Another category is that of stories about the past. The history of organizations. This bounds people. This is what Zander was talking about. What really restrains and constrains a lot of behavior in organizations are stories about the organization’s past. The stories seem to have such power that economists call this path-dependency. And when they talk about that, economists don’t talk about what is it exactly in the past that makes a firm path-dependent, meaning that the road you took determines where you are going. The actual mechanism of how that works, they don’t get into that. Stories play a big role here. A very big role.

    Take IBM for example. I was on a number of committees, acquisition committees, and very often in 

   And you hear this all the time, maybe in different versions. “We did this and it didn’t work and we’re never going to do it again.” Or “We tried that and it can’t increase sales in Germany.” “You can’t open an office in Kuala Lumpur.” Or You can’t acquire a telecom firm.”  IBM tried three times to buy a telecom firm, and each time it was a disaster. Does that mean necessarily that the fourth time it will be a disaster. No, not at all. There is no logic behind it. But the story is so powerful and it becomes so embedded in legends and myths and opportunity costs that people’s careers were killed because they did this, the associations of the story become so powerful that it constrains behavior, often to the detriment of what could be done. It becomes a very powerful factor. 

    We were talking about raising children, and it’s like telling a child, “God’s always watching you! If you do something bad, you will go to hell!” Things like that. It certainly influences the child, certainly not for the better. But we used to hear things like that when we were growing up. 

Participant: That’s a kind of an implicit order. So does making it explicit help at all?

Larry Prusak: No. (Laughter) It doesn’t seem to change. That’s what’s interesting. You’d think it would. But it doesn’t. So that even if the kid at the age of 15 reads Bertrand Russell and discovers that there is no God, he will still feel funny. Maybe he will feel that all his life. (Laughter) 

Participant: It seems that what you’re saying is that stories are a way of promoting cultural norms.

Larry Prusak: Yes, that’s one of the ways that norms get transferred. If you’re interested in norms, the best book ever written about this is a book called Social Norms*, edited by Michael Hechter.  I have been reading about that subject all my life, and this is the best book on norms in organizations, how they grow, how they evolve, where they are, Again it’s somewhat academic prose, but it’s very good. Yes, stories  I don’t think norms develop rom stories, but I think stories carry lessons about behavior. Stories say, “Do this, not that!” And that establishes and helps these norms to be perpetuated within organizations. 

DOES THE STORY HAVE TO BE TRUE?

Participant: I think you and others have said, in a sense, that some stories could be considered true, and others could be considered either false or not quite true. What are the criteria, when you think about a story and you hear about it for the first time? What does it mean to say that it’s true or not?

Larry Prusak: I don’t think it matters that much whether a story is true or not. We’ll talk more about this later.

THE UNRELIABLE STORY

Participant: A lot of the research has shown that stories will evolve and that the stories will become socially constructed to reflect various views.

Larry Prusak: Yes, I think they can do that. It’s what called Carl Weick called “retrospective sensemaking”. You know, you change an opinion, and suddenly you change the story. There is a great story about Honda on that. Richard Pascale, a business researcher, has a wonderful piece. For years, on the Honda company, there was a story and it was put into a case format by the Harvard Business School. So stories gain cognitive authority when institutions pick them up and circulate them. I assure you that the Harvard Business School is in the business of cognitive authority. They say, “This is true. It has Harvard’s seal of approval.” And there was this story about Honda, about how Honda wiped out Harley-Davidson in the motorcycle wars, at least for a while. Harley obviously came back. And there were certain things that Honda did with market research and so forth, and Pascale, who’s a very clever fellow, looked into it and found it that it was all made up. There was chance, luck, circumstances, a whole set of things, what Jim March called the Garbage Can Model of Decisions* . Everything was thrown into the can. The can was shaken up. Something was thrown out. And Honda won some market share. It was not at all rational decision-making, even though the Japanese were very rational. And yet the story gained tremendous credence, so even after Pascale showed that it wasn’t true, most people still think that it’s true. And a lot of things are like that. 

   If you read accounts of the Cuban missile crisis in 1962. It’s the same thing. It’s presented as a rational thing. But a lot of it boils down to garbage can models, as March said. You have a question?

ORAL HISTORIES OF ORGANIZATIONS

Participant: I’m here because I’ve been tasked to write an oral history of my organization. So given what you’ve just said, what should I do, and what shouldn’t I do? (Laughter) 

Larry Prusak: What did Voltaire say about history? “It’s a pack of tricks played on the dead.” (Laughter) How old is your organization? 

Participant: 43 years old.

Larry Prusak: Then you can probably find people still alive who can really talk about it. I wouldn’t try to do much more than interview people and tape the conversations on video. Talk to people who have stories to tell about it, and let the viewers make their own decision as to what this means. If I had to do something like that, I would not try to write it. You could write it. There are whole firms that do that for other firms. But almost no-one reads that stuff, because they know it’s not true. (Laughter) It doesn’t accord with their own sense of how an organization would work. I’ve read a number of corporate histories. Not country histories, that’s different. Historians sometimes write really well and so yes, that seems to be the way it must have been. But corporate history is different. It’s mostly public relations, that is to say, bunk, and people know it. I’d sort of interview people. Talk to people and let them talk. Let others decide what it adds up to. 

** The garbage-can theory (Cohen, March, and Olsen 1972) argues that an organization is a collection of choices looking for problems, issues and feelings looking for decision situations in which they might be aired, solutions looking for issues to which they might be the answer, and decision makers looking for work. Problems, solutions, participants, and choice opportunities flow in and out of a garbage can, and which problems get attached to solutions is largely due to chance.