Great Expectations

What is the role of a business leader today? The pressures placed on managers and leaders have grown exponentially with expectations from all stakeholders to lead in a certain way. And that way is what those stakeholders believe is the right way. The leadership arena is complex and risky. Whether you lead a small association or a multinational brand, the skillset required to exceed everyone’s expectations has expanded beyond organizational expertise.

As we turn our attention, despite current circumstances, to a new year filled with optimism and promise, we must recognize that our customers, staff and stakeholders continue to expand their expectations of us and in turn, we must rise to the occasion and seek to meet those expectations.

Consider for a moment the new cultural/social domains that leaders need to master and have teams in place to manage: DEI, ESG, local politics, national policy, multicultural communities, workforce mental health, privacy, and cybersecurity — just to mention a few. At the heart of these issues is the need to balance people, profits, and products/services.

“Many of the current problems in the digital society we now exist in equates to — lack of trust, misaligned incentives, controlling gatekeepers, treating audiences as a resource to be exploited — arise from its intense centralization around massive tech platforms that seemingly only get more massive as they lock in their network effects and store of data.” So says Brian Morrissey. Add to the tech issues, the drama and demands of fulfilling social expectations, many of which are unstated.

Core Competencies

Ethics, empathy, and emotional intelligence are core competencies for today’s leaders. Shane Parrish writes that “Learning comes when experience meets reflection.” He believes that it is essential to “monitor your track record in areas which you have, or want to have, a circle of competence. And you need to have the courage to honestly monitor feedback so it can be used to your advantage.” At 2040 we help clients use critical thinking to ensure that overconfidence is managed with honest self-reporting and awareness of potential conscious or unconscious bias. We all are subject to the temptation of imposing what we think and believe on our customers and workforce and even those who represent our personal connections and networks. Parrish adds, “Ego is a powerful enemy when it comes to better understanding reality.” How do you manage this predisposition? He says that “Our circles of competence extend only so far. There are boundaries on the areas in which we develop the ability to make accurate decisions.” As Parrish reminds us, it is impossible to have a circle of competence that encompasses everything. We cannot know everything with great depth and understanding. So, leaders need to bite the bullet and admit that their greatest strength may not be their vision or opinion, but rather to orchestrate the talents and expertise of their workforce in service to their customers.

• Make your circle of competence wide and filled with niche expertise to contribute to the solution.
• Uncomfortable as it may be, practice self-evaluation.
• Admit what you know, don’t know and what you don’t know you don’t know.
• Support interconnected circles of competence that when combined create a holistic system with a systemic approach to innovation, problem-solving and maintaining a healthy culture internally and externally.

Misled and Misjudged

How you manage is correlated to your own psychological tendencies. According to Charles T. Munger, author of The Psychology of Human Misjudgment, our psychological tendencies are situation-based, which means that different situations will cause different conclusions and beget different behaviors. As such, situations can reveal who we really are and who those around us really are.

As a result, he says, different psychology-based tendencies are often misleading because there is no one version of reality or the truth. The outcomes of these tendencies can influence decision-making and be both positive and negative.

We have curated the 24 tendencies that Munger has identified into the seven key behaviors that impact an organization and its culture — and set up great stakeholder expectations for leadership.

1. Excessive Self Regard

Leaders with excessive self-regard prefer people like themselves. How can this meet the expectations of a diverse workforce? This attitude can become dysfunctional when executives hire people very much like themselves. The temptation to surround themselves with like-minded individuals is a trap. Deeply rooted in a high sense of self-regard is an excessive appraisal syndrome. Munger states that employers grossly over appraise the worth of their own conclusions that rely on impressions of potential employees in face-to-face contact. He adds that the correct antidote to this bias is to under weigh face-to-face impressions and overweigh the applicant’s past record. What happens when excessive self-regard is an organizational practice? Conformity, groupthink, and a potentially close-minded approach to innovation change or disruption. The solution to an excess of self-regard is to force yourself to be more objective when you are thinking about yourself, your family and friends, your property, and the value of your past and future activity, says Munger. This isn’t easy to do well and won’t work perfectly, but it will work much better than simply letting psychological nature take its normal course.

