What really motivates us?

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It’s not money for starters.

Many organisations still have compensation systems built entirely around the concept of extrinsic rewards.

This is the idea that if you give a rat a reward for performing an action, like cheese if it runs through a maze, then it will be motivated to keep doing that for the reward.

Extrinsic rewards in the workplace are things like pay, bonuses based on performance and punishment, like the threat of being fired for being late to work.

The theory that most of us believe is that if you pay people more you get a more motivated workforce that performs better.

Even better, if you make rewards conditional – i.e, if they meet targets they get a certain reward – that will focus their minds and they’ll perform even better.

Except, it appears that it doesn’t.

A number of studies show that the link between pay and performance is weak, and this is the case around much of the world.

Once you get beyond a reasonable standard of pay, each increase has a temporary and diminishing impact on motivation.

It turns out that for a few weeks after we get a pay rise, we work harder and then the rush fades and we slip back to previous levels of performance.

The next time around, it takes an even bigger pay rise to get the same uptick in motivation.

What’s worse is that if we’re paid to do something we like, we tend to stop doing it unless we’re paid – so being paid for doing what we love could end up stopping us doing it at all unless we’re paid.

That makes sense – we’re paid because if we weren’t we’d be off doing something that we wanted to do, so perhaps we should only take jobs at things we wouldn’t do given the choice.

The worst kind of extrinsic reward, it turns out, is a conditional if-then reward.

Dan Pink, in his book Drive: the surprising truth about what motivates us, writes about experiments showing that when people were paid for completing tasks based on meeting certain performance scores, their overall performance actually dropped.

So, what does motivate us?

That’s where intrinsic motivation comes in.

Kenneth Thomas, in his book Intrinsic Motivation at Work, writes about four characteristics of work that increases intrinsic motivation.

We like working on things that have meaning and purpose. It feels good to know that what we’re doing is adding value rather than being parasitic.

We like being able to choose how we go about things – to use our judgement, select what should be done and in which order. That makes us feel like we own what we do.

We like being able to do things competently and know that we are performing well. This is more about having personal standards and knowing that what we do is good.

Finally, we like knowing that we are making progress – not running all the time to stay in the same place. It feels good to know that we are building something and moving in the right direction.

All this doesn’t say that money doesn’t matter. It does, but not as much as people think.

What’s perhaps more more important is fairness.

We really don’t like being paid less than someone else for the same work.

Do you have Grit?

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Grit is in fashion.

Angela Lee’s TED talk has racked up 12,600,192 views at the time of this writing and she expanded on her ideas in Grit, her best-selling book.

Her basic premise is that grit is what we need to have in order to achieve something outstanding.

So, what is grit and how can we develop it?

The internet’s definition of grit is courage and resolve; strength of character.

It’s a character trait, and so it’s developed from a combination of nature and nurture.

Some of it has to come from our genes – there’s natural talent and capability that is baked into us from the start for different things.

Then there’s the image we have of grit – perhaps a soldier moving forward despite the conditions, a runner pushing through the wall to keep moving.

Another way of looking at it is as resilience or persistence.

This is the willingness to not let small setbacks knock you back but to keep going rather than giving up.

This is a powerful image but is also linked with a macho culture of winning – of beating everyone else. Success is defined as much by who you defeat as what you achieve.

But that’s not all there is to achievement. What’s is the point at winning at something you don’t really like in the first place?

Angela suggests that grit is a blend of passion and perseverance or resilience. Get this right and you’re going to succeed.

If you care about what you do, and you are willing to work on it day after day, then you’re going to get better and perhaps, one day, be outstanding.

This probably doesn’t surprise anyone.

The last piece of the puzzle may be something else that we have no control over.

Many world-class performers are fortunate to have good role models – often their parents.

They showed them how to work hard, to try their best, do their work before playing and work towards long term goals.

Often, it seems that parent’s interests were picked up by children.

Angela quotes educational psychologist Edward Bloom as saying that parents would send their children to some activities and take them to others.

Guess which ones the kids became better at?

So, in summary, nurture helps. Learning persistence and applying it to something you are passionate about is important.

But, as Bertrand Russell said, it is also important to choose your parents wisely.

How to spot fake news quickly

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Fake news is not new. What is recent, however, is how quickly it can spread through the internet.

It’s impact is increasing, especially in politics, and may well have influenced BREXIT and the US Presidential election.

So, what can we do to spot such news – quickly?

Most of us scan news fast, and the writers who create such news know how to get our attention and draw us in.

The most important component is the headline.

Many news creators don’t write their own material. Instead, they find the story and create a sensationalised headline.

A sensational headline may:

  • Appeal to our emotions
  • Take a controversial stance
  • Introduce misleading information

The headline pulls us into the story, so we need to be especially wary of it.

The next part to look at is where the story is from – does it have authority?

We need to look at the website and the writer.

We can trust some sources, especially the major news outlets, to do good journalism. They should check their sources and facts before putting something out there for us to read.

