What is the "boiled frog phenomenon"?
How does it apply to business and, particularly, strategic management?
List an example of a situation where this has occurred?
What could the company have done to avoid the effects of the phenomenon?
The Boiling Frog
Systems thinkers have given us a useful metaphor for a certain kind of human behaviour in the phenomenon of the boiled frog. The phenomenon is this. If you drop a frog in a pot of boiling water, it will of course frantically try to clamber out. But if you place it gently in a pot of tepid water and turn the heat on low, it will float there quite placidly. As the water gradually heats up, the frog will sink into a tranquil stupor, exactly like one of us in a hot bath, and before long, with a smile on its face, it will unresistingly allow itself to be boiled to death.
Applications to business and examples:
The primary thrust of organizational level analysis is to emphasize the need to plan, analyze and implement downsizing carefully and within the framework of organizational purpose (e.g., Cascio, 1993; Greengard, 1993). Downsizing is framed within the context of improving and streamlining work processes, as exemplified by total quality management and reengineering (e.g., Cameron, 1991). Key assumptions include a mechanistic notion of organizations, in which the parts are examined to improve fit with the whole. Organizational survival is seen as paramount (e.g., the first order of business is for organizations to thrive and be competitive). Key mental shifts involve development of a "customer first" attitude (stated as part of a total quality management approach) and a realignment of importance among stakeholders, with shareholders coming first (largely unstated).
In one of the key early works on downsizing, Tomasko (1987) identifies corporate cultures based on mistrust as a leading cause of excessive staffing. American corporate culture, he contends, rewards winners, not losers; places control at the top of the agenda; and causes people to believe that it is better to hide mistakes than admit them. In consequence, staff groups (such as planning departments) are formed to serve as watchdogs. Managers respond by attempting to gain control of ever more bloated corporate bureaucracies. Tomasko's solution is a flatter, leaner organization in which a team environment prevails and people trust each other to contribute to common goals.
Cameron et al (1991) conducted the most extensive single study of downsizing to date in terms of number of organizations involved, breadth of investigation, and time span. The authors conducted a four year longitudinal study of 30 organizations in the automotive industry. Their viewpoint was that downsizing is a necessary and affirmative approach to becoming more competitive, and an appropriate response to the disproportionate growth in the white-collar work force over recent decades. The successful companies in their study did not only reduce the work force, but also engaged in organizational redesign and systematic efforts at quality improvement. Successful companies engaged in downsizing as a purposeful and proactive strategy. Interestingly, only a handful of companies in their study were found to have improved organizational performance.
Two studies of change at major U.S. corporations - Xerox (Kearns and Nadler, 1992) and General Electric (GE) (Tichy and Sherman, 1994) deal explicitly with culture change. Tichy and Sherman refer to a revolution at GE; part of that revolution, under Jack Welch, was to eliminate almost 170,000 positions. One of the basic assumptions at GE: "The ultimate test of leadership is enhancing the long-term value of the organization. For leaders of a publicly held corporation, this means long-term shareholder value" (p.367). GE turned against the notion of lifetime employment in favor of a stated goal of providing employees with the best training and development opportunities, but only conditional employment. Xerox also resorted to massive layoffs. Like GE, this downsizing was framed within the larger picture of adopting a total quality management culture. Kearns believed that the number one key to success was shifting focus outward to the customer.
The Kearns and Nadler book and the Tichy and Sherman book lucidly address the process of culture change management, and they explicitly state what many will not: that part of the intentional aspect of downsizing in the midst of culture change is the infliction of pain on at least some to get the attention of all. Tichy and Sherman ...