New Guest Blogger

My partner Dan Wallace was a guest blogger today at NewHire.  His blogs are always great!
http://new-hire.com/blog/4-ways-build-company-culture-drives-results/

Leaders! Who needs 'em?

Today I was reading a blog about so called ‘hard’ and ‘soft’ skills that leaders must have.  In the blog the author said, “In reality, there is nothing ‘soft’ about the skills needed to relate to people well enough to lead them.”  The theme here is the idea that an organization functions best when leaders lead.  It’s because the workers in the organization supposedly need a leader.   What does the leader have to do according to the blog?  The leader must hold others accountable to their commitments; marshal others to work together while following you; make timely and informed decisions; define priorities and goals; see situations from a wide, organizational perspective; etc.

That’s how the Army trained its leaders…until someone came along who paid attention.  It was General Wesley Clark. When he worked at the U.S. Army’s National Training Center, he observed that the incoming battalions never beat the resident “enemy,” even though the visiting leaders were given lots of training and advice.  General Clark began to wonder why. He got in a jeep and went out into the field to observe the fighting.  For the visiting army, all the strategy and tactics were managed through the chain of command. This trickled down to the frontline lieutenants, who were given a set of tactical instructions and expected to execute the tasks as commanded. The soldiers just followed whatever reasonable orders were given.

The training center’s resident enemy received no such detailed tactical instruction. Their job was simple: to defeat the incoming army by whatever means necessary. It was the initiative and ingenuity of the frontline soldier that made the difference in the outcome of the battle. The frontline soldiers worked in small teams, defined the problem they faced at any moment, and invented a solution. They were free to behave as thinking adults. That is why the smaller resident enemy always won the battle.  No leader got in their way.

What General Clark realized what that the actions of senior commanders could lose a battle, but their orders could not win it.   Perhaps the best business leadership advice ever given was advice Stanford Professor Dr. Robert Sutton gave to a CEO.  He advised: “Hire a bunch of smart people, and stay out of their way until they ask for your help.”

There is so much material out there covering the ‘How to’ for leaders, that we take it for granted that the key to success is having great leaders. 

If you Google ‘books on business leadership’  your first hit will say this “Business Leadership Books - Millions of titles, new & used.”  Millions of titles indeed!

But it’s not true.  Great organizations don’t need leaders.  And we have ample evidence that people don’t need leaders. 

In a December Harvard Business Review article in 2011 the author made the following observation about the assumption that you need leaders.  If you have 100,000 employees and a 10 to 1 ratio of leader to employee, then you will need 11,111 leaders.  That is a costly overhead.  The article then goes on to talk about a very successful 30 year old company that has no leaders, just workers.

In 2012, the Boston Research Group, along with Research Data Technology and The Center for Effective Organizations at the University of Southern California conducted a study that surveyed over 36 thousand employees from the C-suite to the front line, across 18 countries.  The single most important finding of this research was that where employees had the opportunity to self govern their behavior; the company out performed other types of management structures on all 14 measures used in the study.

There is structure to employee self-governance.  We call it Peer Accountability and it is the backbone of the work I do at both my companies: Tailwind Discovery Group, and THNK.  It works!

Hank Paulson and the Peak/End Question

A few nights ago, I asked Hank Paulson, the United States Treasury Secretary during the financial crisis of 2008-9 and former Goldman Sachs CEO, the Peak/End question.

Having used the Peak/End question many times before, I knew that it has broader application than the narrower definition in The Peak Interview book.  In the job interview context, the question is designed to create a real peak for the person answering the question.  I was actually hoping it would turn out that way last night, but by the time I got to ask the question I suspected something else would happen, and it did.

The other night’s topic was US-China relations in 2013 and beyond.  When Paulson was with Goldman Sachs, he made upwards of 70 trips to China and has close personal relationships with the past and current leadership.  He has established the Paulson Institute at the University of Chicago to promote international engagement on issues of global scope, with particular focus on cooperation between the United States and China. However, in his introductory talk he made it clear that he would also be happy to talk about his role in the financial crisis of 2008.

One way or another Mr. Paulson is doomed to be remembered primarily for his actions during the five days of turmoil between September 15 and September 19, 2008.  That he would bring it up himself hinted that he wanted to talk about it.

During his talk, I also observed a number of behaviors that are classic signs of  struggles with the truth.  At one point, he answered a question by saying “No” while nodding emphatically.  He shrugged while talking; he smiled moments when it seemed inappropriate to do so, etc.   

