Why a few broken eggs are a small price to pay for a delicious omelet

The world’s most highly-regarded experts on organizational transformation seem to agree that the steps that must be taken to establish and then sustain a decision-driven reorganization include these:

1. Identify your organization’s key decisions. Not all of them. Only those that are absolutely essential to a successful reorganization. Pick lots of brains but only those that contain the most relevant knowledge and the best judgment.

2. Determine where in the organization those decisions should be implemented. Where will the great impact occur now, soon, or eventually? Must there be a process or sequence? Who owns each decision? Metrics for tracking its progress?

3. Figure out what level of authority decision makers need. The key word is “power.” Decisions without power, without authority, are merely aspirations.

4. Align other elements of the organizational system, such as incentives, recognition, rewards, information flow, and possesses, with those related to decision making. It’s not just ”getting ducks in a row,” it’s “getting the right ducks in the right row, properly spaced, and highly visible.”

5. Help managers to develop the skills and behaviors necessary to make and execute decisions quickly and effectively. Some decisions will be made as a group only after rigorous and thorough discussion. Others must be made on-the-spot in situations that, hopefully, have been anticipated by asking “what if?” questions.

Keep in mind: These are steps and considerations when planning and implementing a reorganization and thus changes of the status quo will generate substantial resistance.

I always remind my corporate clients that a few broken eggs are a small price to pay for a delicious omelet.

Narcissism, Partnership and Strategy

Walter Kiechel III

Here is an excerpt from article written by Walter Kiechel III for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please visit dailyalert@email.harvardbusiness.org.

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As the great Nebraskan Fred Astaire (born Frederick Austerlitz, Omaha, 1899) used to sing, “There may be trouble ahead…” An article in the latest issue of Academy of Management Learning and Education reports that over the past 25 years college students in the U.S. have scored steadily higher on tests for narcissism. Professors Bergman, Westerman and Daly note that “the mean narcissism score of 2006 college students on the Narcissistic Personality Inventory (NPI) approached that of a celebrity sample of movie stars, reality TV winners and famous musicians.”

Fabulous. If that weren’t bad news enough, “Narcissism in Management Education” (Academy of Management Learning and Education, 2010, Vol. 9, No. 1, 119-131) also cites research indicating that “narcissistic tendencies such as materialistic values and money importance tend to be particularly evident in business students.”

Most studies of narcissists in business focus on their usually awful eventual effect on co-workers. To ride along with them can be energizing, even inspiring at first, but frequently ends in tragedy. As I was reminded last week when I caught one of the last New York performances of Lucy Prebble’s “Enron,” which pretty much reduces that company’s rise and fall to a story about Jeff Skilling’s increasingly delusional hubris. (A hit in London, the play bombed in Babylon on the Hudson, which already has enough challenges to its own hubristic tendencies these days.)

In a terrific 2001 HBR article, Michael Maccoby argued that a “productive narcissist” can be good for a company — setting out a vision, rallying the troops to achieve it. (As examples he cited Jack Welch and George Soros.) But in my observation, narcissism in strategy-makers almost always represents an invitation to disaster.

This for at least two reasons. Narcissistic executives usually create around themselves a miasma of distrust. They take credit for other’s work, value no one else’s ideas as highly as their own, and are so busy looking after No. 1 that they can be oblivious to the welfare of others. This makes it tough to develop a strategy in consultation with colleagues, who usually know more about vital details of the competitive situation than the Great One. And even tougher to actually carry the strategy out, except under the narcissist’s lash, which most talented people quickly lose a taste for.
The more fundamental problem may be that with sufficient feeding of their grandiosity, narcissists deteriorate in their ability to do what psychologists call “reality testing,” being able to spot the difference between the movie they’re playing in their heads (guess who the star is) and what’s actually going on in the world.

