Are You the Lid?

I’ve written many times about the concept of organizations as complex systems in the context of transformation. I’d like to introduce another characteristics of systems that could be keeping your organization from being able to meet the needs of growing demand for your good or service – capacity. All systems have a finite capacity.

Sometimes that capacity is limited by physical constraints such as space or machine production time. There are plenty of business models to deal with those. However, more often capacity is constrained by something called “The Law of Lid.” This “law” states that leadership ability determines a person’s level of effectiveness. In other words, an organization cannot sustainably grow beyond its leadership.

Here are two things you can start doing immediately to make sure you aren’t the “lid” of your organization.

  1. Be accountable. It’s easy to think you are above the rules because of your position in the organizational chart. You are not. Most people know this intellectually, but fewer actually practice it. You need to be the person you want in your organization. That means delivering on your promises and modeling the behaviors you want all the time.
  2. Value people not just the job they do. There are all sorts of trite sayings I could use here. You know them. People don’t care how much you know until they know how much you care. People don’t leave jobs; they leave managers. These sayings have stuck around because for the most part they are true. Sincerity is easier for some than others, but it is still critical. It’s important people feel valued beyond just their role in the organization. Be intentional about getting to know your team’s interests and passions. When it’s time to say thank you, use that knowledge to make the expression of gratitude all that more personal.
  3. Develop your direct reports. The most valuable contributors to any organization are those who can develop the potential in others. To do this, start making fewer decisions. As a young manager, I would often get great satisfaction from solving problems brought to me by my direct reports. I thought that was leadership – having the answers. However, that satisfaction quickly turned to frustration when my direct reports seemed to be lacking the ability to solve any problem on their own. Get your team thinking. This will require you to create clarity around expectations, objectives, behaviors, authority, and responsibility.

Does all this sound like work? It is. Does it sound like it takes time? It does.

However, if you don’t want to be the lid in your organization, it’s mandatory.

Rationality Is an Illusion

Illusion of Rationality

As mature adults and business professionals, we like to claim we approach life rationally. However, the evidence is stacked against us. We err either on being too optimistic or too pessimistic. We take too long to cut losses on bad investments or unhealthy relationships. We regularly make statements like, “I know this is bad for me, but…” We have long lists of phobias. You get the picture. Even the most rational among us cannot be 100% rational.

Why is this?

Rationality is an illusionFirst, our perception is not necessary reality. If you have ever seen a magic act, 3D sidewalk artist, or flipped through a book of optical illusions you have experienced this truth. Our brains are wired to try to make sense of the complex world around us. Add to that the ways our eyes work with our brain to process sight, and you have a fun world of parlor tricks.

However, our brains don’t stop filling in gaps and jumping to conclusions just because we aren’t being entertained by an illusion. It’s not something we can turn off. It is neurologically impossible for us to understand and process everything going on around us. We can’t even process everything our eyes see. Our brains are constantly making decisions on what information to keep and what to ignore. Our brains are also adding information to make incomplete information make sense.

Try to read the following paragraph. Even if you struggle with the first few words, keep pressing on. You might be amazed.

Fi yuo cna raed tihs, yuo hvae a sgtrane mnid too. cna you raed tihs? Olny smoe plepoe can. I cdnuolt blveiee taht I cluod aulaclty uesdnatnrd waht I was rdanieg. The phaonmneal pweor of the hmuan mnid, aoccdrnig to a rscheearch at Cmabrdgde Uinervtisy, it dseno”t mtaetr in waht oerdr the ltteres in a wrod are, the olny iproamtnt tihng is taht the frsit and lsat ltteer be in the rghit pclae. The rset can be a taotl mses and you can sitll raed it whotuit a pboerlm.

Think about the implications of what you just experienced. If your brain did that with letters on a page, what other information is it making up?

Most of the time this process is very useful as in the example above. We are unique in this regard. Our brains are simply amazing, but we must always remember that what we see is not necessarily what is. Simply ask any police detective about eyewitness reports. He or she will tell you that only by looking at similarities across multiple eyewitnesses can the actual events begin to be determined.

Second, biases from experiences and education impact our perception. From the moment we are born, we are developing biases. They allow us to apply our experience for survival. Again, in most cases this is a healthy thing. However, it can also cause us to be irrational. For example, a person who had an overbearing teacher might have a bias against all educators. Similarly a traumatic experience that happened to a loved one or us can impact our perception of situations or people who remind of the traumatic experience. This is something we all do. It is the way we are wired.

