What individual stress says about organizational defects

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There is never enough time to get everything done, everyone is always busy and some people are stressed.

Not in a good way. Not in the way that makes you perform better, also called eustress.

Stressed in the way that means they are not happy.

How should organizations deal with this?

Most approaches revolve around helping individuals deal with stress through education, coaching or counselling.

It is seen as a problem that the individual needs to work through and solve.

Now, imagine you are in a large factory making widgets and the inspector finds a problem with a widget, say it has a crack.

The crack is a defect. The inspector does not blame the part for the defect – there is clearly something wrong with the system of production that has resulted in the defect when the part was produced.

Instead, the production line is stopped until engineers figure out what is going on and how the process can be fixed to make sure that defective parts don’t keep being produced.

We are still in the very early days of knowledge working environments and knowledge workers.

It is easy to say that stress is a problem for individuals and should be dealt with at that level.

This, however, is an example of the fundamental attribution error – saying that something is happening because of the people involved rather than the situation they are in.

There is a case to be made that cases of individual stress should be treated as symptoms of organizational failings.

The system creates the conditions for stress to develop.

Research shows that changing organizations instead of focusing on individuals could have real benefits.

Some organizations are trying to address this. Jason Fried, the founder of Basecamp, talks about “library rules” in this interview with the Harvard Business Review. At their offices they:

  • Work like they are in a library – you know, quietly.
  • Minimize interruptions, both physical and virtual.
  • Create deep communication; write things up and give people time to respond in their own time.
  • Dial down the speed; does everything always need to be in such a rush?

And much more.

There are no answers that are going to work for every organization – many people will disagree violently with Jason’s practices and argue that they won’t work for them.

The question, however, is that in a world where knowledge work can be done by anyone, anywhere, which organizations will develop the capability, processes and resources to pull ahead of the rest?

Is it time yet for another crisis?

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We had the dot com bubble at the start of the millenium and the financial crisis in 2008.

Where is the next bubble building and when could it pop?

Markets are now highly correlated – information is plentiful and most people know most of the same things about what is going on, and so make pretty much the same decisions about what, when and how much to buy.

Whether it’s shares, bonds or commodities, the large players all have more or less the same approaches and strategies.

And that leads to a problem.

If everyone were suitably diversified, and held enough different things, then no one thing should be enough to cause a crash.

But this isn’t how it seems to work in practice.

The financial crisis showed that all the major financial players were exposed to the same kinds of toxic products that they didn’t understand.

Like elephants in a rowing boat, when they all tried to get to the other side to escape, the whole thing tipped over and was in danger of sinking.

Governments had to step in and bail them out.

Apparently its easier to let markets blow bubbles and pick up the pieces when everything falls apart than it is to try and stop them before they get out of control, according to Alan Greenspan, once the U.S Federal Reserve Board Chair.

Since bottoming out after the financial crisis in 2008, stock markets recovered steadily and hit new highs.

Many investors, wary of overvaluated stock markets, began piling into bond markets.

That has led to higher bond prices and lower yields. Many bond yields are in fact negative in real terms.

The actual yield, however, is not always the main criterion. Having bonds in your portfolio acts as a hedge against the stock component.

If you could have had a 100% stock portfolio and it would have fallen by 50%, you might feel relatively happy if you actually had half your portfolio in bonds, and the actual drop was 25%.

Bonds have traditionally been your friend when things go wrong.

It’s not at all clear whether high valuations are a threat to markets.

Some people say that if interest rates rise, then all bets are off, markets will crash and values will fall.

Others say that just having valuations move higher is not the problem – the risk comes from increased lending for dodgy purposes.

Or in a slightly more technical words from Jim Chanos, a prominent short seller, “Bubbles are best identified by credit excesses, not valuation excesses.”

The existence of new and risky lending practices, however, is often hard to pinpoint until after they have wreaked havoc on the system.

Until then they are likely to be hailed as the best thing since sliced bread.

The rule of thumb is that a crisis happens every decade and a depression every seventy or so years.

Ten years after the last crisis, we might do well to be wary.

What is your time worth?

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The dystopian science fiction thriller In time dreams up a world where everything you buy must be paid for in time.

If you want to pay for a bus ride, you pay using 30 minutes of your time.

When you have no time left in your account, you literally time out and die.

Is this simply science fiction, or is there something relevant in it for us?

The way in which we refer to time suggests that there is. We talk of “spending time” on an activity, in the same way that we talk of spending pounds to do something or buy something .

Clearly, for most people, we exchange time for money and use that money to buy experiences and things.

