The Secret Life of Organizations

Business literature typically characterizes the people at the top of organizations in remarkably positive terms. Senior executives are described as visionary, acute, charismatic, decisive, creative, etc.—i.e., as being substantially more talented than the average person. They are also usually described as being well motivated, as caring about their staff, their colleagues, their organizations, and their shareholders. The reality is somewhat less flattering.

With regard to the talent level of senior executives, there are no reputable data to support the claim that they are more capable than a group of younger but equally well educated managers. The data do indicate, however, that, as one ascends the corporate hierarchy, the demands of jobs change, and the data show that derailment is a function of an inability to make the needed adjustments to changing job demands. We can conclude that the senior people in most organizations differ from their younger colleagues primarily in terms of age and political experience, and little else. But what about the claim that the senior people are better motivated than the rest of us? The example of Sprint Nextel, a telecommunications company headquartered in Overland Park, Kansas is instructive.

Daniel R. Hesse, who formerly ran the wireless business at AT & T, became CEO of Sprint Nextel in December, 2007. Consider the situation he faced and with which he is valiantly trying to cope. First, the management team that he inherited had participated in the merger of Sprint with Nextel, a merger that is charitably described as “ill fated” because the two corporate cultures were so poorly aligned. Second, the same management team presided over a massive defection of customers; at 2.5 percent, Sprint’s client churn is the highest in the industry; in the first quarter of 2008, 1.1 million of Sprint Nextel’s 59.3 million customers defected to other companies. They left because they were tired of surly customer service and lackluster cell phones.

At his first meeting with his senior management team, Mr. Hesse asked the group who was responsible for customer service and no one raised a hand. At his next meeting he asked senior managers how they had arrived at their earnings projections and the response was blank stares. Mr. Hesse has moved quickly to put some accountability in place for his senior managers, but that is not the point. The situation he encountered is actually quite common, the reason the situation is common is important, and has to do with the secret life of organizations.

The fundamental dynamic in every organization is the individual search for power. It is a Darwinian process, which means some people are more successful at it than others, and they rise to the top. Perhaps the most important single challenge for top managers is to try to persuade their staff to spend less time trying to advance their careers and more time trying to enhance the performance of the organization that employs them. This is a challenge for two reasons. On the one hand, American culture, with its symbiotic ties to capitalism, is inherently individualistic and typically misreads Adam Smith’s concept of the “invisible hand”. Many people (who should actually know better) believe Adam Smith argued that if each person pursues his/her self-interest, the general welfare will take care of itself. Smith had no illusions about the rapacious tendencies of capitalism; he understood that, left to their own devices, most people will behave badly. Smith also understood how hard it is to get people to understand that their welfare is tied to the welfare of the collective.

On the other hand, managers are usually evaluated and promoted based on how much their boss likes them. They are rarely evaluated and promoted based on their contribution to the maintenance of the entire organization, or to the team for whose performance they are responsible. And this was exactly what was going on at Sprint Nextel before Daniel Hesse arrived. His challenge is to damp down the individualistic excesses of his managers and find leaders who are willing to think about and work for the good of the organization rather than trying to enhance their personal careers. His biggest asset in this process is his own stature as a role model.