“We know a lot about organizations; they’re not as mysterious as they seem.” Bill Daniels and the System Four Organization

This weekendwhen not washing my hands, obsessing about COVID-19, or re-binge-watching West WingI watched the HPT Legacy interview of one of my favorite evidence-based practitioners, Bill Daniels.

Check it out.

Bill Daniels in HPT Legacy interview with Guy Wallace (2011).

This post contains a brief introduction to Bill and a summary of my favorite part of the interview: his description of System Four organizations.

About Bill

Bill Daniels is an amazing guy, and an inspiration to anyone interested in improving human performance, but especially to those of us interested in helping managers become better leaders.

Bill has a quick wit, a quiet demeanor, valuable insights gained over a long and productive career, and a great story to tell about another of my HPT heroes, Bob Mager.

One of the most important things to know about Bill is that the primary focus of his career has been management development.

That, and he’s a big fan of Rensis Likert.

You know Likert. From the Likert scale. Yes, that Likert. [Turns out it’s pronounced LICK-ert. And, I confess, I too have been mispronouncing it all my life.]

Likert’s work with the Institute for Social Research (at University of Michigan) and, in particular, Likert’s management systems (e.g., the study of “system four” organizations) had a huge impact on Bill.

Likert’s System Four Organizations

I met Bill for lunch many times several years back. And our conversations were always wide-ranging and insightful. And I think anyone who knows Bill knows that if you start to talk about his work, or society, or management, it won’t be long before Bill tells you—with great reverence—about System Four organizations.

While System Four does not seem to be in common usage [meaning only that I had not heard of it], the concepts are both hauntingly familiar and existentially important.


If you’d like to hear Bill’s full description of these management styles, watch the interview. For a brief (or brief-ish) description, read on.


Likert studied the relationship, involvement, and roles of managers and their subordinates in business settings and outlined four systems (or cultures) to describe what he found. He based these systems on observations of highly productive supervisors and their team members.

The systems have complicated, multi-syllabic names (which you can learn more about here), but for now let’s refer to them as Systems One though Four, with Four being the most effective for long-term organizational viability.

“We know a lot about organizations,” Bill says. “They’re not as mysterious as they seem. And what they [the Institute for Social Research] call System Four is consistently the best kind of organization we see.”

System One –

System One cultures are authoritative and exploitative.

In System One, leaders have low regard for people and they tend to use threats and other fear-based tactics to get the work done. As a result, workers may be quick to perform well, but the environment is loaded with stress and negative feelings.

In a System One culture, communication is almost entirely downward and the psycho-emotional concerns of people are ignored.

Bill explains that System One organizations are characterized by “vicious, autocratic management” and represented by the manager who says, “Look, I didn’t hire you to listen to you. I hired you to do what I tell you to do.”

It’s intimidating. And overbearing.

And yet sometimes there’s value in this style. Much like yelling at a child just before she burns her hand on a hot stove, Bill says, “it’s great for a quick, brief success; but for the long term, it’s a disaster.”


Bill warns, “any department you let [a System One leader] run, they will kill it within 30 months.”

System Two –

System Two cultures are authoritative and benevolent. But Bill cautions about that combination. He says they are also “devious and psychologically dangerous.”

In a System Two culture, there’s less control over workers than in System One. In this system, workers are motivated through potential punishment AND rewards. Lower-level workers are more involved in the decision making processes, but they’re still limited by upper management.

In Bill words, the System Two culture is “autocratic [like System One], but it smiles while it’s doing it.” He explains, it’s “very devious and psychologically dangerous because it’s highly manipulative, very dishonest, and full of covert conflict.

“It’s a VERY emotionally stressful working environment. They’re even worse than the overt ones.”


Quoting one of his mentors,  Bill’s recommends, “Don’t try to work with ‘Twos.’ But work with ‘Ones,’ because very often Ones know they’re failing and they’re looking for help. And they make very good students.”

