One Friday afternoon a few years back, at about three o’clock, I found myself trying to explain to the national media why an organisation responsible for rescuing people from dangerous situations had restricted its employees from training on ladders above a height of roughly one metre. I was the head media person at the time, and it was my job to manage reputational situations that had escaped the the four walls of the organisation and found their way into the public domain.
In this case, there was an internal explanation for why this was happening. There had been an injury during a training exercise, followed by a decision involving internal safety and risk considerations. I’m sure the people involved could explain exactly how they’d arrived at it.
Unfortunately, that explanation didn’t make the resulting situation any less ridiculous when the media got hold of it. We got torn apart in the media for it (and honestly, who could blame them?).
I’m telling you this because it illustrates something I've noticed repeatedly throughout my corporate career. Companies can become so caught up in the internal logic behind a decision that they lose sight of whether the outcome makes any sense to anyone else.
The Aussie pub test
One way to recognise when this is happening - and stop it before it becomes an issue - is to apply something we used regularly when I worked in corporate communications. It’s called the pub test, or you might even know it as the common sense test.
For those unfamiliar with the Australian expression, it’s a pretty simple idea. Imagine explaining a decision to a group of ordinary people over a beer at the pub, or bar as you might call it in your part of the world. Could you tell them what you’ve done and why, in a couple of sentences and ordinary language, without being laughed or jeered out of the room?
Importantly, passing the pub test doesn’t mean everyone has to agree with you. Someone might listen to your explanation and say, “I understand why you did it, but I still think you’re wrong.” That’s fine. They understand your reasoning and can take it seriously.
Where you have a problem is when someone’s response is more likely to be along the lines of, “hang on, you did what?”.
My ladder story was a classic example of a decision failing the pub test… and we weren’t alone, because history is full of companies that have failed the pub test in spectacular fashion.
That time Netflix failed the pub test…
One of my favourite examples of this is Netflix’s ill-fated Qwikster experiment.
Back in 2011, Netflix was dealing with a genuine business challenge. Streaming was becoming increasingly important, while its original DVD-by-mail service was effectively a different business with different costs and operating requirements.
As a result, Netflix decided to separate the two parts of the business. The DVD business would become Qwikster, while Netflix would focus on streaming. From a corporate strategy perspective, there was a logical explanation for doing this.
Unfortunately, the decision created an extraordinarily bad customer experience. Having already announced a substantial price increase, Netflix was now telling customers who wanted both services that they’d need to manage two separate websites, accounts and queues.
Customers hated the idea, and Netflix abandoned the Qwikster plan within weeks.
… and Kraft, too
Then there’s the infamous iSnack 2.0 debacle, which Australians of a certain age might remember.
In 2009, Kraft launched a new Vegemite product mixed with cream cheese and named it iSnack 2.0. There was a marketing rationale behind the name, including positioning the product as something new and different.
Unfortunately, Australians weren’t having it. Vegemite has a particular place in Australian culture, and the attempt to modernise its image didn’t go down well. The backlash was so strong that Kraft dropped the name within days.
These are both examples of failing the pub test, rather than just companies making unpopular decisions. The people involved could probably explain the reasoning behind their decisions, but somewhere along the way, they lost sight of how those decisions would look to the people affected by them.
How reasonable decisions become absurd
So how is it that organisations full of intelligent, experienced people keep arriving at outcomes that seem so obviously absurd? There’s a concept from organisational research called local rationality that helps to explain at least some of this behaviour.
Large organisations are complex systems, and they tend to manage complexity by breaking problems into smaller pieces. Different parts of the business take responsibility for different areas, making decisions based on the information relevant to their particular function.
What that means is that finance might focus on cost, while HR considers employee engagement. Legal looks at risk, and operations has its own requirements.
There’s nothing inherently wrong with this approach. Large organisations couldn’t function if everyone had to consider every possible consequence of every decision. However, problems tend to arise when each part of the organisation makes decisions without recognising what happens when all those decisions come together.
I think of it like a puzzle. Imagine five people sitting around a table, each working on a different section of the same puzzle. They know exactly where their pieces belong, and everything looks right from where they’re sitting. At some point, however, somebody needs to stand up and look at the completed picture.
Let’s take the example of a company spending $100,000 on consultants to investigate employee engagement while its workforce is struggling with rising living costs.
Finance might correctly argue that consulting is a one-off expense, while salary increases create ongoing costs. HR might have a legitimate reason for commissioning independent employee research. There could already be an approved budget for the project, and procurement may have followed every required process.
You can look at each individual part and agree that the decision makes sense, and the process was followed. Then you step back and consider the situation from an employee’s perspective.
People are telling you they’re under increasing financial pressure, while the company is spending a substantial amount of money investigating why those same employees aren’t particularly happy. Suddenly, the decision looks rather absurd.
The impact of goal displacement
There’s another concept from organisational research called goal displacement that also helps explain why companies can struggle to recognise these contradictions. Essentially, organisations create rules and processes to help them achieve particular objectives. Over time, however, following those processes can become an objective in itself.
