The Strategic Imperative

It seems like everyday we’re treated to a business news story that just a couple of years ago would’ve seemed fantastic, but now is just taken in stride. Many of the pillars of American industry have either gone bankrupt or been acquired at fire sale prices, more than one quarter of all residential mortgages are under water, unemployment is at ten percent and could stay that high for years, and even Harvard has been forced to cut back because of the thirty percent drop in the value of its endowment.

All of these are just examples of what economists tell us is structural, not cyclical change. The business world is now a fundamentally different place, and things are not about to return to the way they were. In my day job, I see lots of pain out there, which drives an intense focus on cost reduction and a strong aversion to risk trying anything new. While it’s understandable that in such times people would just hunker down, I fear this is exactly the opposite of what needs to be done.

When a crisis hits, our fight or flight reaction kicks in, narrowing our vision to what it takes to survive. But the unexpected and painful event can also stop the automatic processing of the brain and change the way we look at things. We become more willing to change, and with a fresh perspective, we become more innovative and recognize new opportunities. How we respond is a conscious decision.

At the same time our economy is being transformed, so too is our understanding of how our minds work and how we make such decisions. We’re learning about how our perceptions shape the world we live in, how much our actions are driven by emotion and not logic, and how big ideas change the way the mind works. These and other findings of brain science challenge the conventional wisdom on how to conduct business.

The changes roiling the economy and the latest brain research combine to create an imperative for every company to fundamentally rethink their business. Customer needs have changed, but now we have better ways of understanding what they are. Costs must be controlled, but there are new management practices and organizational designs that ensure greater efficiency. Fundamental change is now a fact of life, but we have the tools to help people prosper from it.

Perhaps the most fundamental lesson of brain science is that the world is only what we think it is, but our thoughts will determine our actions. My bet is that those that see the present as an opportunity are going to take the bold action needed to flourish. Those that don’t will be yesterday’s news.

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Dissonance Not to Be Wasted

The day I landed, the earthquake hit. The island is only ninety miles from Haiti and we felt the tremor.

I wasn’t in the Caribbean for a vacation. A Latin American client was looking for a place to hold an executive offsite, so I suggested the island I had lived on for four years. With tourism down, both travel and rooms were inexpensive, and the location of the island relative to the company’s offices made it very cost effective to hold our meeting there.

I had put together a very aggressive agenda for this meeting and we found ourselves working 12 to 14 hours a day. When I’m facilitating, I am totally immersed in my work and can barely even find time to respond to emails. let alone surf the news websites. So to be frank, I didn’t even realize the magnitude of what was going on in Haiti.

This island has a large Haitian population, so little by little the news leaked into our meeting room. It wasn’t cleaned our second day because the housekeepers were Haitian and too consumed with worry about their friends and family to show up for work. The third day a relief benefit was held in the building next to ours. By the fourth day, we had all had a minute or two to read about the catastrophe and were quickly becoming aware of the scope of the disaster.

I have many friends on the island from Haiti and had long heard the tales of the horrendous conditions in the country. Several month ago, I wrote a post about Charles, who had survived a harrowing boat trip as a teenager to escape the poverty. One morning two years ago, I had woken up and looked out my window, only to see the coast guard fishing a body out of the ocean. A sloop from Haiti full of people looking for a better life had capsized just a few hundred yards from shore. An estimated eighty bodies were never even found.

With our meeting over and an acknowledged success, I flew back to the U.S. Finally, I had a chance to catch up on the news I had missed. It was even far worse than I could have imagined. The numbers of the dead and displaced were incomprehensible. Gut-wrenching pictures of injured children were all over the major internet news sites. The day I returned, a 6.1 aftershock hit the island. There was not much additional physical damage, journalists reported, but the psychic trauma to an already shaken people was huge.

Such calamities stop us in our tracks. They halt the automatic processing of our brains and activate the areas responsible for seeing the whole. We’re pulled back to a vantage point that changes our perspective on everything. The dissonance primes us for a change in what we value and how we behave.

I have felt numb since my return and nothing seems quite the same. I look around my house and wonder why I ever thought I needed all of the stuff I’ve accumulated. I listen to my daughters bicker as close sibling will do, and question how I ever could’ve been irritated by it. I reflect on the worries that used to seem so all consuming and feel ashamed.

This morning I read about the debate over whether we should send more financial aid to Haiti–we currently give about 97 cents per American. Many feel the country is so far gone that it’s just a waste of money. Others write that such handouts diminish the spirit of industry needed to turn the country around.

