Thursday, 26 February 2009

An introduction to the principles

“Do you ever see directors approach a strategic decision with dispassionate analysis? Don’t you find they start with their instinctive decision (influenced by emotions and self-interest) and then happily use any misleading argument or irrelevant facts to dispose of any argument standing in the way of deciding as they want?” Anon

That was the kind of thing people were saying to us, and we were saying to each other, before we decided to stop moaning and work out why. (We are a senior civil servant, a company director with experience of technical risk management, and a CxO in an IT company.)

We want to explain why the top-level directors of a large organisation can be so clever yet make such bad decisions. We set out here to explain some behaviour of directors, and some features of their decisions making processes.

We will draw several threads together:
the theory of evolution (on the 200th anniversary of Darwin’s birth);
the factors at work in promotion of managers to director level;
the calls in recent years to ‘strengthen business governance’; and
how evolutionary principles might be applied to the current crisis in banking.

You can compare the race for survival between enterprises in a competition with each other with the race for survival between individuals and species in the theory of evolution. We consider the race for promotion in the same light.

We don’t insist that our principles are good or bad. We think of them as the natural consequences of evolutionary forces and human nature. You the reader may choose whether you use the principles or decry them.

Despite our best attempts to be satirical, some advice on professional decision making has crept in here and there. And we give you some references to follow up.

It is encouraging to find our principles are endorsed by others.

“In a job like mine… you only really have a 55% chance of being right, now matter how bright you are.” James Crosby (then CEO of a major UK bank).

Before we set out our principles, let us a recap some established principles.

The Peter Principle (Laurence Peter)
"In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence"

The Dilbert Principle (Douglas Adams)
“The most ineffective workers are systematically moved to where they can do the
least damage: management.”

“Power tends to corrupt” (Lord Action)
"I cannot accept your canon that we are to judge Pope and King unlike other men with
a favourable presumption that they did no wrong. If there is any presumption, it is the
other way, against the holders of power, increasing as the power increases.”

The theory of evolution (Charles Darwin)
You will know that evolution works on the basis of random changes, some of which
lead to an individual having an advantage over others

Parkinson's Law (Cyril Northcote Parkinson)
"An official wants to multiply subordinates, not rivals"

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