But then we also “invest time” in activities that we think are worthwhile – education, leisure and time with family.

In other words, the language we use to describe time is not very different from the language we use to describe money.

Stretching the logic a little – we understand the need for financial education so that we can make better decisions about money. We should also understand what time means to us so that we can make better decisions about time.

I remember reading a line that said people who would be anguished at the thought of losing their life suddenly are content to waste it minute by minute.

Many successful people, according to Daniel Levitin in The Organized Mind, calculate what their time is worth to them.

This does not have to be what they earn or what their job is worth in companies but those numbers can inform the calculation.

For example, if you earn £50,000 a year and work 2,000 hours a year, then your time could be worth £25 an hour.

When there are things you have to do – where you need to spend time – using this number to decide whether you should do it or get someone else to do it may be helpful.

For example, if you need to mow your lawn and you can hire a gardener for £15 an hour, perhaps you should hire the gardener and save £10.

There is the old story of the little boy who asked his busy, successful mum how much she earned an hour. She said £20 an hour. The boy went to his piggy bank and counted out £10 and gave it to her. She asked what that was for, and the little boy said, “I want to buy half an hour of your time, can you sit and have dinner with me?”

We perhaps only understand the value of time when we start to run short of it.

And this happens faster than you think.

Tim Urban, in his blog Wait but why, worked out that by the time he left high school aged 18, he had used up 93% of the total in-person time he would spend with his parents during their lifetimes.

He was in the tail end of that time already.

Assuming we don’t manage to invent the technology that lets us live to 1,000, learning how to invest your time well so that you can do fulfilling work and spend time with the people that matter to you could be the most important thing you do with your life.

What’s holding you back?

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It’s not easy to swim with something weighing you down.

Various versions of an old parable tell this story – individuals and organisations are weighed down by their history, old decisions, possessions, assumptions and fears.

In the story, the person carrying the rock has to let go of it in order to survive. In other versions, they are pulled under, and the last words they say as the onlookers urge them to drop the rock is “I can’t, it’s mine.”

This is sometimes called the sunk cost fallacy. You may have invested years of your life and huge amounts of money in a project that cannot be recovered.

Should this past investment influence a decision you have to make now?

Logically, it should not. If the past cannot be changed, you should evaluate the decision purely based on what you will happen as a result in the future – so called future utility.

As human beings, however, this is very hard to do. We have evolved and survived by placing more emphasis on avoiding threats rather than chasing opportunities.

There is a built-in loss aversion mechanism inside our brains that fears losing much more than winning.

And this mechanism can make us take bad decisions when it comes to our businesses, investments, jobs and personal circumstances.

How can you avoid this trap?

One approach is to start with a clean sheet of paper.

Some organizations use zero based budgeting. At the start of each new period, people in the organisation need to ask for money and must justify what they are going to do with it. The previous year’s allocations are cancelled and everyone starts from a zero base.

This means that instead of simply rolling over budgets from previous years, you need to look again at how you do your business and where you should invest time and money the next year.

Some investors have been known to sell their entire portfolios, just so that they can start again with a fresh allocation.

The problem is that letting go of long-held fears and assumptions is not easy.

What you think is possible, achievable and desirable is boxed in by what you already know and believe.

Questioning your assumptions and taking apart long held views may be the only way to really let go of your rocks and move on.

When will we have have more zero energy buildings?

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In 2015 Whitbread, the parent company of Costa Coffee, announced that they had built the first zero energy coffee shop in the UK.

In an example of how constraints help create innovation, the building has a number of features that help it reach the ‘zero energy’ standard including:

  • A frame made from sustainable wood rather than steel
  • Solar panels
  • Capturing and using rainwater
  • Lots of insulation to keep heating and cooling needs low
  • Use of natural or passive ventilation
  • Underfloor heating

Two of the three things on that list, solar panels and rainwater harvesting systems can be added to existing buildings.

The others involve more work and disruption – insulation, changing heating systems and installing passive ventilation can’t be done without getting in the way for some time.

And changing the frame just isn’t an option for most buildings.

The amount of energy lost because a building structure is inefficient can be considerable.

These parts of a building also have a long life cycle and may only be replaced or upgraded in some cases after more than 60 years.

Organisations that look at the life-cycle cost of their buildings may find that the long-term benefits of investing in more energy efficient design now can create huge savings over time.

But they are also fighting the short-term needs of their organisations to conserve cash and limit budgets.

So, will things be better in the future?

It is easy to predict a future full of super-efficient buildings such as Costa Coffee’s, a de-carbonised transport system and zero-carbon development.

The problem is that there are many possible futures. Which one is most likely?

