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.  

Do You Work in a Trusting Environment?

Trust is one of those words rarely discussed in the work place, yet it has a huge impact on performance, talent retention and sustainable growth, to name just a few elements. All the leaders I’ve respected in my career have been men and women I genuinely trusted, amongst other great attributes; and the high performing teams I’ve been involved with also had trust as a key element in their successful make up.

 

Paul Zak in a 2017 Harvard Business Review article found that “building a culture of trust is what makes a meaningful difference. Employees in high-trust organizations are more productive, have more energy at work, collaborate better with their colleagues, and stay with their employers longer than people working in low-trust companies. They also suffer less chronic stress and are happier with their lives, and these factors fuel stronger performance,” (p.86).

 

Worse still trust is a word customers hardly use anymore where in fact distrust seems to be the rule rather than the exception. I’m still amazed that organizations and leaders feel that trust isn’t an attribute worth focusing on; and don’t care if they and their organizations are distrusted. Yet Zak highlights how “leaders understand the stakes – at least in principle. In its 2016 global CEP survey, PwC reported that 55% of CEO’s think that a lack of trust is a threat to their organization’s growth. But most have done little to increase trust, mainly because they aren’t sure where to start,” (p.86).

 

Trust is actually very healthy in all aspects of the business equation – it’s not just important for the business-customer relationship, but has a huge impact inside the organization too. Zak highlights how “neuroscience shows that recognition has the greatest effect on trust when it occurs immediately after a goal has been met, when it comes from peers, and when it is tangible, unexpected personal, and public. Public recognition not only uses the power of the crowd to celebrate successes, but also inspires others to aim for excellence. And it gives top performers a forum for sharing best practices, so others can learn from them, (p.88).

 

The problem with trust is, as we know, that it takes time and a constant effort to develop a trusting environment, probably even more so in the 21st century, and yet that same trust can be eradicated in a split second. It seems that too many leaders either simply don’t want to put in the effort to build trust in their workplace or feel that ‘trust’ limits their leadership style – where the latter is a very scary but real fact in today’s business world.

 

The thought that some leaders would feel that ‘trust’ limits their ability to lead should be something more academics and subject matter experts are discussing openly. The signs are everywhere, an over-promoted to fearful of showing their weaknesses and too scared to ask for help and development, limp through their leadership role using mostly power, with a pinch of ‘fear’ and find a distrusting environment makes it easier for them to lead; and I’d even suggest in some cases they purposefully create the mistrust.

 

I mentioned in the first paragraph how the high performing teams I’ve worked with in my career have all had ‘trust’ as a key attribute; and looking back it wasn’t even something the team consciously worked at. It was simply a team of skilled and principled people, who wanted the best for the organization and that was our primary focus. We felt great once the objective was achieved and had leaders who recognized our successes. Zak mentions how “when a manager assigns a team a difficult but achievable job, the moderate stress of the task releases neurochemicals, including oxytocin and adrenocorticotropin, that intensify people’s focus and strengthen social connections. When team members need to work together to reach a goal, brain activity coordinates their behavior efficiently. But this works only if challenges are attainable and have a concrete end point; vague or impossible goals cause people to give up before they even start. Leaders should check in frequently to assess progress and adjust goals that are too easy or out of reach,” (p.88).

 

Further Zak highlights how “only 40% of employees report that they are well informed about their company’s goal, strategies, and tactics. This uncertainty about the company’s direction leads to chronic stress, which inhibits the release of oxytocin and undermines teamwork. Openness is the antidote. Organizations that share the ‘flight plans’ with employees reduce the uncertainty about where they are headed and why. A 2015 study of 2.5 million manager-led teams in 195 countries found that workforce engagement improved when supervisors had some form of daily communication with direct reports,” (p.89).

