The Business Sensei

A Street Called “Brid Geout”

“Beep Beep!”

• The Roadrunner

Remember the classic Roadrunner cartoons? Each episode would feature Wile E. Coyote, rated one of the nastiest villains of all time, pursuing and attempting to eat the Roadrunner. Always imaginative, the Coyote used all manner of elaborate and complex devices to catch his prey. Sadly for the Coyote, the devices would either fail spectacularly or work perfectly but in ways that always came out badly for him. It was not unusual for the Acme speed skates, for example, to let the Coyote almost catch the Roadrunner, only to have the Roadrunner make a sharp left leaving the Coyote to go straight over the side of the cliff. Don’t worry, the Coyote was tough. He could fall thousands of feet and only injure his dignity.

Wile E. Coyote may be a villain, but he’s also someone who never, ever, gives up. He hits the bottom of that cliff, dusts himself off, and embarks on his next cunning plan to catch the Roadrunner. You have to hand it to the Coyote: no matter how many times he got blown up, fell off a cliff, run over, had boulders fall on him, or had his Acme products malfunction in countless other ways, he never hesitates, never doubts himself. Truly, the Coyote has a bias for action.

“A bias for action,” is, by an interesting coincidence, exactly how Zenefits CEO Parker Conrad described his company in a recent article titled, “Engineer asks Quora which job offer to take. CEO replies: not ours.”

According to this article, an engineer with job offers from Zenefits and Uber speculated on Quora about which company would be the best place to start his career. Apparently, the fact that the engineer wasn’t sure was just absolutely unreasonable in the mind of Parker Conrad, who rescinded the job offer. Conrad further stated that one of his company’s values is a “bias towards action,” and so when someone has doubts that’s a bad sign.

Now, let’s face it, too much doubt can be a problem. There is real truth to the saying that “he who hesitates is lost.” However, there is also something to be said for stopping to think and consider the consequences of an action. The Coyote might have benefitted from the occasional doubt; perhaps it would have helped him plan better, or at least consider buying his gadgets from someone other than Acme. Tom Watson, Sr., the founder of IBM was famous for, amongst other things, getting feedback from people. He knew everyone in the company and he listened to what they had to say. Conversely, when an emergency struck, he also knew how to jump into action: in one famous Tom Watson story, a train bringing IBMers to the World’s Fair derailed in the middle of the night. Watson got the phone call and was within an hour was out in the middle of Nowhere, New York, organizing the rescue effort.

There’s an important lesson here: in a real emergency, it’s time to act. Much of the time, though, pausing to think is not a bad idea. Even in an emergency, correct action is critical!

Another famous Watson story is that when the United States entered World War II, Watson seized the opportunity to provide high tech equipment to the government. No hesitation, not even for an instant. Of course, the reason he could act without hesitation is that he had been planning that action for a very long time. That was the moment that transformed IBM into a global powerhouse. The lesson: rapid, unhesitating, successful action is the result of extensive preparation. Of course, if you don’t mind dropping the word, “successful,” then you can also drop the extensive preparation. Wile E. Coyote is an expert at skipping the preparation step.

It may surprise Conrad, but most people do not expect that their first job will be their last job. Speculating about and exploring options is hardly a bad thing; would you rather someone accepted your offer while secretly wondering if they should have gone elsewhere, or that they satisfied their concerns and concluded you were the best choice? I suspect that most people would prefer the second. People who feel they are making the choice of their own free will are going to be much more loyal than those who are afraid to express their doubts and concerns. If your company is as good as you say it is, then they’ll stay and they’ll become your most ardent fans.

Again, there’s a lesson here: if your goal is to build loyalty, give people the space to convince themselves that you are the right choice for them. If they can’t express their doubts or if they feel pressured into making a decision, they won’t own their decision. When someone is thinking, “I only did it because…” then they already have one eye on the exit.

Beyond that, though, there is a difference between effective action and action for its own sake. Taking action is easy. Taking the right actions often requires planning and consideration. Indeed, one of the surest signs of a bad leader is someone who refuses to stop and consider alternatives or the possibility of failure. If you’re zipping down the road at high speed, it’s not such a bad idea to hesitate if the sign you just passed displayed the rather unusual street name, “Brid Geout.”

After reading countless articles that appeared in the days following the 2012 elections, we know that Mitt Romney truly believed he was going to win: he viewed it as inevitable. He even had the internal polls to prove it. Why was no one pushing back on those internal numbers and questioning their internal assumptions? And if someone was pushing back, why was no one listening? Teams work better when someone plays the role of “Devil’s Advocate,” asking the uncomfortable questions and pushing people to justify their assumptions. The Devil’s Advocate is only effective, though, if the leader is willing to be questioned and there exists sufficient trust on the team that members don’t believe they’ll be punished for bringing up unpleasant topics. A leader who appears to lash out or act impulsively, as Conrad certainly appeared to do by publically rescinding the job offer, is sending a very clear message that you cross him at your own peril. That is not exactly the best way to engender trust.

I would imagine, though, that Conrad viewed the engineer’s speculation as implicit criticism of Zenefits. Either that or he just could not stomach the idea that someone might turn down his company in favor of Uber. Better to just rescind the offer rather than face rejection. An attitude like that is bad enough in a low level manager or individual contributor, but it can be downright dangerous when it’s the CEO. Change it: fear and insecurity only lead to harmful, and avoidable, errors.

