Saturday, October 27, 2018

How Good is Your Judgement?

In a 2016 article Paul Schoemaker and Philip Tetlock remind us that “companies and individuals are notoriously inept at judging the likelihood of uncertain events, as studies show all too well. Getting judgements wrong, of course, can have serious consequences. Steve Ballmer’s prognostication in 2007 that there’s no chance the iPhone is going to get any significant market share, left Microsoft with no room to consider alternative scenarios,” (p.74).
 
There’s a direct link between judgement and accountability. For example in our youth our judgement often goes awry simply because we don’t feel accountable for our actions and hence don’t think things through properly. Even organizations have issues with ‘judgement’ because individuals aren’t held accountable; and hence don’t ‘learn’ to think things through quickly. In fact one of the downsides of command and control style leadership is that these leaders use their power to avoid accountability when it comes to ‘bad’ judgements being made.
 
Schoemaker and Tetlock mention “the experience of a UK bank that lost a great deal of money in the early 1990’s by lending to U.S. cable companies that were hot but then tanked. The chief lending officer conducted an audit of these presumed lending errors, analysing the types of loans made, the characteristics of clients and loan officers involved, the incentives at play, and other factors. She scored the bad loans on each factor and then ran an analysis to see which ones best explained the variance in the amounts lost. In cases where the losses were substantial, she found problems in the underwriting process that resulted in loans to clients with poor financial health or no prior relationship with the bank – issues for which expertise and judgement were important. The bank was able to make targeted improvements that boosted performance and minimized losses,” (p.74).
 
There’s the other side of the coin too – organizations that are so ‘risk averse’ that employees make judgements based on ‘fear of failure’ which rarely leads to optimum solutions for the organization in the short or long term. Most of us learn through the mistakes that we make and through the risks that we have taken in our lives. Being able to take risk is based on values like accountability, but also integrity and excellence, and safety where appropriate. Our core values, if aligned correctly, should be enough to allow us to make those judgements that have risk attached but the rewards are worth it; where even failure has a reward, as we learn ‘what doesn’t work.’
 
Schoemaker and Tetlock highlight how “most predictions made in companies, whether they concern project budgets, sales forecasts, or the performance of potential hires or acquisitions, are not the result of cold calculus. They are coloured by the forecaster’s understanding of basic statistical arguments; susceptibility to cognitive biases, desire to influence others’ thinking, and concerns about reputation. Indeed, predictions are often intentionally vague to maximize wiggle room should they prove wrong. The good news is that training in reasoning and debiasing can reliably strengthen a firm’s forecasting experience,” (p.75).
 
A key cognitive bias is the perceived culture of the company and the perceived impact this culture has on the judgements you make. This perceived culture will be different for employees in different departments; or at different levels or at different stages in their career; as well as the personal values of each of the employees in the organization.
 
Schoemaker and Tetlock remind us that “cognitive biases are widely known to skew judgement, and some have particularly pernicious effects on forecasting. They lead people to follow the crowd, to look for information that confirms their views, and to strive to prove just how right they are. Training can help people understand the psychological factors that lead to biased probability estimates, such as the tendency to rely on flawed intuition in lieu of careful analysis. Another technique for making people aware of the psychological biases underlying skewed estimates is to give them confidence quizzes,” (p.75).
 
We live in a world where judgements that are made can impact more than just the individual making the judgement, but can impact the whole world. Take global warming, a scientific phenomenon that if correct and not ‘checked’ will be the end of the world as we know it. Yet recently the President of the United States broke away from the Paris Accord on Climate Change, claiming ‘global warming’ was a politically driven ‘con’ and that because his grandfather was a Professor at MIT, he had an instinct for science – hmmm, making judgement on a phenomenon that could be the end of life on earth requires patience, accountability, integrity and much more serious debate.
 
Schoemaker and Tetlock remind us of the importance of building the right teams. “Whether a team is making a forecast about a single event or making recurring predictions, a successful team needs to manage three phases well: a diverging phase, in which the issue, assumptions, and approaches to finding an answer are explored from multiple angles; an evaluating phase, which includes time for productive disagreement; and a converging phase, when the team settles on a prediction. In each of the three phases, learning and progress are fastest when questions are focused and feedback is frequent,” (p.77).
 
The key to judgement in the 21st century, besides the values already discussed is the concept of trust. We need to recruit the right people with the right experience and values; then trust them to make the right judgement calls and trust them to be flexible in their approach so that they will be honest when things start to go wrong or don’t work.
 
The judgements organizations make today shouldn’t just be about short term shareholder value, but about long term sustainable growth. The UK has seen the ‘high street’ change so much in the last 12 months. Retail stores that have been around for hundreds of years closing their doors for good or closing down a large proportion of their stores laying off thousands of employees. These closures are due to poor judgement and now everyone pays, even the shareholders.
 