 

It genuinely saddens me that one has to write articles about an attribute like trust – where even without the science, we know ‘trusting’ environments are better than ‘distrusting’ ones. As Zak mentions “the brain network that oxytocin activates is evolutionarily old. This means that trust and sociality that oxytocin enables are deeply embedded in our nature. Yet at work we often get the message that we should focus on completing tasks and not making friends,” (p.89). Why, even when we know something is right, are we prepared to settle for less. We know how long it takes to build a trusting environment – and we know how much harder it is to rebuild trust, if the trust has previously been broken. We also know there comes a point where it’s virtually impossible to rebuild trust without fundamental changes in the makeup of the group.

 

So let’s draw a line in the sand. Shareholders, corporate boards and executive directors make it your mission for 2018 to build a trusting working environment – the benefits both in the short and long term will be well worth it for all of you.

 

Zak highlights how “high-trust workplaces help people develop personally as well as professionally. Numerous studies show that acquiring new work skills isn’t enough; if you’re not growing as a human being, your performance will suffer. High-trust companies adopt a growth mindset when developing talent. Some even find that when managers set clear goals, give employees the autonomy to reach them, and provide consistent feedback, the backward looking annual performance review is no longer necessary. Instead, mangers and direct reports can meet more frequently to focus on professional and personal growth. Assessing personal growth includes discussions about work-life integration, family and time for recreation and reflection. Investing in the whole person has a powerful effect on engagement and retention,” (p.90).

 

Reference:

 

Zak, P.J. (2017). The Neuroscience of Trust. Harvard Business Review. Jan-Feb. p.84-90.

How Often Do You Receive Performance Feedback?

In an article in this month’s Harvard Business Review Lori Goler, Janelle Gale and Adam Grant mention how “performance reviews are awkward. They’re biased. They stick us in boxes and leave us waiting far too long for feedback. It’s no surprise that by the end of 2015, at least 30 of the Fortune 500 companies had ditched performance evaluations altogether,” (p.92).

 

I don’t fully agree with their comment about the link between feedback and performance reviews – as I think they are mutually exclusive and that whatever your approach to performance reviews, feedback shouldn’t be something you have to wait ‘far too long for’ and should be a regular event occurring on a weekly/monthly basis where the employee sits with their immediate boss on an one-on-one basis for a honest and forthright discussion about what’s going well; what isn’t (if anything); areas where improvement could be made (which might lead to development needs) and what’s going to happen in the next ‘period’ of time.

 

Feedback is different to ‘acknowledgement’ where acknowledgement is or should be immediate following a ‘job well done’ and where feedback is a more formal regular event. Feedback isn’t just the responsibility of leaders, it’s also the responsibility of employees to seek feedback – so if you aren’t getting feedback on a regular basis it’s your responsibility to ask for it.

 

What’s true is where Goler, Gale and Grant highlight how “as researchers pointed out in a recent debate in Industrial and Organizational Psychology, ‘Performance is always rated in some manner.’ If you don’t have formal evaluations, ratings will be hidden in a black box.” In today’s world we are rating ‘things’ all the time, virtually instantly, and ‘performance’ isn’t any different. But how we ‘rate’ and what we do with this ‘rating’ defines good leaders, from poor leaders (and good organisations from bad ones). If you don’t have formal evaluations then you shouldn’t be hiding your ‘tendency’ to rate in a black box – you should be totally transparent with your ‘black box’ and this is done through regular transparent feedback. ‘Black box’ mentalities lead to distrust and demotivation within the team, where there is no chance of honest feedback taking place and employees find themselves in a ‘toxic’ environment.

 

Goler, Gale and Grant mention how “we all want performance evaluations to be fair. That isn’t always the outcome, but as more than 9,000 managers and employees reported in a global survey by CEB, not having evaluations is worse. Every organization has people who are unhappy with their bonuses or disappointed that they weren’t promoted. But research has long shown that when the process is fair, employees are more willing to accept undesirable outcomes. A fair process exists when evaluators are credible and motivated to get it right, and employees have a voice. Without evaluations, people are left in the dark about who is gauging their contributions and how.”