System Three –

System Three culture is consultative. Lower-level workers are motivated through rewards and occasional punishments, and have some involvement in making decisions and setting goals.

Compared to the first two systems, workers in this consultative environment have more freedom to communicate and make company decisions, but communication still tends to flow mostly downward.

Bill refers to System Three culture as, “the muddled thing you get when you really aren’t trying to do it together.” It’s typified by managers who say, “Eh, however you want to manage is fine by me, as long as you get some results.”

While the consultative approach may seem productive at first, the problem is a lack of consistency. “Everybody’s running their part of the organization their own way,” says Bill. “It’s terribly inefficient and uncoordinated.”


Bill notes that there’s often, “a lot of covert conflict” in a System Three culture. And “it doesn’t feel autocratic until crisis time.”

Bill suggests that most organizations (about 60%) in America today are System Three.

We have many, many companies doing okay but not great with, as Bill puts it, “lots of mismatched management theories at play.”

System Four –

Highly Participative

A System Four culture is highly participative. It promotes genuine participation in decision-making and goal setting. And in comparison to the other systems/cultures, it is the most effective.

In System Four, managers value and encourage cohesiveness between team members. Communication is free-flowing and lateral. Creativity is encouraged. As a result, workers become more involved within the organization and they’re more satisfied and productive.

Bill describes System Four organizations as being “consultative” and “decision-oriented.” Group work process seems very important.

Disciplined, Systematic Decision-Making

“The key difference,” Bill says, “is the System Four organization’s dependence on small group decision-making in the management structure.”


The System Four culture has a “highly disciplined system of meetings that link together so that the organization literally cycles its resource issues from the bottom of the organization as high as sometimes five- or six-levels of management. And from dinky little stuff that doesn’t require anything to $50 million decisions.”

A System Four organization can turn important decisions around very quickly. “And the decisions are good,” Bill says. “And they get implemented immediately.”

High Capacity for Flexibility and Innovation

A System Four organization, according to Bill, has “an unusual capacity for flexibility and innovation. After entering an industry, they can take it over in about 10 to 15 years.

“It’s highly disciplined and overt in its conflict.

“It’s not the warm fuzzy thing people were thinking it might be back in the 60s and 70s.”

An organization of this nature, “has rules of engagement which allow people to make their decisions openly and to disagree and commit—to continue disagreeing while they actually decide we will do this anyway.”

Only About 20% of Organizations are System Four

On the effectiveness of System Four organizations, Bill notes that the statistics are consistent over time–these organizations are year after year the best of the best.

Considering the distribution of these management systems, he explains:

  • “We have about 20% of American organizations being absolutely destroyed in the next 30 months by their System Ones and Twos.”
  • “We have 20% who are about to take over their market in another 10 to 15 years—even if they’re very small—and they’re System Four.”
  • “In between is the large part of the curve, the other 60% of the organizations in America, and they’re in System Three.”

Recommended Resources

Bill recommends several resources for learning more about these kinds of organizational distinctions:

  • Likert’s New Patterns of Management and The Human Organization. These may be tough to find, but Bill refers to them as “the bibles” of this kind of work.

He also recommends:

  • Peters’ and Waterman’s In Search of Excellence
  • Jim Collins’ work (e.g., Good to Great)

Two things about Jim Collins’ work:

  1. Bill say he’s “very excited about the consistency with which Collins rediscovers these patterns in his work. And he [Collins] is pretty specific about the behaviors.”
  2. On Collins’ Good to Great, Bill notes, “the quiet leadership that Collins highlights in Good to Great—his Level 5 Leaders—is common in System Four organizations. These are leaders who are humble and rarely showy. They can be hard to find.”

Don’t Miss the Mager Story

If you watch the video, don’t miss the story in which Bill and his wife, Lila, invite Bob Mager to speak at an ASTD conference. (It starts around 26:06.)

Lila made the call and when Bill asked “So, what did he say?” Lila responds, “Well, he spent most of the time explaining to me that ASTD is not a professional association. And said No he would not come.”

