Russell Ackoff – U.S. Navy two-day training in Thinking… — Transcript

He wants those people to be on this board, and he asked them to. That's quite common. It's not the design I gave you, but there's nothing cast in concrete. You do whatever you have to to make the board effective, keeping to the basic principle that everybody over whom he has authority must have authority over him through the book. The other thing that happens is in a decentralized company, as I mentioned, he may have external stakeholders here: customer representatives, supplier representatives, advertising agencies, bankers on the board as well. He treats us like a corporate board. So there are all kinds of variations possible. There are no rules to say you have to do it this way. The only thing you have to do if you're going to keep this system effective is you give everybody an opportunity to participate in decisions that directly affect that. That's the critical requirement. Yeah, once instituted, has there been any instance of abandonment? No, I don't know this thing well. I should explain this was published for the first time about 10 years ago now. I keep running across organizations that are using it, that took it out of the book. We have probably installed it in 50 or 60 organizations of a wide variety of types in a number of different countries. I have had no direct experience with any company that installed it later withdrew it. Now, I can't speak for others. All the cases I've heard of independently have been effective. Can you have an outside member on a board that's maybe four or five levels down in the organization? If it's useful for you, you sure can. When you make the rule, for example, when we did the first one, we said the top manager ought to be the chairman of that board, right? Makes sense. Do you know that almost every single board that we've established over 10 years has rejected that idea? Guess what they do? They rotate the chair. Almost invariably, it's fine. That's what they want to do. We see the federal government have this paranoia almost about holding people accountable or responsible. Do you run into the argument that everyone's accountable, therefore no one is accountable? You haven't changed the accountability of a manager at all. You haven't reduced this task of managing. You've just changed the way the policies and plans are prepared and made sure that they're better coordinated and integrated, but you haven't reduced it. Let me tell you what the fundamental problem is associated with this, and we may want to explore this this afternoon. What you do here is you reduce the power that any manager has over subordinates, no question about that, but you increase his power to accomplish what he wants to see. There are two kinds of power: power over and power to. And what most people don't realize is they're inversely related. As one increases, the other decreases. Let me point out what I mean. The most powerful man on earth up to a few years ago was the Shah of Iraq. He was subject to less constraint than any other ruler in the world. He could do just about any damn thing he wanted. I had one occasion to meet with the royalty of Iran shortly before the revolution, and the entire meeting was devoted to his complaints about the fact that he couldn't implement a single goddamn policy. He said they mess it up every time down below. Now, he could have hung, killed, or done anything he wanted to any of those people without any crime, any court, or anything, and infinite power over them, but he couldn't get it done. On the other hand, the president of the United States doesn't have any power over me. The president of the university has no power over me. He didn't fire me, doesn't control what I teach, how I teach it, or anything, but he can get a lot of things done that he wants to get done because I approve of him, and I'll work with him to get done what he wants. Okay, this involves a conversion of the concept of management from the concept of command to the concept of leadership, and they are fundamentally different. This is the radical transformation that's required. Managers have to develop capacity to lead rather than to command. Why? Because it's more effective with an intelligent group of supporters. When you had a group of illiterates, functional literates under you, that may have not been the case. Now, also let me point out that in time of emergency, you've got another situation. Nobody says that if you're walking across the street and about to be hit by a truck, and you call a board meeting to decide what to do. You jump apart. Part of your planning and policy is the preparation for reactions during emergency, and they may involve one man takes command at that point, or else you're going to screw it up, but that's a collective decision. So it's not that you eliminate the use of authority. Under appropriate circumstances, is that in general authority is exercised through leadership, not through command. Any other questions? How do you handle the problem of poor discipline, kind discipline, and confidence leadership? In other words, the methodology by which the boards work in an efficient manner, time division, or this is very—the boards make their own rules. I can tell you the most successful ones, clear boards are most successful work by consensus. Now, consensus is very different than agreement. Let me explain the difference. We had a meeting recently of a corporate board in which each member was asked to consider a certain problem, and we came up—they all came up with different solutions. Each solution was presented. They reached absolutely no agreement as to which solution was best. In fact, each one thought his solution was the best, but they were all different. I was present at this meeting, and the conversation went on for two hours. I broke in at that point and said, "Look, I would like to offer you the following choice. Tell me what you would do. You can either keep what you got now; we won't make any changes, or you will allow me to pick one of these eight at random. Which will you do?" It was unanimous to allow me to pick one at random. That's consensus without agreement. See, they agree that any of these alternatives is better than that, but they didn't agree on which one was. Now, these groups ought to operate on consensus. They don't have to agree that this particular proposal is the best thing that could be done. I have to agree it's better to do this than what we have been doing. Now, you don't always generate consensus. Then what do you do when you can't generate consensus? You design a test of the alternatives, and you get consensus on the fairness of the test. It's that double procedure which is the most effective that I see. By the way, it's all written up. There's a procedure for going through that process of getting a fair test and so on. I've even had to design it on the issue of capital punishment, or I could not get consensus on whether there ought to be capital punishment or not in a government. We did. We designed a test in which both sides agreed, and the interesting thing was we did it without killing anybody. Any other question? We're just about ready for lunch. So what's happening? Oh, it's conventional in delivery of a sermon to begin with the parable, and since a certain portion of this afternoon is going to be a sermon, it seems appropriate to begin with a parable. This happens to be one that I first heard in Mexico for reasons that will be apparent to you. The parable is about three sailors who were on a merchant marine that wrecked off the coast of Mexico. Always, they managed to survive by getting on a raft and floating to a deserted island that nevertheless had enough resources so they could sustain themselves. They were a Russian, an American, and a Mexican. They spent all their time sitting on the beach trying to spy a passing vessel in the hope that they could get saved. And while they were sitting on the beach one day, they saw a small object coming through the surf towards them, and they rushed into the surf to catch it, whatever it was. And as it got within reach, they grabbed it, pulled it out of the water, and it was a very dark smoky brown bottle.

