The HiPPO effect

The Highest Paid Person’s Opinion. If you’ve spent any reasonable length of time in a large corporate environment you will probably have seen something a bit like this first hand. It usually happens when a group of people are attempting to make a difficult decision, for which there are lots of opinions, but not a lot of data or analysis. There’s often a spirited discussion exploring the various options when the person in the room who is further up the hierarchy (and therefore typically paid more) expresses what they think…

Squashed by a HiPPO

Once the HiPPO is out, it can be very difficult to put it away again. Like it or not, the group will probably weight the HiPPO more than any other voice involved. It can be very difficult (and sometimes career limiting) to prevent the group from gravitating towards that opinion.

Sometimes the HiPPO can be very subtle. Some senior executives I’ve worked with genuinely don’t realise the effect they are having. They can even feel quite frustrated by how sometimes an off the cuff comment is reinterpreted. What they may think of as engaging with the team and being present can often turn into something that places false constraints or simply just a focus on the wrong things. A classic version of this is when the Chief Marketing Officer of a company I’ve worked with casually asks how long something will take. Eager to please them they invariably get a ball-park estimate. What the CMO doesn’t realise is that this ball-park then becomes a date that is repeated throughout the organisation and like a corporate form of Chinese Whispers becomes a commitment.

Other times it is less opinion and more like an order. Having promoted Alpha males (typically) these guys are used to ordering people around and getting what they want. They may even consider it good “leadership”. When it seems like the team are floundering, considering options and not making a decision, they sail into the confusion and quieten the storm with their authoritative words. Less subtle.

Either way though, it can be a dangerous thing. What is happening here is the premature closing down of options and the hardening of soft edges into false constraints. I’ve lost count of the number of times I’ve asked where a project’s due date came from, only to hear that the source of the date is the HiPPO. And then there are the closing down of options about the direction of focus. Again, I’ve lost count of the number of times I’ve asked about what the business case is for a project, only to hear “it’s strategic” – which is nearly always code for the HiPPO believes it will be valuable at some point in the future.

Sometimes, the HiPPO gets lucky. That only makes them worse though. They lose any sense of humility about how fortunate they were and start believing their own hype. Ron Johnson, the ex-Head of Retail at Apple, and responsible for the creation of the fabulously profitable Apple Stores suffered from this. When he left Apple to take the CEO role at the J.C. Penney, one of the oldest and largest chain of US department stores, he somehow didn’t realise that the context was different. From this story by Chris DeRoes and Noel Tichy in Forbes:

[Johnson] not only ignored existing data, but he was also convinced he didn’t need new information to validate the righteousness of his strategy. Although encouraged by the company’s retail veterans to do so, Johnson decided not to test any of his changes because Apple had never tested when growing its store network. Experimentation in a small number of stores is common practice in retail before nationwide roll-outs. Had Johnson been interested, surely experiments would have provided an early warning that his strategy wasn’t sitting well with customers.

Once execution of the company’s new direction was underway, Johnson did reportedly ask frequently “is it working?” It’s not surprising that few had the courage to speak up and give Johnson an unvarnished dose of reality. The former CEO liked to tell employees that there were two kinds of people – skeptics and believers. At Apple, Johnson said, there were only believers and he expected the same at JCP. It’s not hard to imagine employees hearing that message loud and clear – speak up and you’ll be labeled as a resister.

There are plenty more where this story comes from – this is just one of the more high-profile ones. Ironically, the very company that the Forbes article suggests does this right, Amazon, has recently had it’s own episode of the HiPPO driving decision-making in a way that has led to a high-profile failure – the Amazon Fire Phone.

After talking to more than a dozen Amazon employees, Carr puts the failure squarely at the feet of Amazon CEO Jeff Bezos, suggesting Amazon’s hardware development issues may run deeper than previously thought. As Carr tells it, the Fire Phone succumbed to misplaced ambitions and micromanagement from Bezos [who] obsessively monitored the project. “Even the very smallest decisions needed to go through him,” one Amazon employee told Carr. By the end, the team had given up building a phone for consumers and shifted building one that would satisfy Bezos’s ambitions.

Uh-oh, doesn’t sound good.

In the end, the [dynamic perspective feature] drove up costs without providing any real utility to the end customer, entirely driven by Bezos. “He had this childlike excitement about the feature and no one could understand why,” another insider told FastCo, describing dynamic perspective. “Whenever anyone asked why we were doing this, the answer was, ‘Because Jeff wants it.’ No one thought the feature justified the cost to the project. No one. Absolutely no one.”

The sad thing is, there are thousands of these stories playing out in companies across the globe every day. From a Product Development perspective, I’d go so far to say that it is one of the most damaging and wasteful aspects of business. The more we share the stories of failure, perhaps the more we will learn to be on the lookout for the HiPPO. We badly need to share the stories of failure since we are so prone to attributing success to the HiPPO. We suffer from retrospective coherence and tend to ascribe success to an individual rather than a team, and it is these stories that dominate. You only have to look at how the media portrays Steve Jobs to see this effect.

In the meantime, one way to handle this is to try and put some numbers on the value and urgency of the things we are working on. Quantifying the Cost of Delay forces us to surface our assumptions about value and in the process can even help us to understand which parameters are the most uncertain and sensitive. We can then turn these assumptions into hypothesis, running experiments to validate or invalidate the assumed value.

Comments 2

  1. It’s strange that this effect still occurs as the story is often re-told how Kennedy addressed the dangers of groupthink and the HiPPO effect during the Cuban Missile crisis. Having learned from the disastrous Bay of Pigs, he implemented a number of measure to ensure that such cognitive biases did not cloud the thinking of his advisers.

    It’s fair to say that Kennedy was dealing with a far larger issue than that of either Jeff Bezos or Ron Johnson. Then again the very skills that enabled Kennedy to become President and to be able to realise the mistakes made during the Bay of Pigs and as a result implement measures to address these, may not be the skills required to succeed in business.

  2. A solution to this problem is paying the resident subject matter expert the most.
    That way, our… errr, I mean, uhm, “their” opinion counts.

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