The Performance Improvement Blog

Decision-Making, Perceptual Psychology, and Leadership

David Brooks, in his October 28 New York Times column, cited the work of Nassim Nicholas Taleb in describing the kind of thinking that has gotten us into the economic mess in which we currently find ourselves. Brooks writes that we have:

…perceptual biases that distort our thinking: our tendency to see data that confirm our prejudices more vividly than data that contradict them; our tendency to over-value recent events when anticipating future possibilities; our tendency to spin concurring facts into a single causal narrative; our tendency to applaud our own supposed skill in circumstances when we’ve actually benefited from dumb luck.

This short paragraph is an excellent summary of decades of psychological research on perception and decision-making. This research has confirmed that we humans have innate tendencies that result in fallacious thinking. This kind of thinking is not only a contributor to our economic problems but also is a cause of many of the performance problems that we have in the workplace. It is a kind of thinking that is a barrier to organizational learning. For example, if we believe that people who come from a culture that is different from our own are inferior, we will look for data to confirm that belief. If we have had a recent failure with a cross-functional team, we will assume that all future cross-functional teams will fail. If we know of a manager who has received coaching to improve his leadership but continues to lead an unproductive team, we will assume that coaching doesn’t work. If our sales team gets great numbers one month, we will believe that something we did made the difference.

The same basic human behavioral tendencies that get us into trouble economically, get us into trouble everyday in the workplace. We need to be aware that we have these tendencies and look for signs of this behavior before we make decisions. This has nothing to do with being smart or experienced. It’s the way the human mind works (possibly because of an ancient survival instinct) and can only be changed through diligent self-reflection and feedback from others.

Layoffs, Pinkslips, Downsizing, Forced Retirement

We have many euphemisms for workers losing their jobs, none of which make the pain any less for the person walking out the door or for the organization which is losing the employee’s talent and institutional memory. The pressure on companies to cut costs is tremendous in the current global recession. Everybody is feeling it: banks; manufacturing; high tech; retail; hospitality; services; tourism; etc. And the first thing they do is look at their payrolls, hoping that job cuts will demonstrate to their stockholders and boards of directors that they are taking decisive action to stem the loss of revenue. But this is, in most cases, the wrong course of action.

First of all, we have no evidence that mass layoffs result in more successful organizations, whether we are talking about productivity, revenue, or stock price. In fact, the opposite appears to be true. The research does not support across-the-board layoffs as an effective response to losses in profit and market share. A short-term rise in stock price might occur, but this doesn’t last. When a company’s stock does outperform the market over a couple of months it is usually because of other factors, not simply because of a reduction in payroll.

A colleague of mine, who was having a stellar career in a company, had her director job terminated due to wholesale cuts of everyone at her level. The business processes and initiatives that were managed by directors will continue; it’s just that they will now be the responsibility of VPs who may or may not know how to manage these efforts and who are quite removed from the internal and external customers of these jobs. This company is sending its institutional knowledge and talent out the door as well as creating low morale and a survivor mentality among remaining staff, and will have a tough and expensive time recovering once the economy turns around.

Even when cuts are targeted at low performers, morale is affected. In an About.com article titled Alternatives to Layoffs, the author writes:

A company may lay off employees it considers the low end producers, but in doing so it creates a climate of personnel uncertainty. That uncertainty causes others to leave. The first people to leave due to uncertainty in the company are the best people, because they can always get another job somewhere else. The climate of uncertainty that follows a layoff, therefore, always guarantees a reduction in the quality of the staff, not just the quantity.

It’s easy for an executive, several layers removed from the people being forced out, to make the job-cut decision. And I can appreciate how tempting it is (having done it myself, in a small business) to cut people from the payroll in order to stop the bleeding as quickly as possible. But this is usually a case of slower is faster. Companies need to look at all other ways to cut costs before removing the knowledge and talent that they need to get back on the right track and to stay there.

Organization Transparency

Transparency has become a popular term. It refers to an organization that is open and candid with information. This can mean financially open books, anti-corruption policies, providing public access to information, making strategy and tactics known to others, and more. Business leaders, politicians, educators, and even military leaders, are all claiming transparency in order to shine a positive light on their organizations. But it’s easier said than done. Often there is a disconnect between what organizational leaders say about their openness and what actually happens in the workplace. In practice, secrecy, public relations spin, and misleading information are more the norm.