effective keeping to the basic principle that everybody over whom he has authority must have authority over him through the book the other thing that happens is in a decentralized company as i mentioned he may have external stakeholders here customer

representatives supplier representatives advertising agencies bankers on the board as well he treats us like a corporate board so there are all kinds of variations possible there are no rules to say you have to do it this way the only thing you have to do if you're

going to keep this system effective you give everybody an opportunity to participate in decisions that directly affect that that's the critical requirement yeah once instituted uh has there been any instance of abandonment no i don't know this thing well

i should explain this was published for the first time about 10 years ago now i keep running across organizations that are using it that took it out of the book we have probably installed it in 50 or 60 organizations of a wide variety of

types in a number of different countries i have had no direct experience with any company that installed it later withdrew it now i can't speak for others all the cases i've heard of independently have been effective can you have an outside member on a

board that's maybe four or five levels down in the organization if it's useful for you you sure can when you make the rule for example when we did the first one we said the top manager ought to be the chairman

of that board right makes sense do you know that almost every single board that we've established over 10 years has rejected that idea guess what they do they rotate the change almost invariably it's fine that's what they want to do

we see the federal government have this paranoia almost about holding people accountable or responsible do you run into the argument that everyone's accountable therefore no one is accountable you haven't changed the accountability of a manager at all you haven't reduced this task of

managing you've just changed the way the policies and plans are prepared and make sure that they're better coordinated and integrated but you haven't reduced it let me tell you what the fundamental problem is associated with this and we may want to explore this this

afternoon what you do here is you reduce the power that any manager has over a subordinates no question about that but you increase his power to accomplish what he wants to see there are two kinds of power power over and power two

and what most people don't realize is they're inversely related as one increases the other decreases let me let me point out what i mean the most powerful man on earth up to a few years ago was the shah of iraq

he was subject to less constraint than any other ruler in the world he could do just about any damn thing he wanted i had one occasion to meet with the royalty of iran shortly before the revolution and the entire meeting was devoted to

his complaints about the fact that he couldn't implement a single goddamn policy he said they mess it up every time down below now he could have hung killed or done anything he wanted to any of those people without any crime any court or

anything and infinite power over them but he couldn't get it done the other hand the president of the united states doesn't have any power over me president university got no power over me he didn't fire me doesn't control what i teach how i teach

it or anything but he can get a lot of things done that he wants to get done because i approve of him and i'll work with him to get done what he wants okay this involves a conversion of the

concept of management from the concept of command to the concept of leadership and they are fundamentally different this is the radical transformation that's required managers have to develop capacity to lead rather than to command why because it's more effective with an

intelligent group of supports when you had a group of illiterates functional literates under you that may have not been the case now also let me point out that in time of emergency you've got another situation nobody says that if you're walking across the street

and about to be hit by a truck and you call a board meeting to decide what to do you jump a part of your planning and policy is the preparation for reactions during emergency and they may involve one man takes

command at that point or else you're going to screw it up but that's a collective decision so it's not that you eliminate the use of authority under appropriate circumstances is that in general authority is exercised through leadership not through command

any other questions how do you how do you handle the problem of poor discipline kind discipline and confidence leadership in other words the methodology by which the boards work in an efficient manner time division or this is very the boards make their own

rules i can tell you the most successful ones is clear boards are most successful work by consensus now consensus is very different than agreement let me explain the difference uh we had a meeting recently of a corporate board

in which each member was asked to consider a certain problem and we came up they all came up with different solutions each solution was presented they reached absolutely no agreement as to which solution was best in fact each

one thought his solution was the best but they were all different i was present at this meeting and the conversation went on for two hours i broke in at that point and said look i would like to offer you the following

choice tell me what you would do you can either keep what you got now we won't make any changes or you will allow me to pick one of these eight at random which will you do it was unanimous to allow me to pick

one at random that's consensus without agreement see they agree that any of these alternatives is better than that but he didn't agree on which one was now these groups ought to operate on consensus they don't have to agree that

this particular proposal is the best thing that could be done i have to agree it's better to do this than what we have been doing now you don't always generate consensus then what do you do when you can't generate consensus you

