By the time he left, less than three years later, Benfold had become the highest-performing ship, and retention was amazing. And he did it all without changing a single member of the crew.

As he recounts in It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy the opportunity wasn’t without its irony.

Our military has spent a lot of time and money preparing for tomorrow’s battles with antiquated methods. We continue to invest in the latest technologies and systems, but, as we all know, technology is nothing but a facilitator. The people operating the equipment are who give us the fighting edge, and we seem to have lost our way when it comes to helping them grow.

Echoing Confucius, who said, “Real knowledge is to know the extent of one’s ignorance,” Abrashoff believes the key to leadership is about understanding yourself first and then using that knowledge to shape the organization.

Leaders must free their subordinates to fulfill their talents to the utmost. However, most obstacles that limit people’s potential are set in motion by the leader and are rooted in his or her own fears, ego needs, and unproductive habits. When leaders explore deep within their thoughts and feelings in order to understand themselves, a transformation can take shape.

That understanding shifts the leader’s perspective on all of the interactions in life, and he or she approaches leadership from a completely different place. As a result, the leader’s choices are different from those he or she made when blinded by fear, ego, and habit. More important, others perceive the person as more authentic, which in turn reinforces the new behavior. This can vastly improve how people respond to their leaders and makes their loyalty to the source of gratification more likely: my ship, your company, their peers, the culture that gives their lives meaning and purpose.

To be sure, your organization has a pragmatic goal, and obviously, it isn’t to be a therapeutic shelter. My ship’s job was war; your company’s purpose is profit. But we will achieve neither by ordering people to perform as we wish. Even if doing so produces short-term benefits, the consequences can prove devastating.

Adding to this later and expanding on how so many people lead, he writes:

Leaders must be willing to put the ship’s performance ahead of their egos.

[…]

The command-and-control approach is far from the most efficient way to tap people’s intelligence and skills.

[…]

Show me an organization in which employees take ownership, and I will show you one that beats its competitors.

Highlighting the divisiveness that so many organizations experience, he writes:

In business, as in the Navy, there is a general understanding that “they” don’t want rules to be questioned or challenged. For employees, the “they” is the managers; for managers, the “they” is the executive cadre. I worked hard at convincing my crew that I did want the rules to be questioned and challenged, and that “they” is “us.” One of the ways I demonstrated my commitment was to question and challenge rules to my bosses. In the end, both the bosses and my crew listened.

In a world that is always moving, staying still is near-certain death.

Organizations should reward risk-takers, even if they fall short once in a while. Let them know that promotions and glory go to innovators and pioneers, not to stand-patters who fear controversy and avoid trying to improve anything. To me, that’s the key to keeping an organization young, vital, growing, and successful. Stasis is death to any organization. Evolve or die: It’s the law of life. Rules that made sense when they were written may well be obsolete. Make them extinct, too.

The primary reasons that people leave an organization have nothing to do with money.

However the economy is doing, a challenge for leaders in the twenty-first century is attracting and retaining not just employees, but the best employees— and more important, how to motivate them so that they work with passion, energy, and enthusiasm. But very few people with brains, skills, and initiative appear. The timeless challenge in the real world is to help less-talented people transcend their limitations.

Pondering all this in the context of my post as the new captain of Benfold, I read some exit surveys, interviews conducted by the military to find out why people are leaving. I assumed that low pay would be the first reason, but in fact it was fifth. The top reason was not being treated with respect or dignity; second was being prevented from making an impact on the organization; third, not being listened to; and fourth, not being rewarded with more responsibility.

Abrashoff came to the conclusion that the best thing he could do was see the ship through the eyes of the crew.

What a powerful idea – seeing the world through the eyes of others. When you see the world through someone else’s eyes, it becomes much easier to identify what’s wrong.

Most systems reward micromanagement, which only disempowers subordinates and removes ownership and accountability.

Officers are told to delegate authority and empower subordinates, but in reality they are expected never to utter the words “I don’t know.” So they are on constant alert, riding herd on every detail. In short, the system rewards micromanagement by superiors— at the cost of disempowering those below.

Organizations commanded by a micromanager create a subculture of micromanagement. Individual initiative is the exception, not the norm, and people who exhibit it often get beaten down quickly, either quitting or becoming cynical.

I began with the idea that there is always a better way to do things, and that, contrary to tradition, the crew’s insights might be more profound than even the captain’s. Accordingly, we spent several months analyzing every process on the ship. I asked everyone, “Is there a better way to do what you do?” Time after time, the answer was yes, and many of the answers were revelations to me.

My second assumption was that the secret to lasting change is to implement processes that people will enjoy carrying out. To that end, I focused my leadership efforts on encouraging people not only to find better ways to do their jobs, but also to have fun as they did them. And sometimes— actually, a lot of times— I encouraged them to have fun for fun’s sake.

No one is capable of making every decision.

While there are an infinite number of ways to make decisions, most organizations create an ineffective system of rules and policies that attempt to prepare for every possible contingency.

The thing about rules and policies is that they can be very hard to change once they are in place. Both the people who put them in place and the people whose job it is to exercise them become highly motivated advocates of the policies.

Even if the policies originally made sense, they become very hard to change when circumstances change.

Owners vs. Renters

When you try to change something but can’t, you start becoming a tenant and stop being an owner. It turns out that ownership dramatically increases the odds of success.

If you can find the right people, set the direction, and give them autonomy, they will take care of the details. In fact, not only will they handle the details, but they will insist on it because they feel responsible for the outcome.

When was the last time you felt responsible for something and absolved yourself of the details? Never. When you’re responsible, you care.

One way to tell if you’re working with owners and renters is whether they insist upon a sufficient level of autonomy. Renters never want the responsibility that comes with autonomy. Owners can’t live without it. Autonomy comes from influence, power, and direction. You can’t be slowed down by bureaucracy or management.

Instead of rules, great organizations use principles and allow for exceptions and judgment. A friend of mine has a saying that comes to mind: ‘the young person knows the rules, the old one the exceptions.’

If you want an organization where people take responsibility, you have to let them think for themselves and take action.

It’s Your Ship goes on to detail the ideas and techniques that Abrashoff used to win trust, create an environment where people felt accountable, and gain commitment.

The post Lessons on Leadership: Michael Abrashoff’s Turnaround Playbook appeared first on Farnam Street.

If we want to get away from glorifying those who run around putting out fires, we need to cultivate an organizational culture that empowers everyone to act responsibly at the first sign of smoke.

How do we make that shift?

We can start by looking at ourselves and how we consider the voyage that is our work. When do we feel fulfillment? Is it when we swoop in to save the day and everyone congratulates us? It’s worth asking why, if we think something is worth saving, we don’t put more effort into protecting it ahead of time.

In Crossing the Unknown Sea, poet David Whyte suggests that we should view our work as a lifelong journey. In particular, he frames it as a sea voyage in which the greatest rewards lie in what we learn through the process, as opposed to the destination.

Like a long sea voyage, the nature of our work is always changing. There are stormy days and sunny ones. There are days involving highs of delight and lows of disaster. All of this happens against the backdrop of events in our personal lives and the wider world with varying levels of influence.

On a voyage, you need to look after your boat. There isn’t always time to solve problems after they happen. You need to learn how to preempt them or risk a much rougher journey—or even the end of it.

Whyte refers to the practice of taking control of your voyage as “developing an inner sense of captaincy,” offering a metaphor we can all apply to our work. Developing an inner sense of captaincy is good for both us and the organizations we work in. We end up with more agency over our own lives, and our organizations waste fewer resources. Whyte’s story of how he learned this lesson highlights why that’s the case.

***

A moment of reckoning

“Any life, and any life’s work, is a hidden journey, a secret code, deciphered in fits and starts. The details only given truth by the whole, and the whole dependent on the detail.”

Shortly after graduating, Whyte landed a dream job working as a naturalist guide on board a ship in the Galapagos Islands. One morning, he awoke and could tell at once that the vessel had drifted from its anchorage during the night. Whyte leaped up to find the captain fast asleep and the boat close to crashing into a cliff. Taking control of it just in time, he managed to steer himself and the other passengers back to safety—right as the captain awoke. Though they were safe, he was profoundly shaken both by the near miss and the realization that their leader had failed.

At first, Whyte’s reaction to the episode was to feel a smug contempt for the captain who had “slept through not only the anchor dragging but our long, long, nighttime drift.” The captain had failed to predict the problem or notice when it started. If Whyte hadn’t awakened, everyone on the ship could have died.

But something soon changed in his perspective. Whyte knew the captain was new and far less familiar with that particular boat than himself and the other crew member. Every boat has its quirks, and experience counts for more than seniority when it comes to knowing them. He’d also felt sure the night before that they needed to put down a second anchor and knew they “should have dropped another anchor without consultation, as crews are wont to do when they do not want to argue with their captain. We should have woken too.” He writes that “this moment of reckoning under the lava cliff speaks to the many dangerous arrivals in a life of work and to the way we must continually forge our identities through our endeavors.”

Whyte’s experience contains lessons with wide applicability for those of us on dry land. The idea of having an inner sense of captaincy means understanding the overarching goals of your work and being willing to make decisions that support them, even if something isn’t strictly your job or you might not get rewarded for it, or sometimes even if you don’t have permission.

When you play the long game, you’re thinking of the whole voyage, not whether you’ll get a pat on the back today.

***

Skin in the game

It’s all too easy to buy into the view that leaders have full responsibility for everything that happens, especially disasters. Sometimes in our work, when we’re not in a leadership position, we see a potential problem or an unnoticed existing one but choose not to take action. Instead, we stick to doing whatever we’ve been told to do because that feels safer. If it’s important, surely the person in charge will deal with it. If not, that’s their problem. Anyway, there’s already more than enough to do.

Leaders give us a convenient scapegoat when things go wrong. However, when we assume all responsibility lies with them, we don’t learn from our mistakes. We don’t have “our own personal compass, a direction, a willingness to meet life unmediated by any cushioning parental presence.”

At some point, things do become our problem. No leader can do everything and see everything. The more you rise within an organization, the more you need to take initiative. If a leader can’t rely on their subordinates to take action when they see a potential problem, everything will collapse.

When we’ve been repeatedly denied agency by poor leadership and seen our efforts fall flat, we may sense we lack control. Taking action no longer feels natural. However, if we view our work as a voyage that helps us change and grow, it’s obvious why we need to overcome learned helplessness. We can’t abdicate all responsibility and blame other people for what we chose to ignore in the first place (as Whyte puts it, “The captain was there in all his inherited and burdened glory and thus convenient for the blame”). By understanding how our work helps us change and grow, we develop skin in the game.

On a ship, everyone is in it together. If something goes wrong, they’re all at risk. And it may not be easy or even possible to patch up a serious problem in the middle of the sea. As a result, everyone needs to pay attention and act on anything that seems amiss. Everyone needs to take responsibility for what happens, as Whyte goes on to detail:

“No matter that the inherited world of the sea told us that the captain is the be-all and end-all of all responsibility, we had all contributed to the lapse, the inexcusable lapse. The edge is no place for apportioning blame. If we had merely touched that cliff, we would have been for the briny deep, crew and passengers alike. The undertow and the huge waves lacerating against that undercut, barnacle-encrusted fortress would have killed us all.”

Having an inner sense of captaincy means viewing ourselves as the ones in charge of our voyage of work. It means not acting as if there are certain areas where we are incapacitated, or ignoring potential problems, just because someone else has a particular title.

***

Space and support to create success

Developing an inner sense of captaincy is not about compensating for an incompetent leader—nor does it mean thinking we always know best. The better someone is at leading people, the more they create the conditions for their team to take initiative and be proactive about preventing problems. They show by example that they inhabit a state rather than a particular role. A stronger leader can mean a more independent team.

Strong leaders instill autonomy by teaching and supervising processes with the intention of eventually not needing to oversee them. Captaincy is a way of being. It is embodied in the role of captain, but it is available to everyone. For a crew to develop it, the captain needs to step back a little and encourage them to take responsibility for outcomes. They can test themselves bit by bit, building up confidence. When people feel like it’s their responsibility to contribute to overall success, not just perform specific tasks, they can respond to the unexpected without waiting for instructions. They become ever more familiar with what their organization needs to stay healthy and use second-order thinking so potential problems are more noticeable before they happen.

Whyte realized that the near-disaster had a lot to do with their previous captain, Raphael. He was too good at his job, being “preternaturally alert and omnipresent, appearing on deck at the least sign of trouble.” The crew felt comfortable, knowing they could always rely on Raphael to handle any problems. Although this worked well at the time, once he left and they were no longer in such safe hands they were unused to taking initiative. Whyte explains:

“Raphael had so filled his role of captain to capacity that we ourselves had become incapacitated in one crucial area: we had given up our own inner sense of captaincy. Somewhere inside of us, we had come to the decision that ultimate responsibility lay elsewhere.”

Being a good leader isn’t about making sure your team doesn’t experience failure. Rather, it’s giving everyone the space and support to create success.

***

The voyage of work

Having an inner sense of captaincy means caring about outcomes, not credit or blame. When Whyte realized that he should have dropped a second anchor the night before the near miss, he would have been doing something that ideally no one other than the crew, or even just him, would have known about. The captain and passengers would have enjoyed an untroubled night and woken none the wiser.

If we prioritize getting good outcomes, our focus shifts from solving existing problems to preventing problems from happening in the first place. We put down a second anchor so the boat doesn’t drift, rather than steering it to safety when it’s about to crash. After all, we’re on the boat too.

Another good comparison is picking up litter. The less connected to and responsible for a place we feel, the less likely we might be to pick up trash lying on the ground. In our homes, we’re almost certain to pick it up. If we’re walking along our street or in our neighborhood, it’s a little less likely. In a movie theater or bar when we know it’s someone’s job to pick up trash, we’re less likely to bother. What’s the equivalent to leaving trash on the ground in your job?

Most organizations don’t incentivize prevention because it’s invisible. Who knows what would have happened? How do you measure something that doesn’t exist? After all, problem preventers seem relaxed. They often go home on time. They take lots of time to think. We don’t know how well they would deal with conflict, because they never seem to experience any. The invisibility of the work they do to prevent problems in the first place makes it seem like their job isn’t challenging.

When we promote problem solvers, we incentivize having problems. We fail to unite everyone towards a clear goal. Because most organizations reward problem solvers, it can seem like a better idea to let things go wrong, then fix them after. That’s how you get visibility. You run from one high-level meeting to the next, reacting to one problem after another.

It’s great to have people to solve those problems but it is better not to have them in the first place. Solving problems generally requires more resources than preventing them, not to mention the toll it takes on our stress levels. As the saying goes, an ounce of prevention is worth a pound of cure.