As we become more technologically advanced; and as we see the divide between rich and poor become even greater, we need leaders, both from business and politics to make better judgement calls for the world in general – otherwise the future could be very bleak.
 
Finally Schoemaker and Tetlock suggest that “companies should systematically collect real time accounts of how their top teams make judgements, keeping records of assumptions made, data used, experts consulted, external events, and so on. Where well-run audits can reveal post facto, whether forecasters coalesced around a bad anchor, framed the problem poorly, overlooked an important insight, or failed to engage team members with dissenting views. Likewise they can highlight the process steps that led to good forecasts and thereby provide other teams with best practices for improving predictions,” (p.78).
 
References:
 
Schoemaker, P.J.H. and Tetlock, P.E. (2016). Superforecasting: How To Upgrade Your Company’s Judgement. Harvard Business Review, May, p.72-78.

Sunday, September 30, 2018

Do You Believe in Transformational Leadership?

Transformational leaders try to develop their followers’ full potential (e.g., Bass, 1985; Johnson & Dipboye, 2008); therefore, followers tend to feel that their organization is effective and that it can provide future opportunity and development. As such, it is expected that followers will be more likely to stay in the organization because they are satisfying their needs for self-categorization/self-identity, and they have a sense of being unique from other members in society. Organizational identification is therefore likely to be strengthened.
 
Wang and Huang state in a 2009 article, that “in the last few decades, within the field of leadership, transformational leadership behaviour has come to represent the most effective form of close engagement between leaders and followers that motivates the latter to perform beyond their transactional agreements. Robbins (2001) defined transformational leaders as, leaders who provide individualised consideration and intellectual stimulation, and who possess charisma,” (p.381).

It was the late Bernard Bass (founding editor of the leadership quarterly journal) who back in 1990 attributed four behavioural characteristics to a transformational leader: charisma, inspirational motivation, intellectual stimulation and individualised consideration. It was only later, in 2003, when John Antonakis, Bruce Avolio and Nagaraj Sivasubramaniam replaced the characteristic of charisma with, what they termed, idealised influence.

Wang and Huang (2009) remind us that “a leader only possesses idealised influence if his or her followers seek to identify with, and want to emulate, him of her. This type of leader is admired, respected and trusted.” Further, “transformational leaders behave in ways that;

1) Motivate and inspire their followers by providing meaningful challenges;
2) Encourage followers to envision attractive future states, which they can ultimately envision for themselves; and
3) Aim to expand their followers efforts in terms of innovativeness and creativity by questioning assumptions, reframing problems and approaching old problems in new ways;” (p.381).

Research has also linked transformational leadership with levels of emotional intelligence. Where, for example, Wang and Huang mention that “emotional intelligence is an emerging topic within psychological, educational and management research, and that it was Daniel Goldman back in 1995 who suggested that the best predictor of who eventually emerges as a leader is based on emotional intelligence (EI), which includes abilities such as;

Self-Awareness;
Self-Management;
Self-Motivation;
Empathy; and
Social Skills.”
 
John Ryan from the Center of Creative Leadership mentions that "as we explore what's new and meaningful on the frontiers of leadership development, we do know this: the context in which leadership happens is changing every day in every sector. We are living in a VUCA world: one characterized by Volatility, Uncertainty, Complexity and Ambiguity and will be for years to come. In a dizzying swirl of socio-political upheaval, natural disasters and volatile business markets, many of us stay awake at night wondering if our skills and knowledge are enough to see us through tomorrow or the next quarter. Seeing farther than that is even more daunting and yet we have to keep searching."

The findings from Wang and Huang’s study “indicate that leaders exhibit more transformational leadership behaviour when they have the ability to perform self-emotional appraisals; others’ emotional appraisals; regulation of emotions and constructive use of emotions. Their findings support the view that emotional intelligence is an important variable for understanding and predicting transformational behaviour. Their results also contribute further evidence that transformational leadership influences not only individual level consequences, but also group level consequences,” (p.389).
 
Genuine transformational leaders possess great referent and inspirational power (Bass, 1985) which enables them to gain the respect, admiration, and trust of their followers. They are also seen as role models who exert significant and positive influence on followers that creates a sense of meaningfulness (Bass, 1985). Employees who experience a greater sense of meaning from their work are likely to feel more empowered (Spreitzer, 1995) and proud of being a member of the organization, and thereby enhance their identification with the organization (Koberg et al., 1999).
 