design a test of the alternatives and you get consensus on the fairness of the test it's that double procedure which is the most effective that i see by the way it's all written up there's a procedure for going through

that process of getting a fair test and so on i've even had to design it on the issue of capital punishment or i could not get consensus on whether there ought to be capital punishment or not in a government

we did we designed a test in which both sides agreed and the interesting thing was we did it without killing anybody any other question we're just about ready for lunch so what's happening oh it's uh conventional in uh delivery of a sermon

to begin with the parable and since a certain portion of this afternoon is going to be a sermon it seems appropriate to be with a parable this happens to be one that i first heard in mexico for reasons that will be apparent to you

the parable is about three sailors who were on a merchant marine that wrecked off the coast of mexico aways they managed to survive by getting on a raft and floating to a deserted island that nevertheless had enough resources so they could sustain

themselves they were a russian an american and a mexican they spent all their time sitting on the beach trying to spy a passing vessel in the hope that they could get saved and while they were sitting on the beach

one day they saw a small object coming through the surf towards them and they rushed into the surf to catch it whatever it was and as it got within reach they grabbed it pulled it out of the water and was a

very dark smoky brown bottle tightly corked so they hauled it ashore and they had to improvise by breaking shells they eventually pried the cork loose and popped it out and out of the bottle appeared a beautiful young genie

she told him that they were each entitled to a wish but they'd have to make them very quick quickly because she had a hell of a schedule and she had to get on to the next stop and before she finished the sentence the

russians said i wish i went to bolshoi with my wife watching the ballet like that he disappeared he had no sooner finishing america said i wish i were at the plaza hotel with my girlfriend having a dine a dining and

dancing evening like that he disappeared but the mexicans sat there on the sand didn't say a word she stood there tapping her foot finally she said i'm sorry i can't wait any longer you either give me your wish

right now or i have to leave and he looked up and took a big sigh and he said i miss those two guys i wish they were back we're going to have something to say about planning hence the paradigm

management is an incredible phenomenon we want to look at management now through the evolutionary process we've been going yet and by the way this is in this area at that magnificent corporations universities or whatnot it's completely general there's a tremendous variety of ways in

which people manage almost as much variety among managers as there is in color not an infinite number of colors but you also know something about color that's important namely that all color reduces the three elementary colors red blue and yellow

the infinite variety simply comes about by various mixtures of the three basic pigments turns out management is exactly the same there are three fundamental types of management which appear in different mixtures in an individual and organization over time

that make up all the variety and moreover in most organizations one type of management dominates so it becomes possible to look at an organization say your type a b or c depending on the one that's the dominant one but in any organization you'll find

them all to some degree now with that proviso if you keep thinking of them as primary numbers i'm going to describe to you the pure forms the thing that distinguishes between these basic types of management is their attitude towards time

now time is very nice variable because it breaks into three parts the past the presence and the future attitudes an even nicer variable because the breaks in the two favorable and unfavorable now i have to apologize for what i'm

about to do to you i want to use a little mathematics and i'm sorry and if it throws any of you let me know and i'll try to do it in words but i'd like to use a plus sign for a favorable

attitude and a minus sign for an unfavorable one and hope it causes no trouble the first type of management is dissatisfied with the current state of affairs that means it has a negative attitude towards the presence furthermore it doesn't like the way

things are going they're getting worse what it likes is the way they used to be therefore the primary objective is to recreate a previous state therefore i'm going to call this reactive management [Music] its primary logic is described in our attitude towards

change we want to unmake change now let me make explicit what that means the logic of this type of management goes as follows i came into work today and i was confronted with the problem i didn't have yesterday

what the hell happened that caused that problem but who's the blame if i find the cause of the problem and remove it i'll be back to where i was and that's fine that's where i want to be now when you put it that way it doesn't

sound very reactive but it is the primary objective is to go back to a previous state in which the problem didn't exist exist this logic pervades our public life in 1920s we developed a major social problem in the united states called

alcoholism right we looked around and said what's the blame for alcoholism what was the answer alcohol what do you do about it prohibit it that's typically reactive get rid of it and then we'll be back to where we were

it happened it didn't work as you know we didn't get rid of alcohol and we got something else we hadn't bargained for called organized crime but that didn't reduce our commitment to the method in the 60s when we began to develop a drug

addiction problem in the united states we looked around and said what's the cause of that narcotics so we illegalized them all we're the only developed country in the world that did and today we have the highest rate of

addiction of any of the developed countries in the world but nevertheless we're committed perhaps the prime example of that commitment is in the way we treat crime crime is an undesirable social state we look around and say who's to blame for

crime the answer is a criminal therefore get rid of them imprisonment despite the fact that all the data shows that crime is increasing despite imprisonment and in prison is a college of crime so 80 of the people who go in will go in

again and they'll go in the second time for a worse crime they committed the first crime first time because they learned how to do better crime while they were in there so we produce a school for perpetuating crime