The classic posterboy for this syndrome: John De Lorean, father of the Pontiac GTO, who when he wasn’t hanging out with movie stars or marrying again was going to set the automotive world on fire with the De Lorean Motors gull-wing doored DMC 12. The entrepreneur’s arrest for drug-trafficking — allegedly to raise money for his failing company — put the finishing touches on that endeavor; even though he eventually beat the charge, he would spend the rest of his days bouncing down the stairs, eventually into personal bankruptcy.

In the face of what may be a rising tide of MBAs with, how shall we say, narcissism issues, and the chance that some may climb into strategy-making positions, the news of Britain’s new coalition government comes as all the more intriguing. Here you have two politicians, David Cameron and Nick Clegg, heads of rival parties, who, admittedly under serious pressure, manage to quickly form a partnership that has at least some observers suspecting that the country may have lucked into a governing solution better than any one party could have afforded.

For all the usual bromides about how “you can’t run a company by committee” and “you gotta have clear lines of authority,” partnerships have worked remarkably well in running a few fabled companies, including in setting their strategy. The modern Walt Disney Co. was at its best when Michael Eisner was complemented by Frank Wells. Coca-Cola’s patrician, aloof Roberto Goizueta wouldn’t have accomplished nearly as much without the consummately personable Donald Keough presenting a smiling corporate face to the world. Some of us wonder whether Goldman Sachs would be in the doghouse it is today if it had stayed with its tradition of two-headed leadership — John Weinberg teamed with John Whitehead, Robert Rubin with Steve Friedman. Astaire wasn’t the only Nebraskan who appreciated the value of a good partner — to every Warren Buffet, his Charlie Munger.

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To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please visit dailyalert@email.harvardbusiness.org.

Walter Kiechel III is the former Editorial Director of Harvard Business Publishing, former Managing Editor at Fortune magazine, and author of The Lords of Strategy: The Secret Intellectual History of the New Corporate World. He is based in New York City and Boston.

How to test your decision-making instincts

Here is an excerpt from an article written by Andrew Campbell and Jo Whitehead for McKinsey & Company. To read the complete article, check out a wealth of other valuable resources, and/or to sign up for a free online subscription, please visit https://www.mckinseyquarterly.com/home.aspx.

Executives should trust their gut instincts—but only when four tests are met.

One of the most important questions facing leaders is when they should trust their gut instincts—an issue explored in a dialogue between Nobel laureate Daniel Kahneman and psychologist Gary Klein titled “Strategic decisions: When can you trust your gut?” published by McKinsey Quarterly in March 2010. Our work on flawed decisions suggests that leaders cannot prevent gut instinct from influencing their judgments. What they can do is identify situations where it is likely to be biased and then strengthen the decision process to reduce the resulting risk.

Our gut intuition accesses our accumulated experiences in a synthesized way, so that we can form judgments and take action without any logical, conscious consideration. Think about how we react when we inadvertently drive across the center line in a road or see a car start to pull out of a side turn unexpectedly. Our bodies are jolted alert, and we turn the steering wheel well before we have had time to think about what the appropriate reaction should be.
The brain appears to work in a similar way when we make more leisurely decisions. In fact, the latest findings in decision neuroscience suggest that our judgments are initiated by the unconscious weighing of emotional tags associated with our memories rather than by the conscious weighing of rational pros and cons: we start to feel something—often even before we are conscious of having thought anything. As a highly cerebral academic colleague recently commented, “I can’t see a logical flaw in what you are saying, but it gives me a queasy feeling in my stomach.”

Given the powerful influence of positive and negative emotions on our unconscious, it is tempting to argue that leaders should never trust their gut: they should make decisions based solely on objective, logical analysis. But this advice overlooks the fact that we can’t get away from the influence of our gut instincts. They influence the way we frame a situation. They influence the options we choose to analyze. They cause us to consult some people and pay less attention to others. They encourage us to collect more data in one area but not in another. They influence the amount of time and effort we put into decisions. In other words, they infiltrate our decision making even when we are trying to be analytical and rational.

This means that to protect decisions against bias, we first need to know when we can trust our gut feelings, confident that they are drawing on appropriate experiences and emotions. There are four tests.

[Here’s one of the four.]

