Pragmatism

Pragmatism is the doctrine that truth is what works — that an idea's validity consists in its practical consequences rather than in its correspondence to reality. Objectivism rejects it, and treats the popular version of it, acting on immediate results without reference to principles, as the practical expression of the same error.

The philosophical doctrine

Pragmatism as a school holds that concepts are instruments for coping rather than identifications of fact, and that a belief is "true" insofar as acting on it succeeds. Objectivism's objections:

It cannot say what "works" means. Success is success at achieving something, so the standard presupposes a value the theory has no way to establish. Asking what works is asking a question the doctrine has ruled unanswerable. See Value and Ethics.
It reverses the order of knowledge and action. One acts successfully because one has identified reality correctly. Making the success the definition of the correctness leaves no account of why anything works at all. See Causality and Truth.
It abolishes principles by construction. If truth is settled case by case, there is nothing that holds across cases, and long-range action becomes impossible in theory as well as in practice. See Context and Hierarchy.
It is self-refuting. The claim that truth is what works is not itself offered as merely something that works. It is offered as true.

Its epistemological ancestry is empiricism: having concluded that no generalisation is fully warranted, pragmatism keeps the concretes and reinterprets truth as whatever handling them successfully amounts to. It arrives at subjectivism by a different road, since what "works" is finally judged by whoever is judging.

Pragmatism as a way of living

The everyday sense — "be pragmatic", meaning do whatever the situation seems to call for — is the same doctrine applied without the label. Objectivism's argument against it is that it does not achieve what it promises:

Man's life is long-range. His mode of survival is conceptual, which means acting now for consequences that arrive years later. A policy of consulting only the immediate case forfeits precisely the advantage a conceptual mind confers. See Life and Purpose.
There are no unprincipled actions, only unexamined ones. A person handling each situation "on its merits" is still applying some standard of what counts as a merit. Pragmatism does not remove the principle; it removes it from inspection.
It concedes every argument in advance. Someone with no principles has nothing to refuse with. Rand's political charge against pragmatism was that it leaves a culture able to bargain over everything and defend nothing, which is why she treated it as the enabling philosophy of modern statism.
Compromise stops being bounded. Trading concretes between people who share a principle is ordinary. Trading the principle is what pragmatism cannot distinguish from it. See Integrity.

The false alternative it exploits

Pragmatism gets its plausibility from the assumption that one must choose between principles and practicality — that a person of firm convictions is by that fact unequipped for the real world. Objectivism denies the split. A principle is an identification of what a whole class of situations actually requires; if a principle does not work, that is evidence against the principle, not against having any.

This is the theory-practice dichotomy, and Rand held that it survives because most people's principles were acquired as floating abstractions and so genuinely do not fit the cases they meet. See Practical and Rationalism.

Common misunderstandings

That it means being effective or realistic. Objectivism holds that acting on correct principles is what effectiveness consists of. The disagreement is about where the principles come from, not about whether results matter.
That rejecting it requires ignoring consequences. Consequences are the evidence by which a principle is validated in the first place. What is rejected is treating each consequence as settling a question on its own.
That it is a purely academic school. Rand's interest was in its cultural form — the widespread assumption that firm convictions are a kind of naivety — which she thought had done more damage than the technical doctrine.
That it is the same as flexibility. Adjusting a plan to circumstances is judgment. Having no standard by which to adjust it is not flexibility but drift.

Discussion

References

Rand, Ayn. "Faith and Force: The Destroyers of the Modern World", Philosophy: Who Needs It.
Rand, Ayn. "Doesn't Life Require Compromise?", The Virtue of Selfishness.
Peikoff, Leonard. Objectivism: The Philosophy of Ayn Rand, chapter 5.