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April 8, 2007
David Warsh, Proprietor

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Beyond Coordination and Control Is… Transformation

By any measure, Michael Jensen is an interesting figure. After graduating from Macalester College in 1962, he learned economics at the University of Chicago in the mid-1960s, and became co-founder in 1973 of the Journal of Financial Economics that, along with  two other scientific journals, launched a revolution in quantitative finance — portfolio selection, options pricing and all that. His 1976 paper with William Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” started another revolution, and quickly became one of the most-cited papers in all of present-day economics.

By emphasizing the frequent misalignment of incentives between decision-making and risk-bearing — between “ownership and control” — Jensen and Meckling provided a deep theoretical rationale for a good deal of industrial restructuring that took place in the West, starting in the 1980s. Meckling retired and died, at 76, in 1998. Jensen, having made his reputation at the University of Rochester, moved to the Harvard Business School in 1985 and became an academic star of the first magnitude

At Harvard, he served during much of the 1990s on the steering committee of the Mind Brain Behavior Initiative, an interfaculty effort to bring together a wide range of scholars interested, as Jensen describes it, in understanding the limitations of the human brain and its role in generating counter-productive human behavior. And in 1994, he co-founded the Social Science Research Network (SSRN), the largest publisher of scientific working papers in the social sciences. The idea was to make a more efficient market in serious new scholarly ideas.

“We apply no filters other than that the paper should be part of the worldwide scholarly discourse in the area,” he explained to Economic Principals at one point. “So, once in a while, an editor, or I, or somebody else, will send back a paper as inappropriate. But other than that, we’ve followed the principle, ‘Let a thousand flowers bloom.’”

Last month, Jensen himself put that principle to the acid test when he partnered up with fifteen others to create on SSRN an outlet, an abstracting journal, for the work of something they call the Barbados Group — as they describe it, “an international, self-selected group of scholars, consultants and practitioners whose intention is to create a New Paradigm of Performance, the working name for which is The Ontological Foundations of Performance.”

The Ontological Foundations of Performance? Among the leaders of the Barbados Group is self-help guru Werner Erhard, founder Erhard Training Seminars, or est, as it became known, which in the 1970s enjoyed a vogue as a rival of sorts to the Church of Scientology, before Erhard sold the seminar business to a group of friends and relatives (who renamed it Landmark Education) and went to live outside the United States. Part of the Barbados plan, Jensen explained in a conversation last week, is to “lay the foundations for real science of leadership.

Although long out of the news, Erhard remains a controversial figure.  Born in Philadelphia in 1935, he worked as an automobile and encyclopedia salesman, becoming interested in the self-help industry in the early 1960s.  He dabbled in Dale Carnegie courses, the Church of Scientology and Zen Buddhism, among other spiritual disciplines, before founding the est discipline in 1971. A set of techniques for seeking rapid self-improvement, est training relied on long weekend sessions, sometimes including 18-hour days and other boot-camp methods, to produce dramatic changes in self-image and behavior. Something of the flavor of the controversy surrounding Erhard’s self-improvement techniques can be gleaned from this heavily-contested Wikipedea entry. Erhard’s own page is illuminating, too.

In addition to Jensen and Mark Zupan, dean of the Simon School of Business at the University of Rochester, the Barbados Group includes three other at least part-time academics (David Logan of the University of Southern California business school, Bruce Gregory of the Harvard-Smithsonian Center for Astrophysics and Michael Zimmerman, professor of philosophy at the University of Colorado, Boulder). Four Landmark executives and six participants in the self-help and consulting industry are also members. (The list, along with the project’s prospectus, can be found at here.)

The prospectus states, “This new paradigm is based on the fundamental proposition that the performance of an individual, group or organization is a correlate of the way the world in which and on which that entity is performing ‘occurs’ for that entity. Our new paradigm also offers access to this ‘occurring’ through a specific use of a distinct aspect of language.

“We intend the new paradigm to cause a new understanding of the source of action that provides powerful access to elevating individual, group and organizational performance. Derived from such access one can see the possibility of, and we intend to provide, new initiatives, applications, and practices that will be effective in reliably, rapidly and significantly elevating performance of any enterprise or selected enterprise segment. We assert that the possibility of such initiatives, applications, and practices, and therefore even the possibility of considering them, lies outside the current paradigm.

“The foundations of the new paradigm utilize the perspectives provided by the disciplines of neuroscience, complex adaptive systems science, rhetoric, and philosophy. The new paradigm reveals the importance of the correlative, linguistic, and ontological elements of action.”

