The Emperor’s Old Clothes

OPINION

A big risk in deploying management software is that it may disguise poor-quality thinking within a slick user interface. Unless someone deliberately searches for the underlying assumptions, they may be buying a system that constrains them to the past.

Most modern management software looks good and is easy to use. Mobile apps are very appealing and the sales presentations are sharp. A more detailed analysis may reveal some outdated assumptions embodying years of legacy thinking. These assumptions often concern how people are motivated, how culture develops, how we make decisions, and the repeatability of an operating environment.

Swarthmore College professor of social theory and social action Barry Schwartz argues that “idea technology” (ways of understanding how humans operate) is embedded within the way we work – and these ideas are often out of date or just plain wrong. At Cornwall Strategic, we see this in many of the systems used for HR management, health and safety, and management decision-making.

Many HR management systems embed old assumptions about motivation and reward. They link pay grades to performance through assuming a linear relationship between effort, reward and outcome. Yet many independent studies have shown that intrinsic motivation is actually destroyed by extrinsic reward.

In health and safety there are multitudes of software packages treating risk as a calculation of likelihood with outcome. The embedded assumption is that we live in a world that can be modelled using Gaussian mathematics (data fitting nicely into a bell curve). In reality, many of these challenges are Pareto in nature (data fitting a power law), meaning high impact events happen more often than Gaussian probabilities predict.

We see classification and categorisation systems being deployed in accident investigation processes, for instance. The base assumption is that cause and effect have a linear relationship and that we can find one true narrative or pathway to accurately describe the event. Yet the complexity of real life situations means that causation is more likely non-linear and that many paths can lead to disaster.

Likewise, many technology-based decision support systems deploy algorithms to find patterns in historical data. They embed the assumption that tomorrow’s market will perform much the same as todays. For many businesses operating in fast changing and highly networked consumer driven markets, this is no longer a valid assumption.

Lessons for Leaders
Simplistic analysis of past events can lead to overconfidence in our ability to manage the future. This is the error that sports commentators make when constructing a narrative to explain a rugby match or a basketball game with the concept of the “hot hand”. They identify a number of situations and data, ascribe value to these, and then try to use it as a predictor.

Before investing in a new technology solution, leaders should make an effort to understand the real world environment in which it will be deployed. Is this environment a complex system? Will history repeat itself, and if so, will it happen in a way that can be accurately modelled?

An example: ask a vendor to explain how software accounts for the complexity of the business, and ask them to state the assumptions that are being made. In HR management systems, ask the vendor to explain what HR theories underpin the software development. How does it account for easy-to-articulate factors but hard-to-quantify, such as the value of an employee’s professional network?

For systems designed to increase efficiency and quality it might be useful to have a discussion about the differences between manufacturing and service operations. Which paradigm underpins the development of the system? What aspects of the software still retain production-line thinking?

Often new systems (and most new initiatives in general) seem to yield results. But this is generally because people are simply more mindful and focused!

Beware of this false attribution, and of the risk that great technology usability may disguise poor logic. Unless someone deliberately searches and tests the underlying assumptions, they may be tying the future to the management thinking of the past.

Steve McCrone is executive director of Cornwall Strategic