Stanford’s Jeffrey Pfeffer, one of my all-time favorite business thinkers, has some new research out that confirms one of Fast Company’s long-held beliefs: that competing differently in a marketplace is strategy. In a new research paper, Pfeffer argues that the assumptions we frequently made as leaders often lead us astray.
We think that incentive pay makes organizations perform better. We believe that driving down product and wage costs is essential for success in low-margin businesses. And we believe that holding people accountable results in fewer screw-ups. These are all, pretty much, fundamental beliefs that everyone buys into. Pfeffer says you’re dead wrong, if you do. Instead, he urges, you should challenge and change your assumptions and you might find your company — and your profitability — vastly improved.
Pfeffer says that “numerous, often hidden, assumptions underlie the mental models or mindsets of senior leaders. These assumptions inform the design of specific business practices — the particular compensation mechanisms, performance management systems, new measurement practices, and the like that define an organization. If such underlying assumptions are correct reflections of what truly produces employee and organizational effectiveness, youre golden. But if they turn out to be erroneous, you could be headed for trouble.”
As Pfeffer notes in a recent article, the mental model driving Southwest Airlines puts employees first, customers second, and shareholders third. Company practices such as not serving meals or flying only 737s on short hauls are an outgrowth of this model, he argues. Its the philosophy, not the techniques, that has led to Southwests growth and consistent profitability.
What assumptions are you making that can undermine your success?