through the reactive mode now reactive management tends to romanticize and idealize the past and see the solutions to problems back there therefore what it reveres is history history reveals the solutions to problems so it's not surprising that one of the

favorite aphorisms of a reactive manager is dash is the best teacher what is it experience right experience is the best teacher is a typical reactive aphorism what's the best school to go to right there it's straight reactive uh concepts

it's for this reason that a reactive organization status is directly proportional to seniority it's not surprising that the man at the top is referred to as the old man right because he generally is as a matter of fact studies have shown that

on the average he's 11 years older than his counterpart in other types of organizations he does tend to be the old man uh the enemy of this type of organizations change because change is retrogressive so look out there

and say what's the primary driving force producing change in society and what do you think your answer is what's primarily responsible for all the changes going on no it's so obvious you're having trouble with it technology technology is the driving force of all

the changes we're going through and therefore technology is the devil literally if we look historically at reactive management you can see the development of this uh very clearly uh how many of you ever read charles snow's famous i say the the war of two

cultures now that was a famous set of lectures that charles snow the british novelist and philosopher gave at cambridge many years ago in which he describes society as a war between the humanists on one side and the scientists or technocrats on the

other the reactive manager is clearly on the side of the humanist historically uh oriented arguing against technology as an evil force in society if you go back to the industrial revolution in england as it got started there was a major

social movement in england called the luddite movement any of you ever hear the luddites don't know it that was a social movement involving a very large number of people who aren't themselves with pickaxes crow bars and explosives and they broke in the factories and try

to blow them up and destroy them because they argued that the mechanization of production was destroying the quality of life and they wanted to go back to handcraft guild production typical reactive movement in the middle of the french revolution

the principal intellectual leader who emerged was jean-jacques rousseau a philosopher who led what was called the back to nature movement he tried to convince the french public that they ought to abandon the cities and the factories go into the

country stripped down and prancing a newt over the prairies whistling bach he painted the picture of the idyllic pastoral life getting back to nature and restoring the quality of life at the end of the 19th century in england

john ruskin and william morris led a movement called the gothic revival and they literally built towns modeled after medieval communities in which they brought artisans and craftsmen and went back to medieval type production produced some very great art

in these communities particularly industrial kind of art but it was all individually made because they claimed that industrialized england was destroying the quality of life and the quality of art the united states in the 1960s when the hippie movement was going

there was a large subgroup in the hippie movement that withdrew form communes went up to british columbia bought land and tried to do organic forming using no implements except their hands and feet there's a marvelous record of one such

group written by the son of one of the cult heroes of the 60. kurt vonnegut was one of the real popular novelists of the kids in the 60s and he had a son by the name of mark who

was a member of one of these communes and mark came back and wrote a book called return from eden about one of these an effort to go back to nature and escape the harshness and crassness of highly industrialized

technologically oriented life during the 1960s one of the most common pieces of graffiti around was a short expression which said god is dead do you remember that do you ever wonder where that came from came from a book written by a french

mystic jacques lowell e-l-l-u-l the book was called technology and god is that is a phrase from a sentence a whole sentence read as follows god is dead the devil reigns and the devil is technology that was the whole sense

so the reactive sees technology is a threat once you get back to the eternal verities it's science and engineering that's destroying things all right what does this kind of an organization look like well first of all it will be organized

the way the oldest surviving form of human organization is organized what's the oldest surviving form of human organization family right the family is the metaphor this organization wants to be a great big happy family right that's one of the reasons the man

at top is also called the old man first level of vice presidents are the oldest sons then come the younger sons and then come to the nephews and the first cousins the second cousins and so on down through

the line loyalty and commitment to the welfare of the whole is absolutely essential above all other things loyalty is required in such an organization it's hierarchical and very very highly centralized nothing happens without the approval of the patriarch the old man

he's all powerful in that system okay that's a quick picture of what such an organization looks like let's take a look at how they plan well first of all this organization won't plan unless the old man approves of it because nothing is done in this

organization unless the old man approves it's not always easy to convince me or to start planning in fact very few people did until perhaps 15 years ago when columbia university had a brilliant idea of running an educational program

exclusively for these old men they did it first of all by calling it a senior executive development program you had to be either an executive vice president or ceo to be admitted so that immediately made them all want

to go but they're easy to identify the easiest way of telling one of these programs they always take place in the bahamas the second essential characteristic is the attendees are always male because in reactive organizations you don't find

females anywhere near the top except as secretaries and they are required to bring their wives or a reasonable facsimile the final characteristic of these programs is that they are required strictly to attend classes for at least two hours a day

is no real effort to overwhelm them or overcome them with education but occasionally what happens is one of the entertainers they've hired to come in gets ill conks out and i have to get somebody quickly and occasionally they

have to get they get somebody who takes it seriously and tries to teach them something and occasionally it happens that the person who they get tries to teach them something about planning so it started to happen about 15 20

years ago occasionally these old men would come back after a week and feel they have to justify their vacation to their subordinates so they would call a meeting now the first thing about the old man is he never has a meeting with anybody