2. Reward and Punishment

Widespread incentive-caused bias can be a landmine for any organization. Simply stated, employees (and sometimes customers) can be incentivized (or “punished”) based on their understandings of what resonates with them personally. This type of bias can be mitigated by careful thinking with a healthy dose of skepticism. Consider who is offering the incentive and for what ultimate reason. Also, consider how bad behavior can become habit-forming when it is rewarded. Interestingly, research has revealed that a salesforce paid purely on commission is less trustworthy than a compensation arrangement. But there are trade-offs in the compensation decision; commissioned salespeople may be more cost-efficient. Incentive-caused bias also lends itself to shrewd individuals gaming the system by being rewarded for what is easily faked. Punishment as a strategy to change behavior can backfire when it is extreme. And lastly, “Granny’s Rule” may be the most expeditious way to balance reward and punishment. The rule is children are asked to eat their vegetables before receiving dessert. In a work setting, individuals are asked to complete the unpleasant but necessary work before rewarding themselves with what they most enjoy doing. Ineffective leaders use unconscious or conscious bias for both reward and punishment; enlightened leaders practice meritocracy and collective consensus on how reward and punishment can be utilized as motivational tools that respect a shared purpose.

3. Doubt/Avoidance

Munger writes that by nature humans remove doubt by quickly coming to a decision. Any decision. In other words, taking decisive action is an antidote to doubt. But taking such an action may not be appropriate or even relevant. Rather, it is just a shortcut to avoid doubt. In this context, making a quick decision under pressure typically happens when an individual is threatened. Stress is a trigger for quick decision making and it can have significant ramifications. The quick decision-making pattern is to avoid the appearance or admission of doubt by making a snap decision. One way out of this behavior is to intensely consider any or all evidence that appears to dispute or disconfirm a hypothesis, especially if you think your hypothesis is brilliant. Charles Darwin sums it up: “To kill an error is as good a service as, and sometimes even better than, the establishing of a new truth or fact.”

4. Curiosity

Curiosity helps reduce the possibility of bad consequences, according to Munger. Curious people ask the tough questions. They seek wisdom and knowledge, not information. They ask why. Curious people in an organization are invaluable for the unexpected surprises and connecting what appears to be disassociated facts. Informed curiosity encourages transformation. Curious people challenge preconceived conclusions, conscious or unconscious bias and legacy attitudes of doing what has always been done. Here’s a thought: “The thing that doesn’t fit is the thing that is most interesting,” according to theoretical physicist Richard Feynman. Meeting the expectations of a workforce and customers can leverage curiosity as a tool for innovation and change.

5. Contrast-Misreaction

How to market and sell to your customers is based on trust. A contrast-misreaction tendency is routinely used as a ruse for customers buying merchandise and services. According to Munger, “to make an ordinary price seem low, the vendor will very frequently create a highly artificial price that is much higher than the price always sought, then advertise his standard price as a big reduction from his phony price. Even when people know that this sort of customer manipulation is being attempted, it will often work to trigger buying.” Dynamic pricing is a tech-based ploy and Amazon and Expedia have mastered the contrast-misreaction strategy. Think deeply how this approach may tarnish trust and affect customer expectations.

6. Authority/Misinfluence

Organizations mirror societies that are bult on dominance hierarchies. Humans are predisposed to follow leaders, with only a few people doing the leading. This follow-the-leader tendency puts pressure on leaders and managers to understand that with power comes responsibility. Consider the fallout when the leader is wrong or misunderstood. Authority is a frequently abused power and next gens are especially sensitive to a command-and-control hierarchical management style. The Industrial Age is long gone, and in the era of knowledge and services, collaboration and collective leadership promote success, replacing a calcified legacy dominant structure.