Warren Bennis, Daniel Goleman, and James O’Toole address transparency in their recently published book: "Transparency: How Leaders Create a Culture of Candor". For a summary by O’Toole of the main points of the book go to a video on Bnet. The author talks about the importance of the leader’s role in ensuring that “…crucial information gets to the right person at the right time and for the right reason.”

Leaders have no choice but to be transparent. Dov Seidman, author of “How”, said in an interview for Business Week that nothing is hidden anymore; we are completely exposed due to Internet technology, so what is important is how these naked organizations behave. Tom Friedman in his op ed column in the New York Times on 101508, reported on his conversation with Seidman:

In a connected world,” Seidman said to me, “countries, governments and companies also have character, and their character — how they do what they do, how they keep promises, how they make decisions, how things really happen inside, how they connect and collaborate, how they engender trust, how they relate to their customers, to the environment and to the communities in which they operate — is now their fate.

So transparency is very difficult to avoid. Organizations need to put less effort into controlling who sees what and more effort into how they act given that everyone knows what they know.

A Checklist for Evaluating Training

The UK’s Chartered Management Institute offers a seven step “checklist” for evaluating training. Of course, any evaluation checklist is, by definition, an over-simplification of what can be a very complex process. Essentially, the CMI approach consists of clarifying training objectives, comparing trainee knowledge and behavior to objectives, and using this information to improve the training in the future. This is a useful way of thinking about evaluation when the program to be evaluated is highly technical, straightforward, predictable, and knowledge and skills can be learned in a relatively short period of time. But for anything else, such as leadership development, the seven steps fall short. Graham O’Connell, of the UK National School of Government, captures the issues well in his comment about the CMI article:

…I think there are some gaps [in the checklist] which reflect gaps in the wider debate on evaluation. Firstly, let me say unequivocally that evaluation is about securing and demonstrating great value results. But for these to be sustainable results we need to understand why things have worked and, where there have been problems, why those have occurred and what we might do about them. In other words we need to evaluate the process right from concept and the agreement of success criteria, through the design and delivery of the learning interventions, on to the consolidation, application and cascade of learning, and into improved performance and any other intended or unintended outcomes. In a sense evaluation is about learning. Our learning about learners, other stakeholders, organisations, culture, change, business and how learning interacts with all these issues…What we need is an intelligent analysis of the whole process - including satisfaction and results, quality improvement and systemic learning, real business benefits for today and increased capability for the longer term.

I agree with O’Connell; when we think of training evaluation as an opportunity for organizational learning, and not simply a way to determine if the initially intended results were achieved, the approach we must take is very different from CMI’s seven point checklist. We must consider how trainees come to the task of learning, how the training is delivered in the classroom and outside the classroom, what organizational factors (e.g., structure, communication, strategy) are affecting learning, what happens in the workplace over time to facilitate learning or to be a barrier to learning, what are the unintended consequences of the training program, and how are the individual, teams, and the organization affected by what the trainee has learned.

What Can We Learn From AIG?

What performance is AIG rewarding? Is that the performance it wants to be rewarding? Yesterday, Bloomberg.com reported that after much harsh criticism from Senator Max Baucus, Senator Henry Waxman, Representative Elijah Cummings, and presidential candidate Barak Obama, the new CEO of American International Group, Inc. announced the cancellation of recognition and education events like the $440,000 meeting of 100 independent insurance agents at the St. Regis Resort in Monarch Beach, California held after AIG received an $85 billion bailout from the U.S. government. The excuse given by people in the finance and insurance industries for these kinds of posh events is that this is how they reward and inform their sales agents and executives, and, they say, “If it didn’t work, we wouldn’t be doing it.”

