February 15, 2010

What exactly did Jeff Immelt mean by ‘domain knowledge’?

Dear Puritans:

My friend Fay read my blog last Friday and has raised an interesting question: what exactly did Jeff Immelt mean by ‘domain knowledge’?

We all agree that managers should possess something that goes by this name. People who run engineering or chemical companies, for example, should know a lot about engineering or chemicals. Without domain knowledge, a CEO will exist in an intellectual vacuum. It is not enough for him to be advised by a corps of specialists, since he will not be able to distinguish between good and bad advice. Ultimately, he is the decision-maker whether he acknowledges it or not.

On page 163 of THE PURITAN GIFT, we quoted the example of Sean O’Keefe, the Administrator (or CEO) of NASA from 2001 to 2005, who preferred ‘to let professionals at lower levels take responsibility for evaluating engineering risks and for making decisions’. It cannot be entirely a coincidence that, on his watch, the space shuttle Columbia crashed with the loss of seven lives. And now we have the example of Stafford Hospital in England, to which I referred on Friday, where staffing levels were cut to a point where nurses became ‘immune to the sound of pain.’ In both cases, the ultimate decision makers lacked domain knowledge.

But what is it? In the case of hospitals, an extreme view might be that senior hospital positions should be open only to medically qualified men and women, who also happen to possess the skills of general management. I disagree with the first part of this proposition; in my opinion, candidates for such positions do not all need to be formally qualified as doctors. It will be sufficient for some at least of them to possess a considerable practical knowledge, which they will have acquired  ‘on the job,’ in much the same way as they acquired their general managerial skills. But such individuals must additionally be surrounded and supported by colleagues who are formally qualified. In a good, collegiate management team, the doctrine of complementarity applies, each member being expected to make up for deficiencies in his colleagues, as explained on page 288 of our book.

Yours aye,


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