In their HBR article from 2012 Boris Groysberg and Michael Slind highlight that “smart leaders today engage with employees in a way that resembles an ordinary person-to-person conversation more than it does a series of commands from on high. Furthermore, they initiate practices and foster cultural norms that instill a conversational sensibility throughout their organizations. Chief among the benefits of this approach is that it allows a large or growing company to function like a small one. By talking with employees, rather than simply issuing orders, leaders can retain or recapture some of the qualities that encourage operational flexibility, high levels of employee engagement, and tight strategic alignment.”

In the last few years transformational leadership has become one of the dominant leadership theories and applications for successful organisational development. Occasionally as a leader, it’s worth stepping back and asking; are you a leader who is admired, respected and trusted by your followers and your peers – do people in your organisation strive to be like you? An honest reflection will help you understand the difference between just being in a leadership position and actually being an effective transformational leader.

References:

Groysberg, B. and Slind, M. (2012). Leadership is a Conversation. Harvard Business Review. July.
 
Ryan, J.R. (2012). What's next for leadership? 5 big ideas. Center for Creative Leadership Annual Report, 2011-2012.
 
Yung-Shui Wang and Tung-Chun Huang. (2009). The Relationship of Transformational Leadership with Group Cohesiveness and Emotional Intelligence. Social Behavior & Personality: An International Journal; Vol. 37, Issue 3, p.379-392.
 
Zhu, W., Sosik, J.J., Riggio, R.E., and Yang, B. (2012). Relationships between Transformational and Active Transactional Leadership and Followers’ Organizational Identification: The Role of Psychological Empowerment. Institute of Behavioral and Applied Management. p.186-212.

Sunday, August 26, 2018

Is Your Leadership Training a Success?

Any form of training and development is an investment, for which there should be a measurable return in the short, medium and long term; hopefully in excess of the original investment. Organizations should spend the right amount of time identifying specific training and development needs; identifying how success will be measured; identifying potential suppliers and gaining the usual three or more quotes, (where the supplier identifies and commits to some form of measurable outcome for their service); and then implementing the solution and measuring the success. But is this what your organization is doing?
 
Michael Beer, Magnus Finnstrom and Derek Schrader in their HBR article write that “corporations are victims of the great training robbery. American companies spend enormous amounts of money on employee training and education - $160 billion in the United States and close to $356 billion globally in 2015 alone – but they are not getting a good return on their investment. For the most part, the learning doesn’t lead to better organizational performance, because people soon revert to their old ways of doing things,” (p.51).
 
What Beer, Finnstrom and Schrader identify is that organizations aren’t identifying specific needs, but instead seemingly responding to an organizational cultural need that simply says (or implies) ‘we have to have done some training this year’ – lets go and spend some money! If you don’t have a specific need in mind that is ‘owned’ by those taking the training and those they report to – is it any wonder ownership, implementation and change don’t take place after the vast amounts of money have been spent.
 
Beer, Finnstrom and Schrader mention how “education with the objective of individual growth is worthy in its own right, of course, and people are eager to acquire knowledge and skills that will help them advance in their careers. However, the primary reason senior executives and HR invest in management training is to make their leaders and organizations more effective, and results on that front have been disappointing. Three-quarters of the nearly 1,500 senior managers at 50 organizations interviewed in 2011 by the Corporate Leadership Council were dissatisfied with their companies’ learning and development function. Only one in four reported that it was critical to achieving business outcomes. Decades’ worth of studies show why it isn’t working, but, sadly, that understanding has not made its way into most companies,” (p.52).
 
In some organizations training just seems to be like a production line, i.e. let’s just show that we’ve put x amount of people through x number of courses and that will impress the bosses. But a good CEO or executive will always ask to see the impact of the return on investment and won’t be fooled by numbers. Great organizations look for quality that makes a real difference, rather than quantity that has no impact, other than on the ‘expenses’ column of the HR budget.
 
Beer, Finnstrom and Schrader highlight how “from all the streams of research we’ve learned that education and training gain the most traction within highly visible organizational change and development efforts championed by senior leaders. That’s because such efforts motivate people to learn and change; create the conditions for them to apply what they’ve studied; foster immediate improvements in the individual and the organizational effectiveness; and put in place systems that help sustain the learning,” (p.53).
 
I know some organizations where their employees have a reputation of being ‘training tourists’, because when they are assigned to a training program they hardly ever show up, as they know they’re not actually expected to ‘change’ once they get back to their organization. Often the training organization doesn’t mind, as they’re getting paid whether the employee turns up or not, so it’s a complete farce all round.
 