 

The reality is that performance evaluations simply aren’t ‘genuine’ performance evaluations if they aren’t honest and transparent. All the talk about ‘black boxes’ etc doesn’t belong in the same sentence as performance evaluations; and it’s because they now seem to appear in the same sentence that performance reviews have become misunderstood and gained a bad reputation – but it isn’t the concept of performance reviews that is bad, it’s the people that have misused them for decades that have made them bad.

 

Goler, Gale and Grant highlight how “at Facebook, to mitigate bias and to do things systematically, we start by having peers write evaluations. They share them not just with managers but also, in most cases, with one another – which reflects the company’s core values of openness and transparency. Then decisions are made about performance: Managers sit together and discuss their reports face-to-face, defending and championing, debating and deliberating, and incorporating peer feedback. Here the goal is to minimize the ‘idiosyncratic rater effect’ – also known as personal opinion. People aren’t unduly punished when individual managers are hard graders or unfairly rewarded when they’re easy graders.”

 

Two of the authors of the article are from Facebook, Lori Goler and Janelle Gale and though it’s good that they are trying to use performance reviews effectively, it’s sad that they think they need their own ‘theory’ to mitigate ‘bias’ – as there have been tips and tricks on how to mitigate performance review bias for decades. One of the simplest, wasn’t to rate performance on an annual basis in the first place it was to give regular reviews based on a ‘management by objectives’ approach. This professional approach meant that ‘performance reviews’ linked with regular ‘feedback sessions’ to form a constant review of performance that didn’t leave employees in any doubt about how they were doing; and became a seamless ‘performance review’ that left employees motivated, engaged and inspired to over-achieve against their objectives on a continuous basis.

 

Goler, Gale and Grant state that “many companies that are abandoning performance evaluations are moving to real-time feedback systems. That is an excellent way to help people repeat their successes and learn from their failures. But it doesn’t help them – or the organization – gauge how they’re doing overall.” Again I have to totally disagree with their statement that ‘it doesn’t help them gauge how they’re doing overall’ and to me the statement sadly shows a misunderstanding about managing performance, reviewing performance and the art of ‘feedback’. Done correctly there is no doubt in the employees mind about ‘how they’re doing overall’ – and it’s scary that a company like Facebook could be so confused and misinformed about what regular performance feedback is all about.

 

The most important aspects of ‘great’ performance feedback is that;

 

It should be a regular, formal process.

 

Leaders and employees should be ‘trained’ in how to give and receive feedback – a skill that is rarely taught and hence where many of the problems start;

 

Feedback is specific, constructive and makes a real impact;

 

Feedback is genuine and honest, discussed in a ‘safe’ environment - which only exists in great organisations, with great leadership and a strong culture of transparency;

 

Feedback is based on specific objectives that leads to performance improvement and development needs as and when necessary;

 

The employee learns how to receive feedback in a constructive and not a defensive way; and to seek clarification from the feedback in a positive way, that makes a difference to their performance.

 

If you give regular feedback in the right way, you won’t need to only ‘rate’ your employees once a year; as through regular, honest feedback all your employees will be performing at their optimal level of performance balanced between the organisations ‘present and future needs’ – it’s a genuine win-win for everyone. So let’s take this opportunity to go back to basics; teach our leaders and employee’s how to give and receive feedback; and get back to giving regular, honest feedback to our employees – it will make a huge difference to the employees and the organisation.

 

 

Reference:

 

Goler, L., Gale, J. and Grant, A. (2016). Let’s Not Kill Performance Evaluations Yet. HBR, November, p.90-94.

Who Inspires You?

Having someone in your business life who inspires you to succeed and achieve your goals seems to be the exception than the rule these days. I still remember the managers I had early in my career who were truly inspirational and in no small way helped me create the solid foundation on which I was able to build my career.

 

Talking to thousands of employees over the last 40 years there’s no doubt about how much difference an inspirational leaders makes – not just to the employees level of commitment and motivation – but the impact these leaders have on improving and optimising organisational performance, as they help create a culture that wants to ‘over achieve’ in areas that are synergistic to the employee and the organisation – creating a win-win for everyone involved.