A good way to predict the future is to ask what you have done so far.

In other words, instead of asking “What are you going to do to become more energy-efficient”, you ask, “What have you done so far to become more energy-efficient”.

For the vast majority of people and organisations, the answer is going to be “not much”.

And for a futurist, that suggests that in the future, people will still not do very much.

A key reason for this is that the costs of investing in projects like Costa Coffee’s needs resources now and the benefits come later.

As human beings, we are built to overvalue the present and discount the future, and this naturally leads to inaction and apathy when it comes to looking at such projects.

This is why regulation and government action in this space is so important to spur innovation and creativity.

So, while in many areas we need the government to get out of way of business, building standards is one where we may need more intervention and not less to create a low energy future.

How to design incentive systems

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Many believe that if you create the right system of incentives people will perform better at what they are needed to do.

For example, with sales people you just need to get the commissions and bonuses right and that will result in people meeting and exceeding targets.

But is this really the case?

An increasing amount of research (and a helping of common sense) suggests that it isn’t.

Linking a reward directly to behaviour has an unwelcome side effect – it tends to reduce how much you want to do it.

Ideally, you want behaviour to be intrinsically motivated: people do a good job because they want to, children eat greens because they want to, people turn off the lights when the leave a room because they want to.

In their book Intrinsic Motivation and Self-Determination in Human Behavior the authors, Edward Deci and Richard Ryan, write that “the research has consistently shown that any contingent payment system tends to undermine intrinsic motivation.”

Such payments can have a corrosive impact on organisational performance, especially when you are asking people to do complicated or interesting things.

People quickly learn just how much they need to do to get the payments, and no more.

Or they “game” the system – by making decisions that protect their own payments while ignoring the decisions that may provide a greater overall benefit.

It turns out that there are at least two things you can experiment with to break this cycle.

First, make rewards a surprise. If you can’t predict when you will be rewarded, you don’t link the reward to what you do, and that has less of an impact on your behaviour.

Second, it turns out that people are more motivated when given a choice between a bad task and a worse one.

Try this on your kids: see how much longer they do their homework when given an choice to do that, or clean the dishes versus being able to watch TV when they are done.

The silver bullet, however, is to aim for incentive systems that design in goal congruence.

Goal congruence simply means that individual goals are consistent with, or agree with the larger organisational goals.

It requires looking at more than just the person and their role but also consider how what they do interacts with and influences the larger organisational system.

This is easy to say, but not that easy to do.

But that is also why organisations that can pull this off should be able to show real improvements in organisational productivity and behaviour.

Are you as good as you think you are?

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There appear to be no shortcuts to becoming competent at something.

All skills, rather inconveniently, seem to take time and effort to master.

Why is it then that some people believe that they are outstanding performers at an activity when it is clear to others that they are not based on their performance?

This appears to be because of a cognitive bias called the Dunning-Kruger effect, shown in the chart above.

When you are starting an activity, you may not be fully aware of what it means to be good at that activity.

As a result, you may be excessively confident of your ability and performance.

As you spend more time doing the activity and undergoing training, you become better at identifying what it means to be good.

As a result, your confidence in your ability to do the activity might also fall.

This can carry on until you reach a point where you can see that you are now doing better at the activity each time, and your confidence once again grows.

Once you are competent, perhaps even an expert, your confidence in being able to carry out the activity is now justified and is apparent to others through your results.

In essence, the way to avoid being trapped by the Dunning-Kruger effect is to become more self aware.

In her book Madness, Rack and Honey, the author Mary Ruefle writes about a remark made by the Vietnamese monk Thich Nhat Hanh on self awareness: “Before I began to practice, mountains were mountains and rivers were rivers. After I began to practice, mountains were no longer mountains and rivers were no longer rivers. Now, I have practiced for some time, and mountains are again mountains and rivers are again rivers.”

Or, as Confucius said succinctly: “Real knowledge is to know the extent of one’s ignorance.”

Why constraints are crucial to innovation

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We are often told to “think outside the box”.

Working within constraints, however, may be crucial to actually being able to innovate and create something new and different.

When you are free of any constraints or limitations, it is difficult to see what will truly make a difference because you don’t really have anything to measure yourself against.

You might end up doing new things for the sake of newness, rather than because they are going to be a improvement on what has happened so far.

Take, for example, Frank Gehry’s design of the Walt Disney Concert Hall, hailed as one of the “most acoustically sophisticated concert halls in the world”.

According to the architect, the interior space was designed for stringent acoustic standards, and the limations and constraints that resulted from the standards drove the design and innovation choices that have made the hall a landmark.

