Negative Attribution Bias – What are you assuming?

Ever been enjoying a nice drive, blasting your favorite music, when you ended up stuck behind another driver at the intersection on a green light? Did you immediately think what an idiot the other driver was? Maybe your internal voice said, “Hey put down the phone, quit looking in the mirror, and stop acting like an entitled jerk who thinks the world revolves around you; the light’s green – let’s go!”  Acting on your frustration, did you lay into the horn to voice your objection to the sheer audacity of this nuisance to society…..…only to find out the driver was stopped to let a fire truck pass?  It happened to me once. Imagine how I felt when I realized I was the jerk who had his radio too loud and was too impatient to realize the other driver had a perspective greater than my own that benefited my own safety.

Humans by nature tend to have a bias to attribute negative meaning to circumstances. We often think we were cut-off in traffic because the other driver was careless rather than because they were distracted and rushing to the hospital to visit a critical loved one.  Leaders must be very cognizant of this bias.  It’s not uncommon for a CEO to think they’re smarter than everyone else around them and not realize that their own behavior discourages direct reports from disagreeing with him. The CEO negatively assumes a “yes man” equals ignorance rather than merely conditioned response to the CEO’s behavior. The sales manager may think sales are down because she assumes her staff is not making enough sales calls. She negatively assumes that the staff needs to be micromanaged when in reality she may be unaware of a shift in the marketplace or an internal systems failure that stretches the sales cycle.  The non-profit leader who asks for volunteers may attribute a lack of compassion when their request is rejected rather than assuming the other party is already overcommitted to other charities.

The underlying elements that permit negative attribution bias to flourish often stem from a lack of self awareness (of the stresses and inputs influencing behavior) and a lack of self confidence (the calm assertive force that maintains objectivity in light of said influences).   The CEO’s stress to meet quarterly earnings may cause a degree of impatience and frustrated reactions to bad news that undermines their effectiveness to lead and to maximize the utilization of their direct reports. The sales manager, unconsciously reacting to the stress of the CEO and fearful for her job, might react with negative assumptions on her team’s performance. Rather than objectively evaluate the business environment or individual team member contributions, it’s likely the manager will react to what she interprets as her boss’ expectations. This can lead to condescending behavior, frustration, and micromanagement rather than trust and leadership benchmarked to the realities of a changing marketplace.  She spreads fear rather than possibility and expends energy rather than energizing others.  Ask yourself, what are you assuming? Are you reacting or creating?




Merchant Cash Advance from Shearson Capital

Star Trek: A Model to Unleash the Power of Your Business!

It’s undeniable; Star Trek has had a universal and sustainable appeal for generations of fans. Yes, I may be revealing my inner nerd but, I have a theory on why Star Trek is so appealing and it has potential opportunity for business leaders to create high performance cultures.  The cornerstone of my theory relies on the assumption that audiences are finding something they can identify with in the franchise.  While I think basic elements such as exploration, technology, equality, and adventure are important elements; they can readily be found in other franchises that have not been sustained. I think there’s something deeper.  I believe that people are identifying with characters that are representative of their natural abilities.  I think these unique abilities are often oppressed, underappreciated, or not fully expressed in many people’s lives and it feels good for them to watch a relatable character exercise their talents in a rewarding environment. Star Trek makes the Chief Science Officer, Chief Engineer, and Medical Officer something cool.  Audiences aren’t limited to aspire to be the Captain; there are other experts vital to the mission in roles just as prominent.  There is always a challenge that unifies the crew behind a common cause that requires the unique skills of several experts to resolve it. Contributions are transparent to all of the team and politics are non-existent.  The Captain doesn’t run around like he is the smartest person in the room, stealing all the limelight, and publishing a memoir on why he was solely responsible for the turnaround of the situation (aka General Motors).

Think about the potential of this Star Trek culture in a workplace. What if everyone was tested for their greatest aptitude and prepared to reach that potential? What if every participant showed up to work with people they admired and performed a job doing what they love? What if the entire team had the singular clarity of purpose brought about by something worth fighting for? On the Enterprise, the organization of each expert’s role creates a wide range of freedom to exercise authority within their role; even for the Captain. The Captain’s chief job is to make smart and objective decisions, often under great pressure and with limited information. As such, the Captain contributes to the team by bringing his expertise in decision making in support of his peers, not over them. The Captain values the input from his experts and serves to inspire their best input. To elicit the input and analyze information, the Captain himself must be a master generalist in several areas of expertise and managerial excellence. This support sustains the integrity of the organization which gains its power from the utilization of each member’s contributions. It may sound ideal, but I’m not one to settle. I’d say such a work environment would be the most rewarding professional experience a person could enjoy. 