except the oldest sons so he calls in the senior vice presidents and the meeting goes as follows he says boys he said i just came back from that meeting and i really learned something down there was justified to visit

he says we ought to start some corporate planning or some organizational planning so i've decided we're going to prepare a five-year plan and i want it at the end of this year he said now this is what we're going to

have to do he said in order for me to have a corporate plan at the end of the year i'm going to need a plan from each one of you in 11 months for your divisions is that clear

and they say yes sir click the heel salute and leave and they call it the next level and they say boys the old man wants a corporate plan in a year that means i gotta have a divisional plan eleven months so i need

a plan from each of you from your for your department in ten months is that clear and they say yes sir click their heel salute and leave and this process just keeps going down and it keeps going down until they reach

the indivisible part the atom of the organization this is joe in this workforce now you can see what happens is ibm or ge you've got more levels and you've got months so they call joe in to say hey

joe the old man wants a corporate plan we got to start with you so we need a plan for your section six months ago so he's used to that kind of request so the planning although initiated from the top will

begin at the bottom okay so the first thing to notice about reactive management is it engages in what's called bottom-up planning as you'll see planning will migrate up from the bottom to the top now what's the planning look like

well let's take a look this is a reactive organization so the first thing you do is make a list of all the things that are wrong with the present situation these are called deficiencies well it's easy anybody can sit down and

make a list of all the things that are wrong that's an easy step the second step is harder you design an effort to identify the cause of the deficiency and remove it that's called a project so we now have a project

for each deficiency so we have sufficiency 1 efficiency 2 and so on then we have project 1 project 2 and so on estimate the cost of the project so we get a cost estimate for each project next step estimate the benefit of the

project when we combine the cost and the benefit either the ratio a difference depends on the measures used to get a measure of performance next benefit and now you can set priorities easily enough you take the project with

the highest performance measure give it priority one two three four five and so on he's now completed the first phase of planning second phase he has to decide how much resources are going to be available to him for

engaging in these projects now the fact is he knows pretty well let's say he had a hundred thousand dollars available to him last year it was a good year i'll get five or ten percent more this year he knows that

it was a bad year we'll get five or ten percent less if so so you're going to get the same thing that's not the problem the problem is how much does he have to ask for to get that amount

[Music] because you never get what you asked for now if he's a smart manager he will consult the literature and extensive studies have been done on this and we know what the average is in the american industry i don't know what it is in

american military but i suspect it isn't very much different the appropriate multiplier is two so if he decides he wants a hundred thousand he starts off by saying i'm gonna ask for two hundred thousand that's the second state

[Music] third thing he now picks priority project number one and looks at its cost let's say it's fifty thousand dollars he subtracts that from the two hundred thousand and these are 150 thousand he takes priority project number two is

twenty five thousand he subtracts that and he keeps working his way down the priority list until he's used to 200 000.

he has 15 projects now he now packages them he produces a document which he brings these 15 projects together defending them making all sorts of promises about the rewards to be obtained by conducting them and that's his plan

which he then submits to his immediate boss all right now what happens with this immediate boss we gotta come back to this diagram [Applause] when it comes up to his immediate boss that's this fell off here now he's got seven or eight of these

things submitted to him he does three things first he has to establish his superiority to a subordinates that's critical the way he does that is he corrects their spelling and grammar the second thing he does is he adds his

own projects because he has deficiencies at his level he's gone through the same process so he now puts in projects of second level then he takes all these together repackages them adds the appropriate safety factor and submits it as his plan

and up this process goes through the lab eventually reaches here and they put together a corporate plan or a departmental plan or an agency plan which consists of 150 or 200 projects with an allocation of resources to them

in a statement of the expected benefits from each about 25 of the corporate plans i've ever seen and i've seen over 400 of them are exactly of this form and in government it's about 50 this type of planning is much more

common in government than it is in industry but it's not rare in industry before i look at this seriously with you to see what's wrong with it i'd like to share an experience i had a couple years ago

i was at a conference in new york and ran into an old classmate of mine who had really made out he was the ceo of one of the large electrical manufacturing companies in the united states we hadn't seen each other for a

long time so we had a great reunion and lunch together and i asked him what he was doing he told me the kind of work he was doing in the company and he asked me what i was doing

and he said hey he said you're doing planning he said we got a planning meeting for the corporation coming up in a few weeks up in our hunting lodge that we own in wisconsin would you like to come up and

join us and i said did you say wisconsin a hunting lodge he said yeah i said i'll be there so i joined them i spent three days up there while the vice presidents reported in their packages in exactly the way i've

just described to the executive committee of the corporation at the top and they did a little honing and chiseling and sandpapering and the projects and changed a little bit and they wound up at the end of three days

with a corporate plan with 150 or 200 projects i was very quiet during those three days i was almost in awe of this process and as a result i was invited back to next year so i was there the second year

and it was on the second day of the three i was having lunch with the ceo he said to me russ he said you know you never told me what you think of this process i said well buck before i tell you what