I understand that sales meetings are intended to reward people for their hard work, fire them up to do more selling for the company, and inform them about any strategic and product changes. And I don’t have a problem with a company spending $4400 per person for a week-long meeting…if that meeting gets the results the company needs in order to be successful over the long term. However, from what I understand about the situation, AIG, along with many other financial services companies, has been guilty of greed and excess that was not sustainable and would have resulted in bankruptcy if it had not been bailed out by U.S. taxpayers. It is clear that their sales meetings have been rewarding the wrong behaviors on the part of their agents and executives. If you could build a house of cards in these companies, you were put on a pedestal.

All companies should examine their sales meetings in light of corporate values, goals, and intended results. Are they achieving what is intended? Is this the best way to use resources? If the intent is to reward high producers, then they need to ask if increasing sales is all they care about. Are there other goals, more in line with the values of the organization, for which employees and independent agents should be held accountable? Are there better ways to achieve these goals?

Email Sender Beware

Email appears to be replacing the telephone and even meetings (heaven forbid!) as the primary mode of communication, especially in global companies. This is causing miscommunication to be the norm rather than the exception. Non-verbal behavior is an essential element of face-to-face communication, but, obviously, totally absent in email communication. In her blog post “Why Email Humor Falls Flat (and What to Do About it), Jessica Stillman cited research reported in an article in Psychology Today that found that sarcasm and humor were communicated in email messages only about half the time. She concluded:

Email strips us of the smiles, widened eyes and posture signals that help us convey our meaning and mood, while leaving intact our conviction that we’re being perfectly clear.

One commenter to the blog post wrote:

As a manger of several extremely competent senior professionals on a virtual global team where email is the main mode of GTD, I spend more time managing the impact of email misunderstandings than any other single thing.

When email is the only mode of communication between two people, the danger of miscommunication is even more serious. In research conducted by Janice Nadler at Northwestern University, email negotiations between law students were much more likely to end in agreement when the negotiations were preceded by a getting-to-know-you telephone conversation. Without voice contact much is lost in building rapport, without which there is a tendency to make negative assumptions about what is in or not in email messages.

I find that even simple comments in email can be interpreted in many different ways by the receiver. Take for example the statement, “I think you handled that well.” The sender knows exactly what he means. You, on the other hand, can understand this in different ways depending on which word you put the accent and what meaning you attribute to that accent. If you put the emphasis on “I”, you might say to yourself that he thinks I handled the situation well but nobody else thinks so. If you put the emphasis on “think”, you might say to yourself that he’s not sure if I handled it well. If you put the emphasis on “you”, you might say to yourself that I handled it well but nobody else handled it well. If you put the emphasis on handled, you might think that he thinks I manipulated the situation for personal gain. If you put the emphasis on “that”, it might be interpreted as sarcasm. And if you put the emphasis on “well”, you might wonder if “well” is good enough. In face-to-face and phone communication you hear the word emphasis and tone of the statement.

This might sound like an extreme over-analysis of a short, innocuous sentence, but in the hurried, stressful environment of a workplace, this is the kind of instantaneous interpretation that occurs. And in a global environment, language and culture increase the likelihood of this kind of interpretation leading to miscommunication with possibly dire consequences.

Rational Communication

Frequent, meaningful communication builds respect, confidence, and trust. In an interview that appears in American Express’s blog, Open Forum, Guy Kawasaki asks Ori Brafman, one of the authors of Sway: The Irresistible Pull of Irrational Behavior, why frequent contact between people seems to improve perceptions of each other. Brafman says:

We all like to have a voice and feel we’re taken seriously. Studies have shown that people are perceived as more reliable and effective when they communicate frequently. For example, entrepreneurs who keep in close touch with their VCs are perceived to be doing a better job. The frequent communication doesn’t mean sending out annoying emails or spam, but rather keeping people in the loop. “I just finished doing this and that. I’m going to start working on this project.” People love being included. It makes them feel important and it makes them feel like they’re part of the team. When we’re quiet, people assume—incorrectly many times—that we’re not staying on task and that we’re not being as productive and studious as we can be.

When there is a communication void, it is our natural tendency to fill that void with assumptions about what the other person is thinking and doing. We need to resist this temptation and, instead, communicate regularly and significantly with our bosses, direct reports, peers, and partners. We should keep them informed; not in a burdensome way but so that they feel respected and trusted.