Comment The perils of success, or failure, where isthy sting? A comment on Whyte,Saks and Hook

DANNY MILLER

Ecole des Hautes Etudes Commerciales, Montreal and Graduate School of Business,Columbia University, Canada

Whyte, Saks and Hook (1997) show vividly the potential complementarity of macro- andmicro-approaches to organizational analysis. These authors and other scholars of self-e�cacyhave made signi®cant progress in explaining the sources of one of the most important macro-organizational problems: the perils of success (Miller, 1990, 1994). In this commentary I willexamine some possible macro-organizational causes and e�ects of self e�cacy, and delineate someissues and questions that may be worthy of further research.

The business press is ®lled with countless examples of once thriving organizations thatfoundered because they became too wed to existing practices and policies, or because theyescalated those practices well past the point of utility. Rolls Royce's stellar record of innovation,for instance, made its executives so con®dent of their ability to meet technological challenges thatthey bet the company on a hopelessly futuristic jet engine (Mecklin, 1969). And IBM, hypnotizedby its marketing triumphs, focused increasingly on selling, but forgot about product development(Loomis, 1987). Conglomerates such as Litton, LTV, Gulf and Western and ITT, too, engaged inprolonged bouts of escalation, as each successful acquisition led to a larger and riskier one(Miller, 1990). Of course much of this literature is largely anecdotal and we are left wonderingabout just why the managers of these once-successful companies behaved the way they did.

The Whyte, Saks and Hook (1997) paper provides some important clues. It suggests thatsuccessful managers, departments, and even companies develop greater con®dence in theirabilities and in their winning policies or programs. As a result they stick with or amplify currentpractices in the belief that these are appropriate, and in the expectation that any emergingproblems can easily be solved. In short, success breeds a sense of self-e�cacy, which then causes aperpetuation or ampli®cation of the status quo. Although growing self-e�cacy can undergirdvaluable persistence and necessary commitment, its darker side becomes apparent in reactions ofhidebound inertia and unwarranted escalation.

The Whyte et al. (1997) study suggests several interesting avenues for future research. First, itwould be useful to establish just what determines a manager's sense of self-e�cacy. To whatdegree is it due to personal factors, and to what degree is it a function of conditions in theorganization or environment? Among the former in¯uences, how important are a manager'scareer successes, his or her status in the organization, or positive feedback from immediate co-workers or personal projects? The broader organizational context also may play a role inmanagers' self-e�cacy. This context may include factors such as company performance or thesuccess of a particular product line. Indeed, Miller (1994) and Miller and Chen (1994, 1996)found that ®rms that had performed well were less apt to change their strategies and more apt to

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JOURNAL OF ORGANIZATIONAL BEHAVIOR, VOL. 18, 433±435 (1997)

focus increasingly on a favorite tactic. The external environment, too, may be important to self-e�cacy. A placid and predictable setting that poses few threats may bestow on executives a senseof power and superiority that is quite conducive to self-e�cacy. By contrast, a diversity ofchallenges in the market may promote a healthy level of skepticism, humility and self-doubt(Miller and Chen, 1994, 1996).

Even more important to organizational performance than perceptions of self-e�cacy is theaccuracy of those perceptions. It is when such evaluations are unrealistically high that the dangersof escalation are perhaps greatest. If so, it is useful to speculate about the personal or organiza-tional factors that determine the level and direction of bias in assessments of self-e�cacy. Mightaspects of organizational culture be in¯uential? For example, would rituals that continuallycelebrate organizational competences in¯ate the sense of self-e�cacy of decision makers? Wouldnorms, selection and promotion procedures, and hierarchical arrangements that discouragecriticism have this e�ect? Or might it result from the exclusive focusing of intelligence systems onthe things a ®rm does well? Conversely, would a climate of open discussion, a heterogeneouscorps of executives, or a broad and sensitive information system act to prevent overcon®denceand its ill-e�ects? All of these questions may warrant further attention.It is interesting too to consider the possibility of `cycles of reinforcement' among the causes and

e�ects of self-e�cacy. Good objective performance may increase the perceived self-e�cacy ofdecision makers, who thus become more con®dent of their practices or policies. They theninstitutionalize these practices by designing more specialized routines and information systemsand by establishing cultures that are less tolerant of change or critical thinking. These develop-ments in turn enhance the chances that success will be credited, now erroneously, to alreadycherished practices, while failures will be ignored or blamed on `uncontrollables'. Thus self-e�cacy will continue to grow `no matter what', and the capacity for organizational learning willdiminish (Levinthal and March, 1993). Such transformations in organizational systems, routinesand rituals may cause a climate of high self-e�cacy to di�use throughout the organization.

