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# Section 1: The Public Management Context

## Government is the Problem

_Friedman, M. (1993). Why government is the problem. Hoover Press._

Author: Uk, Bolary; Editor: Sears, Kicia Kimberly

The article was adapted from the 1991 Wriston Lecture, which was presented in New York City. It argued that the government is the reason behind all of the major social problems in the United States.

Friedman argues that there are 10 major social problems created by government.

First, the US government’s expenditure on education is the second big social spending after military and it has tripled after adjusting to inflation in the last 30 years; however, the schools have been deteriorating.

Second, the lawlessness and crime in society. There are many laws to break, and a "[large] fraction of the laws fail to command the allegiance of the people." The government can enforce only laws that most people believe to be good laws, meaning the laws that most people would follow even if the laws did not exist. The issue here, the author asserts, is that there are too many actions rendered illegal that people generally believe to be "moral and proper," and this makes them difficult to enforce without resulting to brute force. Friedman argues that a major problem is the prohibition of drugs. He believes these laws end up doing more harm than good.

Third, homelessness made by government actions, such as rent control, empty mental facilities and turn people out on the streets with few options. Additionally, he argues "urban renewal and public housing programs have destroyed far more housing units than they have built."

Fourth, the collapse of family values such as increased "teenage pregnancies, illegitimate births, and one-parent families" were caused by "mistaken and misdirected" governmental policy.

Fifth, the high cost of housing and the destruction of housing is a problem. He argues this was caused by rent control policies in cities such as New York as well as expanded regulations for building. The costs of obtaining permits and building within regulations is too high.

Sixth, the high cost of Medical Care: the cost was 26 times as high in 1989 as it had been in 1946. Most of the increased cost after 1965 mostly pay for personnel the author views as ineffective.

Seventh, the savings and loans crisis produced by government, "first by the accelerating inflation in 1970s, which destroyed the net worth of many savings and loan institutions, then by poor regulation in the 1980s, by the increase in the amount covered by deposit insurance to $100,000, and...[the recent] heavy-handed handling of the crisis."

Eighth, the highway congestion. The government is unable to produce an adequate highway system compared to the increasing needs of automobile drivers.

Ninth, air control facilities run by the government are unable to effectively handle the number of airlines, planes, and personnel demanded by the airline industry.

Finally, Friedman mentiones miscellaneous issues such as the botched economic policies of the Bush Administration that contributed to the 1990-1991 recession, the over-regulation of industry, and agricultural policies that end up wasting food.

Friedman argues that the basic fucntions of governemnt are to "defend the nation against foreign enemies, to prevent coercion of some individuals by others within the country, to provide a means of deciding on our rules, and to adjudicate disputes."

Further, Friedman argues against his critics by attacking what he calls their best evidence that capitalism and private enterprise is the major cause of problems: pollution. He argues that in countries where industry is run by the government, pollution is far worse. In the United States, pollution is not as bad because private enterprise has found it more profitable to avoid pollution and therefore, the market adjusted and pollution did not get too bad. He argues that government does play a role in pollution regulation, but that the U.S. has created policies that are expensive and ineffective.

Friedman goes on to explain why he believes the government is the problem:

The influence of special interests which favor a few and impose small costs on many. Friedman uses the example of taxi regulation in New York City. Although the market would seem to support an increase of taxis in operation, the current drivers do not wish to compete and decrease their slice of the pie. Therefore, they lobby city hall to ensure governmental limitations are continued. This is an example of a deeper truth: the pursuit of self-interest. Friendman argues that this quality is in all people, whether they run private companies or governmental agencies.

"Self-interest is served by different actions in the private sphere than in the public sphere." An enterprise in private sector may succeed or fail. So their bottom line is to either make the enterprise work or to shut it down. However, the enterprise in the government sector has a very different bottom line. When it does not work, nobody likes to admit the mistake. Instead "they argue that the enterprise initially failed only because it was not pursued on a large enough scale." Friedman argues that this fundamental difference has caused failing governmental programs to spin out of control, as more money is pumped into them.

Another example in international sphere is the International Monetary Fund (IMF) and the World Bank. The IMF was established to administer a system of fixed exchange rates. After President Nixon closed the gold window in 1971, the fixed exchange rate system was replaced by a system of floating exchange rates. Instead of closing down, the IMF changed its function and expanded to be a relief agency with greater financial support from its sponsors.

After WWII the US had wage and price control. In order to recruit employees, many employers began to offer health care as a fringe benefit to attract workers. "As a new benefit, it took years for the Internal Revenue Service to require the cost of the medical care to be included in the reported taxable income of the employees." Later the wage and price control were eliminated, but the tax exemption of health benefits continued and employers providing benefits to workers has been normalized as an essential right.

Overall, Friedman argues the issue is that the government is spending too much on the wrong things, public officials are "led by an invisible hand to serve private interests," and people have no voice in governmental institutions. According to James Payne’s study of 14 different government hearings dealing with spending issues, "of the 1,060 witnesses who appeared, 47 percent were federal administrators, and another 10 percent were state and local officials...and 6 percent were congressmen". In short, the spending programs are shaped by government officials.

Friedman argues that there are many ways to correct these problems. The one that he emphasizes is creating term limits for government officials, particularly in Congress. He believes this would eliminate the conflict of interest that positions representatives as direct beneficiaries of very large governmental bodies. Further, he argues the people would support term limits, as they have in several state elections. Though he understands this would not eliminate the multiple problems he delineates, he thinks this would be a huge step in the right direction.

## Reinventing Government

_Clark, CS, “Reinventing Government: Two Decades Later.” Government Executive: April 26, 2013._

Author and Editor: Sarawat, Fariha

Clarke writes about the Clinton administration’s effort to reinvent the way the government works--The Clinton administration’s National Performance Review, which was re-christened during President Clinton’s second term as the National Partnership for Reinventing Government. Clinton and Gore decided to create a smarter government by adopting private sector practices aimed at improving efficiency, to reduce costs and have greater results.

This goal driven effort focused on   putting customers, the taxpayers, first, cutting red tape, empowering employees to get results and cutting government back to basics.
The scheme has had mixed success and has been criticized for aligned with major challenges, management goals not relating to budgets and lack of rigor in achieving results. A lot of the work was undone by the subsequent Bush administration.

## Is Public Management Unique?

_Boyne, G. A. (2002): Public and Private Management: What’s the Difference, in: Journal of Management Studies, 39:1, pp. 97-122._

Author: Creedon Jr, John Thomas; Editor: Hamlin, Madeleine Rose

In Public and Private Management: What's the Difference, Arthur Boyne argues that there is a lack of evidence to support the thesis that public and private sector organizations are too different to apply private sector managerial practices to. The article statistically analyzes and critiques 34 empirical studies by critics of New Public Management (NPM). While much of the evidence supports that they are very different on the surface, Boyne argues that few of them are statistically significant.

Boynes breaks down the analysis of the studies under four theoretical interpretations of publicness on the differences between public and private organizations:
- Publicness an organizational environments
- Organizational goals
- Organizational structures
- Values of managers.

Under each of these theoretical concepts, Boynes evaluates the statistical analyses of empirical evidence and claims assumed by the research in a number of subcateogries. Boynes analysis for each will be briefly summarized below:

**Publicness an organizational environments**
- Complexity
- Permeability: All studies support that publiv orgs are more open to environmental infuences but statistical results provide weak evidence of this.
- Instability
- Absence of competitive pressures

**- Organizational goals**
- Absence of equity and accountability in private sector: Results are mixed.
- Multiple goals and stakeholders in public sector: No tests to support one way or the other.
- Goals of public organizations more vague

**Organizational structures**
- Public organizations more bureaucratic: Majority of studies find strong support but there is no statistical controls of organizaitonal size.
- More red tape in public organizations: If red tape is interpreted as procedural delay then there is some support but the evidence is not always consistent with the conclusion.
- Lower managerial autonomy in public organizations: Statistical results mixed and inconclusive.

**Values of managers.**
- Public sector less materialistic: Strong evidence that public sector managers are less materialistic than their private sector counterparts.
- Public sector ethos: Evidence is partly consistent with the view that managers are driven primarily to serve the public interest.
- Less organizational commitment in public sector: 3/5ths of studies consistent with hypothesis that organizational commitment is weaker in public sector.

Some criticisms of the empirical evidence is that they were primarily done in the United States which possesses unique characteristics that define the public and private sectors when compared to many other coutnries. Additionally, the studies were all performed between 1960-1999, with most being from the late 1970's and early 1980's before NPM and a strong movement to apply private sector practices to public sector organizations. Moreover there were omissions of explanatory variables, little control, and few multivariate analyses. Boynes notes that all of these factors may have skew results.

Boynes utilizes a support score of 50% or higher to indicate whether instances would occur by chance or alone but argues this number should really be higher. The author concludes that there is little statistical significance that their are differences so fundamental between the public and private sectors that private sector management practices could not effectively be applied to public organizations. Only three studies met Boynes statistical threshold of significance: Public organizations are more bureaucratic, public managers are less materialistic, and organizational commitment is weaker in the public sector. Boynes concludes that that this not to say there are not differences but there remains little empirical grounds support that theory and oppose NPM's utilizaiton of private sector practices
the public sector. The article provides a review of 34 empirical studies comparing public and private sector organizations, and employs quantitative methods to analyze and critique the results of these studies. While critics of New Public Management (NPM) argue that business practices from the private sector cannot be applied to public organizations, Boyne argues that, based on the available literature, there is little evidence to support that the two spheres are fundamentally different.

Boyne first describes the concept of 'publicness,' which he defines according to Bozeman's 3-part model, whereby a public organization can be distinguished from a private one in terms of its ownership, funding, and control.

Then, in reviewing the literature comparing public andn private organizations, Boyne structures his findings according to four themes:
- Publicness and organizational environments
- Publiness and organizational goals
- Publicness and organizational structures
- Publicness and managerial values.

Boynes analysis for each theme will be briefly summarized below:

**Publicness and organizational environments**
- Complexity: Studies show that public agencies tend to be more complex than private ones.
- Permeability: All studies support that public orgs are more open to environmental infuences but statistical results provide weak evidence of this.
- Instability: There tends to be more turnover of managers at public organizations.
- Absence of competitive pressures: Public agencies have few competitors for provision of their services.

**Publicness and organizational goals**
- Absence of equity and accountability in private sector: Results are mixed.
- Multiple goals and stakeholders in public sector: No tests to support one way or the other.
- Goals of public organizations tend to be more vague.

**Publicness and organizational structures**
- Public organizations more bureaucratic: Majority of studies find strong support but there are no statistical controls for organizational size.
- More red tape in public organizations: If red tape is interpreted as procedural delay, then there is some support but the evidence is not always consistent with the conclusion.
- Lower managerial autonomy in public organizations: Results are mixed and inconclusive.

**Publicness and managerial values**
- Public sector less materialistic: Strong evidence that public sector managers are less materialistic than their private sector counterparts.
- Public sector ethos: Evidence is partly consistent with the view that managers are driven primarily to serve the public interest.
- Less organizational commitment in public sector: 3/5ths of studies consistent with hypothesis that organizational commitment is weaker in public sector.

Boyne notes that many of the studies were conducted in the United States, and therefore cannot necessarily be applied to international contexts. Additionally, the studies were all performed between 1960-1999, with most being from the late 1970s and early 1980s before there was a strong movement to apply private sector practices to public sector organizations. Moreover, there were omissions of explanatory variables, little control, and few multivariate analyses. Boyne notes that all of these factors may have skew results.

Boyne utilizes a support score of 50% or higher to indicate whether instances would occur by chance or alone but argues this number should really be higher. He concludes that there is little statistical significance to prove that are differences so fundamental between the public and private sectors that private sector management practices could not effectively be applied to public organizations. Only three studies met Boyne statistical threshold of significance: public organizations are more bureaucratic, public managers are less materialistic, and organizational commitment is weaker in the public sector. Boyne concludes that that this not to say there are not differences, but that there is not enough evidence that public and private organizations are too different to apply similar management practices across sectors. Overall, there is more research to be done in this area

## Managing Government, Governing Management

_Mintzberg, H. (1996). “Managing Government, Governing Management.” Harvard Business Review, May, 75-83. _

Author: Dorries, Joshua Wayne; Editor: Checksfield, Molly Wentworth

Managing Government can be surmised into one concept: balance. Henry Mintzberg’s primary supposition is that we need balance among the four sectors of society (the public and sphere, and the cooperatively owned organizations and not-for-profit noncooperative organizations), as well as a balance between our public concerns as individuals with the private demands of institutions.

According to the Mintzberg, because Western society feels that capitalism won over communism, we believe that the private sector is good, and the public sector bad, with all other types of organizations deemed irrelevant. Thus, people have erroneously argued that the government should become more like a business. The author disagrees, arguing that “[i]f we are to manage government properly, then we must learn to govern management.” He states, “capitalism did not triumph at all; balance did. We in the West have been living in balanced societies with strong private sectors, strong public sectors, and great strength in the sectors in between. The countries under communism were totally out of balance.”

Managing the government as a business promotes an interpretation of the populous as _customers_. But when it comes to complex services promulgated by the government, the idea of customer is dangerous. As the author writes, “the private ownership model, much as it provides ‘customers’ with a wonderfully eclectic marketplace, does have” as he says “... something more than arm’s length trading and something less than encouragement to consumer.” “When I receive a professional service from government […] the label _client_ seems more appropriate to my role.” Yet, beyond customers and clients, members of society are citizens with individual rights and allowances. Yet, citizenship goes beyond receiving various services, and imbeds within some sort of 'obligations as a _subject_.'” (Pg. 77) In one way or another, we are all subject. We pay taxes, fight and allow ourselves to be drafted into the armed forces, and respect government regulations. These four labels that members of society fall within are useful to clarify the varied purposes of government. Each label is served by a different sector of society, whether customers are appropriately served by privately owned organizations or through cooperatively owned ones, or client relationship which are best served by non-owned organization or cooperatively owned ones. A balanced society requires the various intuitional forms of ownership and control for success, the question becomes how government activities should be managed?

Mintzberg details Albert Shapero of Ohio State University concept of Management in an attempt to prove the incapability between managing a government as a company. Shapero’s three assumptions are: first that _particular activities can be isolated – both from one another and from direct authority_; second, that _performance can be fully and properly evaluated by objective measures_; and finally that _activities can be entrusted to autonomous professional managers held responsible for performance_. According to Mintzberg, “[t]hese assumptions[…] collapse in the face of what most government agencies do and how they have to work.”

In the _Government-as-Machine Model _the government “is viewed as a machine dominated by rules, regulations, and standards of all kinds.” (pg. 80) This model as fallen out of favor due to its lack of flexibility and responsiveness to the individual. The _Government-as-Network Model_, the polar opposite of the government-as-machine model, is where government is viewed as one intertwined system, a complex network of temporary relationships fashioned to work out problems as they arise and linked by informal channels of communication. The _Performance-Control Model_ is the realization of Shapero’s Management, and “aims above all to make government like business.” (pg. 80). The _Virtual-Government Model_ “contains an assumption that the best government is no government,” the motto of which could be thought of as “privatize, contract, and negotiate.” (pg. 81)

Mintzberg argues that the above models all fail, as they do not structure social authority adequately. Instead, he argues for the _Normative-Control Model_, which is “not about systems but about soul.” The idea is that control is normative, meaning it is “rooted in values and beliefs.” The key to the success of the normative model is dedication by and for the providers of service. The normative model is based upon five key elements: _selection_ of people chosen by values and attitude rather than credentials; _socialization_ to ensure a membership dedicated to an integrated social system; _guidance_ by accepted principles rather than imposed plans, vision rather than targets; shared _responsibility_ by all members; and _judgement_ of performance by experienced people.

While Mintzeberg believes that we as a society need to shift towards the normative model, he concludes that “[t]here is no one best model. […] Government, […] is an enormously eclectic system, as varied as life itself.” (pg. 82). Mintzberg concludes that “business is not all good; government is not all bad. Business can learn from government no less than government can learn from business; and both have a great deal to learn from cooperative and nonowned organizations. We need proud, not emasculated, government. Above all, we need balance among the different sectors of society.” (pg. 82-83).

## Managers Not MBAs

_Moynihan, Donald P. (2007) Review of Managers not MBAs, by Henry Mintzberg. Public Management Review 9(1): 155-158. _

Author: Washington, Layvon Q; Editor: Perez, Philip A

Donald Moynihan, provides an introspective review of Henry Mintzberg’s book, _Managers, not MBAs_. Moynihan explores and concurs with Mintzberg’s criticisms of MBAs today and the impact that it has on management.

Moynihan argues that current MBA programs do not resemble “actual management,” but rather “creates illusions” about what management ought to be. Moynihan articulates the point that while MBA programs teach critical skills, such as analytics, they neglect the craft based on experience. As a result, graduates are overly analytical and/ or engage in a "heroic pretense" that they are managers. Mintzberg and Moynihan view MPA programs as the best option for managers because they drive individuals to create a social impact. The clear separator between MPA and MBA programs, as stated, is the corrupting influence of money. MBA students often come with the notion that fortunes will be made after graduating because of the promise of high-paying jobs. Given that MPA candidates cannot expect to make a huge fortune, it is often the motivating force for them to become active public servants, which is a trait that is absent from individuals who hold MBAs, Mintzberg and Moynihan argues.

Given the benefit of professional experience in public administration, Mintzberg proposes the creation of a Masters Program in Practicing Management (MPM). This model would be for individuals between the ages 35 and 45, who have significant management experience. The MPM would require individuals to leave their jobs for intensive two-week periods. However, Moynihan argues that this would exclude most of the population of current MPA programs because the MPA “provides different benefits to students at different periods of their careers” (p.157). As students with more professional experience have a head start and opportunity to understand “relevance of concepts and analytical skills as a balance to managerial craft” (p.157).

The benefits of the MPM proposed by Mintzberg stem from classroom pedagogies that emphasize practical experience and participation. "Faculty should lecture less, facilitate more, enlarge participation, defer to the experience of their students, and encourage them to learn from one another" (p. 157). Based on Mintzberg's proposal, Moynihan suggests MPA programs should make it clear to students that analytics are a small part of management, and that the "true art and craft of management" can only be developed through learning soft skills such as effective communication, teamwork, the ability to negotiate, ethics, and leadership. Furthermore, faculty at MPA programs should assign work that is less theoretical and more relevant and digestable for students. Mintzberg offers strategies in his book that can be utilized by individual professors, while others would necessitate an overhaul of professional education programs.

Mintzberg critiques of MBAs and proposal for MPM are attempts to make individuals more cognizant of the social impact that they can create. Social impact is the crux of public administration and managers ought to be driven by the need to make an impact, rather than fortune!
# Section 10: Organizational Culture
_How does culture emerge within an organization, and how can managers and leaders shape it? What role does personality play in the cultural DNA of an organization? How can you effectively leverage the culture within an organization?_

## Culture Eats Strategy for Lunch
_Parr. S. Culture Eats Strategy for Lunch, Fast Company. Author: Fantigrossi, Steven Marc; Editor: Steele, Samantha E_

Culture is defined as “a balanced blend of human psychology, attitudes, actions, and beliefs that combined create either pleasure or pain, serious momentum or miserable stagnation.” An organization's brand is a function of culture and serves as the most important factor toward helping an organization stand out from the pack. As such, the long term success of an organization depends not only on making good products and a profit, but also on thriving culture. Good culture incorporates focus, motivation, connection, cohesion, and spirit in order to create a healthy workplace environment for employees to succeed. Employees and leadership alike must understand the vision of the organization and take steps to move forward towards its goals. Workers should be happy to be at work, be loyal to the organization, and put the team before themselves by working with others to increase efficiency and effectiveness.

However, a successful company culture cannot be created overnight, it has to be embodied by everyone in an organization from the leader down to the bottom. It must be indoctrinated into employees from day one, just as a U.S. Marine learns the values of “the few, the proud” during the first day of training. In order to develop and nurture good culture, dynamic and engaged leadership must effectively communicate its organization’s values both internally and outside the organization and show that they genuinely care; “authenticity and values always win.” Employees must be given clear roles and held accountable when they violate the values that they should be upholding. Conversely, it is also necessary that organizations stop, celebrate success and take time to learn from failures.

Organizational culture is a driving force in retaining both employees and customers. That being said, having a common culture should not be confused with a lack of diversity. Core values drive culture and it is essential that everyone in an organization is moving in the same direction. That's not to say everyone should behave identically; within a company culture, people of many different backgrounds, experience, and skills must be included to make it successful. By hiring employees who believe in the core values of an organization and that fill a unique role, a company will be well-suited to be prosper in the long term.

## Building a Team Culture Guided by Happiness
_Sutherland, J. & Sutherland, J.J. (2014). Scrum: The Art of Doing Twice the Work in Half the Time. Crown Business, Happiness: pp 145-170. Author: Dorries, Joshua Wayne; Editor: Orlan, Samuel Lawrence_

Sutherland argues that happy people do better, from making more money to living longer. He points to a 2005 paper which analyzed over 225 papers with 275,000 participants that found: “happiness leads to success in nearly every domain of our lives, including marriage, health, friendship, community involvement, creativity, and, in particular, our jobs, careers, and businesses.” Essentially the argument is that people aren’t happy because they're successful, they’re successful because they're happy.

If success is a result of happiness, and personal success leads to organizational success, it makes sense to incorporate happiness into an all-inclusive workflow system. Thus Sutherland wants to first quantify happiness, and then equate it with performance. The question becomes: how do we quantify happiness? But before quantifying, he argues we must first understand the underlying goal of implementing a new workflow. For Sutherland the goal of scrum is kaizen, the Japanese word for “improvement.” Once one evaluates what can be improved, happiness will flow, as individuals gain happiness through a sense of worth.

From the idea of kaizen, the “Happiness Metric,” was born. For Sutherland, at the end of each Sprint, each person on a team answers four questions which effectively identify what the kaizen should be, and the kaizen which will make people the happiest. There four questions are:

1. On a scale from 1 to 5, how do you feel about your role in the company?
2. On the same scale, how do you feel about the company as a whole?
3. Why do you feel that way?
4. What one thing would make you happier in the next Sprint?

Once all of the team members have answered these questions, the team decides on one top improvement and determines acceptance rates to achieve that improvement during the next sprint.

Perhaps the most important quality for successful improvement and happiness is organizational culture, specifically a culture of transparency, teamwork and collaboration. Sutherland states that scrum “provides a structure for the whole organization to head toward a common goal. Its pillars are transparency, teamwork, and collaboration.” Scrum makes people happy by providing direct feedback and a platform for collaboration.

An essential aspect of collaboration is understanding the type of people present within a workplace. They tend to fall into one of four categories: the hedonist, the nihilist, the rat-race-addicted manager and the person who is enjoying the work they’re doing today while keeping an eye towards the future. The hedonist is someone who is doing what makes them happy right now, with no concern for tomorrow. The nihilist believes that if work is not enjoyable today, it will forever be unenjoyable. The rat-race-addicted manager believes that if they put in 80-hour work weeks, and force others to do the same, then they’ll get promoted, which will lead to happiness, only to find out that once they get the promotion, there is a new set of obstacles that require more time than before. Scrum tries to identify the fourth type of person, as they rarely experience burnout or disillusionment. By working together and promoting a single mindset, the other personality types are able to resolve their underlying problems, and build a successful organization. People are incentivized to change themselves, team members become better people, and causes of unhappiness are systematically removed.

##Can a Teacher Be Too Dedicated? The Atlantic.
Author: Boucher, Timothy M.; Editor: Dorries, Joshua Wayne_
Summarized by Tim Boucher

This article describes a problem plaguing "no-excuse" charter schools: teacher fatigue. The article suggests that the problem arises , in part, because the no-excuse schools pride themselves on high expectations for their students and teachers and to achieve lofty goals require time intensive preparation and execution of lesson plans. The author states that in these schools "[e]very moment is planned [and] ... [n]o moment is wasted..." Every teacher and administrator at the school is on the same page about what their presence at the school is for: to get better educational results for historically underserved and underperforming students. To achieve this end, the schools have historically placed high demands on teachers, either requiring or necessitating that the teachers put in longer hours than the national average. To be clear, though, the vast majority of these no excuse charter schools are extremely successful at achieving their goals.