It takes confidence to make a job offer, and even more to accept the fact that you might be rejected by the candidate. A leader who is truly confident can accept the loss and move on; someone whose confidence is brittle, however, cannot. He needs to protect his ego. Say what you’d like about Wile E. Coyote, he isn’t afraid to fail. Failure is only a problem when nothing is learned from it. Properly done, the interviewing process can also be used to build the sort of excitement that will have a candidate eager to say yes. Unfortunately, it’ll be lot harder now for Zenefits to find out how they missed. That’s the real failure, not having a candidate express doubts.

In a very real sense, Parker Conrad did this unknown engineer a real favor. His actions say a great deal about his style of leadership and his company. It’s much better to find out that the CEO can’t handle criticism or lacks tolerance for questions before you’ve taken the job rather than after.

The engineer who posted the question got the best possible answer: a demonstration of what working for Zenefits would be like. It’s hard to do better than that.

The Four Innovation Traps

This is an excerpt from my new book, Organizational Psychology for Managers.

Practically speaking, innovation is about optimism, risk taking, and effective decision making. It is not the province of one wild-eyed kid in a garage or the iconic lone inventor. No matter how much movies make innovation out to be the result of some crazy inventor having a sudden brilliant insight, innovation comes from the organization; it is about building the environment which fosters creativity and which gives people room to explore. In order to make that happen, we have to avoid four traps and make sure we institute four key elements.

The four innovation traps are:

• Perfection trap – making our products and services more perfect always feels like a worthwhile goal. Make no mistake, to a great extent it is worthwhile. However, each generation has less “gosh wow!” than the previous one. My iPhone 4 was a lot better than an iPhone 3G, but the iPhone 5 wasn’t enough better to convince me to upgrade from the 4. The 5s was. Pursuing perfection can blind us to alternatives, and it’s the alternatives that defeat our “perfect” products. The perfect mousetrap is wonderful until someone shows up with a cat.
• To much to lose trap – we become focused on not hurting our existing products. Just remember, if you don’t turn your cash cow into hamburger, someone else will.
• Identity trap – the company defines itself in terms of its products: “we’re a database company” or “we’re a hardware company.” Specialization is great until your niche becomes irrelevant. IBM reinvented itself to have a life outside of mainframes and is doing quite well.
• The creeping box trap – it’s great to think outside the box. The problem is, once you move outside the box, it eventually grows to surround you again. Yahoo thought it was outside the box until Google came along. As already mentioned, Apple is in the box that Jobs built. Organizations get so focused on their own cleverness that they forget that other people are looking to think outside their box.

Balzac combines stories of jujitsu, wheat, gorillas, and the Lord of the Rings with very practical advice and hands-on exercises aimed at anyone who cares about management, leadership, and culture.

Todd Raphael
Editor-in-Chief
ERE Media

Using serious games for learning

This is an excerpt from my new book, Organizational Psychology for Managers

Gamification, or the art of using games in a business setting, is becoming extremely popular. Turning things into games promises to revolutionize productivity, training, and also wash dishes. Okay, maybe the dish washing is wishful thinking. Unfortunately, so is much of the promise of gamification. Fortunately, however, there are also some aspects of using games that are very promising. The key is to use games correctly: highly competitive games are far more likely to do harm than good in organizational settings. Internal competition, within a team or within a business, creates a short-term boost. Over the medium and long-term, however, competition leads to lower productivity, factions, and silos. Schein observes that the damage caused by internal competition can take years to reverse.

The good news, though, is that certain types of games do lend themselves extremely well to training and improving organizational performance. At the most basic level, the “video game” model of points, badges, and leaderboards can create some excitement and increased interest. Without the glitz and action of video games, though, I have serious doubts how long this approach can maintain interest. On the other hand, certain types of serious games can prove extremely beneficial. It should be recognized at this point that the term “serious games” is not synonymous with computer games; the original concept of serious games had, in fact, nothing to do with computers. We will be looking at a variant of that type of interactive, face-to-face game here: while computers might be used to supplement the game, the objective of the game is to maximize human contact and interaction. Particularly in areas such as leadership and team development, person to person interaction is what it’s all about.

How do we apply serious games to business training or organizational development and organizational psychology? We need look no farther than the legend of King Arthur.

What do King Arthur and a modern CEO have in common? Oddly enough, a great deal. Leaving aside the obvious point that King Arthur had Merlin the court wizard, and the modern CEO has his technical wizards, the two are actually facing similar problems. Granted, the modern CEO is somewhat less likely to be hit over the head with a sword or be eaten by fire-breathing dragons. On the other hand, King Arthur didn’t have to worry about lawsuits or crashing computers, so advantage Arthur. When you strip away the scenery, the problems, methods, and solutions aren’t that different. When you put the scenery back in, you have an opportunity to learn a great deal through the experience of being King Arthur. Not only does the story of King Arthur contain numerous lessons for CEOs, how Arthur trained his workforce has lessons for training leaders and team members today. Through appropriately designed serious games, we can learn those lessons without facing the unfortunate consequences that Arthur faced.
The first connection between King Arthur and a CEO is that both of them require a highly skilled workforce in order to accomplish their goals. King Arthur needed to recruit the top knights to sit at the Round Table. The CEO needs to recruit top people to sit around the table and develop the products and services that the company needs to be successful. How does he know what to do? How does he hone his skills? We’ve already discussed what needs to be done to hire effectively; appropriate training games are how people can learn to do it.