Applied Wisdom: Essential Critical Thinking

In the course of an average day in the company of mediocrity, I feel the need to share a word or two on the subject of wisdom.  The applied knowledge of today’s middle manager reminds me of the story of the drunk pulled over by the police. The officer checking the sobriety of his suspect inquires how many years education the man has, to which the drunk replies, “twenty years; I took the tenth grade twice”.  While the drunk’s arithmetic is technically sound, it’s horribly misapplied. 

In the workplace, such interactions tend to be much less humorous and yet are just as serious as a drunk behind the wheel. Here’s an example. A salesperson that does really well selling widgets in an era of tailwinds may be promoted to a management position. Full of confidence from their success and presented with the opportunity for advancement and increased compensation; the salesperson would rarely turndown the offer.  It would be especially difficult to resist the offer in a corporate culture that does not provide the same accolades for subject matter expertise and craftsmanship as it does to the management career track of the corporate ladder.  The newly minted manager would rarely evaluate their skills as an effective leader to check for areas of improvement let alone consider whether management itself is the best application of their talents. Furthermore, the company would rarely set feedback systems outside of the reporting chain to evaluate the new manager’s skills.  Still in an era of tailwinds without proper benchmarks, the new manager excels on the labor of their direct reports.  As the new manager acclimates to their role, they began to apply what’s always worked for them in the past, the cornerstone of attribution error. They reach into their toolbox of skills, find a lone hammer, and readily apply their myopic view to every problem as if the whole world were a nail.

The new manager, with their limited tools, decidedly micromanages employees rather than selecting appropriate talent and offering the opportunity for failure. They hire new people from known companies because they have not the skill to uncover raw talent on their own terms. They require without the slightest hint on how to inspire. They measure without a tether to the reality of the marketplace. And for all of this poor behavior; they are often richly rewarded so long as the market continues to make them successful despite themselves. Soon new opportunity is upon them. They move up in the company and hire their replacement; the loyalist that never challenged them. Throw in a couple of mergers and now this person is responsible for a large P&L, their tenure lends credibility to their stature, and the mirage becomes perceived reality. Next, the incentive biased search consultant comes a calling and applies his own attribution error by applying the track record of the industry to that of the person sitting in front of him. Now we may call this, once middle manager, CEO.  Thousands of families’ livelihoods depend on this manager that is ignorant of their own weaknesses and that the company’s leadership ranks are filled with his dysfunctional replicates.  A few years ago we called these companies Enron, WorldCom, and Tyco.  One only has to look to today’s headlines and the careers of Lee Abrams and Randy Michaels from the Tribune Company to realize that several leadership ranks are still filled with this cancer.

Applied wisdom requires new leaders to avoid attribution error and man with a hammer syndrome while taking on intense personal evaluation and vast interdisciplinary study to fill their toolboxes with various skills.  Therefore, to ensure leaders have no resemblance to the drunk of this story, we must apply our wisdom with fastidious mental awareness and humility. A leader must think and therefore have command of multiple mental models built upon a framework of resilient confidence and self-awareness. To do so will be going against the grain. The good news is that new leaders have two things going for them.  First, the tide has receded and poor managers are exposed. Secondly, career advancement and pay aren't as they once were, new leaders have much less to lose when challenging the folly of their predecessors!  Warren Buffett and Charlie Munger would be proud if you were to adopt such thinking.


Charlie Munger

The Fundamental Flaw of Capitalism – Authored by a Capitalist

There’s a lot of blame to go around in our Nation’s financial crisis. In my humble opinion, a lot of blame has been thrown around with a bit of a myopic viewpoint that fails to account for the underpinnings of a capitalistic system and the psychology of its participants.  Now keep in mind, this is written from an ardent capitalist and in no way suggests a “progressive” or socialist agenda; merely something that patriots of a capitalistic society should focus on.

I wanted to write this after seeing so many politicians use the age old fallacy of false dichotomy to push through their hidden agendas. An example of arbitrarily reducing a set of many possibilities to only two is, “if we don’t pass this bill right now with our solution we’ll have financial Armageddon”. Some would argue that this thinking results in rash actions with many unintended consequences. Yet, this is not what I’m taking issue with here. What I take issue with is that Republicans, Libertarians and capitalists have not succinctly articulated the core issue at hand; the one issue, that without it, all other measures will have diluted impact. We don’t hear about the many options available to us and we don’t hear the conservatives speaking-out against dichotomy fallacies; they use such fallacies as masterfully as anyone for their own agendas. What we do hear from “fiscally conservative” leaders is that socialism is wrong and, if they offer a solution of any kind, it is often a compromise of regulatory reform or a call for further deregulation. I just think this falls short; I want one simple message that guides decisions in an ever changing market system. I don’t want the kind of deregulation that leads to Enron or the overregulation that creates so much legalese that no human can possibly synthesize the information. I want a smart and simple solution that hits the nail on the head.