Due to the high expectations and lengthy hours, though, some of these no-excuse charter schools have seen significant annual turnover among their teachers with some teachers leaving after just 2 years and citing burnout and fatigue as reasons for their departure. To remedy this trend some of the schools have started to implement policies aimed at alleviating teacher fatigue. These policies include providing childcare to teacher-parents who have to work late, providing coverage the next morning by other teachers for people who had to stay late for student-concerts, and reducing the length of the school-day. One school reported that after implementing policies such as these, that they were able to keep 91% of their teachers.

One problem still exists though, and that is that even when administrators try to alleviate stress, "urging [teachers] to take a break," the teachers fail to do so. They feel they still have a lot of work to do in order to render the services they were hired to achieve. So the teachers continue to work and put themselves in a position where they may more likely to burn out. The author of this article did not suggest any systematic way to overcome this issue. Thus the problem remains of how these successful charter schools can keep their successful teachers.

## Why Zappos Pays Employees to Quit
_Taylor, B. “Why Zappos Pays Employees to Quit, and You Should Too.” Harvard Business Review, May 19, 2008. Author: Rosa, Adelaide Lee_

Paying new employees to quit is an extremely innovative strategy piloted by CEO Tony Hsieh of Zappos. Such a strategy would not normally be thought of as organizationally advantageous, as the objective of the hiring process is to acquire new employees not fire them. However, Hsieh seeks to foster a very specific organizational culture. Zappos is an extremely fast-paced environment that demands constant dedication from its employees. Those unable to sustain the high level of effort or those not completely dedicated to their employment are not the productive employees that Hsieh searches for. The hiring process is thus adapted to winnow the field, sorting the less dedicated employees from the desirable.

The method is quite simple, though the separation bonus has increased from “$100, … to $500, and may well go higher than $1000.” New employees are hired, then placed in a fully compensated “four-week training period that immerses them in the company's strategy, culture, and obsession with customers.” After one week of this training cycle, the new employee is offered a separation bonus. Hsieh's logic is that it is less costly to separate from employees before fully investing in them. A week of training gives the new employee a clear understanding of Zappos' organizational culture, and allows them to understand if they will be a good fit in that organization.

This hiring method results in a 1600 employee company filled with invested, motivated people. It is these people that connect emotionally with customers, building loyalty and brand. Hsieh strengthens the organizational culture, and more importantly the buyin of the employee as stakeholder, by sorting out those who are a bad fit at the very beginning of their employment.

## I'm Sorry to All the Mothers I Have Worked With

_Female company president: "I'm sorry to all the mothers I worked with." Fortune, March 3, 2015. Author: Sarawat, Fariha; Editor: Dorries, Joshua Wayne_

PowerToFly president Katherin Zaleski shares a personal story of how she, a ‘hardliner’ in her 20s who judged women with kids as unequal contributors to the workforce, came to realize how productive mothers can be after experiencing motherhood herself. She writes about how she, like many other women, have helped perpetuate a work culture that judges working mothers as less ‘committed’ or ‘productive’.

Zaleski weighs in on the male-dominated corporate culture of valuing time-spent-at-work over actual productivity that undermines the discipline, flexibility, time and effort that mothers bring to work. She shares a number of anecdotes, including one about meeting Cathy Sharick, the then managing editor of and also a mother of three children, and decided not to work with her for being ‘too much of a mother’; Zaleski ends up hiring Sharick later in life. She also mentions how books like Sandberg’s ‘Lean In’ basically perpetuate a sexist corporate culture by telling women to play the old rules to succeed.

In the piece she talks about how motherhood enabled her to see her past choices and judgments in a different light and taught her to appreciate the role of working mothers in the workforce. This lesson is what inspired her to co-found PowerToFly, a start-up that pairs women developers with jobs they can do from home. By working with more working mothers, Zaleski came to value how productivity overall could be increased by giving working mothers more flexibility and a chance to work remotely—especially given that 80% of US women will become mothers by the age 44.

Zaleski ends her piece on the note that working mothers are better at multi-tasking and keeping to deadlines as they have to balance responsibilities at work with those at home.

## Why Do So Many Incompetent Men Become Leaders?

_Chamorro-Premuzic, T. “Why Do So Many Incompetent Men Become Leaders?” Harvard Business Review, August 22, 2013. Author: Gobbo, Andre Francis; Editor: Hamlin, Madeleine Rose_

This article aims to explore the reasons why there are so few women in management positions. The three most popular explanations for why women are under-represented among managers are that: (1) they are not capable, (2) they are not interested, and (3) they are both interested and capable but unable to break the glass ceiling. However, the author finds that these three explanations fail to account for the largest reason why women are underrepresented in management roles: namely, a failure to distinguish between confidence and competence.

The author then goes on to explain that because we conflate confidence and competence, we tend to view men as better suited for management positions because they display their confidence (sometimes even hubris) more often than women. The arrogance and overconfidence more often found in men means they are often perceived as better leaders, when in fact these traits are inversely related to leadership capability.

In most sectors the best leaders are humble, and women exhibit humility more often than men. This is not only in the United States; the author cites a study done involving 23,000 participants in 26 different cultures that found that women tend to outperform men in emotional intelligence: in general, they are genmore sensitive, considerate, and humble than men. The author cites another study showing that normative data on thousands of managers from across different industries and sectors points to men being consistently more arrogant, manipulative, and risk-prone than women.

The author makes an important distinction between _getting_ a management job and _doing the job well_. This difference is why many incompetent men find management roles and proceed to not do well. Because of this, many leaders tend to fail in their roles. The author notes that good leadership has always been the exception, not the norm.

Because there is an ongoing push to get women into leadership roles, the author notes that women shouldn't be trying to adopt these faulty characteristics of men in order to become more appealing for management positions. Rather, women should be emphasizing the characteristics that make them better leaders: their ability to elicit respect and pride from their followers, effectively communicate their vision, empower and mentor subordinates, and a employ a more flexible and creative approach to problem-solving.

While the glass ceiling persists, the author concludes that the more pertinent issues are: (1) the lack of career obstacles for incompetent men, and (2) that we continue to confuse confidence for competence, thus equating good leadership with psychological features that make the average man more inept than the average woman. Taken together, these issues perpetuate a system in which we reward men for qualities that ultimately make them bad leaders, and punish women for the traits that make them good ones.

## The Hidden Dimension of Corporate Culture

_Grant, A. (2013). “Givers take all: The hidden dimension of corporate culture.” McKinsey Quarterly, April. Author: Perez, Philip A; Editor: Steele, Samantha E_

Adam Grant discusses corporate culture in his article "Givers take all: The hidden dimension of corporate culture." In his dialog, he suggests that “giver cultures” render many benefits such as greater productivity and organizational effectiveness in comparison to “taker cultures.”

### Types of Corporate Cultures
Grant identifies three types of cultures in organizations that he calls: giver cultures, taker cultures, and matcher cultures. A giver culture is one wherein employees help others, share knowledge, offer mentoring and make connections without expecting anything in return. In contrast, a taker culture is characterized with the norm being employees taking and not contributing anything in return. In these cultures, employees only help if their expected return outweighs personal costs. Different still are matcher cultures, which fall in the middle of the two aforementioned culture types, where employees trade favors and maintain an equal balance of give and take.

### Research Findings
Grant cites research on intelligence work finding that the “single strongest predictor of group effectiveness was the amount of help that [intelligence] analysts gave to each other.” He also cites researching suggesting that the amount of help employees give to each other in diverse contexts facilitates organizational effectiveness by “enabling employees to solve and get work done faster . . . enhancing team cohesion and coordination . . . ensuring that expertise is transferred from experienced to new employees . . . reducing variability in performance when some members are overloaded or distracted . . . [and] establishing an environment in which customers and suppliers feel that their needs are the organization’s top priority.” These examples suggest the importance toward creating a giver culture within an organization as opposed to a taker culture.

### Barriers to Giver Culture
Two primary barriers exist to creating a giver culture in an organization. The first is our natural human tendency to avoid asking for help—an employee may fear burdening colleagues, not know who to ask for help, or may fear appearing vulnerable or incompetent. The second is existing organizational structures that look more like winner-take-all markets, where leaders reward individual performance. The disadvantages of such cultures are that employees compete for resources and therefore will not provide help unless they receive something in return. Additionally, employees who give may see their productivity diminish as takers use their time and steal their ideas. Grant identifies three practices that create a giver culture in an organization: (1) Facilitating Help-Seeking, (2) Recognizing and Rewarding Givers, and (3) Screening Out Takers.

### Facilitating Help-Seeking
Grant states that, “Giver culture depends on employees making requests; otherwise, it’s difficult to figure out who needs help and what to give.” The problem is overcoming the first barrier of people’s tendency to avoid asking for help.

The author suggests an exercise called the “reciprocity ring,” where employees in an organization come together in small groups. Within these groups, employees ask personal requests, and then as people open up and feel comfortable they take turns asking for professional requests. The benefit of the reciprocity ring exercise can be both monetary and cultural. For example, one pharmaceutical executive saved $50,000 when another participant in the exercise had extra capacity at his lab and offered to synthesize an alkaloid free of charge.

One other example of a program that facilitated a giving culture was with a call-center provider that was experiencing a 97 percent turnover rate. The CEO’s team created a program called “Dream On,” which was modeled after the Make-A-Wish Foundation and invites employees to request one thing they want most in their personal life. A secret committee then began to make some of these requests happen. The program “has helped promote a culture where . . . ‘employees look to do things for each other and are literally paying it forward.’” Retention at the call-center increased to 67 percent from 3 percent and had its most profitable quarters after the program was implemented.

One disadvantage of a giver culture is that employees may end up so consumed with trying to fulfill others’ requests for help that they do not have the time or the energy to fulfill their own responsibilities. Grant suggests that this can be mitigated by setting clear time boundaries around helping others, allowing for the organization to “leverage the benefits of giver cultures while minimizing the costs.”

The author also notes that a designating an assigned helping role to one employee may provide additional benefits, as employees may be more comfortable asking that person for help than their colleagues.

### Recognizing and Rewarding Givers
A giver culture depends on a “comprehensive set of practices for recognizing and rewarding helping behavior in organizations.” As such, organizations should move away from performance evaluations based solely on results, which create win/loss mindsets, and towards evaluations that include an employees’ impact on other individuals and groups.

Caution must be employed with monetary incentives in a giver culture, they must not be too large. Employees may begin to game the system, seeking the rewards and undermining the motivation to give without expecting to receive in return, generating a taker culture.

### Screening Out Takers
An organization seeking to create a giver culture should have policies against hiring takers. Grant identifies three ways to identify takers.

First, takers “tend to claim personal credit for successes,” and tend to use the pronouns “I” and “me” instead of “us” and “we.” Look for applicants that “describe accomplishments in collective rather than personal terms.”

Second, takers “tend to follow a pattern of ‘kissing up, kicking down.’” These people are charismatic and appealing towards their bosses or other people in power, but negative towards subordinates and peers. Look for recommendations and references from a prospective employee’s colleagues rather than his bosses.

Third, takers “sometime engage in antagonistic behavior at the expense of others.” These people talk negatively about colleagues up for promotion or take advantage of customers to try and get ahead. Grant points to a questionnaire called the “conditional reasoning test of aggression” that research suggests accurately identifies whether a person is likely to engage in theft, plagiarism, forgery and other illegal activities, and likely to be absent or quit work.

### Live It
The article ends with advice that it is not enough for leaders to encourage a giver culture, but they must live it (“give it”). Grant provides an anecdote of a struggling film company that hired a new CEO. This CEO asked two leaders of one of the divisions of the company to give him names of people to layoff to save money on the budget. The division leaders resisted, and the CEO gave them an ultimatum. The next day the two men came in with a list containing two names—their own.

“No layoffs were conducted, and a few months later Steve Jobs bought the division from Lucas film and started Pixar with Ed Catmull and Alvy Ray Smith. Employees were grateful that ‘managers would put their own jobs on the line for the good of their teams,’ marvels Stanford’s Robert Sutton, noting that even a quarter century later, this ‘still drives and inspires people at Pixar.’”

## Can a Teacher Be Too Dedicated?
_Can a Teacher Be Too Dedicated? The Atlantic. Author: Boucher, Timothy M.; Editor: Dorries, Joshua Wayne_
Summarized by Tim Boucher

This article describes a problem plaguing "no-excuse" charter schools: teacher fatigue. The article suggests that the problem arises , in part, because the no-excuse schools pride themselves on high expectations for their students and teachers and to achieve lofty goals require time intensive preparation and execution of lesson plans. The author states that in these schools "[e]very moment is planned [and] ... [n]o moment is wasted..." Every teacher and administrator at the school is on the same page about what their presence at the school is for: to get better educational results for historically underserved and underperforming students. To achieve this end, the schools have historically placed high demands on teachers, either requiring or necessitating that the teachers put in longer hours than the national average. To be clear, though, the vast majority of these no excuse charter schools are extremely successful at achieving their goals.

Due to the high expectations and lengthy hours, though, some of these no-excuse charter schools have seen significant annual turnover among their teachers with some teachers leaving after just 2 years and citing burnout and fatigue as reasons for their departure. To remedy this trend some of the schools have started to implement policies aimed at alleviating teacher fatigue. These policies include providing childcare to teacher-parents who have to work late, providing coverage the next morning by other teachers for people who had to stay late for student-concerts, and reducing the length of the school-day. One school reported that after implementing policies such as these, that they were able to keep 91% of their teachers.

One problem still exists though, and that is that even when administrators try to alleviate stress, "urging [teachers] to take a break," the teachers fail to do so. They feel they still have a lot of work to do in order to render the services they were hired to achieve. So the teachers continue to work and put themselves in a position where they may more likely to burn out. The author of this article did not suggest any systematic way to overcome this issue. Thus the problem remains of how these successful charter schools can keep their successful teachers.

## The Untold Story of Larry Page’s Incredible Comeback

_Carlson, N. “The Untold Story of Larry Page’s Incredible Comeback.” Business Insider, April 24, 2014. Author: Swartwood, Hilary Ann; Editor: Dieselman, Andrew_

Larry Page is the child of computer science professors at Michigan State University. Page drew inspiration from Nikola Tesla; a Serbian immigrant who was a brilliant inventor and a lousy businessman. Tesla taught Page that big ideas aren’t enough- they need to be commercialized. To be successful, Page realized you also need a successful company while being wary of the Thomas Edison’s of the world.

In the beginning, Google gave Page the best of both worlds: he was building a product that millions of people use and he created an interpersonal culture intensely focused on ideas and outcomes rather than emotional niceties. Page wasn’t a social child, but in college and graduate school he connected to people over external abstractions- visions of the future, cool technologies. Page originally bonded with Sergey Brin, his co-founder, over a fierce day of argument and that’s how Page styled his management of Google. He encouraged his senior executives to fight the way he and Brin did. From this Page developed his rules for management:
- Don’t delegate: do everything you can yourself to make things go faster.
- Don’t get in the way if you are not adding value. Let the people actually doing the work talk to each other while you go do something else.
- Don’t be a bureaucrat.
- Ideas are more important than age. Just because someone is junior doesn’t mean they don’t deserve respect and cooperation.

When Google incorporated, Page was lucky to have Brin as a partner. Unlike Page, Brin was outgoing and energetic. He was a great at strategy, branding and developing relationships between Google and other companies. However, Google's insane growth prompted venture capitalists to invest $25 million with the stipulation that Page step down as CEO and hire “adult supervision.” Page took the deal, but later tried to change the terms so that Brin and him could continue running the company. This was mostly because Page was a paranoid control freak and didn’t want to relinquish his hold to someone else. However, John Doerr set up a meeting with other CEO’s so Page could see that Google did indeed need one. Page reluctantly hired CEO of Novell, Eric Schmidt.

Schmidt kept things even keeled, hired a team of executives, built a sales force, and took Google public. Even though he became more distant and remote, Page never stopped reviewing, approving, and contributing to products Google shipped. He remained a deciding vote in big strategic initiatives, like Google’s bid for wireless spectrum and acquisition of YouTube, but he was much less involved in the day-to-day operations. Over time Page came to appreciate Schmidt’s strengths. Schmidt had played a huge role in building the type of company that could capitalize financially on Page’s vision. The more comfortable Page became with Schmidt the farther he retreated.

In 2005, Page decided he wanted to put handheld computers with access to Google in everyone’s pocket. He bought a start up called Android and set it up as a separate entity only marginally tied to Google. Page gave Rubin the autonomy to run it without interference from the parent company. Eventually Android become the world’s most popular operating system. This gave Page enormous confidence in his executive abilities and he realized that earlier in his career he had been bad at delegating and trusting people.

In this time frame, Google had also developed big company problems- it was too bureaucratic and bloated, there were too many people working on projects and very little of those projects got public exposure, and it was not the cool, new super power any more, Facebook was. Further, among the senior executives, Schmidt had never entirely resolved the argumentative decision-making from the earlier days of Google. This had lead to the formation of bitter rivals who nearly refused to work with one another. Plus, Google had dialed back its ambitions, which didn’t make sense to Page. Google’s search-advertising business, incredible profit margins, and sustained growth was the kind of cash-generating machine needed to fund crazy schemes- exactly the type Page was always thinking up. After Page’s frustrations were voiced in an executive meeting Schmidt stepped down as CEO and Page took the reigns once again.

Page’s first order of business was reorganizing the company’s senior management by taking a handful of the companies most important product divisions and putting a CEO-like manager at the top of each. He decided Google would have a zero tolerance for fighting and admitted that in Google’s younger days this argumentative atmosphere was necessary because that was when Google had linear problems. However, now Google was faced with, what Page called, n-squared problems. To solve these, people needed to learn how to work together. From there, Google expanded it's interests. For example, Google began to install fiber-optic internet cables that are 100 times faster than broad band.

Google’s real danger for the long-term future is that it will become so huge it will capture nearly all the money any businesses on the planet spends on marketing. This means that Page spends a lot of time brainstorming and experimenting. For example engineers are working on creating a self driving car, and researching artificial intelligence. Google also hasn’t stopped acquiring other companies that fit its interests, like Titan Aerospace which produces drones. However the diversity of ideas has left investors worried that Google won’t be able to keep its focus. Page’s answer is: (1) Its easier for google to work on moonshots because there is less competition and the best people will work for google because they like ambitious projects and (2) all these schemes are part of providing the world better search. For Page “the perfect search engine would understand whatever your need is. It would understand everything in the world deeply [and] give you back kind of exactly what you need.”

## Inside Amazon: Competition as Culture
_Kantor, J. & Streitfeld, D. “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace.” The New York Times, August 15, 2015. Author: Swartwood, Hilary Ann; Editor: Farrior, Cheri Nicole_

Amazon employees are told to forget the habits they learned at previous jobs and follow the leadership principles- fourteen rules inscribed on laminated cards, eventually being quizzed on them. They are encouraged to tear apart one another’s ideas in meetings, keep long hours, and work towards the impossibly high standards the company sets for its employees. This is all part of the company’s experiment to test how far they can push their workers; redrawing the lines of what is considered acceptable. They do this by rejecting many of the popular management ideals that most corporations at least pay lip service to.

Amazon’s founder, Jeff Bezos, uses data-driven management as the underlining foundation for the company. From the moment Bezos founded Amazon he was determined to avoid the forces he believed weakened businesses over time- bureaucracy, wasteful spending, and lack of accuracy. As Amazon grew into a technological and retail giant, Bezos codified his ideas about the workplace into the leadership principles, or articles of faith that describe how Amazonians should act. Some of them are: No.5 hire and develop the best, No.2 exhibit ownership of every element of their businesses, No.8 bias for action, and No.7 think big.

Unlike other tech giants that motivate employees with gyms, meals, and benefits, Amazon does not make catering to employees a priority. Instead workers are motivated to embrace frugality and be relentlessly driven to please customers. Furthermore, Amazonians are encouraged to critique, and rip into each others ideas in order to come to the right decision. The genius of Amazon then is its ability to drive employees to drive themselves. Those employees who are good enough become an ‘Amabot” (or becoming one with the system). In warehouses employees are monitored by electronic systems to ensure they are packing enough boxes every hour, and in offices Amazon uses a self-reinforcing set of psychological, management and data tools to spur its employees forwards. Amazon has a perpetual flow of real-time, ultra-detailed metrics that allows it to measure pretty much everything its customers and employees do.

Many employees have said they were motivated to work at Amazon because they were driven by innovation, being able to think big, and be limitless. Other employees have chosen to work at Amazon to jump start their careers, eventually becoming addicted to Amazon ways of working.

Despite its highly competitive and data driven management, the rigorousness of Amazon is not for everyone. Most employees work 80 hours per week, and all employees are meant to put work first before everything else which has lead to unfairness. There have been cases of women taking maternity leave and then being accused of falling too far behind so they are let go. This is a reoccurring problem with employees who have undergone chemotherapy for cancer, or have lost loved ones and taken time off. The internal phone directory allows coelleagues to send secret feed back to other colleageus bosses, which ultimately tears down other employeees. Employees use the Anytime feedback tool to give co-workers feedback, but this has lead to scheming to ensure a certain employee receives bad reviews, and if you are unable to defend yourself against these criticisms you are often let go. This is one of the reasons Amazon has a high turnover rate. When employees are not able to give it everything, all the time, Amazon see’s it as a weakness. Team members are ranked and those at the bottom get let go from the company every year. However, this hasn’t stopped Amazon from growing, with the potential to become the first trillion- dollar retail company in the world. Amazon is driven by data, so the only way it will change is if the data says it must; that it makes the most economic sense to do so.

# Section 11: Organizational Change

_All organizations must change, either because of a shift in mission or threats from the external environment. However, organizations must also put in place standard operating procedures in order to align action and resources towards specific organizational goals. Similarly, networks form organically in organizations that actively participate in problem-solving. In order to change, these processes and structures must be disrupted. Delicate political balances can be upset. As a result, inertia is very common in organizations. What are factors that lead to failed change processes in some organizations, and what can be learned from organizations that successfully implement change efforts?_

## Why Transformation Efforts Fail

_Kotter, J.P. (2007). “Leading Change: Why Transformation Efforts Fail.” Harvard Business Review, January: 96-103. Author: Tansits, Colin E; Editor: Perez, Philip A_

In John Kotter’s Leading Change: Why Transformations Efforts Fail, he explains that many managers and leaders in organizations do not understand that transformation is a process, not an event. Transformation occurs in stages that build on one another, and it takes a long time—years. Kotter explains that managers, who feel pressure to speed up the process, end up skipping stages. He warns that short cuts do not work when trying to effectuate a transformation.

In the article, Kotter focuses on eight errors common to several attempted corporate transformations: (1) Not Establishing a Great Enough Sense of Urgency, (2) Not Creating a Powerful Enough Guiding Coalition, (3) Lack of a Vision, (4) Undercommunicating the Vision by a Factor of Ten, (5) Not Removing Obstacles to the New Vision, (6) Not Systematically Planning for, and Creating, Short-Term Wins, (7) Declaring Victory Too Soon, and (8) Not Anchoring Changes in the Corporation’s Culture. Coincidentally, Kotter explains that positively addressing these errors creates the eight steps to transforming an organization.

Not Establishing a Great Enough Sense of Urgency is a common mistake that befalls many corporations. Kotter explains that a large percent must believe that a change to the usual course of business must occur. He says that, “From what I have seen, the answer is when about 75% of a company’s management is honestly convinced that business as usual is totally unacceptable.”

Not Creating a Powerful Enough Guiding Coalition is an error borne of only having a minimal amount of leadership on board with the transformation. Kotter explains that some minimum mass of leadership must join the transformation coalition for it to be successful.

Having a Lack of a Vision is a fairly straightforward error. Kotter explains that the guiding coalition must have a detailed picture of the future that is sought by the transformation. The vision should be more than a five-year plan—it should help clarify the direction in which the company needs to move. This vision should also include a strategy to achieve it.

Communication is essential to proper organizational management, and Undercommunicating the Vision by a Factor of Ten is all too common. Kotter explains that communications on all levels of the organization is necessary, and further, he explains that employees must be understanding and open to the communicated messages.

Despite creating a vision, Not Removing Obstacles to the New Vision can stop the transformation dead in its tracks. Kotter explains that the big obstacles must be confronted and removed. Obstacles might include decisions between moving the organization forward per its new vision and serving one's self interest. For example, budget cuts may be necessary for an organization, and if a manager cannot or will not cut his own salary, then others will question his commitment to the vision and the vision will be undermined. The manager should probably be let go.