Here are four implications for leadership.

A diverse, cohesive leadership team is important. Your core management team should be made up of people from diverse backgrounds and experiences connected by a bond of trust. Multiple perspectives and interests help create a more complete picture of reality. The trust is necessary to allow the team to bring those perspectives together in debate without harming the ability of the team to work together. The trust will not be automatic. It has to be built and maintained intentionally.

Challenge your assumptions. Past successes can cause us to make foolish mistakes. For more on this one, read my last post titled The Delusion of Competence.

Consider all perspectives and data. When making decisions, gather enough information from various perspectives until the proper course of action is clear. To avoid group-think or dominant contributors overshadowing others, consider the following technique. Ask your question, but tell responders to write their answers down without discussing them with one another. Then those answers are read aloud, posted, and duplicates eliminated. If needed, participants can ask for clarification of a response. Then the group is asked to write a ranking of the choices from 1 to however many options were available. The group facilitator then tallies those rankings. This process is called Nominal Group Technique (NGT) and is just one way to make sure everyone’s input is considered.

Have a defined, objective decision-making processes. There are many good decision making process, and one process will not work on all types of decisions. Therefore, it is important to have managers trained in the various techniques and when to apply them. Far too often managers make a decision, and then set about gathering evidence to support their position.

While it is impossible for us to be 100% rational, there are things we can do to hedge against our irrational tendencies. Being disciplined enough to have these four areas covered will improve the quality of the decisions made in your organization. By making better decisions, you’ll find you improve the culture and overall financial performance of the organization too, and that’s very rational.

Overcoming Decision Paralysis

Overcoming Decision ParalysisThe trusted advisors have been consulted. Much thought and deliberation have been done. The answer and direction are clear. Still there is hesitation.

There are all kinds of excuses offered up.

“I want to be sure I’ve thought this through.” “It’s not that simple.”

Whatever the explanation, it’s nothing more than a justification for inaction.

While this scenario is common in all areas of life, it can be particularly detrimental for those in positions of leadership. Those over whom the leader is responsible often perceive this paralysis as leadership failure.

So how can it be overcome?

It’s important to recognize a very real psychological component that keeps us stuck in the status quo. It’s a concept called prospect theory, and it comes from decades of research by Daniel Kahneman and Amos Tversky on decision-making processes involving risk and uncertainty. In Kahneman’s book, Thinking Fast and Slow, he provides this simple definition: we are more inclined to avoid loss than we are to move toward a gain.

Any change from the status quo is psychologically perceived as a loss. This is one of the reasons people stay in bad relationships – it is familiar and there is a substantial emotional investment. Even with significant pain, the severing of that relationship is regarded as a loss.

Now, let’s apply that to business.

Most executives understand sunk cost. This is the concept that what’s done is done, and decisions should not consider sunk cost. Decisions should only be based upon the return on the next dollar or hour spent on the project or line of business. This, however, is not the way most people operate.

Often managers say, “We’ve got too much invested in this to let it go now.”

While understandable, it’s the wrong perspective. The only thing that matters is the return on the time and resources necessary to complete the project or initiative. There is often a huge sense of loss with abandoning a failed initiative into which so much time and money have been invested. The result is an increase in risk tolerance when it comes to trying to limit losses.

Here’s the classic example from Kahneman and Tversky’s research. Subjects were presented with the following questions.

  1. You have $1000 and you must pick one of the following choices:
    A: You have a 50% chance of gaining $1000, and a 50% chance of gaining $0.
    B: You have a 100% chance of gaining $500.
  1. You have $2000 and you must pick one of the following choices:
    A: You have a 50% chance of losing $1,000, and a 50% chance of losing $0.
    B: You have a 100% chance of losing $500.

From a purely logical analysis, options A and B are equivalent in both questions. However, respondents overwhelmingly chose B for question 1 and A for question 2. In other words, they were risk averse when it came to the potential for gains, but risk seeking when it came to limiting losses.

This leads us to the second reason for decision paralysis: fear. Fear of making the wrong decision often overwhelms the pain of the current situation. Fear is also tied to the concept of prospect theory. The status quo is known. The consequences of a choice that may result in an even greater loss have yet to play out.

Many leaders fall prey to the illusion that they must be invulnerable and infallible. Vulnerability is vital for leaders. History is filled with examples of people embracing leaders that display their humanity. The converse is also true. Leaders projecting a persona of invulnerability are often perceived as unapproachable, disconnected, and egotistical.

