Effect

The metaphor Aaker and Smith chose is one of a dragonfly’s agility being dependent upon it co–ordinating the use of four wings. In communicating effectively using digital media, Aaker and Smith’s four components are:

  1. Focus
    What one goal will you pursue?
  2. Grab attention
    How will you seize your audience’s attention in a noisy environment?
  3. Engage
    What story will engage your audience and appeal to their emotions?
  4. Take action
    What will you ask of your audience, and what difference will they make?

What Goal?

Before you communicate, you need to decide on a goal. It will need to meet five design criteria:

  • Humanistic – affecting people
  • Actionable – inspire action
  • Measurable – clear success criteria
  • Clarity – cannot be further simplified
  • Happiness – achieving the goal will make people happier

Grab Attention

To grab attention, your message must  be at least one of:

  • Personal
  • Unexpected
  • Visual
  • Visceral

Engage

To engage your audience, you need to tell a story. Stories connect the audience to the story-teller and create an emotional response. This is important because we primarily make our decisions emotionally, and use reason to justify them afterwards.

Take Action

People should fee ready and able to take action. As much as possible, make it easy for them, and fun. And the more they feel you are offering them something that is uniquely tailored to them and their circumstances, the more readily they will act.

Jennifer Aaker talking about her Research on Happiness

… and how it relates to social media.

 


* The Big Five Personality Factors are: Openness, Conscientiousness, Extraversion, Agreeableness, Neuroticism

** Dimensions of brand personality, Jennifer L Aaker, JMR, Journal of Marketing Research; Aug 1997; 34, 3

Charles Handy Part 2: The Nature of Organisations

In last week’s Pocketblog, we surveyed the life of Charles Handy, and referred to some of the big ideas in his many books. Now it’s time to look at those ideas.

The Gods of Management

In Handy’s first book, Understanding Organisations, he set out to collate and understand a wide variety of management and organisational thinking. In his second, The Gods of Management, he presented his own ideas. He perceived that organisational cultures can be classified into four broad types, according to how formal their structure is, and how centralised power is, within them. He drew the analogy with the characters of four of the olympian gods, from Greek mythology. He was, after all, an Oxford classics scholar.

The Gods of Management - Charles Handy

The Gods of Management – Charles Handy

Zeus – The Club Culture

Zeus presides over a highly centralised ‘Club’ culture, where one dominant executive holds all the reigns of power, making all of the important decisions themselves. They control al the important resources and can have low acceptance of what they perceive as under-performance. This culture tends to arise under a dominant and successful founder, or with the ascendancy of a charismatic leader. Political parties, start-ups, and crime families often share this culture.

Apollo – The Roles Culture

Mature, bureaucratic organisations adopt a solid, stable, rule-based culture, where everyone has a specific role. People know what is expected of them and will rarely step beyond those boundaries. Reporting lines are well-defined and decisions follow set procedures. Job positions confer authority to make those decisions, and processes can be long-winded and inflexible. Apollo cultures struggle to adapt to a changing environment

Athena – The Task Culture

The Athena culture is a meritocracy, where ability to think and get things done is highly valued, and rewarded well. Talent is well rewarded, and teams are fluid, with people coming together to work on projects and solve problems. Authority is less important here than knowledge, expertise and the ability to influence and persuade. You can see this culture in consultancies, research organisations, and in agile business units of larger, forward thinking businesses that may be stuck with an Apollo or Zeus culture.

Dionysus – The Existential Culture

The Dionysus culture is all about me, me, me. It serves the individuals and can lead to both creative freedom and equally internal discord and unproductive competition. The organisation is little more than the home and resource for a set of self-motivated individuals who often care more about their own position than that of the organisation. Accounting and law firms are good examples, because of the partnership nature of the businesses. So too are pressure groups.

New Organisations

In his 1989 book, The Age of Unreason, Handy started to foresee some of the changes we now take for granted. As technological and commercial realities were shifting, Handy built on his earlier book, The Future of Work, to develop new models of how we would work in the future. He further developed those ideas in The Empty Raincoat, and The Elephant and the Flea. Two of the characteristics of Handy’s books are

  • That they often take management and organisation as their starting point, but then extend their ideas outwards to reflect on the impact of society
  • Each book seems to build on and develop further, the ideas of its predecessor

Here are four of the trends and ideas that most appeal to me as both relevant to our readers, and accurate as forecasts. Inevitably, they interlink into a coherent idea-set.

Portfolio Workers

Handy’s concept of a portfolio career, with lots of components, rather than one single ‘job’ is a reality for many professionals nowadays (including me). The concept of a flexible labourer able to turn his hand to anything from agricultural work to general making and mending, to selling goods at market, to working in a tavern, is ancient. What Handy foresaw (and embraced for himself) was the emergence of this lifestyle for white collar, knowledge workers.

The Shamrock Organisation

This trend will enable what Handy describes as a Shamrock Company.

The Shamrock Organisation - Charles HandyThe Shamrock Organisation - Charles Handy

The Shamrock Organisation – Charles Handy

In the The Age of Unreason, Handy originally described three leaves, but four seems to be a fuller model: the first is the professional core of managers, technocrats, vital support staff, and a minimum of specialists. Together, they define the core competence of the business, and provide and manage its infrastructure. Everything else is provided by contracted workers: outsourced services from specialist providers, contracted independent professionals with highly specialised skills, and a flexible, lower-paid  workforce that can be brought in on short contracts and day-rates.

The Federal Organisation

Berkshire Hathaway seems to me to be the epitome of Handy’s Federal Organisation. Here, there is a tiny core business, managing a large number of highly independent businesses, all of whom have complete autonomy to manage their affairs, and succeed on their own terms. When you see the success that Warren Buffett and Charlie Munger have created, you have to wonder why other large federal multinationals spend so much effort trying to control their subsidiaries, impose processes and functional verticals upon them, and generally over-manage the local talent.

The Triple-I Company

The astonishing rise of internet-based software companies, web-based news aggregators, digital information providers (increasingly, Management Pocketbooks is transitioning to becoming one of these), and the high-tech consultancies that serve them, seems to me to be ample evidence of the prescience of Handy’s third kind of new organisation: one that capitalises, above all, on:

  • Ideas
  • Intelligence
  • Information

Discontinuous Thinking

Handy foresaw our current period of discontinuous change, and suggested that incremental ‘continuous’ thinking was not going to solve the problems it throws up. He doesn’t require us all to have the genius-level intellects of Einstein or Marx, but instead implies we need to build a capacity for curiosity, reframing situations, and constant learning. It seems inevitable that, once again, Pocketblog returns to the thinking of Carol Dweck, on Growth Mindset.