Operations Research Management Science

OR/MS Today - October 2002

Forum

Are Smart People Overrated?

By Andrew Boyd

Deceitful accounting practices, dishonest management and complicit boards of directors are the common reasons cited for the downfall of Enron and the growing lack of confidence in Corporate America. Without doubt these are the most visible factors leading to Enron's collapse, but there are deeper cultural issues that reach frighteningly close to the well-educated roots of management scientists.

Enron believed in smart people. Streams of advanced-degree recipients from top schools were brought through annually to feed "the talent mind-set," a business philosophy captured by McKinsey consultants Michaels, Handfield-Jones and Axelrod in their book "The War for Talent." Talent became an end unto itself. Embracing the "new orthodoxy of American management," former Enron CEO Kenneth Lay went so far as to say, "The only thing that differentiates Enron from our competitors is our people, our talent."

The faith placed in talent extended beyond hiring to management practices. Management could only serve to restrain the creative energies of talented people. Corporate goals were best served by hiring smart people and getting out of their way. In "Leading the Revolution," Gary Hamel, visiting professor at the London School of Business, extols Enron while relating an encounter with Ken Rice, former head of Enron Capital and Trade Resources. "You cannot control the atoms within a nuclear fusion reaction," says Rice. "We allow people to go in whichever direction that they want to go."

Malcolm Gladwell relates these and other accounts in a thought-provoking New Yorker essay entitled "The Talent Myth" (July 22, 2002, pgs. 28-33). "Enron hired and rewarded the very best and the very brightest," Gladwell notes, "and now they are in bankruptcy." Perhaps with a hint of irony, he is led to ask a question that seems inconceivable: "What if Enron failed not in spite of its talent mind-set, but because of it? What if smart people are overrated?"

Gladwell's comments are easily dismissed, but consider the following scenarios:

A management scientist locates a high-value modeling application that will impact the daily activities of users that are not technically oriented. Inadequate time is spent addressing the concerns of the users, the model value is never realized, and the project is a highly visible failure that negatively impacts future operations research activities.
A sophisticated model is developed by a management scientist who then loses interest and fails to put in place processes and documentation to maintain the model. The model and its value wane and become part of a legacy environment that no one understands well enough to support.
Two management scientists disagree on how a problem should be modeled. Internal fighting negatively impacts organizational credibility and the problem is abandoned.
Faced with two problems — one with high value but low interest, and one with low value but high interest — a management scientist chooses to work on the low-value, high-interest problem.

In each case, talented people fail to use their abilities effectively. Responsibility lies both with the individuals and with the organizations for which they work. For its part, Enron failed to manage its talent, mistaking creative activity for profitable creative activity. Disliked by many talented people, management keeps organizations working as a coherent entity toward common goals. It also serves as a repository for accumulated knowledge so that mistakes made in the past can be avoided in the future.

"Groups don't write great novels, and a committee didn't come up with the theory of relativity," Gladwell points out. "But companies work by different rules. They don't just create; they execute and compete and coordinate the efforts of many different people." Companies exist because they can achieve objectives beyond the capacity of any single individual, but achieving those objectives requires management. A controlled nuclear reaction is capable of generating tremendous power. An uncontrolled nuclear reaction is a bomb.

For our part as management scientists, focusing on mathematical models and algorithms to the exclusion of more fundamental business issues stymies the growth of our discipline. Operations research has made phenomenal contributions in its half-century of existence, and our skills are needed now more than ever. Yet many business leaders remain unaware of what operations research is, or fail to appreciate its vast potential. To the extent that we can communicate the competitive necessity of operations research, we can drive the productivity and profitability of organizations to levels never before experienced. However, to achieve the impact we are capable of, we must look beyond models and algorithms to the bigger picture. We must be smart enough to warrant the designation.

E. Andrew Boyd is chief scientist and senior vice president of Science and Research at PROS Revenue Management, www.prosrm.com. He received his Ph.D. in operations research from MIT in 1987, and can be reached at aboyd@prosrm.com.

Table of Contents

OR/MS Today Home Page

Lionheart Publishing, Inc.
506 Roswell Rd., Suite 220, Marietta, GA 30060 USA
Phone: 770-431-0867 | Fax: 770-432-6969
E-mail: lpi@lionhrtpub.com
URL: http://www.lionhrtpub.com