Because the transformation process is so long and drawn out, small wins are important. By Not Systematically Planning for, and Creating, Short-Term Wins, there will be no goals for the organization to meet and celebrate. Kotter explains that employees need to see evidence of success in 12 to 24 months of the start. Further, Kotter makes clear that there is a difference between hoping for short term wins and creating them.

Tied directly to this is Declaring Victory Too Soon. Managers who do this can sink morale, and give little incentive for employees to follow them due to the lowered level of credibility. Declaring victory too soon kills the progress made on the organizational culture, progress, and other habits an organization is trying to create. Kotter states it takes 5-10 years for such progress to really "sink deeply into a company's culture," and declaring victory too soon may destroy any progress made. Kotter finds that "resistors" point to the declared victory as an indication that the "war has been won," and the old traditional habits that were toxic creep back in to the organization.

Lastly, Kotter explains that the transformation becomes the new norm when it becomes “the way we do things around here.” Not Anchoring Changes in the Corporation’s Culture is a harmful error that may lead to failure. For the transformation to fully succeed, it must become a part of the new norm.

## The Power of Crisis
_Duhigg, C. (2012). The power of habit: Why we do what we do in life and business (Vol. 34, No. 10). Random House. CH 6: The Power of Crisis: How Leaders Create Habits through Accident and Design. Author: Damon-Cronmiller, Christopher; Editor: Boucher, Timothy M._

Chapter 6 of Charles Duhigg's "The Power of Habbit: Why We do What we do in Life and Business," focuses on the major themes of "An Evolutionary Theory of Economic Change," by Yale professors Richard Nelson and Sidney Winter. Duhigg notes that this particular book is much too dense for the average person, and so takes the liberty of explaining its major themes of institutional habbits in layperson's terms. Institutional habits, according to Duhigg, are a response to inherent human nature and a fundamental characteristic of human organizations. Specifically, they are "battlefields in a civil war" with people constantly trying to vie for power and control. Most companies, nontheless, manage to survive because of artificially constructed "institutional" or "organizational" habits that prevent office politics from bogging them down (or even outright destroying them). Indeed, Duhigg argues that institutional habits actually give workers freedom to "experiment with new ideas without having to ask for permission" every time they try something new. He further finds, relying on Nelson and Winter, that institutional habits actually serve as a "rought organizational justice" in which internal strife "'follows [a] largely predictable path[]'" that is kept within certain confines so that work continues to get done. Furthermore, once institutional habits are formed, the only way to modify them is through crisis - that is, if an organization's life is hanging by a thread. To futher illustrate this concept, Duhigg draws upon two very different real-life cases that nontheless have a very similar theme.

The first case is that of the Rhode Island Hospital, which at the time was the only Level 1 trauma center in southeastern New England, and Brown University's primary teaching hospital. Despite its prestige, however, it was also a high-stress organization with an incredibly toxic work environment. In fact, nurses even set up a "color-code" system among themselves to brief each other of the doctors' personalities: from blue (nice and easy to work with) to black (can potentially put a nurse's job in jepoardy if they offer so much as one word of criticism). They also had a system to double-check orders from particularly "error-prone physicians." Technically, these habits worked for a time, but ultimately were unsustainable because they were constantly being developed on the fly. Ultimately the nurses' system began to fall apart when one day, a man in his late 80's arrived delirious and with severe bleeding from within his brain (sustained by a fall a few days prior). Due to a mix-up with the consent forms, the doctor in charge accidentally began to operate on the wrong side of his head; and beforehand when a nurse (not acknowledging at that moment this doctor was "code black") voiced concern about the consent forms, the doctor verbally attacked him and essentially threatened to kick him out of the room. While the doctor's team eventually drained the blood and stopped the bleeding, the man unfortunately never woke up from surgery and died a couple of weeks later. Some nurses claimed that this kidn of accident was inevitable because the hospital's institutional habits were abysmal.

Similar errors happened within the next couple of months, and the hospital ended up loosing roughy $500,000 in one year from fines alone. Before long the hospital became the sight of a media circus, forcing (among other things) an administrative change in staff and all elective surgery units to be shut down for an entire day while staff went through emergency team-building activities. As of Duhigg's book, safeguards are in place to make sure that everyone working in a trauma room has their voices heard, and the hospital has largely shaken off its reputation as a toxic place to work; and error rates went down significantly.

The second case is of a very different organization - King's Cross station of the London Underground (a.k.a., the city's metro system). Unlike the Rhode Island Hospital, the London Underground had a rigid, firmly planted system in place to make sure the organization ran smoothly and that no one stepped on each other's toes - drawn upon previous, legitimate altercations among staff and department heads. Unfortunately, the London Underground's institutional habbits were so deeply engrained it became very hard for staff to take on additonal duties, to grow professionally, and to take immediate action if they saw something was going wrong. This system of institutional habit fell apart during the King's Cross fire of 1987, which began when ticket booth worker Philip Brickell saw a wad of burning tissue at the foot of one of the station's wooden escalators and put out the fire. However, due to institutional habits, he was dissuaded from notifying anyone of (or doing anything else about) the incident, since an entierly different department handled fire saftey - and he knew better than to potentially get into trouble by overstepping his bounds. Several minutes later, a passenger hit the escalator's emergency stop button upon seeing smoke and "a glow from underneath the escalator's stairs." However, the station's chief saftey inspector Christopher Hayes did not initially call the fire department (a police officer on duty ultimately did) because he did not see any smoke at first and risked getting into trouble if he called the fire department before it was "absolutely necessary". When Hayes eventually entered the machine room to investigate, he immediately realized the fire was far larger and stronger than anyone could have imagined; however he, nor anyone else working in the station, could activate the sprinklers because the only people who knew how worked in an entierly different department (and even if they did the fire was already too powerful by the time Hayes officially discovered it). Additionally, King's Cross Station's Director of Operations was previously worried about the flamibility of the station's ceiling paint, but did not mention anything for fear of stepping on the toes of maintanance department officials.

The first firefighter arrived a half hour after Brickell first saw the burning tissue, but by then it was too late - a few minutes later a gust of wind from an arriving train triggered a flash fire throughout the station that killed 31 people and injured at least a dozen others. While such disasters are not entierly unheard of in metro stations, what set King's Cross station apart from other cases was what happened after the fire. When government special investigator Desmond Fennell probed into the specifics of what happened, he realized that the institutional habits that allowed the fire to happen had to be changed - and could only be changed through a crisis situation. A media circus developed from the 1987 King's Cross fire's aftermath, similar to that of the Rhode Island hospital - yet this one was deliberately orchestrated on Fennell's part through months of hearings, interviews, and a sharply critical report of his own writing. As a result, the administration of King's Cross station changed hands, and an entierly new institutional habit was formed - that of placing passenger saftey above all else.

## How a Charter School Revamped Its Culture
_How a Charter School Giant Revamped Its Culture to Put a Stop to Burnout. Author: Orlan, Samuel Lawrence; Editor: Lancto, Katelyn N_

This article is about how the KIPP charter schools tackled the difficult task of decreasing prevalent principal burn out that was leading to harmful turn over of talented teachers and principals at their schools.

KIPP is one of the largest charter school networks in the U.S. with over 180 schools in Washington, D.C. and 20 states. By 2010, KIPP had grown from one classroom in Houston to almost 100 schools. KIPP quickly realized that they had a problem; their principals were buring out after just one or two years. Approximately half of the KIPP principals who founded schools in 2006 were not in those same roles four years later. Research showed that principal turnover had a detrimental effect on student learning. In 2011, the National Bureau of Economic Research published a report stating that “the departure of a principal is associated with higher teacher turnover rates and lower student achievement gains.” It also said that “faltering organizations with high levels of turnover often have difficulty attracting experienced successors, who tend to be more effective. As a result, they become trapped in a ‘vicious circle’ of high managerial turnover and declining performance.” Dave Levin, a cofounder of KIPP charter schools, wanted to shift the way that people think about teaching, to viewing it as something you “could do for a career” and not just “thinking about it as something you do for a limited time, almost as a tour of duty.”

The broader education reform movement was also trying to dispel the perception that it was recruiting young individuals into the classroom that were only using the teaching experience as a stepping stone to other professions. Some charter schools have embraced this “revolving door of talent” system, accepting high turnover with teachers who are willing to work 80 hour weeks for a few years, while others have sought to retain educators deep into their thirties. These schools have tried various incentives including pay raises and “doctor days” which are semi-annual personal days dedicated to health and well-being. These changes were not enough. KIPP had a culture where the school leaders were seen as a “mythic figure.” Working long hours was a badge of honor, and that culture had to change. They were not sleeping; they were not exercising; they were not living in ways that were sustainable. KIPP hired a consultancy company called VitalSmarts to help change a culture where principals, similar to relay runners in a race, would “sprint for two years, and then pass the baton to someone else.”

The solution, VitalSmarts determined, was to “get help, so you can focus on what’s important.” A new approach, based on “vital behaviors,” was developed in an effort to change habits. The biggest task was changing the view of the principal and their primary responsibilities. Steven Epstein, executive director at KIPP school in Austin said "there’s nothing unique about your skill set that can do something better around a custodial issue or a food service issue, but there is something unique about coaching and professional development. The principal’s main responsibility is to develop the other people in their building." In 2011, KIPP introduced this new model and way of thinking. Of the founding principals who started that year, 82% were still in those positions four years later.

This new framework had many practical changes for principals. They shared “personal and professional goals with their managers, mentors, and staff [and] also [spoke] publicly about objectives like attending yoga twice a week, having dinner with friends once a week, and cooking healthy weeknight dinners for growing families.” The intent here was to link personal goals to the long-term success of the organization, which also helped eliminate some of the weirdness of talking about it. One principle lost over 60 pounds. The last “vital behavior” was “Renew to get stronger.” Levin chose this language because he felt “it removes all of the guilt.” He feels that the phrase “work-life balance” is too prosaic and can set the wrong tone. He reasons; "From an organizational point of view I tend not to think about issues of balance, I tend to think about issues of fulfillment. Everyone’s balance is going to be different, and there are going to be really long days. That’s just the nature of doing something great. But there’s an ebb and flow to this stuff and we want to create the condition for people to be successful and fulfilled by their roles."

## The Ballad of Paul O'Neill
_Duhigg, C. (2012). The power of habit: Why we do what we do in life and business (Vol. 34, No. 10). Random House. CH 4: The Ballad of Paul O’Neill. Author: Dieselman, Andrew; Editor: Whiting, Cal McCulley_

In the fourth chapter of Duhigg's "The Power of Habit," the author begins by introducing the new CEO of Aluminum Company of America (Alcoa). This new CEO, Paul O'Neill, was first introduced to investors. He began, not with the usual CEO speak of profit and synergy, but safety. This confused investors, and they panicked. They were wrong to do so. O'Neill, the author explains, drove Alcoa to massive profits in his 13 years at the companywould exit the company 13 years later having driving Alcoa to massive profits, all while driving down intances of accidents. How? O'Neill explains it as targeting 'keystone habits,' or habits that, when they start to shift, dislodge and remake other patterns.

O'Neill used the education he gained from his job in D.C., observing various agencies utilize their institutional habits to do either good or pointless work. He stepped into a very serious situation, one worker described it as "the Manson family, but with the addition of molten metal." He intended to bring the company together by focusing on something that everyone could agree on, safety.

He understood that he needed to find the root cause of injuries - why the injuries happened in the first place. He needed to institutionalize habits that promoted safety. O'Neill did this by forcing VP's to contact him with a plan everytime someone was injured on the job, in order to ensure that that injury could not happen again. This shifted everything else at Alcoa, making it a safer and more productive company.

The author continues the chapter by using Micheal Phelps as an example. In order to make him into an olympian, Phelps' coach knew they had to do something extra. Everyone in the olympics is a good swimmer, but phelps and his coach implemented a habit of visualizing the perfect race. Through continual visualization, Phelps was able to dive into the pool as if he had done it a thousand times before, and succeed.

The third portion of this chapter begins with O'Neill's experience with the U.S.'s high infant mortality rate. O'Neill was able to trace this phenomenon back to poor diets of mothers in rural areas, which was caused by poor education, which was caused by a lack of teacher training. Therefore, the solution was to educate teachers better on nutrition, so they could teach young women more effectively. By creating strctures that help other habits to flourish, O'Neill helped lower the infant mortality rate by 68%. The key to O'Neill's success was getting at the root cause of institutional failures. At Alcoa, this was safety. For infant mortality rate, it was lack of teacher training. O'Neill did not just attempt to address problems he saw at face value, but rather the things that caused these problems to occur, thus eliminating the problem more effectively.

## eBay's $50 Billion Turnaround
_Carlson, N. “You Can Explain eBay’s $50 Billion Turnaround with Just This One Crazy Story.” Business Insider, February 8, 2014. Author: Uk, Bolary; Editor: Boucher, Timothy M._

The article describes an incredible visionary of eBay CEO, John Donahoe, who successfully turned around the company from an 80% decline in stock price. After joining eBay in 2005, Donahoe started to restructure the company by deemphasizing eBay’s auction business. He began to move the company towards being a “technology partner” to small and large retailers and helped the businesses cope with a world dominated by Amazon.

The story of turnaround at eBay started from this smart tactical adjustment. Donahoe realized the main problem of eBay was the death of innovation in that employees stopped creating and developing sophisticated search technology. The company lost profits to other tech companies. In turn, the quantity of sales declined as the company depended on the Google ads tool which made it hard for consumers to find products they wanted to buy. After the issues had been identified, Donahoe came up with a solution after consulting with eBay board director Marc Andreessen, who was best-known as the creator of the first Web browser. Andreessen strongly believed that the output of tech companies is innovation and that great innovative ideas come from the founders of the successful tech companies.

Knowing that the founder of eBay had no interest in re-joining the company, Donahoe decided to build a team of founders by acquiring 34 companies after becoming the CEO. Currently thirteen startup founders work for eBay. A great turnaround example is the two-week reinvention of the eBay homepage, which was based on a rough idea of Jack Phillip Abraham, the founder of an e-commerce startup called Milo. When Milo joined eBay and Abraham built Milo’s technology into eBay the team soon became known as eBay Local, a division of the company responsible for assisting customers in getting quick access to products from local retailers.

On Feb, 2012, Donahoe invited Abraham to join him and other senior personnel for a meeting on the topic of “Innovation." The purpose of the meeting was to bring to life the earlier idea pitched by Anreessen to revamp innovation in the company. Abraham got the idea to reinvent eBay by having a similar News Feed like Facebook. However, instead of displaying updates from friends, the page could show updates from eBay sellers and product categories. Based on the shopping history and searches of users, eBay would turn the feed on without waiting for users to start following any product. Donahoe was excited about the idea and asked Abraham to get him a plan for next few weeks. He also promised to give Abraham all the resources he would need. While Abraham still had his own daily work to do with eBay local, he decided to create a small team of 6 of the smartest people from eBay to turn his idea into a reality. He kept his team small because having a bigger team would be time consuming, due to the politics and bureaucracy of eBay. Abraham also believed that he needed to take the team to far-away location for a limited time to accelerate the project. With a long history of entrepeneurial spirit, Abraham has been the kind of person whose risk-taking has resulted in significant innovation and productivity. However, without a clear roadmap of what the team was going to do, the fear of uncertainty arose and Abraham began to second guess his plans to reform the eBay website. Despite this fear, Abraham moved forward and took his team of six to Sydney, Australia where they brought his dream into fruition. Over two weeks, the team worked together and built a functioning prototype of a reinvented

Upon returning from the secret trip, Abraham had a meeting with Donahoe and presented the prototype of the new Donahoe looked at the prototype on the computer screen and ultimately burst out laughing stating "this could be the future of eBay." Similarly, the entire board of directors loved the feed and soon the feed became the central part of With this valuable tool, eBay has been able to increase sales and engagement. This is but one example of Donahoe's innovative vision for the future of the digital world and his ability to reform a slacking tech company back into the market leader it once was.

## Failed Policy Change
_Greider, W. “The education of David Stockman and other Americans.” The Atlantic, December 1981. Author: Sears, Kicia Kimberly; Editor: Tansits, Colin E_

The article details the first year in office of the man behind Reganomics, David Stockman. To get the public behind the drastic changes in Washington, Stockman had weekly conversations with the author, explaining the ideology behind supply-side theory, the chaos of early budget meetings, the battles in Congress, and the adjustments made after failure—either in Washington or in the market.

Stockman grew up on a farm in Michigan, and was a conservative Republican congressman when he was appointed to run the OMB for President Reagan. He enjoyed a mild youthful rebellion against his conservative beliefs as an activisit and theology scholar, but eventually came back to republicanism after studying at Harvard under influential neo-conservatives in political science and history. When he was called to work for OMB, he was a newcomer to supply-side theory, and was tasked with making Reagan's campaign promises a reality.

Unfortunately, the doubters and naysayers would prove themselves correct. Reagan's promises to cut income taxes, raise defense spending, and balance the budget were mutually exclusive. But early on in his appointment, Stockman was confident. He and other supply-side economists were predicting that Reagan's dramatic policy action would be enough to shock the market: they expected interest rates and inflation to fall, employment to become more efficent, and a big boom in the private sector that would outgrow the government. This belief held strong, and Stockman was confident that these new methods would do a far better job than the mostly-democratic relief programs, which he had seen fail again and again in his home state of Michigan. He predicted some pushback from liberals but thought that they would be convinced if he went after weak ideas and claims rather than people.

The first few months in office were a whirlwind. Stockman and his staff were putting together policy papers that recommended drastic cuts in nealry every governmental program in existence in a matter of days. They were also forecasting with the help of a computer that modeled the national economy. However, after inputting their changes based on Reagan's campaign promises, the model showed massive federal defecits, to the tune of $82B in 1982 and $116B in 1984. These numbers would certainly not result in the kind of market shock Stockman was hoping for, so he and other supply-side theorists changed the computer's model.

Stockman used the deficit predictions, however, to get the President to commit to the massive cuts necessary to balance the budget. He calculated that $40B in cuts were needed across the board. However, with the way actual government spending works, these cuts seemed impossible. If the total federal spending were a dollar, 48 cents of it went toward the social safety net, which Reagan had promised not to touch, so that whole piece was exempt from Stockman's cuts. Defense was another 25 cents of the dollar, and not only could that not be touched, but Reagan had promised to increase its share. 10 cents of the dollar went to paying off interest on the national debt. The remaining 17 cents went toward everything else government does: operations and grants to state and local governments. This is where most of the cuts would have to be taken from. Even though this seemed impossible, Stockman didn't believe the numbers. He thought he could make the government run more efficently with his cuts and the effects wouldn't be as drastic as they seemed.

Additionally, the plan was to get cuts approved as quickly as possible, before new Cabinet members could fully get a grasp of their departments and put together effective counter-arguments and proposals. And this worked. As a result, "Stockman's agency did in a few weeks what normally consumes months; the process was made easier because the normal opposition forces had no time to marshal either their arguments or their constituents and because the President was fully in tune with Stockman."

The author also presents a nice summary of some of these changes that I will reproduce in full here:

"The check marks [programs that were approved by the President for cuts] were given to changes in twelve major budget entitlements and scores of smaller ones. Eliminate Social Security minimum benefits. Cap the runaway costs of Medicaid. Tighten eligibility for food stamps. Merge the trade adjustment assistance for unemployed industrial workers with standard unemployment compensation and shrink it. Cut education aid by a quarter. Cut grants for the arts and humanities in half. "Zero out" CETA and the Community Services Administration and National Consumer Cooperative Bank. And so forth. "Zero out" became a favorite phrase of Stockman's; it meant closing down a program "cold turkey," in one budget year. Stockman believed that any compromise on a program that ought to be eliminated—funding that would phase it out over several years—was merely a political ruse to keep it alive, so it might still be in existence a few years hence, when a new political climate could allow its restoration to full funding." (My note).

This all happened so fast, and eventually Stockman would come to lament the speed with which everything was done. He had to make snap judgements based on little information--something that barely ever works unless one is already deeply experienced.

One of the major fights that came up was regarding cuts to the Export Import bank (Ex-Im). Stockman was trying to prove that supply-side theory could be equitable, and make cuts on the wealthy, on big interests, etc. and not just cut social programs. However, the interests he was going after favored big American manufacturers. Though he got the cuts for the moment, he anticipated pushback in the future.

While this was happening, defense was running wild with spending. They had been told they couldn't be cut, and had been promised increases in the future. Their budget was basically rubber-stamped and then ignored.

Stockman was also preparing to increase revenue and reduce defecits. This next phase of his plan involved closing loopholes in the tax code, which he thought would assuage liberal fears. However, the President rejected this plan. Stockman, at least on the surface, wasn't upset, "The vulnerability of Stockman's ideology was always that the politics of winning would overwhelm the philosophical premises." When his ideas would get shot down by the president, fail or get mutilated in Congress, or fail to meaningfully affect the market, he was quick to shrug it off and move on. He felt like the drastic action by the administration was shocking politicians and more and more were coming to support supply-side theory. He even had a "spy" in Democratic meetings that helped him meet and respond to their budget proposals.

However, though he could rally after political failures, the market failures were a much bigger pill to swallow. In fact, the market was not only not booming, but going into decline. The CBO predicted future defecits of $60B, which forced the administration to face uncomfortable questions, questions that Stockman thought he had prevented by placing what he called a "magic asterisk" on any future defecit problems that came up in his recommendations, claiming that these issues could be taken care of in the future, with more cuts. At this point, Stockman and his analysts knew the plan wasn't working. But this is not what they said publicly. The author notes, "Reagan's policy-makers knew that their plan was wrong, or at least inadequate to its promised effects, but the President went ahead and conveyed the opposite impression to the American public. With the cool sincerity of an experienced television actor, Reagan appeared on network TV to rally the nation in support of the Gramm-Latta resolution, promising a new era of fiscal control and balanced budgets, when Stockman knew they still had not found the solution."

Instead, Stockman planned to make small changes to the Reagan policy that he hoped would go unnoticed in the political arena as being contrary to what was initially promised. He needed to cut the defecits, but he couldn't be perceived as abandoning the strategy. He hoped to make changes to the tax-cut plan, and to cut defense, Social Security and health costs (Medicare and Medicaid). He hoped that the uproar after the CBO's defecit numbers was enough to get people willing to do these things.

He anticipated delaying the tax-cuts would be easy, politically. He also anticipated that he could make compromises to Social Security and health costs by ignoring future predictions of problems (in 2010) and emphasizing how bad things would be immediately if these cuts weren't made. The hardest part was defense, and Stockman knew he couldn't make any changes that looked like contradictions to the Presidents promises. However, he thought that defense had gotten so greedy that they alienated themselves and the cuts wouldn't be opposed in Congress. He still anticipated a market boom, but pushed it from April to August.

When he was met with bigger resistance on Social Secuity cuts than he anticipated, he brushed it off, saying that he felt peopel would come around and that they were just too sensitive to reactions of the public and press. In the end, the President turned on these cuts and they were postponed, until they would be of no use in preventing huge defecits. They ended up modifying the tax-cut plan instead to help close the gap.

Through all of this, Stockman was beginning to doubt the supply-side theology. He had seen what happened with these ideas in action, and thought that instead of being revolutionary, supply-side was just a way to rebrand old Republican idology of "trickle down" economics.

As things fell apart, his fears were confirmed. Politicians did what they (are supposed to) do best: compromise and make trades. Agreements were reached, and figures were decided. However, Stockman felt the figures that got approved were "ceilings" which could be reduced later on. Politicians were not on the same page, and when these figures were challenged later on, they turned on him. Eventually more agreements were struck and Stockman was forced to admit that his quest for equity in fiscal revolution had failed: "Now, as the final balance was being struck, he was forced to concede in private that the claim of equity in shrinking the government was significantly compromised if not obliterated."

Though it seemed like they had won politically, Stockman was no longer confident. He knew the numbers being presented to the public were imaginary. He said, " 'There was less there than met the eye. Nobody has figured it out yet. Let's say that you and I walked outside and I waved a wand and said, I've just lowered the temperature from 110 to 78. Would you believe me? What this was was a cut from an artificial CBO base. That's why it looked so big. But it wasn't. It was a significant and helpful cut from what you might call the moving track of the budget of the government, but the numbers are just out of this world. The government never would have been up at those levels in the CBO base.' "

Faced with failure, not just in the present but in the future, Stockman reflected on what had gone wrong. He blamed the speed with which he was asked to make cuts in the early months of his term, admitting they were made without much information. He turned on the supply-side purists, calling them "naive" and arguing that they had "gone too far." But more than that, he basically threw up his hands. He was scrambling to keep things together and said he couldn't put too much thought into how the system works, how slowly it moves, or what might happen, since he had little control over those things. He instead tried to focus on the immediate, and continue plugging away. He didn't know what would happen after the next election cycle, but it didn't seem to concern him too much. The reporter ends the article with a quote that seems to show Stockman calling supply-side a "crackpot" theory, but one that he is still going to push forward until there is another major shift in the economy or the political arena. He is defeated, but committed to lying in the bed he's made for himself. Unfortunately, it's not just his bed, but one he has made for the entire country as well.