There is an industry, however, of organisations that create material and then use social media to get it in front of people, and they can be hard to distinguish from reputable ones.

We don’t need to do it all ourselves though.

The chances are that someone else has already flagged the story as untrue or fake and posted a comment on the post or the site.

Scanning through the comments will give us an idea of whether the story is likely to be true or not.

If we have the time, before we believe something, we should try and look for another independent source that confirms the story.

This is different from stories that reference the same source. The internet is full of circular references where stories cite each other.

We just need to read more carefully before sharing these days.

Why we need to look behind the story

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What are the chances that we’ll make money investing in Initial Public Offerings (IPOs)?

Not that high, it turns out. As a group, IPO performance tends to lag the market for some time.

An IPO is accompanied by lots of excitement and hype. Expectations are high and buyers are worked up into a fever.

The best result for the promotors is that values are pushed up well beyond any rational assessment. This attracts people who believe by buying early, they can profit from a quick rise during trading.

Then, because the price is so high, it takes time for reality to catch up, and the relationship between earnings and price to reassert itself, which often means that the growth rate slows down for a while.

The problem we face is that the story we hear hugely influences how we think about a sitution.

For example, lets say you are given a description of a person as someone who likes solving puzzles, is good at maths and something of an introvert.

Also, you’re told that the description comes from a list of 30 engineers and 70 lawyers.

What is the probability that the person described is an engineer?

If you’re like most people, you probably think there is good chance that the description is of an engineer.

Most of us, in this situation ignore the base rate – the fact that 70% of the list are lawyers and so that we should start with the expectation that there is a 70% chance of an individual selected from that list at random being a lawyer.

And the reason we ignore the base rate is because of the story – the additional information about the person’s personality – the puzzle solving and maths capability sends us in the wrong direction.

Without that information, we would probably have gone with the probabilities as given to us. The addition of a third piece of information changed how we looked at the situation.

We see this effect happening all the time around us.

When something happens we cling to the first story that claims to explain what is happening. This bias is exploited by viral fake news stories.

The challenge these days is that we have so much information and so many stories around us that it’s virtually impossible to have an informed view.

Instead of watching the news, it may be a better idea to study history before handing over your money.

Are you focused on the right thing?

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How do we decide where to spend our time – as individuals and organisations?

A quote often misattributed to Albert Einstein says “If you judge a fish by its ability to climb a tree, it will spend its whole life believing it is stupid”.

The quote is intended to be used in an educational context – to remind us that children may be innately better at some capabilities than others and so they should learn in the way that works best for them.

The counter to this is that the point of education is to learn and that comes through practice and sustained effort.

A fish has evolved to survive in a particular environment with every aspect of its function optimised for the things it needs to do to stay alive.

We humans, on the other hand, have a capability for learning.

At any given time, however, the capabilities we have are a function of the learning activities we have engaged in, either through interest or because it was what we had to do to survive.

It’s unlikely that any of us grew up dreaming of being good at constructing spreadsheets – but that’s where we might have ended up.

In organisations the collection of individual talents, efforts and skills results in the emergence of organisational capability – what the organisation can do as a whole.

Today, the capabilities of many organisations, especially service based ones, are inseparable from the individuals involved.

If someone leaves, a part of that capability goes with them. People are no longer interchangeable cogs in an organisational machine.

This creates a dilemma when it comes to answering the question in the title, both for individuals and organisations.

Should we focus on our core talents – doubling down and spending time just on those aspects of work that we are best at and compete on our strengths.

Or should we be exploring the areas we are not so good at yet, looking to develop our capabilities and expand our horizons?

It is, after all, a fundamental issue, as a traditional economic assessment would suggest that we should plan and allocate our scarce resources on the activities that will result in the highest net return.

But, who really makes a living allocating resources based on an economic assessment?

The answer for us, perhaps, is to have a go at the opportunities out there and see what works.

We may end up finding new and interesting trees to climb.

How to avoid a life full of regret

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Bronnie Ware spent eight years working as a nurse in palliative care with people who had gone home to die and spent time with them during the last three to twelve weeks of their lives.

In her memoir, The Top 5 Regrets of the Dying, she talks writes about the themes that emerged from conversations with them and expanded on the most common ones.

We live our lives surrounded by expectations and sometimes lose sight of the things that really matter to us.

It’s easy to follow a career path for good practical reasons, but then end up wishing one had the courage to do what one had really wanted.

The book reminds us that our lives are made up of choices, and we need to experience it when we have the ability to still make those choices.

When we lose our health, for example, many choices are curtailed – and we may not realise what we have lost until we no longer have it.

Many people wished they hadn’t worked so hard – certainly from every male patient.

Perhaps when you do what you enjoy, it feels less like work.

Work is clearly important – but we may have less regret at the end if we get the balance right.

Many of us suppress our feelings – either to get on with others or because we don’t have the courage to say how we feel.

Being able to do that either makes things better, or closes the chapter on an unhealthy relationship.