I don’t mean to suggest that Mr. Paulson is dishonest.  Rather, I had the impression that perhaps he is at war with himself.  Given the prominence in his life of those five days in 2008, and his apparent desire to talk about them, I can’t help but wonder if that’s what the war is about.

It is said that events are neutral, yet what we live are the stories we tell ourselves and others about those events.  Those stories are part of how we create the identity that we want others to have of us, and that we want to have of ourselves.  They often are how we make ourselves feel better about the events we’ve precipitated.  

The Peak/End question is simply this: “You’ve had an interesting career.  Looking back through that career, what is the one thing you’re most proud of?”

Mr. Paulson has done lots of things in his life that must have had clear and unambiguous benefits to people.  He’s been very active in conservation and has no question that global warming is real and manmade.  He has helped establish nature preserves and national parks in China.  He has already donated in excess of $100 million to conservancy causes and has pledged his entire fortune to the effort upon his death (why people don’t do this when they are alive is a mystery). This is clearly a huge priority for him.   In answer to the question I thought he might have gone there.

He also must have been involved in at least one transaction at Goldman Sachs that had positive human consequences in the face of many that probably didn’t.  But he did not go there either.  

Instead he went to his role in the financial crisis as his best moment.  It is possible that those five days in 2008 sustain an identity crisis for Paulson.  No matter how many times he says he chose the best possible action to avert a global meltdown of the financial system (which may be true), the fact will remain that the most obvious direct beneficiary of his action to bail out AIG was Goldman Sachs, his former employer and the source of his extraordinary wealth.

Psychologically, if you say something often enough it becomes your truth, your story.  Perhaps that is what he is doing.   Honestly, I feel badly for him because if he has this identify crisis, it is irresolvable.   Nothing will change the simple fact that his action saved Goldman Sachs.

Paulson mentioned the quandary of a counterfactual.  The economic collapse that he believes his action avoided is a counterfactual.  That is, we cannot know that a worse crisis would have occurred if he had acted differently.  Equally counterfactual is an outcome that might have turned out better, not for Goldman Sachs, but for millions of people who saw much of their savings and none of their debt disappear in the crisis. For Paulson, hanging his identity on this moment will always be murky.  

Perhaps he would be happier if he could just let it go, be satisfied that perhaps he did his best, and leave the learning to others.  Then, he could choose something else as his proudest moment.  He has many such moments from which to choose.   

The Peak/End question usually will help you see who a person really is. Unlike Paulson, almost everyone else answers the Peak/End question by telling a story about the impact their action had on specific other people.  For example, yesterday I attended a presentation a fellow gave regarding the recent sale of the company he’s run for several years.  He talked about all the difficulties and frustrations and risk associated with such a transaction. Toward the end of the question period I asked him a version of the Peak/End question, “Through the months of this transaction, what was most gratifying to you personally?” 

He didn’t hesitate for a moment.  “Well, after the transaction was complete I was shocked to learn the new owners were planning to let go five of our managers.  This was unexpected and would have been devastating to those people.  I argued with the new owners and managed to convince them not to do that.  And I have to tell you, that gave me such a wonderful feeling … you know it’s one of those great moments in life to be able to do something good for someone else, even though they’ll never know it.”

Diversity of Mind

On several occasions we have used a certain kind of puzzle to root out people who have very strong synthesis skills.  If you give a supersynthesizer this sort of puzzle problem they will eventually figure out the angles and come back with a complete solution.  It is a difficult exercise because it requires that you solve in one way and then need to search for three other ways to solve the puzzle.  We give people 24 hours to solve the puzzle.  It is more than enough time for a supersynthesizer.  

For everyone else, you can give them lots more time and it just won’t matter.  Our minds work on a problem until no more patterns emerge and we then get stuck in a series of thought-loops.  This particular kind of puzzle causes this to happen.  People who don’t find a solution to a problem within the first few minutes may be destined to work on the problem for a very long time before a solution is found.  Physicist Richard Feynman stepped into just such a situation.

In the early 1940s, while Feynman was still at Princeton working on his PhD, the atom bomb project got started.  But the facilities in Los Alamos were not yet ready so the scientists involved had some time to kill before moving out west.  It was decided that it would be a good idea for Feynman to go to Chicago to visit the team working on the worlds only nuclear reactor at the University of Chicago in Hyde Park.  The atom bomb project was all very secret of course so Feynman went there under the guise that he would have a job there working with the scientists on the nuclear reactor.   His assignment was to go to each group, tell them he was going to work with them, have them reveal all the problems and issues they were working on and when he had enough detail to start working on it himself he would go to the next group.   While it was a good idea, he was bothered a bit by his conscience that his scientific bretheren were doing all this work to bring him up to speed but he wasn’t helping them in any  way.