As fans of the story will recall, even when Arthur drew the sword from the stone, he still had to fight for his kingdom. As an untested 15 year old, he needed to inspire his troops to go up against some of the toughest, most famous kings in the land. The CEO needs to inspire his company with the full knowledge that the competition ranges from tiny startups to behemoths like IBM or GE. King Arthur couldn’t win through brute force or simply by fencing just a little bit better: his troops were outnumbered. He needed to employ superior battle strategies and tactics. Similarly, most companies are competing against numerous opponents, more than a few of whom have far more resources than they do. Even when you are a behemoth, you can’t take on everyone. Quite simply, you can’t win by doing the same thing only maybe a little cheaper. You need to develop innovative products and services that create both markets and loyalty, possibly displacing an existing competitor along the way. Building an innovative environment doesn’t just happen. It too takes training and practice.

As we all know, King Arthur’s court was not without its share of interpersonal problems and politics, Lancelot’s affair with Guinevere and Mordred’s betrayal being the most famous. Arthur himself handled these situations poorly by not confronting the various parties early and dealing with the situation when it was small and easily managed. That inaction cost Arthur his kingdom and his life. John Gutfreund, CEO of one-time investment bank Salomon Brothers, ignored the actions of a rogue trader and lost his kingdom: he was forced to resign his position at Salomon and the company was nearly destroyed. Unfortunately, it’s not easy dealing with such problems and the natural instinct for many people is to hope the problem will go away. It takes facing such problems regularly to develop the skill and confidence to recognize and deal with them early. Appropriately designed games allow that to happen without creating an unpleasant working environment.

King Arthur also had the problem of training the next generation of leaders. The knight business is a tough one. Getting onto a horse in full armor isn’t easy, and when dismounting involves another knight with a spear, well, there’s going to be some workforce attrition. Even worse, during peacetime, there was the problem of making sure the knights kept their swords, and skills, sharp. King Arthur solved that problem through holding tournaments. The tournaments of the King Arthur stories were the pseudo-battlegrounds in which knights honed their skills and kept themselves ready for war. The skills they practiced, horsemanship, swordplay, archery, gymnastics, were the much in demand skills of the day. Given that the tournaments were often bloody, and people were often injured or even killed during them, one could describe them quite fairly as serious games. Modern sports are the present day incarnation of the serious games of the past: fencing, kendo, judo, gymnastics, and pentathlon, to name but a few. Each of these sports once represented the battlefield skills of the elite warrior. Masters of these sports learn early that success comes from being fully involved and from testing their skills under pressure. In the days of King Arthur, if you weren’t fully involved, you would likely end up fully dead.

Fortunately, in today’s business environment, sword fighting is strongly discouraged and paper cuts are rarely fatal. In the constantly changing environment of today’s competitive landscape, it’s hard to know which skills will be needed when. The serious games of today need to focus on a different set of skills from King Arthur’s time, but skills that are no less critical: leadership, negotiation, teamwork, confronting problems, public speaking, improvisation, persuasion, decision making with incomplete information, and remaining calm under pressure.

Celebrate Progress

This is an excerpt from my new book, Organizational Psychology for Managers

One of the most important things you can do as a team is periodically celebrating progress. It is always more motivating to look at how far you’ve come rather than how far you have yet to go. Indeed, it’s more motivating to say, “we’re half done,” than to say, “There’s still half left to do.” The two statements may be mathematically equivalent, and IBM’s Watson, the Jeopardy playing computer, would probably find them identical. If you happen to be employing Watson, then it may not matter what you say. However, if you happen to be employing people, it matters.

In jujitsu practice, the students who always focus on how far off the black belt is tend to not finish the journey. Those who focus on how far they’ve come are the ones who keep coming back.
You don’t need to highlight individuals every time you do this; in fact, you shouldn’t. The goal is not to make anyone feel bad for not getting as much done as someone else; rather, it’s simply about sharing success. Feeling that the team is making progress helps boost everyone’s morale, increases team cohesion, and helps build trust.

Depending on your organizational culture, you can occasionally highlight individual accomplishments in much the way that some sports teams will highlight most valuable players. It’s important, though, to pay close attention to how people work and what they expect. At Atari, a new CEO tried to transform the highly collaborative, team-based culture into a more individual, competitive culture. He focused heavily on “engineer of the week,” and other such awards. However, engineers at Atari viewed game development as a collaborative process, where everyone worked together to produce a quality product. The focus on individual performance shattered the team structure, turning high performance teams back into struggling level one groups. Atari never recovered.

When you celebrate team successes, you build relationships, strengthen competence, and provide the trust necessary for greater levels of autonomy. Success builds on success just as failure feeds on failure. What you focus on is what you get.