Beer, Finnstrom and Schrader remind us how ‘a poor return on investment isn’t the only bad outcome of failed training initiatives. Employees below the top becomes cynical. Corporate leaders may fool themselves into believing that they are implementing real change through corporate education, but others in the organization know better. Why don’t leaders get this? So what happens is HR defines the requisite individual competencies according to the company’s strategy and then sells top management on training programs designed to develop those competencies, believing that organizational change will follow. This widely embraced development model doesn’t acknowledge that organizations are systems of interacting elements: Roles, responsibilities, and relationships are defined by organizational structure, processes, leadership styles, people’s professional and cultural backgrounds, and HR policies and practices. And it doesn’t recognize that all those elements together drive organizational behavior and performance. If the system doesn’t change, it will not support and sustain individual behavior change – indeed, it will set people up to fail. Second HR managers and others find it difficult or impossible to confront senior leaders and their teams with an uncomfortable truth: A failure to execute on strategy and change organizational behavior is rooted not in individuals’ deficiencies but, rather, in the policies and practices created by top management. Those are the things to fix before training can succeed longer-term. It’s much easier for HR to point to employees’ competencies as the problem and to training as the clear solution. That’s a message senior leaders are receptive to hearing,” (p.54).
 
Organizations need strong leaders that demand an ROI on training and development solutions; and leaders that demand that those solutions meet a specific need that is identified and owned by the key players (the employee and their boss); and leaders that hold HR, functional leaders and the training suppliers to account. These three attributes are essential to stop the drain of money and the failing of training solutions.
 
Finally Beer, Finnstrom and Schrader indicate how “part of creating a favorable context for learning is making sure that every area of the business provides fertile ground. Soil conditions will inevitably vary within an organization, because each region, function, and operating group has its own needs and challenges. In our studies of corporate transformations and our work with clients, unit leaders have told us that their companies’ education programs were not wrong in substance but failed to align with their local priorities and stage of business and organizational development. In other words, their groups were not ready for the training yet. So companies should invest in capability development unit by unit. The corporate-level unit links everyone at the top – the CEO, their senior team, and key business units, regional and functional leaders and their key people. Individual units must consider their needs and their capabilities in the context of their own strategies and goals,” (p.56).
 
References:
 
Beer, M., Finnstrom, M. and Schrader, D. (2016). Why Leadership Training Fails – and What to Do About It. Harvard Business Review, October, p.50-57.

Sunday, July 8, 2018

Do You Have to Lie to be a Good Negotiator?

In the 21st Century it seems like not telling the truth has become an acceptable norm. Besides the ‘fake news’; and the fake stories around fake news; we’ve seen a tidal wave of bad business deals, the most catastrophic leading to the financial crisis in 2007-2008.
 
Leslie John in a 2016 article highlights how “robust social psychology research indicates that people lie – and lie often. One prominent study found that people tell, on average, one or two lies every day. Judging from studies done in 1999 and 2005, roughly half of those negotiating deals will lie when they have a motive and the opportunity to do so. Typically they see it as a way to gain the upper hand (although it can actually cause a backlash and prevent the kind of creative problem solving that leads to win-win deals). Deception is thus one of the intangibles that negotiators have to prepare for and take steps to prevent,” (p.114).
 
Social media has also increased the propensity to lie – in many cases just to try and keep up with all the other lies flying around in the social media space. Social media may have a means to bring people together – but it has also caused an environment of significant individual competition, as people try to ‘stand out’ within the social media crowd.
 
John mentions how “one meta-analysis (a study of studies) found that people can correctly identify whether someone is telling a lie only 54% of the time – not much better odds than a coin flip. Even the polygraph – a technology specifically engineered to detect lies in a controlled setting – is riddled with problems and comes to the wrong conclusion about a third of the time. Humans are particularly inept at recognizing lies that are cloaked in flattery: your boss promises that a promotion is coming any day now; the supplier’s assurance that your order is his top priority. We’re wired to readily accept information that conforms to our pre-existing assumptions or hopes,” (p.115).
 
Because lying is prevalent in the 21st Century the younger generation haven’t had a chance to ‘learn’ how to spot the difference between fact and fiction. Experience comes with time; and as the younger generation get ‘burnt’ again and again, they will eventually learn to look for the tell-tale sign of dishonest behaviour.
 
John highlights how “there are several science-backed strategies that can help you conduct conversations in a way that makes it more difficult for your counterpart to lie. Though these methods aren’t fail safe, they leave you better positioned to create maximum value” in a more honest environment;
 
Encourage Reciprocity
Ask the Right Questions
Watch for Dodging
Don’t Dwell on Confidentiality
Cultivate Leaks
 
 
“Humans have a strong inclination to reciprocate disclosure: When someone shares sensitive information with us, our instinct is to match their transparency. Reciprocity is particularly pronounced in face-to-face interactions. In experiments led separately by Arthur Aron and Constantine Sedikides, randomly paired participants who worked their way through a series of questions designed to elicit mutual self-disclosure were more likely to become friends than were pairs instructed to simply make small talk. Other research by Maurice Schweitzer and Rachel Croson shows that people lie less to those they know and trust than they do to strangers,” (p.115).
 