Jensen’s interests in the innermost secrets of human nature emerged in Chicago, flowered in Rochester and found expression in celebrated course at he founded at HBS known as CCMO — Coordination, Control and the Management of Organizations.  When first taught, at Harvard Business School, in 1985, it attracted 35 students.  By the mid-90s, the course as taught by Jensen and others was regularly enrolling 600 students in study of human physiology, the psychology of emotions, the management of knowledge, and the possibilities for various “rules of the game” within organizations, governing everything from compensation to governance to performance measurement.  After retiring from teaching, Jensen had been working with fellow business school professor Chris Argyris on training to counter behavior he considered “not rational, self-destructive.”  While Argyris had made considerable progress, Jensen says, his technology wouldn’t “scale,” that is, it had difficulty accommodating more than ten people at a time; and it took a long time to produce results.

That changed when Jensen’s daughter, from whom he had been “somewhat estranged,” phoned one day after taking a weekend Landmark course. To that point, the occasional business school student had recommended Landmark courses to him; fellow professor Warren Bennis was said to be a long-standing advocate of Landmark’s teaching methods. But this was different, Jensen says. “I got a call from my daughter, and she was like a different person.”  One person in a room with 110 people in a weekend course from Friday to Sunday had accomplished “an amazing set of results,” she reported, and almost everybody had been similarly affected. “I have a favor to ask,” she said. “I would like you to try it.”

So Jensen flew out to Landmark headquarters in San Francisco and took a course. The year was 1998. “I became very interested in what this technology was. It was not brainwashing, not a cult. It was something I had never seen before, but it clearly had scale.”  Eventually he wrote a case for the business school with which to teach.

He began “a campaign to figure out what this stuff really was.”  As practitioners, Landmark’s managers were “totally uninterested in providing access to the model [meaning the mechanisms that underlay their successful techniques],” Jensen says. They were primarily interested in giving access to a powerful way of living with people rather than helping them understand. They had to give up this notion that understanding was the ‘booby prize’ — that’s the language they use.” If people didn’t understand [what was being accomplished],” according to Jensen, “they were going to wind up saying it was a cult, or brainwashing.” He began to understand his task as “get[ting] them to change the way they operated to have a bigger impact.”

At some point, he met Erhard — “maybe it was in Japan,” Jensen says — and, at some point, “the world ‘occurred’ to me in a different way.” The mechanism is something other than cause and effect, says Jensen; better to describe it as action that is “correlate.” When individuals experience such a shift in the way the world “occurs” to them, “their behavior, and therefore their performance, will shift, without even thinking about it. That’s the way it is….When that happens, incredible change in performance and cooperation are the result.  “Werner is absolutely a genius, an amazing man, a remarkable man.” The two began a collaboration (“he invited me to help him with his stuff”); Jensen, in turn, offered to venture a deeper explanation of the phenomenon. “Werner and I are writing what I think is a terribly profound piece on integrity…. Integrity is an incredibly important factor of production, at least as important as knowledge and technology. Werner is the most rigorous guy I’ve ever worked with. We can spend an hour working on a four- or five-sentence paragraph.” That collaboration, along with several other projects of mutual interest, eventually coalesced as the Barbados Group.

“I want to explain how they can take that technology and start at nine [in the morning] go to six [at night], and get them to understand what leadership is all about, actually transform them…. I gave them the Michael Porter example: how Mike, along with a few others, discovered [the mechanics of] strategy, published it all, created a huge industry, and had huge impact on the world. That was very important, but it is nowhere near as important as this body of work that Werner and his colleagues have accomplished.  But it’s viewed with suspicion, and properly so, because they’re interested in having secrets so that no one can steal their idea.”

Properly understood, Jensen says Barbados Group findings can “cause a revolution.” “I’ve already experienced over the last 2 years dramatic increases in output and productivity from applying the leadership model in SSRN. And our technology supplier has also adopted it because they found huge increases as well just from dealing with us.

“It’s not that they’ll throw out all that we know about incentives, cause and effect relationships. All of these things can be added on top of a much more palatable set of procedures which can bring about change in a very rapid way that is so astounding that it’s almost hard to believe it can happen.  My part of the job is make sure we can lay bare the underlying intellectual model of it …and take the mystery out of it. When people first began to do engineering, a lot of that was mystery, too. I’m willing to risk my reputation….  I’m having a ball.”

Maybe so.  But it is a mighty big risk.

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