Stephen Balzac is an expert on leadership and organizational development. A consultant, author, and professional speaker, he is president of 7 Steps Ahead, an organizational development firm focused on helping businesses get unstuck. Steve is the author of “The 36-Hour Course in Organizational Development,” published by McGraw-Hill, and a contributing author to volume one of “Ethics and Game Design: Teaching Values Through Play.” Steve’s latest book, “Organizational Psychology for Managers,” is due out from Springer in late 2013. For more information, or to sign up for Steve’s monthly newsletter, visit www.7stepsahead.com. You can also contact Steve at 978-298-5189 or steve@7stepsahead.com.

What Is Organizational Narrative?

This post is an excerpt from my upcoming book, Organizational Psychology for Managers.

Humans are pattern-matching creatures. We are built to try to make sense of our environment. Indeed, as more than one psychologist has observed, we see patterns even when they aren’t there! This tendency toward pattern-matching is a very powerful tool, though, because it enables us to impose structure on our environment. If we’ve done a good job of imposing structure, we can not only make sense of what is happening now, we can make reasonably accurate guesses about what will happen in the future. In fact, our ability to impose order and identify patterns is a big part of what enables us to think and plan strategically.

Culture, you will recall, is a device for making the world predictable. It tells us what to do when. Structurally, what we have is a narrative: in a certain situation these actions led to these results or these actions expressed these values, and that’s why we do things that way today. Quite simply, we impose a narrative structure on our own experiences and those of the organization. Consider how many of our metaphors reflect this view: “turning over a new page,” “starting a new chapter in our lives,” “taking a page from his book,” and so forth.

This narrative structure is so powerful that many people will ignore information that doesn’t fit the narrative: for example, there are still many people who believe that Humphrey Bogart said, “Play it again, Sam,” in the movie Casablanca. He didn’t, but he should have. It’s a much better line than the one he actually says.

This narrative structure helps us understand, or at least explain, our own lives: Elizabeth Loftus, a psychologist and Harvard professor, is also the world’s expert on memory. She believed that this stemmed from her experience of repressing her memories of discovering her mother’s drowned body in the family swimming pool. She later recovered her memory of the event and, over the course of a few years, the rest of the details came back to her. It made sense; it explained her fascination with memory. Then one of her relatives told her that she hadn’t discovered the body, her aunt had. Other relatives confirmed this. The memory expert had, herself, created a false memory and believed it because it made sense.

Organizational stories are most obvious in older organizations, be they corporations, religious institutions, professional groups, and the like. However, even small organizations, including start up companies, quickly develop their own organizational narratives. Indeed, the question is not whether you will develop a narrative, but who will do it. Will you define your narrative or will others define it for you? If you don’t define your own story, you can be certain that your competitors will be only too happy to do it for you. All too often, companies allow themselves to accept default stories about their business and then wonder why they are seen as “just like everyone else.”

Think about how often you’ve heard someone talk about your company’s “story.” We assemble incidents into chronological events and draw lessons from those events. The following three snippets play out in organizations all the time:

“Bob ignored his assignment to deal with what he felt was a serious problem and the boss fired him even though Bob was right.”

“Bob stood up to the boss, the boss was going to fire him for insubordination, but the boss’s boss said, ‘Hey! Bob just saved the company a ton of money! What is wrong with you?’”

Each of these stories teaches a different lesson about how to behave. The first says never argue with the boss. The second says you should bring up problems. The third says that if you bring up a problem and your boss doesn’t appreciate hearing it, don’t worry, his boss will see that justice is done. I saw this one play out in just my first few weeks at IBM after I graduated from college. When Bob’s boss was subsequently reassigned to a remote branch office, that cemented the lesson that employees should act on serious problems.

The problem with most organizational stories is that they just happen. Events occur and are assembled after the fact into stories that current employees tell one another and pass along to new hires. These stories become part of the background, repeated often without really thinking about it. Frequently, the lessons taught to new employees are not the lessons management thinks are being taught. Taking control of the process, however, can dramatically improve organizational performance in all areas.

Twinkie, twinkie, little star…

The news that Hostess Brands (aka Interstate Bakeries), maker of the legendary Twinkie, is closing its doors after 80 some years is all the rage these days.

Along with that news is the argument about why they are closing their doors. There are so many claims and counter-claims running around that it’s starting to sound like the beginning of a bad detective movie. Hostess is dead! Whodunit?

Some people are claiming that union demands killed Hostess, others that tripling the CEO’s pay did the job. More than likely, what really did the job was the death of a thousand knives: a series of cascading errors that put them in the position where their demise was inevitable; it was just a question of what specific event finished them off.

Of course, to really understand what happened, we then have to ask the question, “How did the cascade get started? What happened, or didn’t happen, what changed or didn’t change, to make the vulnerable in the first place?”

Here we can see the power of organizational culture at work. Specifically, we can see what happens when two cultures that were tightly aligned drift apart from one other.

When Hostess was founded in 1930, it was a product of the culture of the time: created by people living and working in that time period. The foods it sold were the foods of the day, the things people wanted. Over the years, Hostess became very successful selling twinkies, Wonder Bread, and the like. They weren’t just the best thing since sliced bread, they were the sliced bread!