An inner sense of captaincy on our voyage of work is good for us and for our organizations. It changes how we think about preventing problems. It becomes a part of an overall voyage, an opportunity to build courage and face fears. We become more fully ourselves and more in touch with our nature. Whyte writes that “having the powerful characteristics of captaincy or leadership of any form is almost always an outward sign of a person inhabiting their physical body and the deeper elements of their own nature.”

The post Solve Problems Before They Happen by Developing an “Inner Sense of Captaincy” appeared first on Farnam Street.

***

Be honest: How often do you feel as if you’re really able to express your true opinions without fearing judgment? How often do you bite your tongue because you know you hold an unpopular view? How often do you avoid voicing any opinion at all for fear of having misjudged the situation?

Even in societies with robust free speech protections, most people don’t often say what they think. Instead they take pains to weigh up the situation and adjust their views accordingly. This comes down to the “spiral of silence,” a human communication theory developed by German researcher Elisabeth Noelle-Neumann in the 1960s and ’70s. The theory explains how societies form collective opinions and how we make decisions surrounding loaded topics.

Let’s take a look at how the spiral of silence works and how understanding it can give us a more realistic picture of the world.

***

How the spiral of silence works

According to Noelle-Neumann’s theory, our willingness to express an opinion is a direct result of how popular or unpopular we perceive it to be. If we think an opinion is unpopular, we will avoid expressing it. If we think it is popular, we will make a point of showing we think the same as others.

Controversy is also a factor—we may be willing to express an unpopular uncontroversial opinion but not an unpopular controversial one. We perform a complex dance whenever we share views on anything morally loaded.

Our perception of how “safe” it is to voice a particular view comes from the clues we pick up, consciously or not, about what everyone else believes. We make an internal calculation based on signs like what the mainstream media reports, what we overhear coworkers discussing on coffee breaks, what our high school friends post on Facebook, or prior responses to things we’ve said.

We also weigh up the particular context, based on factors like how anonymous we feel or whether our statements might be recorded.

As social animals, we have good reason to be aware of whether voicing an opinion might be a bad idea. Cohesive groups tend to have similar views. Anyone who expresses an unpopular opinion risks social exclusion or even ostracism within a particular context or in general. This may be because there are concrete consequences, such as losing a job or even legal penalties. Or there may be less official social consequences, like people being less friendly or willing to associate with you. Those with unpopular views may suppress them to avoid social isolation.

Avoiding social isolation is an important instinct. From an evolutionary biology perspective, remaining part of a group is important for survival, hence the need to at least appear to share the same views as anyone else. The only time someone will feel safe to voice a divergent opinion is if they think the group will share it or be accepting of divergence, or if they view the consequences of rejection as low. But biology doesn’t just dictate how individuals behave—it ends up shaping communities. It’s almost impossible for us to step outside of that need for acceptance.

A feedback loop pushes minority opinions towards less and less visibility—hence why Noelle-Neumann used the word “spiral.” Each time someone voices a majority opinion, they reinforce the sense that it is safe to do so. Each time someone receives a negative response for voicing a minority opinion, it signals to anyone sharing their view to avoid expressing it.

***

An example of the spiral of silence

A 2014 Pew Research survey of 1,801 American adults examined the prevalence of the spiral of silence on social media. Researchers asked people about their opinions on one public issue: Edward Snowden’s 2013 revelations of US government surveillance of citizens’ phones and emails. They selected this issue because, while controversial, prior surveys suggested a roughly even split in public opinion surrounding whether the leaks were justified and whether such surveillance was reasonable.

Asking respondents about their willingness to share their opinions in different contexts highlighted how the spiral of silence plays out. 86% of respondents were willing to discuss the issue in person, but only about half as many were willing to post about it on social media. Of the 14% who would not consider discussing the Snowden leaks in person, almost none (0.3%) were willing to turn to social media instead.

Both in person and online, respondents reported far greater willingness to share their views with people they knew agreed with them—three times as likely in the workplace and twice as likely in a Facebook discussion.

***

The implications of the spiral of silence

The end result of the spiral of silence is a point where no one publicly voices a minority opinion, regardless of how many people believe it. The first implication of this is that the picture we have of what most people believe is not always accurate. Many people nurse opinions they would never articulate to their friends, coworkers, families, or social media followings.

A second implication is that the possibility of discord makes us less likely to voice an opinion at all, assuming we are not trying to drum up conflict. In the aforementioned Pew survey, people were more comfortable discussing a controversial story in person than online. An opinion voiced online has a much larger potential audience than one voiced face to face, and it’s harder to know exactly who will see it. Both of these factors increase the risk of someone disagreeing.

If we want to gauge what people think about something, we need to remove the possibility of negative consequences. For example, imagine a manager who often sets overly tight deadlines, causing immense stress to their team. Everyone knows this is a problem and discusses it among themselves, recognizing that more realistic deadlines would be motivating, and unrealistic ones are just demoralizing. However, no one wants to say anything because they’ve heard the manager say that people who can’t handle pressure don’t belong in that job. If the manager asks for feedback about their leadership style, they’re not going to hear what they need to hear if they know who it comes from.

A third implication is that what seems like a sudden change in mainstream opinions can in fact be the result of a shift in what is acceptable to voice, not in what people actually think. A prominent public figure getting away with saying something controversial may make others feel safe to do the same. A change in legislation may make people comfortable saying what they already thought.

For instance, if recreational marijuana use is legalized where someone lives, they might freely remark to a coworker that they consume it and consider it harmless. Even if that was true before the legislation change, saying so would have been too fraught, so they might have lied or avoided the topic. The result is that mainstream opinions can appear to change a great deal in a short time.

A fourth implication is that highly vocal holders of a minority opinion can end up having a disproportionate influence on public discourse. This is especially true if that minority is within a group that already has a lot of power.

While this was less the case during Noelle-Neumann’s time, the internet makes it possible for a vocal minority to make their opinions seem far more prevalent than they actually are—and therefore more acceptable. Indeed, the most extreme views on any spectrum can end up seeming most normal online because people with a moderate take have less of an incentive to make themselves heard.

In anonymous environments, the spiral of silence can end up reversing itself, making the most fringe views the loudest.

The post The Spiral of Silence appeared first on Farnam Street.

***

Many of us end up in leadership roles at some point in our career. Most of us, however, never get any training or instruction on how to actually be a good leader. But whether we end up offering formal or informal leadership, at some point we need to inspire or motivate people towards accomplishing a shared vision.

Directors are the leaders of movie productions. They assemble their team, they communicate their vision, and they manage the ups and downs of the filming process. Thus the experience of a successful director offers great insight into the qualities of a good leader. In 1970, film director Jean Renoir gave an interview with George Stevens Jr. of the American Film Institute where he discussed the leadership aspects of directing. His insights illustrate some important lessons. Renoir started out making silent films, and he continued filmmaking through to the 1960s. His two greatest cinematic achievements were the films The Grand Illusion (1937) and The Rules of the Game (1939). He received a Lifetime Achievement Academy Award in 1975 for his contribution to the motion picture industry.

In the interview, Renoir speaks to humility in leadership when he says, “I’m a director who has spent his life suggesting stories that nobody wanted. It’s still going on. But I’m used to it and I’m not complaining, because the ideas which were forced on me were often better than my own ideas.”

Leadership is not necessarily coming up with all the answers; it’s also important to put aside your own ego to cultivate and support the contributions from your team. Sometimes leaders have the best ideas. But often people on their team have excellent ones as well.

Renoir suggests that the role of a director is to have a clear enough vision that you can work through the imperfections involved in executing it. “A picture, often when it is good, is the result of some inner belief which is so strong that you have to show what you want, in spite of a stupid story or difficulties about the commercial side of the film.”

Good leaders don’t require perfection to achieve results. They work with what they have, often using creativity and ingenuity to fill in when reality doesn’t conform to the ideal image in their head. Having a vision is not about achieving exactly that vision. It’s about doing the best you can once you come into contact with reality.

When Renoir says, “We directors are simply midwives,” he implies that effective leadership is about giving shape to the talents and capabilities that already exist. Excellent leaders find a way to challenge and develop those on their team. In explaining how he works with actors, he says, “You must not ask an actor to do what he cannot do.” Rather, you need to work with what you have, using clear feedback and communication to find a way to bring out the best in people. Sometimes getting out of people’s way and letting their natural abilities come out is the most important thing to do.

Although Renoir says, “When I can, I shoot my scenes only once. I like to be committed, to be a slave to my decision,” he further explains, “I don’t like to make the important decisions alone.” Good leaders know when to consult others. They know to take in information from those who know more than they do and to respect different forms of expertise. But they still take accountability for their decisions because they made the final choice.

Good leaders are also mindful of the world outside the group or organization they are leading. They don’t lead in a vacuum but are sensitive to all those involved in achieving the results they are trying to deliver. For a director, it makes no sense to conceive of a film without considering the audience. Renoir explains, “I believe that the work of art where the spectator does not collaborate is not a work of art.” Similarly, we all have groups that we interact with outside of our organization, like clients or customers. We too need to run our teams with an understanding of that outside world.

No one can be good at everything, and thus effective leadership involves knowing when to ask for help. Renoir admits, “That’s where I like to have my friends help me, because I am very bad at casting.” Knowing your weaknesses is vital, because then you can find people who have strengths in those areas to assist you.

Additionally, most organizations are too complex for any one person to be an expert at all of the roles. Leaders show hubris when they assume they can do the jobs of everyone else well. Renoir explains this notion of knowing your role as a leader: “Too many directors work like this. They tell the actor, ‘Sit down, my dear friends, and look at me. I am going to act a scene, and you are going to repeat what I just did.’ He acts a scene and he acts it badly, because if he is a director instead of an actor, it’s probably because he’s a bad actor.”

***

Although leadership can be all encompassing, we shouldn’t be intimidated by the ideal list of qualities and behaviors a good leader displays. Focus on how you can improve. Set goals. Reflect on your failures, and recognize your success.

“You know, there is an old slogan, very popular in our occidental civilization: you must look to an end higher than normal, and that way you will achieve something. Your aim must be very, very high. Myself, I am absolutely convinced that it is mere stupidity. The aim must be easy to reach, and by reaching it, you achieve more.”

The post Aim For What’s Reasonable: Leadership Lessons From Director Jean Renoir appeared first on Farnam Street.

***

The job interview is a ritual just about every adult goes through at least once. They seem to be a ubiquitous part of most hiring processes. The funny thing about them, however, is that they take up time and resources without actually helping to select the best people to hire. Instead, they promote a homogenous workforce where everyone thinks the same.

If you have any doubt about how much you can get from an interview, think of what’s involved for the person being interviewed. We’ve all been there. The night before, you dig out your smartest outfit, iron it, and hope your hair lies flat for once. You frantically research the company, reading every last news article based on a formulaic press release, every blog post by the CEO, and every review by a disgruntled former employee.

After a sleepless night, you trek to their office, make awkward small talk, then answer a set of predictable questions. What’s your biggest weakness? Where do you see yourself in five years? Why do you want this job? Why are you leaving your current job? You reel off the answers you prepared the night before, highlighting the best of the best. All the while, you’re reminding yourself to sit up straight, don’t bite your nails, and keep smiling.

It’s not much better on the employer’s side of the table. When you have a role to fill, you select a list of promising candidates and invite them for an interview. Then you pull together a set of standard questions to riff off, doing a little improvising as you hear their responses. At the end of it all, you make some kind of gut judgment about the person who felt right—likely the one you connected with the most in the short time you were together.

Is it any surprise that job interviews don’t work when the whole process is based on subjective feelings? They are in no way the most effective means of deciding who to hire because they maximize the role of bias and minimize the role of evaluating competency.

What is a job interview?

“In most cases, the best strategy for a job interview is to be fairly honest, because the worst thing that can happen is that you won’t get the job and will spend the rest of your life foraging for food in the wilderness and seeking shelter underneath a tree or the awning of a bowling alley that has gone out of business.”

— Lemony Snicket, Horseradish

When we say “job interviews” throughout this post, we’re talking about the type of interview that has become standard in many industries and even in universities: free-form interviews in which candidates sit in a room with one or more people from a prospective employer (often people they might end up working with) and answer unstructured questions. Such interviews tend to focus on how a candidate behaves generally, emphasizing factors like whether they arrive on time or if they researched the company in advance. While questions may ostensibly be about predicting job performance, they tend to better select for traits like charisma rather than actual competence.

Unstructured interviews can make sense for certain roles. The ability to give a good first impression and be charming matters for a salesperson. But not all roles need charm, and just because you don’t want to hang out with someone after an interview doesn’t mean they won’t be an amazing software engineer. In a small startup with a handful of employees, someone being “one of the gang” might matter because close-knit friendships are a strong motivator when work is hard and pay is bad. But that group mentality may be less important in a larger company in need of diversity.

Considering the importance of hiring and how much harm getting it wrong can cause, it makes sense for companies to study and understand the most effective interview methods. Let’s take a look at why job interviews don’t work and what we can do instead.

Why job interviews are ineffective

Discrimination and bias

Information like someone’s age, gender, race, appearance, or social class shouldn’t dictate if they get a job or not—their competence should. But that’s unfortunately not always the case. Interviewers can end up picking the people they like the most, which often means those who are most similar to them. This ultimately means a narrower range of competencies is available to the organization.

Psychologist Ron Friedman explains in The Best Place to Work: The Art and Science of Creating an Extraordinary Workplace some of the unconscious biases that can impact hiring. We tend to rate attractive people as more competent, intelligent, and qualified. We consider tall people to be better leaders, particularly when evaluating men. We view people with deep voices as more trustworthy than those with higher voices.

Implicit bias is pernicious because it’s challenging to spot the ways it influences interviews. Once an interviewer judges someone, they may ask questions that nudge the interviewee towards fitting that perception. For instance, if they perceive someone to be less intelligent, they may ask basic questions that don’t allow the candidate to display their expertise. Having confirmed their bias, the interviewer has no reason to question it or even notice it in the future.

Hiring often comes down to how much an interviewer likes a candidate as a person. This means that we can be manipulated by manufactured charm. If someone’s charisma is faked for an interview, an organization can be left dealing with the fallout for ages.

The map is not the territory

The representation of something is not the thing itself. A job interview is meant to be a quick snapshot to tell a company how a candidate would be at a job. However, it’s not a representative situation in terms of replicating how the person will perform in the actual work environment.

For instance, people can lie during job interviews. Indeed, the situation practically encourages it. While most people feel uncomfortable telling outright lies (and know they would face serious consequences later on for a serious fabrication), bending the truth is common. Ron Friedman writes, “Research suggests that outright lying generates too much psychological discomfort for people to do it very often. More common during interviews are more nuanced forms of deception which include embellishment (in which we take credit for things we haven’t done), tailoring (in which we adapt our answers to fit the job requirements), and constructing (in which we piece together elements from different experiences to provide better answers.)” An interviewer can’t know if someone is deceiving them in any of these ways. So they can’t know if they’re hearing the truth.

