Predictably Irrational: Interactive Tools, Free Bagels and the Power of Appreciation

Picture courtesy of Villains WIki

I recently wrote a post about Dan Ariely’s fascinating work on behavioural science, Predictably Irrational.  You can read the post here, summarizing some of the key findings from the book, but after receiving several questions about how to operationalize this information I decided to write a follow up post.

1.      Everything’s relative: Humans understand and navigate the world by making comparisons.  That’s why when executive salaries were first published they skyrocketed rather than becoming more normalized, resulting in diverse organizational disfunctions.  It’s also why forced ranking can backfire in a high performing team.  From an HR perspective, it’s naïve to assume people won’t make comparisons regarding their own compensation, benefits, career progress, etc.  It’s therefore important to establish a perception of fairness in the organization, i.e. not equality per se but equal opportunity with a clear path to the next level of pay or responsibility.  I recommend investing in a visual career path as an employee branding and coaching tool (example below), because it creates an immediate frame of reference that helps people understand where they are on the journey and how to progress to the next level.  To promote higher engagement with the tool consider making it interactive, for example using Visme.  

Courtesy of Amoria Bond

2.      Emotions cloud our judgement even more than we realize: People like to think of themselves as fair and impartial but in fact most people are ruled most of the time by their own emotional biases. That’s why a great theory tends to break down in practice when it encounters the personal agenda, why nepotism exists, why people believe false information, and why the overarching goal of talent management as defined by Cornell University is to reduce the impact of human frailty (or bias) in decision making.  Although self-serving behaviour limits company growth by undermining people and trust, many organizations inadvertently incentivize confidence over substance and being seen over being impactful.  Whereas truly innovative companies stamp out undermining behaviours and recognize leaders who put team, customer or business first.  

3.      Don’t confuse social norms with market norms: Compassionate and authentic leadership can inspire great things from teams, and most people want to help others and be part of something greater than themselves.  So how do we explain bullying, marginalizing and self-optimizing behaviour in the workplace that prevent people from contributing as much as they could in a more supportive environment?  Amongst other reasons – including company culture - it turns out that monetary transactions bypass the helpfulness impulse and activate a ‘market norm.’  People behave competitively and won’t go the extra mile for a low reward when market norms are in operation.  If you’d like to learn more about how applied social norms such as recognition empower employees and drive higher performance, I recommend The Power of Thanks, co-authored by my former Compensation Café colleague Derek Irvine.  

4.      Expectations shape perception: Expectations colour our experiences, which is why two people can share the same experience but describe it completely differently.  Employee engagement research shows that people who feel appreciated and recognized at work are also more likely to enjoy their jobs, trust their managers and believe they are compensated fairly.  It’s almost like there’s no downside to this whole recognition thing…

5.      Free has magical properties: People can’t seem to resist the lure of the freebie, which creates all sorts of interesting possibilities for creative total compensation packages.  One of the companies I worked for that was consistently voted a best place to work in the competitive Bay Area paid a bit less than competitors but offered free Noah’s bagels and cream cheese two days a week.  You can’t beat a good schmear.

6.      It’s hard to let go: People like to keep all the options on the table for as long as possible, which is why limited availability or putting a time limit on options can help create clarity and spur people into action.  When preparing for significant organizational change it’s important to give people time to prepare, but it’s equally important to ‘burn your ships’ and start working in the new way.  Too often, people and organizations get stuck between old and new, spreading valuable creativity too thinly across too many initiatives.  My recent blog post on failure and innovation spotlights the role of leadership in focusing creative energy.

7.      First choice results in a better experience: The person who raises their hand first is in a unique position to set the tone or volunteer for a choice assignment, while less assertive voices may be unheard or ignored, leading to less satisfaction in the outcome.  A more inclusive strategy is to ask everyone to write down their thoughts and pick someone at random to share their notes first without interruption until everyone has had a chance to speak.  This tactic has the advantage of enabling introverts to have an equal share in the discussion, which doesn't usually happen.

Picture courtesy of Impulse

So there you have it: interactive career paths, recognition programs, free bagels, clear priorities, and more inclusive discourse can help put behavioural economics to work in your organization.

Thanks for reading and as always, comments and additional suggestions are welcome.

Working Girl

Predictably Irrational: Behavioral Economics, Talent Management and Employer Branding

Inspired by my recent work sourcing and coaching speakers for the 2018 TEDxTUM event in Munich, I’ve been devouring great books by former TED speakers. One of these that stood out was Dan Ariely’s fascinating work on behavioural science, Predictably Irrational. 