Culture, of course, is the residue of success: the accumulated lessons an organization learns over time about how to successfully navigate the world. Those lessons can be hard to unlearn. Sometimes bankruptcy will do it, but not always. In the case of Hostess, they went bankrupt in 2004 and spent the next five years in Chapter 11 bankruptcy protection. When they emerged from Chapter 11 in 2009, however, they had apparently failed to learn some lessons, specifically:

1. Sliced bread was no longer quite the rage it had been in 1930.Indeed, today artisan breads, local breads, and the like are extremely popular. Wonder bread is no longer the first choice of many parents.

2. The dessert market changed. Twinkies are not so cool or fun anymore. They are the object of jokes and experiments to see how long before the go bad, or how much oil can one absorb, and so forth. They are not a school lunch staple as they were even 30 or 40 years ago. Same for Hostess cupcakes, ding-dongs, and the rest.

Are there additional factors? Sure. Supposedly Hostess never really modernized its distribution system and it’s not at all clear how much their internal management ever adopted modern goal-setting and motivational techniques. Fundamentally, though, what killed Hostess is the same thing that almost killed IBM in 1992: their market changed; their culture did not. Unlike IBM, Hostess didn’t have the same willingness to confront unpleasant realities and make necessary changes soon enough.

The rest is merely detail.

QWERTY Culture

Remember the last time the keys on your computer jammed because you were typing too fast? Neither do I.

The fact is, our QWERTY keyboards are an artifact of history, a solution to a problem that hasn’t existed for at least half a century: typewriter keys jamming when you type too fast. The solution was to design a keyboard which reduced the speed at which someone could type. Even though that problem hasn’t existed at least since the 1960’s IBM Selectric Typewriter, with its “letter ball,” we still use QWERTY keyboards. Better keyboard layouts do exist, but that hasn’t changed the fact that QWERTY still owns approximately 98% of the keyboard market. QWERTY is so accepted that even my spell-checker recognizes QWERTY as a word.

Now, one can make all manner of arguments about how QWERTY persists because there is a significant investment in QWERTY keyboard manufacturing in place, or because most people are comfortable with QWERTY keyboards and don’t want to learn something new, or that learning the more efficient Dvorak keyboard isn’t a transferable skill, and so forth. All of these arguments are even sort of true, albeit of questionable relevance. Fundamentally, they call boil down to tradition. We’ve always done it this way, so let’s keep doing it this way. Everything else arises in response to that.

Maybe this isn’t such a big deal in the world of keyboards. After all, most people are pretty happy with their QWERTY keyboards, and it’s not that hard to use a Dvorak if you really want to. The QWERTY phenomenon can be more of a problem, though, in large organizations where continually solving a problem that no longer exists wastes time, energy, and resources.

The “way we’ve always done it” is very attractive. It’s familiar, safe, something we often don’t think much about. Doing things the way we’ve always done them feels good, like putting on a favorite coat. Sure, it may not be as nice or as warm as a new one, but it’s comfortable. We’ve grown used to it. Quite frequently, we’ve built up structures or procedures to help us do whatever it is we’ve always done. Those structures and procedures, like QWERTY keyboard factories, give us a convenient excuse to not make changes.

Founded over a century ago, General Motors learned many lessons about how to sell cars. Those lessons were the results of hard won victories over competitors and economic disasters including the Great Depression. Those lessons made GM the most successful auto maker in the world for many years. Those same lessons, unfortunately, also eventually led to a GM executive pointing to a GM parking lot and declaring there was no need to worry about competition because there were no foreign cars in the lot. The world, and the competitive landscape, had changed and GM hadn’t kept up. They were, metaphorically, still happily using their QWERTY keyboards in a world where everyone else had moved on to something far more effective. It took an economic disaster and the near destruction of the company to force them to start facing modern problems instead of hiding comfortably behind old ones.

By comparison, IBM badly misjudged the computer market in the late 1980s and early 1990s. They were so accustomed to being on top that they simply couldn’t imagine any need to do things differently. Thus, the techniques they’d learned selling giant multi-million dollar computer systems to large corporations were the same techniques they applied to selling little tiny PCs to individuals. The results were underwhelming. It took the first loss in the company’s history to shake them out of their complacency. For the first time in IBM history an outsider, Lou Gerstner, was brought in to run the company. He successfully refocused IBM on the market in front of them, not the market they were used to being in.

Giant companies are not the only ones vulnerable to this “QWERTY trap.” It’s a game everyone can play. One Silicon Valley company I worked with asked me to convince all their employees to work twelve hour days. When I pushed them on what they were trying to accomplish, they first spoke about deadlines, fixing bugs, and customer commitments. When I kept pushing, it eventually turned out that they wanted their employees to work twelve hour days because, “This is Silicon Valley and that’s what we do here!” Once I convinced them that a more sane work schedule would make more sense, we saw productivity go up and both the quantity and the severity of software bugs go down. The company actually started hitting its deadlines.

It’s easy to get caught up in the idea that the way to do things today is the way we’ve always done them. It’s also easy to use existing procedures and policies to justify our desire not to change. Doing things the familiar way feels good. However, just because something feels good doesn’t mean it’s actually doing what we think it’s doing. It pays to stop periodically and check to see that we’re doing is actually solving the problems in front of us, not problems that disappeared fifty years ago.

The Corporate Culture Conundrum

I get asked a lot about corporate culture. In this case, I ended up responding to a very detailed query at such length that I decided to include it here since I doubt the person interviewing me will be able to use all of what I wrote (I’m also posting this after the article comes out, so I don’t upstage anyone).

