Fundamental truths or erroneous assumptions?

Jul 18 2005 by Brian Amble Print This Article

Offering incentive pay makes organizations perform better. Driving down product and wage costs is essential for success in low-margin businesses. Holding people accountable results in fewer screw-ups. All fundamental truths of business, right?

Wrong, says Jeffrey Pfeffer, Professor at the Stanford Graduate School of Business. These are merely assumptions about what makes organizations competitive.

Change your assumptions and you might find your company - and your profitability - improving, he argues.

Pfeffer . . .has observed that numerous, often hidden, assumptions underlie the mental models or mindsets of senior leaders. These assumptions inform the design of specific business practices—the particular compensation mechanisms, performance management systems, new measurement practices, and the like that define an organization. If such underlying assumptions are correct reflections of what truly produces employee and organizational effectiveness, you're golden. But if they turn out to be erroneous, you could be headed for trouble.

Untested Assumptions May Have a Big Effect