Because most decision paralysis happens around large financial or human resource decisions, having a logical decision-making process is critical. This is also where the healthy conflict of effective teams is vital. Leaders must have mentors, advisors, and team members that will ask the difficult questions during the decision-making process.

With those components in place, the correct decision will become clear.

At that point, it is time for the leader to lead.

Do You Have the Courage to Be Great?

Do you have the courage to be great?It’s easy to look at Fortune’s “Most Admired Companies” or the “100 Best Companies to Work for” list and think, “That’s what I want to build.”

Why wouldn’t you? Can you imagine the talent trying to work for those organizations anytime there is a vacancy? I’m sure it is a who’s who list of the best and the brightest.

However, I’m not sure most leaders have the courage to do what it takes to build and maintain the organizational health necessary to make these lists. Our organization has worked with hundreds of business leaders around the world. One thing is consistent across different continents and cultures: true courage is rare.

In some ways, this seems obvious. It is, of course why we admire the companies on that list so much. Those organizations are not common. Where we often fail to make the connection is in the implications about the leadership of those organizations. The leadership being practiced in those organizations is uncommon too – by definition. If they were common, we would not celebrate them.

So what is the secret? In my 20 years of experience, I’ve determined it comes down to one thing: courage. The organizations’ leaders must have the courage to stand by the values and behaviors they claim to want in the organization, the courage to be held accountable and to hold others accountable, and the courage to remove those from the organization not willing to model and support those values and behaviors – NO EXCEPTIONS. There can be no individual so important to the organization he or she is above the organizations’ values

If it sounds strong, it is. If it sounds difficult, it is. If it sounds uncommon, it is.

That’s why we celebrate the best places to work.

How have you seen this play out in organizations you’ve been a part of?

Organizational Change – It Really Comes Down to Two Things

Organizational Change

Amy Swenson recently asked a question in the Human Resources (HR) & Talent Management group regarding why over 70% of organizational change initiatives fail and if anyone has a methodology that works.

It’s a great question. However, the answers are not a secret. Some great books have been written on the topic.

So why have the statistics not changed that much?

Organizations are systems perfectly designed to create their current results.

Let that sink in for a moment.

Organizations are systems — systems of people, processes, and tools. Those people have an acceptable or standard way of interacting with one another called “culture.” They have ways of interacting with their processes and tools called “Standard Operating Procedures.” Each of these has it’s own inertia. The longer the organization has been around, the more inertia it has. Remember Jim Collin’s flywheel from Good to Great? This is the flywheel.

Another analogy I like to use is an aircraft carrier. It is a huge piece of machinery. It requires a massive staff to maintain and run. Roles are clearly defined in a nice kanban manner through uniforms and vest colors. Operating procedures are highly rehearsed and executed with fine precision.

People inside and outside the organization have adapted to survive in the system of your organization. They understand how to navigate the nuances of the organization’s culture and operating procedures, and the organization reinforces their behaviors through lack of punishment and sometimes reward.

Most change initiatives in organizations are the equivalent of ramming the side of that aircraft carrier with a rowboat. There is little if any noticeable impact on the carrier and it just about kills the people in the rowboat.

I’ve worked with dozens of organizations across my 20-year career. Whether a change initiative succeeded or failed, I noticed the reasons fell into two buckets — Lack of Clarity and Lack of Organizational Reinforcement. You will notice that the second contributes to the first.

Organizational clarity starts with a cohesive leadership team. By “cohesive” I mean a leadership team with no air gaps between them regarding the purpose, behaviors, and objectives of the organization. If the leadership team is not on the same page and committed, then their is no hope for the organization.

Once the leadership team is on the same page, then they can engage the proper stakeholders and create clarity around what is changing, why it is changing, and when it is changing. This part is not too difficult.

However, this next step is where many organizations stumble. Remember the system? We’ve now got to modify the system to reinforce the change. This may mean that some people that just won’t get on board after much listening and coaching need to go. That’s tough when it’s someone you like or an otherwise great employee. It definitely means that reward systems and processes need to be revamped to be aligned to reinforce the change. It also means that there need to be reinforcement mechanisms in place to inspect the new process and disciplinary action steps to handle non-compliance.

If that sounds hard, it is. Change is difficult. That’s why most organizations fail at it.

By the way, I still have not shared with you the two keys to success in change transformation. While the things I mentioned are critical, it really comes down to this: uncommon discipline and persistence.