If you don’t mind paging through a seemingly endless stream of creative, low cost experiments involving chocolate, beer, and unsuspecting MIT students, you’ll learn some amazing things. Some things you might have already known or suspected, but other things may surprise you because they not only irrational but predictably irrational.

I recommend the book, as the experiments are sometimes hilarious and always instructional, but here are a few highlights for talent strategy:

1.  Everything’s relative: If you want people to choose A instead of B, introducing a third option that is a slightly worse version of option A will make A more attractive than B and also make it easier to reach a decision. The reason is that making A better than something also makes A seem better than B. This is useful information when designing total compensation packages as well as communicating bad news.

2.  Emotions cloud our judgement even more than we realize: We know people tend look for data points to justify the decisions they already want to make, but if you ask people to predict how they would decide in a moment of emotional excitement, it turns out they are vastly wrong at predicting their own behaviour - even with the benefit of experience, meaning Dean Martin got it wrong. That’s why creating a positive emotional response to your employer brand is so important, and why charismatic and caring managers can do more for the business than complicated performance management strategies.

3.  Don’t confuse social norms with market norms: This is important for businesses trying to be the ‘caring employer’ because trust implies a social relationship. If the company doesn't live up to that trust and tries to fall back on impersonal market norms when something goes wrong after building a relationship based on social norms, it creates a trust problem that’s difficult to come back from. This distinction is a critical part of defining your employer brand, i.e. don’t position yourself in terms of social norms unless you can also deliver an employee experience that lives up to your promise.

4.   Expectations shape perception: If I give you two menu choices and one is described as, ‘lightly braised pork medallions with a caramelized puree of autumn apple,’ and the other as, ‘pork chops with apple sauce,’ it turns out that a richer and more emotion-evoking description leads people to expect a more enjoyable experience, which in turn becomes a self-fulfilling prophesy. Similarly, a higher price creates the expectation of a superior product, which in turn creates a more positive experience. Important note for HR when defining your employer brand: Don’t confuse richer and emotion-evoking with longer and/or full of buzzwords.

5.   Free has magical properties: If you normally charge $2 for a service and offer a $1 discount, the impact is very different from a reduction of $1 to free, even though the difference in both cases is $1. Rationally speaking, there should be no difference and yet people can’t seem to resist the lure of the freebie. This creates all sorts of interesting possibilities for HR and compensation professionals to design compensation packages in creative ways.  

6.  It’s hard to let go: Any good sales person understands the value of the hard deadline when the current offer vanishes forever. Anyone working for a business in transition has experienced the treadmill of adding new workstreams while still keeping legacy parts of the business on life support (tips for avoiding here). People like to keep all the options on the table for as long as possible, which is why limited availability or putting a time limit on options can help create clarity and spur people into action.  For any HR manager who's had to chase people to complete the much hated engagement survey, a 'Free gift card if you respond by 3PM today' strategy can work wonders.

7.   First choice results in a better experience: In an interesting experiment where four menu options are offered to four people, the person who chooses first is more likely to enjoy their meal more than the others. The people who choose next feel subtly pressured to make a different selection and are then more likely to experience buyer’s remorse and wish they’d ordered the same thing as the happy early adopter. This highlights the potential of making people feel they are getting special consideration or ‘first dibs’ on a new project or opportunity.

Understanding how behavioral economics shape behavior and perception can help strengthen your talent management strategy and create a more positive employee experience.  If you'd like to read more about behavioral economics, I wrote a similar post for marketing professionals here.

Thanks for reading and comments are always welcome.

Working Girl

Get Off the Couch: Agility, Innovation and Failure

After a three-year hiatus spent living and breathing supply chain finance and building a truly exceptional global marketing team, I am re-launching Working Girl.  This is slightly ironic as I am not currently working per se, nor looking for a job.  However, after some reflection I realized Working Girl is my brand when writing about all things talent management, organizational development or human motivation. My latest blog post is about innovation.

Fail fast, learn, try again.  Catchy, huh? 

According to experts, embracing failure makes you more agile because – amongst other things - those who fear failure hesitate to act, and it’s rare to be hesitant and agile.  It’s like you can’t be an Olympic gold medalist and a couch potato, although you can sit on your couch and watch the Olympics.  Similarly, some organizations try to implement agility without getting up off the couch.