i think of it what i really would like to do is ask you a couple questions he said go ahead i said okay i was here last year and watched you go through this process i've been here this year through a day

and a half and there hasn't been a single reference this year to last year's plan i don't understand that oh he said that's easy he said we didn't use it i said you didn't use it i said i don't

understand he said we never use it i said oh come on you know it must cost you three to four million dollars to prepare that damn thing and manpower what do you mean you don't use it he said you don't understand i said i

know i don't you know please help me he looked at me for a moment thoughtfully and he smiled he said hey he said when you went to high school did you have to study latin well that seemed like an oddball

question i said sure he said how many years i said four you said you ever wonder why you had to study it i said of course i did he said you ever asked the teacher i said sure what'd she say he said

i said she told me it was good for me he said right he said that's good for me now at the time at the time i thought that that was really incredibly stupid it took me a long time to realize what a

genius that guy was because he knew something i didn't know he knew that if they had used that plan it would have destroyed the corporation of course at least helped the question why they did it but the fact is it was a destructive

process if they had followed through why well there are two reasons one obvious and one not at all but it will be to you now that you're educated the first is that this planning is directed to getting rid of what you

don't want right it's directed at the removal of deficiencies now unfortunately or fortunately as the case may be when you get rid of what you don't want you do not necessarily get what you do want now the easiest way i know to

demonstrate this is to go up to a room that has a television set and turn it on what's the probability you will get a program you want i have calculated this very carefully over the years and it's 0.01

one out of 100 times i will get a program i want now it's very easy to get rid of all i have to do is turn the chain what's the probability i will get a program on one in fact i've got a 50 50 chance of

getting something i want even less first principle of effective management effective management must be directed at getting what you do want not at getting rid of what you don't want because they are not equivalent things now we'll see the implications of that

as we move along the second deficiency is a lot more critical and just four or five hours ago you wouldn't know what the hell i was talking about but now you really are in good position remember we started off by describing

how the old man got it started right here when he worked his way down to joe what was he doing what was he doing to the corporation don't you see first step of analysis it was taking the hole apart exactly he

kept taking it apart until he hit the element right what happens to a corporation which is a system or a government agency which is a system when you take it apart it loses all of its essential properties the second step of this planning process

is each part prepares a plan for itself taken separately what happens it loses all of its essential properties and therefore this kind of planning never addresses the essential opportunities or problems of the organization taken as a whole or

any of its parts it's irrelevant it can't help the organization for that reason because it's non-systemically orient let me tell you one of the most important things we know about a system we can prove this rigorously but it's a

very complicated technical proof but nevertheless it's easy to grasp by example if you take any system take it apart and then arrange to have each part operate as efficiently as it possibly can you know something about the system as a

whole you want to guess what it is the system as a whole cannot be operating as efficiently as possible when you maximize the efficiency of each part taken separately you cannot have the hole operating at optimal efficiency why not

well that's what we can prove but let me give you an example incidental intelligence this is for your trivial pursuits i don't know whether it's any longer true but a couple years ago i read in the new york times

that there are 142 makes of automobile available in the united states i like that number so i'm going to have you engage with me and what galileo called a thought experiment it's an experiment so simple we can do it in our

heads let's buy one of each of the 142 automobiles bring them into a big garage you with me now we go out and hire 50 of the best automotive engineers in the united states we give them the following job tell us

which one of these cars has the best carburetor well they go off it's great fun and they come back sometime later and say the mercedes has the best carburetor so we make a note carburetor mercedes say okay now take the transmission and

do the same thing they run off and they come back said lincoln's got the best transmission so we make a note transmission link take the distributor they come back and say the volkswagen's got the best distributor one by one we take every part required

for an automobile and they tell us the best one available okay you got the picture now we take the composite list and give it back to them and say take the carburetor off the mercedes the transmission off the

lincoln and so on down this list and put it together into the best possible automobile we're gonna have all the best parts and the simple fact is we don't even get an automobile not only do we not get a good one we

don't even get an automobile the reason is perfectly clear why parts don't fit the performance of a system is never the sum of the performance of its parts it is the product of their interactions effective management must be the management of the

interactions of units not the actions of units this type of planning is planning the actions of units never the interactions what kinds of organizations tend to be reactive in their culture well the ones that blew it some years

ago they failed to make an important technological change the steel industry which failed to see what the oxygen furnace was about other industries which failed to see the value of automation the railroads which didn't see the value of the diesel until it was much too late

and they've been overtaken by the truck these industries in general tend to project their failure onto the environment and invariably it's some technological change that's occurred in the environment i've had the chance of working seven railroads over my lifetime

it's marvelous because i know the solution to the problem before i begin i don't even have to know what the problem is i know what to solve the railroad is a system of solutions looking for problems to apply them to

every damn time i work on a problem in the railroad somebody will come up to me and say we know how to take care of that i don't know what you're doing i say how would you do it

one of two answers either eliminate trucks or the interstate commerce commission [Music] typically reactive you see the railroads were once the largest corporations in the united states what the hell happened to changing they said trucks and regulations get rid of trucks and