I also read about Goldman Sachs’ near record profit, just a small fraction of which, if invested in Haiti, could transform the lives of its people.  I then thought about Lloyd Blankfein’s comment that the firm was doing God’s work.

Later when I was driving my daughters to school, I must have committed some heinous traffic sin, for another motorists made an obscene gesture. When I then pulled up at a light next to him, he refused to look in my direction. When eye contact is made, it’s hard not to empathize and see the other person as a human being like yourself.

Haiti’s earthquake is one of Obama’s “teachable moments.” It should change everything, from the tone of our political debate over issues like healthcare to the unproductive squabbling in our business organizations. We need to focus on what’s fundamentally important to us as human beings.

First, though,we need to stop and look each other in the eye.

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What Can Brain Science Teach Us About Nasal Spray and Accountability?

In a recent study, researchers found that the neuropeptide Oxytocin leads to more trusting behavior, even in relationships where there’s built in conflict. Subjects that received Oxytocin through a nasal spray displayed more trust in the classic game Prisoners’ Dilemma than those that were administered just a placebo.

In Prisoners’ Dilemma, the logical bet is for both prisoners to look out for themselves and not depend on the other one being trustworthy. It’s a particularly interesting game for business because it mirrors life in most organizations. Each member stands to benefit from collective action, if everyone else is trustworthy. But if they’re not, looking out for number one is often the safer strategy. Or as a client once put it, “If it’s a question of my team being successful or sending my son to college, it’s a no brainer.”

Because of this, leaders have long struggled with the issue of trust, but now through the miracle of modern science, we have a solution. Everyone just needs a little sniff of Oxytocin nasal spray, which is apparently available on the internet for as little as $29.95 for a two week supply. That’s quite a bit cheaper than hiring a team building consultant.

Tempting as it may be, this is precisely the kind of lesson we don’t want to learn from brain science. It’s not only that the same spray could be used for dishonest purposes–imagine if it were pumped into the showrooms of used car dealers, but that we’re drawing the wrong kind of lessons from the latest discoveries. The real learning is that our behavior is driven less by the nature of any situation we may find ourselves in, than by the way we think about the situation. Change the thinking and we change the behavior, and we can it do perfectly well without recourse to pharmaceuticals.

Recently, one of my clients was distressed by the unwillingness of his direct reports to be held accountable. As a result, he was focused on how to improve the organization’s measurement systems and how to establish clear consequences for non-performance. While the right kind of measures are critical for any business and while people should not be immune from the consequences of a failure to perform, accountability is less of a problem to be solved than it is a symptom of a more basic issue.

When I talked to the direct reports, they weren’t unwilling to be held accountable. They just didn’t agree with what they were being held accountable for. Their objectives were set top down, and they felt that they didn’t match the reality of their businesses. Much as they respected and even admired their boss, they were convinced he was too far removed from operations to understand what they were up against. The perceptions of each were different and in conflict.

Our logical minds are deluded into either/or thinking. In fact, one of Aristotle’s laws of logic mandates that there can be no middle ground–something is either the case or it is not.  Either the objectives are fair or they’re not. Either the boss is right or the employees are. But when we move beyond logic and incorporate how the mind works, we appreciate that both the manager and his direct reports are right, from their point of view.

The solution to this disconnect is not tighter measures and more draconian consequences. It’s impossible to build an infallible system for accountability and threats of punishment hardly motivate people to give their all for the business. Instead, the conflict should be taken as an opportunity to rethink the business from the top down.

Our ideas are instantiated  in neural networks arranged hierarchically in the brain. Those at higher levels drive decision-making and behavior at lower levels that are in harmony with them. If we get agreement at the highest levels, operational conflicts disappear.

When I pulled together my client and his team to address the conflict over accountability, we started by agreeing on a vision for the business and a strategy to achieve it.  With everyone in sync on what they wanted to accomplish and how best to do it, the objectives and how to ensure they were met just fell out naturally. Even better, the managers now worked toward achieving their objectives because they wanted to, not because they were afraid of the consequences if they didn’t. The result was a tighter and more efficient organization, and far more engagement from everyone. In just a quarter, performance improved significantly.

A squirt of nasal spray might have made the direct reports more trusting of their boss and the boss more trusting of his people. But it wouldn’t have made the direct reports able to achieve objectives that didn’t fit their businesses. The best chance of improving performance is to address how people think at the highest level.

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