Although the ‘agile organization’ promises a long-awaited alternative to heavy processes that erode motivation and stifle innovation, it also gets used as a rationale to introduce uncoordinated workstreams; to cherry pick projects (and avoid all that boring stuff like planning and execution); or to spin underwhelming results as success.

It seems I’m not the only one on the fence about agility because while some experts sing the praises of failure in the innovative organization, others ask why innovation rarely occurs even at companies that embrace the whole 'fail fast' thing.

In a rapidly changing and competitive world, it makes sense to strive for holocracy instead of hierarchy; collaborative networks instead of siloes; rapid experimentation instead of fear of failure; participation instead of central decision making; bottom up brainstorming instead of top down directives; and innovation instead of stagnation. 

It’s easy to get buy in, too, because no one’s going to say, ‘Let’s not try new things.  Let’s not collaborate.  Let’s not innovate.’ 

It sounds great but…

I worked for ten years at a very disruptive and successful start-up where no one ever talked about failing, let alone failing fast.  I mean, sure, if you had to fail better do it quickly but the goal was to succeed with careful planning followed by rapid, coordinated execution.  Failure was acknowledged and usually forgiven but it wasn’t in any way romanticized. 

OK, there was this one senior exec who’d get up at each all hands meeting with a self-deprecating grin and say, ‘Yeah, we should have seen that coming,’ which we all found hilarious.  Good times.

I absolutely believe huge success can happen by trying lots of things – the lucky punch - but I also believe greater success is possible with ruthless prioritization and proper planning.  You may miss the lucky punch but trying out lots of free floating ideas without a cohesive strategy has a high opportunity cost and adds complexity to a shaky foundation. 

Don’t get me wrong, I’m a firm believer in cross-team collaboration, iterative learning and letting people make mistakes.  Simply put, since top down decision-making and fear of failure are innovation killers, if you want to innovate and move fast you need to break down siloes, decentralize decision-making and make it OK to fail.  However…

My point is that how you do it matters.  Good execution and alignment can make all the difference between spectacular and underwhelming results.  Here are a few pointers from the trenches:

• Have a cohesive strategy: A strategy is not a vision or a statement of intent, it’s an execution plan to achieve your goals.  If there isn’t a coordinated execution plan, people will come up with their own, which is how you end up with siloes and competing priorities.
• Find the right balance: You can’t just innovate, unless you’re Thomas Jefferson working alone with independent finances.  You still need to do the business as usual stuff to be successfully innovative.  Some innovative companies tackle this by creating dedicated teams focused on new frontiers, others by dedicating a certain amount of time to pure innovation each week. 
• Don’t just pile more stuff on: A common mistake companies make when introducing agile processes is to introduce them on top of everything else rather than ruthlessly re-prioritizing to allow people to focus on innovation.  A good rule of thumb is that if people are too busy to think, they’re probably too busy to innovate. 
• Make it OK to say no: When companies decentralize decision making to empower people to say yes, they sometimes forget to empower them to say no.  In lean organizations iterative experimentation tends to put the highest burden on a subset of folks – in marketing this may be the creative team, for example.  Every great idea has an opportunity cost.
• Don’t diss the boring stuff: I’ve seen failure being celebrated as ‘learning’ while solid successes were ignored, and it wasn’t pretty.  Good people felt overlooked and upset.  The folks who keep the lights on while the innovators are off innovating also deserve to be celebrated.
• Keep your powder dry: I remember discussing a high-ticket dinner event for decision makers in an industry we weren't even targeting.  It turned out the organizer wanted to try that venue and proposed the event as an innovative experiment.  The key takeaway here is that self-optimization isn't innovation and steals resources needed for real innovation.
• Manage the process: I haven't yet seen an organizational model that eliminates the need for good leadership.  Someone needs to support teams, curate ideas, communicate the strategy, balance the workload, manage the budget, coordinate execution to eliminate duplication of effort, hold people accountable and ensure everyone has an opportunity to contribute.  
• Measure things that matter: Your website traffic increased 12%.  Your industry event attracted 150 people.  Your new white paper was downloaded 800 times.  You met your 3x coverage for lead targets. Great but so what?  Will it help you provide better service and – ultimately - sell more? 
• Listen to the naysayers:  Some naysayers are a real drag and seem to be against anything new.  Ignore them, but don’t ignore the input of people who have valid concerns about proposed changes.  Addressing these concerns – or at least considering them with an open mind – may help you avoid serious challenges down the road. 