## Organizational Change in an International NGO

_Lux, S. and Bruno-van Vijfeijken, T. (2013). “From Alliance to International: The Global Transformation of Save the Children.” E-PARCC Case Study on Collaborative Governance. Author: Whiting, Cal McCulley; Editor: Fantigrossi, Steven Marc_

**Part A - Barry Clark comes on Board**
In 2002, Barry Clark took note of many organizational issues when he joined an NGO named “Save the Children Alliance” (SC). The organization of the company did not connect between regional offices and there was no way to distinguish offices from each other. Even worse, the SC United Kingdom director barley even knew his counterparts. This decentralized organization was a result of World War II, where SC affiliates were on opposite sides and began to focus on different missions. As a result of SC’s lack of coordination, its reputation was damaged in the 1960s and 70s. Failure to respond effectively to disasters like the Guatemalan earthquake in 1976 plagued the organization.
To address the issue, SC members established an independent secretariat in Geneva, Switzerland in 1993 and named it the Save the Children Alliance (SCA) with the goal of facilitating collaboration. Due to its too few employees, lack of a clearly defined mission, and self-interested SC branches, SCA struggled to come together for the common cause.

Part B - In Search of Strategy
Clark noted that “[SCA’s] problem wasn’t so much a structure or organization or people problem, it was in fact a lack of coherent strategy.” While CEOs of the four major SC members representing United Kingdom, USA, Norway, and Sweden began to assert themselves in promoting a more centralized SC, but the many SC identities made its organization and strategy confusing to donors and also created inefficiencies. Many SC partners were not only not collaborating but were openly competing with one another!
Due to these inefficiencies, Clark convinced SCA to develop a new global strategy which included the adoption of independent board members to the Save the Children Alliance and the appointment of an independent Chair, a plan to develop a coordinated Alliance strategy for 2020, a 5-year plan, and an agreement on a common goal for the alliance to maximize contribution to the children,

**Part C - Give and Take, Changing Governance**
Three years after implementing the new global strategy, SC Alliance brought Peter Woicke onto its Board as Chair and appointed Charlotte Petri Gornitzka as the Alliance’s CEO. After receiving some resistance from the idea, Barry Clark took steps to coordinate work at headquarters, just as they do at the field level. Since Woicke believed that the four largest SC’s dominated the decision making process, he began to make changes to the structure and governance. The mission drove the structure; as Gornitzka stated, “We didn’t start with a decision about what would be the right organizational structure, instead, we focused on thinking about what children need, what the relevant role for Save the Children was, and what we were good at.” Unsurprisingly, the four large branches pushed back against the changes as they would be losing autonomy in decision making.
As part of the centralization process, SC established “managing members” of countries instead of “participating members” in order to make managing affairs in a country more clear-cut. SC established three workgroups focused on Fundraising, Strategic positioning, and People, Organization, and Governance (POG) group. These groups engaged in talks about the different options SC should look at.
In 2009, Members agreed to reconstitute Save the Children Alliance into what would now be Save the Children International. New bylaws for SCI board were then drafted and approved and the old alliance board stepped down. SC International’s board now consists of 14 directors – 9 drawn from the boards of the largest members by income, 3 elected by other members, and 2 independent external elected by the board. Peter and Charlotte resigned and took over responsibility for the next most significant task of SC’s organizational change, what became known as the “All Members Agreements.” To make the change, member organizations had to give up the operational control and direction of programs that occur in the field which was now facilitated by SC International through the regional offices and country programs as a direct outgrowth of the model of Unified Presence.

**Part D - Save the Children Org. Change: Implementation and Early Results**
Implementation of the new Members Agreement, in fact, would be more laborious, more time consuming, and more complicated than the change that SC had experienced to that point. The most daunting task that SCI faced were two key aspects of transferring country level programs into a unified delivery platform
Staffing issues became a difficult challenge, necessary for the new SCI. SCI needed to quickly recruit transfers from member organizations or hire externally into the new SCI positions that had been opened up. Budgets and decision making authority was lost by the program staff, national boards who raised funds no longer controlled the resources, and finance and audit departments lost authority over project finances. SC leadership faced pushback on the needed changes and relied on the values of organization to make the point that more children would be helped through the new structure.
The changes resulted in the members of the organization thinking of themselves as part of a larger SC team. Save the Children received increased media attention and was able to gain greater geographical coverage. Additionally, SC found attract talent and funders to help their efforts.


Organizational change was needed at Save the Children because it lacked unity among its various field offices, which created inefficiencies in service delivery that cause funding to decrease. Since SC is an international organization, its offices throughout the world quickly developed their own identities, funding mechanisms, and decision making processes. These problems made it difficult to coordinate in its response and advocacy functions. Often, different field offices had different missions and visions for responding to certain crises or how to operate their individual office. All of these problems were manifest from a highly decentralized organization of the company that lacked an independent authority responsible for establishing a unified mission and coordinating between offices to ensure adequate delegation of authority and responsibilities.
SC organizational change was successful primarily because it centered on maintaining the mission and identity of SC. In the talks surrounding how to change the organization of SC, the main question asked was “how does this change assist in our mission of assisting as many children as we can?” By having organizational mission drive organizational change, SC was able to greatly enhance efficiency while maintaining and building its ultimate goal.
# Team Performance

_Team work is simultaneously one of the most important ingredients in organizations and one of the most difficult things organizations do. Teams rarely function well without effort. What are processes that can help teams function better?_

## Why Teams Don't Work

**Why Teams Don’t Work: Harvard Business Review. Author: Sarawat, Fariha; Editor: Checksfield, Molly Wentworth**

These are findings from an interview with J. Richard Hackman, the Edgar Pierce Professor of Social and Organizational Psychology at Harvard University and a leading expert on teams. His research reveals that most of the time team members don’t even agree on what the team is supposed to be doing and that team leaders have to assume great personal and professional risks to determine the team’s direction.

Hackman talks about how people are taught from very early on in life that teams are great and can get the work done in a shorter time. However, research shows that challenges with coordination and motivation negate the benefits of collaboration, making teams underperform quite consistently. Even among teams of senior executives there are similar challenges and Hackman argues that choosing effective team members requires ruthless decision making.

Leaders also are critical to setting the direction of the team, however in doing so they encounter resistance so intense that it can place their jobs at risk.

Hackman also confuse the cause-effect relationship between effective teams and job satisfaction—‘When we’re productive and we’ve done something good together (and are recognized for it), we feel satisfied, not the other way around.’

His research shows that smaller teams are more effective than larger teams and while the addition of new members can inspire creativity, injecting too many new members can actually reduce productivity and accuracy.

He thinks every team needs a ‘deviant’—a disruptor who questions them and pushes back on complacence—to be more effective.

## How Teams Can Work Better

Sutherland, J. & Sutherland, J.J. (2014). Scrum: The Art of Doing Twice the Work in Half the Time. Crown Business, Happiness: pp 71-144. Author: Legnetto, Deanna Marguerite; Editor: Rodriguez Ranf, Daniela

Throughout these three chapters, Sutherland discusses the importance of cutting down waste and planning strategically and realistically before what he calls Daily Stand-Up meetings and Sprints.

_Chapter 4: Time_

_The Sprint:_ Companies frequently give their employees large amounts of time to work on projects, most of the time which they seldom receive feedback before it’s too late and the time is long wasted. Instead of working slowly on long, drawn out projects, the Scrum sprint is a way to present the receiving end with a product in a short amount of time. Using an example of “Team WIKISPEED” a company that makes cars in Seattle, they use a large white board and present all the items they perceive can get done an a week (one Sprint) and team members see the progress being done by their colleagues as these items are moved from “Backlog, Doing, and Done”.

_Daily Stand-Up:_ Sutherland builds on the Sprint idea by using daily, 15 minute meetings in which everyone participates and attends. These performance measurement meetings revolves around three questions that can be utilized to assess each Sprint by giving the team a chance to spot any weaknesses or problems and solve them right away. Since special titles and specialization seem to create tension between roles in a group, absolving titles can be a productive action before adopting this “Daily Stand-Up”.

_Time and Time Again:_ Sutherland uses an interesting scenario of a friend’s plan for remodeling his house and a neighbor attempting the same. By using the Scrum model of Daily Stand-Ups and Sprints, his friend was able to complete the project in six weeks, while the neighbor’s project took twice as long and cost twice as much. One of the main differences between the jobs was how much time was wasted waiting on each piece to finish before the other could start.

_Chapter 5: Waste Is a Crime_

Sutherland stresses the importance of establishing a positive rhythm or pattern of occurrences without succumbing to waste through unreasonableness, inconsistency, and outcomes.

_Doing One Thing at a Time:_ Evidence shows us that working on more than one thing at a time presents extreme cases of waste, even if you’re a business executive and you are trying to juggle several projects at once. Similar to talking on the phone and driving, one’s brain cannot concentrate equally on both tasks. Teams can suffer tremendously from trying to multi task on three projects simultaneously instead of working through the first part, then the second, and finally the third. Rotating through projects creates wasteful time trying to get back on track when switching gears.

_Half Done Isn’t Done at All:_ Sutherland discusses the importance of having fully finished products or tasks rather than a bunch of half-finished ones. It is wasteful to invest in effort without the positive outcomes.

_Do It Right the First Time:_ A team that stops and works together to fix a problem, will achieve success faster than a team that has to make corrections following completion.

_Working Too Hard Makes More Work:_ Working longer hours is not necessarily an indication of working harder and in many cases can be seen as working slower or more inefficient. This idea syncs up with “ego depletion” and the notion that an individual is limited to a certain number of good or mindful decisions each day.

_Be Reasonable:_ Sutherland discusses Toyota’s Taiichi Ohno three types of unreasonableness waste and the effects on teams. Absurd goals can frustrate and destroy teams, unreasonable expectations sets teams up to fail, overburden can waste valuable time with monotonous tasks, and also “Emotional Waste” usually comes from a poisonous employee whom incessantly causes trouble.

_Flow:_ He finishes chapter five by suggesting teams should strive to create an effortless flow of discipline that does not succumb to waste.

_Chapter 6: Plan Reality, Not Fantasy_

Planning can easily get out of hand and buried underneath piles of paper. Grouping similar points together and organizing where to start first allows groups to prioritize their work.

_Wedding Planning:_ Sutherland relates estimating goals for a business to planning a wedding. It is important to make a priority list, which is consistently reviewed and updated and organized by value.

_Size Does Matter, but Only Relatively:_ Once a prioritized list is created, it’s important to scale these items in terms of size or amount of involvement. One scale is the Fibonacci sequence or “Golden Mean”, which is a pattern of numbers where the following number is always the sum of the previous two. This pattern allows our brains to better handle estimating large jumps than slight changes, which is more comfortable for the human mind.

_The Oracle of Delphi:_ It is common for certain things to occur when dealing with groups, such as “the bandwagon effect” or following the common ideas, “informational cascade” or over-valuing the judgement of others, and the “halo effect” or allowing one characteristic to influence other unrelated characteristics. In the case of the Rand Corporation during the Cold War, these three effects were avoided by the use of anonymous surveys given to each team member, so as to get rid of potential bias and locate commonalities in thinking.

_Planning Poker:_ Similar to Delphi, the art of “Planning Poker” is a faster and more accurate way of estimating. Each team is to use Fibonacci sequence labeled cards to estimate the size of each piece of the project. If each card is not within two sequences then the group must come together and share their reasoning, and re-submit their cards. This too allows groups to work without bias effects.

_There Are No Tasks; There Are Only Stories:_ Without giving individuals or teams a context of the items that need to be done, workflow may suffer. Similar to telling a story, providing an outline of who the task is being done for, what the particular goal is, and the motivation of why this individual wants this done will provide clear reasoning and may even improve estimates. These stories however, are best told as short, to the point stories that pinpoint straight forward tasks.

_Be Ready and Be Done:_ Sutherland uses the INVEST criteria to identify if a story is ready: Independent (able to self-complete), Negotiable (be flexible), Valuable (delivers value), Estimable (provide a scale), Small (to make for easy planning), and Testable (a way to test for completion). Tying this back to Sprints, these stories are commonly discussed at Sprint Planning meetings where accomplishments can be estimated.

_Know Your Velocity:_ By using all the applications discussed in this chapter, teams can develop a velocity and use this to calculate the time for a finished product. Using the Medco example, this velocity can and should be used to identify and correct for waste.

## The Shift in Management Philosophy

Denning, S. "Why do Managers Hate Agile." Forbes Magazine. Part I (January 26, 2015) and Part II (January 28, 2015). Author: Farrior, Cheri Nicole; Editor: Dieselman, Andrew

This article discusses the worlds of management and Agile. Management is when everything is vertical and being run top-down. Management functions systematically. The top bosses appoint workers, assign tasks, make decisions, and assess performance. Employees compete with other employees for compensation, and compensation is tied to rank. There is tight control and a heavy focus on efficiency. On the other hand, Agile is horizontal. The goal is customer satisfaction and money is a result, but not the ultimate goal. There is a focus on innovation which enables those doing the work to be able to utilize their talents and abilities. Firms with the horizontal mindset are thriving, while those firms with a vertical mindset are struggling.

The article states that the Agile approach consists of self-organizing teams working to deliver additional value directly to customers. Teams trying to go the distance as a unit, passing the ball back and forth, is more effective in today’s competition verses the relay race approach to product development. The agile approach is now becoming more popular in all sectors of the economy.

The agile approach was a result of hierarchical bureaucracy, which consists of individuals who report to bosses who have control and tell them what to do. Hierarchical bureaucracies created order in times of chaos and was scalable, efficient, and predictable. However, the focus was internal, it was non-collaborative, its plans were linear, and it was dispiriting to staff. However, none of these liabilities didn’t matter much because firms could overcome them, but then all of a sudden the world changed due to a number of factors: globalization, deregulation, new technology, and the Internet. The buyer gained power in the marketplace and the customer was now central. Average performance as no longer good enough. Innovation was required. This led to managers rethinking the way in which organizations were run and the birth of the agile world. Work was now done by self-organizing teams that could utilize the talents of all involved in the work and there was a main focus on satisfying customers needs.

The Agile approach there is a belief that if you put the customers needs first then the organization will flourish. Making money is the result not the goal.

At the team level, firms use the Product Owner to interpret what the customer wants. At firms like Apple, those doing the work are able to deal directly with the customers. Apple has been able to achieve a massive scale by having a platform serving as a lens to the need of the customer. They have hundreds of thousands developers working to meet the needs of its hundreds of millions of customers and because of that the hundreds of millions of customers have a product that is customized to meet their own interests and needs.

Scrum teams and the Apple platform are similar in that they have total focus on the customer, they have an ideology of enablement rather than control, they have a flat horizontal structure, they have the same iterative dynamic, and they both are inspiring people to do the work.

Another example of the dynamic of Agile is Autodesk, which is a leader in the CAD/CAM software and building system modeling. Autodesk has created a platform where companies in construction and civil engineering can utilize a number of apps to help large construction companies simulate all aspects of a giant building project before it begins. This allows these companies to anticipate problems and coordinate suppliers. As a result, Autodesk has been able to outperform the S&P 500 index.

Agile is not easy to accomplish, as there will be losses for the first few attempt, which can be costly. However, if companies are dedicated and persistent they will get to the goal, which will exceed any losses and failures they encountered a long the way.

Another component of Agile is continuous deployment. deploys more than 30 software improvements each day. By releasing small changes on a daily basis, its easier to spot and fix problems than it would be by releasing a bundle of many changes at once, as this can be difficult to figure out exactly where the problem was. In addition, management does not have to approve changes to the site. Improvements that have been fully tested are deployed immediately, with the staff devising the improvement overseeing their implementation. This creates mastery and autonomy. These small changes are significant and can create additional millions of dollars in sales. This method also enables rapid innovation and learning.

Managers are now having to ask new questions and with these new questions, the person at the top of the hierarchy doesn’t have the best answers anymore. There are some organizations who transition partially. You have one part of the company operating in a hierarchical bureaucracy, while the other part is operating under the agile and scrum mode. These different ideologies within the same organization can lead to a lot of friction within the company.

## Building Effective Teams

Duhigg, C. What Google Learned from Its Quest to Build the Perfect Team. The New York Times Magazine, February 25, 2016. Author: Berkley, Njeri N; Editor: Fantigrossi, Steven Marc

Twenty-five year old Julia Rozovsky wanted to find a job with a social aspect that would allow her to "be a part of a community". Upon being accepted to Yale School of Management, Rozovksy "was assigned to a study group carefully engineered by the school to foster tight bonds". Business schools have recently altered their curriculums to emphasize "team-focused learning" and reflect the enlarging demand for employees who can adeptly navigate group dynamics. Rozovsky met with her four teammates daily, and found that despite their shared experiences, the study group was stressful. She recalls feeling constant pressure to prove herself to the group, whose dynamics "put her on edge".

Rozovsky later joined a team as part of "case competitions". Rozovsky found this experience to be completely different from her study group, with members coming from different backgrounds. Everyone got along and worked well together in a fun and easygoing environment that they created and socialized prior to meetings. No team memberes were worried about other team members judging their suggestions. Rozovsky couldn't figure out why her experiences with the two groups were so dissimilar: she had friendly one-on-one interactions with the study group members, but when the group gathered, tension would arise. On the other hand, her competition team members seemed to have gotten along better as a group than as inidividual friends.

Psychologists, sociologists, and statisticians are now studying work habits and team composition, like Rozovsky's, in order to find out how to make employees more efficient and productive. Valuable firms have concluded that "employee performance optimization", the practice of "analyzing and improving individual workers," is not enough. Studies show that managers and employees' time spent on collaborative activities have increased by 50% or more over the last twenty years. Studies also show that groups tend to innovate faster, find better solutions, report higher job satisfaction, and increase profitability. It is imperative for companies to ensure effective teamswork if companies want to beat out their competitors.

After graduating from Yale, Rozovsky was hired by Google and assigned to Project Aristotle, where she studied the habits and tendencies of Google teams to figure out why some teams failed where others didn't. The researchers for Project Aritstotle reviewed academic studies regarding team functionality and scrutinized the composition of Google's groups. The researchers drew diagrams to display overlapping membership and looked at things like gender balance and group longevity, but were unable to find patterns that indicated an impact of team composition. Rozovsky and her colleagues continuously came across research that may provide insight to her previous conundrum: "group norms". Norms are the behavioral standards that can be unspoken or openly acknowledged. Norms can have a heavy impact on the way individuals act, but when the group gathers, the group's norms will often override individual inclinations. Project Aristotle's researchers began looking for group norms in their collected data and concluded that understanding and influencing group norms was the answer on how to improve Google's teams. Now they just needed to figure out which norms mattered the most.

In 2008, a group of psychologists from Carnegie Mellon, M.I.T. wanted to find out if there was a collective I.Q. that emerged in a group setting and is distinct from any individual. The researchers found that the right norms could raise a group's collective intelligence, while the wrong norms could be detrimental. Although not all successful groups behaved in the same ways, two behaviors were prominent: equality in distribution of conversational turn-talking (members spoke in same proportion), and average social sensitivity (intuiting how others feel based on tone of voice, expressions, etc.). These traits are aspects of psychological safety: a group culture defined by the Harvard Business School Professor Amy Edmondson as a "shared belief held by members of a team that the team is safe for interpersonal risk-taking". The concept and research of psychological safety led Project Aristotle to particular norms that are critical to success. After identifying the most critical norms, Rozovsky and her colleagues had to fgure out how to formulate communication and empathy into an easily scalable algorithm.

In late 2014, Project Aristotle publicized its research to select groups in the hopes of prompting employees to come up with ideas of their own. After one of Rozovsky's presentations, the group met Matt Sakaguchi, an ex-SWAT team member who currently manages technical workers at Google. Sakaguchi's previous team did not get along too well, and he wanted his new team to be different. Partnering up with Project Aristotle, Sakaguchi distributed a survey to his team which produced results that indicated a disconnect between members' work and overall impact. At a requested off site gathering, Sakaguchi related psychological safety to emotional conversations and began opening up to his team members. The experience allowed team members and researchers to realize that in order to feel psychologically safe, individuals must be able to share personal thoughts and feelings, and not just focus on efficiency.

Google's intense data collection did not lead to any new thinking, but actually confirmed what was already known: in the best and most successful teams, members listen to each other and show sensitivity to feelings and needs. Google did however demonstrate the usefulness of figuring out how to create psychological safety faster, better, and in more productive ways. Project Aristotle's data proved that success is often built on experiences and supported giving people a common platform and operating language.

## Dynamics of Team Formation

Casciaro, T., Lobo, M.S. (2005). “Competent Jerks, Lovable Fools, and the Formation of Social Networks.” Harvard Business Review, June, 92-99. 8 Author: Wohlenberg, Danielle Irene; Editor: Uk, Bolary

Informal social networks play a large role in resolving tensions and is crucial for success. These networks pose both positive and negative effects, and there are ways for organizations to learn how to emphasize the positive effects.

Competence and likability are the two most important factors in employees, and to determine how they matter, the Harvard Business Review completed social network surveys at four different organizations, and studied more than 10,000 relationships. The goal of this study was to see if their would be consistencies among organizations and cultures, and if the findings would remain consistent with different measures of likability and competence. The study accounted for various biases and determined that among all organizations people wanted to work with the “lovable star” (the person who is competent and likable).

Managers commonly report preferencing competence over likability but the study determined that reverse is true in practice, but would look “unprofessional” to profess.

The bias that everyone has different preferences in who they like plays a relevant role because people tend to like people who are similar, familiar, reciprocal, and attractive. However there are positive and negative effects of “liking” the person you work with. “The objective is to then leverage the power of liking while avoiding the negative consequences of people’s affect-based choice.”

This study recommends to 1-manufacture liking in critical relationships, 2-position universally likable people to bridge organizational divides, and 3-work on the jerks. This can be accomplished through “peer assist” knowledge management process, where environments are fostered for peer collaboration. There can also be less-formal Friday afternoon get-togethers.

Distrust and animosity can hinder these efforts and sometimes “intense cooperative experience” can be facilitated by organizations. In addition when there is an employee who is a “lovable fool” (likable but incompetent) this employee should be identified so that they can be used to bridge gaps between diverse groups that may otherwise not interact.

This study determined that likability is a very important trait in employees, more so than competency. Likable individuals can be a great asset to an organization and help to foster a positive work culture. When individuals are identified who are good connectors and likable, it is important to position them strategically and to take measures to keep them in the organization. It is also necessary for organizations to identify the “jerks” and reward good behavior, punish bad behavior, and assess their contributions, and reposition if necessary.

## When Teams Fail

Holmes, A. (2006). Maine's Medicaid Mistakes. CIO. Author: Kim, Chung Myung; Editor: Berkley, Njeri N

In October 2001, the state of Maine made a $15 million dollar contract with CNSI to create new generation of end-to-end system to process Medicaid claims and payments. It was expected to process claims much faster, cost efficiently, and accurately than its old Honeywell mainframe. From the beginning, it had to suffer from serious problems. First of all, when the state of Maine issued an RFP for creating its new system, only two companies Keane ($30 million) and CNSI ($15 million) turned in their proposals. When contracting this type of project, government and agencies are supposed to expect more bids within the similar price ranges, however, Maine only had two proposals with totally different bidding price. As a result, CNSI, which did not have any experience in creating Medicaid claim processing system won the bid. CNSI was given 12 months to finish their project, but it was oblivious that they were not going to meet the given deadline. Only 65 people from DHS IT staffers and CNSI representatives were assigned to the project and did not have any Medicaid experts within the team, so they had difficult time communicating with those Medicaid experts in the Bureau of Medical Services. For the next two years, DHS IT staffers and CNSI workers worked intensively writing codes, but they still could not meet the extended deadlines, so they decided to reduce the testing procedures. They only went through 10 providers and claim cases, and there was no training for the staff to answer providers’ questions.