Then one day as a fellow scientist was explaining a particular problem that had stumped him for three months, Feynman looked at the problem and right away said “Why don’t you do it by differentiating under the integral sign?”  In half an hour the other scientist solved the problem.  The incident relieved Feynman of his guilt.  It was a great example of someone getting stuck in a thought-loop that makes it very hard to see a problem with fresh eyes when that’s exactly what you need.  Feynman had those fresh eyes.  He was also probably the best supersynthesizer in history.

In addition to supersynthesizers being good at puzzle problem solving, we discovered that if you pull together teams of four or five people from a pool of diverse people you will get consistent good results.  When we’ve done this, every team, even ones that contain no supersynthesizers, solves our puzzle problem within 45 minutes every time.  Interestingly, if you have several such teams working on the challenge, all the  different approaches to the problem will emerge from the different teams.  Diverse minds brought together can cause a lot of synapses to fire in new and thoughtful ways.  Plus, the nature of the team enterprise is such that as a member of a team you can be a bit more relaxed than you would be if you were working the problem by yourself.  While someone is going down one path, you can relax and watch for where it goes.  This relaxed state allows your brain to use the free energy to search for patterns and fire synapses.  You are not conscious of this brain activity but the brain work is going on.  It has been long understood that in a relaxed brain-state we are better problem solvers.

Insidious Advocacy

In a prior blog (http://superinnovator.blogspot.com/2012/05/leader-speak-advocacy-vs-inquiry.html) I talked about how leaders speak and the role of Advocacy vs Inquiry.  Advocacy is about stating your case, and usually begins with “I think...”.  Inquiry happens when people ask questions to seek clarity "How do we...". I pointed to an example that came from Chris Argyris, a Harvard Professor.  

“Another example given is “What evidence do you have that our expenses are too high? And how certain are you of this?”  The first question is ok, although I would have replaced the “you” (which can be seen as a bit accusatory) with “we” to distance ourselves from Advocacy.  The second question, “And how certain are you of this” is problematic.  We don’t care how certain someone is of an opinion.  We need the facts, and the only relevant question is “What are the facts?”

Advocacy can create a significant road block to truth.  Psychological examinations of this show how insidious strong Advocacy can be.  In the book Nudge, authors Richard Thaler and Cass Sunstein talk about research done by Muzafer Sherif.  In his work he had people make judgements about something they observed.  In groups people seemed to converge on a single judgement even though individually their judgements varied greatly.  Then he added a confederate, someone who was introduced to see if strong Advocacy could sway the group.  The confederate would take a radical but very confident stance on the judgement.  This would sway the group to move closer to that position than they’d been inclined to without the Advocate.  What was discovered next was truly remarkable and worrisome.

Once you participated in the group judgement it became thoroughly internalized.  When reporting that judgement later, even a year later, and in a new group, people will adhere to the original judgement.  For some reason we conserve a collective judgement until it can become truly entrenched in our thinking.

In business this is almost always a weakness.  And you are better off guarding against group think.  We train individuals to play “Good Cop” in a meeting.  Their assignment in a meeting is to observe the meta-talk of other participants in the meeting and at the appropriate time, report on where the team has trapped itself.  This requires a bit of team training  to make sure the team handles this part of the agenda correctly.  Otherwise, you end up with decision that are based on opinion and strong advocacy rather than good analysis.  

How, not What!

Understanding your competition is only useful if it gives you new insights, or new perspectives into your target customer.  If you have to make a choice between studying your target customer, or studying the competition, always focus on the customer.

When you do study the competition, if you focus mainly on what the competition is doing you’ll miss the most valuable intelligence. 

The what is derivative of the how.  It is more informative to understand how the competition views the customer; how the competition studies the customer; how the competition innovates; how the competition deals with costs; and how the competition expects to grow.

But do not obsess over the competition.  Keep in mind that truly great companies don’t worry about competitors, they don’t have any reason to.

Solving the job interview problem

When I was working on finding competitive advantage in the job interview, I was using it as an example of our innovation capabilities.  We just picked the job interview as the test case because it was something everyone understands. 

The interesting problem I encountered wasn’t in understanding Kahneman’s Peak/End theory which, by the way, he does a nice job of explaining in his new book Thinking Fast and Slow.  Rather the interesting problem developed when I came across two other psychological insights.