 

So it seems sad that in the early years of the 21st century, today’s leaders seem to lack the basic skills needed to inspire employees and further seem to lack the desire to inspire them in the first place. Many leaders seem to look inwardly rather than outwardly – putting themselves and their career path and ‘status’ before anything else – possibly fearing that they might lose control of their ‘own’ future and that others may excel and be noticed more than them.

 

Yet the inspirational leaders I worked with had both – successful careers and created successful careers for those around them. Rather than being fearful of others excelling, they embraced it and were recognised throughout the organisation for their success in taking their department/organisations to new levels of excellence. These ‘new’ levels of excellence and the inspirational leadership style created yet further incremental increases in performance that could be tracked to the bottom line.

 

In 2013, after interviewing over 100 HR professionals in the US, research by Keas, a company that focuses on employee health and wellness, found on one question - “in your experience, what are the top three Human Resources mistakes that every CEO makes?” - that the top-scoring three responses were:

 

64% – leaders don’t recognize what truly motivates employees

41% – leaders fail to lead by example

32% – leaders don’t make company culture a priority

 

Where all three of these actions (or non-actions) send a loud, clear message to employees: you are not that important to me, (Anderson, 2013).

 

Just the fact that 64% of leaders don’t even recognize what truly motivates employee’s highlights today’s problems around inspirational leadership. It’s a fundamental requirement of a leader to know their people and especially what motivates them. These are basic conversations that usually take place at the ‘interview’ stage and then on a regular basis each and every year after that.

 

This is then backed up by the next two traits – ‘failing to lead by example’ and ‘not making company culture a priority’. It seems that many leaders today see themselves ‘above’ those that work for them and hence don’t see a need to lead by example. They are the boss, they have the power – “you simple exist to do my bidding”. In fact it wasn’t that long ago I heard a leader define their staff as “people whose job it is to make me look good.”

 

Leadership seems to be going backwards – partly because the inspirational role models that exist out there in the global economy don’t even see the light of day. Where the media is obsessed with reporting ‘negative’ behaviours these days and seem to fail to grasp the need to show future generations ‘positive’ behaviours in the work place so they can see the benefits early in their lives and might even be positively rather than negatively influenced.

 

Whether we want to openly admit it or not – we all want to be led by an inspirational leader – as if nothing else they make our jobs so much more enjoyable and give the opportunities for us to challenge ourselves, if we want to.

 

In 2013 IBM asked 1,700 CEOs in 64 countries, “what do top executives want from their leaders?” The three leadership traits that most mattered were; (1) the ability to focus intensely on customer needs, (3) the ability to collaborate with colleagues and (3) the ability to inspire. (Zenger and Folkman, 2013).

 

Zenger and Folkman’s research found that “some of what (inspirational) leaders did was specific and tangible. For example, they set stretch goals with their team. They spent time developing their subordinates. They engaged in highly collaborative behavior. They encouraged those about them to be more innovative.”

 

Other things Zenger and Folkman identified were somewhat less specific and less tangible, yet are probably the real traits that make them stand out of other wannabe inspiring leaders; where “these inspirational leaders were more adept at making emotional connections with their subordinates, for instance. They were better at establishing a clear vision. They were more effective in their communication and willing to spend more time communicating. They were ardent champions of change. They were perceived as effective role models within the organization.”

 

What I’ve found during the course of my career is that inspirational leaders embrace the following key behaviours and traits;

 

1) They ensure that making time for meeting with their employees, one-on-one, on a regular basis is their number one priority;

 

2) They are visionaries and have the ability to communicate these visions in a transparent and compelling narrative, that inspires their employees to want to be part of the journey;

 

3) They are ‘big picture’ focused and can look beyond their own department or organisation; and see short and long-term opportunities;

 

4) There have experienced life to the full (both business and personal); and have usually experienced both significant ‘ups’ and ‘downs’ but learnt real life lessons from both;

 

5) They are principled role models; and never ask people to do things they would never do themselves;

 

6) They are passionate – not just for the future of their organisation – but passionate about all their employees too, knowing that you can’t have one without the other; and finally

 

7) They are both patient and excellent listeners.