When they finally opened their new system to public, the system had sent 50 percent (24,000) of the claims into the ‘suspended’ files within the first week, which is much higher than the previous system’s 20 percent rate of sorting into suspended files. As a result, state owed health care providers about $310 million in Medicaid payments and misprocessed or unprocessed claims had reached almost 647,000. Although, state of Maine finally hired XWave, an integrator and management consultant to resolve the issue, the decision that state of Maine made to spend over $25 million new system that is not any better than previous system is questionable.

# Innovation

_Innovation is the process of solving large-scale organizational problems or developing new technologies and processes to more effectively pursue goals. What can we learn from past examples of innovation? What types of organizational policies and processes inhibit innovation? What are characteristics and leadership practices in organizations that have been innovative?_

Bornstein, D. (2007). How to change the world: Social entrepreneurs and the power of new ideas. Oxford University Press. CH3 – Fabio Rosa: Rural Electrification. Author: Gobbo, Andre Francis; Editor: Rodriguez Ranf, Daniela

Lerner, J. (2012). The architecture of innovation: The economics of creative organizations. Harvard Business Press. CH1 – The Search for Innovation and Growth. Author: McCully, James I; Editor: Legnetto, Deanna Marguerite

Gladwell, M. “The Creation Myth: Xerox PARC, Apple, and the Truth about Innovation.” The New Yorker, May 16, 2011. Author: Boucher, Timothy M.; Editor: Berkley, Njeri N

Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH4 – Fire Bullets, Then Cannonballs. Author: Lancto, Katelyn N; Editor: Legnetto, Deanna Marguerite

Christensen, C. (1997). The innovator's dilemma: when new technologies cause great firms to fail. Harvard Business Review Press. CH5 – Give Responsibility for Disruptive Technologies to Organizations Whose Customers Need Them. Author: Rodriguez Ranf, Daniela; Editor: Swartwood, Hilary Ann

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 4: Find Someone Who Has Solved Your Problem.

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 3: Multi-Track.

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 7: Ooch.

# Public Private Partnerships

Lerner, J. (2009). Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed--and What to Do About It. Princeton University Press. Author: Hamlin, Madeleine Rose; Editor: Creedon Jr, John Thomas

Mazzucato, M. (2013). The Entrepreneurial state: Debunking Public vs. Private Sector Myths. Anthem Press. Author: Perez, Philip A; Editor: Tansits, Colin E

Case Study on Public Private Partnership
# Section 5: Measuring Performance

How can we translate abstract organizational goals into tangible outcomes that can be easily measured? What types of metrics and performance indicators have worked well in specific organizations? What are the limits to a performance or outcome-based perspective in the public sector (or alternatively, what types of programs will be difficult to track)?

## Validity and Reliability

_Kimberlin, C. L., & Winterstein, A. G. (2008). Validity and reliability of measurement instruments used in research. Am J Health Syst Pharm, 65(23), 2276-84._

Author: Hanson, Keely; Editor: Hanson, Keely

## Key Performance Indicators

_USAID (1996). Performance Monitoring and Evaluating Tips: Selecting Performance Indicators._

Author: Checksfield, Molly Wentworth; Editor: McCully, James I

## SMART Criteria
_SMART Criteria for Performance Measurement._

Author: Rodriguez Ranf, Daniela; Editor: Gobbo, Andre Francis

The purpose of this article is to review issues related to the **validity** and **reliability** of measurement instruments used in research. The article provides background on why using tests or instruments that are valid and reliable to measure such constructs is a crucial component of research quality. Given that public organizations have many areas where metrics and performance indicators may be subjective in nature, this article explains how reliability and validity can be useful in assessing performance in order to mitigate subjectivity and effectively translate organizational goals into tangible outcomes.
Reliability and validity are highlighted as key indicators of the quality of a measuring instrument and are defined as follows:

• **Reliability**-- how estimates evaluate the stability of measures, internal consistency of measurement instruments, and interrater reliability of instrument scores.
• **Validity**-- the extent to which the interpretations of the results of a test are warranted, depending on the particular use the test is intended to serve.

**Evaluating the quality of measures**
Whether it is healthcare, education or beyond, there are many organizations in the public sector where data collected encounters a greater degree of subjectivity in judgment, or other potential sources of error in measurement. Managers and their research team must control for known sources of error and report the reliability and validity of measurements used.

Reduction of error is one of the main focuses when developing and validating an instrument. There are several measures that reliability estimates are used to evaluate. Reliability is used to evaluate the, “the stability of measures administered at different times to the same individuals or using the same standard (test–retest reliability).” It also looks at “the equivalence of sets of items from the same test (internal consistency) or of different observers scoring a behavior or event using the same instrument (interrater reliability).” These specific items within reliability that public administrators can evaluate when interested in performance evaluation are: stability, internal consistency, responsiveness, and interrater reliability.

- Stability of measurement, or test–retest reliability, is “determined by administering a test at two different points in time to the same individuals and determining the correlation or strength of association of the two sets of scores.” It essentially helps evaluators understand how consistent or stable the results of a test being administered are.
- When evaluating stability, the time interval in between test administrations is very important and critical to the assessment. The article explains that it is ideal that the, “interval between administrations should be long enough that values obtained from the second administration will not be affected by the previous measurement (e.g., a subject’s memory of responses to the first administration of a knowledge tests, the clinical response to an invasive test procedure) but not so distant that learning or a change could alter the way subjects respond during the second administration.”

**Internal consistency**
Internal consistency is a measure of how different items assess the same construct or idea on the same test. This gives public managers the ability to understand how well an item of interest is being accounted and the consistency of their results. The most widely used method for estimating internal consistency reliability is Cronbach’s alpha, which is “a function of the average intercorrelations of items and the number of items in the scale.”

**Responsiveness **
Responsiveness is the ability of a measure to detect change over time in the construct of interest. Reliability is a crucial component of responsiveness and can be very useful in the public sector to identify interventions that are effective in changes of interest.

**Interrater reliability**
Interrater reliability helps illustrate the degree of consensus amongst observers. It is also know as interobserver agreement, and can be important in ensuring that raters making subjective assessments have consistency. It “establishes the equivalence of ratings obtained with an instrument when used by different observers.” A reliable measure that involves judgments or ratings by observers, will observe consistency between different raters. There must be No discussion or collaboration can occur when observers are giving ratings in order to maintain the integrity of interrater reliability.

Validity is a very relevant construct for public administrators given the public nature of their work. It is known as “the extent to which the interpretations of the results of a test are warranted, which depend on the test’s intended use.” Evaluations in the public sector need to be mindful of validity, because it is “the extent to which an instrument measures what it purports to measure.” In evaluation, an instrument can be reliable without being valid. Public administrators have a responsibility of transparency and are depended upon to have the upmost integrity in what they provide to the public; that is why validity emerges extremely important, especially in respect to subjective constructs.

Whether it is in health, education, or other arenas of the public sector, there are many cases in performance evaluation that may require quantifying attributes that cannot be measured directly. These explanatory variables that are not observable are called hypothetical constructs. **Hypothetical constructs** “cannot be measured directly and can only be inferred from observations of specified behaviors or phenomena that are thought to be indicators of the presence of the construct. An operational definition of a construct links the conceptual or theoretical definition to more concrete indicators that have numbers applied to signify the “amount” of the construct.” How this construct is operationally defined and quantified is the core of the measurement.

**Construct validity**
This type of validity assesses how well the test or experiment measures the construct of interest. Evaluation of construct validity requires “examining the relationship of the measure being evaluated with variables known to be related or theoretically related to the construct measured by the instrument.”

**Content validity**
Content validity is usually assessed based on the judgment of experts in the field. It addresses how well the items developed to operationalize a construct, “provide an adequate and representative sample of all the items that might measure the construct of interest.”

**Criterion-related validity**
This type of validity "provides evidence about how well scores on the new measure correlate with other measures of the same construct or very similar underlying constructs that theoretically should be related." Selecting an appropriate and meaningful criterion measure can be a challenge because often the criterion a researcher would like to be able to predict is too far ahead in time or too expensive measure.

**Selecting an existing instrument**
Especially in the public sector where assessments have long been utilized and are often required, evaluators should identify any existing instruments that measure the construct of interest before developing a new test or measure. It can be more cost-effective and time-efficient. The article also highlights the following questions to ask when selecting an instrument:

_1. Do instruments already exist that measure a construct the same or very similar to the one you wish to measure?
2. How well do the constructs in the instruments you have identified match the construct you have conceptually defined for your study?
3. Is the evidence of reliability and validity well established? Has the measure been evaluated using various types of reliability estimates
4. In previous research, was there variability in scores with no floor or ceiling effects? D
5. If the measure is to be used to evaluate health outcomes, effects of interventions, or changes over time, are there studies that establish the instrument’s responsiveness to change in the construct of interest?
6. Is the instrument in the public domain? If not, it will be necessary to obtain permission from the author for its use. Even though an instrument is published in the scientific literature, this does not automatically mean that it is in the public domain, and permission from the author and publisher may be required
7. How expensive is it to use the instrument? A mail questionnaire costs less to administer than do telephone or face-to-face interviews.
8. If the instrument is administered by an interviewer or if the measure requires use of judges or experts, how much expertise or specific training is required to administer the instrument?
9. Will the instrument be acceptable to subjects? Does the test require invasive procedures?_

As a public manager interested in evaluation, there must be great attention paid to how instruments for **data collection** are developed, and should include pilot testing to determine their reliability and validity. This will help ensure the quality of research conducted.

One of the primary threats to quality assessments is the accuracy of data collected. In the public sector, there may be much use of **self-reported **and/or **secondary data** sources. Using secondary data may have particular relevance for data assessment in the public sector. Collecting secondary data is generally a standard practice for public organizations. However, the article highlights that it is imperative to “verify that the data set appropriately measures the variables required to answer the research questions.” Self-reporting can be particularly subject to issues of responses with social desirability biases or perceived impressions that need to be made. This should be considered when public managers seek to assess or collect data, especially when conducting surveys or questionnaires. One strategy to mitigate this when asking questions about frequency of behavior, is that it usually best to let the subject fill in the blank on an item with a clearly defined reference period. There are other ways to control for social desirability biases and evaluators should defer to such when using self-reporting measurements.

In the public sector, there are many variables of interest and outcomes that are important that will inevitably be abstract in nature. Using tests or instruments that are valid and reliable to measure such constructs is a critical aspect of ensuring research quality, and becomes even more imperative when assessing services and outcomes within the context of the public sector.

## Key Performance Indicators

_USAID (1996). Performance Monitoring and Evaluating Tips: Selecting Performance Indicators._

Author: Checksfield, Molly Wentworth; Editor: McCully, James I

The USAID Center for Development Information and Evaluation has developed criteria for how to create performance indicators to determine a program's success in achieving its objectives. This methodology expands past a results statement that shows what objectives are hoped to be achieved but rather a measure to determine if the objective has been achieved. Indicators are generally quantitative measures but can also be qualitative observations. They define how performance will be measured along a scale or dimension, without a specific level of achievement (Targets are separate from indicators). These evaluations serve as extremely valuable parts of an organization's reflection process while working towards its goals.
Being able to monitor performance is important for the wellbeing of an organization, as well as the ability to measure how a program is progressing towards its intended goals and outcomes. They are an indispensable management tool for making performance-based decisions about program strategies and activities.
However, many organizations have difficulty determining how to measure performance indicators most efficiently. Selecting appropriate and useful performance indicators requires careful thought, iterative refining, collaboration, and consensus-building. According to USAID, there are four steps in selecting proper performance indicators:

**Step 1. Clarify the results statements: **
The first step in determining effective performance indicators is being able to clarify a common goal that the organization is striving for. This goal should be articulated as clearly and concisely as possible. It is imperative that all those working towards the goal are aware of the team’s objectives so that results can be measured most accurately.
When developing results statements, it is best to use precise language, as individuals may interpret broad statements differently.

Clarification of the _type of change_ being sought is important as well, whether behavioral, situational, conditional, attitudinal, etc. Also, it is important to indicate whether the goal is absolute change, relative change, or no change.
 Absolute change: creating something new
 Relative change: “increases, decreases, improvements, strengthening or weakening in something that currently exists, but at a higher or lower level than is considered optimum” (USAID, p. 2)
 No change: maintaining the status quo.
Proper identification of _where change should occur_ is important as well- this is also known as the “unit of analysis”. Change can occur among individuals, groups, communities, regions, etc.
It is necessary to provide clarity about how different types of activities will directly lead to intended results in order to determine reasonable expectations for outcomes. In contrast, certains activities will produce the change less directly. Therefore, how direct of an effect of change should also be conisdered.

**Step 2. Develop a List of Possible Indicators**
There are a variety of ways to evaluate outcomes, but it is advised to select indicators that are best suited for the type of results desired. One way to determine how to choose an indicator is to list the types of indicators possible to use in a given situation. Always keep the objective in mind, consult with the experts of that field, and utilize the experience of other units with similar indicators.
Inclusivity is also vital to the development of a robust list of performance indicators so that all perspectives are on the table when choosing the most appropriate levels of measurement.

**Step 3. Assess Each Possible Indicator**
The next step is to assess all possible indicators brainstormed in step 2. There are seven criteria to evaluate such indicators:

1) Performance indicators should measure the intended result as closely as possible. _Direct measures_ are a more accurate representation of performance than indirect ones.
2) _Objective measures_ reduce ambiguity and levels of interpretation.
3) Performance measures should most _adequately_ measure the result in question.
4) Descriptive, _quantitative analyses_ are often preferred over qualitative measures where possible because they yield more straightforward results. The type of indicator (quantitative or qualitative) should be determined on a case to case basis.
5) _Disaggregated data_ indicate differences in how the outcomes affect groups. It is best for management to be able to measure how performance indicators affect a variety of different groups, rather than the group as a whole.
6) _Practicality_ of an indicator is important because the cost and time necessary to obtain data should be used in assessing whether an indicator is acceptable for achieving the goal.
7) _Reliability_ of the data is an important factor in choosing a performance indicator based on the data

A helpful way to choose performance indicators is to create a spreadsheet to assess each indicator by rating each criterion from 1-5 and then determine best fit based on the overall score of each indicator.

**Step 4. Select the “Best” Performance Indicators: **
The final step is to narrow the performance indicator list down to those of best fit based on the intended outcome. The cost and practicality of each performance indicator should be taken into consideration when determining the best measurements of performance.

** Conclusion: **
It is important for an organization to brainstorm which performance indicators are best suited to measure success so that goals are realized most efficiently. The data collected by the performance indicators measures the progress of an organization, and is therefore vital to the mission and life of the organization.

## SMART Criteria
_SMART Criteria for Performance Measurement._

Author: Rodriguez Ranf, Daniela; Editor: Gobbo, Andre Francis

The [SMART Criteria article]( is about how to evaluate and develop clear and useful objectives. SMART is an acronym comprised of key measures for judging objectives: **S**pecific, **M**easurable, **A**chievable, **R**elevant, and **T**ime-bound (_please note that different sources exchange words like attainable instead of achievable, or realistic instead of relevant_). The development of the SMART criteria have been most commonly credited to Peter Drucker’s Management by objectives (MBO) concept, also known as management by results (MBR). This concept defines a process within organizations where management and employees are in agreement of objectives and goals, and understand what they need to do to achieve them. SMART criteria does not imply that all objects must be quantified at all levels of management. The utility of SMART criteria should be seen as a combination of the objective and the action plan.

The following characteristics of S.M.A.R.T goals are described by Paul J. Meyer in _Attitude is Everything._

_**Specific:**_ This first criterion focuses on scope. It stresses the need to be specific when developing objectives or goals in order to avoid misinterpretations, and to provide as much clarity and direction as possible. A good test to see if a goal is specific enough is to apply the five “W” questions:
_- What: What do you want to accomplish?
- Why: Provide specific reasons, purpose or benefits of accomplishing the goal.
- Who: Who is involved?
- Where: Identify a location.
- Which: Identify requirements and constraints_

_**Measurable:**_ The second criterion focuses on the need for a standards of measuring progress. This is necessary for a team to know that they are working towards the successful completion of a goal. Measurement helps a team stay on track, develop benchmarks, meet deadlines and helps evaluate progress. Indicators should be quantifiable. Questions to ask to see if a goal is measurable include:
- How much?
- How many?
- How will I know when it is accomplished?

_**Achievable: **_ The third criterion focuses on the need for goals to be realistic, attainable and within reach. It highlights the importance of being aware of the team’s capacity and resourcefulness. The article explains that “when you identify goals that are most important to you, you begin to figure out ways you can make them come true. You develop the attitudes, abilities, skills and financial capacity to reach them. The theory states that an attainable goal may cause goal-setters to identify previously overlooked opportunities to bring themselves closer to the achievement of their goals.” Questions to ask when trying to evaluate whether a goal is achievable include:
- How can the goal be accomplished?
- How realistic is the goal based on other constraints?

_**Relevant:**_ The fourth criterion focuses on identifying whether the goal matters to the mission of the organization, program, or department. Goals need to be relevant and important to supervisors, bosses, the team, and the organization. A common understanding of relevance and why goals are important can unify teams and drive progress. It is important for goals to be relevant, but it is also crucial for goals to be aligned with other goals for a coordinated and cohesive approach to achieving all of the goals. Answering yes to the following questions would help evaluate where a goal is relevant:
-Does this seem worthwhile?
- Is this the right time?
- Does this match our other efforts/needs?
- Are you the right person?
- Is it applicable in the current socio-economic environment?

_**Time-bound:**_ The fifth criterion focuses on having a clear time-frame and target dates. Setting deadlines helps the team prioritize and structure resources and time in order to complete tasks. The importance of this criterion is also to establish a sense of urgency and a clear end-date in order to prevent goals from being sidetracked by day-to-day tasks. Questions to ask when evaluating whether a goal is time-bound include:
- When?
- What can I do six months from now?
- What can I do six weeks from now?
- What can I do today?

Other authors have added additional letters to SMART. Here are some examples:
- Evaluated and reviewed
- Evaluate consistently and recognize mastery

- Trackable and agreed

- Realistic and relevance ('Realistic' refers to something that can be done given the available resources. 'Relevance' to the bigger picture and vision.)

- [Management by objectives](
- [Performance indicator](
- [Strategic planning](
- [PDCA](
- [SWOT analysis](

# Section 6: Performance Management Systems

Are statistically driven performance management systems a fad or a public management reform here to stay?

How do performance management systems position organizations, their structures, cultures, and employees, to reach milestones.

## Why Do Managers User Performance Information?

_Moynihan, D.P. and Pandey, S.K. (2010). “The Big Question for Performance Management: Why do Managers Use Performance Information?” Journal of Public Administration Research and Theory, 20(4): 849‐866._

Author: Farrior, Cheri Nicole; Editor: Rosa, Edwin Emory

## Use of Incentives in Performance Management Systems

_Heinrich, C.H. (2010). “Incentives and Their Dynamics in Public Sector Performance Management Systems.” Journal of Policy Analysis and Management, 29(1): 183‐208._

Author: Checksfield, Molly Wentworth; Editor: Swartwood, Hilary Ann

## Integrating Performance Management and Strategic Planning

_Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH 6 – Specific, Methodological, Consistent (SMaC)._

Author: Fantigrossi, Steven Marc

A SMaC recipe is a specific, yet durable set of operating practices that allow organizations to replicate success. The acronym “SMaC” stands for specific, methodical, and consistent. SMaC recipes are long-term strategic guides that are intended to last many years. Through changing economic situations, SMaC recipes keep organizations on track towards their stated goals and allow them to operate at a high level despite uncertainty. Companies that follow through with SMaC practices are more successful than their non-SMaCing counterparts.

Merely having a SMaC plan is not sufficient. Organizations must also commit to following their recipe and only amending it when sufficient empirical evidence suggests a change in course of action. Organizations can fall to mediocrity when they continually change their strategy. In an constantly changing world, organizations often incorrectly believe that they must respond to every change, or they will fall behind. As Collins points out, “most change is just noise and requires no fundamental change in ourselves.” Sometimes changes do need a response from an organization.

The United State’s Constitution is a great example of striking the proper balance between addressing change and adhering to core principles.The Constitution’s framework of clearly articulated principles provided the basis for which the government operates. The founders understood two important things as human beings: we are unable to predict the future and we want to immediately respond to change. The lengthy and difficult amendment process was created to allow the Constitution to be changed, but only after the nation had thoroughly debated the suggested change.

SMaC recipes are articulated through ten key statements that serve as do’s and don’ts for Managers to follow. SMaC principles keep organizations doing what they’re good at and prevent them from overextending themselves. Former CEO of Southwest Airlines, Howard Putnam, created a specific and simple SMaC recipe for the company that was only changed 20 percent in 25 years. It made Southwest successful by focusing on providing short, low-fare, and quick service to customers traveling in Texas and kept the company out of the business of food service and mail delivery. In 1997, Steve Jobs turned around Apple by bringing the company back to its original SMaC recipe that it had abandoned after he was ousted more than ten years earlier. As proven, the SMaC recipe can be utilized by leaders in organization to set clear goals for the organization and plan strategically.

## Performance Management in Practice Part 1

_Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH3 – The 20 Mile March._

Author: Hanson, Keely; Editor: Uk, Bolary

## Performance Management in Practice Part 2

_Hatry, H., and Davies, E. (2011). A Guide to Using Data‐Driven Performance Reviews. IBM Center for the Business of Government._

Author: Steele, Samantha E; Editor: Wohlenberg, Danielle Irene
Adelaide Lee

**Introduction **
Can government activity reduce the performance deficit? Significant concerns have long been raised that government organizations are unresponsive, inflexible, and inefficient, that private enterprises are more capable of more efficient operation. In response to these concerns, government reforms require agencies to track and measure strategic goals, targets, and achievements. As a result of this reform process, there exists more access to performance information than ever before. Managers use performance information to study the successes and failures of an organization. It also enforces goal-orientated decisions that the public expects from bureaucrats. A challenge of this process is how to use information from performance evaluation systems; information alone without context has little meaning.

**Previous Research**
"Research on performance information has linked the following variables to be positively associated with performance information use: **administrative stability**,** internal requirements** and **lower levels of government**, **inclusion of organizational members** in performance management processes, and **chief executive power**" (Moynihan, Pandy). Efforts by the **central **agency to** control** the policy agenda and **measurement challenges** are both negatively associated with effective use of performance information. Significant evidence shows public employee behavior can benefit the organization. Employees that have a high level of public service motivation are more likely to be committed to their job and experience greater job satisfaction, as they care more about achieving organizational goals. Employees are more likely to use performance information when _rewards_, such as pay and promotions, are linked to _goal achievement_. Leaders who have more task-specific responsibilities are more likely to use performance information than more senior leaders, because senior leaders spend a lot more of their time dealing with things outside of management. The supply-side approach to performance information suggests that available performance information data is more likely to be used when tied to management systems. The contrary, a demand-side approach, states that access to data is not enough, because managers must actually want to use the data. Mangers who are in support of the development of the organization are more likely to use performance information data than those who do not buy into the goals or vision. Furthermore, if managers have flexibility they are more likely to use performance information to find opportunities for innovation. Over the years the role of budget officials has changed, becoming more about controlling performance, measuring technical efficiency, and overseeing allocation of resources.

**External Factors**
If citizens and stakeholders support performance information use then it is more likely to be implemented. There is an assumption that more participatory governments would feel more pressured to use performance data. Professional organizations in the public sector likewise encourage the use of performance management systems.

**Data Collection**
The survey was administered to senior managers, general managers, and field managers who head key departments. The majority of the participants were older white men who were highly educated with high salaries. The survey measured the use of performance information to make decisions, noting the regularity and consistency of use.

**Results & Discussion**
Results show that public service motivation and performance information use are positively correlated, but there is not convincing evidence that public service motivation fosters higher performance. Results also imply that performance systems should focus on encouraging a sense of public service, not just rewarding expectations; performance information use correlates with _altruism_ rather than _self-interest_. Due to the strong correlation between individual reward and performance data, incentives are more likely to encourage performance information use. Greater access to performance management systems likewise increases the frequency of use. When an organization is more open to taking risks, they are more likely to have reported performance information use. Organizations with greater managerial flexibility also display increased use of performance information. The results neither accept nor reject the variable tested, instead calling for additional testing to filter out several environmental variables that affect performance information use.

