Paradox Lost - The Four Major Mistakes GOOD Leaders Make in Tough Times

A global client recently told me that they were considering instituting across the board cost-cutting measures, including major reductions in their leadership training. He also said his company was evaluating the feasibility of centralizing several previously decentralized operations, as well as increasing the frequency of sales-call reporting. I congratulated him on taking measures that would improve his short-term financial performance, but then asked how much he wanted to hurt long-term performance by implementing the four major mistakes good leaders make in tough times:

1. Cutting cost without protecting strategic expenditures.

2. Reducing training in a time when employees actually have time to learn.

3. Centralizing functions without considering the benefits of decentralization.

4. Increasing pressure to perform without assessing the impact of stress.

In reality, the global client described in the first paragraph does not exist as a single entity. However, in the last few months I've consulted with several clients on the precipice of committing some or all of these missteps. Their error was in thinking that they had a problem to solve instead of a paradox to manage. A paradox is a statement that seems self-contradictory but in reality expresses a possible truth. It is derived from the Latin word paradoxum, meaning beyond belief.

To be able to think paradoxically is a very rare, desirable and effective leadership skill. (1) The essence of thinking paradoxically is, as F. Scott Fitzgerald once wrote, "the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function." In times of stress, the tendency for many leaders is to focus on addressing one issue in the paradox instead of managing the tension between both interdependent issues. For example, what if instead of making the four major mistakes, leaders eXpanded their thinking by asking four paradoxical questions:

1. How can we cut costs and protect our strategic expenditures? Professors Robert Kaplan and David Norton remind us that cutting discretionary spending across the organization is a major mistake because it fails to distinguish between short-term operational issues and long-term strategic issues. There is nothing wrong with using a scalpel to excise operational slack and inefficiencies. But turning on the chainsaw to treat a flesh wound will seldom do the trick. These researchers recommend creating a new expenditure category, called strategic expenditures to supplement the traditional capital and operational expenditure categories.

2. How could we cut costs and increase training? The amount of training should increase during tough times, but the expenditures for training do not need to. This can be accomplished by conducting internal lunch-n-learns, making education an agenda item during meetings, and creating an educational library for you and your staff. You can also increase job shadowing, coaching, and mentoring because there is often a slowdown in the daily workflow during tough times. How surprised will you be when you see an educated, engaged and motivated team as the workload increases?

3. How can we better manage the tension between centralization and decentralization? Any good leader wants the ball when the game is on the line. Often, as the Los Angeles Lakers found out in the 2008 NBA championships, this is a mistake. (The Lakers kept trying to put the ball in the hands of Kobe Bryant at the end of the games. The Boston Celtics’ defense was able to shut Kobe down.) Although ego may play a role, my experience is most leaders feel an obligation to make difficult decisions during tough times. They want more control over costs, approval of initiatives, and impact on key decisions. Tamara Ericsson, president of nGenera Innovation Network, points out that leaders often forget that there is wisdom in their crowds, their company, even when the heat is on. She recommends that leaders resist the temptation to over centralize during tough times by asking more questions, building trust through increased collaboration, and challenging the status quo. These ideas worked for Jorma Ollila during his tenure as CEO of Nokia. How might they work for you?

4. How can we improve sales performance and manage stress at the same time? An executive of a medical distribution company recently told me that one of the companies that he distributes for is calling him twice as often because of decreased sales. He told me that the increased pressure is annoying him and his team. They are currently seeking other partners and considering dropping the irksome company. Professor Stewart Friedman has found that you have the best chance of producing results during tough times if you acknowledge the pressure everyone is under and show that you care about your team and their lives… beyond work. Remember, people don't care how much you know until they know how much you care… about what they care about. How do your people know you really care about what they care about?

Of course, tough times require difficult decisions. Yet, I've been helping leaders ask and answer paradoxical questions for over a decade. My experience and research strongly suggests that the most effective leaders resist the temptation to always choose sides during tough times. They know the power of both/and thinking. They recognize the need to manage the tension between interdependent and opposing issues. Although paradoxical, these eXpansive leaders understand that it is not ‘beyond belief.’ Do you?

Keep on eXpanding,

Dave

1. Robert S. Kaplan, David P. Norton, Stewart D. Friedman, BV Krishnamurthy, Tamara J. Erickson, Jeffrey M. Stibel, Peter Delgrosso: Unconventional Wisdom in a Downturn, ‘Harvard Business Review,’ December 2008, 28-31.

Why Leaders Don’t Pay for Teamwork Unless There’s Trust

Have you ever played on a team where one of the team members was a low performer? How did you handle it? If it was near the end of a game and the stakes were high (e.g., you bet big bucks that you could beat the other team), did you pass him the ball? Probably not. If you analyzed why you did not pass the ball, you'd probably conclude that it was because you didn't trust his ability. In other words, when trust is low you do not want your “payoff” to be based on team performance, you want it to be based on your performance. Yet, what is common sense in sports does not always play out as common practice in business.

According to the University of Southern California Center for Effective Organizations, 85% of Fortune 1,000 companies used team-based pay in 2005, up from 59% in 1990. Most of these companies believe that team-based pay is the best way to encourage cooperation. However, recent research reveals that few of these companies consider trust among team members as a key factor regarding how to pay. (1) Do you?

Professor Kimberly Merriman and her colleagues studied 49 teams, who collaborated on four-month projects. They found that team members who reported lower levels of trust in their colleagues’ ability, honesty, or dependability had a greater preference for individual-based rewards. The lower the levels of trust the more the team members cared about whether they were paid individually or collectively. This is consistent with the findings of other researchers, who have reported that people will forgo higher compensation to avoid having their pay tied to unproven team members.