One reason why we think job interviews are representative is the fundamental attribution error. This is a logical fallacy that leads us to believe that the way people behave in one area carries over to how they will behave in other situations. We view people’s behaviors as the visible outcome of innate characteristics, and we undervalue the impact of circumstances.

Some employers report using one single detail they consider representative to make hiring decisions, such as whether a candidate sends a thank-you note after the interview or if their LinkedIn picture is a selfie. Sending a thank-you note shows manners and conscientiousness. Having a selfie on LinkedIn shows unprofessionalism. But is that really true? Can one thing carry across to every area of job performance? It’s worth debating.

Gut feelings aren’t accurate

We all like to think we can trust our intuition. The problem is that intuitive judgments tend to only work in areas where feedback is fast and cause and effect clear. Job interviews don’t fall into that category. Feedback is slow. The link between a hiring decision and a company’s success is unclear.

Overwhelmed by candidates and the pressure of choosing, interviewers may resort to making snap judgments based on limited information. And interviews introduce a lot of noise, which can dilute relevant information while leading to overconfidence. In a study entitled Belief in the Unstructured Interview: The Persistence of an Illusion, participants predicted the future GPA of a set of students. They either received biographical information about the students or both biographical information and an interview. In some of the cases, the interview responses were entirely random, meaning they shouldn’t have conveyed any genuine useful information.

Before the participants made their predictions, the researchers informed them that the strongest predictor of a student’s future GPA is their past GPA. Seeing as all participants had access to past GPA information, they should have factored it heavily into their predictions.

In the end, participants who were able to interview the students made worse predictions than those who only had access to biographical information. Why? Because the interviews introduced too much noise. They distracted participants with irrelevant information, making them forget the most significant predictive factor: past GPA. Of course, we do not have clear metrics like GPA for jobs. But this study indicates that interviews do not automatically lead to better judgments about a person.

We tend to think human gut judgments are superior, even when evidence doesn’t support this. We are quick to discard information that should shape our judgments in favor of less robust intuitions that we latch onto because they feel good. The less challenging information is to process, the better it feels. And we tend to associate good feelings with ‘rightness’.

Experience ≠ expertise in interviewing

In 1979, the University of Texas Medical School at Houston suddenly had to increase its incoming class size by 50 students due to a legal change requiring larger classes. Without time to interview again, they selected from the pool of candidates the school chose to interview, then rejected as unsuitable for admission. Seeing as they got through to the interview stage, they had to be among the best candidates. They just weren’t previously considered good enough to admit.

When researchers later studied the result of this unusual situation, they found that the students whom the school first rejected performed no better or worse academically than the ones they first accepted. In short, interviewing students did nothing to help select for the highest performers.

Studying the efficacy of interviews is complicated and hard to manage from an ethical standpoint. We can’t exactly give different people the same real-world job in the same conditions. We can take clues from fortuitous occurrences, like the University of Texas Medical School change in class size and the subsequent lessons learned. Without the legal change, the interviewers would never have known that the students they rejected were of equal competence to the ones they accepted. This is why building up experience in this arena is difficult. Even if someone has a lot of experience conducting interviews, it’s not straightforward to translate that into expertise. Expertise is about have a predictive model of something, not just knowing a lot about it.

Furthermore, the feedback from hiring decisions tends to be slow. An interviewer cannot know what would happen if they hired an alternate candidate. If a new hire doesn’t work out, that tends to fall on them, not the person who chose them. There are so many factors involved that it’s not terribly conducive to learning from experience.

Making interviews more effective

It’s easy to see why job interviews are so common. People want to work with people they like, so interviews allow them to scope out possible future coworkers. Candidates expect interviews, as well—wouldn’t you feel a bit peeved if a company offered you a job without the requisite “casual chat” beforehand? Going through a grueling interview can make candidates more invested in the position and likely to accept an offer. And it can be hard to imagine viable alternatives to interviews.

But it is possible to make job interviews more effective or make them the final step in the hiring process after using other techniques to gauge a potential hire’s abilities. Doing what works should take priority over what looks right or what has always been done.

Structured interviews

While unstructured interviews don’t work, structured ones can be excellent. In Thinking, Fast and Slow, Daniel Kahneman describes how he redefined the Israel Defense Force’s interviewing process as a young psychology graduate. At the time, recruiting a new soldier involved a series of psychometric tests followed by an interview to assess their personality. Interviewers then based their decision on their intuitive sense of a candidate’s fitness for a particular role. It was very similar to the method of hiring most companies use today—and it proved to be useless.

Kahneman introduced a new interviewing style in which candidates answered a predefined series of questions that were intended to measure relevant personality traits for the role (for example, responsibility and sociability). He then asked interviewers to give candidates a score for how well they seemed to exhibit each trait based on their responses. Kahneman explained that “by focusing on standardized, factual questions I hoped to combat the halo effect, where favorable first impressions influence later judgments.” He tasked interviewers only with providing these numbers, not with making a final decision.

Although interviewers at first disliked Kahneman’s system, structured interviews proved far more effective and soon became the standard for the IDF. In general, they are often the most useful way to hire. The key is to decide in advance on a list of questions, specifically designed to test job-specific skills, then ask them to all the candidates. In a structured interview, everyone gets the same questions with the same wording, and the interviewer doesn’t improvise.

Tomas Chamorro-Premuzic writes in The Talent Delusion:

There are at least 15 different meta-analytic syntheses on the validity of job interviews published in academic research journals. These studies show that structured interviews are very useful to predict future job performance. . . . In comparison, unstructured interviews, which do not have a set of predefined rules for scoring or classifying answers and observations in a reliable and standardized manner, are considerably less accurate.

Why does it help if everyone hears the same questions? Because, as we learned previously, interviewers can make unconscious judgments about candidates, then ask questions intended to confirm their assumptions. Structured interviews help measure competency, not irrelevant factors. Ron Friedman explains this further:

It’s also worth having interviewers develop questions ahead of time so that: 1) each candidate receives the same questions, and 2) they are worded the same way. The more you do to standardize your interviews, providing the same experience to every candidate, the less influence you wield on their performance.

What, then, is an employer to do with the answers? Friedman says you must then create clear criteria for evaluating them.

Another step to help minimize your interviewing blind spots: include multiple interviewers and give them each specific criteria upon which to evaluate the candidate. Without a predefined framework for evaluating applicants—which may include relevant experience, communication skills, attention to detail—it’s hard for interviewers to know where to focus. And when this happens, fuzzy interpersonal factors hold greater weight, biasing assessments. Far better to channel interviewers’ attention in specific ways, so that the feedback they provide is precise.

Blind auditions

One way to make job interviews more effective is to find ways to “blind” the process—to disguise key information that may lead to biased judgments. Blinded interviews focus on skills alone, not who a candidate is as a person. Orchestras offer a remarkable case study in the benefits of blinding.

In the 1970s, orchestras had a gender bias problem. A mere 5% of their members were women, on average. Orchestras knew they were missing out on potential talent, but they found the audition process seemed to favor men over women. Those who were carrying out auditions couldn’t sidestep their unconscious tendency to favor men.

Instead of throwing up their hands in despair and letting this inequality stand, orchestras began carrying out blind auditions. During these, candidates would play their instruments behind a screen while a panel listened and assessed their performance. They received no identifiable information about candidates. The idea was that orchestras would be able to hire without room for bias. It took a bit of tweaking to make it work – at first, the interviewers were able to discern gender based on the sound of a candidate’s shoes. After that, they requested that people interview without their shoes.

The results? By 1997, up to 25% of orchestra members were women. Today, the figure is closer to 30%.

Although this is sometimes difficult to replicate for other types of work, blind auditions can provide an inspiration to other industries that could benefit from finding ways to make interviews more about a person’s abilities than their identity.

Competency-related evaluations

What’s the best way to test if someone can do a particular job well? Get them to carry out tasks that are part of the job. See if they can do what they say they can do. It’s much harder for someone to lie and mislead an interviewer during actual work than during an interview. Using competency tests for a blinded interview process is also possible—interviewers could look at depersonalized test results to make unbiased judgments.

Tomas Chamorro-Premuzic writes in The Talent Delusion: Why Data, Not Intuition, Is the Key to Unlocking Human Potential, “The science of personnel selection is over a hundred years old yet decision-makers still tend to play it by ear or believe in tools that have little academic rigor. . . . An important reason why talent isn’t measured more scientifically is the belief that rigorous tests are difficult and time-consuming to administer, and that subjective evaluations seem to do the job ‘just fine.’”

Competency tests are already quite common in many fields. But interviewers tend not to accord them sufficient importance. They come after an interview, or they’re considered secondary to it. A bad interview can override a good competency test. At best, interviewers accord them equal importance to interviews. Yet they should consider them far more important.

Ron Friedman writes, “Extraneous data such as a candidate’s appearance or charisma lose their influence when you can see the way an applicant actually performs. It’s also a better predictor of their future contributions because unlike traditional in-person interviews, it evaluates job-relevant criteria. Including an assignment can help you better identify the true winners in your applicant pool while simultaneously making them more invested in the position.”

Conclusion

If a company relies on traditional job interviews as its sole or main means of choosing employees, it simply won’t get the best people. And getting hiring right is paramount to the success of any organization. A driven team of people passionate about what they do can trump one with better funding and resources. The key to finding those people is using hiring techniques that truly work.

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In Messy: The Power of Disorder to Transform Our Lives, author Tim Hartford walks us through some amazing examples of cross-fertilization and how purposefully adding a measured dose of chaos to your work can benefit you greatly.

Sandpaper Without the Sand

In the 1920s a gentleman by the name of Dick Drew worked as a sandpaper salesman at the Minnesota Mining and Manufacturing Company.

One day Drew was thinking about the challenge of painting a car — it wasn’t a specialty of his but he could appreciate the problem. What he did know inside and out was sandpaper, and he intuitively realized that sandpaper could help solve the problem. What he needed was a roll of sandpaper without the sand.

This became known as masking tape and it transformed more than just how we paint cars.

Presently we call the Minnesota Mining and Manufacturing Company 3M, and Dick Drew’s insight in the early 1920’s wasn’t an anomaly, it is the type of innovation that has defined 3M as a company. What made them so consistently creative and innovative?

…3M has a “flexible attention” policy. In most companies, flexible attention means goofing off on the company dime. In 3M it means playing a game, taking a nap, or going for a walk across an extensive campus to admire the deer. 3M knows that creative ideas don’t always surrender to a frontal assault. Sometimes they sneak up on us while we are paying attention to something else.

3M also rotates its engineers from one department to another every few years. This policy is one that many companies—not to mention some employees—resist. Why make someone with years of expertise in soundproofing or flat-screen displays work on a vaccine or an air conditioner? For the company it seems wasteful and for the employee it can be stressful. But for a company that makes masking materials out of sandpaper… the real waste would be to let ideas sit in their tidy silos, never to be released.

The key term here that Harford hits on is reducing silos.

Many companies, whether by design or by accident, tend to be very compartmentalized. In essence, you are given a tiny box within which to work on your project but you often won’t have a good idea of what’s going on in other areas of the company; the opportunities for cross pollination are limited unless you commit to moving positions/projects.

By adding just a little disorder, a company can give it’s employees the freedom to think differently and maybe even help them out of a rut that is often caused by looking at something with too narrow a focus. Sometimes we just can’t “see the forest through the trees” — we’re stuck in our little box.

Crop Rotation

A company doesn’t have to rotate it’s personnel into wildly varying positions to achieve this goal; it can be as simple as providing an environment which allows employees to easily work on various/differing projects.

Creativity researchers Howard Gruber and Sara Davis see a strong link between the most creative people and their tendency to work on multiple projects. Gruber notes that Charles Darwin is a good example of this.

… throughout his life [Darwin] alternated between research in geology, zoology, psychology, and botany, always with some projects in the foreground and others in the background, competing for his attention. He undertook his celebrated voyage with the Beagle with “an ample and unprofessional vagueness in his goals.”

And then there are the earthworms. Darwin could not get enough of earthworms. This great scientist, who traveled the world, studied the finches of the Galápagos, developed a compelling account of the formation of coral reefs, and—of course—crafted the brilliant, controversial, meticulously argued theory of evolution, studied earthworms from every possible angle for more than forty years. The earthworms were a touchstone, a foundation, almost a security blanket. Whenever Darwin was anxious, puzzled, or at a loss, he could always turn to the study of the humble earthworm.

Gruber and Davis have coined a term for this melting pot of different projects at different stages of completion, they call it a ‘network of enterprises’. They argue that the parallel project approach has four benefits:

1. Multiple projects cross-fertilize. The knowledge gained in one enterprise provides the key to unlock unlock another.
2. A fresh context is exciting; having several projects may seem distracting, but instead the variety grabs our attention—we’re like tourists gaping at details that a local would find mundane.
3. While we’re paying close attention to one project, we may be unconsciously processing another—as with the cliché of inspiration striking in the shower. Some scientists believe that this unconscious processing is an important key to solving creative problems. John Kounios, a psychologist at Drexel University, argues that daydreaming strips items of their context. That’s a powerful way to unlock fresh thoughts. And there can be few better ways to let the unconscious mind chew over a problem than to turn to a totally different project in the network of enterprises.
4. Each project in the network of enterprises provides an escape from the others. In truly original work, there will always be impasses and blind alleys. Having another project to turn to can prevent a setback from turning into a crushing experience. The philosopher Søren Kierkegaard called this “crop rotation.” One cannot use the same field to grow the same crop indefinitely; eventually the soil must be refreshed, by planting something new, or simply taking a break.

Gruber and Davis argue that with the right network of enterprises, an impasse in one project can end up feeling somewhat liberating. If you fall down the wrong rabbit hole you have the ability to pivot to something fresh.

The writer can pull out some old jottings, the scientist can turn to an anomaly she had long wanted to investigate. What would have been a depressing waste of time for a single-minded person can become a creative lease of life for someone with several projects on the go. That’s the theory, but in practice it can be a source of anxiety. Having many projects on the go is a stressful experience that can quickly degenerate into wheel-spinning. (Rather than turning to the study of earthworms for a break, we turn to Facebook instead.)

We have written before about the negative aspects of multitasking and dividing your attention and focus. The goal here would be to find out the number and type of projects which give you the benefits outlined by Gruber and Davis but still keep that number manageable enough to not create an undue amount of stress. This will likely take a bit of trial and error.