As humans we build our reputations on our integrity – and though it may take a few years to gain a reputation – once you have it, you’ll have the best competitive advantage you could possibly want – and those who have tried to lie their way to success, will find a sudden rocky road ahead and find doors closing in their faces. Lies, when they work, only give a short term benefit.
 
Negotiation is a true art – and if you’ve met great negotiators in your career, you’ll know what I mean. They don’t lie – to achieve success – but they know how to ‘play poker’ and when to be strong and when to fold.
 
“Most people like to think of themselves as honest. Yet many negotiators guard sensitive information that could undermine their competitive position. In other words they lie by omission, failing to volunteer pertinent facts. The risk of not getting the whole story is why it’s so important to test your negotiating partners with direct questions. Schweitzer and Croson found that 61% of negotiators came clean when asked about information that weakened their bargaining power, compared to 0% of those not asked. Unfortunately, this tactic can backfire. In the same experiment, 39% of negotiators who were questioned about the information ultimately lied. But you can go a long way toward avoiding that outcome by posing your questions carefully.”
 
If you look a politicians these days – they have lost the art of negotiating – and prefer to either misdirect or ignore questions completely. “Savvy counterparts often get around direct questions by answering not what they were asked but what they wished they’d been asked. And, unfortunately, we are not naturally gifted at detecting this sort of evasiveness. As Todd Rogers and Michael Norton have found, listeners usually don’t notice doges, often because they’ve forgotten what they originally asked. In fact, the researchers discovered that people are more impressed by eloquent sidestepping than by answers that are relevant but inarticulate,” (p.116).
 
Trust is something that is earned over time, by being trustworthy in all aspects of your life. “Research shows that when we work to assure the others that we’ll maintain their privacy and confidentiality, we may actually raise their suspicions, causing them to clam up and share less.”
 
“People inadvertently leak information in all kinds of ways, including in their questions. When people leak mindlessly, the information tends to be more accurate. Astute negotiators realize that valuable knowledge can be gained simply by listening to everything their counterpart says, even seemingly extraneous or throwaway comments – in the same way that interrogators look for statements from criminal suspects that include facts not known to the public.”
 
I remember being taught by my parents to ask if I didn’t know and never to lie. Those basic values are just as true today. Ignore the pressures of social media and others around you to lie – just be yourself and garner a reputation of reliability and trustworthiness – and you’ll be surprised with the rewards that this will bring to your career and your personal life too.
 
Finally John states that “lying surrounds us – and can be a real impediment to the creation of value in negotiation. The good news is that deploying science-backed strategies can go a long way toward bringing out the best in negotiations and in the parties involved,” (p.117).
 
References:
 
John, L.K. (2016). Managing Yourself: How to Negotiate with a Liar. Harvard Business Review, July-August, p.114-117.

Sunday, June 24, 2018

Do You Let Bias Effect Your Decisions?


Decision making and leadership are not mutually exclusive. Make effective decisions and your team will be motivated and more productive; and the implementation of the decision is more likely to be a success. Yet if you keep making ineffective decisions, eventually you’ll demotivate your team (probably quite quickly), productivity will fall and implementation is less likely to succeed.
 
For decades, behavioural decision researchers and psychologists have suggested that human beings have two modes of processing information and making decisions. The first, System 1 thinking, is automatic, instinctive, and emotional. It relies on mental shortcuts that generate intuitive answers to problems as they arise. The second, Systems 2 thinking, is slow, logical, and deliberate.
 
To find out how much you rely on each mode of thinking – intuitive System 1 or more deliberate System 2 – try this cognitive reflection test, below, before reading on (answers at the end of this article).
 
1 A bat and ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost?
 
2 If it takes five machines five minutes to make five widgets, how long would it take 100 machines to make 100 widgets?
 
3 In a pond is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire pond, how long would it take for the patch to cover half the pond?
 
See the answers at the end of the article to see if you were right?
 
It’s worth noting that each of the two models of thinking has distinctive advantages and disadvantages. In many cases, System 1 takes in information and reaches the correct conclusions nearly effortlessly using intuition and rules of thumb. Of course these shortcuts can lead us astray. So we rely on our methodical System 2 thinking to tell us when our intuition is wrong or our emotions have clouded our judgement, and to correct poor snap judgements. All too often, though, we allow our intuitions or emotions to go unchecked by analysis and deliberation, resulting in poor decisions.
 