## Use of Incentives in Performance Management Systems

_Heinrich, C.H. (2010). “Incentives and Their Dynamics in Public Sector Performance Management Systems.” Journal of Policy Analysis and Management, 29(1): 183‐208._

Author: Checksfield, Molly Wentworth; Editor: Swartwood, Hilary Ann

Heinrich and Marschke illustrate the complexities of measuring performance through a variety of examples in the public sector. The authors explore the history of performance management, and the challenges in determining how to measure performance based on organizational structure and how well performance indicators reflect the true values of the organization.

Early performance measurement was based on scientific management principals, and has since transitioned into a stricter focus on outcomes in complex organizational settings. As performance measures have changed over the years, the types of measurement used within the public sector have changed as well. Instead of focusing solely on the descriptions of structures within the scientific model, we now see a greater emphasis on studying the dynamics of systems and the incentives that guide employees to work towards organizational goals.

Performance can be measured through the use of incentives to motivate employees to reach the goals set by their organization. The definition of performance within an organization is largely based on the values of that organization, as well as the type of motivation employees possess (intrinsic/extrinsic). An employee who is well matched with an organization with similar values may need less incentive to reach organizational goals; suggesting that some employees may respond more directly to employers’ incentives.

Employers (principals) should determine which performance indicators to use within the context of their organizations, as well as how to measure performance before they begin assessing their employees. While some employees respond to incentives in the form of monetary compensation, others may respond to more value-added incentives. It is necessary for employers to understand the preferences of the employees in order to maximize worker output.

The principal-agent model measures organizational structures as well as the features of performance management through the lens of resulting incentives. Heinrich and Marschke suggest that a combination of objective and subjective assessments provide a more accurate depiction of employee effort. Determining how to best quantify subjective measurements remains a barrier for measurement practices.

Not all organizations should be treated alike- incentives should only be used in instances in which employees will respond. Some actions may affect performance differently than they affect value- a point that is crucial to understand when measuring performance and incentives. Intrinsically motivated individuals can be assigned tasks that specifically target their skills and value where they act as stewards of the goals of the organization, while others who are extrinsically motivated can be assigned tasks that are more easily measured.

One of the loopholes in performance management systems is the ability for employers to game the system. This concept of “gaming” results in lower program impacts- controlling the performance measure could have seemingly positive effects for the organization, but produce an inaccurate depiction of program growth. Another potential barrier for success is when an organization sets “benchmarked targets”, where too much emphasis is placed on performance without analyzing the process behind the progress within the organization.

In conclusion, the process by which an organization decides to measure performance should be based on that organization’s goals as well as the employee’s extrinsic/intrinsic motivations related to their work. Before performance indicators are measured, principals should have a foundation of knowledge about the type of measurement being used so that the effectiveness of the measurement is not distorted by the neglect of the principal. Each employer’s situation is unique- and a variety of factors should be taken into consideration when implementing performance management systems.

## Integrating Performance Management and Strategic Planning

_Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH 6 – Specific, Methodological, Consistent (SMaC)._

Author: Fantigrossi, Steven Marc

A SMaC recipe is a specific, yet durable set of operating practices that allow organizations to replicate success. The acronym “SMaC” stands for **specific**, **methodical**, and **consistent**.

SMaC recipes are long-term strategic guides that are intended to last many years. Through changing economic situations, SMaC recipes keep organizations on track towards their stated goals and allow them to operate at a high level despite uncertainty. Companies that follow through with SMaC practices are more successful than their non-SMaCing counterparts.

In an constantly changing world, organizations often incorrectly believe that they must respond to every change, or they will fall behind. As Collins points out, “most change is just noise and requires no fundamental change in ourselves.” Organizations must also commit to following their recipe and only amending it when sufficient empirical evidence suggests a change in course of action.

Former CEO of Southwest Airlines, Howard Putnam, created a specific and simple SMaC recipe for the company that was only changed 20 percent in 25 years. It made Southwest successful by focusing on providing short, low-fare, and quick service to customers traveling in Texas and kept the company out of the business of food service and mail delivery. In 1997, Steve Jobs turned around Apple by bringing the company back to its original SMaC recipe that it had abandoned after he was ousted more than ten years earlier.

The United State’s Constitution is another example of striking the proper balance between addressing change and adhering to core principles.The Constitution’s framework of clearly articulated principles provided the basis for which the government operates. The founders understood two important things as human beings: we are unable to predict the future and we want to immediately respond to change. The lengthy and difficult amendment process was created to allow the Constitution to be changed, but only after the nation had thoroughly debated the suggested change.

SMaC recipes are articulated through ten key statements that serve as do’s and don’ts for Managers to follow. SMaC principles keep organizations doing what they’re good at and prevent them from overextending themselves. The SMaC recipe can be utilized by leaders in organization to set clear goals for the organization and plan strategically.

## Performance Management in Practice Part 1

_Collins, J., & Hansen, M. T. (2011). Great by Choice: Uncertainty, Chaos and Luck-Why some thrive despite them all. Random House, CH3 – The 20 Mile March._

Author: Hanson, Keely; Editor: Uk, Bolary

The 20 Mile March is a performance management system designed to position an organization to reach milestones by setting a performance metric to be met on a consistent basis over a long period of time to achieve sustained growth. It imposes order amidst inconsistency by operating as a strategic mechanism that builds organizational confidence, especially in times of uncertainty. Setting performance benchmarks to drive consistent progress into an organization’s culture, no matter if the conditions are good or bad. In other words, this promotes a culture of commitment to high performance in difficult conditions and holding back in good conditions. This mechanism can keep an organization’s performance on a right and controllable track and solve problems by taking corrective actions along the way. This approach depends on fanatic discipline to achieve systematic progress with a no excuses approach. It can be leveraged to navigate turbulence, especially in an out-of-control environment.

There are seven key distinguishing factors that make a good 20 Mile March:

1. Clear performance markers:
a. Delineate a lower bound of acceptable achievement.
b. Must be challenging to achieve in difficult times, but not impossible.
2. Self-imposed constraints:
a. Honoring an upper bound that delineates boundaries of overextension in good conditions.
b. Constraints should complicate pressure of achieving more or at higher levels.
3. Appropriate to specific enterprise:
a. Tailored to the respective organization and its environment.
4. Largely within the team or company’s control to achieve:
a. Based on tangible goals that do not require luck.
5. A proper timeframe:
a. Timeline long enough to retain power, and brief enough to control for variability outside of control
6. Designed and self-imposed:
a. Internally-designed and imposed.
b. Reflects clarity and rigor specific to underlying performance drivers for that enterprise.
7. Achieved with high consistency:
a. “March” must be achieved year after year.
b. Must be achieved as a result of fanatic discipline.

The 20 Mile March is not limited to the financial sector. It can be implemented across organizational sectors as long as it has the aforementioned characteristics that make a 20 Mile March successful. The absence of a 20 Mile March may make an organization more vulnerable to turbulence and uncertainty. Adhering to the 20 Mile March system fosters organizational confidence because it demonstrates performance is determined via actions rather than as a result of conditions. The more volatile the environment, the greater the need for a 20 Mile March. It acts as an internal safeguard to being overextended when calamity hits. There are some questions that arise in regard to the 20 Mile March approach. For example, how do you balance fanatic discipline and adherence to a specific performance metric without undermining innovation and adaptation? This should be a consideration when implementing the 20 Mile March as a performance management system. However, if there is a need to establish organizational confidence, delineate boundaries for sustainable success, and achieve consistent results, then the 20 Mile March is a viable performance management approach.

## Performance Management in Practice Part 2

_Hatry, H., and Davies, E. (2011). A Guide to Using Data‐Driven Performance Reviews. IBM Center for the Business of Government._

Author: Steele, Samantha E; Editor: Wohlenberg, Danielle Irene

Businesses and government alike are seeking ways to improve efficiency and effectiveness in order to to better serve their constituents. Performance measurement has become a familiar tool to achieve just that. This summary will identify and explain three important concerns for implementing a performance system and touch on what and where stakeholders should be involved in that implementation process.

So what is a data-driven performance system? It is a strategy for leadership, specifically for federal executives, so that they can improve efficiency and effectiveness within their sector. This strategy implements goal driven management, facilitated by data analysis and regular reviews on performance indicators. These tactics are not simply a fad, and are proving to be a management reform that is here to stay; in fact, it has even started to become a requirement for some government agencies. The Government Performance and Results Act (GRPA) Modernization Act established in 2010 currently requires that each federal agency: set priority goals, identify a goal leader, review progress on goals, and then publically report that progress on a quarterly basis.

Hatery and Davies created a “how to” guide for implementing and operating data-driven performance reviews. These authors have identified three vital considerations to a functional performance system; they are: interested and engaged leadership, timely performance measures, and staff that has the capability to analyze measures prior to performance review meetings. The first consideration lays in leadership; it is essential that leaders are not only interested in supporting this strategy but have the willingness to attend and participate in regular meetings. Second, performance measures must be comprised of valid, accurate data on program outcomes that have the ability to promote meaningful discussion. Lastly, staff must be able to support their leadership by examining data and providing thoughtful advice to contribute in meetings.

The implementation activities should include a number of vital persons in order to produce an impactful data-driven performance system. Hatery and Davies suggest that heads of all reporting units be included in the start-up activities. Specifically, they should be directly involved in developing the approach of the system, clarifying goals, aid in creating follow-up protocol after each meeting, determining staff and resources required, and it is especially important that they help to choose performance indicators. It is also necessary to consider the stakeholders in a data-driven management performance system. In a federal agency the stakeholders include the public, other federal agencies, as well as the state and local government. Hatery and Davies suggest that these stakeholders not be allowed in performance review meetings initially, but that they be phased in over time.

A number of successful programs have implemented data-driven performance systems and found that services have improved, and that associated costs have gone down. Examples include the CompStat in New York City, and the FDA-TRACK. The CompStat in New York City has as of 2011, been the most studied performance review program, andit has rendered a “substantial contribution to reducing crime in NYC”. The FDA-TRACK performance management system was designed in 2009 and after its implementation in 2010, individuals noted that the system provided opportunities for more preventative measures. Regular meetings allowed for the discussion of possible hindrances to performance and thereby allowed for quicker solutions.

In order to achieve a successful implementation of a data-driven performance system it is necessary to have: interested and engaged leadership, timely performance measures, and staff that has the capability to analyze measures prior to performance review meetings. Additionally, a successful implementation involves all of the heads of reporting units. The stakeholders for a performance system of a federal agency include the public, other federal agencies, as well as the state and local government. Each of these stakeholders should be allowed to observe performance review meetings once a firm system has been established. Hatery and Davies have illustrated how to reach important milestones with a performance management system by describing what is necessary of employees, and the type of structure and culture to propagate within an organization.

# Section 7: Incentives in Organizations

What are the important questions should we ask before we start to design organizational incentives? Which incentives work (and under what circumstances)? What types of incentives do not work? Are performance reviews (peer feedback) a good incentive to use?

## Making Sense of Incentives

_Levitt, S. (2005). Do This, Get That: Making Sense of Incentives. Associations Now._

Author: McCully, James I; Editor: Creedon Jr, John Thomas

## Performance Monitoring Systems

_Are Amazon’s Feedback Tactics Unusual? BBC, August 22, 2015. _

Author: Hamlin, Madeleine Rose; Editor: Whiting, Cal McCulley

## Highest Paid CEOs are the Worst Performers

_Adams, S. The Highest Paid CEOs are the Worst Performers, New Study Says. Forbes, June 26, 2014. _

Author: Wohlenberg, Danielle Irene; Editor: Kim, Chung Myung

## What Field Experiments Have Taught Us About Managing Workers

_Levitt, S. D., & Neckermann, S. (2014). What field experiments have and have not taught us about managing workers. Oxford Review of Economic Policy,30(4), 639-657. _

Author: Legnetto, Deanna Marguerite; Editor: Hanson, Keely

## Group-Level Incentives

_Pentland, A. (2014). Social Physics: How Good Ideas Spread-The Lessons from a New Science. Penguin. CH 4: Engagement._

Author: Lancto, Katelyn N; Editor: Orlan, Samuel Lawrence

## Monetary vs. Non-Monetary Compensation

_Ariely, D. (2008). Predictably irrational (p. 20). New York: HarperCollins. CH 4: The Cost of Social Norms. _

Author: Sears, Kicia Kimberly; Editor: Farrior, Cheri Nicole

## Pay for Performance

_Lazear, E. P. (1996). Performance pay and productivity (No. w5672). National bureau of economic research. _

Author: Dieselman, Andrew; Editor: Washington, Layvon Q
The author’s underlying premise is that incentives are a vital tool for accomplishing objectives. He believes that “economics is, at root, the study of incentives: how people get what they want or need, especially when other people want or need the same thing.” Under the general public’s perception, incentives are associated with business. However, even in this context, the use of incentives is highly underutilized given the great reward. This is especially prominent in the nonprofit sector where incentives are seen as a corporate mechanism and frowned upon. Given the great reward that incentives bring in accomplishing objectives, true mastery of the incentive system is difficult. There is underlying issue with individuals gaming the system to their benefit while reaching the goals initially planned.

### Three Incentive Programs

Incentive programs can be split into three types: economic, social, and moral. The most common incentive program would be financial and is the manner in which the general public views incentives but it is not necessarily always the most effective mechanism.

Social incentives focus on making individuals feel liked, respected, and appreciated. This can be done through special recognition for a job well done or through an employee-of-the-month program. On the flip side, by publicizing relative performances of individuals can stigmatize poor performances and act as a form of negative social incentive as well.

Moral incentives allow individuals to act upon an internalized moral code by presenting them with choices that could be right or wrong. An example would be to increase the number of organ donors, a moral incentive would be to let individuals know the value they would provide since organs would save lives. These types of incentives lends themselves well to the non-profit sector as many who work in this sector view themselves as driven towards a higher cause.

A question is presented as to whether all three incentives should be used together to maximize the benefits. The author argues that this strategy is not efficient as evidence points to financial incentives weaken both social and moral incentives and vice versa. An experiment showed that parents who were fined for coming late to pick up their children from day care did not reduce the number of parents who came late but rather increased the number. The experiments concluded that with no initial fine, parents were faced with a social or moral penalty for making the day care providers wait longer with the children. However, once a financial penalty was placed, which could be seen as a financial incentive to not be late to pick up their children, it took away from the moral or social penalty as parents did not feel as bad for being late since they had to pay for it. This experiment shows that it is very difficult to combine the three types of incentives.

### Incentives Audit

The author discusses looking at both internal and external audits and comparing the best and worst individuals from both scenarios and what makes them so. Using this evaluation can then produce an incentive system that would fit better with the vision of how the organization should work. One particular focus is ensuring the right type of incentive is used to match with the desired result. This is not a simple task of asking the targeted group what would make them respond. The author believes that there is a great source of data that could be used to analyze these issues but it is not being used by organizations as much as it should be. One issue is that to draw relevant conclusions would require experimentation that may not be well received by clients and customers.

### Testing Incentive Plans

Two methods: First, integrate incentives one at a time so each can be measured or aligned more easily than if it were offered as a batch. Second, implement a range of treatments for different groups. The best ways to evaluate incentive programs is through randomization and take the process like an experiment but care should be taken not to antagonize people.

Experimenting with different incentive programs is extremely useful and important but there are two reasons for caution. One, a slight change can lead to large changes, second, changes that you get are often unanticipated. Mistakes are going to be made but the challenge for association leaders will be ensuring that an incentives strategy inspires not only tremendous activity among their members and stakeholders but also drives the right activity. This could be the difference between energetically driving an organization to accomplish even the most grandiose goals or settle for mediocrity.

## Performance Monitoring Systems

_Are Amazon’s Feedback Tactics Unusual? BBC, August 22, 2015. _

Author: Hamlin, Madeleine Rose; Editor: Whiting, Cal McCulley

In August 2015, the New York Times published an exposé about the work culture in Amazon’s white-collar Seattle headquarters. Despite the controversy that ensued, Peter Fleming argues that there is little new about Amazon’s management practices.

Amazon employees are subject to what is known as a ‘rank and yank’ performance review system: they are regularly reviewed and ranked, and the lowest-performing employees are fired. The system relies on a micro-performance management philosophy that is best reflected in the company’s “Anytime Feedback Tool.” Using this tool, workers can comment anonymously on their co-workers’ performance at any time. Employees are reviewed on nearly every action, including how long it took them to reply to an email. In this way, Amazon effectively “turn[s] the annual performance review into a daily event.”

However, Fleming argues that, despite relying on new tools enabled by ‘big data’ technology, the principles behind Amazon’s management system date back to Taylorism. Frederick Taylor (1856-1915) popularized the 'rank and yank' management system that emphasized the scientific measurement of every aspect of worker performance. He was famous for using a stopwatch to evaluate steel factory workers and their output. Amazon's use of 'big data' is an extension of Taylorism facilitated by the increased capacity and use of technology. Many major companies employ ‘rank and yank’ systems, including General Electric, Microsoft, and Accenture. The “Anytime Feedback Tool” is not so different from the “360 degree” appraisal method, which has been used since World War II.

While Amazon is not alone in its management practices, doubts remain about the efficacy of this system. Fleming argues that constant surveillance and evaluation discourages cooperation and breeds paranoia, mistrust, and anxiety, making it difficult for workers to perform.

## Highest Paid CEOs are the Worst Performers

_Adams, S. The Highest Paid CEOs are the Worst Performers, New Study Says. Forbes, June 26, 2014. _

Author: Wohlenberg, Danielle Irene; Editor: Kim, Chung Myung

**The Impact of Incentives for CEO’s**

This article analyzes the success of companies when the CEO has a pay increase. According to Michael Cooper from the University of Utah’s David Eccles School of Business “the more CEO’s get paid, the worse their companies do over the next three years.” This then poses the question, is money an incentive for better performance? Or does it develop complacency and overconfidence?

A combined study by The University of Utah, Purdue, and the University of Cambridge researched 1500 companies over three year periods, from 1994-2013. The revenue generation of these companies was then compared to other companies in the same field. The research discovered a trend, that CEOs with higher pay have companies who do “worse”. More specifically the companies that were paid at the top 10% of the scale had the worst performance, returning 10% less than other companies in their field; and the top 5% of CEOs with the highest pay had companies that did 15% worse on average than their peers.

Michael Cooper theorizes that this trend is a result of overconfidence by the CEO and leads to overinvesting, and investing in bad projects. He suggests that claw-back provisions can be used as a way to incentivise the CEO to make better and wiser financial decisions. The claw-back provision can be included in the CEO's contract and would stipulate that if the firm perform poorly compared to its peers, then the CEO will lose a share of his or her compensation.

This research recommends to therefore increase proficiency of a corporation through negative incentives instead of positive incentives. According to Cooper most corporations however are unlikely to implement negative incentives.

## What Field Experiments Have Taught Us About Managing Workers

_Levitt, S. D., & Neckermann, S. (2014). What field experiments have and have not taught us about managing workers. Oxford Review of Economic Policy,30(4), 639-657. _

Author: Legnetto, Deanna Marguerite; Editor: Hanson, Keely

## Field Experiments: Where they are and where they should be

Levitt and Neckermann discuss the extent to which research is available on field experiments as useful tools to measure relationships between employees and their employers. While significant evidence is avaible indicating output responds positively to
financial incentives, there is mixed support in regard to the output response to employer generosity.

Their discussion highlights five commonly known main points to be made about these relationships, and also recommends that research be conducted by asking these questions to be asked concerning these relationships.

There are five conclusions to be made from field experiment research regarding employee incentives. According to Levitt and Neckermann, both monetary and non-monetary incentives will work. It is evident that when presented with general or competitive financial incentives, employees performing simple or straight-forward tasks will work harder. If employees are given a few gestures of appreciation, whether it be monetary through pay raise or gift or general consistent kindness, work output will tend to increase but not at the same rate. Providing employees with different types of recognition including awards and honors may correlate with increased levels of output, but will differ among organization type and culture. The social culture of the workplace that exhibits friendly professional relationships can have a positive effect on work effort. Lastly, the organization of the work itself, especially implementing group work, can effect employee performance.

Although employee responses to incentives is an interesting point to be made, Levitt and Neckermann believe field experiments have failed to assess three other areas that can be connected to the relationship between the employee and employer. Examining the recruiting process an employer exhibits may give valuable information on the relationship between employees and employers. Field experiments should analyze the reasoning behind promotions and assess their implications. Funding employee training is also another area that would benefit from further analysis. Little research and experiments have been done regarding recruiting, promotions, and training mainly because employers are not interested and have difficulty admitting there are issues in these areas. Aside from financial approaches to incentives, employers can add ‘meaning’ to mundane tasks and/or recognize their employees and also potentially see an increase in output. Thus, social relations are also important for employers to consider in how firms function and design their incentive structures.

## Group-Level Incentives

_Pentland, A. (2014). Social Physics: How Good Ideas Spread-The Lessons from a New Science. Penguin. CH 4: Engagement._

Author: Lancto, Katelyn N; Editor: Orlan, Samuel Lawrence

Engagement is the repeated cooperative interactions within a group. Collaboration is achieved by encouraging individuals of a group to adopt certain behaviors and norms that become harmonious. Working together requires compromising to adopt behaviors and develop habits that result in optimal cooperation. Many animals have developed techniques to facilitate group decision making, such as signaling mechanisms, vocalization, body posture and hand movements. Synchronization and uniformity of idea flow is critical within a group; when the majority of group members seem ready to adopt new ideas, the skeptics are convinced to go along.

Leaving the animal world, engagement is important in business as well. Research has shown that engagement can improve the social welfare of the group and promote positive behavior that is conducive for successful business practices. Microfinance banks are an example where strong social engagement is key to success. They have found that strong engagement increases the likelihood that loans will be repaid.

An experiment was done to see how Facebook users would respond to social pressure. Some users received a “get out and vote” message alone, some received the message along with seeing the faces of friends who already voted. The group that was shown pictures of their friends who had already voted, voted at a higher rate. Words themselves had very little effect without the social pressures. The manipulation of social ties was effective in pushing individuals toward a desired behavior. Seeing members of the group adopting new ideas or exhibiting certain behaviors provides motivation to follow suit. Social pressure works, especially in small groups, because the ability to punish or reward members helps promote cooperative behavior. This also tells us that standard economic incentives often miss the mark because they ignore the fact that people are social creatures influenced by social ties. Therefore, in order to change behavior, we need to aim incentives at social networks, rather than offering traditional economic incentives.

Another experiment was conducted to test the theory that the best way to motivate people was by using social network incentives. Citizens of Boston are much less likely to engage in physical activity during winter. The experiment sought to promote physical activity levels by assigning all participating members two “buddies” and the buddies were given cash rewards based on the behaviors of the “behavior-target person.” It turned out that this system increased physical activity almost four times as much as traditional individual incentives, and for those who had a close relationship with their buddies, the effect was almost eight times as high. The study found that the number of direct interactions that people had with their buddies was a good predictor of the level of behavior change. Additionally, the number of times people had direct interactions with each other gave an accurate preediction of the trust they expressed in each other.

This chapter also looked into “digital engagement.” Pentland looked at an experiment where individuals were not only rewarded for staying active, but they could see how their buddies were doing online. This added a competitive aspect that led to a doubling in the effectiveness compared to the financial incentive alone. Social media is often used within companies, especially those with global reach that span across time zones. A study of companies with digital networks found that when the digital social network grows in bursts of engagement, the network ends up being more effective than when it grows gradually. Additionally, it mattered who invited whom to join the network. The study found that if you receive three invitations from people who are close to you, you are virtually guaranteed to join. However, even if you received 12 invitations from people you are not regularly engaged with, you were not likely to change your behavior and join.

Adam Smith explained capitalism as the “social fabric created by the exchange of goods, ideas, gifts and favors”, which guides capitalism to create solutions that are good for the community. However, Adam Smith lived in a smaller world, where the poor were not considered and the lack of engagement between rich and poor removed the social constraints. When there is no engagement between social groups, there is more chance of “between-group violence” because the groups are poorly integrated. When there is a mismatch of this type, subjugation and persecution often follow. When there is not cooperation, but instead a distrust based on previous interactions, the majority of interactions are explosive, and each interaction would serve to further erode trust leading to increasingly negative engagements.

In summary, success at being part of a team depends on having continual engagement with the team network. The level of engagement is a strong predictor of team productivity and resilience across human activities. There are three key ideas about engagement, or in other words, the process in which the ongoing network of exchanges between people changes their behavior: (1) Engagement requires interaction because there needs to be network restraint, or repeated interactions between all members of the group. The number of direct interactions is a good measure of social pressure to adopt cooperative behavior, as well as an excellence predictor of how well people maintain new, more cooperative behaviors. (2) Engagement requires cooperation where each individual must be pushed towards joint ownership of the group project or goal. (3) Engagement requires building trust which enhances the expectation of future fair and cooperative exchanges.