The organizational implications of self-e�cacy may well depend on the exact abilities inquestion. Some administrators might feel very competent at ®ne-tuning established policies andpractices but are less sure about their capacity to make more substantial changes. Other managersmay believe in their ability to revitalize current practices but are less sure about their ability toimplement them. These di�erences in the substance of e�cacy beliefs may have importantimplications for organizational behavior.

Indeed, unless we specify the domain of self-e�cacy, the research may produce some para-doxical results. This might be the case in the extreme example where one manager has low self-e�cacy in the domain of development, and another high self-e�cacy, but in the domain ofexisting practices. Both conditions might be caused by success in a placid environment, and bothmight encourage inertia towards or escalation of existing practices (Miller, 1993).Certainly, it will be useful to distinguish among the di�erent kinds of organizational e�ects of

high self-e�cacy and to investigate their contextual sources. Might, for example, high self-e�cacyin some cases lead to escalation but in others to complacency or inertia? Miller (1993) and Millerand Chen (1996) have suggested still a third possibility: that managers' overcon®dence in theirown abilities and in their ®rm's competencies can lead to organizational `simplicity'Ðthat is, atendency for companies to concentrate their attention and resources very narrowly on one skill,resource, or competitive advantage. Inertia, escalation and simplicity are quite di�erent responses,but all three may stem from a sense of competency and power regarding a speci®c task or function.What is it, then, about a person, ®rm or context that determines such di�erent outcomes?

Subsequent researchers might also want to consider potential `intervening factors' in therelationship between the self-e�cacy of individual managers and corporate outcomes. Under

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434 D. MILLER

what conditions does the self-e�cacy of a top executive translate into escalation behavior inorganizational strategy? What are the roles played by other top managers, governanceconditions, and organizational structures and processes? Moreover, precisely which behaviorsfollow immediately from self e�cacy, and in turn lead to escalation? For example, might self-e�cacy trigger myopic learning or constrain the search for alternative ways of behaving, whichthen lead to escalation or inertia (Levinthal and March, 1993)?

Finally it might be useful to look into the organizational consequences of low self-e�cacyamong managers. Does this cause excessive vacillation within the organization? Could theperception of inadequacy cause threat-rigidity e�ects that lead to inertial responses that alsoenhance the probability of commitment or escalation (Staw, Sandelands and Dutton, 1981)?Might it be, then, that under some conditions both very low and very high self-e�cacy createsimilar reactions or pathologies?

All of these questions suggest that there is much more work to be done. But at the same time,they signal the richness and potential relevance of the subject. They also delineate additionalopportunities for bridging macro- and micro-perspectives which may combine powerfully toexplain the dangers of success.

References

Kets de Vries, M. and Miller, D. (1984). The Neurotic Organization, Jossey-Bass, San Francisco.Loomis, C. (1987). `IBM's big blues', Fortune, January 19, 1987, 40±50.Levinthal, D. and March, J. G. (1993). `The myopia of organizational learning', Strategic ManagementJournal, 14, 95±112.

Mecklin. J. (1969). `Rolls Royce's $2 billion hard sell', Fortune, March 1969, 123±140.Miller, D. (1990). The Icarus Paradox: How Exceptional Companies Bring About Their Own Downfall,Harper Collins, New York.

Miller, D. (1993). `The architecture of simplicity', Academy of Management Review, 18, 116±138.Miller, D. (1994). `What happens after success', Journal of Management Studies, 31, 325±358.Miller, D. and Chen, M.-J. (1994). `Sources and consequences of competitive inertia: A study of the U.S.airline industry', Administrative Science Quarterly, 39, 1±24.

Miller, D. and Chen, M.-J. (1996). `The simplicity of competitive repertoires', Strategic ManagementJournal, 17, 419±439.

Staw, B. M., Sandelands, L. and Dutton, J. (1981). `Threat-rigidity e�ects in organizational behavior:a multilevel analysis', Administrative Science Quarterly, 26, 501±524.

Whyte, G., Saks, A. M. and Hook, S. (1997). `When success breeds failure: The role of self-e�cacy inescalating commitment to a losing course of action', Journal of Organizational Behavior, 18, 415±432.

# 1997 John Wiley & Sons, Ltd. J. Organiz. Behav. 18: 433±435 (1997)

A COMMENT ON WHYTE, SAKS AND HOOK 435