Real Madrid recently agreed to pay £80 million for one man - Cristiano Ronaldo. Not only is this a huge amount of money in real terms, it's a huge amount when compared to other football transfers. It eclipsed the previous world record, which was set only days earlier, by more than 40%.
So why did Real Madrid spend so much? Firstly, they had been performing relatively poorly and were seeking to improve their performance. In doing so, they bought into the 'hero fallacy'. This is a tendency we all share to place a disproportionate emphasis on individuals when explaining success. Essentially, we explain the outcomes of amazing events by paying attention to the most obvious causes - the leader or outstanding performer. The fallacy is that the real causes are often too subtle and less visible to us, so we overemphasise the part played by the most visible - the heroes.
The second reason Real Madrid spent so much is they failed to take into account 'regression to the mean'. This is the principle that the more extreme a performance (either very good, or very bad) the more likely it is to move back toward the average. Why? Ronaldo's outstanding performances were based on three factors - his ability, his form, and luck. Whilst his ability is a constant, his form and luck will vary over time. The £80 million price tag reflects Ronaldo's performances when he was in good form and having the rub of the green. As his form and luck inevitably changes so his performances will decline, even though he still retains tremendous ability.
So what does this tell us about managing a business in a downturn? Like Real Madrid, many businesses will be desperately keen to improve their performance. With this there comes the risk of overreliance on following or recruiting 'heroes' - the highly visible individuals who will single-handedly turn things around. Instead, organisations should remember that success is rarely predicated on one person alone and that everyone, even the best, will waver at times. In many ways the answers can be found in the world of football - the best teams tend to have two features - good players throughout the team and good teamwork. The conclusion, therefore, is to focus on getting and retaining good people across the business, and to ensure good communication, with everyone working towards the same objective.
And what lies in store for Ronaldo? No doubt he'll score some spectacular goals, but without 10 colleagues backing him up, few of them will be winning goals.
Stafford Hospital has hit the headlines for all the wrong reasons. A report by the Healthcare Commission found that around 400 more people died at the Hospital between 2005 and 2008 than would be expected, compared to national averages.
How could such poor patient care have come about? It’s all down to the targets, apparently. Several doctors recounted occasions where managers had asked them to leave seriously ill patients to treat minor ailments so that a target could be met. There was also “pressure, pressure, pressure” on staff to meet the four-hour Accident & Emergency waiting time target. So the targets did it, right?
Wrong. That argument quickly falls flat under scrutiny. The targets in question are national ones – the same that every Hospital in the country operates under. If the targets are to blame, why were so many more patients dying at the Stafford Hospital in comparison to others? It doesn’t make sense. That’s because targets aren’t the real issue.
The use of targets to stimulate increased performance has been well evidenced. They can focus people’s attention on important tasks, provoke additional effort , and be used to measure performance – when used properly.
The act of setting targets, per se, is not the problem. How they are used (or misused) is. The Chinese philosopher Confucius said that “the superior man understands what is right; the inferior man understands what will sell”. Unfortunately, the leadership at Stafford hospital saw targets as a way of ‘selling’ themselves into Foundation status – rather than a means of promoting and monitoring patient care.
Targets, then, are desirable but not sufficient for effective performance. Really, this is a tragic case of poor leadership and management leading to unnecessary deaths. Ignore the cries of ‘target culture’ because poorly used targets are the symptom not the cause. A poor manager is a poor manager – with or without targets.
"Perhaps in future it would be better if all involved accepted the age old adage that private parties are just that." So wrote Nathaniel Rothschild in his now infamous letter to the Times newspaper about George Osborne, the shadow chancellor. Rothschild's letter was short, sharp, punishment, meted out because Osborne broke one of high society's unwritten rules.
Unwritten rules surround us, some we are aware of and others we are not, because they are unconscious. In both cases there are consequences for breaking these rules. For example, stereotypes are powerful sources of unwritten rules. When you think of a leader what sort of person springs to mind? For most of us the answer will be a man, especially a tall man. Take the workplace. Recent research by the Cranfield School of Management showed that women held just 12 per cent of board seats at FTSE 100 companies. Meanwhile, Psychologists have found that tall men earn more than their shorter counterparts - a man who is 6 feet tall earns, on average, nearly $166,000 more during a 30-year career than a man who is 5 feet 5 inches.
This is because women, and short men, break our unwritten rules. We expect our leaders to show signs of 'strength' such as a large stature and a deep voice. However, these examples show that unwritten rules can be neither fair nor helpful. Importantly, we can also fall foul of our own rules. Take Warren Harding who was president of the United States from 1921-1923. In his book 'Blink', Malcolm Gladwell draws on evidence describing Harding as "Looking like a President"; his biographer wrote that his "lusty black eyebrows contrasted with his steel-grey hair to give the effect of force, his massive shoulders and bronzed complexion gave the effect of health." In essence, this was a man who appealed directly to out unwritten rules about what a leader should look like.Unfortunately for the American electorate, Harding has also been described as "one of the worst presidents in American history". His limited intellect and unclear direction meant that he was, in many respects, an ineffectual leader. The voters' unwritten rules blinded them to the rather disappointing reality.
This poses a real problem for organisations that can't (or won't) challenge and change these types of unwritten rules. The result is talent management, promotions, and hiring processes which play to stereotypes, hunches, and 'intuition', favouring those who meet the rules but not the real needs. The result, like Harding, can be someone who looks like they can do a job which, in reality, is beyond them, whilst those who are capable are either frustrated bystanders or are busy succeeding elsewhere. In the current climate who can afford that?
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