## Monetary vs. Non-Monetary Compensation

_Ariely, D. (2008). Predictably irrational (p. 20). New York: HarperCollins. CH 4: The Cost of Social Norms. _

Author: Sears, Kicia Kimberly; Editor: Farrior, Cheri Nicole

Ariely argues that we live in two worlds of exchange: a world of social norms and a world of market norms.

In the world of social norms, people are willing to help another person as a favor, without expecting anything in return. The pleasure of helping someone is worth the exchange of our efforts. In this world, the mention of money is gauche: We would be offended if someone offered to pay for a Thanksgiving meal we've just cooked for them, for example.

However, accepting gifts is perfectly ok in the world of social norms. Even though we know, intellectually, that gifts cost money, we feel that a small gesture is appropriate--though perhaps unnecessary--in exchange for our help.

In the world of market norms, however, money is expected. There are no "warm & fuzzy" feelings about our exchanges. We expect to be compensated at a value equivalent to our efforts and talents. The market world is not mean, per se, but it values "self-reliance, inventiveness, and individualism." In addition, in market norms, people expect to be paid on time and consumers get what they pay for.

Keeping these worlds separte is crucial. When we begin to mix them, social norms are the ones that get destroyed.

The author cites experiments done to explore this dual yet often unspoken understanding of how exchanges work. In one experiment that he completed with a partner, participants were asked to complete a mundane task on a computer: putting a circle from one side of a screen into a box on the other. One group was given $5 at the beginning of the experiement for 5 minutes work. The second group was given $.50 for the same amount of time. A third group was asked to do it without mention of any reward. The results were interesting: the first group ($5) dragged an average of 159 circles in 5 minutes; the second group ($.50) dragged an average of 101 circles, and the third group ($0) dragged 168 circles. Though the difference between the first and third group averages is small, the implication is clear: on average, people will work just as hard for a favor (free) as they will for an appropriate wage.

The same experiment was done with gifts: the first group was given a box of Godiva chocolates ($5 value), the second a Snickers bar ($.50 value) and the third was not promised a gift. The result was that all three groups worked equally hard on the task--the first group dragged 169 circles, and the second and third dragged 162 and 168, respectively.

These experiments show that a social exchange (gifts or simply favors) can compel people to work just as hard as they would for an appropriate wage ($5).

When the author and his partner blended the worlds--as they have advised against--the results were predictably worse: Before the experiment, they told the first and second groups the cost of the gift. "They reacted to the explicitly priced gift in exactly the way they reacted to cash, and the gift no longer invoked social norms--by the mention of its cost, the gift had passed into the realm of market norms." People will work hard for free or they will work heard for a reasonable wage, but if you offer them a small monetary payment then they will walk away. When offering a gift as compensation, do not mention the cost of the gift or it will loose its purpose.

The author argues that Market norms also create a strange set of behaviors with regard to how we interact with one another. As mentioned before, the market norms value individualism and self-reliance--two things that seem at odds with the "warm & fuzzy" feelings of social exchanges. The authors wanted to see if simply making people think about money was enough to invoke these norms and do away with social norms.

They gave two groups a set of scrambled sentences or phrases to unscramble. In one group, the sentences were neutral and did not invoke the market. In the other, the sentences were related to money (for example, "High-paying salary" versus "It's cold outside"). Once these puzzles were done, participants in each group were given a more difficult puzzle and told that they could ask for help if they needed it. The group given money-related sentences showed much more self-reliance and either didn't ask for help, or waited for longer before asking for help. This is seen as a positive effect.

However, the particpants in the group with money-related sentences were also less likely to assist others, including other participants who were struggling, an expirimenter who needed to enter a lot of data, or a "stranger" who "accidentally" spilled pencils.

The point of these experiments is to show that social norms and market norms really make people think and behave differently when it comes to the exchange of goods and services. When kept separate, things go smoothly. When mixed, the market norms tend to win out over social norms and damage personal relationships as well as productivity.

The author also discovered that mixing the worlds has even worse affects on social norms. A daycare in Israel imposed a fine on parents who picked up their children late in an attempt to discourage tardiness. What they discovered was that the social contract they had in place prior to the fine--guilt, mostly--was much more effective than the fine. People were picking up their children late even more frequently. Therefore, they removed the fine. However, the social norms had already been ruined by imposing the market norms (in the form of a fine), and tardy pickups became even *more* frequent. The point is that market norms are powerful: they have the ability to destroy social norms for a long time after they have come and gone.

Here, the author begins to make an argument regarding the proper places of social and market norms with regard to the business world. Companies have begun attempting to create a social connection between themselves and their customers and/or their employees. This is a good idea in theory, but has not been successful for more than a few companies. The author argues that this is because companies fundamentally don't understand social norms. They expect to "have it both ways" by asking customers for loyalty then turning around and imposing exhorbitant automatic fees on bank accounts, for example, or by asking employees to behave as friends doing favors by going above and beyond (staying late, being available out of office, etc.) but do not return the exchange with behavior or policies in kind (being unreasonable regarding sick leave, cutting health benefits, etc.)

The author argues that this problem is especially hurtful to employer/employee relationships. Companies want productivity and loyalty, but cut all kinds of benefits for employees that foster these behaviors far more than money. Ariely: "As companies tilt the board, and employeees slide from social norms to the realm of market norms, can we blame them for jumping ship when a better offer appears?"

Since social norms are just as powerful as market norms and foster a more desirable environment for both companies and their customers or employees, the author concludes that more needs to be done BY companies to foster an environment of social exchange. A company can't claim to be "family" and then turn around and treat its customers or employees poorly. Though the author understands that an entire world made up of *only* social norms of exchange would not be realistic or particualrly fun, more social norms need to be introduced--and properly upheld--to truly improve our lives.

People aren't willling to risk their lives ding their job when the pay isn't worth it or they don't feel that their job is valued high enough. However, this situation could be changed by elevating the social norm and making workers feel like the job they are doing is worth way more than the pay they receive for it.

In the educational setting, standardized testing and performance based salary are pushing schools further and further away from social norms and more into market norms. The focus should not be so much on test scores and salaries, but more so linking students education to social goals and making them feel a sense of pride and purpose in their education. It is important to get kids excited about their education the same way they get excited about other things that are important to them, such as sports.

Money can turn out to be a costly way to motivate people, whereas social norms are cheaper and have a larger effect.

## Pay for Performance

_Lazear, E. P. (1996). Performance pay and productivity (No. w5672). National bureau of economic research. _

Author: Dieselman, Andrew; Editor: Washington, Layvon Q

"Pay Performance and Productivity"

In Edward P. Lazear's 1996 working paper, supported in part by the National Science Foundation and the National Bureau of Economic Research, he discusses the implications of performance pay and productivity. This case study examines Safelite Glass Co.'s switch from paying hourly wages to paying piece rates.

Lazear theorizes that paying workers based on performance, rather than traditional hourly wages, will increase their levels of output. In using data from the Safelite Glass Co., Lazear is able to conclude that (1) a switch from hourly to performance based wages had a "significant effect on the average levels of output." Lazear is also able to state that (2) there are two reasons for this increase: workers have more incentive to produce more; and, there is a reduction in turnover among the most productive workers coupled with an ability to hire the most productive workers.

This paper refutes claims that monetized incentives will reduce output. Lazear does not outright state that a piece rate wage system is better, only that his data supports the traditional economic theory. A firm must still weigh this information with the low monitoring cost and "perhaps higher quality output," which one gets through the hourly wage system, with the benefits from piece rate wages. It is important to note that Lazear's results found that by shifting from hourly pay to performance based pay, the productivity of the average worker increased by 36%, in one year after the new system was adopted (Lazear, p.36). Interestingly enough, this new system attracted empolyees who had better productivity than veteran employees.

Based on Lazear's article, some important questions that should be considered before designing organizational incentives includes the following: Does the benefits outweight the cost?; In what ways will veteran and incoming employees be effected?; How will the change from hourly to performance based wages impact the hierarchical structure of the organization, will there need to be more managerial position to monitor performance? The aforementioned will aid in determining if the shift from hourly wage to performance based wage will be the most effective method in improving productivity through incentives.

# Section 8: Citizen Participation

## Discussion Case

_Jack Becker (2014). When a Highway Divides a City Improving Decision Making in Syracuse, New York. E-PARCC Case Study on Collaborative Governance._

## Citizen Participation
_Irvin, R. A., & Stansbury, J. (2004). Citizen participation in decision making: is it worth the effort? Public Administration Review, 64(1), 55-65._

Author: Orlan, Samuel Lawrence; Editor: Damon-Cronmiller, Christopher

### Introduction
Since the 1950s many governmental organizations at all levels have launched citizen-participation programs, predicated on the assumption that if citizens become more actively involved, then governance will emerge as more democratic and effective. A popular assumption is that an engaged citizenry promotes policies grounded in citizen preference and developes a greater understanding of the tough decisions government administrators must make; which in turn fosters a less divisive and confrontational environment that is easier to govern and regulate. Yet, there are social and economic costs of citizen participation, as Irvin and Stansbury point out.

### Benefits
Improved participation could stop the erosion of public trust evidenced by widespread hostility toward government entities. In evaluating the effectiveness of the citizen-participation process, there are two tiers of benefits (process and outcomes) and two beneficiaries (government and citizens.) One decision process advantage is the benefit of education. Administrators can educate citizens by explaining their reasons and clarifying their logic in the hope that a greater level of community understanding will yield better policy decisions; thus leading to improved environmental and social outcomes. Citizens can educate administrators by informing them of certain community positions, since policies that are well grounded in citizen preferences tend to be implemented in a smoother, less costly manner.

Another advantage is that the government can persuade citizens and vice versa. Government leaders can build trust and allay anxiety and/or hostility, while citizens can enlighten their leaders on their own needs and concerns. Whether government merely works to win over citizen sentiment, or if it truly collaborates with citizens, is up for debate. Nevertheless, if goverment officials can persuade influential community members, enthusiasm for the policy will likely spread throughout the community as a whole. The citizen-participation process also allows for the government to gain legitimacy and for citizens to gain skills for activist citizenship. Citizen advisory boards additionally provide an “opportunity to meet face to face with and personally persuade decision makers.”

Furthermore, citizen participation can help break gridlocks and lead to positive outcomes. Participatory initiatives can vastly improve social outcomes because they put pressure on politicians to take actions for which they are reluctant (e.g. implement budget cuts.) Likewise, government agencies can obtain political support to make decisions they would have a difficult time doing unilaterally. From a government standpoint, public participation reduces the probability of litigation making it cost-effective. This does not mean that disgruntled stakeholders will not walk out of the process or go to court, but that it is the cost-efficient decision compared to no stakeholder participation at all. Overall, citizen-participation results in better policy and implementation decisions. Environmental policy formation is one specific area where citizen-participation is incredibly useful for informing regulators exactly where volatile public backlash is likely to occur, and for winning the sympathies of a few influential citizens in places where opposition to environmental regulation is strongest.

### Drawbacks
On the flipside, citizen participation can also be both time consuming and costly. The per-decision cost of citizen-participation groups is normally much higher than the decision making of a single government administrator who is likely technically trained and politically astute enough to recognize the probable consequences of the decision, and may come to the same decision that the community group chose with considerably less deliberation time. Many argue that decisions happen slowly enough in government organizations without complicating it with public forums. A robust participation process could very well divert resources away from an agency’s mission. Others argue that the social-capital value that citizens gain by becoming involved offsets these costs, and does not account for smoother, and thus cheaper, implementation due to smarter policy.

Community size and demeanor can also serve as a drawback. When the group is small and homogeneous, as is the case in many rural communities, collaborative decision making works better than in larger areas where it is naïve to think 10-15 citizen representatives can alter popular opinion of a much larger diverse group. Many communities also demonstrate complacency in regards to citizen participation and top-down administration is simply the most efficient. A study showed that while community members indicted their intent to participate, less than 1% followed up by seeking information to join a participatory process. Also, there is nothing to suggest that those who actually do participate automatically possess altruistic concern for others.

Another disadvantage is the “representation” itself and lack of authority. Citizens are not paid for their time so citizen-participation committees tend to be dominated by strongly partisan individuals whose livelihoods or values are strongly affected by the decisions being made, or by those who live comfortably enough to allow them to participate regularly. Usually, committees are disproportionally comprised of top socioeconomic individuals, and studies show that the median income of these members are usually higher than regional averages. Often, decisions are ignored or merely taken under advisement which breeds resentment. Lack of a real “voice” can lead to the participation processes backfiring and an increase in public dissatisfaction.

### Environmental Decision-Making Case Study
In considering new management alternatives for the Papillion Creek watershed in Omaha, researchers received a grant from the EPA to incorporate multicriteria decision-making methodology into a participatory process with area stakeholders. Working groups were formed that included agency representatives, rural public, urban public, recreational users, and developers. However, articles in local newspapers, brochures, phone calls, and even free pizza were unsuccessful in attracting interested stakeholders to public meetings. The project failed to spark widespread public interest because of a failure to define the problem so people did not regard it as a crisis issue. EPA officials acknowledged from the start that the stakeholders’ decisions would be strictly advisory, and they failed to involve certain stakeholders with extensive political influence. Subsequently,the project was doomed due to widespread public complacency.

### Ideal/Non-Ideal Conditions for Citizen Participation
There should be careful selection of a representative group of stakeholders, a transparent decision-making process to build trust among all participants, clear authority in decision making, competent and unbiased group facilitators, regular meetings, and adequate financial resources to support the group process. Low-cost indicators and high-benefit indictors should be identified. Examples include “citizens readily volunteer for projects that benefit the entire community” and “hostility toward government entities is high, and the agency seeks validation from community members to successfully implement policy,” respectively. An administrator might be better advised to use a more streamlined decision-making process if high-cost, low-benefit indicators are present. Examples include “low-income residents are key stakeholders for the issue at hand and should be included, yet they cannot because of work and family priorities” and “the decisions of the group are likely to be ignored, no matter how much effort goes into their formation.” Widespread public benefit should be the goal of any public policy, and any administrator needs to consider the advantages and disadvantages of a citizen-centric decision-making process.

# Section 9: Strategic Decision-Making

Managerial decision-making reliably fails in predictable ways. What are the main sources of bias and weakness in strategic decision-making, and what types of habits and processes can we develop to overcome these constraints?

Assigned Cases (full group is responsible for presentations and summaries):

## Overview of Managerial Decision-Making

Garvin, D.A., and Roberto, M.A. (2001). “What You Don’t Know About Making Decisions.” Harvard Business Review, September, 108-116. Author: Creedon Jr, John Thomas; Editor: Wohlenberg, Danielle Irene

The Gavin and Roberto article, "What You Don't Know About Making Decisions" argues that decision makers are adopting the wrong approach by advocating for a particular decision, rather than inquiring about how and what the best decision should be.

Advocates generally approach a decision by passionately arguing for a position while simultaneously downplaying contrasting viewpoints, or aguments against which prevents a health dialogue and consideration of opposing views. The decision becomes a competition that focuses on winning for their side, rather than achieving the most optimal outcome. This leaves others feeling disaffected and shut out of the process. By approaching a decision through inquiry, one can better consider a variety of options; They can collaborate and stimulate creative and productive problem solving while reducing the factors that would create dissent.

In order to achieve optimal outcomes through inquiry, the authors recommend three methods to employ in decision-making: constructive conflict, consideration, and closure.

**Constructive conflict** argues that debate and disagreement are a healthy part of decision-making, so long as the conversation is substantive, challenging, critical, and has a well-defined goal and rules that prohibit defaulting into defensiveness or misdirected language. People are broken up from their typical pre-disposed silos and put in with others to challenge their presumptions and reconsider key assumptions.

**Consideration** refers to an environment of peaceful and respectful dialogue and understanding of challenging viewpoints. Participants in the process must convey openness and actively listen to other views, rather than simply waiting their turn to re-affirm their predisposed biases.

**Closure** is the final consideration that Gavin and Roberto stress for an effective decision-making process based on inquiry rather than advocacy. An agreement must not only be arrived at, but it must be done in a timely manner. Rushing too quickly to an answer to minimize conflict may fail to properly evaluate the decision and gloss over critical issues while deciding too late may cause people to get caught in a feedback loop re-iterating their opposing arguments over and over without resolution.

## Expertise:

_When should we trust an expert? And how often are they right?_

Lancto, Katelyn N; Checksfield, Molly Wentworth; Sarawat, Fariha; Rosa, Adelaide Lee; Orlan, Samuel Lawrence

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. Introduction.

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 7: Ooch, pp 140-143 (pundits and predictions).

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. pp 3-5, 35-38, 140-143 (overconfidence).

Sutherland, J. & Sutherland, J.J. (2014). Scrum: The Art of Doing Twice the Work in Half the Time. Crown Business, pp 129-132 (expertise without context).

Leonhardt, D. "Sorry, NFL Fans — A Tweeting Robot Is Probably Smarter than Your Team’s Coach." WBUR, November 19, 2014.

When we are making decisions, we easily draw conclusions based on the information that is in front of us, while failing to consider the broader picture (this is called “what you see is all there is,” or “the spotlight effect”). However, what’s in the spotlight is rarely everything that we need to know in order to make a good decision; this can lead to poor decision-making. Human decision making is often flawed, from the career choices we make to our personal decisions. “Following your gut” is rarely the best way to make a decision. Rather in making decisions, you should focus on using a good process. A process is important because it is hard to fix a bias in our mental process just by being aware of it. “A better decision process substantially improves the results of the decisions, as well as the financial returns associated with them” (p 6).

Overconfidence, narrow framing, confirmation bias and short-term emotion are the four villains of the decision making process. Narrow framing is the the tendency to see decisions as simple binaries, without accounting for alternatives and options. Confirmation bias is the seeking out information that supports our self-serving, preconceived ideas, assumptions and beliefs. Short-term emotion is allowing temporary emotion to supercede evidence or logic in decision-making. Overconfidence is having irrational confidence in outcomes and predictions and it can give us false hopes about the unpredictability of the future. The four-peg WRAP strategy can help fight these four villains.
_Widen your options
Reality--test your assumptions
Attain distance before deciding
Prepare to be wrong
**Pundits & Predictions: **
University of Pennsylvania psychology professor Phil Tetlock developed a survey in 1985 designed to determine the validity of predictions in experts’ areas of expertise. Tetlock asked 284 economists and political experts to predict basic trends within their respective fields. The study yielded nearly 83,000 predictions and found that experts underperformed compared to algorithms that assumed no change to the previous year’s status quo. Pundits with more media appearances tended to be the worst predictors. The findings suggest that relying on predictions by experts is not advisable.

**Bot vs. Experts**
New York Times created the Fourth Down Bot which analyses coaches’ decisions on whether or not to go for it on 4th down. The purpose was to show that coaches (read: experts) are too conservative with their 4th down play calling, and based on statistics are hurting their own team with their decision making. The Bot analyzes NFL history, recent game history, various odds, average punt distance, data on what happens when teams get the ball at the 20-yard line vs. the 40-yard line, etc. The Bot then tweets out its situational analysis (Example: “Detroit punted on a 4th-and-1 at their 45. I would have gone for it.”) Over the last couple decades NFL offenses have significantly improved (many more yards and points), so the value of having the ball has increased, while the distinction of whether you have it at the 20 or 50 has declined. NFL coaches have not adjusted to this statistical reality. The Bot cannot take into account the specific teams as it is predicting based on an average offense vs. an average defense. Reporters have questioned coaches when they see the Bot is critical of their decisions, but it has had little effect to lead to more logical, statistics-based decisions.

**SCRUM - Expertise Without Context**
“Planning Poker” is a quick and accurate way of gathering estimates using Fibonacci numbers, taking the average of each team member’s estimated effort to complete a task. Should the initial estimates be too far apart, iterations of discussion and re-estimation commence. It is critical that the project team runs this evaluation rather than an outside expert. Sourcing estimation from the team avoids misinterpretation and builds context. This allows the planning process to target beneficiaries and correctly follow objectives, to build a story rather than a disjointed collection of data.

## Prediction:

_What are the different forms of prediction?_

Kim, Chung Myung; Uk, Bolary; Damon-Cronmiller, Christopher; Gobbo, Andre Francis; Dorries, Joshua Wayne

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 7: Ooch, pp 140-143 (pundits and predictions).

Chapter 7 of _Decisive: How to Make Better Choices in Life and Work_ by Heath & Heath, details a method they call "ooch" to test out potential scenarios in order to make high-stakes decisions in a small amount of time. All too often, according to Heath and Heath, we make extremely important decisions without having enough information to make them, or the time to gather the preferred amount of information to do so. To "ooch," as the two authors put it, is to conduct small tests in order to test one's "hypothesis" about how a particular program or business model might work, and then make a more informed decision based upon the results from these tests. Heath and Heath refer to a legal secretary, scientific equipment manufacrurers, and even an elementary schooler as people who used ooch to great effect. Having at least a little bit of information before making high-stakes decisions is important for everyone - even for experts with several years of experience. Using economists and political scientists as examples, Heath and Heath point out that while experts in the social sciences get almost double the amount of assumptions they make correct than novices do, the success rate for these experts is still only 45% on average. Thus, the ability to "ooch before leaping" is a skill set that hods great potential benefit to just about anyone, no matter what age or job occupation they have.

Lehrer, J. (2010). How we decide. Houghton Mifflin Harcourt. CH2 – The Predictions of Dopamine.

In the article, the author presents elements that are closely related to one’s decision-making processes and activities that take place in brain when making decision. Based on the studies of a Cambridge Neuroscientist, Wolfram Schultz, the decision making process begins with the change in level of dopamine in our brain. Interestingly, the level of dopamine was varied upon the certain patterns that are based on the past experiences and current situations. If there is failure in getting reward for certain decision or action, some kind of error signal gets generated and the newly adjusted dopamine level will affect the level of dopamine being generated. The neurons in our brain will constantly gather new information and data to generate new patterns during the decision making process and it helps to prevent further errors in future prediction.

Interesting example was given in the reading, during the Operation Desert Strom, Lieutenant Commander Michael Riley found blip in the radar, at that moment, he did not have enough information about that blip to distinguish whether it was a friendly plane or a silkworm missile. He had to make decision to shoot it down or just let it go, and he finally made the decision to shoot it down and was later discovered that it was a Silkworm missile. Although there was no way for Riley to distinguish that radar blip, Schultz discovered that it was Riley’s dopamine neurons that unconsciously helped him detecting slight difference in the blip to make a final decision to shoot it down. A cognitive psychologist, Gary Klein found out that in high-pressure situations, the intuition of our decision making could be surprisingly insightful. In the case of Riley, he felt something wrong about the radar blip, because he had used to a very consistent blip pattern of the planes from the Silkworm missile and the different timing of the radar blips that helped him unconsciously evaluated the altitude of the blip. Just like a computer programmed Artificial Intelligence, human brain is designed to go through learning process that includes both successes and failures to minimize the errors or mistakes in future decision making process, and within that frame, dopamine is unconsciously helping one to make decision.

Gladwell, M. (2007). Blink: The power of thinking without thinking. Back Bay Books. CH1 – The Theory of Thin Slices: How a Little Bit of Knowledge Goes a Long Way.

## Bias:

_What are the most common ways in which decision-processes fail?_

Berkley, Njeri N; Sears, Kicia Kimberly; Tansits, Colin E; Fantigrossi, Steven Marc; Steele, Samantha E

Ariely, D. (2008). Predictably irrational (p. 20). New York: HarperCollins. CH 8: The Cost of Ownership (loss aversion)

In the article, The High Price of Ownership: Why we Overvalue What We Have, the author addresses the question of whether owners believe that their possession is worth more money than potential owners are willing to pay. Hypothesizing that ownership of something increases the value in the owner's perspective, the author ran an experiment using excited students at Duke University vying for the opportunity to be entered into a lottery to win tickets to a Duke basketball game. While all the students may have valued the tickets equally prior to being selected, after the lottery drawing occurred, the students were psychologically divided into the ticket owners and non-ticket owners group. The result was that students who did not own a ticket were willing to pay around $170 for one while students who owned a ticket believed their ticket to be worth roughly $2,400.