But of course it’s not quite that simple. Psychologists and behavioural economists have identified many cognitive biases that impair our ability to objectively evaluate information, form sound judgements, and make effective decisions. Where an effective leader is aware of their biases and when they may affect their judgement for the worse; and of course where the ineffective leader is often in complete denial of their own biases, refusing to look at themselves in the mirror, instead insisting it’s those around them who need to look in the mirror (as they couldn’t possibly be at fault).
 
These ineffective leaders, who are in denial about how biases effect their judgement, can be in positions of power for years before they are identified as the problem. This is because they are naturally manipulative and divert the problems on to other people; and where their bosses are also blind to the problems they are causing in their organization.
 
Below are several biases that can have a negative impact on both our decisions and our employees.
 
Action-orientated biases include excessive optimism and overconfidence. Where with excessive optimism we are overly optimistic about the outcome of planned actions. We overestimate the likelihood of positive events and underestimate that of negative ones. And with overconfidence we overestimate our skill level relative to others’ and consequently our ability to affect future outcomes. We take credit for past positive outcomes without acknowledging the role of chance.
 
Biases relating to perceiving and judging alternatives. Where firstly with confirmation bias we place extra value on evidence consistent with a favoured belief and not enough evidence that contradicts it. We fail to search impartially for evidence. Secondly with anchoring and insufficient adjustment we root our decisions in an initial value and fail to sufficiently adjust our thinking away from that value. Thirdly with groupthink we strive for consensus at the cost of a realistic appraisal of alternative courses of action. Finally with egocentrism we focus too narrowly on our own perspective to the point that we can’t imagine how others will be affected by a policy or strategy. We assume that everyone has access to the same information.
 
Biases related to the framing of alternatives. Where firstly with loss aversion we feel losses more acutely than gains of the same amount, which makes us more risk-averse than a rational calculation would recommend. Secondly with sunk-cost fallacy we pay attention to historical costs that are not recoverable when considering future courses of action. Thirdly escalation of commitment where we invest additional resources in an apparently losing proposition because of the effort, money, and time already invested. Finally controllability bias where we believe we can control outcomes more than is actually the case, causing us to misjudge the riskiness of a course of action.
 
Stability biases, where with status quo bias we prefer the status quo in the absence of pressure to change it; and present bias where we value immediate rewards very highly and undervalue long-term gains.
 
Beshears and Gino found that “holding individuals accountable for their judgements and actions increase the likelihood that they will be vigilant about eliminating bias from their decision making. For example, a study of federal government data in the USA on 708 private-sector companies by Alexander Kalev and colleagues found that efforts to reduce bias through diversity training and evaluations were the least effective ways to increase the proportion of women in management. Establishing clear responsibility for diversity (by creating diversity committees and staff positons, for example) was more effective and led to increases in the number of women in management positons.”
 
Answers to Cognitive Reflection Test:
 
1 Correct Answer: Five Cents
 
The intuitive response is to assume that the bat costs $1.00 and the ball costs 10 cents. But if you engaged System 2 and did the math, you’d see that this couldn’t be true. There’s a dollar difference between the two, so the only set of prices that meets all the requirements in the problem is $1.05 for the bat and $0.05 for the ball.
 
2 Correct Answer: Five Minutes
 
It’s easy to get this one wrong, because our minds spontaneously pick up a pattern that is misleading. We assume that if five machines make five widgets in five minutes (5-5-5), by analogy 100 machines would make a 100 widgets in 100 minutes (100-100-100). But if you’re using System 2, you see that each machine takes five minutes to make one widget. Think of it this way: if it takes nine women nine months to give birth to nine babies, how long would it take 100 women to birth 100 babies?
 
3 Correct Answer: 47 Days
 
If you jumped to the conclusion that half the pond would be covered in half the time (48/2 = 24 days), you neglected to account for exponential growth, a type of reasoning that requires cognitive effort (and, thus, System 2 thinking). The correct answer is 47 days, because if the pond is half covered by then, a doubling over the next (48th) day will result in the pond being entirely covered with lily pads. By the way, ‘one day’ is also a correct, albeit uncommon, response. It takes one day for the lily pads to cover the second half of the pond. If that was your answer, you deserve extra credit for creativity.
 
References:
 
Beshears, J. and Gino, F. (2015). Leaders as Decision Architects. Harvard Business Review, May, p.52 – 62.  

Sunday, May 27, 2018

What are Some Basic Mistakes Organizations Make?

