Bob Sutton on Organizational Wisdom and Building Better Companies

The Knowing-Doing Gap in Organizations

Bob Sutton, organizational psychologist at Stanford and bestselling author, joined the Eric Ries Show to discuss his decades of research on workplace culture, leadership, and building better organizations. They began by discussing Sutton's classic book "The Knowing-Doing Gap", which explores why smart people in companies often fail to act on what they know.

Sutton explained that there are several key reasons for this gap:

1. Misaligned incentives - Sometimes it's safer to go along with bad decisions than to speak up, even when you know better.

2. The "smart talk trap" - In many organizations, people are rewarded more for saying smart things than for actually implementing ideas. Strategic planning exercises that go nowhere are a common example.

3. Spending as a substitute for thinking - Especially in wealthy companies, throwing money at problems is often easier than carefully analyzing and solving them.

4. Status games and internal competition - People focus on looking good and winning arguments rather than collaborating to get things done.

Sutton noted that these issues are especially prevalent in large, complex organizations. However, he emphasized that some companies manage to avoid these traps and maintain a bias for action even as they grow.

The Disease of Addition in Organizations

A major theme Sutton has explored in his work is what he calls the "disease of addition" in organizations - the tendency to constantly add new initiatives, processes, and bureaucracy rather than streamlining and focusing.

He explained several reasons why organizations tend towards addition rather than subtraction:

1. Evolutionary psychology - Historically, humans who hoarded resources were more likely to survive, so we're biased towards accumulation.

2. Perverse incentives - In most organizations, people are rewarded for launching new initiatives, not for eliminating unnecessary ones.

3. Identity and ego - People become attached to their own ideas and projects, making it hard to let go of things.

4. The "my stuff is stuff, your stuff is shit" mentality - We tend to see our own ideas as essential while viewing others' as expendable.

Sutton argued that the best leaders and organizations are able to resist this tendency and maintain focus on what truly matters. He gave the example of Steve Jobs ruthlessly cutting projects at Apple to maintain focus.

Constancy of Purpose and Organizational Culture

A key theme in Sutton's work is the importance of "constancy of purpose" - having a clear, consistent mission and set of values that guide decision-making throughout an organization.

He explained that the best organizations have:

1. A few simple, shared beliefs about what's sacred and taboo
2. People who talk about these beliefs regularly
3. Mutual accountability for upholding them
4. Actions that are guided by these core principles

Sutton gave Amazon as an example, noting that regardless of their role, Amazon employees were laser-focused on customer experience and frugality. When people violated these principles, they faced pushback not just from bosses, but from peers.

He contrasted this with organizations that lack a strong, consistent culture. These companies often suffer from:

1. Incoherence between different parts of the organization
2. Constant shifts in priorities and strategy
3. Difficulty maintaining focus as they grow

Sutton emphasized that building and maintaining this kind of culture requires constant effort and reinforcement from leaders. It's not something that can be established once and then left alone.

Leadership and the "Attitude of Wisdom"

Sutton discussed what he calls the "attitude of wisdom" that the best leaders possess. This involves:

1. The confidence to believe you might be right and push people forward
2. The humility to realize you might be wrong and remain open to feedback

He argued that great founders and leaders are able to balance these two mindsets - expressing strong conviction while remaining adaptable. Steve Jobs and Jeff Bezos were cited as examples of leaders who could push hard for their vision while still being willing to change course when needed.

Sutton contrasted this with leaders who become overly attached to their ideas or overly confident in their own abilities. This often leads to ignoring warning signs and doubling down on failing strategies.

Building More Humane and Effective Organizations

Throughout the conversation, Sutton emphasized that it is possible to build organizations that are both highly effective and treat people well. Some key principles he highlighted:

1. Focus on long-term value creation rather than short-term profits
2. Treat employees and customers with genuine care and respect
3. Maintain high standards while also fostering psychological safety
4. Resist the urge to constantly add complexity - be willing to subtract and simplify
5. Align incentives with desired behaviors and outcomes
6. Foster a culture of mutual accountability and continuous learning

He gave examples like Costco, which has achieved massive success while treating workers well, and innovative healthcare companies that genuinely put patient outcomes first.

Sutton acknowledged that building such organizations is challenging and requires constant effort. However, he argued that in the long run, more humane and mission-driven companies tend to outperform those focused solely on short-term profits.

Resisting Organizational Corruption

Ries raised the question of whether it's truly possible to build organizations that can resist corruption and maintain their values over the long term. He noted that even companies with strong initial cultures often seem to eventually succumb to financial pressures and lose their way.

Sutton offered a nuanced perspective on this:

1. He agreed that no organization is immune to corruption, and many do eventually decline.

2. However, he argued that companies with strong, positive cultures tend to last longer and perform better over time.

3. When corruption does set in, it often leads to inferior products, poor treatment of employees and customers, and eventual decline.

4. There are examples of companies that have maintained strong values and performance over many decades.

5. Leaders play a crucial role in setting the tone and maintaining ethical standards.

Sutton emphasized that while perfection may not be possible, striving to build more ethical, mission-driven organizations is still worthwhile and tends to produce better outcomes in the long run.

Practical Advice for Leaders

Sutton offered several pieces of practical advice for leaders trying to build and maintain healthy organizational cultures:

1. Be very careful about the risks of power - as you become more successful, people are more likely to flatter you and withhold critical information.

2. Maintain connections to all levels of the organization - don't rely solely on information filtered through management layers.

3. Focus intensely on the most important priorities and be willing to delegate or ignore less critical areas.

4. Know when to get deeply involved and when to step back and let others take the lead.

5. Foster an environment where people feel safe and obligated to offer constructive criticism.

6. Maintain a learning mindset rather than fixating on success or failure.

7. Clearly communicate and reinforce a small set of core values and principles.

8. Be willing to remove people, even high performers, who violate core values.

Conclusion

Sutton's decades of research offer valuable insights into building more effective and humane organizations. While he acknowledges the challenges, his work demonstrates that it is possible to create companies that achieve high performance while treating people well and maintaining a strong sense of purpose.

Key takeaways include the importance of:

1. Maintaining constancy of purpose
2. Resisting unnecessary complexity and bureaucracy
3. Aligning incentives with desired outcomes
4. Fostering cultures of mutual accountability and continuous learning
5. Balancing confidence with humility as a leader

By focusing on these principles, leaders can work to build organizations that not only perform well financially, but also make positive contributions to society and provide fulfilling environments for employees.

Ultimately, Sutton's work suggests that while building great organizations is never easy, it is a worthy and achievable goal - one that can create tremendous value for all stakeholders in the long run.

Article created from: https://www.youtube.com/watch?v=K_ZczJFIlPQ