Ya gotta love it.

Other Highlights

Throughout the interview, Bill also offers insight and wisdom on the importance of our work in HPT and how we can help:

  • managers clarify outputs, feedback and resources
  • organizations be more productive and productive of the right things
  • businesses cover for inadequate educational systems
  • leaders improve the way they communicate and make better use of technological advances available to them
  • workers build and maintain trust


In light of the current COVID-19 crisis and the fact that many of our governments and organizations have failed us in their lack of preparations and response speeds, here’s one more favorite quote from Bill:

“It is important that we get our organizations out of the muddle. We must help more organizations perform their functions so that our society is productive and productive of the right stuff. We have a big, big change ahead of us.”


See the full interview here.

Many thanks to Guy Wallace for capturing the wit and wisdom of so many HPT practitioners over the years! THANKS, Guy!

Follow Russ Powell on LinkedIn or Twitter.


Lessons from Super-forecasters

I recently found myself caught up in a podcast about predictions and how to become better at making them. Part of my fascination was simply that I enjoyed the content of the show. Part of it was that, to my surprise, I heard some great tips and techniques that spoke directly to my work in the world of human performance technology (HPT).


The show was the Freakonomics Radio podcast How to Be Less Terrible at Predicting the Future, hosted by Stephen Dubner. Check it out. I highly recommend it.

If you work as a training consultant, an instructional designer, an evaluation or measurement expert, or any professional interested in improving your evidence-based practices, I think you’ll find—the probability is greater than two-in-three (ahem)—that you’ll find value in the podcast.

Here are my top-ten takeaways from the show:

1 – We should hold experts and pundits more accountable for the accuracy of their predictions.

  • “[Pundits] are notoriously bad at forecasting, in part because they aren’t punished for bad predictions. Also, they tend to be deeply unscientific.” (Dubner)
  • “I think in your guys’ profession [sports reporting, punditry], you can easily take back what you say… there’s no danger when somebody says it. Y’know, if there was a pay cut or if there was an incentive, if picking teams each and every week, you may get a raise, I guarantee people would be watching what they say then.” —Cam Newton (football player) on the lack of accountability for sports reporters on their predictions
Cam Newton playing against the New Orleans Saints in 2015. Photo: Tammy Anthony Baker
  • “When you don’t have skin in the game, and you aren’t held accountable for your predictions, you can say pretty much whatever you want.” (Dubner)

“When you don’t have skin in the game, and you aren’t held accountable for your predictions, you can say pretty much whatever you want.” –Stephen Dubner

2 – For far too long, very smart people have been content to have little accountability for accuracy in forecasting.

  • “Experts think they know more than they do; they’re systematically overconfident.” –Philip Tetlock (political science writer, professor at Univ. of Pennsylvania, author of Superforecasting: The Art and Science of Prediction)
  • “A lot of the experts that we encounter, in the media and elsewhere, aren’t very good at making forecasts. Not much better, in fact, than a monkey with a dart board.” (Dubner)

3 – One of the distinguishing characteristics of bad, overconfident forecasters is dogmatism.

  • A bad forecaster tends to have an unwillingness to change his/her mind in a reasonably timely way in response to new evidence. “They have a tendency, when asked to explain their predictions, to generate only reasons that favor their preferred prediction and not to generate reasons opposed to it.” (Tetlock)

We are predisposed toward interpreting data in a way that confirms our bias or our priors or the decision we want to make. –Stephen Dubner

4 – Forecasting is everywhere. We do it, and rely on it, far more than we realize. And yet we rarely measure the accuracy of our forecasts.

  • “People often don’t recognize how pervasive forecasting is in their lives — that they’re doing forecasting every time they make a decision about whether to take a job or whom to marry or whether to take a mortgage or move to another city. We make those decisions based on implicit or explicit expectations about how the future will unfold. We spend a lot of money on these forecasts. We base important decisions on these forecasts. And we very rarely think about measuring the accuracy of the forecasts.” (Tetlock)

People often don’t recognize how pervasive forecasting is in their lives. And yet we very rarely think about measuring the accuracy of the forecasts. –Philip Tetlock

5 – One of the great historical examples of bad forecasting with dire consequences was the Bay of Pigs Invasion (1961).

