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Financial Myths: Work Smarter Not Harder — Part III

By  +Follow July 1, 2014 7:21AM
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value of business consultants, working harder versus working smarter, examples of working smarter, bad business advice

Much like Garrison Keillor’s Lake Wobegone Days, everyone wants to be above average, so, by definition, people work smarter if not harder. The first installment showed that this myth appeals to many but it fails to yield unvarying success.

Jumbo Shrimp, Anyone? 

Part II looked at the curious tendency toward oxymorons, an ironic word for the Work Smarter devotees. The platform concept in manufacturing generates its own incongruity – small car extravagance; fuel efficient large car feel, affordable luxury. Curiously, this apparent lack of logic may open the door to market hegemony as emerging markets cut into the apple of success.

The myth deserves a more probing exploration of the “Work Smarter” notion. Those who work smarter spur the product and business methods sovereignty of the United States. Iconic brands such as Coca Cola (KO) , Microsoft (MSFT) , Apple (AAPL) , McDonald’s (MCD) and Phillip Morris (PM) circle the globe. Business practice leadership shows itself in the growth of Masters of Business Administration (MBA) programs worldwide, including the former Soviet Union. Students see American business practices as the most practical and successful.

Despite a long record of such breakout successes, popular wisdom holds that the US economy is in a slump and that China will soon rank first. What an opportunity for the Myth Buster!

Satchel Paige’s idea that “Something might be gaining on you” is not new. In previous decades, it was widely believed that Japan would overtake the American economy through seizing ideas that are loosely considered American and making them better: cameras, televisions and automobiles, for example, Canon (CAJ) , Sony (SNE) and Panasonic (PCRFY) . Japanese firms made their mark through a single-minded dedication to quality. Even though the Iphone is thought to have changed the way people communicate, Samsung, a South Korean company, holds higher market share than Apple. So, the idea of Americans inventing a product or technique and someone else perfecting it has been in our face for decades.

A major adherent to this subset of the Work Smarter Not Harder myth is Germany, which is also grabbing American ideas and making them work. The latest target is less attractive emerging markets. Take, for example, the expansion of on-line shopping. The wizard behind the curtain is a German company, Rocket Internet GmbH, which employs 27,000 in 50 countries. While eBay (EBAY) focuses on Russia, China and Brazil – members of the well known BRIC group -- Rocket Internet uses concepts developed by Amazon (AMZN) , Groupon (GRPN) and eBay to target Latin America, Africa (especially Nigeria) and the Middle East. While the American progenitors of online shopping reap the profits of the wealthiest markets, German entrepreneurs make the concept work in the shadow of the United States and Europe, much as Japan first focused on small cars with superior quality.

Being Smarter and Working

An intriguing sidebar of this myth is those who really are smarter; how hard they work is another matter. If you have been in management for a long time, you know that some senior managers possess limited experience managing people, money or projects. They reach their positions by fitting the profile of a good manager -- they’re smart. At least they appear smarter than their colleagues.

Some years ago, the author worked for a CEO who thought he could raise $35 million based on his ability to convince others of the soundness of the project. He flopped. Only when a feasibility study was created that showed the purposes and uses of funds and how the investment would work did the financial spigots turn on. The CEO convinced himself that he wrote the feasibility study. After all, he was smarter than everyone else. It is rumored that he is now selling sand in the Sahara equipped with attractive financial projections.

This vignette reveals the power of this myth – being smart can outduel experience and hard work. Here is how it works. Think of an organization that abhors a new technology, a competitor or a new product. How can they find independent verification for their passion? Senior managers are more likely to believe a point of view if it comes from an outside consultant. Outside means independent; consultant means smart.

According to Duff McDonald’s The Firm: The Story of McKinsey and Its Secret Influence on American Business, one of the worst examples of bad advice was McKinsey & Co. advising AT&T against mobile phones. Let’s give this the myth buster review. Which company did not want to hear that mobile phones had potential? AT&T (T) , the masters of land lines and wall phones? By comparison, which organization was most certain that Fed Ex’s (FDX) overnight mail idea was ridiculous? The Post Office (USPS)? Beyond the idea that mobile phones really might have been a bad idea at that time and beyond the notion that McKinsey could couch its recommendations in a dizzying array of statistics, outside experts confirming what management thought would prove very welcome.

This smart consultant effect is true even if the manager inside the company already believes the idea and even if he or she told the consultant about the idea. Notice the distinction. Many critics cite consultants for giving bad advice. In many instances, they only delivered bad advice derived from the company.

So, some managers who listen to the consultant’s presentation are thinking they agree because they already knew what the consultant says. A few disagree but cannot say anything – after all, the advice is coming from smart, independent consultants. Underlying this sweet spot of the management consultant is the Work Smarter Not Harder myth.

Considering three installments on this intriguing myth, it has staying power. But to get the most out of it, do both: Work Smarter and Harder. The next article will examine another compelling myth.

************************************

Michael McTague, Ph.D. is Executive Vice President at Able Global Partners in New York, a private equity firm.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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By  +Follow July 1, 2014 7:21AM
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