A simple constraint can focus attention and create the conditions for generating innovative solutions.

Take the idea of Zero Emissions Cities. If you wanted to reduce emissions in a city to nothing, what would you do?

Governments and city officials would need to radically change their policies and incentives to support zero emissions energy initiatives.

You would need to think about how the energy infrastructure could be upgraded, the issues around smart mobility and logistics – moving passengers and freight around, and the way in which the environment and ecosystem would be managed.

The possibilities for innovation are endless – once you have imposed a constraint or target.

Coming closer to home, constraints can increase your own productivity.

One of the biggest time sinks for us is mobile phones. The endless screens mean that you could keep scrolling and reading for ever.

Software with features can result in you spending more time with the features and less time doing any useful work.

Most advice around personal productivity involves turning off phones and distractions and slimming down your work tools to the essentials needed to get on with the job.

According to Donald Sull of McKinsey, the key to improving the way in which you innovate is to pick simple rules to guide how you work.

Having these rules helps you prioritize, to assess where you are, to keep an eye on whether you are on target and can make a step change in improving your innovation processes.

You do need to think outside the box to come up with ideas and in order to be open to possibilities.

When it comes to action and innovation, however, the crucial next step may be to choose the right box to step into and work within.

Should knowledge be accessible to everyone?

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Publically funded research in Europe could be free to access by 2020 if the European Union carry out necessary reforms.

At the moment, despite there being more information available than ever before, access to high quality research is still limited to people who can either pay for it or belong to universities that can afford the subscriptions.

This freezes out the vast majority of people from accessing scientific knowledge.

The Open Science movement is an attempt to change this, making the results of research and the underlying data more accessible to all levels of society.

The main arguments against open science are:

  1. The peer-review system operated by journals maintains quality.
  2. Scientists should be compensated for their work
  3. Widely available data could be misinterpreted by lay people.
  4. Making certain kinds of research findings public could mean they are misused, for example to create biological weapons.

The proponents of open science argue that:

  1. Publically funded research should be available to the public.
  2. Open access means that there will be more review by a more distributed readership.
  3. Open science will make findings more reproducible.
  4. More people can apply the findings

For individuals and businesses, the easiest thing to do right now is rely on the first few results of a google search to provide all the evidence they need to make a decision.

This results in inevitably narrowing the amount of information that is taken into account when analysing a situation and deciding what to do.

One of the benefits of a well written paper is that the author takes the effort to examine prior lines of thinking, point to seminal works in the field and set out why the information in the paper is new and relevant to you.

This contextual approach is crucial – relying on easily accessible information can create a bias and it is important to consider alternatives to the options that seem most obvious to make good decisions.

There appears to be little truly useful scientific information out there to help businesses improve how they operate, especially ones that operate in niche manufacturing fields.

Perhaps making scientific research more open and accessible is one way to change that and make organisations more productive and sustainable.

Some open science resources are:

How to invest in yourself

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For a long time people were thought of as “resources”, lumped together in a generic mass of labour that had an economic purpose.

Many organisations still think of people in this way – and it’s in the title they give the department that deals with this task – Human Resources.

Is this the right term to describe this activity now?

The Economist has an interesting article on Gary Becker, the Nobel prize winning economist, who in the 1950s began to articulate a theory of economics based on “human capital” – investments in things that raise your own value.

Becker explains that a form of capital like a physical asset is something that yields income and other useful benefits over time.

Less tangible investments such as education, health or habits can also yield income and other useful benefits – and this is what economists refer to as human capital.

The most important ways to create human capital are through investing in education, training and health.

Human capital is something that an organisation cannot separate from you.

You can’t be forced to give up your knowledge, skills or health in the same way that your house, car or bank savings can be taken from you.

This creates a quandry for organisations such as banks or employers.

A bank may be happy to lend you money for a house, knowing that they can always get the house if you fail to make repayments, but they may be less happy to lend you money for an education.

Employers may be happy to invest in job-related training that makes you more productive on their equipment or technology but less willing to invest in generic education that makes you more marketable.

This is why many investments in human capital have to be funded by people themselves, rather than relying on others to fund it for them.

One form of investment is “opportunity cost”, the earnings forgone by someone who goes on to complete advanced education. Many others rely on savings for later education.

It is also important to value the total returns from human capital accurately.

One form of return is income – more money – which seems all important because it is so visible.

But you also have other useful benefits – more interesting work, more choice, perhaps more opportunities, that arise as a consequence of increasing your human capital.

You need to take into account all these potential returns as you decide where and when to invest in yourself.