First, it turns out that the power of the peaks is dependent upon the activity level in brain.  The more active the brain is, the more powerful the peak.  This should have been a simple problem, just find our what things activate the brain and use the ones available in the conversation.  Perhaps tell a story, or a joke, or craft a particularly clever way to answer an expected standard interview question.  Then came the bigger problem.

Second, it turns out that fMRI studies have shown that the human brain is four times more active when we are talking, than when we are listening.  That meant I would need a way to cause the peaks to happen while the hiring manager was doing the talking, not while I was doing the talking.  The peaks had to happen in the hiring manager's brain.  It took a little more digging to come up with the strategy in the book.  If you can solve this problem differently, I would love to hear about it. 

Fascinating Human Behavior

Miles per Gallon across different speeds. (Actual data)

Miles per Gallon	at 75 MPH	at 65 MPH	at 55 MPH
Car 1	30.7	33.5	39.9
Car 2	36.5	44.8	51.9
Car 3	17.8	21.2	23.8
Car 4	25.9	29.3	34.6

It is clear that Car 2 is the most fuel efficient car.  Obviously when you drop from 75  MPH to 55 MPH you improve your miles per gallon.  If all four cars drive 10000 miles, which car will save the most gas by reducing the speed from 75 MPH to 55MPH?

Reducing to 55 from 75 MPH	MPG Improvement
Car 1	9.2
Car 2	15.4
Car 3	6
Car 4	8.7

This question is complex.  In situations like this, rather than do the math our brains look for an easy relationship to use as the basis for the decision.  We substitute something that looks like the same question and use that answer as the answer to the more difficult question.  In this case we are drawn to the MPG change as a stand-in for doing the more difficult calculation.   On that basis, Car 2 is the answer.  

But that turns out to be wrong.  Car 2 will save just over 81 gallons of gas per 10,000 miles driven.  But Car 3 will save over 141 gallons of gas for the same distance.  Only Car 1 saves less gas that Car 2.

Human behavior is very interesting.  As an experiment next time you're on the highway. Drive at say 10% over the posted speed limit (you’d better be in the right lane)  Then count the number of hybrids that pass you.  Assuming that many people who buy hybrids do so because they are “environmentally conscious”, you have to wonder why they don’t drive close the the speed limit where their gas consumption will be lower.  The answer is that we are all comfortable with a certain level of hypocrisy, (except for that lone wolf driving at 55 in the right lane that you nearly rear-ended!)


The issue of framing and looking for an easier problem to solve is covered well in Daniel Kahneman's new book Thinking Fast and Slow.

Long held beliefs fund their own truth.

In his new book Thinking, Fast and Slow, Daniel Kahneman talks about the work he and his colleague Amos Tversky did on Prospect Theory.  Their work over-turned Bernoulli economic theory of expected utility.  

Looking back on it, Kahneman wondered why something that is so obvious as a counter example to Bernoulli’s theory could have escaped notice for over a hundred years.  He then goes on to say “I can explain it only by a weakness of the scholarly mind that I have often observed in myself.  I call it theory-induced blindness: once you have accepted a theory and used it as a tool in your thinking, it is extraordinarily difficult to notice its flaws.”

Of course Kahneman is not the first to notice this.  Einstein said “It is the theory that decides what can be observed.”  I pointed this out in my book Advantage.  I further point out that he also said , “The only thing that interferes with my learning is my education.” He knew his ability to see something new depended on not embracing what was already there. 

Kahneman is right about this theory-induced blindness, but it doesn’t only affect the scholarly mind.  We all suffer from this phenomenon.  People in companies who have been doing the same thing over and over again have a hard time seeing alternatives.  It is why we can go into a company, see what they’re doing and wonder why they are doing something that is clearly not effective.  When someone is newly employed by a company, comes in and observes the ineffectiveness of something and offers a suggestion, it us usually rejected out-of-hand.  It takes a surprising amount of work to get people in the company to take on a different perspective.  Long held beliefs fund their own truth.

What do arranged marriages have to do with making a CEO's life better?...Well, a lot ...

Arranged marriages tend to work.  If we use divorce rate as the measure of success for marriages, then statistics place the divorce rate for arranged marriages much lower than those where marriages result from romantic personal choice.

Why does this occur?

Marriage is a social contract.  The reason the bride and groom exchange vows in public in front of all the people that matter to them, is because this is supposed to give the promises more importance.  Marriage is more than just a contract between the couple, it is a social contract with peer pressure weighing in to ensure promises are kept.  It turns out that the power of the peer pressure is determined on the value placed on those peer relationships.