Let’s start by defining culture. At root, culture is nothing more than the residue of perceived success. In other words, it is the accumulated knowledge of how to be successful at a particular company and how the company is successful in the marketplace.

Why success and not failure? Simple. We tend to repeat the behaviors that appear to bring us success, and discontinue those that do not. Moreover, cultures based on failure simply do not survive. At some point, there have to be successes in order for the culture to remain viable.

I focus on perceived success because what really matters is not whether a behavior is really successful so much as our belief that it is successful. For example, in the 1990s, Nokia firmly believed that its success was due to its innovative management style. The reality was that they had a hot product, cell phones, in an exploding market. When the market saturated, their revenues dropped off along with every other cell phone provider in 2000. Today, Nokia is increasingly irrelevant. If everyone at the company had come to work wearing Groucho Glasses every day, their product would still have sold and they might very well have ascribed their success to their innovative dress code. The results would have been pretty much the same, although people might have been inspired to tell better jokes.

Because culture contains within it the memory of success, it is very hard to change. No one likes to change what’s working! What’s worse is that a behavior rarely succeeds all the time: when something doesn’t work, we ascribe the failure to “not trying hard enough” and resolve to do better. The resulting semi-randomness to the success produces a response similar to playing a slot machine: random success is highly addicting.

This phenomenon becomes particularly important when we realize that the business environment changes more rapidly than the culture. A once successful behavior gradually stops working. However, because it fades out slowly, intermittent successes along the way serve to make the behavior stronger and stronger even as its usefulness is decreasing. When it comes to not changing a behavior, it takes only the occasional success to make up for an awful lot of getting kicked upside the head.

This also means that there are two key aspects to culture: what we do and why we do it. Most organizations focus purely on the “what” and ignore the “why.” Even when an organization attempts to change culture, they almost always focus on what they are doing. Unfortunately, when you only change the what, you are changing the superficial. The underlying why will rapidly pull the new behavior back into alignment with the original behavior; although cosmetic changes may persist, the new “what” will be fundamentally identical to the old.

The “whys” of culture also interlock: there is rarely one reason for a particular behavior. As a result, attempting to change one “why” can also be quite difficult because a) it’s hard to identify it precisely, and b) the rest of the interlocking structure of beliefs pulls it back. It is quite possible for a CEO or senior management team to simply chop off a piece of a corporate culture, but it can be quite unpredictable what else they’ll lose: for example, when IBM dropped its traditional full-employment policy, they also lost a great deal of employee loyalty and their historic “IBM takes care of me and my family, I take care of IBM” employee mindset.

With that said, let me jump over to your questions:

1. How do you know when there's something wrong with your corporate culture (what are 2-3 signs), or how do you know if things need improving just a bit?

Something is “wrong” with a corporate culture when the culture can no longer obtain resources, that is to say clients and revenue, from its environment. The early symptoms can manifest in several ways before the revenue drop really hits. The most common is a persistent feeling of being stuck: more and more effort is expended for less and less success. Previously successful revenue generating behaviors are losing their effectiveness, but doing so in fits and starts.

Another common symptom is increasing defensiveness on the part of management: executives don’t want to hear why something isn’t working, and attempts to address problems are met with denial. At exactly the point where the executive team should be bringing in outside help, they become increasingly unwilling to do so. An outsider is far too likely to grind the sacred cows into hamburger. IBM’s decision to bring in Lou Gerstner in 1992 is an example of a company overcoming that fear of outsiders and actually addressing their problems.

A third symptom of culture problems is a persistent inability to make and keep decisions. When teams within the company, or the company as whole, continually revisits discussions and can’t seem to follow-through on goals, that’s a major warning sign that you need to take action.

2. Where do generational differences among staff and colleagues come into play?

Let’s start with the elephant in the living room: the Gen Y myth. This whole concept that Gen Y’ers are somehow less dedicated, less motivated, or less <insert here> than Gen X or Boomers is, quite simply, a myth. Indeed, the whole idea that the younger generation is less respectful, dedicated, hard-working, and so forth, than their elders is itself a cultural belief that goes back at least to Socrates.

What is different, however, is that Gen Y’s do not share the cultural belief that you graduate from college, work at one job for 40 years, and retire to enjoy your “golden years.” While this was, or at least appeared to be, a valid cultural belief at one time, it is no longer valid in the current environment and shows no signs of regaining validity. However, for those who grew up with it, it is very difficult to put it aside.

Within an organization, what matters first is not the generational differences but the degree of immersion in the culture of the organization. Younger employees are less deeply immersed in the culture; they’ve had less time to absorb it and to assume its values. Thus, they are more likely to propose ideas and approaches that older employees view as violating cultural values and hence are more likely to reject. Note, by the way, that I’m referring less to chronological age than to amount of time with the company. Since the older employees typically have more authority, younger employees are more likely to be frustrated. How they cope with that will, however, be strongly influenced by their generational cultural values: a Boomer or X’er might decide that if they stick around and pay their dues, they’ll get a voice in due time; a Gen Y’er is probably more likely to go somewhere else. One solution is not inherently better than another.