7. Reason-Respecting

How we share knowledge can tap into humans’ natural love of accurate cognition. But there is a caveat. When a “teacher” “communicates correct reasons for what is taught, instead of simply laying out the desired belief with no reasons given, the learning will stick. Munger cautions that the reason-respecting tendency is “so strong that even a person’s giving of meaningless or incorrect reasons will increase compliance with his orders and requests. This sort of unfortunate byproduct of reason-respecting is a conditioned reflex, based on a widespread appreciation of the importance of reasons.” Customers want to trust an organization’s solutions with reasons that are honest and meaningful. Likewise, employees want to trust managers who respect them by sharing knowledge with the appropriate context to make information actionable.

Leadership and Politics

According to Brunswick Consulting, “In a highly complex civic, socioeconomic and communications environment, there is enormous pressure on organizations to respond to everything that is happening.” We have seen this play out this past year in everything from state voting policies to vaccination protocols. Customers rely on organizational leaders to speak out and lead. However, as much as people want leadership, there is a veneer of disbelief and incredibility that colors messaging from leaders of all types of enterprises, private and public.

New research from Gallup shows Americans have decreasing confidence in all American institutions except for the military, small business, and the police. Corporations are ranked third from last, only above Congress and television news. Brunswick research reveals that the “Talking Trap” makes leaders at risk if they don’t align ethics and commerce with a “strategically thoughtful framework for engagement.” As it turns out, corporate executives have a highly inflated sense of how effective corporate communication has been on social issues (74%), compared to the public (39%). The proof is immutable when investments don’t match intentions. And the core mission doesn’t align with action. Consumers are savvy and demanding. Walking the talk is not just a cliché; it has relevance and meaning.

Their research is enlightening and disturbing.

• Corporate executives are 2-to-1 out of step with broader public sentiment as it relates to engagement on social issues.
• 63% of corporate executives believe they should speak out, yet only 36% of voters agree.

Trust is the lynchpin in the business and political discourse. Brunswick cautions, “In a vicious cycle, trust is further eroded, and there is even less room for organizations to engage meaningfully.” At 2040 we have found that in many cases an audience (customers and the workforce) sees an executive as different from themselves and who is distanced from their own day-to-day challenges. An audience believes executives cannot understand their life circumstances fully as they have no real experiential context for what is important to them and why. This is particularly relevant to younger generations who often cannot relate to executives.

What is an executive to do? Meaningful engagement means it is okay not to comment on every social or political issue according to Brunswick. They also suggest that an organization can — and should — have an action orientation without always-on impulsivity. That requires a framework of action.

• Present a clear-eyed view of the circumstances.
• Layer in a filter to analyze the implications for your organization.
• Evaluate whether a response is appropriate given the requirement to engage meaningfully and, if so, what the most appropriate actions might be.
• Insert a beat of introspection to ensure you are proceeding as thoughtfully as your intentions.
• Decision-making has to include paths to not respond to a particular issue, in addition to the many ways in which it could and should.

Brunswick also states that if an organization decides to respond to an emerging issue, it should “engage with humility, vulnerability, and enthusiasm on the issues and in ways that are most relevant to the organization.” They add that this includes “engaging with employees to illuminate the issues and then create channels and feedback loops for everyone in the organization to have the opportunity to act.”

And when an organization does take action, ensure that the impact is direct and has a meaningful impact on people’s lives. Brunswick advises: ”Statements and symbols — however sincerely delivered — may be necessary but they are not sufficient. Organizations need to be ready to back it up with an investment that is as tangible as it is earnest — donations of cash, donations of product, donations of your employees’ paid time, and with your daily business practices.”

End Notes

In our hyper-connected world, we often feel compelled to communicate and use our voice as part of the choir of voices to express our alignment to a cause or situation. What we often fail to determine is whether there is an expectation for us or our organization to be part of the conversation. Our stakeholders may not expect us or our organization to “go public.” And our desire, fueled by immediacy, is to speak forth, but it may lead to unintended consequences. As we enter a time of yearly reflection, it’s important to understand who has expectations of us and our organizations. We must assess how we can meet those expectations smartly and concretely, which leads to a continuation of trust including all stakeholders.