268 - Jeffrey Pfeffer: Power, Influence, and the Psychology of Institutions

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1:10I've done something like 270 episodes of the show now, and I've done no episodes on organizational behavior. And I'm not sure that many of my listeners will know what it is, even though you spent many decades studying it. So what first drew you to the field? And is there a through line question that has guided your research interests throughout your career? It's a field that really began probably in the 1940s, 1950s out of the study of organizations and the administration and management of organizations. and it is an applied social science. It is a combination of sociology, social psychology, a little bit of political science, a little bit of anthropology.

2:03It uses multiple methods to try to understand both behavior inside of organizations, why people do what they do, and why organizations as entities do what they do. And I was drawn to it because at the time I entered the field, It was in its infancy. And as I sometimes tell my doctoral students, it is much easier to be a pioneer when you're the first person into the forest. So as opposed to economics or other behavioral and social sciences that I think were much more developed and maybe still are much more developed, organizational behavior, I thought, had more opportunity and had more, frankly, interesting questions to answer.

2:47So that's what drew me to the field. Over the years in my career, I have studied a number of different things. I'm probably most famous, particularly now that I've done a master class on it, for my work on power. and I teach a very popular elective called the Paths, P-A-T-H-S, to Power. I teach this both online as part of the Stanford LEAD program and in the Stanford Graduate School of Business's MBA program, which is one of the most popular electives. But I've also done research on what I call the knowing and doing gap, the gap between knowing what to do and doing it. I've done a book with my colleague Bob Sutton, on evidence-based management, which is the same principle in medicine, except many management practices are not based on research and evidence, but based on casual benchmarking and other things like that.

3:45I've done research and teaching in the field of human resource management. I've written a book called Competitive Advantage to People, and another book called The Human Equation, Building Profits by Putting People First, which I think the titles are reasonably self-explanatory about building high commitment work practices and how to manage people more effectively. And my current research focuses on the U.S. healthcare system, which is basically a catastrophe. And it's a catastrophe mostly because employers who pay for well over half of U.S. healthcare basically do an abominable job of managing and measuring the administration of their health benefits.

4:32So I now have, as of a couple of months ago, a courtesy appointment in the School of Medicine. And I work with a colleague there, Sarah Singer, and some other colleagues as well, to study how we might get employers to take their fiduciary responsibilities to oversee health benefits more seriously. So that gives you, I think, an overview of both the field and need, but you're welcome to ask any follow-up questions you want. Yeah, it's funny when you say that it's much easier to be a pioneer when you're the first person in the forest. I'm getting a PhD in philosophy here and this forest has been around for a long time there have been a lot of people in it and it's it's very difficult to find new problems to be tackling but one field I was curious about that I imagine might have a big influence on organizational behavior is evolutionary biology and does that intersect with your work at all?

5:37Not much there are people who believe that a lot of human behavior comes as an adaptation to evolutionary pressures. Social psychology and sociology really emphasize the effect of the environment on behavior. So it is less hardwired and more a response, I think, to social influence. So I certainly believe that we are obviously influenced by our evolutionary past and our evolutionary history. But if I were to emphasize what influences us in our day-to-day behaviors, it is more current kind of what's in our informational environment, what's in our social environment than kind of how we've been hardwired.

6:38wired. Okay, that's fair. And then one other just sort of framing question is with regard to your research, I know you prime, even though you have a courtesy appointment in the medical school, you're mainly a professor in the business school. And is your research more oriented toward understanding the way that organizations and people within them function or toward helping people within organizations and the organization organizations themselves to function better? I think in order to do the latter, you have to do the former. In other words, if I'm going to give you advice on how to have a more successful career, or if I'm going to give you advice on how to build a more successful organization or if I'm going to give you advice on, frankly, any topic related to that, I need to understand the forces at play, the dynamics.

7:44I need to understand the landscape in which you're going to operate and how other people are going to be operating and how other people are going to be thinking. I wrote a book recently called The Seven Rules of Power If you're going to have power, the first thing you need to understand is the social forces at play and what your competitors are thinking and what they're doing and what has made some of them successful and how you can, basically how you can master the science of this. So I'm a big believer in the power of social science to explain behavior. I think social science has done a much better job that people oftentimes give it credit for and understanding the fundamental dynamics of human behavior.

8:27And so if I want to influence you, the first thing I need to understand is basically that social science. So interesting. It's not it seems like maybe this should be obvious, but it's not just the study of the organizations themselves. but you really need to understand the individuals within the organization to understand that organization. That's correct. You need to understand the dynamics of human behavior and how humans influence each other and how and why those interactions aggregate organizational logics. And you can study it on a variety of different levels. And in fact, I have over time.