 

It’s up to today’s executive boards to embrace inspirational leadership at the top and then ensure these basic behaviours role down the leadership pipeline and become an integral part of the organisations culture.

 

It’s not complicated or rocket science – we just need to bring inspiration back to the work place. The benefits will gleaned by all stakeholders.

 

References

 

Anderson, E. (2013). 3 Simple, Powerful Things Leaders Can Do To Inspire People To Do Great Things. Forbes On-Line, August 29.

 

Zenger, J. and Folkman, J. (2013). What Inspiring Leaders Do. Harvard Business Review On-Line, June 20.

 

 

Are You Good At Giving and Seeking Advice?

In an excellent HBR article entitled ‘the art of giving and receiving advice’ David Garvin and Joshua Margolis highlight how “seeking and giving advice are central to effective leadership and decision making. Yet managers seldom view them as practical skills they can learn and improve. Receiving guidance is often seen as a passive consumption of wisdom. And advising is typically treated as a matter of ‘good judgement’ – where you either have it or you don’t, rather than a competency to be mastered.”

 

There are many influencing factors that influence our basic desire to seek advice, just as much as they influence how we give advice;

 

Our upbringing – i.e. were we encouraged to seek advice when we were growing up, or did we ‘learn’ that asking for advice was often seen as a weakness and hence we’ve taught ourselves that it’s better just to ‘keep quite’ and appear smart. This influencing factor has a huge impact not just on how individuals avoid seeking advice, but also significantly impacts how these individuals give advice and their perception of those that ‘seek ‘ advice from them.

 

Organisational culture influences employees ‘desire’ to both seek and give advice. Some organisations encourage an open and transparent environment where employees are encouraged to seek advice from as many quarters as possible and this is seen as a strength. Also in these cultures ‘leaders’ are keen and available to give advice but not from a position of power and/or telling, but based on the situation – where for example they might counsel; or coach; or mentor depending on the situation and the type of advice being sort.

 

Age will influence an employee’s desire both to give and seek advice. It wasn’t that long ago – before the advent of social media and the like, that age equated to wisdom. In fact it wasn’t that long ago that age equated to seniority and hence perceived experience – and this is still true in some cultures today. But organisations have learnt that age and historical experience don’t on their own equate to genuine wisdom as business is constantly evolving and changing over short time intervals. So the wisdom resides with those that have learnt to adapt to different business scenarios and who are up-to-date with current business skills.

 

But because of the above, there will be some who have been in business for a long time who genuinely believe that they know best; and what they don’t know isn’t worth knowing. And then at the other end of the spectrum there will be those who have been in business for a long time who are nervous about seeking advice as they fear that it will be perceived as a weakness rather than a strength – but this links more to culture than age.

 

As Garvin and Margolis mention “advice seekers and givers must clear significant hurdles, such as deeply ingrained tendency to prefer their own opinions irrespective of their merit, and the fact that careful listening is hard, time-consuming work. The whole interaction is a subtle and intricate art. On both sides it requires emotional intelligence, self-awareness, restraint, diplomacy, and patience. The process can derail in many ways, and getting it wrong can have damaging consequences – misunderstanding and frustration, decision gridlock, subpar solutions, frayed relationships, and thwarted personal development – with substantial cost to individuals and their organisation.”

 

Even then, it is not a ‘black and white’ scenario – some employees may be good at asking for or giving advice in certain situations and not in others; good at giving or receiving advice on certain topics and not on others; etc. Just the daily pressure of work can significantly influence the quality of advice given or received.

 

Garvin and Margolis remind us that “whether you’re receiving or giving advice, flawed logic and limited information complicate the process. Advice seekers must identify their blind spots, recognize when and how to ask for guidance, draw useful insights from the right people, and overcome and inevitable defensiveness about their own views. Advisors, too, face a myriad of challenges as they try to interpret messy situations and provide guidance on seemingly intractable problems.”