So what is the fundamental flaw of a capitalistic system? Well, it starts with the psychology of incentive based bias.  This means that an industry with perverse incentives to make short-term profits will likely have at least one participant do so and wittingly or not, will sacrifice long-term stability. But that’s not the problem. The systemic issue is that if the sound and reasonable competitors do not follow, they may very likely face going out of business themselves. We saw this in the mortgage industry; if you did not offer low doc, adjustable, Alt-A, or subprime loans – you simply were not relevant or competitive in the marketplace. You can blame the greed and behavior of consumers, mortgage brokers, banks, and Wall Street all you want – and you’d be right. However, the overarching theme is; if all the incentives run the wrong way through all of the industry participants, who can put an end to the madness?  The simple answer is the regulator.

The notion that an industry will police itself is ridiculous to me. Try to call your competitor who’s making more money than you (even though jeopardizing his long-term viability) and convince him that he should stop what’s working so well for him; good luck. I’d love to see some capitalistic leaders calling for a truly independent regulator (not financed by the industry participants) that is sufficiently staffed with high caliber, richly rewarded employees that have the authority to stop short-term practices dead in their tracks. Such a solution merely requires the enforcement of ending practices that are foolish in the marketplace and a regulator that will be accountable and sign-off on appropriate practices. We don’t need thousands of pages of reform that lead to loopholes and uncertainty as to what are legal practices. I realize that this is an “ideal” proposal set against a backdrop of political compromise but, as a capitalist, complacency isn’t my strong suit. In a world of “progressive” solutions being enacted with thousands of pages of regulatory reform, I have to ask – where’s the common sense mission statement that can stand as a litmus test to ensure we’re on the right track? Where are the leaders who can provide a simple core message that all the participants can rally behind? Have we not learned our lesson?

What is a Strategic Plan?

Strategy is one of those topics that volumes of books have been written on using various and often “fuzzy” words such as initiatives, critical success factors, objectives, mission, balanced scorecard, control systems, and the value proposition.  While each of these items can certainly be an integral part of a sound strategic methodology, they can also overwhelm management with “process” and inadvertently dilute the development of an acute strategy.  So, when building a crisp and high impact strategy, what is it that management should stay grounded to?

The core principal of a strategic plan is simply this; how do you play your hand with the cards you’re dealt?  Strategy, at its simplest, is allocating resources. But a lot goes into creating a good strategy; one that your unique organization has the ability to do well at given the environment it operates in.  It sounds simple but there is a lot that goes into it, right down to the values and beliefs of the leadership.  To help in the malaise of these details, it is good practice to stay focused on the core principal of resource allocation. The actual formation of a good strategy can be thought of as part art and part science, each of these elements contributing to the most efficient allocation of resources.

The science of strategy development takes many forms but at a high level it consists of the typical SWOT analysis, time horizons, and perspectives.  The SWOT is simply matching the internal strengths and weaknesses of the organization to the external environment’s opportunities and threats.  Brutally honest analysis is the key to effectiveness in this process.   The science comes in developing an effective framework to avoid “analysis paralysis” and in using professional analytical techniques to avoid personal bias and assumptions in the data.  When viewing the results and developing the strategy, an organization must also consider its short, mid, and long-term focus.  Should a company focus only on near term results, it unwittingly is still making a long-term strategy without deliberately thinking about it.  Another aspect of a well balanced strategy is in considering the multiple perspectives of the organization such as financial, corporate, customers, employees, etc.  As an example, a growth strategy may include the value proposition the salespeople employ, but from a corporate perspective, it could also mean acquiring competing companies.

As for the art form of strategy development, we will forgo the standard football analogies and use music as a reference.  It has been said that you can pick up just about any instrument and play a couple of good notes, even if by accident.  However, as a person learns to read and write music along with proper technique, they often struggle with finding the “feel” of making music.  To rectify this, teachers often encourage their students to forget what they have learned, to let the music move them, and to just play.  So what does this all have to do with the strategy for a company?  Forming a strategy is not about rigid methodology and word-smithing.  Strategy is about being in-tune with the psychology of your clients and employees, letting your subconscious synthesize all of the available information for analysis with a holistic cognitive perception, and going with your gut to form a vision of what could be.  The challenge and the fun come in distilling the information down to a few key themes and matching the internal and external information for the highest probability of success. It is best to not get caught up in formal presentations and too much structure that might obstruct robust debate and creativity. You know you have a hit when your strategy is just what your client wanted, or even better.......what they didn't yet know they wanted!

Managing in Tough Times....

It is wise to remember that a securely grounded kite rises against the winds of adversity.

Leadership Problems

All rivers and some men are crooked because they follow the path of least resistance

Retooling an Organization

The organization that needs a new tool or talent and hasn't bought it yet is likely already paying for it.