Harford himself has a strategy that seems to work. It’s a wonderful mix of messy and organized.

I have a related solution myself, a steel sheet on the wall of my office full of magnets and three-by-five-inch cards. Each card has a single project on it—something chunky that will take me at least a day to complete. As I write this, there are more than fifteen projects up there, including my next weekly column, an imminent house move, a standup comedy routine I’ve promised to try to write, two separate ideas for a series of podcasts, a television proposal, a long magazine article, and this chapter. That would potentially be overwhelming, but the solution is simple: I’ve chosen three projects and placed them at the top. They’re active projects and I allow myself to work on any of the three. All the others are on the back burner. I don’t fret that I will forget them, because they’re captured on the board. But neither do I feel compelled to start working on any of them. They won’t distract me, but if the right idea comes along they may well snag some creative thread in my subconscious.

You can organize your projects like Harford, or come up with your own technique that suits your network of enterprises. The key is to create an environment that allows you to cross pollinate and, ideally, to rotate your crops when you stop liking what the harvest looks like.

If you want more, check out our other post on Messy, it’s a great book if you are looking for ways to facilitate a bit more creativity in your life.

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While the U.S. team had won the gold at the Squaw Valley Olympics in 1960, they hadn’t done much since then. The only notable showing was 5th place at the 1976 games. The Soviets, on the other hand, came into the 1980 Olympics having won 12 of the previous 15 world championships and 4 Olympic gold medals in a row. The Soviet record since Squaw Valley was 27-1-1.

In fact, the Soviets were so good, that in 1979 there was no NHL all-star game. Instead they just invited the Soviets to play a three-game series called the Challenge Cup. The U.S.S.R crushed the best players in the NHL 6-0 in the deciding game.

The Soviets beating the U.S. hockey team at the 1980 Olympics was as close to a sure thing as you could imagine, or so it seemed. Only things didn’t play out the way either team expected.

In his book, 99: Stories of the Game, the legendary Wayne Gretzky tells the incredible story of what transpired.

“In the United States,” Gretzky writes, “the goal was to build a team that, while not having much chance of winning, would at least not embarrass the country.”

Herb Brooks was hired as coach. If there was one guy in the program who wasn’t playing to avoid embarrassment, it was Brooks.

Eighty of the best college players were invited to Colorado Springs in July of 1979 to compete for a roster spot (remember at the time the Olympic games were for amateurs). Although it wasn’t so much a competition as formality. Brooks had won three NCAA championships coaching Minnesota, so he pretty much knew the 23 man roster he wanted.

A bit of leadership …

Brooks took one of the assistant coaches aside and said “A lot of these guys hate each other, and the only way I can think to make them a team is for all of them to hate me. You’re going to have to keep all the pieces together and be the guy they can lean on, because they’re not going to be able to lean on me. I’m going to be the same to all of them. I’m going to be tough on all of them.”

In a warm up game before the Olympics at Madison Square Garden, team USA lost to the Russians 10-3. The players were in awe of the opponent.

Brooks has spent a lot of time in Russia learning some of their systems. Herb discovered that when the Russians played hockey, they didn’t shoot the puck unless they thought they could score, and so although it might look as if they had fewer than ten shots on goal, they were shots that counted. …

[I]t was all about puck possession. The Russian team didn’t have to work as hard in defense because they had the puck so often. When a lot of people watch hockey, they don’t seem to focus on that. A big part of my game (Gretzky) was the forecheck—chasing a defenseman down, lifting his stick, and taking the puck. If you take the puck off a defenseman or player in his own end, you don’t have as many players to beat in order to score or to make a play.

An unexpected bit of ego and overconfidence …

The first medal-round game featured the Soviets and Americans. The game was played at 5 p.m. but didn’t air on ABC until 8 p.m. “One of the most memorable moments in American sports history would be watched by most Americans three hours after it happened,” Gretzky tells us.

In the locker room just ahead of the game, Herb Brooks gave the most inspirational speech of his life. He told the guys, “You were born to be a player. You were meant to be here. The moment is yours.”

The players skated onto the ice and looked up. The arena was packed. People were waving American flags everywhere. In the first minutes, the Americans surprised the Soviets with how fast and emotionally they played. Still the Soviets scored first. Then the unexpected happened.

Buzz Schneider took a slapshot and beat the legendary Soviet goaltender Vladislav Tretiak, tying the game. The Soviets quickly scored again and it looked like the first period would end that way when Dave Christian picked up the puck in his own zone with only five seconds left. Rather than play till the whistle, a lesson we all learn at one point or another and one that was drilled into me by my high-school football coach, the Soviets had let up thinking the period was over. Christian shot the puck up ice, Mark Johnson chased it down, deked Tretiak, and scored with only one second left. Tie game.

In the second period, Soviet coach Viktor Tikhonov pulled a surprise move. He replaced Tretiak—a guy known as one of the best goalies of all time—with his backup, Vladimir Myshkin. I’ve (Gretzky) had the opportunity to sit down with Tretiak and hear his opinion about it. Tretiak was the biggest star in Russia—and maybe still is, thanks to what he did in ’72 as a twenty-year-old goalie—and I think it used to drive Tikhonov crazy. He wanted to show everyone that his coaching was the reason they were winning the Olympics, not Tretiak’s goaltending. And to this day, Tretiak thinks that’s why he was pulled.

“Don’t change a thing. Don’t change a thing because they’ve changed goalies. Don’t change a thing. Play the same way,” Brooks was heard telling his team.

A lucky bounce …

In the third period, the Soviets looked dominant again. Then, on a rush, a shot from Dave Silk slipped through a Soviet defenceman’s skate right onto Mark Johnson’s stick. Before Myshkin could move, it was in the net and the score was tied (3-3). A minute later, the American captain, Mike Eruzione, scored.

Now the Americans were leading, just ten minutes away from a shot at a gold medal. Brooks kept walking up and down the bench saying, “Play your game. Play your game.” He repeated it a thousand times at least.

Jimmy Craig (the American goaltender) was in the zone. He wasn’t going to get scored on. When a goalie is in that kind of zone, especially in the playoffs, his ability to anticipate the shot is as good as the rest of his skill set. And Craig wasn’t alone—the whole team was flying out there. When you go into a series without the sense of entitlement the Russians had, it gives you the intensity you need to get to that extra level.

The gamed ended 4-3 for the U.S. The Americans swarmed the ice. They could hardly believe it—they had to keep telling themselves, “We beat them. We. Beat. Them.”

It was the first game the Soviets had lost at the Olympics in 12 years.

There are several lessons one can take away from this story—Brooks’ leadership to make the team hate him more than each other; Tikhonov’s ego pulling the legendary Tretiak to show the world how amazing he was; and the importance of playing to the whistle come to mind. Perhaps the most important lesson of all is that when the conditions are right, a group of “average people” can come together and get non-average results.

99: Stories of the Game goes on to tell 98 other stories about the game of hockey.

The post Inside a Miracle: The 1980 U.S. Hockey Team appeared first on Farnam Street.

The author is probably best known for his thoughts on the role of autonomy in intrinsic and extrinsic motivation. Deci co-developed the Self-Determination Theory with Richard Ryan.

Intrinsic Motivation

Deci and Ryan believed that people naturally develop through a process of engagement and interaction with the world and that said interaction tends to be driven by a “movement toward greater consistency and harmony within.”

The urge to develop an integrated sense of self is thus a central feature of who we are as individuals, and the activity — both physical and mental — that is necessary for this natural developmental trajectory is intrinsically motivated.

This intrinsic motivation is both driven by three innate psychological needs:

1. The need for autonomy
2. The need to feel competent
3. The need for relatedness

In Deci’s view, when the needs are being fulfilled, we will have plenty of motivation. When there are obstacles between us and these needs, it will be demotivating.

***

In our day to day lives, we will interact with the environment and we will integrate what we feel and learn from these interactions into our sense of self. Think of this like a continuous feedback loop. This environment is littered with societal influences, which can be motivating or demotivating, depending on how they interact with our innate needs and sense of self.

Deci uses an example of a young “artistic athlete.” This individual, who has talent both in an athletic arena and with artistic expression, will ultimately be tugged at times towards being an artist or athlete. To feel authentic to themselves, they will need to find a way to express themselves in both of these realms. If they don’t then they won’t be able to feel that sense of harmony; the self they are reflecting to the world won’t be consistent with the self they feel within.

Ideally, both aspects of this individual need to be nurtured, which Deci calls “autonomy support” — supporting the development of a whole, integrated person.

To characterize our perspective more formally, we view human behavior and experience in terms of the dialectic between the person and the environment – the interaction (and potential opposition) between the active organism striving for unity and autonomy and the social context that can be either nurturing of or antagonistic toward the person’s organismic tendencies. Synthesis occurs when there is enough support in the social context so that the natural, proactive tendencies are able to flourish. But in the absence of adequate supports, not only will intrinsic motivation be undermined, but so too will the development of a more integrated or coherent sense of self.

Deci and Ryan discovered that there are specific social contexts that can undermine this integration.

First, those social contexts that are excessively inconsistent and chaotic. These situations make it next to impossible for people to know what is expected of them: They can’t understand how to behave as there is no consistent feedback, which tends to leave people with little to no motivation (they can’t tell if they are being effective and will feel less a part of the group/situation – no competence, no relatedness).

Second, those social contexts which are extremely controlling. These environments pressure people into certain types of behavior and removes autonomy. The people who comply with the demands tend to become almost robotic at times. Whether the individual is complying with or actively defying the controls, they are not acting autonomously.

Autonomy is the key; without it, Deci believes people will lose their motivation and worse, it will hinder their development.

To develop in a natural and healthy way people need to perceive that they are in a “psychological state of feeling free.” People tend to know when they are being controlled, even if they can’t name it, they feel it. We can’t even trick ourselves, sometimes we think we truly want something but we are actually doing it out of a sense of obligation or fear.

Some people believe that our need for autonomy and our need for others is inherently contradictory. Not so, says Deci:

People have often portrayed the needs for autonomy and relatedness as being implicitly contradictory. You have to give up your autonomy, they say, to be related to others. But that is simply a misportrayal of the human being. Part of the confusion stems from equating autonomy and independence, which are in fact very different concepts.

Independence means to do for yourself, to not rely on others for personal nourishment and emotional support. Autonomy, in contrast, means to act freely, with a sense of volition and choice.

Internalizing & Autonomy

So how do we nurture those around us to help them become the best, authentic version of themselves? Deci and Ryan talk about this in terms of helping people to internalize values/regulations.

They believe there are two distinct types of internalization: Introjection and Integration. Introjection is akin to swallowing a rule whole without thought, whereas integration is more like chewing and digesting a rule. This the optimal form of internalization.

The behavioral output of introjection—swallowing a rule whole—are things like rigid compliance, halfhearted adherence and sometimes even defiance.

Introjected values and regulations can thus result in a variety of outcomes, but none of these is optimal. Clearly the half-heartedness and the rebellion are good for neither party. And while the rigid compliance may please the socializing agents who prompted it, there are serious costs to be borne by the people who comply.

This introjection manifests mostly in a lack of vitality and enthusiasm. It’s hard to be motivated when you are focused on pleasing others instead of being authentic to yourself.

So how can we focus on helping people integrate the regulations and values that will help them to develop to their full potential?

If you put a rooted avocado pit in a pot of earth it will probably grow into a tree, because it is in the nature of avocados to do that. It happens naturally. But not all pits become trees; some shrivel and decompose. They fail to thrive because the climate is inadequate, or the necessary nutrients are lacking. They need sun; they need water; and they need the right temperatures. Those elements do not make trees grow, but they are the nutriments that the developing avocados need, that are necessary in order for the avocados to do what they do naturally.

The metaphor is simple but poignant. Too often we ask the avocado pit to grow into an apple tree. You can try to nudge that avocado into becoming something else but it will never happen, and you will both be miserable.

It all comes down to autonomy support, according to Deci:

It is particularly interesting that autonomy support, which was a crucial contextual nutriment for individuals’ maintaining intrinsic motivation and as a result being more creative, processing information more deeply, and enjoying their activities more, also turns out to be essential for promoting internalization and integration of the motivation for uninteresting, though important, activities.

At one level of analysis, autonomy support means to relate to others – our children, students, and employees – as human beings, as active agents who are worthy of support, rather than as objects to be manipulated for our own gratification. That means taking their perspective and seeing the world from their point of view as we relate to them. Of course, autonomy support may require more work, but then, as socializing agents, that is our responsibility. For us to expect responsibility from others, we must accept our own responsibility as the agents of their socialization.

Autonomy support is not the same as being overly permissive. Having no limits or regulations will create inconsistent and chaotic environments that are no better to generating feelings of autonomy and full development.

Permissiveness is easy, but autonomy support is hard work. It requires being clear, being consistent, setting limits in an understanding, empathic way.

People will continue to make mistakes; that’s human nature (and it’s often a byproduct of trying hard things). Reacting with either heavy-handedness or permissive indifference does not help. Setting the environment for growth and trying to understand the situation from the other person’s point of view is the best course of action.

We all have the need for autonomy, to feel competent, and to relate to others. If you want to learn more about motivation in yourself and others pick up Why We Do What We Do, it’s well worth the read. The other influential book on motivation in recent years is Daniel Pink’s Drive.

The post Edward Deci: On the Relationship Between Need Fulfillment and Motivation appeared first on Farnam Street.

***

The biologist Lewis Thomas, who we’ve written about before, has a wonderful thought on creating great organizations.

For Thomas, creating great science was not about command-and-control. It was about Getting the Air Right.

It cannot be prearranged in any precise way; the minds cannot be lined up in tidy rows and given directions from printed sheets. You cannot get it done by instructing each mind to make this or that piece, for central committees to fit with the pieces made by the other instructed minds. It does not work this way.

What it needs is for the air to be made right. If you want a bee to make honey, you do not issue protocols on solar navigation or carbohydrate chemistry, you put him together with other bees (and you’d better do this quickly, for solitary bees do not stay alive) and you do what you can to arrange the general environment around the hive. If the air is right, the science will come in its own season, like pure honey.

One organization which clearly “gets the air right” is the much lauded Mayo Clinic in Rochester, Minnesota.

The organization has 4,500 physicians and over $10 billion in revenue from three main campuses, and it is regularly rated among the top hospital systems in the United States in a wide variety of specialities, and yet was founded back in the late 20th century by William Worrall Mayo. Its main campus is in Rochester, Minnesota; not exactly a hub of bustling activity, yet its patients are willing to fly or drive hundreds of miles to receive care. (So-called “destination medicine.”)

How does an organization sustain that kind of momentum for more than 150 years, in an industry that’s changed as much as medicine? What can the rest of us learn from that?