 

When you’re seeking advice, watch out for these common obstacles;

 

1) Thinking you already have the answers;

2) Choosing the wrong advisers;

3) Defining the problem poorly;

4) Discounting advice;

5) Misjudging the quality of advice;

 

And when you’re giving advice, watch out for these common tendencies that can cause problems;

 

1) Overstepping boundaries;

2) Misdiagnosing the problem;

3) Offering self-centered guidance;

4) Communicating advice poorly;

5) Mishandling the aftermath;

 

Garvin and Margolis mention that “though seekers and advisors work together to solve problems, they have different vantage points. Recent social psychology research shows that people in an advisory role focus on overarching purpose (why an action should be performed), whereas recipients of advice – who usually face an impending decision – are more concerned with tactics (how to get things done). An individual is likely to think idealistically as an advisor but pragmatically as a seeker, even when confronting the same challenge.”

 

You’ll often find that those who are best at giving advice are those that regularly seek advice themselves, regardless of their level in the organisation – and that’s what makes them extra special advice givers. They appreciate that asking and giving advice is an art – and they are keen to perfect it.

 

Garvin and Margolis conclude that “overall our guidelines for both seekers and advisers amount to a fundamental shift in approach. Although people typically focus on the content of advice, those who are most skilled attend just as much to how they advise as to what they advise. It’s a mistake to think of advice as a one-and-done transaction. Skilled advising is more than the dispensing and accepting of wisdom; it’s a creative, collaborative process – a matter of striving, on both sides, to better understand problems and craft promising paths forward. And that often requires an ongoing conversation.”   

 

The danger is that future generations aren’t being encouraged to ask for advice face-to-face; but are being taught at an early age that they can get advice remotely – without being able to check whether the ‘adviser’ is qualified or whether advice is accurate or not, often until it is much too late. The art of seeking and giving advice needs to be an integral part of the educational curriculum so that ‘we’ can teach future generations the importance of seeking and giving the right advice.

 

References:

 

Garvin, D.A. and Margolis, J.D. (2015). The Art of Giving and Receiving Advice. Harvard Business Review. Jan/Feb, p.61-71.

 

 

 

Can We Justify the Gap Between CEO and Worker Pay?

In a 2014 article in Forbes, Kathryn Dill highlighted how “with CEO compensation analysis season in full swing, the AFL-CIO released data (in April 2014) stating that American CEOs in 2013 earned an average of $11.7 million - an eye-popping 331 times the average worker’s $35,293; where information is further broken into categories including compensation by industry and state. As of April 2014, Michigan, Nebraska, and Rhode Island have the greatest CEO to minimum wage worker pay ratios, with New York and Colorado following close behind.”

 

This perspective is supported by further research highlighted by Schuyler Velasco who mentions that “worker pay has been a big story in 2013, with worker strikes in the retail and fast-food industries putting a harsh light on anemic wage gains alongside ballooning corporate profits. Now, a new study from NerdWallet and Glassdoor.com highlights just how vast the wage gap is in major US companies, comparing how much the United States' highest-paid chief executives make in an hour with the average hourly wage of their employees. Can you guess which company had the highest pay gap?

 

McDonalds: CEO: Donald Thompson

 

Average hourly worker wage: $7.73

 

CEO hourly compensation: $9,247 (1,196 times the average worker wage).

 

The next 9 companies with the highest pay gap between the CEO and the average hourly worker were;

 

Starbucks: CEO: Howard Schultz, hourly compensation = $9,637 ((1,096 times the hourly average worker wage of $8.79);

Dollar General: CEO: Rick Dreiling, hourly compensation = $7,720 (1,007 times the hourly average worker wage of $7.67);

GAP: CEO: Glenn Murphy, hourly compensation = $8,209 ((947 times the hourly average worker wage of $8.67);

T.J.Maxx: CEO: Carol Meyrowitz, hourly compensation = $7,256 (924 times the hourly average worker wage of $7.85);