The Familiarity Test: Have we frequently experienced identical or similar situations?

 Familiarity is important because our subconscious works on pattern recognition. If we have plenty of appropriate memories to scan, our judgment is likely to be sound; chess masters can make good chess moves in as few as six seconds. “Appropriate” is the key word here because many disastrous decisions have been based on experiences that turned out to be misleading—for instance, the decision General Matthew Broderick, an official of the US Department of Homeland Security, made on August 29, 2005, to delay initiating the Federal response following Hurricane Katrina. 

The way to judge appropriate familiarity is by examining the main uncertainties in a situation—do we have sufficient experience to make sound judgments about them? The main uncertainties facing Broderick were about whether the levees had been breached and how much danger people faced in New Orleans. Unfortunately, his previous experience with hurricanes was in cities above sea level. His learned response, of waiting for “ground truth,” proved disastrous. Gary Klein’s premortem technique, a way of identifying why a project could fail, helps surface these uncertainties. But we can also just develop a list of uncertainties and assess whether we have sufficient experience to judge them well.

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If a situation fails even one of these four tests, we need to strengthen the decision process to reduce the risk of a bad outcome. There are usually three ways of doing this—stronger governance, additional experience and data, or more dialogue and challenge. Often, strong governance, in the form of a boss who can overrule a judgment, is the best safeguard. But a strong governance process can be hard to set up and expensive to maintain (think of the US Senate or a typical corporate board). So it is normally cheaper to look for safeguards based on experience and data or on dialogue and challenge.

In the 1990s, for example, Jack Welch knew he would face some tough decisions about how to exploit the Internet, so he chose experience as a solution to the biases he might have. He hired a personal Internet mentor who was more than 25 years his junior and encouraged his top managers to do the same. Warren Buffett recommends extra challenge as a solution to biases that arise during acquisitions. Whenever a company is paying part of the price with shares, he proposes using an “adviser against the deal,” who would be compensated well only if it did not go through.

There are no universal safeguards. Premortems help surface uncertainties, but they do not protect against self-interest. Additional data can challenge assumptions but will not help a decision maker who is influenced by a strong emotional experience. If we are to make better decisions, we need to be thoughtful both about why our gut instincts might let us down and what the best safeguard is in each situation. We should never ignore our gut. But we should know when to rely on it and when to safeguard against it.


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To read the complete article, check out a wealth of other valuable resources, and/or to sign up for a free online subscription, please visit https://www.mckinseyquarterly.com/home.aspx.

Andrew Campbell and Jo Whitehead are directors of London’s Ashridge Strategic Management Centre and co-authors, together with Sydney Finkelstein, of Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You (Harvard Business School Press, 2009).

Customer Response 101 – A Story from The Big Short

We are all experts on customer service.  When we receive good customer service, we know it.  And when we receive bad customer service, we know it.  And when we receive awful customer service, we know it and we tell everybody we know about it.

But – how well do we do letting people know when we appreciate what they do.  My sense is…not that well.

This is a story from The Big Short by Michael Lewis.  One of the handful of people who got it right – who “bet” on the “big short,” and made a boatload of money for himself and his investors, was Dr. Michael Burry.  He was the one-eyed man with Asperger’s-investing genius.  He had made his investors money – significantly more than any one else.  Then, he had a difficult year (because he had placed all of the money in the “bets” that were soon to pay off big time).  And then, the money came.

From the book:

“Even when it was clear that was a big year and I was proven right, there was no triumph in it.  Making money was nothing like I thought it would be.”  To his founding investor, Gotham Capital, he shot off an unsolicited e-mail that said only, “You’re welcome.”

The International Monetary Fund “put the losses on U.S.-originated subprime-related assets at a trillion dollars.”  Everyone had lost money – lots and lots of money.  Venerable Wall Street firms no longer existed.  But Burry’s clients had made a small fortune.

And no one said thank you.

Here’s the lesson:  yes, it is ok to expect competence and good customer service.  But when you get it, remember to say thank you.  It’s the human thing to do.