Instead of asking whether a decision produced a sensible outcome, people point to the fact that the correct procedures were followed as evidence that the decision was sound. You hear versions of this all the time in corporate life:
‘We followed the process.’
‘Legal signed off.’
‘The business case was approved.’
While all of those statements might be true, they don’t necessarily tell you whether the final decision makes sense when you step right back and look at it impartially. That’s what the pub test forces you to do - consider the outcome as a whole, rather than relying on the individual explanations for how the organisation arrived there.
The role of leadership
Company leaders have a significant role to play in ensuring companies aren’t regularly failing the pub test. After all, the leadership team is one of the few groups in an organisation that should be in a position to see all those individual pieces at once.
They can understand the financial argument, consider the legal and operational constraints and hear the reasoning behind decisions made by different parts of the business. Then ultimately, someone needs to take responsibility for what those decisions add up to.
In my experience, the best leadership teams do this instinctively. They consider how a decision will affect the people involved, rather than relying on whether it can be justified internally.
Of course, that doesn’t mean every decision has to be popular. Companies sometimes need to close unprofitable operations or restructure teams, for example. Employees might strongly disagree with those decisions, while still understanding why they were made. The pub test is about whether people can take your reasoning seriously, even when they don’t like the outcome.
For decisions affecting employees, there’s a simple way leaders can tell if their proposed explanation is going to pass muster. I used to tell CEOs I worked with to imagine standing up at an all-staff meeting and explaining the decision directly to the people affected.
Take our consulting example. Imagine telling a group of employees who have been struggling financially that you can’t approve pay increases in line with inflation, but you’re going to spend $100,000 on consultants to investigate why employee engagement is falling.
You could explain the financial mechanics in depth, if you like - namely that the consulting budget is separate and a one-off expense, whereas salary increases compound over time. Lay out all the facts and make your case.
The question is whether you’d feel comfortable making that argument to the room. More importantly, would the employees regard it as a credible explanation, even if they disagreed with the decision?
In my experience, I can’t imagine many CEOs willingly putting themselves in that position. If that’s the case, your explanation has failed the pub test.
Good leadership requires understanding the individual pieces without becoming trapped inside them. Someone needs to look at the completed puzzle and ask whether the company has ended up somewhere that makes sense.
Social media is the modern pub test
The pub test has become even more relevant over the past decade because companies have lost much of their control over where conversations about their decisions take place.
When I first started working in media and communications, a couple of decades ago, a questionable corporate decision might become a public problem when a journalist discovered it. That was usually the point when someone had to consider how the decision would sound outside the organisation.
These days, you don’t need a journalist. An employee can post about something that happened at work and suddenly, a decision that previously existed within the context of internal company processes is being discussed by thousands, potentially millions, of people who have none of that background.
In some ways, social media has become the modern pub. People take corporate decisions outside the meeting room, with none of the the internal explanations, and discuss whether they make sense.
Of course, that process isn’t always fair. Social media can remove important context, and a complicated decision might look ridiculous precisely because the explanation has been oversimplified. However, that’s the era we’re living in, and companies need to adapt to it - just like the rest of us.
What should we take away from this?
First and foremost, I certainly wouldn’t suggest that companies should make decisions according to whatever gets the most likes online, or what would prove popular in the local pub or bar. However, I do think leaders should be able to explain important decisions in ordinary language without relying on all the internal processes that produced them.
If people can understand the reasoning and take it seriously, the decision can pass the pub test, even when they disagree with it. On the other hand, if the explanation still sounds absurd, it’s advisable to take another look at the decision itself.
Ultimately, I think this comes down to leadership capability. Sometimes the most valuable thing someone can do in a meeting is acknowledge that they understand all the reasoning behind a decision, then ask whether it truly makes sense. It sounds almost too simple, but it’s a question that can easily get lost in the complexity of corporate decision-making.
And in my experience, the decisions that fail that common sense test are often the ones that cause the biggest problems, so proceed with a lot of caution.
One thing I’m thinking about this week
I’m writing this at the end of the spring school holidays here in Australia, and I have to admit my brain is feeling pretty fried.
One of the biggest advantages of working for myself is having far more flexibility than I ever did in corporate life. I can organise my working hours around my kiddo, which is something I value enormously.
That being said, school holidays are still hard work. The usual routines go out the window because you have a child to entertain, and you’re constantly trying to fit work around whatever else is happening that day. Even when you have control over your schedule, it can be difficult to find a decent stretch of uninterrupted time to concentrate. I don’t context-switch well, so it’s always a major challenge for me.
(It also doesn’t help when you didn’t realise the school holidays were imminent until a few days before, like me…)
If you’re in the corporate world, you might envy those of us who work for ourselves for the extra flexibility we have. Yes, it’s definitely there, but I also want to know that having the freedom to choose when you work doesn’t necessarily mean you have fewer competing demands on your time. Sometimes you’re just swapping hard for a different kind of hard.
Anyway, the school holidays are almost over, and I’m looking forward to getting back into something resembling a normal routine. Preferably after a very long nap.
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