Freedom, Inc_ - Brian M. Carney [19]
Gordon Forward, the former CEO of Chaparral Steel, calls this “managing for the 3 percent.”12 Many managers have a tendency to address a small problem—sometimes a problem confined to a single “nonconforming” employee, or a couple of them—by creating even more drastic rules for everyone. One CEO at a small company explained to us that because he caught one secretary dipping into the office supplies for her kids’ back-to-school needs, he issued a regulation that no office supplies could be ordered during the summer. “In that way,” he explained, “there will be nothing left on September first for her to take.” Of course, by then there might not be any office supplies for anyone else either, but by golly, he showed that secretary, didn’t he?
“Management for the 3 percent” is inevitable in “how” companies because simple controls are always outwitted by that 3 percent. Naturally, new, more drastic ones are introduced to catch them. In addition to the ordinary bureaucratic overhead incurred through the accumulation of these “corrective” policies, managing for the 3 percent imposes dramatic hidden costs on businesses by contributing to the disengagement of the other 97 percent.
But this kind of rule making, as silly as it looks from the outside, does have a number of advantages if you’re a manager. There’s no awkward confrontation with the pilfering employee, no embarrassed denials or outward resentment. Instead, the manager gets to fall back on the last refuge of bureaucrats everywhere: “That’s the policy!” And so the regulations live on, far beyond whatever usefulness they once had, even years or decades after the single, awkward circumstance that they were designed to address has passed out of memory. All the while, these “useless” rules nevertheless have far-reaching consequences. They reliably contribute to the malaise of the 97 percent, who find themselves treated with suspicion and crushed by seemingly arbitrary company policies.
But more and more “how” companies go even further than simply casting a generalized control and suspicion over the 97 percent. Still unable to catch the 3 percent who usually find ways to outwit the bureaucratic police, these companies try to enroll the 97 percent in policing.
We happened to encounter two managers from one large American company who had been placed in precisely that situation. They had received a new company policy document on “how we conduct business.” Every employee was expected to read, agree to, and sign the document, which included a commitment to call a hotline and blow the whistle on any malfeasance of which he became aware. One of the two objected to this—he didn’t want to be a snitch. He threatened to refuse to sign the policy. His colleague suggested that, instead, he just sign it and not adhere to it, as others would do. The two men then proceeded to debate whether it was better to object to the policy openly or pretend to abide by it.
The point is not which course of action they chose in the end; that these two were even having this debate demonstrates that the objector, at least, had enough integrity to take the policy seriously. The 3 percent at whom the policy is aimed, by contrast, won’t hesitate to sign and ignore the policy while the rest of the employees will feel alienated by the humiliating ritual of promising to act as informers on their colleagues.
You may think that disengagement problems like these are rare in “how” companies—that in the majority of traditional companies, a very small proportion of employees is disengaged. Otherwise, how can we explain the unprecedented growth that the developed world has experienced since the Industrial Revolution? This argument would be plausible if we didn’t have some statistics on the matter. Gallup regularly conducts broad surveys on the engagement of American workers. Its results are always similar. In 2006, only 27 percent of employees at