It’s a prime example of where culture eats strategy. Even Warren Buffett admires the system:

A medical partnership led by your area’s premier brain surgeon may enjoy outsized and growing earnings, but that tells little about its future. The partnership’s moat will go when the surgeon goes. You can count, though, on the moat of the Mayo Clinic to endure, even though you can’t name its CEO.

Pulling the Same Oar

The Mayo Clinic is an integrated, multi-specialty organization — they’re known for doing almost every type of medicine at a world class level. And the point of having lots of specialities integrated under one roof is teamwork: Everyone is pulling the same oar. Integrating all specialities under one umbrella and giving them a common set of incentives focuses Mayo’s work on the needs of the patient, not the hospital or the doctor.

This extreme focus on patient needs and teamwork creates a unique environment that is not present in most healthcare systems, where one’s various care-takers often don’t know each other, fail to communicate, and even have trouble accessing past medical records. (Mayo is able to have one united electronic patient record system because of its deep integration.)

Importantly, they don’t just say they focus on integrated care, they do it. Everything is aligned in that direction. For example, as with Apple Retail stores (also known for extreme customer focus), there are no bonuses or incentive payments for physicians — only salaries.

An interesting book called Management Lessons from the Mayo Clinic (recommended by the great Sanjay Bakshi) details some of Mayo’s interesting culture:

The clinic ardently searches for team players in its hiring and then facilitates their collaboration through substantial investment in communications technology and facilities design. Further encouraging collaboration is an all-salary compensation system with no incentive payments based on the number of patients seen or procedures performed. A Mayo physician has no economic reason to hold onto patients rather than referring them to colleagues better suited to meet their needs. Nor does taking the time to assist a colleague result in lost personal income.

[…]

The most amazing thing of all about the Mayo clinic is the fact that hundreds of members of the most highly individualistic profession in the world could be induced to live and work together in a small town on the edge of nowhere and like it.

The Clinic was carefully constructed by self-selection over time: It’s a culture that attracts teamwork focused physicians and then executes on that promise.

One of the internists in the book is quoting as saying working at Mayo is like “working in an organism; you are not a single cell when you are out there practicing. As a generalists, I have access to the best minds on any topic, any disease or problem I come up with and they’re one phone call away.”

In that sense, part of the Mayo’s moat is simply a feedback loop of momentum: Give a group of high performers an amazing atmosphere in which to do their work, and eventually they will simply be attracted by each other. This can go on a long time.

Under One Roof

The other part of Mayo’s success — besides correct incentives, a correct system, and a feedback loop — is simply scale and critical mass. Mayo is like a Ford in its early days: They can do everything under one roof, with all of the specialities and sub-specialities covered. That allows them to deliver a very different experience, accelerating the patient care cycle due to extreme efficiency relative to a “fractured” system.

Craig Smoldt, chair of the department of facilities and support services in Rochester, makes the point that Mayo clinic can offer efficient care–the cornerstone of destination medicine–because it functions as one integrated organization. He notes the fact that everyone works under one roof, so to speak, and is on the payroll of the same organization, makes a huge difference. The critical mass of what we have here is another factor. Few healthcare organizations in the country have as many specialities and sub-specialities working together in one organization.” So Mayo Clinic patients come to one of three locations, and virtually all of their diagnoses and treatment can be delivered by that single organization in a short time.

Contrast that to the way care is delivered elsewhere, the fractured system that represents Mayo’s competitors. This is another factor in Mayo’s success — they’re up against a pretty uncompetitive lot:

Most U.S. healthcare is not delivered in organizations with a comparable degree of integrated operations. Rather than receiving care under one roof, a single patient’s doctors commonly work in offices scattered around a city. Clinical laboratories and imaging facilities may be either in the local hospital or at different locations. As a report by the Institute of Medicine and the National Academy of Engineering notes, “The increase in specialization in medicine has reinforced the cottage-industry structure of U.S. healthcare, helping to create a delivery system characterized by disconnected silos of function and specialization.

How does this normally work out in practice, at places that don’t work like Mayo? We’re probably all familiar with the process. The Institute of Medicine report referenced above continues:

“Suppose the patient has four medical problems. That means she would likely have at least five different doctors.” For instance, this patient could have (1) a primary care doctor providing regular examinations and treatments for general health, (2) an orthopedist who treats a severely arthritic knee, (3) a cardiologist who is monitoring the aortic valve in her heart that may need replacement soon, (4) a psychiatrist who is helping her manage depression, and (5) and endocrinologist who is helping her adjust her diabetes medications. Dr. Cortese then notes,”With the possible exception of the primary care physician, most of these doctors probably do not know that the patient is seeing the others. And even if they do know, it is highly unlikely they know the impressions and recommendations the other doctors have recorded in the medical record, or exactly what medications and dosages are prescribed.” If the patient is hospitalized, it is probably that only the admitting physician and the primary care physician will have that knowledge.

Coordinating all of these doctors takes time and energy on the part of the patient. Repeat, follow-up visits are done days later; often test results, MRI results, or x-ray results are not determined quickly or communicated effectively to the other parts of the chain.

Mayo solves that by doing everything efficiently and under one roof. The patient or his/her family doesn’t have to push to get efficient service. Take the case of a woman with fibrocystic breast disease who had recently found a lump. Her experience at Mayo took a few hours; the same experience in the past had taken multiple days elsewhere, and initiative on her end to speed things up.

As a patient in the breast clinic, she began with an internist/breast specialists who took the medical history and performed an exam. The mammogram followed in the nearby breast imaging center. The breast ultrasound, ordered to evaluate a specific area on the breast, was done immediately after the mammogram.

The breast radiologist who performed the ultrasound had all the medical history and impressions of the other doctors available in the electronic medical record (EMR). The ultrasound confirmed that the lump was a simple cyst, not a cancer. The radiologist shared this information with the patient and offered her an aspiration of the cyst that would draw off fluid if the cyst was painful. But comforted with the diagnosis of the simple cyst and with the fact that it was not painful, the veteran patient declined the aspiration. Within an hour of completing the breast imaging, the radiologist communicated to the breast specialist a “verbal report” of the imaging findings. The patient returned to the internist/breast specialist who then had a wrap-up visit with the patient and recommended follow-up care. This patient’s care at Mayo was completed in three and one-half hours–before lunch.

So what are some lessons we can pull together from studying Mayo?

The book offers a bunch, but one in particular seemed broadly useful, from a chapter describing Mayo’s “systems” approach to consistently improving the speed and level of care. (Industrial engineers are put to work fixing broken systems inside Mayo.)

Mayo wins by solving the totality of the customer’s problem, not part of it. This is the essence of an integrated system. While this wouldn’t work for all types of businesses; it’s probably a useful way for most “service” companies to think.

Why is this lesson particularly important? Because it leads to all the others. Innovation in patient care, efficiency in service delivery, continuous adoption of new technology, “Getting the Air Right” to attract and retain the best possible physicians, and creating a feedback loop are products of the “high level” thought process below: Solve the whole problem.

Lesson 1: Solve the customer’s total problem. Mayo Clinic is a “systems seller” competing with a connected, coordinated service. systems sellers market coordinated solutions to the totality of their customers’ problems; they offer whole solutions instead of partial solutions. In system selling, the marketer puts together all the services needed by customers to do it themselves. The Clinic uses systems thinking to execute systems selling that pleasantly surprises patients (and families) and exceeds their expectations.

The scheduling and service production systems at Mayo Clinic have created a differentiated product–destination medicine–that few competitors can approach. So even if patients feel that the doctors and hospitals at home are fine, they still place a high value on a service system that can deliver a product in days rather than weeks or months.

[…]

Patients not only require competent care but also coordinated and efficient care. Mayo excels in both areas. In a small Midwestern town, it created a medical city offering “systems solutions” that encourage favorable word of mouth and sustained brand strength, and then it exported the model to new campuses in Arizona and Florida.

The post Under One Roof: What Can we Learn from the Mayo Clinic? appeared first on Farnam Street.

In Leviathan, for example, Thomas Hobbes argued for a single, absolute sovereign to hold together the social contract. He was addressing a debate over how leaders should act—whether they should follow their citizens’ wishes or act in the interests of future generations, against current pressures.

Other thinkers have focused on the real-world, actual path to leadership, leaving justice and civic virtue out of it; a more “descriptive” lens. For example, Robert Caro’s The Power Broker, required reading at many college campuses, focuses on just that idea. How does power actually work? (Part of his answer was that power doesn’t always corrupt, but it does always reveal.)

Or take Niccolò Machiavelli’s well-known brand of statecraft:

Whoever desires to establish a kingdom or principality where liberty and equality prevail, will equally fail, unless he withdraws from that general equality a number of the boldest and most ambitious spirits, and makes gentlemen of them, not merely in name but in fact, by giving them castles and possessions, as well as money and subjects; so that surrounded by these he may be able to maintain his power, and that by his support they may satisfy their ambition.

Machiavelli may not have had access to statistical analytic tools, but the cross-national data seems to back up his crony-focused approach, according to the four authors of The Logic of Political Survival.

Over the course of 500+ pages of formal game theory proofs and model testing, they make a strong case for what they call Selectorate Theory.

That book is a bit dense, so for the layperson, two of the authors—Bruce Bueno de Mesquita and Alastair Smith—also distilled their findings into the far more readable The Dictator’s Handbook: Why Bad Behavior is Almost Always Good Politics.

Their idea is that governance—public or corporate—is driven by the self-interested effort of leaders to acquire and keep their power.

Under this lens, all policy decisions are a play for the loyalty of key backers, whether it’s the inner circle in a dictatorship or a whole populace in a democracy.

The logic of a leader’s political survival dictates all of the varieties of governments we see, from monarchies or corporate boards to communist states and democracies. According to Selectorate Theory, it boils down to the relative size of three groups:

The Nominal Selectorate (interchangeables), which has at least some small voice in choosing the leader. This is the pool of potential supporters.

Example: Millions of individual voters or small shareholders.

The Real Selectorate (influentials), who actually choose the leader.

Example: Senior members of the Saudi royal family or big institutional shareholders.

The Winning Coalition (essentials), whose support is critical both to gaining the leadership and to keeping it.

Example: A handful of board members and senior management.

Our starting point is the realization that any leader worth her salt wants as much power as she can get, and to keep it for as long as possible. Managing the interchangeables, influentials, and essentials to that end is the act, art, and science of governing.

The difference in the relative size of these groups determines how much a leader can get away with and what the quality of life is like for those at the bottom of the system.

Dictatorships are governments based on a small winning coalition formed of a handful of generals, bureaucrats and regional leaders. The real selectorate is also small, and drawn from a large population.

In democracies, the opposite is true: the winning coalition is large, and the real selectorate is almost as large as the nominal selectorate. This means that dictators can keep their jobs by handing out private goods to their cronies, whereas democratic leaders have to dole out public goods to maintain their power. That seems to square pretty well with observations in the real world.

De Mesquita and Smith place the governance of most publicly-traded companies on the dictator side of the scale. A very small number of people usually determine the political survival of a CEO – small enough that the CEO can maintain power by making this small group happy rather than working for all of the shareholders.

In cases where companies have large groups whose approval is essential for leadership, public goods like increasing share value reward everyone and become the focus of the leader.

Much of political theory has focused on what justice and civic virtue looks like, without much evidence of the way things really work. But to change the world for the better, it is not enough to take a philosophical position. Wishful thinking has never been a wise starting point.

De Mesquita and Smith conclude that leaders shouldn’t be taken at face value on their motives.

Appeals to ideological principles and rights are generally a cover. J.P. Morgan had it right: There is always some principled way to defend any position, especially one’s own interests.

They propose five rules to keep a hold on power in any system:

1. Keep your “Winning Coalition” as small as possible.

The smaller the symbiotic group of people beholden to you, the more efficient it is to retain leadership through giving private benefits.

2. Keep your “Nominal Selectorate” as large as possible.

You’ll want to keep your inner circle on its toes by having many people waiting in the wings to replace them. You also want a large tax base to draw from.

3. Control the flow of revenue.

State bankruptcy is a political crisis. It either means the leader cannot purchase political loyalty from key backers or, in a democracy, cannot afford pork-barrel projects to buy popularity.

4. Pay your key supporters just enough to keep them loyal.

And make sure you’re the only one with access to the treasury.

5. Don’t take money out of your supporters’ pockets to make the people’s lives better.

Starving illiterates don’t make good revolutionaries, whereas dissatisfied cronies can oust you.

As a ruler, your inner circle may include very few of the people who brought you to power in the first place. Your fellow revolutionaries may be too much in the habit of revolution to be safe colleagues going forward. As Machiavelli wrote in The Prince:

It is easier for the prince to make friends of those men who were contented under the former government, and are therefore his enemies, than of those who, being discontented with it, were favourable to him and encouraged him to seize it.

Much as we may wish it weren’t the case, the authors’ data suggest corrupt dictatorships or oligarchies handled in this way are actually quite stable and long-lasting.

As long as the leader offers more benefits to his essentials than they could expect from alternate leadership, the incumbent enjoys a large advantage, and coup attempts often fail. For example, from 1917 until the 1980s, all but one Soviet leader ruled until his natural death. The exception, Kruschev, was deposed after reneging on promises to cronies.

The three most important characteristics of a coalition are: (1) Loyalty; (2) Loyalty; (3) Loyalty. Successful leaders surround themselves with trusted friends and family, and rid themselves of any ambitious supporters.

Though the logic of politics cannot be changed, it can be applied to finding windows for change.

The beginning of a leader’s rule or his or her terminal illness mark unstable periods of the reign, particularly if an heir has not been assigned and groomed. Sometimes it’s a financial angle: Under severe financial pressure, even an autocratic leader may see that political reform holds the best promise of political survival.

(In Taiwan, for example, Chiang Kai-Shek expanded his own coalition, in response to various pressures, until one day he found himself in a democracy.)

If an autocrat’s “inner circle” feels that their future is insecure, they will be incentivized to improve the lot of the nominal selectorate in case they someday find themselves on the outside. Mobs may take to the streets or storm government buildings when they are encouraged to do so by someone powerful, like a military leader. And with this blessing from the inner circle, the power of the people can often topple the leadership.

While there is a lot of precedent for nasty regimes being overthrown, certain conditions are necessary to prevent another dictatorship from taking hold. Countries without the political curse of natural resource wealth are more likely to succeed in democratic revolution, because they rely on a well-fed and productive populace to sustain them. The overall structure of the populace and its underlying stability or instability, cohesiveness or disjointedness matters greatly.

And in the end, given that political regimes are extremely complex systems, some of this can simply be hard to predict.

The post Why Bad Behavior is Almost Always Good Politics appeared first on Farnam Street.

