Anti-Studer: Selection Bias

I’d like to start with the claim that selecting the right people is the key to success. First, I dispute it’s truth.

In many cases a group of very successful people become unsuccessful and vice versa. This doesn’t mean that selecting people doesn’t matter, but that it’s not paramount.

1a. From Good to Bad: Digital Equipment Corporation. In 1985, Business Week said that DEC was “a freight train that can’t be stopped.” In 1989, Business Week concluded that DEC had been “derailed by bad management.” DEC's leadership went from being profiled in McKinsey’s In Search of Excellence to near non-existence in less than ten years.

1b. From Good to Evil: The Stanford Prison Experiment. Shortly after becoming “guards,” young men judged to be stable began to abuse the “prisoners.”

In both cases, the bad things that happened, happened under the guidance of formerly good managers/people. The DEC case is particularly interesting, since at no point could any of the leaders have been thought to be stupid or ill-intentioned. In fact, they were clearly dedicated to what was good for the company.

2. From Bad to Good: NUMMI, Fremont, CA. NUMMI is a joint venture between GM and Toyota. GM had closed GM-Fremont in 1982.

The reasons for closing the plant were sound: GM-Fremont ranked at the bottom of GM’s plants in productivity and was producing one of the worst-quality automobiles in the entire GM system. A militant union averaged 5000 to 7000 grievances per thee-year labor contract. The plant was characterized by high use of sick leave, slowdowns, wildcat strikes and even sabotage. First-line managers were know to carry weapons for personal protection. Daily absenteeism was almost 20 percent, and drug abuse and alcoholism plagued the workforce. -Hidden Value, p. 182

NUMMI started producing cars (Chevy Nova and Toyota Corona) in 1984. In 1986, with 85% of the same workforce--many workers had relocated after the plant’s closure in 1982--and under the same union leadership, NUMMI was twice as productive as the next best GM plant and its quality indicators were nearly on a par with Toyota's flagship plant in Japan.

StuderGroup view: hiring the right people is paramount.

Anti-Studer view: this is critical, but only trivially so, since it appears that virtually everyone has the potential to fail, as well as the potential to prosper in a healthy organization. Being selective is good. Hanging all of your efforts on this runs counter to good sense.