In societies where the intragenerational relationship of the family and of community is much more valued than the marital relationship, that peer pressure endures and the public elements of promises are more likely to be kept.  People stay married.  In more nomadic societies like the USA, where such social relationships play a smaller role, the peer pressure to keep the public elements of promises diminishes.  A lot of marriages break up.  Peer pressure matters.

In the motivational model we use, we know that the need to have a social identity is a powerful motivator of behavior.  It’s what’s people think of us that matters.  If there was a huge social stigma associated with divorce, then there’d be fewer divorces.  

So, what does this have to do with business?

In his new book “Advantage” Patrick Lencioni says, “Peer Pressure: Notice, that I’m focussed on peers.  That’s because peer-to-peer accountability is the primary and most effective source of accountability on the leadership team of a healthy organization.  Most people assume that the leader of an executive team should be the primary source of accountability -- and that’s the norm in most unhealthy organizations.”  But peer pressure is a more powerful motivator because it is how we establish our social identity in a company.

For peer pressure to work in a company, the peer relationships must be valued relationships.  The real trick is making that happen, (and we do that really well).

When we implement the Entrepreneurial Operating System we do several things to cause those relationships to develop and flourish.  First, the process we use to build the accountability chart causes the members of the team to invest in one another’s success.  Second, we use discipline around company values to ensure the people working together share the same values.  When someone shares your values the relationship tends to grow naturally.  Third, we do something very subtle every week that deepens these relationships.  And finally, we put a structure around accountability that forces it to the surface over and over again, every week.  Interestingly, the team ends up loving it.

Who benefits the most?  Well one thing we know, the CEO thinks that it’s the CEO.  Peer-to-peer accountability takes all the pressure off the CEO.  No longer does the CEO ever have to ask “Say, you were working on XYZ project. Where are you on it?”  This is a painful question to ask, because you know if you have to ask it, the answer is not going to be good. In the EOS implementation, this question never needs to be asked, because the CEO knows that the right things are being worked on and knows the exact status of every initiative every week.  If something is likely to go off-track, the pressure of the peer group will ensure it gets resolved.

Patrick Lencioni goes on to say, “I realize that people who are used to working on non-cohesive teams will think all this sounds like a fairy tale.  To those who have experienced the reality of cohesive teams, it is simply the most effective way to keep one another focussed on what matters most.”  Both personally and professionally.

If you know a company where this sort of thing would be valued by the leadership team and the CEO, please let me know.  The EOS methodology makes peoples lives better, and we love making people’s lives better.

Values and Behavior

Assumption: Values matter in a company because they form the foundation of how people behave in the company. What we are really after are a set of behaviors that will best give us the results we are after. 

In Patrick Lencione’s book Advantage he recommends as one of the best ways to identify what values are core to an organization is a three step process:

• First, the leadership team picks the employees in the organization who already behave in the manner that makes them admired my the leadership team.  Make a list of all the attributes that make them so revered and this list is the pool of candidates for your core values.

• Second, the leadership team then identifies people who drive them crazy and would be more valuable if they were not there.  Take the opposite of whatever makes then so annoying and those things are candidates for your values.

• Third, the leaders honestly self-evaluate themselves to verify that they too embody the values thus selected.

We use this methodology as part of the Entrepreneurial Operating System.  It works well with small companies.  The smaller the better for this method.  If you’ve kept up on the hot topics of behavior and bias you will recognize a big flaw with the process.  That’s because the sampling method is highly biased.  Where the population size is very small, this is a smaller problem. But, the larger the pool of people gets, the less representative the selected people in Lencioni’s method become.

We did this with a company of 11 people.  Four of them were in the room.  This allowed the leadership team to look at all of the other seven people remaining and while they pick three of them as representative of the good, and one of the bad, they agreed that the three were indeed fairly representative of all the rest.  Had the company consisted of 250 people, or 5,000 people, no claim of representativeness would have been credible. The method works ok for a company of 11 people.  What we end up defining is really a set of behavioral guides.

We utilize this method because human beings believe in causal relationships between what someone values and how they behave.  And since we work with smaller companies, in the grand scheme of things we get close to the result we’re after using the methodology, so why fight the brain’s city hall.  

But, it is just not true that values drive behavior.  What turns out to be true, is that the environment makes a huge difference in how our values influence our behavior. Starting with the Milgram experiment, there is a ton of psychological research to demonstrate this.  Without going into a lot of detail here, look at the video below and you will realize that the degree to which our values influence our behavior depends upon the context.


The point is, we really can skip all this nonsense about values and go straight to answer the question, how do we engender the behaviors we are after?