At the end of the day, innovation has more to do with culture and mindset more than strategy or process.  If your culture isn't innovative, your outcome won't be either.

Picture courtesy of Innovation Labs.

Persistence

A couple of weeks ago I received a notification that someone had commented on a Women of HR post I wrote several years ago.  I had completely forgotten about this post but reading through it again I was reminded that things have a funny way of working out for the best...

If we had a crystal ball, life would be grand. But, because we don’t, we often find ourselves at the mercy of hindsight. Hindsight being 20/20, what is one setback you faced in your career that ended up being a blessing in disguise?

Years ago, I was an HR product manager for a large global software company.  Back in those days at my company, the title ‘product manager’ meant you managed both functional and technical teams.

Then we got a new VP and the entire application development team was reorganized, which tends to happen when you get a new VP.  A decision was made to split the functional and technical teams under two different managers across all products.

I had to make a difficult choice: functional or technical?  My manager encouraged me to choose technical so I’d still report to him but he got moved to another group and I ended up on the functional team.  I enjoyed the design work but missed managing a global team and wanted to do more traveling and fixed my sights on Europe – but how to get someone to pay me to work there? 

I heard about a pan-European role in sales support and finagled introductions to people who could help me get on the short list.  I contrived a few ‘accidental’ meetings and did my best to make an impression.

My persistence paid off and I was offered my dream job as a European product consultant, living in Germany and traveling as needed.  I finished my outstanding product designs, quit my job and started getting ready for an international move. 

Then disaster struck: the hiring manager retracted the offer, opting to go with someone already living in Europe. My tart rejoinder that he could have decided this before I quit my job fell on deaf ears. “Give me a job in Europe,” I demanded of the cosmic forces that make things work out . . . when they feel like it.

Amazingly, about a week later I got an email from a German sales manager offering me a job in technical sales support in Munich.  A bit less money, but it got me over there so I promptly accepted.  But fate intervened once more: when I arrived I found that my new manager had been re-organized and now managed a part of a product I’d never worked with.  So, I had to learn a new language and a new product before I could add any value.

I was starting to feel vexed with fate and new VPs.

The sad truth is that you can’t learn fluent German in a couple of weeks so I was basically useless.  My new boss was very nice about it – and apologetic that the job he’d offered me to begin with no longer existed – but there it was. 

Fortunately, the consulting group desperately needed product experts on a large project.  The German consulting manager told me in blunt terms that with my product skills I could still be of some use as a consultant. Who could resist an offer like that?

So finally, after two reorganizations, a disappearing job offer, an international move and a professional face plant, I was living where I wanted to live and doing a job I was good at. The lesson here is that the road to what you want isn’t always straight and it’s easy to get distracted by what you think you want.

It’s important to know what really matters to you and keep moving toward it, even if you have to make detours or compromises on the way. If you do, things have a funny way of working out for the best.

Link to original post

Photo credit iStockphoto

The Way We Win

On a flight home from San Francisco I watched the movie Ender's Game, which is one of my favorite sci fi books.  Actually, it's one of my favorite books, period.

Two things struck me during the movie:

1. I really, really, really want to play laser tag in zero gee.  Really.
2. Most of us are not part of a controlled leadership experiment where highly trained psychologists throw hard stuff your way to see how you cope before sending you off to battle school - sadly, there's no grand design.

As I watched Ender's Game for the second time... what?  OK, yes, I watched it twice.  It was that or Gravity, which as far as I can tell is about Sandra Bullock and George Clooney in space helmuts the whole time.

 Anyway, it struck me that Ender has a lot to teach us about great leadership:

1. Everyone is part of the team - When Ender gets his own platoon Bernard - a bully - asks him, 'Why am I here? You don't even like me.'  Ender responds: 'I'm planning to turn this 'toon into a team that never loses and I think you can help me do that.'
2. Leaders don't know everything - When introducing himself to his new squadron Ender specifically invites feedback, saying, 'I can't be expected to know everything.  If anyone has a better idea I want to hear it.'
3. Winners don't follow the pack - Ender assigns bunks with senior platoon leaders near the door.  When one of the team points out the other teams have more junior folks near the door, Ender says, 'I don't plan to do things like other platoon leaders.'
4. Make others look good - When the battle tactics instructor chastises Ender's class for not comprehending the basic fundamentals of rocket science, she asks Ender to work a problem for the class.  He defers to two other classmates, saying they know the topic better than himself.
5. If you can't be Ender, be Petra - Petra is Ender's earliest supporter and  offers to work with him despite his nasty squad leader Bonzo's rule that he can't participate in training exercises. She is one of the few trainees perceptive enough to notice high command is grooming Ender.   She is motived by possible future gain but also by genuine kindness, a winning combination that launches her to second-in-command.
6. Change the game - When high command sends Ender's team into a practice battle against two other platoons, Ender forstalls complaints by pointing out there are not rules in war.  He then wins the battle by completely changing how the game is played. 
7. How you win matters - I won't spoil the ending but suffice it to say, there are boundaries that should not be crossed in war or business. 

Racing Along the Electric Highway

I recently had an opportunity to hear Elon Musk, Founder and CEO of Tesla, speak to a select German audience of journalists and Tesla owners.  In fact, I’m pretty sure the person who took this picture was the 6’4’’ guy standing in front of me, forcing me to peek around him at the great man. 

Tesla offers a modern example of how human ingenuity can turn a well-established market on its ear.  Contrary to popular belief, people don’t actually want cars.  What they want is convenient mobility and - if they can afford it - a status symbol. 

Tesla’s CEO also recognizes an important truth about people: Most will not lift a finger to save the environment - let alone give up their beloved SUV - just because it may be better for the world.  It’s not that people are inherently bad or hate polar bears but convenience and comfort will always trump high ideals. 

And let’s face it, owning an electric car is not at present as convenient as owning a gas guzzler.  You have to wait ages to get your Tesla.  You can’t charge it at a regular gas station.  There’s only one Tesla service station in all of Germany.

So what do you do if you want to reinvent the mobility market but you can’t - yet - compete on convenience or price? 

• You make it a status symbol to get the early adopters, knowing that once you get enough swing mass you can focus on other market segments. 
• You have really cool shops with hip and polite young sales reps who have clearly drunk the Tesla Kool-aid. 
• You team up with family friendly franchises like McDonald’s to establish convenient charging stations. 
• You invest in R&D to come up with faster ways to charge than filling a gas tank, such as battery changing stations. 

Most importantly, you show people how the world can be a better place with little or no inconvenience to themselves, whereby any minor inconvenience incurred initially is offset by cool early adopter status.  That, my friends, is how you change the world.

And sure enough, that's pretty much what Tesla is doing, building their own electric highway to bring a new generation of mobility to the masses.  Right now the plan is 10,000 cars on the German roads by 2015, which is a small drop in the bucket compared to the overall German automotive market.  However, if this business model is successful we’ll see electric car adoption spike dramatically over the next decade. 

For you doubters, remember how quickly the iPad took off: quickly passing status symbol status to become a mainstream business tool, inspiring a promising niche business in computing accessories and forever changing how laptop manufacturers and software vendors design their products.

The world is at a critical juncture right now, where established business models persist in trying to hold out against the rising tide of distributed human ingenuity.  This isn't touchie feelie 'power to the people' claptrap, it's a modern business reality.  And it's happening all around us:

• Business leaders cling to the status quo as social networks democratize the leadership function. 
• Utilities conglomerates lobby for enormous energy projects that will take decades to get off the ground while private citizens get on with putting solar panels on their homes. 
• Movie studio executives, venture capitalists and other folks who that have traditionally controlled which ideas make it to market are being sidestepped by the likes of Kickstarter and the Maker Movement.  

And while established car manufacturers make teeny, tiny incremental improvements to reduce gas consumption, visionaries like Elon Musk are reinventing the market.  Whether he succeeds or fails, the mobility industry - among others - will never be the same.

OK, it's just a car but as I listened to Elon Musk's vision for the future it really hit me that the fires of creation are burning brightly, fueled by social platforms, ubiquitous information and enormous technical possibility.   Everything, simply everything, about business as we know it is going to change over the next ten years.

Tomorrow's leaders will be people who partner with others to change the world in a climate where worth is measured not by what you know, but what you share. 

The Truth About Talent

I just finished reviewing a new i4cp research report The People-Profit Chain: A Model for Increasing Market Performance by up to 3x.   It's chock full of metrics, best practices and practical tips on how to connect the dots between people practices and market performance.

You can learn more over at Compensation Cafe: The People-Profit Chain.