In the last 70 years we have seen significant developments in technology – just look at what’s been achieved in the development of computer technologies. For example in 1953, Grace Hopper develops the first computer language, which eventually becomes known as COBOL. Thomas Johnson Watson Jr., son of IBM CEO Thomas Johnson Watson Sr., conceives the IBM 701 EDPM to help the United Nations keep tabs on Korea during the war. In 1954, the FORTRAN programming language, an acronym for FORmula TRANslation, is developed by a team of programmers at IBM led by John Backus, according to the University of Michigan.
 
Then in 1958, Jack Kilby and Robert Noyce unveil the integrated circuit, known as the computer chip. Kilby was awarded the Nobel Prize in Physics in 2000 for his work. In 1964, Douglas Engelbart shows a prototype of the modern computer, with a mouse and a graphical user interface (GUI). This marks the evolution of the computer from a specialized machine for scientists and mathematicians to technology that is more accessible to the general public.
 
Look at mobile technology where the speed of advancements have just been incredible, a trait that seems set to continue in the short term to medium term.
 
The same is true in the medical and health sector, and though we still have to find many more cures, the advancements continue to develop each and every year.
 
So if we look at today’s business organizations and how they are run, how much have they advanced in the last 20 years, let alone the last 70? For example, has customer service got progressively better year on year? Are today’s leaders significantly better than their counterparts 20, 30, 40 years ago?
 
Organizations now have access to so much more information, thanks to the advancements in technology; they have access to hundreds, if not thousands, of training courses on any subject you can think of – but the question is, are ‘we’ getting better at leading and developing business organizations, and if not, why not?
 
I would suggest, for example, that the advancements in business leadership have faded into insignificance compared to the advancements in other areas; where in some areas business leadership has regressed rather than advanced over the last 20 to 50 years. This is partly due to the world changing (not necessarily for the better in some areas); acceptable standards and basic values changing or no longer clearly defined; and a basic lack of accountability at the top of many business organizations on a global scale.
 
Some of the basic mistakes organizations still make in the 21st Century include;
 
1. Businesses not being customer centric. Where some organizations simply don’t focus on customer service, and in fact are happy to mislead customers and take advantage of them – where the organizations sole purpose appears to be on short-term profit maximization at any cost.
 
The 21st century customers are also at fault, whereby they stay customers to organizations who treat them badly, often simply because they can’t be bothered with the hassle of changing their accounts to another supplier – possibly telling themselves that ‘all the suppliers are as bad as one another’.
 
Governments and ‘watchdogs’ also fail customers by allowing ‘cartel’ like arrangements between suppliers, which we have seen in energy sectors, mobile phone sectors, banking sectors, to name just a few.
 
Organizations and customers need to start respectively offering and demanding higher levels of customer service; and customer groups just need to realise the ‘purchasing power’ they have as a customer group and start using this to their advantage. Where the advances in technology now give them access to a lot more power than customers had 20 to 50 years ago and beyond.
 
2. Leaders are not inspiring their workforce. Command and control leadership seems to be on the increase – which is so sad to see. The gap between leaders and employees is widening, due to the poor behaviour of leaders – which unsurprisingly means too many employees becoming demotivated, uninspired and less than optimally productive.
 
What’s worse, is that when these poor leaders become aware of their demotivated workforce – they are in complete denial of their direct role in creating the negative culture and actually blame their employees for not caring, rather than looking squarely at themselves and realizing they are the problem.
 
In my view leadership has become too commercialised and we need to get back to the very basics of leadership; where leaders are inspirational, they are transparent, they lead by example, they see an organizations most vital resource as it’s human resource and treat them accordingly, and where they promote future leaders on skills, behaviors, characteristics and values.
 
3. Organizations don’t communicate a fully transparent corporate vision to their workforce. Too many organizations, of all sizes, seems to fail to be transparent, for whatever reason and don’t share their vision for the future – assuming they even have one.
 
This is business 101, where a well thought-out and well communicated corporate strategy and vision, owned by the workforce leads to an inspired and motivated workforce that understands the future and the role they play in achieving that future state. Without communicating a clear future vision, employees can’t even start to ‘own’ it, don’t see how their job supports the successful future of their organization and hence are less motivated to achieve anything.
 
This also links back to the command and control type leader who doesn’t like to be transparent, seeing employees as a resource that don’t need to know where the organization is going and just need to do what they are told to do, when they are told to do it.
 
A transparent vision doesn’t just help employees see the future and how their role supports it; it also allows employees at all levels to contribute to its success and identify potential problems and also innovate solutions long before a command and control driven organization will know they have problems. Front line employees need a direct link to the organizational strategy to ensure constant optimal growth.
 
4. Business ethics. Suddenly in the last 20 years – the word ‘sorry’ seems to have become the easiest word (not the hardest). Unethical leaders appear too often these days – ripping off customers at best, and leading to unnecessary deaths at worst.
 