Target: CEO: Gregg Steinhafel, hourly compensation = $6,882 (824 times the hourly average worker wage of $8.35);

Walmart: CEO: Mike Duke, hourly compensation = $ 6,898 (779 times the hourly average worker wage of $8.86);  

CVS Caremark: CEO: Larry Merlo, hourly compensation = $6,777 (769 times the hourly average worker wage of $8.81);

Best Buy: CEO: Hubert Joly, hourly compensation = $6,517 (666 times the hourly average worker wage of $9.78);

AT&T: CEO: Randall Stephenson, hourly compensation = $7,412 (558 times the hourly wage of an average worker of $13.28).

 

These figures should shock even the most liberal believers when it comes to executive pay. Even if you reduce the CEO hourly compensation by half, compensating for tax for example, the figures are still impossible to justify, surely.

 

The biggest problem is that even when these figures are ‘out there’ for everyone to see – and 99.9% of people find them unjustified – nothing actually happens to change the ‘status quo’ and in fact it appears that the gap just keeps on getting bigger

 

Velasco goes on to highlight how “wage inequality is becoming a growing concern, both on the ground and at the political level. The wealth gap between the top 1 percent of American earners and the other 99 percent is as wide as it’s been in nearly a century. Corporate profits and stock holdings have soared in value, while the federal minimum wage has remained unchanged since 2009.”

 

So how has this gap been allowed to develop over the last 10, 20 years, especially taking account of one of the worst global financial crashes in our time and more importantly what can be done, in practice, to narrow the gap to a more equitable and justifiable pay scale. Because it appears that though many in academia, the media and definitely at the worker level are strongly opposed to the current pay anomalies – no one has the ability or influence to change this behavior by corporate boards and their shareholders. As we must never forget that it is the boards and shareholders that ratify executive compensation packages on an annual basis.

 

Kathryn Dill pulls no punches when she states that “America’s CEOs, as exemplified by the individuals of companies like Wal-Mart, Darden Restaurants and T-Mobile, are cannibalizing their own consumer base,” by taking money out of the pockets of their workers and putting it into the pocket of the CEO.

 

This isn’t just a US phenomenon and Gretchen Gavett points to research by Chulalongkorn University’s Sorapop Kiatpongsan and Harvard Business School’s Michael Norton that concluded “we’re currently far past the late Peter Drucker’s warning that any CEO-to-worker ratio larger than 20:1 would ‘increase employee resentment and decrease morale.’ Twenty years ago it had already hit 40 to 1, and it was around 400 to 1 at the time of his death in 2005. But this new research makes clear that, one, it’s mindbogglingly difficult for ordinary people to even guess at the actual differences between the top and the bottom; and, two, most are in agreement on what that difference should be.

 

The lack of awareness of the gap in CEO to unskilled worker pay - which in the U.S. people estimate to be 30 to 1 but is in fact 350 to 1 – ‘likely reduces citizens desire to take action to decrease that gap,’ says Norton. (Though he notes some movement on that front, including an unsuccessful vote in Switzerland to cap the ratio at 12 to 1 in 2013 and recent protests by fast food workers in the U.S.)”

 

Michael Norton concludes by stating “many of the heated debates about whether CEO pay should be capped or the minimum wage increased are debates based on an extreme lack of knowledge about the true state of affairs. In other words, both liberals and conservatives fail to accurately estimate the actual current gaps in our pay. Our hope is that presenting the data to all sides might force people to examine their assumptions about whether some people are making more than they would like, and others less.”

 

References

 

Dill, K. (2014). Report: CEOs Earn 331 Times As Much As Average Workers, 774 Times As Much As Minimum Wage Earners. Forbes, 15th April.

 

Gavett, G. (2014). CEOs Get Paid Too Much, According to Pretty Much Everyone in the World. Harvard Business Review, 23rd September.

 

Velasco, s. (2013). CEO vs. worker pay: Walmart, McDonald’s, and eight other firms with biggest gaps. The Christian Science Monitor, 12th December.