***

George Marshall must be one of, if not the most under appreciated leaders in American history, and certainly of the 20th century.

Not only was he the military genius in charge of the US Army during World War II and the most directly responsible for its success, he was considered the primary leader of the Allied War effort by every major Allied leader. Roosevelt found him indispensable as his Army Commander, Winston Churchill called him the “true architect of victory” in the War, and even Stalin claimed he’d personally trust his life to Marshall. General and future President Dwight D. Eisenhower was his disciple.

It was Marshall who, from a standing start of a few hundred thousand soldiers, raised an army of millions and oversaw the major operations that would lead to the liberation of Europe. (Brilliantly recounted by Rick Atkinson in his three volume series.)

Churchill put Marshall’s best qualities — his leadership in the worst of times — on display when he wrote:

There are few men whose qualities of mind and character have impressed me so deeply as those of General Marshall … He is a great American, but he is far more than that … He has always fought victoriously against defeatism, discouragement and disillusion. Succeeding generations must not be allowed to forget his achievements and his example.

Sadly, outside of military circles, that example does seem a bit forgotten.

Marshall is now mostly known for his genius Marshall Plan, which sought to re-build Europe (including Germany) in the aftermath of the war. But he was much more than that.

Before World War II, Marshall had a long and distinguished military career, including as the primary aide to General John J. Pershing, the Commander of the American Expeditionary Force in World War I. And during this time, Marshall wrote a letter that perfectly exemplifies the qualities of a great leader. It would go on to be included in his posthumously published World War I memoir, Memoirs of My Services in the World War, 1917-1918.

Here, Marshall lays out the four qualities required to be a successful leader in a war situation, and notably two of them overlap with what Warren Buffett looks for in a person.

What strikes us most about them is that they are neither complicated nor available to a select few nor specific to war at all. They are simply hard. And if Marshall’s life is a testament to anything, it’s that the ability to do hard things at the right time is the essence of a great leader.

***

November 5, 1920

General John S. Mallory
15 University Place
Lexington, Virginia

My Dear General Mallory,

Last summer during one of our delightful rides I commented on the advice I would give a young officer going to war, based on my observation of what had constituted the success of the outstanding figures in the American Expeditionary Forces, and you asked me to write out what I had said. A discussion with Fox Conner this morning reminded me of my promise to do this, so here it is.

To be a highly successful leader in war four things are essential, assuming that you possess good common sense, have studied your profession and are physically strong.

When conditions are difficult, the command is depressed and everyone seems critical and pessimistic, you must be especially cheerful and optimistic.

When evening comes and all are exhausted, hungry and possibly dispirited, particularly in unfavorable weather at the end of a march or in battle, you must put aside any thought of personal fatigue and display marked energy in looking after the comfort of your organization, inspecting your lines and preparing for tomorrow.

Make a point of extreme loyalty, in thought and deed, to your chiefs personally; and in your efforts to carry out their plans or policies, the less you approve the more energy you must direct to their accomplishment.

The more alarming and disquieting the reports received or the conditions viewed in battle, the more determined must be your attitude. Never ask for the relief of your unit and never hesitate to attack.

I am certain in the belief that the average man who scrupulously follows this course of action is bound to win great success. Few seemed equal to it in this war, but I believe this was due to their failure to realize the importance of so governing their course.

Faithfully yours,

George C. Marshall
Major, General Staff
Aide-de-Camp

*     *     *

If you’re interested in learning about Marshall, there are several good books written about him including Leonard Mosley’s biography, his own WWI memoirs in which this letter is printed, and Winston Groom’s book about Marshall, Patton, and MacArthur and the winning of the war.

The post George Marshall’s 1920 Letter on True Leadership appeared first on Farnam Street.

A good example of this is what he does with Situational Leadership in the book Triggers: Creating Behavior That Lasts – Becoming the Person You Want to Be.

He takes the original ideas postulated by Paul Hersey and Ken Blanchard in their theory of Situational Leadership and adds an interesting spin, allowing us to use some of the insights more personally.

***

Situational leadership is the idea that one needs to constantly adapt their leadership style to the ever changing environment in which they operate.

If a specific style works in one situation with one particular individual, that doesn’t mean we should adopt that style for all people and situations. However, in part because success is reinforced, that is generally what we do.

Hersey and Blanchard’s premise is that leaders need to adapt their style to fit the performance readiness of their followers. Readiness not only varies by person, it also varies by task. Followers have different levels of motivation and ability for different tasks.

Leaders need to acknowledge that situations change along with the readiness of their staff. To be most effective, different people require different types of leadership.

Hersey and Blanchard outlined four distinct styles:

1. Directing is for employees requiring a lot of specific guidance to complete the task. The leader might say, ‘Chris, here’s what I’d like you to do, step by step. And here’s when I need it done.’ It’s primarily a one-way conversation, with little input from the employee.

2. Coaching is for employees who need more than average guidance to complete the task, but with above-average amounts of two-way dialogue. Coaching is for people who both want and need to learn. The leader might say, ‘Chris, here’s what I’d like you to do,’ and then ask for input: ‘What do you think, Chris?’

3. Supporting is for employees with the skills to complete the task but who may lack the confidence to do it on their own. This style features below-average amounts of direction. The leader might say, ‘Chris, here’s the task, How do you think is should be done? Let’s talk about it. How can I help you on this one?’

4. Delegating is for employees who score high on motivation, ability, and confidence. They know what to do, how to do it, and can do it on their own. The leader might say, ‘Chris, here’s the assignment. You have a great track record. If I can help, just ask. If not, you’re on your own.’

The four styles are quite different. The idea is to try and measure the need of your employee and choose the style that best fits them at that particular moment in time. The measuring process needs to happen continually for you to be most effective. The style which best helps Chris in situation X might not be the the one that will help him in situation Y.

Now for the twist.

Hersey and Blanchard’s situational leadership is a perfect analogue to a hidden dynamic that exists within us when we attempt to change our behavior. It’s the same dynamic whether you call it leader and follower, planner and doer, or manager and employee. The terms are interchangeable as far as I’m concerned.

As we go through life making plans to be a better friend, partner, worker, athlete, parent, son, or daughter, inside each of us are two separate personas. There’s the leader/planner/manager who plans to change his or her ways. And there’s the follower/doer/employee who must execute the plan.

Goldsmith argues that whether you are trying to lead other people or lead yourself, the obstacles are very much the same. You still have to deal with all the variables in the environment: temptations pushing you away from your objective, motivation issues, and self-discipline issues. One result is that we tend to be superior planners but inferior doers. We talk a good game.

If you take a moment to think of a recent plan that you devised but never executed, you’ll realize that Goldsmith is onto something here. Would a successful leader come up with a beautiful plan, throw it out to their employees, and then walk away and hope for the best? No.

To improve the odds of success, a leader would check in. They would look for obstacles to remove. They would want feedback on progression. They would be an active part of implementing the plan. We know this, yet we don’t do it in our own work and lives. We don’t manage execution.

What if the planner in each of us, like an effective leader with his or her subordinates, could size up the situation at any point during the day and adopt the appropriate management style for the doer in us? It’s a simple two-step: measure the need, choose the style.

It gives you such a new perspective to think of your goals in this way. It allows you to step back from the situation and clearly see where you are getting off course. Just step into execution mode and out of planning mode, as any good hands-on leader would do.

We don’t adequately weigh many of your past experiences/failures. This may be a willful denial of why you have failed at a task in the past or it could simply be that you’ve never taken the time for reflection.

It’s not just environmental intrusions and unpredicted events that upset our plans. It’s also our willful discounting of past experience. We make plans that are wholly contradicted by our previous actions.

The planner in us is convinced this time it will be different. Yet if you don’t understand why you failed, you’re doomed to repeat folly. Learning from our mistakes is key to increasing the odds to achieve our personal and professional goals.

Goldsmith’s book is filled with insightful ideas. His decades of experience in coaching leaders is evident throughout the pages; both in the way he highlights his ideas with meaningful examples and the way he explains the evolution in his own thinking. You will find yourself identifying with his client’s issues and walking through the solutions, endowing you with practical tools to help you change your own behavior, whatever your own “triggers” might be.

***

Still curious? Check out some other leadership ideas like seeing the world through the eyes of your crew and learning courage during difficult times.

The post Leaders and Followers, Planners and Doers appeared first on Farnam Street.

The book Words Like Loaded Pistols: Rhetoric from Aristotle to Obama by Sam Leith is one tool to help navigate our choppy waters. Leith does an impressive job of unpacking rhetorical concepts while also providing all the knowledge and nuance required to be a powerful speaker.

The book is laid out beautifully, with sections entitled ‘Champions of Rhetoric,’ in which he dissects the work of some of the most famous orators. The chapter comparing Adolf Hitler to Winston Churchill is particularly interesting. 

Churchill

Churchill was a prolific speaker: Between 1900 and 1955 he averaged one speech a week. (That’s 2,860 speeches for those who like math). And they were not just speeches; They carried some of the most famous sayings produced in the twentieth century:

Among the phrases he minted were ‘blood, toil, tears, and sweat,’ ‘their finest hour,’ ‘the few,’ ‘the end of the beginning,’ ‘business as usual,’ ‘iron curtain,’ ‘summit meeting,’ and ‘peaceful coexistence.’

While this impressive resume and history solidified his place on the throne of oratory excellence, it’s important to note that he wasn’t a “born speaker” — in fact, he made many mistakes. And he learned. 

Like many of us, Churchill would even get nervous to the point of nausea before addressing the public. To counter this he engaged in deliberate practice. He would rehearse his speeches in the mirror, modify them as needed, and scribble meticulous notes including pauses and stage direction. In other words, one of history’s great orators painfully engaged himself in a process of trial, error, and practice. 

To shape himself as an orator he learned by heart the speeches of Disraeli, Gladstone, Cromwell, Burke, and Pitt. Churchill combined their example with his father Randolph’s gift for invective. But he added something of his own – and it was this that helped tether his high style to something more conversational. He was a master of the sudden change of register – a joke, or a phrase of unexpected intimacy.

Stylistically, Churchill was known for building up to a great crescendo and then suddenly becoming gentle and quiet. Students of rhetoric recognise this as a device to keep your audience engaged, to surprise it. The joking and intimacy showed his prowess with another important rhetorical device, ethos.

Ethos is about establishing a connection with your audience. A joke can help with this because humor is often based on joint assumptions and beliefs; sharing a laugh with someone tends to make us feel closer to them. It’s human nature to gravitate towards those people who are like us (see the principles of influence). 

Yet, for all the aspects of the ethos appeal which Churchill got right, on more than one occasion he didn’t judge his audience well and was unable to persuade them.

When he was an MP in 1935, his colleague Herbert Samuel reported, ‘The House always crowds in to hear him. It listens and admires. It laughs when he would have it laugh, and it trembles when he would have it tremble… but it remains unconvinced, and in the end it votes against him.’

Much like today, in Churchill’s time parliament was designed for a type of call and response dialogue, not a grand soapbox type speech that he was so fond of.

Leith argues that if it wasn’t for the war, Churchill might have never found his audience and surely would have been remembered much differently, if at all.

The thing about Churchill was that, like the stopped clock that’s right twice a day, he occupied one position and waited for the world to come to him. He spend much of his political career predicting the imminent end of Western civilization — and it was only by the damnedest good luck that it happened to be on his watch that it suddenly appeared to be coming about. If not, he might have been remembered as a self-aggrandizing windbag with an old-fashioned speaking style and a love of the sound of his own voice.

But when the country really was under threat, Churchill’s fierce certainties were what an anxious audience wanted, while his style — steeped in the language of the previous centuries — seemed to encapsulate the very traditions that he was exhorting them to fight for. What at another time might have been faults became rhetorical strengths. That, you could say, is kairos writ large.

What does that last phrase “kairos” mean? It’s all about timing and fit:

As a rhetorical concept, decorum encompasses not only the more obvious features of style, but kairos, or the timeliness of a speech, the tone and physical comportment of the speaker, the commonplaces and topics of argument chosen, and so on. It is a giant umbrella concept meaning no more nor less than the fitting of a speech to the temper and expectations of its audience.

You could argue that the war needed Churchill and that Churchill needed the war. And unlike conflicts of the past, he also had access to the public like no other leader had before. You didn’t need to crowd into a square to hear Churchill speak, you needed to only turn on the radio.

One of the virtues of Churchill’s wartime rhetoric, however, was that whatever his peers in the House of Commons thought, he was able to speak — as politicians a generation before had not been able to — directly to the public through the wireless.

After delivering many of his key speeches in the Commons, Churchill read them out on the radio. Here, that presidential style — all that gruffness and avunicularity all those rumbling climaxes — was able to take full effect without being interrupted by rustling order papers and barracking Opposition MPs. He was pure voice.

Churchill indeed was pure of voice, but there was another loud voice in this conflict: Adolf Hitler. When it came to speaking, the two shared many things in common, but their differences were just as noticeable.

Hitler

Hitler understood the power of words: He saw them as a tool which he needed to master if he wanted to achieve his goals. He had a strong vision which he believed in passionately and he knew that he needed his people to share that passion if he was to succeed.

From Mein Kampf:

The power which has always started the greatest religious and political avalanches in history has been, from time immemorial, none but the magic power of the word, and that alone. Particularly the broad masses of the people can be moved only by the power of speech… Only a storm of hot passion can turn the destinies of peoples, and he alone can arouse passion who hears it within himself.

It would seem that Hitler associated passion with anger, his speeches were known to peak with shouting resembling rage. Even when writing his speeches he would work himself up into a frenzy.

Traudl Junge, the young secretary whose memoir of the last days in the Fuhrerbunker formed the basis for the film Downfall, recalled him composing the speech he gave to mark the tenth anniversary of his dictatorship. He started out mumbling almost inaudibly, and pacing up and down, but by the time his speech reached its crescendo he had his back to her and was yelling at the wall.

Like Churchill, Hitler would often practice in front of a mirror and choreograph the whole performance, but he would take it much further. With an eye for theatrics, he would pay close attention to the acoustics of the venue to accent both his booming voice and the martial music that would accompany him. He was particular about the visuals, with his dramatic lights and placement of flags.

Hitler also used pauses to his advantage. While Churchill would use them mid speech to maintain an audience’s attention or ‘reel them in’, Hitler would use them at the beginning.

It could go on for anything up to half a minute, which is (you’ll know if you’ve tried it) a very, very long time to stand on a stage without saying or doing anything. When he started – which he’d typically do while the applause was still fading out, causing the audience to prick up its ears the more — he would do so at a slow pace and in a deep voice. The ranting was something he built up to, taking the audience with him.

Hitler liked to control every aspect of his performance and paid close attention to those details that others dismissed, specifically the time of day that he gave his speeches (a lesson infomercials learned).