3. How do you cultivate a creative and collaborative team (what 2-3 three things can really build that team culture)?

Culture is whatever is seen as successful. If you want people to collaborate, reward collaboration. Sounds simple, but it just doesn’t happen. Companies focus on individual performance and individual reward. As a result, they get a bunch of individuals often competing for a limited pie. While it is important to acknowledge and reward individual contributions, that cannot be all that you reward and it should never be set up in a way that creates competition between team members.

4. It's all about innovation, how best to encourage creative brainstorming for service/product innovation (what works and what doesn't and why)?

There are four culture traps to avoid and four cultural beliefs to build. The four traps are:

Perfection — We must make the perfect mousetrap… which works until someone comes along with a cat.

Protection — We must not hurt our existing products. Pity our competitors don’t feel that way…

Identity — We’re an X not a Y. IBM was a serious business company in the 1980s. They didn’t “do games.” Now they’re heavily involved in serious gaming.

Creeping Box — We’re so far outside the box no one can catch us. Just ask Yahoo… Once you move outside the box, the box grows and suddenly you’re just one of the pack.

The cultural values to foster

Continuous education — Keep people learning. Don’t limit people to taking classes in their areas of expertise; rather encourage employees to study whatever interests them. Innovation comes from putting together apparently disparate pieces of information.

Making mistakes — How do you respond to mistakes? Innovation is a messy business. If mistakes are punished, no one will risk making them and innovation will falter. Thomas Edison famously said that he’d learned a thousand ways to not make a light bulb. Easy to say, hard to live.

Strategic breaks — Allow the breakthrough to happen. The “eureka” moment doesn’t happen when we’re exhausted from banging our head against the wall. It comes when we take a break and do something different. Learn how to take breaks strategically.

Patience — Don’t wait for a crisis to force your hand. Necessity may be the mother of invention, but waiting for the last minute to start innovating is the number one cause of premature death amongst new ideas.

5. How do intangibles like volunteerism, office greening, impact corporate culture?

Intangibles matter to the extent that they reflect the corporation’s values, beliefs, and aspirations. Volunteerism can be very important in a company that views itself as a good citizen of the community. However, to be effective, intangibles have to be worth the time and energy expended on them. If employees who volunteer their time end up being paid less or promoted less frequently than those who don’t volunteer their time, volunteerism will fade out. The behavior that is rewarded will become part of the culture, and the culture will attract those who believe in the values manifested through the behavior.

6. What are other intangibles that are important but corporations may not be keen about their importance?

How meetings are conducted, whether employees are permitted to work from home, how much freedom and autonomy versus direction employees are given, how mistakes are handled, how disagreements are managed, how permissible it is to question authority, are just a few of the intangibles that shape cultures.

7. How important is culture today and why?

Organizational culture is probably the most important most powerful force in any corporation. Because culture is the lessons of the past, it provides the template for how to behave in the future. Once a corporation loses sight of its culture, it’s only a matter of time before it slams into a brick wall.

8. Is your sense that most firms are focused on their culture, why or why not?

While many firms focus on their culture, they focus on the wrong aspects of it. Most companies focus purely on the “what,” those superficial artifacts that are easy to see but which have the least significance. It’s hard to focus on the “why.” Indeed, really delving into the “why” of your culture is rather like performing open heart surgery on yourself. In other words, you need the assistance of a trained outsider who is not immersed in your culture to see the elements you take for granted.

9. Any interesting, stats, surveys or other data about corporate culture?

Let me point you my book, “The 36-Hour Course in Organizational Development.” Chapter one is about culture and the entire book discusses how organizational development shapes and is shaped by culture.

10. If a company can make only one change in it's culture, how to determine what should be that priority?

The biggest priority is changing the belief that you can change only one thing… Seriously, culture change is not a precise, surgical operation. Sure, if you’re only after changing the “what,” you can pick one thing, but for anything non-trivial you have to go after the “why.” That requires taking the time to really understand what values and assumptions that are taken for granted are no longer valid, and then building up a new set of values and assumptions. Most culture change fails because it tries to focus too narrowly on one thing. Corporations go through a lot of pain and spend a lot of money only to experience a fleeting success before the culture reverts back to the way it was: when you seek to change only one thing, everything connected to that one thing acts to pull it back to its original form.

Make a New Plan, Stan

As published in Corp! Magazine

Jesse Livermore, the legendary stock trader of the early twentieth century, was famed for his ability to keep his cool no matter what the market was doing. He neither became discouraged when he lost money or exhilarated when he made money, and he made a lot of money. His greatest triumph was making $100 million (no, that’s not an error) on Oct. 29, 1929, the day of the market crash that preceded the Great Depression. He was one of only two people to make money that day. As people were panicking around him, he calmly covered his short positions into the chaos. What was his secret?

It was simple: Jesse Livermore had a plan. Over the course of his trading career, he developed a plan for when to buy and when to sell. When the plan didn’t work, he stepped back, analyzed the failure, and adjusted his plan. Jesse Livermore’s plan failed many times, especially during his early days as a trader. He went broke more than once and, in 1915, was a million dollars in debt. But Jesse Livermore never failed.