The article mentions three loss aversion “quirks” that humans tend to have that can be attributed to the difference in perceived value:

- We fall in love with what we already have
- We focus on what we may lose, rather than what we may gain
- We assume other people will see the transaction from the same perspective as we do, sharing our feelings, emotions, and memories.

Ownership doesn’t only apply to material items, but ideas as well. Ownership can even occur before someone becomes the legal owner of an item or idea--that’s why different marketing strategies such as a 30 day money back guarantee work so effectively. Prior to that thirty days, you feel as though you own the item (“virtual ownership”) and do not want to “lose it”. Similarly, it is hard for an individual to downgrade to a lower level item (e.g. luxury to basic car) once they have tasted the higher level.

Understanding the influence of loss-aversion can help us understand how certain decisions of whether or not to make change can be subject to bias. Despite evidence pointing in the direction of change, decision makers may decide to continue with an idea or item that they have due to the fact that they may overvalue that idea or item as “owners”.

**Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 6: Zoom-In, Zoom-Out (the importance of baseline probabilities)**

When we make decisions, we often acknowledge that we don't have all of the information. Heath argues that we typically trust our own ideas about a decision over the averages. That is, we trust the inside view—our own impressions and assessments of the situation we're in—over the outside view—analysis of the larger class of situations.

However, the outside view is almost always more accurate: we check reviews on yelp or tripadvisor rather than trying to glean our own impressions from a company's website. We are naturally drawn to the inside view because we feel like we're the only ones who truly know our situation, that we can beat the odds because of our unique qualifications and experience. It's what makes entrepreneurs bold, says the author, and that's a good thing.

The issue is that we often become trapped in the inside view, and as a result, our decisions will be worse. Heath advises that we begin by looking at the outside view. This involves gathering information in an attempt to find the average, or the "base rates." The author calls this "zooming out."

To zoom out:
- Begin by collecting data. This can be published or from groups who have attempted a similar task.
- You may also ask an expert—someone who has more experience than you—to describe their experience.
- TIP: You are not looking for predictions, experts are bad at making them. Instead, you are trying to find the base rate, or what you can "reasonably expect to happen" after making a particular choice.

As we know, however, often data—as good as it may be—does not fully describe a particular issue, problem, or situation. Nor is it enough for us, as decision makers, to base a complex choice upon. We want to get at what feels more real to us. This is when the author suggests "zooming in." Instead of going back to our own inside-view impressions, though, the author stresses the importance of zooming in on personal experiences of those that have made the choices we are considering.

To zoom in:
- Look for texture beyond the data you've collected: get the opinions behind "liked" vs "didn't like." This may provide context that will better inform your decision.
- Ex: A Yelp review of a Mexican restaurant shows a 3.5 average rating. Instead of stopping there and refusing to eat there, you read a few of the low reviews and find out they are based on things that may not apply to your situation: noise on a Friday night, price, unreasonable expectations of servers, etc. Therefore, you can make a better decision since you now understand the nuance behind the numbers.

Heath advises us, whenever possible, to both zoom-in and zoom-out.

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. pp 11-15 (confirmation bias)

****Author: Colin Tansits****
Heath's book, “Decisive: How to make better choices in life and work,” addresses three specific topics relevant to bias: confirmation bias, the zoom in zoom out technique, and overconfidence. This section discussed "confirmation bias."

Confirmation bias is the human habit of developing a quick belief about a situation then seeking out information to bolster that belief. Thus when people have the chance, they will select information that supports their preexisting attitudes, beliefs, and actions. When we want something to be true, we will find information that makes it true.

The tricky part about confirmation bias is that it can look scientific—people collect data which supports their assertions. Little do they know they are “cooking the books.”

The book retells a story about the president of Intel who struggled to make the decision about foregoing the company’s production of memory—the product that Intel was built on. Memory was being taken over by Japanese companies, and Intel was losing money on it. After considering what a new president and CEO would have done in his situation, it became clear that Intel must drop memory and move away from it. This story illustrates the “confirmation bias” habit of trying to support decisions which we want to be correct, despite empirical evidence suggesting otherwise.

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. pp 3-5, 35-38, 140-143 (overconfidence).

**Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. pp 3-5, 35-38, 140-143 (overconfidence).**

Humans aren't very good at making decisions. Many of us reverse, fail, or quit in business and in our personal lives. Brains can't make rational decisions—we are too full of biases. "Going with our guts" doesn't work any better, either. So, what's the solution?

Some argue that it is analysis. Rigorous analysis will lead to better decisions. Though this helps, studies have shown that the decision-making __process__ is far more important than the analysis alone, by a factor of six. Being too confident in our own decisions without doing proper research or without considering alternatives or flaws often results in failure.

Later, the author tells the story of the Quaker CEO who bought the parent company of Gatorade—a huge success—when he attempted to find another success in Snapple teas and juices. However, this failed miserably. The gut-instinct that had prompted the CEO to trust Gatorade proved wrong on Snapple. One of the problems here was overconfidence in this CEO's feelings: no one at Quaker was there to argue against buying Snapple.

Another problem here is framing the choice one is thinking about as the only option. The author notes that "whether or not" choices fail 52% of the time, versus choices that contain several options, which fail 32% of the time. The lesson here is to ignore the gut, and to broaden our decisions to include several options.

A final point the author makes regarding overconfidence is the tendency to trust experts too much. In fact, though experts are great at analyzing what has happened in the past and what is happening in the present, they are not very successful at predicting the future.

Sadly, experience and education did not increase the expert's chances of being any more correct about future trends than a layman presented with base rate information. The lesson here is to stop seeking out predictions, and expect base rates to continue. This will result in more accurate decisions.

###Leonhardt, D. "Sorry, NFL Fans — A Tweeting Robot Is Probably Smarter than Your Team’s Coach." WBUR, November 19, 2014.

Leonhardt in his article, "Sorry, NFL Fans — A Tweeting Robot Is Probably Smarter than Your Team’s Coach,” describes a robot created by the New York Times that conducts fourth-down analysis for football games. By utilizing a large archive of past NFL games, the robot conducts situational analysis for live games and tweets the odds of going for it on fourth down. This robot has recently brought the conservative bias of NFL coaches into light.

As the NFL has aged, offenses have gotten progressively better and it seems that the coaching has not adjusted to this fact. Having possession of the ball these days has far greater value than it did in past decades. If nothing else, this robot illustrates the very conservative nature of fourth-down calling. The author of this article suggests that coaches should have more faith in their players considering the extremely productive nature of modern NFL offenses. Many fans have been following the robots tweets and have been holding the coaches accountable for their play calling.

Of course this bot does not have perfect accuracy. Bills coach Doug Marrone addresses this fact in an interview where he was criticized for his conservatism and the bot was specifically referenced. Marrone stated that the bot is tailored for the average team, not for an individual match up, which is certainly a truth. He goes on to say that not many of his peers would have been any less conservative than he. Leonhardt criticizes this logic pointing out that it is not helping his team win to claim that other coaches would have made the same move. Professor Cade Massey noted that coaching seemed to trend toward higher risk play calling in ’08 and ’09, until a notorious play made by Patriots coach Bill Belichick went for it on a fourth and short but missed and cost the team the game. After this coaching seemed to trend back toward more conservative play calling in fourth down situations.

A tweeting robot that conducts football situational analysis has managed to uncover the biased nature of coaching in the NFL. Despite advances in offensive performance, play calling in fourth down situations has remained very conservative. Being overly conservative is a common occurrence, and often contributes toward the failure in decision making. Leonhardt advocates for more trust in athletes and for allowance of higher risk play calling. This advice can certainly be applied to decision-making in general, reminding us to make choices based in logic rather than risk aversion.

## Groupthink:

_What is groupthink, and how can we avoid it?_

Dieselman, Andrew; Whiting, Cal McCulley; Perez, Philip A; Boucher, Timothy M.; El Ayachi, Youssef

_**Hansen, M. “How John F. Kennedy Changed Decision-Making for Us All.” Harvard Business Review Blog Network, November 22, 2013.**_

In 1962 President Kennedy ordered a review of the decision making procedures that led to arguably the worst decision he ever made, known now as the Bay of Pigs fiasco. Reviewing psychologists determined that the decision making process that went on and led to the authorization of the Bay of Pigs Invasion was plagued with groupthink - the "psychological drive for consensus at any cost that suppresses dissent and appraisal of alternatives." One historian, who was present during this decision process noted that the "meetings were taking place in a curious atmostpher of assumed consensus, [and] no one spoke against it."
To remedy the failures in decision making that resulted in the politically-damning fiasco, President Kennedy instituted four new priorities regarding how his top aides and advisors would come to critical decisions. The first of these changes was that every participant in the process would "function as a 'skeptical generalist,'" and avoid reviewing the problem from just his/her department's standpoint. The second change was to encourage that group meetings take place in informal locations, and not conform to formal agendas or protocols so that individual status did not hamper frank discussion. Third, each decision making process should involve sub-groups who would break-out, work on theories, and then reconvene. Finally, the team would sometimes meet without the President in order to avoid aides/advisors from just following the cues of the President. The underlying principal "was to solicit diverse viewpoints, stimulate debate, explore options, probe assumptions, and let the best plan win on its merits. This change in decision-making was incredibly successful and lead to a fruitful non-violent end to the Cuban-Missile Crisis in 1962. In addition, this method of combatting groupthink has been implemented numerous times and has had success across many different sectors of society, including corporate boardrooms.

Sutherland, J. & Sutherland, J.J. (2014). Scrum: The Art of Doing Twice the Work in Half the Time. Crown Business, pp 111-132.
Sutherland & Sutherland open this chapert, titled "Plan Reality, Not Fantasy," by detailing a phone call he had received from the Chief Architect of Software at Medco. Medco, as 'Scrum' describes it, was "a Fortune 100 firm with nearly $38 billion in revenue, the largest phamaceutical company in the country..." The phone call was regarding Medco's need for Sutherland to aid in the creation of a system in which Medco was to deliver prescriptions by mail. Medco was terribly behind schedule, and the Chief Architect of Software thought that Sutherland and his 'Scrum' could help.
Sutherland details Medco's first mistake on page 114: "they thought they could plan everything everything ahead of time." Sutherland's solution to this was sticky notes. He directed everyone to write down everything that needed to be done to complete the project, then break those down to manageable tasks. Then, they would estimate how long each small task would take. They then worked to break the notes into different teams, only then could they begin.
Sutherland's method is attempting to fix the issue of planning a task which has not been completed before, you simply don't know. He suggests refining the plan throughout the project, rather than doing all the planning upfront and sticking to it no matter what.
Sutherland also points to a few more intersting suggestions when deterimining how much an effort with cost, in time and money. His friend, he tells us, used "dog points." He asks: "is this problem a dachshund or a labrador?" The idea behind this, Sutherland points out, is using relative sizing to compare tasks. Sutherland likes to use numbers, something along the lines of the first six or so integers of the Fibonacci Sequence. This places numbers far enough apart so there are clear delineations between them.
Sutherland points out a problem with this, he calls it the 'bandwagon effect.' He spends a page and a half giving examples of group-think and how it is engrained in many various aspects of society. The authors give an example of one way around this, the "Delphi Method" used by the Rand Corp. in the '50s. They asked various experts how many nukes the Russians needed to counter our production of nukes. They conducted anonymous surveys, then produced the results to the group, then surveyed again, et cetera. This brought the estimates of the number of nukes to the same number within only a few surveys.
The authors suggest using a modified Delphi Method, by using playing cards. Using the Fibonacci Sequence, a manager gives each person five cards (1,2,3,5,8, and an Ace or blank card with 13 on it). Then ask them to rate the effort needed for a task; each teammember submits their card. They then see other's cards, and can debate with them on why they would submit that number. Then repeat until all issues are resolved.

# Antagonistic Decision-Making:

Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Random House. CH 5: Consider the Opposite

_By: Rodriguez Ranf, Daniela; Farrior, Cheri Nicole; Creedon Jr, John Thomas; Washington, Layvon Q; Swartwood, Hilary Ann_

**How can we systematically evaluate scenarios to avoid biases and identify the best options?**

## CHAPTER 5: _Consider the Opposite_

Sometimes when major corporations are struggling to make growth executives make decisions to buy another company, which can be extremely expensive. CEOs tend to make decisions such as these based off of pride and a confidence that they can work magic with their acquisitions, which ultimately leads them overpaying for their targeted company.

Two business school processors, Mathew Hayward and Donald Hambrick, decided to test this theory by determining if the following factors would boost the egos of inquiring CEOs: 1. Praise by the media 2. Strong recent corporate performance (which the CEO could interpret as evidence of his/her genius) and 3. A sense of self-importance (which was measured by looking at the gap between the CEO’s compensation package and the next highest paid officer). The study showed that CEOS pay a higher premium for an acquisitions when each of the three factors increased. The study also found that CEOs pay lower acquisition premiums when they have people around them who are unconnected to the CEO of the company who are more likely to challenge their thinking.

It is important that CEOS have the courage to seek out disagreement to make good business decisions, because a person’s natural confirmation bias will lead them to hunt for information that flatters their own existing beliefs. Overcoming confirmation bias begins with being willing to spark constructive disagreement. This can include assigning people on the executive team to prepare a case against a high-take proposal or create a safe forum where critics can share their concerns about a particular proposal.

Roger Martins “what would have to be true” strategy is a great technique for organizations to use when dissent is unwelcomed. It allows people to disagree without becoming argumentative.

Digging up disconfirming information can be problematic in situations where we actually want to be sold, because sometimes instead of obtaining information, we are actually asking for support. This comes into play when hiring managers call potential employees references. They want to hire that person, but want affirmation from somebody else that the person is right for the job. However, employers are becoming more strategic about the types of questions they ask and are asking tougher diagnostic questions. By doing so, they are able to collect more quality information

This chapter discusses best practices to systematically evaluate scenarios that avoid biases and identify the best options. Heath and Heath argues that the following will lead in identifying the best options: the practice of asking probing questions, using caution with probing questions backfire, assuming positive intent/ extreme disconfirmation, testing assumptions with a deliberate mistake.

The authors argue that in an attempt to collect unbiased information, it is important for ask probing questions to individuals who have incentives to only tell part of truth, as found in some salesmen, recruiters, and employees with agendas. Thus, to gather more unbiased information, it is important for individuals to ask questions that can be disconfirming, the authors uses the following exemplars: Law students- who were the last three associates to leave the firm? What are they doing now? How can I contact them? iPod Buyers: What problems does the iPod have? These types of open-ended questions aid in receiving information that leaves little room for bias.

Another best practice is being cautious that questions can backfire in situations that may have a power dynamic. Often times, when a doctor is trying to receive information from patients they may ask open-ended questions, that requires further explanation. For instance, a doctor may ask a patient, “what do you mean by dizzy” to receive and better understand information from the patient. This example can be seen in the example with Dr. Barbour and the Patient Joseph, whose statement of feeling dizzy was an indication of other problems to the doctor.

While the author addresses the idea of confirmation bias, the tendency for people to search for or interpret information in a way that may confirm one’s preconception, they argue whether or not it is possible to force ourselves to consider the opposite of our instincts, extreme disconfirmation. The authors offer the example of a marriage diary, as an exemplar of extreme disconfirmation. For instance, a marriage diary is used to help an irritated spouse see that his/her spouse may not always have the issues that he or she may think, such as selfishness. When an individual assumes positive intent, it allows them to view another person’s words or actions in a positive light.

The authors offer this chapter to make individuals cognizant that because it is in human nature to seek self-confirming information, a best practice to systematically evaluate scenarios to avoid biases and identify the best options is to consider the opposite.

## CHAPTER 6: _Zoom Out, Zoom In_

The second villain of decision making is “confirmation bias” where we develop a quick belief about a situation and then we seek information that supports that belief. In order to mitigate this bias, it is important to “reality-test your assumptions”. This involves taking a step back and collect information that you can trust that reflect the broader realities of a situation beyond your own individual impressions. Chapter 6 is about how to zoom out and zoom back in into different situations that involved decision-making.

The first observation the Heath brothers present is that we need to “often trust “**the averages**” over our instincts” in moderation. They explain that often in life we base our decisions trusting our impressions, rather than on the averages. When we make decisions based on reviews we acknowledge that 1) our ability to get the real truth about a product or the full picture is limited and subject to distortion; and 2) because of that we are smarter to trust the averages over our own impressions. Example of taking a job without consulting a sample of people that work there. Reviews from current and former works would be very valuable, as compared to a stranger's assessment of a hotel. The underlying tendency according to the Heath brother is that when we make critical decisions we do less objective research.

The second and key observation when zooming out and zooming back in for decision making is the concept of “inside” and “outside” views, which are categories developed by psychologist to understand perspectives in a situation. **Inside view** is based on one’s own impressions and assessments of a situation. **Outside view** is the opposite, analyzing the broader picture and ignores the particulars. The Heath brothers argue that the outside view is more accurate, as it is a summary of real-world experiences instead of one person’s impressions, yet we are generally drawn to the inside view.

**Take the outside view: **To take the outside view does not mean abandoning understanding or giving up on one’s individual impression, or inside view, in other words, “the outside view doesn’t require defeatism, but it does require respect for the likely outcomes”. The Heath brothers advice is to distrust the inside view and to instead get out of one’s head and consult the experts.

_Caveat: The Heath brothers include an important note: “sometimes people can have access to the perfect set of data, and still manage to ignore it.” So even if you have gathered the information, it does not mean that you will consider the outside view if you are too focused on the inside perspective. _

**Critical point regarding experts: **The simplest advice the Heath brothers can offer when when trying to gather good and reliable information to reality-test assumptions is to go talk to an expert. And an expert does not imply someone who has a “heavily credentialed authority”, rather an expert is simply someone who has more experience in particular area than you do. Seeking an expert is intuitive, but what is less intuitive is having clarity on what to ask them. Experts are bad at predicting, but great as assessing. Asking predictive questions makes people to revert to their inside view. What is important is to extract the knowledge or “base rates” and to avoid “predictions”.

**Keeping the humble approach:** People fall into two categories when confronted with the choice to take the outside view: some accept the idea immediately, while others feel dissatisfied by the analysis because it separates them from passion and trust in their own perspective. The Heath brothers recommend taking a humble approach, asking “what can I reasonably expect to happen if I make this choice?”

Chapter 6 continues to discuss the concept of **inside view** versus **outside view** through the stories of various people making decisions in different situations.

Brian Zikmund-Fisher faced a life-threatening decision to do a risky operation that would either provide him a cure and long, healthy life at the risk of cutting it much shorter or not doing the operation and only living for 5-6 years max. Taking the inside view would have relied upon his presuppositions, his biases, the big glossy sales pitch, instead of honing on asking the right questions, of trusting and interpreting the experiences of others in the situation and gathering data that informed the best decision. Brian researched medical journals, asked questions and analyzed about hospitals, their success rates, and made his decision based on an outside view of broad evidence.

Another concept is the **close-up**. The close-up involves trying to see through the big glossy picture colored by those delivering it to get down to the ground level and to get a real feeling for the types of services you’re providing or the customer’s experience. President Franklin D. Roosevelt employed this by challenging his advisors, going around them to talk to line-level employees, to consider polling and encourage letter-writing from constituents and sending surrogates such as his wife, Eleanor, unannounced to sites to get a real idea of how they were performing. A new Xerox CEO, Anne Mulcahy, also employed the close-up strategy to turn the company’s fortunes around by assigning every executive as the point person with one of their clients and spending at least one day of the year being responsible for fielding all consumer complaints so that they would have a better understanding of their customer’s needs and issues. The Japanese term, **genba**, meaning “the real place” is indicative of the close-up procedure, encouraging decision-makers to go to the store or factory floor and talk directly with people involved to better understand what is going on.

## Self-Control and Focus:

_How does “ego-depletion” affect our ability to make good decisions?_

Wohlenberg, Danielle Irene; Legnetto, Deanna Marguerite; McCully, James I; Hanson, Keely; Hamlin, Madeleine Rose

**Is Willpower a Limited Resource? American Psychological Association.**

In the American Psychological Association’s annual Stress in America survey participants regularly cited lack of willpower as the No. 1 reason for not following through with lifestyle changes. It was also determined that people believe willpower can be learned.

Willpower is defined as the ability to resist short-term temptations in order to meet long-term goals.It is also described as the ability to delay gratification, the capacity to override an unwanted thought, feeling or impulse. The ability to employ a “cool” cognitive system of behavior rather than a “hot” emotional system. The conscious, effortful regulation of the self by the self, and a limited resource capable of being depleted.

Willpower researcher Roy Baumeister, PhD, a psychologist at Florida State University listed three components for achieving objectives; First, an individual needs to establish the motivation for change and set a clear goal. Second, they need to monitor their behavior toward that goal, and the third component is willpower.

Terrie Moffitt PhD from Duke University and her colleagues found that individuals with high self-control in childhood grew into adults with greater physical and mental health, fewer substance-abuse problems and criminal convictions, and better savings behavior and financial security. Self-control scores also correlated with higher grade-point averages, higher self-esteem, less binge eating and alcohol abuse, and better relationship skills.

When willpower and self control is developed at a young age it can lead to positive lifestyle choices as an adult.

**Barnes, W., Gunia, B., & Sah, S. “Morning People are Less Ethical at Night.” Harvard Business Review, June 23, 2014.**

This paper establishes an idea that resisting temptation requires energy and effort, therefore, when an individual’s energy is low, they are more likely to behave unethically. The relationship between energy and ethics vary over time, so one person can act ethically during one part of the day and unethically in another, depending on their energy level.

The author relies on research that demonstrates alertness and energy follow a predictable daily cycle that is aligned to with the circadian process. Given different people have shifts in their circadian rhythms, the author divides them into two groups: “Larks” or “Morning People” who have their circadian rhythm shifted earlier in the day and “Owls” or “Evening People” who are shifted in the opposite direction. Using these two groups the author conducts two studies to see if there is a relationship between low energy levels and unethical behavior.

The first study focused on behavior in the morning. Participants were given a simple matrix task in which they were paid additional money for each additional matrix that they said they solved. Since participants believed that their work was anonymous, and they could earn more money there was an incentive to over-report the number of solved matrices. The results showed that night owls were more likely to cheat than larks given the experiment was conducted in the morning.

The second study was conducted both in the morning and at night. The experiment involved participants rolling a die and reporting the number they rolled with the higher the number paying out more money. Given the average roll should equal 3.5, the reported number rolled by the participants should be close to this number if they were not unethical and exaggerate the number rolled. The results showed that Larks in the morning reported rolls that averaged 3.86 but Larks in the evening reported rolls that averaged 4.55. Similarly, Owls in the evening reported rolls that averaged 3.80 but Owls in the morning reported rolls that averaged 4.23.

The study shows that given the different energy levels of the individuals depending on their circadian cycles would influence them to act unethically when their energy levels are low. The author concludes that managers should be wary of these different individuals and their chronotypes, so that they are not mismatched to the wrong time of day. These ways individual are put into situations to make poor ethical decisions.

**Duhigg, C. (2012). The power of habit: Why we do what we do in life and business (Vol. 34, No. 10). Random House. CH 5: When Willpower Becomes Automatic**

In this chapter, Duhigg describes the concept of willpower and explains how companies and organizations have begun to incorporate willpower into their training programs. Willpower, also known as self-discipline, is a key component of habit. Research shows that willpower is a learnable skill: for example, when children learn to delay gratification in exchange for some reward (eating two marshmallows after fifteen minutes versus one marshmallow immediately), these positive habits spill over into other parts of their life (e.g., better study skills). However, studies also show that willpower works like a muscle: it can be strengthened through practice, but exhausting your willpower resources too quickly in any one situation will leave less remaining for other tasks.

Duhigg provides Starbucks’ training program as a case study of how willpower can be mobilized as an organizational habit. For example, a key component of Starbucks’ employee training program involves teaching baristas how to respond to difficult situations, such as long lines or angry customers. All new employees take a required training course, during which they complete a manual that teaches workers how to respond to specific cues. Workers write out a plan for how they will handle difficult situations and rehearse the plans over and over until they become automatic. Thus, Starbucks teaches new hires how to handle conflictual or stressful scenarios by giving them what Duhigg calls “willpower habit loops” (145). The strategy has proven effective in training employees, boosting employee satisfaction, and improving customer experience, all of which have contributed to making Starbucks a successful enterprise under founder and CEO Howard Schultz. According to Duhigg, these trainings have also made important impacts in employees’ lives, helping them improve their soft skills, which can be applied in many aspects of their life.