9:13I began with an emphasis in more sociological phenomena, then became more interested in individual level phenomenon and, you know, go back and forth. And, you know, multi-level analysis is part of, I think, the field of organizational behavior. here. It's basically, and the wonderful thing about being a professor, and particularly a professor at a place like Stanford, is you get to follow your intellectual predilections. So at one time, I was interested in power. I did a lot of research on power, departmental power in universities, organizational power, et cetera. Then I became interested in you know, human resources and how to manage people, how to achieve competitive advantage through people and the management practices and, you know, and so on.

10:06And then I, you know, I became interested in why organizations don't do what they know they should. That led to the issue of the knowing doing gap and the work on evidence-based management, both of which I did with my colleague, Bob Sutton, who just retired from the School of Management Science and engineering. And then most recently, having served on the Stanford Committee for Faculty and Staff Human Resources, I became interested in why we did, and everybody, most large organizations do such a poor job of managing benefits. And so that's led me to trying to understand sludge and the benefits administration process of research I did with my colleagues at the Gallup organization and all kinds of other things.

10:55So the wonderful thing is, you know, you get to kind of pursue your interests. And as your interests change, your pursuits change. And I've reinvented myself a number of times, which is fabulous. It's a great job. I love it. I would not try. I would certainly not want to try to study philosophy. That sounds way, way too difficult for me. it's much easier to study organizational behavior because there's so many interesting issues and processes that many people are not looking at and that are important so I always find interesting things to look at your little one grew three inches overnight adorable also expensive sell their pint-sized pieces on Depop and list them in minutes with no selling fees Because somewhere, a dad refuses to pay full price for the clothes his kids will outgrow tomorrow.

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12:33After three months, plan auto-renews and$12.99 a month terms apply. I don't think that this podcast is... I'd be very surprised to hear if it has a sizable business audience. I think most people who are listening or watching are just generally intellectually curious. And for that reason, I want to discuss more the sort of understanding element of your work rather than the implementation. And for me, I find myself really struggling to understand a lot of modern institutions, Stanford being one of them, but corporations, governments, our government certainly. And I'm wondering if you think toward better understanding these institutions, it would be better to begin with the most important misconceptions that lay people like me might have about how they work or the things that we have right or what are the key things that determine and how they work?

13:42Yeah, well, I think understanding human behavior is relatively, actually amazingly straightforward. I had a friend who's unfortunately now deceased, who was a colleague of mine at the University of Illinois, which was my first academic job, Jerry Solancic. And Jerry used to say, don't look for complexity. The world is actually quite simple. And I think the world is actually quite simple. So, you know, I have a colleague and a good friend who teaches at Arizona State University named Robert Cialdini, who wrote a bestselling book called Influence. And he talks about the seven principles of influence.

14:19And I believe those principles are, you know, generally pretty universal. One of those principles is that we are influenced by the people around us. We learn by looking at others and what happens to them, and we learn from what they tell us. We face, this is one of the earliest studies in social psychology, we face pressures to conform to what our immediate environment tells us and to what other people are doing. You know, I mean, there's classic studies like, you know, if you stand at a traffic light, if you're a pedestrian standing at a traffic light, if a couple people start walking against the light, other people will follow.

15:07If nobody walks against the light, other people probably won't as well. So, you know, I mean, we are influenced by the world in which we live. And therefore, the practical implication of that is that you need to choose your environments very carefully because you will be influenced by the people you associate with. There's a study done, and I don't know if this is medicine or social psychology, but there have been studies that have shown that smoking, drinking, and weight gain are all contagious in the sense that if you are surrounded by smokers, you are more likely to smoke. If you are surrounded by people who do drugs, you are more likely to do drugs.

15:56If you're surrounded by people who abuse alcohol, you're more likely to abuse alcohol. And in fact, there's a classic study that shows that weight gain diffuses through social networks. So there are, you know, four or five interesting examples of the extent to which we are influenced by the people around us. Almost nobody starts smoking by themselves or just as a response to advertising. If you're surrounded by smokers, you smoke. And by the same token, if you're surrounded by people that don't smoke, you probably don't smoke. So behavior is contagious. Social influence is a simple and important principle that helps to explain a lot of behavior in the world.