  • “The Kennedy administration asked the Joint Chiefs of Staff to do an independent review of the plan and offer an assessment of how likely this plan was to succeed. And I believe the vague-verbiage phrase that the Joint Chiefs analysts used was they thought there was a ‘fair chance of success.’ It was later discovered that by ‘fair chance of success’ they meant about one-in-three. But the Kennedy administration did not interpret ‘fair chance’ as being one-in-three. They thought it was considerably higher. So, it’s an interesting question of whether they would have been willing to support that invasion if they thought the probability were as low as one-in-three.” (Tetlock)
A4D-2 Skyhawks in flight during Bay of Pigs Invasion (Apr 1961)
  • “We are predisposed toward interpreting data in a way that confirms our bias or our priors or the decision we want to make. So, if I am inclined toward action and I see the words ‘fair chance of success,’ even if attached to that is the probability of 33 percent, I might still interpret it as a move to go forward.” (Dubner)

Foresight isn’t a mysterious gift bestowed at birth. It is the product of particular ways of thinking, of gathering information, of updating beliefs. These habits of thought can be learned and cultivated by any intelligent, thoughtful, determined person. –Philip Tetlock

6 –Beware the Vague-verbiage Forecast

  • Forecasts that contain fuzzy words (e.g., “a fair chance of success”) can be misleading and used mischievously.
  • “In a vague-verbiage forecast it is very easy to hear what we want to hear. There’s less room for distortion if you say ‘one-in-three’ or ‘two-in-three’ chance. There’s a big difference between a one-in-three chance of success and a two-in-three chance of success.” (Tetlock)

7 – Super-forecasters tend to have the following characteristics:

  • Do not believe in fate, but do believe in chance
  • Humble about their judgements
  • Actively open-minded
  • Good with numbers, but don’t necessarily know deep-math
  • Use an outside-in view, rather than the inside-out view
  • Curious
  • Strong work-ethic
  • Above-average intelligence
  • Understand probability

Super-forecasters tend to be open-minded, curious, and humble about their judgements. They also understand probability and tend to believe in chance but not fate.

8 – Practical Recommendations for Aspiring Super-forecasters:

  • Focus on questions where your hard work is likely to pay off.
  • Break seemingly intractable problems into tractable sub-problems.
  • Strike a balance between under- and over-reacting to the evidence.
  • Look for the errors behind your mistakes but beware of rear view-mirror hindsight biases.
  • Bring out the best in others and let others bring out the best in you.

9 – Super-forecasting is a set of skills that can be acquired and improved upon with practice.

  • “Just as you can’t learn to ride a bicycle by reading a physics textbook, you can’t become a super-forecaster by reading training manuals. Learning requires doing, with good feedback that leaves no ambiguity about whether you are succeeding or failing.” (Dubner)
  • “Forecasters believe that probability estimation of messy real-world events is a skill that can be cultivated and is worth cultivating. And hence they dedicate real effort to it. But if you shrug your shoulders and say, ‘Look, there’s no way we can make predictions about unique historical events,’ you’re never going to try.”

Forecasters believe that probability estimation of messy real-world events is a skill that can be cultivated and is worth cultivating. And hence they dedicate real effort to it. –Philip Tetlock

10 – If, as a culture, we placed greater value on the accuracy of our predictions, we would improve the quality of public debate.

  • “If partisans in debates felt that they were participating in [events] in which their accuracy could be compared against that of their competitors, we would quite quickly observe the depolarization of many polarized political debates. People would become more circumspect, more thoughtful and I think that would on balance be a better thing for our society and for the world.” (Tetlock)

Here’s another link to the original podcast. Enjoy!

Freakonomics Radio > Podcast > How to Be Less Terrible at Predicting the Future

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