He preferred to speak in the evening, believing that ‘in the morning and during the day it seems that the power of the human will rebel with its strongest energy against any attempt to impose upon it the will or opinion of another. On the other hand, in the evening it easily succumbs to the domination of a stronger will.’

Hitler had a keen interest and insight into human nature. He knew what he needed from the German people and knew the psychological devices to use to sway the masses. He was even cognizant of how his attire would resonate with the population.

While other senior Nazis went about festooned with ribbons and medals, Hitler always dressed in a plain uniform, the only adornment being the Iron Cross First Class that he had won in 1914. That medal, let it be noted, is a token of bravery, not of rank.

This was a calculated move, an appeal to ethos: I am one of you. It was a tricky balance, because he needed to seem like one of the people but also to portray an air of exceptionality. Why else would people follow him if he wasn’t the only one who could do tend to Germany in its time of need?

As a wartime leader, you need to make yourself both of and above your audience. You need to stress the identify of their interests with yours, to create unity in a common purpose. You need, therefore, to cast yourself as the ideal exemplar of all that is best and most determined and most courageous in your people.

As expected, the same type of thing happens in modern politics, which is especially amplified during election time. Everyone is scrambling to seem like a leader of the people and to establish trust while still setting themselves apart from the crowd, convincing us that they are the only person fit for the job.

If you look closely, many of the rhetorical devices examined in Words Like Loaded Pistols are in high use today. Leith discusses a speechwriter for Reagan and one of his Champions of Rhetoric is Obama; these sections of the book are just as interesting as the piece on Churchill and Hitler.

***

Still Interested? If you have a fascination with politics and/or Rhetoric (or just want someone to skillfully distill the considerable amounts of information from Ad Herennium and Aristotle’s Rhetoric, then we highly recommend you pick the book up.

The post Words Like Loaded Pistols: Wartime Rhetoric appeared first on Farnam Street.

***

A mission or vision statement driven by consensus is probably so watered down it becomes meaningless. Part of the reason this happens is that when you seek consensus you end up with something that no one at the table can disagree with so you don’t really end up saying anything important.

A mission statement describes the current central purpose and goal of an organization, to guide daily decision making and performance.  A vision statement describes what an organization seeks to become, or the ideal society to which the organization seeks to contribute.

When drafting and evaluating potential mission and vision statements, ask if the opposite of a proposed statement is obviously undesirable. If it is, the statement is obviously undesirable. For example, a university mission statement that says the institution “seeks to produce highly effective productive citizens” is unlikely to have any real influence on employees or students, since no university seeks to produce its opposite—ineffective, unproductive citizens. A more meaningful statement will assert that which is truly specific to the organization; it describes what the organization seeks to do that many or most of its peers do not.

This is reminiscent of the approach Ken Iverson took at Nucor: The company needs a specific call to a specific action. Otherwise, you’re wasting everyone’s time with a watered down message.

There are no called strikes.

Billy Beane, who offers compelling insight on making better decisions and avoiding biases,  is quoted in Moneyball to have said “You can always recover from the player you didn’t sign. You may never recover from the player you signed at the wrong price.” This is reminiscent of what Warren Buffett had to say on the same subject: “In investments, there’s no such thing as a called strike. You can stand there at the plate and the pitcher can throw the ball right down the middle, and if it’s General Motors at $47 and you don’t know enough to decide General Motors at $47, you let it go right on by and no one’s going to call a strike. The only way you can have a strike is to swing and miss.” Turns out we can learn a lot about decision making from baseball star Ted Williams and the fictional character Mr. Market, who was invented by Benjamin Graham.

Adding to our knowledge on Feedback Loops, Frederick and Preis distinguish the difference between positive and negative feedback loops.

In a negative feedback loop, the system responds in the opposite direction of a stimulus, thereby providing overall stability or equilibrium. The Law of Supply and Demand usually functions as a negative feedback loop: When the supply of a product, material, or service increases, its price tends to fall, which may lead to raising demand, which will drive the price back up.

In a positive feedback loop, the system responds in the same direction as the stimulus, decreasing equilibrium further and further. For example, a consumer who feels prosperous after making new purchases may end up making even more purchases and take on excessive debt. Eventually, the consumer (Ed. or Government) may face financial ruin and have to make a major correction by selling off assets or declaring bankruptcy (Ed. read A Parable About How One Nation Came To Financial Ruin). Because positive feedback loops restore equilibrium in their own, often dramatic way, it is sometimes suggested that positive feedback loops occur within a larger, if not directly visible, negative feedback loop.

Speaking of The Law of Supply and Demand: It doesn’t always apply.

The Law of Supply and Demand says that if the supply of a given product or service exceeds demand, its price will decrease; if demand exceeds supply, its price will increase. Rising and falling prices impact demand similarly. When supply and demand are exactly equal, the market is at an equilibrium point and acts most efficiently: Suppliers sell all the goods they produce and consumers get all the goods they demand.

Not all products have historically adhered to the Law. When the prices of some luxury or prestige items have been lowered, demand has fallen due to reduced cache. In other instances, rising demand for a product has led to improvements in technology, increases in production efficiency, and the perfection of distribution challenges, all of which have driven prices down. Electronic technologies have tended to follow this pattern.

Experts are not always the best people to solve problems – it’s more about combinatory play — A point not lost on Seneca, Steve Jobs and James Webb Young.

Experts are expected to know a lot, but often it is better to know how to organize and structure knowledge than to simply have knowledge. Innovative thinkers don’t merely retain and recite information; they identify and create new patterns that reorganize known information.

When you don’t think about what you’re doing, you tend to promote the best performer to manager, which is often a mistake. Echoing James March, Preis writes:

Employees who excel in one area of business are often promoted to supervisory positions. But in management, one’s achievements are measured through the actions of others. A first-rate lab researcher promoted to lab supervisor, for example, has to coach, mentor, manage, and help other researchers make discoveries—something that may be beyond his or her abilities or interests. Compounding the problem for the organization is that the department no longer has its best researcher making discoveries on the bench.

Contrary to conventional wisdom, the higher one rises in an organization the longer it takes to implement a decision. (The decisions are more consequential, though.)

Front-line managers can effect immediate changes by directly instructing workers. A sales manager can redirect the activities of sales people immediately, and an accounting manager can make immediate changes in bookkeeping practices. At higher levels of an organization, where employees are more concerned with strategic matters, decisions take more time to implement. If the vice president of marketing wishes to change the style of a product being produced, considerable time will be required to engage feasibility studies, explore design alternatives, investigate the technical methods required, and alter manufacturing practices.

Further to this, the higher one rises in an organization the more one must be a generalist. At the front-line level you often only need direct knowledge of specific activities. Managers need a broader understanding in addition to this knowledge, and they are often missing one or the other.

101 Things I Learned in Business School is a good read; however reading The Letters of Berkshire Hathaway (also freely available) is a better way to understand what an MBA should be teaching. This site, after all, wouldn’t exist without the failed education of an MBA.

The post There Are No Called Strikes and Other Lessons You Learn in Business School appeared first on Farnam Street.

Some companies are different. Nucor, a steel company, under the leadership of Ken Iverson is one of them. Iverson details his thoughts in the masterful Plain Talk. (This isn’t the first time we’ve covered Iverson’s wisdom on running a company. His genius was exploiting unrecognized simplicities.)

Under Iverson, compensation at Nucor had two components: A small but meaningful base pay and a very simple weekly bonus based on production. Outside of benefits and a little profit sharing, that was it. Simple, straightforward, and powerful. No subjective criteria.

The real beauty of Nucor’s compensation system, in my opinion, is that there is nothing to discuss. Daily output and corresponding bonus earnings are posted, so employees know exactly what their bonus will be before they tear open their pay envelopes. No judgment. No negotiation. No surprises.

There are three beautiful aspects to the design of this program.

The first is that it’s eminently clear what you will be paid for: making more steel. It’s so simple. Your compensation is never at the hands of someone who may or may not like you. You have no reason to say it’s unfair: You signed up for it when you signed on. If you worked at Nucor under Iverson, the first thought you had every morning was how to make more steel.

Secondly, it offers immediate feedback. Human nature, and the nature of many other higher-thinking animals, is such that immediate rewards work better than delayed rewards. A year-end bonus isn’t nearly as effective as a weekly bonus. A year-end review isn’t nearly as useful as immediate feedback. It’s simple.

And lastly, this program gave Nucor’s employees tremendous skin in the game. Everyone was working towards the same goal. Rowing in the same direction. And that makes a tremendous difference.

Nucor’s great success in harnessing incentives reminds me of Charlie Munger’s discussion on Federal Express in A Lesson on Worldly Wisdom:

From all business, my favorite case on incentives is Federal Express. The heart and soul of their system—which creates the integrity of the product—is having all their airplanes come to one place in the middle of the night and shift all the packages from plane to plane. If there are delays, the whole operation can’t deliver a product full of integrity to Federal Express customers.

And it was always screwed up. They could never get it done on time. They tried everything—moral suasion, threats, you name it. And nothing worked.

Finally, somebody got the idea to pay all these people not so much an hour, but so much a shift—and when it’s all done, they can all go home. Well, their problems cleared up overnight.

So getting the incentives right is a very, very important lesson. It was not obvious to Federal Express what the solution was. But maybe now, it will hereafter more often be obvious to you.

Does this mean every company should model their compensation program after a steel company? Hell no. But you want to think about it. It’s easy to come up with a suboptimal incentive system — just look around corporate America. The difference between a suboptimal compensation system and an optimal one is huge.

The principles for an effective compensation system work at all companies. Let’s invert — think about the common reasons that compensation systems likely fail. First, most of them are hard to explain. They are overly complicated and wordy. (At Nucor everyone from the CEO to the newest employee could explain it.) Second, the rewards are small and untimely. Yearly bonuses anyone? Third, the program has to be designed in a way that the people in it (and the people running it) can’t game it. Finally, everyone is subject to the same plan.

Done poorly, compensation systems foster a culture of individualism and gaming. Done properly, however, they unleash the potential of all employees.

The post Creating Effective Incentive Systems: Ken Iverson on the Principles that Unleash Human Potential appeared first on Farnam Street.

The most important part of a company’s culture is trust. People don’t feel trusted when you micromanage and this has disastrous implications.

In It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy, Michael Abrashoff  writes:

The difference between thinking as a top performer and thinking like your boss is the difference between individual contribution and real leadership. Some people never make this jump; they keep doing what made them successful, which in a leadership role usually means micromanaging. My predecessor on Benfold (the ship Abrashoff commanded), for instance, was extremely smart—a nuclear engineer and one of the brightest guys in the Navy. He spent his entire career in engineering, and when he took command of Benfold, he became, in effect, the super chief engineer of the ship. According to those who worked for him, he never learned to delegate. The more he kept sweating the details, the less his people took ownership of their work and the ship.

This so often happens in organizations: Micromanagement (or picomanagement, if micro doesn’t quite describe it) kills ownership. And when employees don’t have ownership—skin in the game—everything starts to go to hell. This is one reason government organizations are considered to be dysfunctional — everything is someone else’s responsibility. The incentives are awful.

Consider this anecdote Abrashoff uses to illustrate his point.

A pharmaceutical company I was working with promoted its best salesman to be head of sales. Instead of leading the sales force, he became the super salesman of the company. He had to be in on every deal, large or small. The other salespeople lost interest and stopped feeling as if they were in charge of their own jobs because they knew they couldn’t make a deal without him there to close it. The super salesman would swoop in at the last minute, close the deal, claim all the glory, and the others were left feeling that they were just holding his bat.

This reminds me of something Marshall Goldsmith, author of the impressive What Got You Here Won’t Get You There, once relayed in a conference. He told the story of a typical person in a typical organization presenting an idea to the senior approval body. This person did all this work, it’s their idea, and they know it inside and out. Anyway, they present and the senior management team, keen to exercise their egos, start chiming in with things like “did you think of this …” or “but … ” or “however …”. The project gets better with these comments, after all most people don’t get to that level without being somewhat intelligent. However the commitment of the person who presented the idea goes down dramatically because it’s no longer their idea. They’ve lost some ownership (the degree to which is very dependent on the conversation). The end result is a better idea with less commitment. And you know what? The outcome is worse than if the management team just approved the project. Goldsmith was pointing out the obvious and the world has never looked the same to me since.

Abrashoff aptly concludes:

When people feel they own an organization, they perform with greater care and devotion. They want to do things right the first time, and they don’t have accidents by taking shortcuts for the sake of expedience.

[…]

I am absolutely convinced that with good leadership, freedom does not weaken discipline— it strengthens it. Free people have a powerful incentive not to screw up.

Remember the wisdom of Joseph Trussman. Trust is one of the keys to getting the world to do most of the work for you. Call this an unrecognized simplicity — and one that Ken Iverson exploited to help show why culture eats strategy.

The post Why Micromanaging Kills Corporate Culture appeared first on Farnam Street.

The main problem Rosenzweig describes in the book is that attributes we tend to think cause great performance (culture, leadership, etc.) are often just things that are attributed to companies we already know are high-performing. There’s a Halo around everything they do.

How many current high-fliers would ever be described as having a bad culture, or bad leadership? It would be nonsense to say it. Thus, we run into a recursiveness problem. High performing companies have a great culture, and great culture is defined as the attributes that cause high performance.

In other words, when you ask someone if Apple has a great corporate culture, they will tell you it does. (And it’s an extremely successful company, so of course it does.)

But when we try to pinpoint which aspects of Apple’s culture make it more successful than its peers, and which would be predictive of success at other companies, we run into a difficult problem.

The Halo Effect tells us that we will find a lot of false positives. The attributes we think are causal of success are the same ones we often deem causal of failure when company performance deteriorates. This is the strategy paradox.

***

Plain Talk, by Ken Iverson, is a memoir of his time running the steel company Nucor. Despite the warning, above this book deserves your attention for a few reasons:

• Nucor was extremely successful, for a long period, in an industry that provided huge headwinds. There are no magic pills to being successful in steel. It’s generally an awful business.
• The company did some very unusual things that we see in few other companies, even successful ones.
• The book was recommended by a very smart friend who runs a very successful business of his own, using similar principles.
• The author/CEO, Iverson, seems honest about the fact that many of his prescriptions are not new or different. The book is not presented as a panacea.
• It’s generally good to study outlier success or failure.

A Peculiar Kind of Success

Under Iverson, Nucor was an unusual sort of steel company compared to the Carnegie-esque behemoths of the past.