16:44Another behavior, another principle that explains a lot of behavior in the world is the idea that we are motivated to think well of ourselves. And because we are motivated to think well of ourselves, there are all kinds of interesting implications of that. One implication is we love ourselves. Therefore, we love people who remind us of ourselves. A guy named Benedict Cary wrote an article in the New York Times some years ago, summarizing a lot of this research. The title of the article is You Remind Me of Me. And there's a bunch of research on the theory of implicit egotism. You are more likely to remember birthdays close to your own in absolute value.

17:31You're more likely to remember your friends' birthdays if they are, in fact, identical to yours, because, of course, you remember your own birthday. You are more likely to associate and remember and have a favorite number that remind you of things that you do. You are more likely, believe it or not, to go into professions that match your name. You are more likely to live in states that match your name. So if you're a dentist, if your name is Dennis, you're more likely to be a dentist to live in Denver. And you're smiling as you should. But if you do a good search, scholar.google.com, and look under the phrase implicit egotism, You can see all the examples of this.

18:17These are all examples of people who are doing things because of their, the positive association of various things with themselves. You are more likely to like your own decisions. You are more likely in economics. This is called the endowment effect. Once, you know, if I offer you in this classic study in economics, If I give you a choice between a coffee mug and about a 400 gram bar of Swiss chocolate, the distribution of people picking the mug versus the chocolate is about 50-50, as you might expect. If I give you the mug and say, would you trade it for Swiss chocolate? Of course, now it's your mug, so you don't want to trade it.

19:06And similarly, if I give you the Swiss chocolate and say, do you want to trade it for the coffee mug, you're not likely to trade it. So you will pay less for something than the amount of money that you will require for me to separate from you once it's yours. This is and this is this so-called endowment effect is, again, a reflection of the fact that we like things that are associated with ourselves. So once something is yours, its value goes up because because it is yours. So, you know, so self-enhancement explains a lot of behavior. Social influence explains a lot of behavior. Social. The fact that we like things that are associated with ourselves means we like our own decisions.

19:56So once we've made a decision, we are committed to that decision. This is a well-known phenomenon called escalating commitment. And so there are, you know, so we have commitment effects, which are a consequence of self-enhancement. We have social influence. Because we like ourselves, we like people who remind us of ourselves. So similarity is one of the most fundamental bases of interpersonal attraction. Opposites do not attract. Similars attract. And there's a ton of, again, studies that illustrate that. So, you know, so there's all kinds of interesting behavioral phenomena that I think are relatively pretty easy to explain and understand.

20:40mm-hmm it's interesting to me that I mean a few minutes ago you you said you didn't find evolutionary biology particularly relevant to your work relative to some of the other fields that you mentioned and the reason that I find that funny is when I think about the like the seven principles of influence that you first mentioned I think of those as being totally downstream of evolutionary biological pressures. I mean, people who weren't influenced in these ways likely didn't reproduce as much. But I can also see... I would not disagree with that. I mean, you know, it's just that...

21:31So, so I would not, so there is no question that, for instance, following the path, being influenced by others is probably adaptive in the sense that, you know, if they've survived, they must know something that must be useful. So maybe you ought to, maybe you ought to follow them, you know. certainly being able to distinguish friend from foe is useful. This is why, you know, we have the similarity. Similarity could be related to kinship, etc. So I would not for a moment dispute that these things are all adaptively useful. The question is, do you want to begin with an evolutionary explanation?

22:21Or do you want to begin with other explanations and then figure out how they can be adaptive? So I think that it's just a point of departure. I would not disagree for a nanosecond that these things are not, these are not adaptive. Okay. But with these, let's say, these seven principles of influence in mind or these other findings of organizational behavior, If you're looking at the behavior of an institution, like an academic department, for instance, how do you go about trying to figure out what is moving things? Are there certain of these principles that you'll look at first? Like, you'll look at, okay, who's the leader?

23:11What sort of power are they exerting on people? What are the incentives that people have to behave in certain ways? How do you just begin your analysis?

23:24Well, you can begin your analysis several different ways, but they will all probably eventually take you to the same place because you want to look at various things. I mean, you know, the fundamental. So economics is based upon. And I'm not talking about economics. We're talking about organizational behavior. But economics has much to teach us. And economics begins with the principle of self-interest. So as Professor Sand, who won the Nobel Prize in economics, says, basically all of economics is built on the foundation of people engaged in self-interested behavior. So the first thing I would look at, I would look at actually several things first.

24:09So the first thing I would look at is what is in people's interests. and what is in people's self-interest depends in part upon the role they are in. You know, so we are, we are, you know, if I, if I call you, you know, this goes back to Zimbardo's face of famous prison guard experiments. You know, he randomly took Stanford students and called some of them guards and some of them prisoners. And the guards acted like guards and the prisoners acted like prisoners, simply by the labeling effect. So once I make you a dean, you act like a dean. Once you become the president of the university, there are certain expectations that others have for you.