When these ‘bad’ leaders are caught, there seems to be no shame or remorse from the perpetrators – and a simple ‘sorry’ seems to be okay for too many, especially those bodies that should bring these unethical leaders to account.
 
Where are the ethical role models for the future generations of leaders to aspire to be like? In too many cases we are giving the completely wrong impression of leadership to the next generation and this is all we see in the media. Where are we showing what ‘great’ leadership looks like.
 
We need to discuss values more often and openly; what ‘values’ really mean and how they impact organizations and individuals, both in the short and long term. I saw an elderly lady burst into tears the other day in front of an assistant in a store – where she said, I’m so sorry, but it’s so nice to find someone who cares for a change.
 
 
The world is advancing at a phenomenal rate year on year in many sectors and it’s time for business organizations and their leaders to make similar positive advancements for the good of all their stakeholders.

Sunday, April 29, 2018

Does Big Business Learn From Past Mistakes?

Do we learn from past mistakes? In today’s global economy does big business look at past successes and past failures of other organisations to help them plan effectively for the future; or is there a sense of arrogance that comes with the large size of some organizations that makes them feel invincible?
 
On 15th April, 2018, it was 106 years since the Titanic sank and leaders should remember and reflect on the comments of the captain, Edward. J. Smith, before the fateful voyage. When asked how he could best describe his, nearly, 40 years at sea, he replied, “Uneventful. I have never been in an accident and I have seen but one vessel in distress in all my years at sea. I have never seen a wreck and have never been wrecked, nor have I ever been in any predicament that threatened to end in disaster of any sort.”

In the 21st century the biggest and most profitable organisations should be the guiding example for the rest of the business community to follow and learn from. Yet these organisations need to be conscious and aware; and not allow their size to make them complacent to their constantly evolving competitive business environment.
 
I know I’ve learnt so much during my career both from my mistakes and learning from the mistakes of others; and learnt that complacency can be a dangerous trait for both organisations and individuals as we go through our career.

It’s nothing new, “for organisations to deceive themselves is neither rare nor random. Charles Frankel, Assistant Secretary of State in President Johnsons Administration in the US (1965-67) concluded that self-deception was not simply a passing problem, but a permanent condition facing all organisations,” (Landau, M. and Chisholm, D., 1995, p.72).

So what can organisations and leaders learn from history and specifically the tragic story of the Titanic?

The Titanic was warned in advance of the increase in ice and the potential for icebergs, but chose to ignore the warnings; as an example, a steward on the Titanic when asked if it was true that the ship was unsinkable, replied “Madam, God himself could not sink this ship.” Large organisations can enjoy the feelings of power and control – and with it the feeling of invincibility just like the Titanic.

After setting sail the Titanic restated its objectives and decided to attempt to beat the record for crossing the Atlantic to impress its shareholders. There was no immediate reward for beating this record (held by its sister ship) since the Titanic was receiving publicity on both sides of the Atlantic. Power and arrogance led to this decision and contributed to the upcoming disaster. Best practice organisations focus on business principles such as sustainable growth and putting the customer first; on transparency and creating cultures that lead to job satisfaction and retention at all levels – an organisation that will provide a ‘luxurious and safe passage’ for all those who embark on the journey.

Finally, the capacity of the Titanic's lifeboats was only 1,178, while the ship was built to carry 3,000 passengers and crew. There was simply no way any more than half the ship's complement would survive should the unthinkable happen. So when the tragedy occurred, only the few survived - only 705 out of about 2,220 escaped to the safety of these craft. The lessons should be self-evident, plan for all eventualities; accurately analyse, assess and manage your organisations risk.

Critical self-evaluation is a basic requirement of excellence in leadership – it takes courage and self-belief – and that is how we will distinguish between the great leaders of tomorrows great organisations and those organisations who are wondering where the iceberg came from – and who to blame for not seeing it coming!

As Pamela Waymack states in her 2006 article, “management’s overconfidence and failure to see its own vulnerability contributed to the sinking of the Titanic. Neither historic track record nor size and prowess are a match for a market in flux. We cannot assume that our organisations are invincible. A seaworthy captain with a spotless record for 40 years was no match for this field of icebergs,” (p.41).

References

Landau, M. and Chisholm, D. (1995). The Arrogance of Optimism: Notes on Failure-Avoidance Management. Journal of Contingencies & Crisis Management, Vol 3, Issue 2, p.67-80.

Waymack, P. (2006). Managing the ice in the waters ahead: Lessons from the Titanic. HFM (Healthcare Financial Management). Vol 60, Issue 7, p.38-41.