Some of its attributes remind us of companies like Berkshire Hathaway, but Nucor did it very differently. There were a few acquisitions. The company was totally focused on steel. Iverson describes some of the peculiarities in the opening of the book (this was written in 1998):

• Our 7,000 employees are the best paid workers in the industry, yet Nucor has the lowest labor cost per ton of steel produced
• Nucor is a Fortune 500 company with sales in excess of 3.6 billion, yet we have a total of just 22 people working at our corporate headquarters, and just four layers of management from the CEO to the front-line workers.
• Nucor operates in a “rust belt” industry that lost one out of two jobs over a 25-year time span, yet Nucor has never laid off an employee or shut down a facility for lack of work, nor have we lost money in any business quarter for more than thirty consecutive years.

That is, of course, a very interesting outcome. Most steel companies were struggling mightily when Nucor came up. Bethlehem Steel almost went bankrupt in the late 70s. (They eventually did.) Foreign competition, rising input costs, rising labor costs, commoditization…steel is about as bad a business as you could invent. Yet in Iverson’s 30+ year reign, Nucor compounded its per-share earnings at a rate of about 17% per annum. There must have been something going on here — he sounds like an outsider.

Let’s focus on a few things that were particularly unusual.

Extreme Decentralization

Nucor believed (and to my knowledge, still believes) strongly in decentralization. The only parallel for 22 people at headquarters in a $4 billion business is probably Berkshire itself. Capital Cities, now part of ABC, might have been another parallel.

To achieve that leanness at the top, power must have been pushed down pretty far into the organization. And of course, it was:

Each division operates its one or two plants as an independent enterprise. They procure their own raw materials; craft their own marketing strategies, find their own customers; set their own production quotas; hire, train, and manage their own work force; create and administer their own safety programs…In short, all the important decisions are made right there at the division. And the general manager of the division is accountable for those divisions.

This is scary for most companies. They are not willing to allow local general mangers that kind of control and responsibility. The allure of synergy and the allure of top-down controls are too strong. And once it’s in place, headquarters culture has a way of taking on a life of its own. Take a look at PepsiCo, or General Electric, or any number of corporate beasts in the United States. There is huge, expensive bureaucracy at the top. It is always thus. (Of course, that keeps firms like 3G Capital in business.)

But Iverson was willing to take the tradeoffs:

“We are honest-to-god autonomous,” says Hamilton Lott, general manager of our Vulcraft Division in Florence, South Carolina. “That means we duplicate efforts made in other parts of Nucor. The company might develop the same computer program six times. But, the advantages of local autonomy are so great, we think it’s worth it.”

Any of you who have worked in a modern corporation know how unusual this mentality is. Who would allow the same company to develop the same software six times? Why not increase knowledge sharing and synergies?

Part of the problem is that the tremendous benefits of local autonomy are less immediately tangible than the costs. Berkshire has dealt with this for years. Every time one of Buffett’s subordinates acts up, and it happens pretty darn infrequently by our count, people pipe up and ask why he isn’t imposing more rigid oversight on them. It’s very simple: the long-term benefits of trust-giving have far outweighed the occasional cost of non-compliance.

Call this an unrecognized simplicity. Nucor’s corporate overhead expense was so small they didn’t even bother allocating corporate expenses to the divisions. That is rare.

The other under-appreciated value of decentralized control is that great ideas tend to rise from the bottom rather than being dictated by the executives. Iverson claims that many or even most of Nucor’s great innovations came from down in the divisions. The company merely had to be smart enough to harness them.

This has happened elsewhere in Corporate America. Look at McDonald’s. Do you think Ray Kroc invented the Chicken McNugget, the Big Mac, and the Filet ‘o Fish? Do you think he figured out how to keep millions of pounds of potatoes fresh and get them to customers tasting exactly the same every time? No. But franchisees and suppliers did. He just had to be smart enough to help the ideas spread.

Simple and Precise Strategy

In the book Good Strategy, Bad Strategy by Richard Rumelt (highly recommended, and we’ve written about it before), the author is clear that what makes a good strategy is that it’s clear and that it’s precise, a real call to a specific action:

The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action. The guiding policy specifies the approach to dealing with the obstacles called out in the diagnosis. It is like a signpost, marking the direction forward but not defining the details of the trip. Coherent actions are feasible coordinated policies, resource commitments, and actions designed to carry out the guiding policy.

This is precisely what Iverson did at Nucor:

We don’t clutter the picture with lofty vision statements, ask employees to pursue vague, intermediate objectives like “excellence,” or burden them with complex business strategies. Our competitive strategy is to build manufacturing facilities economically, and to operate them efficiently. Period.

Simple but not easy.

Was the technology that went into developing and implementing this strategy simple? I’m not an expert in metallurgy, but I doubt it. The modern steel company is quite efficient and quite advanced. Nucor made major strides like the mini-mill and thin-slab casting of flat-rolled steel. Whether that kind of technology would have been given a chance to succeed in a different culture is hard to say.  We can’t re-run history, but Nucor’s purposeful drive seems to have fostered the right environment.

Remove Unnecessary Hierarchy

Ultimately, it’s hard to build a great, supportive, seamless web of deserved trust if the executives are consistently treated as “above the fray” – subject to a different level of treatment than the rank and file. This is the way it is in most organizations.

The results tend to be predictable. Envy, plus a violation of basic Kantian fairness tendency, will create a lot of hatred. You can’t put the managers and the executives in first-class and stick the associates in coach and expect anything but resentment. It’s basic human nature, driven by biology. Nucor was smart enough to avoid this folly:

Our executives get the same group insurance, same holidays, and same vacations as everybody else. They eat lunch in the same cafeterias. They fly economy class on regular commercial flights (although we do allow the use of frequent flyer upgrades). We have no executive suites and no executive cars. At headquarters, our “corporate dining room” is the deli across the street.

Our executives wouldn’t have it any other way. They see our egalitarian culture serving their interests as much as the interests of our employees. For one thing, our mangers don’t have to waste time fretting over their chances to get the fancy corner office or arguing over who gets to use the company plane. We don’t have those perks, and we imagine they would cause a lot more stress than fulfillment. What a bunch of nonsense! Chasing meaningless status symbols and tokens of power…

Nucor had essentially four promotions available: Supervisor, Department Manager, General Manager, and Chairman (Iverson himself). That’s it. I can imagine that over all those years of growth, more than one consultant tried to get Iverson to create a whole lot of bureaucracy, but he wisely resisted. The costs (such as the mathematically unavoidable large spans of control due to fewer managers in the system) were once again greatly outweighed by the benefits. Another unrecognized simplicity.

And when it came time for pay cuts, everyone shared in the pain. What a simple, yet generally unused concept:

Why, then, would workers who had endured deep cuts in pay and who had every reason to fear for their futures reach out to share a laugh with a manager passing through a mill? Simple. No employee was being asked to carry more than his or her part of the burden.

You see, their department heads had taken pay cuts of up to 40 percent, and the general managers and other officers of the company were earning 50-60 percent less than we had made in preceding years. My own pay dropped that year to about $110,000, from about $450,000 the year before. We not only shared the pain, but doled out the lion’s share to the people at the top.

Think about what an inversion that is of most organizations, where the CEO takes a minor cut in pay (or worse, no cut) and hundreds of low-level employees simply lose their jobs. Wouldn’t most places work better with Nucor’s ethos? The fact that they did this in the highly cyclical steel business gives some tailwind to the idea. It wasn’t a story like Google, where constant success has allowed them to pamper employees financially and otherwise. Nucor managed to avoid layoffs and share in the pain in a business that, by necessity, is constantly offering pain to share.

A Postscript on the Post-Iverson Era; Implications for Investors

In the final analysis, Nucor probably didn’t have any core attributes that were unavailable to its competitors. It simply made better choices and was more fanatical about sticking to them. The resulting success was deserved. This is why culture eats strategy.

But the postscript to the Iverson era has been interesting, at least from the perspective of the passive investor. Nucor was a brilliant investment in Iverson’s time as manager, but if you’d bought the stock in the early 90s when Iverson left the CEO post, your results would have been pretty mediocre. Can we see why? Let’s deduce a few reasons.

• Partially, the stock was fairly rich at that time – trading for something like 40x price/earnings. That’s high even for a good industrial company. It’s not so high now. But their fundamental performance has not been nearly as impressive either, in the time since Iverson left, especially in the last five or six years.
• Partially, the effects of compound interest have served to slow down an increasingly large corporation. Nucor is now a giant in the steel business. They started off as a tadpole. If the company’s net earnings had continued to grow at 17% per annum, they would currently be earning $4 billion a year, versus a little over $120 million in 1993. There’s only so much profit available in steel.
• Is there a tinge of Halo Effect here, as described at the beginning of the piece? Perhaps. Iverson would be the first to say his prescriptions were not that ground-breaking. I tend to think some of the attributes above did contribute greatly to its unusual success, but more of the success may have been situational and strategy-driven than Iverson recognized.
• Even more important might be to recognize that the steel business always was a fundamentally hard one, and even the best ships might struggle on a stormy enough ocean. Iverson and his team rowed very hard and successfully for many years, and that has continued to this day. Bethlehem Steel went bankrupt in 2001 and Nucor made money that year. U.S. Steel has been bleeding red ink for years and Nucor, although less profitable than it once was, has still made money. But the ocean current is what it is.

So even if Nucor has been better than most of its competitors in the last ten or twenty years, and I suspect it has, an investor would have had to ask him or herself: Do I want to be in the steel business at all? As Buffett used to say, something not worth doing well is often not worth doing at all.

Regardless, the lessons from Plain Talk show that the roads less traveled can be worth exploring. They’re not that complicated. But they work.

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The Unpublished David Ogilvy offers a remarkably candid glimpse of the private man behind the public image.

Ogilvy was fond of lists. This one outlines the ten qualities of creative leaders.

The qualifications I look for in our (creative) leaders are these:

1. High standards of personal ethics.
2. Big people, without pettiness.
3. Guts under pressure, resilience in defeat.
4. Brilliant brains — not safe plodders.
5. A capacity for hard work and midnight oil.
6. Charisma — charm and persuasiveness.
7. A streak of unorthodoxy — creative innovators.
8. The courage to make tough decisions.
9. Inspiring enthusiasts — with trust and gusto.
10. A sense of humor.

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Still curious about Ogilvy? Read why education is a priceless opportunity to furnish your mind and scientific advertising.

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The Basic Rule of Management

As our business grows, it becomes increasingly necessary to delegate responsibility and to encourage men and women to exercise their initiative. This requires considerable tolerance. Those men and women, to whom we delegate authority and responsibility, if they are good people, are going to want to do their jobs in their own way.

Mistakes will be made. But if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authority exactly how they must do their jobs.

Management that is destructively critical when mistakes are made kills initiative. And it’s essential that we have many people with initiative if we are to continue to grow.

“If you put fences around people, you get sheep. Give the people the room they need.”

— William L. McKnight

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Still curious? Pair with David Packard’s 11 Simple Rules For Getting Along With Others.

Source

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What’s lacking, the author of The Ten Golden Rules of Leadership argues, is the lack of real leadership.

Here the problem may lie with a lack of deeper, broader insights, the kind of insights that technical skill alone does not confer— the ability to see the big picture, to connect with members of the organization, to foster a meaningful and productive work environment, and to steer the corporate ship through the challenges of highly competitive markets and new technologies.

What is leadership?

The authors define the term “leadership” in a way that differentiates their “interpretation from the offhanded views that too often distort the word’s meaning.”

It is the assumption of the authors that leadership is an uncommon composite of skill, experience, and ripened personal perspectives. It is, of course, the last of those elements that sets the real leader apart from those who simply “run” organizations. Ripened personal perspectives are an essential ingredient in a leader’s efforts to develop and articulate a sound corporate vision. Real leaders, people like Bill Gates and Steve Jobs, see things more rapidly than does the typical executive. At least in part, their insights are a reflection of an “inner” clarity that allows for fuller concentration on the challenges at hand.

This is why leadership cannot be “done by the numbers,” why those who have failed to comprehend the motivating subtleties in their own lives are unlikely to achieve the status of “leader.” Simply put, only those men and women who have cultivated a care fully conceived philosophy of life are ready and able to exhibit the kind of workplace mastery suggested by the term “leader.” Now for some, invoking the term “philosophy” in this context may seem strangely out of place. To one degree or another, we all have been conditioned to believe that philosophy is at best a kind of noble laziness, a speculative exercise devoid of concrete benefit. Yet it may be that many of the inefficiencies and failures that plague our managerial environments are ultimately related to an inadequate consideration of what philosophy has to offer.

The Ten Golden Rules of Leadership

1. Know thyself. Understand your inner world, your bright and dark sides, your personal strengths and weakness. Self-comprehension is a fundamental precondition necessary for real leadership.

2. Office shows the person. The assumption of authority brings out the leader’s inner world. It reveals whether the leader has undergone a process of honest self-discovery that allows for the productive application of power.

3. Nurture community in the workplace. Community development and positive sentiment are virtues leaders must nurture by providing the right support, guidance, and incentives.

4. Do not waste energy on things you cannot change. Do not waste resources and energies on things you cannot control, and therefore, cannot change.

5. Always embrace the truth. Effective leaders should always embrace the truth, always encourage candid criticism throughout the organization, be skeptical of flattering appraisals, and never let authority place a wedge between them and the truth.

6. Let competition reveal talent. Nurture an environment that can use the forces of competition constructively, create a platform that releases the ingenuity and creativity of your employees in pursuing corporate goals and objectives, identify subordinates who use competition as a constructive force, steer away from subordinates who use competition as a destructive force.

7. Live life by a higher code. Dedicate yourself to a higher standard of personal conduct; don’t harbor ill-will toward those who offend; be ready to assist those who are in need without asking something in return; remain calm in the face of crisis; dedicate yourself to principle without compromise; earn the trust, respect, and admiration of your subordinates through your character, not the authority conferred upon you by the corporate chart; turn authority into power.

8. Always evaluate information with a critical eye. Don’t rely upon old premises, assertions, and theories. Develop a critical mindset that accepts nothing at face value, certify the credibility and usefulness of critical information, analyze the con text that produces critical information and the messengers who convey it, and never rush to judgments.

9. Never underestimate the power of personal integrity. Personal integrity is a critical asset for real leadership. Always set an honorable agenda, adhere to a code of professional conduct, never try to justify dishonesty and deceit, rather “fail with honor than win by cheating.”

10. Character is destiny. True leadership is ultimately traceable to factors of character and personal integrity; much of what is called “destiny” lies in our hands, not in mysterious forces beyond our control.

The Ten Golden Rules of Leadership: Classical Wisdom for Modern Leaders is a worthy read for anyone looking to embark on a journey of critical self-examination. You’ll learn from the revered ancient thinkers like Aristotle, Hesiod, Sophocles, Heraclitus, and Antisthenes.

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