regulation we back where we were that's typically reactive whether true or not and there's plenty of evidence to indicate that it isn't true the reactive manager is like a man who goes swimming in the ocean that gets caught in a tide that carries him away

from the shore he turns around and desperately tries to swim against the tide to get back to the shore from which he came okay so much further reactive you got any questions about him do you recognize him all right let's take the second type

inactive the inactive manager doesn't want to go back to a previous state but he does agree with the reactive that things are getting worse what he wants to do is keep things like they are if you think politically he's

reactionary and he's conservative he wants to keep things like they are this may they may not be perfect but they're as good as we have any right to expect so for god's sake keep your damn hands off let him alone

so things will not change what he wants to do is prevent change [Music] basic doctrine is if we didn't didn't do anything nothing would happen and if nothing happened that'd be marvelous because we like things the way they are

the patrons saint of inactive managers is a great german philosopher of the late renaissance leibniz leibniz is the one who proved that the world is the best possible world now you might be interested in the proof so i'll share it with you one is follow

us leyden said in order to conduct any discussion we have to have an agreed upon definition of critical terms he said the most important term in the discussion i want to have with you is god he said by god i mean a perfect being

he said if you accept that we can go ahead well that's easy to accept he said now imagine two gods alike in every respect except one exists and one does which of the two gods would be the more

perfect is it clearly the one that exists but since god is by definition perfect therefore god must exist that's the first part of his proof you like that that's nothing what do you hear the second part imagine two gods each of whom have

created a universe one universe is perfect and one is imperfect which of the two gods would be the more perfect the one that created the perfect universe right therefore since god is by definition perfect the universe must be

that neat well voltaire thought it was a scream so he wrote a satire which many of you read but may not have been aware of candy candy this is satire on on leibniz candida is the story of a young man and

his tutor candida is a young man and the studer is an old professor panglas who's a leibnizian and as they travel around the world trying to educate candide they incur one catastrophe after another but since poor old pangolos believes

this is the best of possible world he has the problem of rationalizing the catastrophes that's where the humor of the book comes out so for example he loses his left arm in an accident he said oh what the hell i'm

right-handed anyhow furthermore i can now get suits with only one sleeve and they will cost less if he later loses his right arm it turns out he didn't like to write anyhow and he hates letters and all the humor in the book comes out

of the effort to support the belief that this is the best of possible worlds now contemporary and activists don't believe this is the best of possible worlds but they believe it's good enough in order to be left alone

just this week driving into work one morning and one of the low grade intellectual disc geographies that i have to be listened to quoted j phillips oppenheimer whom i'm sure you all know the head of the manhattan project the most incredible

quote i just have been absolutely smiling to myself ever since j phillips oppenheimer said that an optimist is a person who thinks that this may be the best of possible worlds and a pessimist is one who knows that it

is in that marvelous god i deliver them that's great okay these people then try to do nothing unfortunately they can't succeed why because not everybody is inactive it's all you people out there that are trying to improve things or mucking it

up you just keep your damn hands off things would be fine but you're screwing it up in your efforts to improve things what do i do nothing until i have to well when do i have to when what you've done threatens my

survival or stability then and only then will i react now what do you call a situation in which your survival or stability is threatened it's about crisis right inactive managers practice crisis management crisis management is their style now crisis management goes under a

number of different titles in the state department was called brinksmanship by john foster dulles the english typically have a more exotic term they call it muddling through if you're a professor you don't use any of those words because students would

understand you so we use a terminology given to us by the principal spokesman of inactive management who are two political scientists eminent ones hirschmann and lindla and the doctrine is called disjointed incrementalism disjointed what does that mean you act

only when you have to not accordance with any plan only under emergencies incrementalism means you do as little as you can possibly get away with no more than you have to you don't try to solve the problem you

try to turn off the heat if you got a racial crisis as we did in the 60s the administration didn't try to solve the race problem try to stop the rioting so what you're trying to do is remove

the symptoms you're not going after the cause the way the reactive is well be that as it may with the increasing number of crises due to accelerating change the inactive manager is far from inactive he's coping with crises day after day

but even if he wasn't he'd be busy as hell the reason he'd be busy as hell is it takes a hell of a lot of work to keep people busy doing nothing it just doesn't happen naturally see people have this terrible

inclination to do something and you can't stop it but what you have to do is allow them to do something that has no effect and that's hard we have succeeded however i'm happy to say by first inventing a type of

organization which is dedicated to occupying people doing nothing and then a process to engage them in the type of organization is called a walk well it's a synonym for it it's called a bureaucracy bureaucracy is an organization whose

primary purpose is to keep people busy doing nothing now it makes all kinds of other declarations but believe me that's what it is the process that employs is called red tape now it's easy to see let me just take a

simple example i live in the state of pennsylvania we have to get our car inspected twice a year and we get our license every two years uh and it's very simple to get my license uh this is all i have to do i