24:56There are certain things that come with that role. So I think there's a common level of understanding of what it means to be a reader. There's a common understanding of what it means to be a dean or a department head or a chair or an associate dean or, you know. So titles matter simply because titles come with a set of role expectations. And people communicate those role expectations to you. And you are likely to do what other people expect you to do simply because expectations are very powerful and their effect on your behavior. So the first thing I would ask is, you know, if I say to you, You know, if you say to me, I am, you know, a lieutenant in the army or I am a journalist or I'm a whatever, you know, I'm an investigative journalist.

25:49That comes with a whole set of expectations and norms and social pressures to behave like an investigative journalist or a lieutenant in the army or a dean of the business school or whatever. And so the first thing I would look at is what are those expectations? What comes here to tell? Well, an immediate follow-up that comes to mind, well, one, the first thing actually is, again, evolutionary biology. And I know that we're not in disagreement here, but I think of self-interest as being the most motivated feature of humans by evolutionary biology. but um

26:38I'm wondering about let me interrupt I could push back on that and to say you know that if you want the species to evolve you need some amount of self interest but you also need some people who are willing to sacrifice themselves for the community and I wanted to ask about the connection between self-interest and power and if there are general findings about this perhaps about how people will exploit their power to advance their own self-interests within an organization perhaps at the expense of the benefit of the organization itself all you have to do is pick up the newspaper or read the news media today.

27:32You see examples of that all the time. You know, I mean, the CEO compensation as a multiple of average pay in the organization has expanded from, I don't know, 80 to 1 some years ago to 300 to 1 today. We currently have a president who has basically made it his project to use the office of the presidency to enrich himself and his family for multiple generations. But that's not, you know, it's an extreme example, but it's not the only case of this. You know, Bill and Hillary Clinton, when they left the White House, you know, and the Obamas as well, you know, I mean, it is quite common for presidents, particularly once they're out of office, to, you know, to charge a lot for their speaking fees and to do various things to make money.

28:29George Bush has done this. I mean, everybody does it. Trump just has taken it to an extreme, but it's quite common. So, I think you see with CEOs and with other people, you see a lot of examples of this behavior, which makes, by the way, life interesting. So people say to me, when I wrote a book called Leadership BS, and BS, by the way, does not stand for business school, to try to debunk a bunch of the common ideas about leadership, one of my good friends, he's quite a smart guy, said to me, he said, well, he said, I read your book. It's interesting. He said, what does this book tell me about how I become a more effective leader.

29:18And I said, you know, effective is a word I try never to use because it has too many dimensions to it. To give you a specific example, to give your listeners a specific example, take Stan O 'Neill. Stan O 'Neill was the CEO of Merrill Lynch at the time of the 2008 financial crisis, during which time Merrill Lynch got itself into enormous amounts of financial difficulty and was ultimately taken over by the Bank of America. It is a matter of public record that Stan O 'Neill left with a severance package of$160 million. Was Stan O 'Neill an effective leader? If you're Mr. or Mrs. O 'Neill or one of the O 'Neill children, the answer to that question is certainly yes.

30:04If you're one of the Merrill Lynch employees that subsequently lost their job after the Bank of America took over a failing Merrill Lynch organization, the answer was almost certainly no. So, you know, I think a lot of this matters upon perspective and time horizon. Every morning, I go through my chicken breakfast sandwich checklist. My breakfast sandwich has to deliver great value, deliciousness, and lots of variety. McDonald's checks all my boxes. Like that savory McChicken biscuit for just$2.49? Consider my boxes checked. If I'm feeling spicy, a hot and spicy chicken McGriddles is breakfast checkmate.

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31:16Well, my question was a bit of a leading question because, yes, I was expecting you to say that power or the exploitation of power and self-interest go hand in hand. But the reason that I ask this is these days for the last few years I've been hearing talk of, I'll just broadly label them, conspiracy theories more and more often. and I have one group of friends who all they want to talk about is conspiracy theories, another group of friends who if I bring them up, they'll say, come on, think critically. This is not a conspiracy. And I find myself wondering how, I mean, quite generally, you think when you hear a conspiracy that might have some plausibility to it, for instance, like Jeffrey Epstein killing himself or being murdered, or when we learn after the fact about how somebody like Dick Cheney serves to make a lot of money if we invade Iraq and Afghanistan.