The good news is that over time, as teams continue working together, trust tends to increase and their preference for individual rewards diminishes if the teams follow a few simple guidelines:

1. Listen well. Survey team members prior to implementing any change in compensation to find out how open they are to team rewards.

2. Clarify roles. Each team member must understand exactly what their role is and what the performance expectations are on the team.

3. Evaluate consistently. Have all team members evaluated by one manager instead of various functional managers.

4. Reward performance. Encourage teamwork by applauding and rewarding each individual team member’s contributions to overall team success.

Next time you're playing a team sport think about the role trust plays in how you play. I also invite you to adapt these ideas to increase trust among teams that you lead at work. Let me know what you think and how they work for you.

Keep on eXpanding,

Dave

1. Kimberly Merriman: Low-Trust Teams Prefer Individualized Pay, ‘Harvard Business Review,’ November 2008, 32.

Why Leaders Must Be Like Their Followers

Leadership is not possible without followship. Research by Stephen Reicher and his associates demonstrates that strong leadership flows from a symbiotic relationship between leaders and followers. (1) This new psychology of leadership suggests that the most effective leaders understand and monitor the values and the opinions of their followers, thereby enabling a productive dialogue about where the group currently is and what actions to take to reach a given destination.

The term "social identity" was coined in the 1970's to refer to the part of a person's sense of self that is defined by a group. Social identity allows people to feel connected to other group members, such as Lakers fans, Catholics, Americans, strong organizational cultures, or a sales team. This social identity helps the group reach consensus on what is important to the group and how to coordinate actions consistent with shared goals. Leaders are more effective when they can help followers see themselves as members of a particular group, as well as see the group's interests as their own interests.

This is what President Bush did after 9/11 when he promised to "hunt down" and "find those folks who committed this act." Bush portrayed himself as an everyday American who was able to speak for America. He has continued to use this folksy, Texas communication style to come across as one of us rather than a member of the elite East Coast Yale University club. Bush new that we not only like people who are like us, we only like to follow leaders who are like us.

Professor Reicher points out that the best leaders are symbolic representations of the group they seek to lead. They not only belong to the group, they exemplify what makes the group different from and superior to other groups. This is what was behind Bush's leather jackets/cowboy clothes and Palestinian leader Yasser Arafat’s headscarf. Barack Obama’s victory stems partly from his ability to "sell" his story as a quintessential, rag to riches American story.

The need to identify with a leader was demonstrated when researchers asked business students to choose the ideal characteristics for a leader. When students were told that a rival group had a very intelligent leader, the students wanted their leader to be unintelligent. However, when the other group's leader was unintelligent, nobody wanted an unintelligent leader.

The lesson for leaders is clear, understand the norms, values and beliefs of those whom you wish to lead, and then access these norms, values and beliefs to lead them to your destination. When Abraham Lincoln emphasized equality in the Gettysburg Address, he rallied people around this ideal to emancipate the slaves and save the union. How should you be creating and accessing social identity to rally your troops?

Keep on eXpanding,

Dave

1. Stephen Reicher et al: The New Psychology of Leadership, ‘Scientific American Mind,’ August/September 2007, 22 - 29.

Leading Companies Manage Paradox

What differentiates top-performing companies from those with mediocre performance? According to OnPoint research, one of the critical skills leaders of top-performing companies possess is the ability to lead by managing paradoxes (1)

Most of us were raised with an either/or mindset. There was one answer in the back of the book when we went to school, we were taught that leaders are paid to make tough decisions, and we learned early in our careers to select the answer to solve the problem.

Researchers tell us that the top leaders understand that things are not always black and white. Top performing companies have leaders that are able to supplement their traditional problem-solving skills with both/and thinking. They learn how to manage the tension between what seems to be mutually exclusive demands from diverse stakeholders. The best leaders grow the business by: embracing short and long-term goals, maintaining control and providing autonomy, keeping costs low and quality high, ensuring stability and stimulating change...

How do you manage a paradox? By considering the two issues of the paradox interdependently as you make decisions. For example, high performing leaders do not push change without providing stability. OnPoint’s analysis shows that leaders adapt the following key behaviors to help build a platform of stability so they can implement change:

A. Provide open and honest communication. Sixty-four percent of the 655 participants in an OnPoint survey said that open and honest communication from leaders, even when they don't have all the answers, would make change easier.

B. Be the change you wish to see. This quotation from Gandhi reminds us that employees need to see words in action. Employees comply with what they hear, but commit to what they see.

C. Set realistic objectives and milestones. When I was Chief Administrative Officer of an Institute at UCLA, I was a member of the "Dean's Goals 2000" committee. The Dean wanted us to set forth the strategies and tactics necessary to accomplish his vision -- for the UCLA School of Medicine to become the preeminent medical school in the world by the year 2000. At the time, UCLA was ranked number eight or nine depending upon which survey you reviewed. The Dean's goal was so lofty that most of the committee members did not believe it was achievable. They therefore did not put forth the effort. They gave the Dean’s initiative lip service but very little hip service.

D. Estimate resources accurately. Employees have a specific capacity to handle change. Too much change overwhelms them. Yet, many organizations push one change after another without assessing the ability of the people to digest the change. One high-tech firm that I've consulted with had three major change initiatives affecting most of its employees at one time. The resources required to implement these changes were severely underestimated, while the capacity for people to absorb them were overestimated.

E. Maintain motivation. Too many change initiatives begin with a grand kickoff meeting and fade because of decreasing communication and leadership visibility. If you want people to stay committed to change, keep communicating and making small victories visible.

The stability/change paradox is just one of the tensions leaders must manage. Which ones are you struggling with?

Keep eXpanding,

Dave

1. Richard Lepsinger, How Top Performing Companies Get Ahead of the Pack and Stay There, ‘American Management Association’s MWorld,’ Summer 2007, 3 - 4.