received from the state an envelope and in the envelope there's a pre-punched ibm card and a self-addressed return envelope i check the entry in the ibm card sign the card make out a check take the check in the card put it in the

envelope and seal it put a stamp on it and mail it 15 minutes and a week later i received my license very easy i lived in mexico in 76 in mexico you have to renew your license every six months

the first thing you observe is four times as often every time i renewed my license i had to fill out a three and a half page form which you could not get by mail i had to go to a government office to get it

having gotten it and filled it out of course in spanish which i couldn't speak i then had to get 16 endorsements it took me an hour to two and a half days to do it every time i renewed my

license now at the end of that i got a little card who said i was authorized to drive a car exactly what i get from the state of pennsylvania what was the difference output was identical the difference is the number of people

are kept busy what were they busy doing nothing absolutely nothing the output's identical that's what bureaucracy is about it's bad enough these people do nothing the real problem is they find ways of obstructing the people who have something to do

because i was busy trying to do something and i had to waste two and a half days doing nothing the worst i've ever seen is i happen to have a trip to the middle east in the 70s and my first stop was in turkey i was at

ankara and one of my former students was my host he was the head of science and technology for the turkish government and he insisted on showing me the new buildings of the university of ankara so we went off to take a tour of

buildings and they were very proud of the fact that the new building had automatic elevators in the first that they had in turkey at the time and they were what turned out to be westinghouse elevators so he wanted me

to take a ride in them this was going to be a great novelty so we got into the elevator and there was a little girl in the uniform who asked us what floor we wanted to go to and she pushed the buttons for us

what was she doing there you know what the hell is the point of an automatic elevator if you got an operator i thought i told you i said my god you know what a hell of a way to create

employment it's a real bankruptcy of the human being that he can't find a productive way to use people he got a waste of doing this and i went on gave a long lecture and if i had known what was going to happen a

week later i would have shut up because a week later i was in iran in tehran and they went to show me a new building that had been built there we went and lo and behold they had westinghouse automatic elevators and

they insisted on taking me for a ride in the elevator was a pretty little girl in the uniform who pushed the buttons for you and out in the hall was a pretty little boy in the uniform who asked you if you

want to go up or down and push that button for you isn't that awful what were they doing absolutely nothing that's what an active manager engaged in keeping people busy doing nothing now what kind of an organization can survive

doing nothing that's the important question only those whose survival is independent of their performance [Music] what kind of organizations can survive independently of their performance the answer is easy subsidized organizations now when i say that of course the first

thing everybody thinks of is government that's true government is overwhelmingly inactive for perfectly obvious reason hard to have a better life than to get well paid for doing nothing very little pressure on you except to look busy and that's fairly easy after a while

but government isn't the only culprit every corporation is full of it you know some of you were saying to me god you know the corporation must be great they're driven by profit that's true the corporation is but the personnel department isn't it

doesn't have any p l statement the advertising department isn't the research and development department isn't the external affairs isn't they are subsidized bureaucracies with no measure of performance applied to them and they're busy making work i just engaged in a study with a major

corporation in this country and we went from 850 in corporate headquarters to 72. and for the first time in 15 years it's working well we got rid of all those damn stuff we didn't fire all those people we got rid

of them other ways shot a few here and there but now it's working well because everybody's there has got something to do that needs to be done corporations are full of it but lest you think i'm prejudiced let me

admit shamefacedly that the absolute epitome of inactivity is the american university no question about it the university has raised an absolute fine art the capacity to occupy large numbers of people doing nothing they do it by perpetuating the myth that

they educate their students that's absolute nonsense anyone who ever went to a university know that you forgot 99 of what was told you there now you learned a hell of a lot while you're at the university but not because of the university despite it

you learned a lot but not in class the university it's incredible you know what a full load is considered to be in the major university united states you teach six hours a week we are the highest paid people in the

united states for our work not the highest paid people but for our work it's just unbelievable can you imagine grown men going in and giving twice a week a course that they've given each week for the last 30 years and that's called

a full-time job the president of my university in a recent faculty meeting in a rare moment of candor and perception said to the faculty gentlemen do you realize that this place is as hard to change as a cemetery

and i was sitting in the audience and i couldn't resist i said and do you realize that the reasons are exactly the same [Music] universities haven't changed significantly since the 12th century when they were created only been superficial changes

you can't change a university is absolutely resistant to any effort to change it the myth that universities are run to educate students just nonsense it's perfectly clear what a university has run for it's to provide the faculty with

the quality of work life that they want you can't understand the university unless you understand that because nothing makes sense if you think it's trying to educate students now we're going to come back to that later okay the inactive is caught in the tide

carrying him away from the shore what does he do he looks around and says hey i like it here he tries to throw out an anchor and hold a fixed position in the moving time okay now we come to the epitome of american

management the dominant counter by the way about 25 percent enacted 25 reactors the dominance type is pre-active and it's much more dominant than that because it's the only kind of management that most business schools teach it's the official management doctrine of

the united states the kind we exported all over the world when they thought we were good we're about to run out of time so we're going to have to stop backing for a little bit take a stretch