Now this may look like sophistry: he created the plan and the plan led him into bankruptcy. Isn’t that a failure? Sure: it was a failure of the plan. By creating an external construct, a plan, Livermore was able to prevent his emotions from dominating his trading. More broadly, he was able to place the failure outside himself. It’s much easier to change one’s plan than it is to change oneself. On the flip side, when things went well, he could enjoy the fruits of victory without allowing the excitement to color his perceptions and cost him his profits. Each day, he knew that he had followed his plan.

This lesson can be easily applied to the business world, especially today. The news is a steady drumbeat of economic disaster after economic disaster, bankruptcies, shrinking sales, and so forth. It’s extremely difficult to not become discouraged; I regularly hear from business owners that they are no longer listening to the news. It’s simply too depressing. Unfortunately, restricting information only reduces a business’s ability to act when the opportunity presents itself; you won’t even know that the opportunity is there! Tom Watson, the founder of IBM, was reputed to read the papers every day all through the Great Depression. He had a plan, and part of his plan involved staying aware of what was happening around him. He was waiting and watching for his moment of opportunity. That moment came, and the rest, as they say, is history.

So how do you go about making a plan?

• Start by defining a broad vision of what your business wants to accomplish. What will the world look like if you’re successful?
• Identify the steps needed to bring that vision into reality.
• For each step, identify how you will recognize whether or not it is working. It pays to decide upon your metrics before the pressure is on, and to identify the signs of trouble as early as possible. Jesse Livermore never bought a stock without deciding in advance the conditions under which he’d sell it, whether for a profit or a loss. As a result, his losses were small and his profits large.
• Break those steps down into activities that can be done on a daily, weekly, and monthly basis.
• Define appropriate checkpoints where you can evaluate progress and determine whether or not your plan is working. Remember to allow sufficient time to collect enough data to make a good decision. Evaluating before you have enough information is an excellent way to abandon a successful plan before it has time to pay off.
• Execute your plan, day in and day out. You measure your own success or failure by whether or not you stuck to the plan.
• Constantly review and revise your plan as you learn more. Failures of the plan are simply an opportunity to evaluate and adjust.

When we fail, it can be difficult indeed to get up and try again. But when the plan fails, it’s relatively simple to modify it and keep going.

What’s your plan?

Stephen Balzac is an expert on leadership and organizational development. A consultant, author, and professional speaker, he is president of 7 Steps Ahead, an organizational development firm focused on helping businesses get unstuck. Steve is the author of “The 36-Hour Course in Organizational Development,” published by McGraw-Hill, and a contributing author to volume one of “Ethics and Game Design: Teaching Values Through Play.” For more information, visit www.7stepsahead.com or contact steve@7stepsahead.com.

The Game’s Afoot!

Remember Sherlock Holmes’s famous line: “Come Watson! The game’s afoot.”

While some have argued that Holmes was referring to a soccer match, in fact this line almost always preceded Holmes going forth and solving the mystery.

This time, though, Watson was the brilliant one.

The news of Watson, the IBM supercomputer, winning Jeopardy has been all over the web lately. I was lucky enough to attend an event at IBM in Littleton where they explained a bit about Watson and how it was developed, followed by the final Jeopardy show.

Yesterday, I received an email from someone arguing that Watson was, quite possibly, just a publicity stunt. After all, doesn’t a computer have an innate advantage in buzzing in? And what”s the big deal about a computer answering questions? After all, can’t Google do that?

Here’s my response (although since I’m quoting myself, I get to add all the things I wished I’d thought of when I originally responded 🙂 )
An interesting post on Watson, but your questions are easily answered… just use Google 🙂

Seriously, as impressive as Watson’s question answering was, that wasn’t what made it so successful. Let me address your other points first, though.

The trigger finger point: all human players develop heuristics for training themselves to buzz in as quickly as possible without getting locked out. Watson has its own algorithms, based on how much confidence it has in its answer. There were times when the human players beat Watson to the punch. However, just as a human player will try to keep the questions in an area where he has greater knowledge, which translates to an improved ability to respond quickly, Watson does the same. Just as humans respond more rapidly when we have higher confidence in our answers, so does Watson.

Watson vs. Google: try typing a typical Jeopardy question into Google: “A city whose first airport is named for a WWII hero and whose second for a famous battle from the same war.” What you’ll get is a discussion of how Watson answered that question (Toronto???). Google forces us to ask questions in a way the computer understands; Watson answers questions the way we naturally speak. Although probably oversimplified, Google does keyword matching ranked by popularity. Watson is attempting to do semantic matching — in other words, answer based on meaning. That’s more like what we do, although Watson doesn’t necessarily mimic how we do it.

The real secret to Watson’s success, though, was less about its ability to answer questions as its ability to gauge the confidence of its answers. Watson bets small amounts when it has low confidence and large amounts when it has high confidence, just like a person (or at least how a person might wish to act). However, Watson is considerably more able than most people to accurately assess the likelihood of its being right or wrong.

Watson is also able to calculate with a high degree of accuracy where Daily Doubles are likely to occur. Apparently, it’s a statistical calculation based on past games, and Watson can run that calculation very, very fast. Faster than any human. Given the previous discussion on confidence, we can see that this strategy gives Watson a chance to really clean up.

In short, as impressive as is Watson’s ability to understand English and understand puns (yes, it can do that!), the real secret to Watson’s success is that it knows how to win big when it’s right and cut its losses when it’s wrong.

Now that’s a lesson we might all benefit from!