Whatever happens, we’re better off.

Perhaps before the age of the internet, many people regretted losing touch with their friends.

With the internet, perhaps we can’t lose track of them, but we still need to spend time with them.

In the end, according to Bonnie, it’s only the relationships that remain in the final weeks.

Finally – many people did not realize that being happy was a choice until it was too late.

Patterns and habits built up over years can get in the way of just letting ourselves be happy.

In the end, whether we have regrets or not depends on the choices we make throughout life.

Why we need to understand psychological contracts

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What makes it possible for people to work together and create value?

For starters, a relationship needs to be created between them.

The most obvious kind that we have around us is an employer-employee relationship in organisations.

In that context, the term Psychological Contract is what the people entering that relationship see as the contract between them, rather than the actual written contract they have signed.

But, you can see this everywhere where interaction happens between people.

For example, a psychological contract exists between us and our children, between us and a search engine like google, between us and a place that serves coffee like Starbucks.

So, how can we model the idea of a psychological contract and use it for good?

The picture above is an adaptation of a framework published by David Guest in 2004.

The basic concept is that any relationship involves promises and expectations on both sides.

For example, an employer promises to pay us and we promise to do work for them. We expect to get paid and they expect us to do work.

These promises and expectations are combined into a deal, which may be very different in the participants minds than what is down on paper.

Fairness in how that deal is implemented by both parties leads to trust.

Then, the level of trust leads to attitudes and behaviour.

If the deal is not implemented fairly, then trust is eroded, people become demotivated and start to produce less and act up more.

If the deal is implemented fairly, trust is increased, people are happier and more productive.

The same basic model can be applied widely.

For example, many years ago, we visited Vienna. We needed food and to use the facilities, so we went to a McDonalds, figuring that it would be the same everywhere and we’d get both there.

We ordered food and then went to use the facilities. It turned out we had to pay.

If we had used the facilities first, then our payment would have been taken off the bill.

As we had already eaten, that wasn’t an option. McDonalds in Vienna, however, refused to refund the charge.

We had a psychological deal with McDonalds – to be treated the same the world over – and this was unfair.

Unsurprisingly, we left with a negative impression of McDonalds and Vienna, with trust eroded and a memory of an experience that has lasted many years.

The psychological contract also underpins how we interact with websites.

When we go to search on google, we expect a search box and a thought-provoking doodle.

We also expect to find what we are searching for, with a balance of advertised and organic content.

But that may no longer be the case – Seth Godin wrote in 2013 about how companies like google change from wanting to create value for customers to creating value for shareholders.

We may live in a world where we sign contracts all the time – take all the software ones that we sign without reading such as when Apple brings out an upgrade on the iPhone.

At the end, however, the only contracts that matter are psychological.

How to write a business playbook

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In sports, a playbook describes plays, a preset plan of action.

It’s a number of moves – a strategy – to move a team into the right places to score.

A playbook is not a woolly wishlist – it’s practical, tactical stuff.

So, how can a business playbook help us be more effective?

Let’s take a very simple example and draw out the most basic business operation possible in a consulting firm.

In basketball playbooks, the court has a number of zones and a basket.

Offensive players are denoted with a O and defensive players with an X.

Lets start with an engagement – a practice lead (O1) enagages with a customer contact (X1).

O1 dribbles the ball (the wavy red line), starting the conversation.

What this very first interaction reminds us is that X1 is not the target.

The target is to be useful – to solve a problem, make money, save money and so on.

That is the basket we are heading for at the end of the court.

When X1 and O1 have decided that there is some merit in this and worked out a problem they would like to solve together (identified the basket), the practice lead passes to an operations lead (O2).

The pass is shown by a line with two slashes. Quite often, people just assume others should know what to do, but a playbook shows that a clear pass is needed, perhaps with an update meeting or formal handover.

X1 may also involve other stakeholders, X2 and X3. O2 now needs to dribble towards the stakeholder team and come up with specific work packages and deliverables.

Finally O2 passes to a consultant or analyst (O3) that does the work, shoots and scores.

Drawing the play in this way also brings out a few other aspects.

O3 needs to deliver the work quickly.

The player is in the 3-second area, and you can’t linger in there. Get things done fast and the customer will appreciate it.

O1 is stood in the three point area.

It might be possible to shoot from there, but its a long shot. Instead, it makes sense to do the play and get closer to the basket.

In other words, rather than guessing and trying to make a quick decision, engaging and understanding the client’s requirements is more useful.

In some cases, we might be offered a free throw – a chance to prove ourselves – with a demo or a pilot piece of work.

We need to put the best player on there to try and make the shot.

It’s interesting how, with just a few components, one can draw out a fairly complex business interaction and make the crucial elements clear.

For example, how many projects have you seen where not having a clear handover or pass meant that requirements weren’t understood and it took longer?

How many times have you seen players going for the long shot when actually getting closer to the basket may have delivered the project?

Running a business is less about wishes and more about action oriented plays with our teams – and those are the things that need to go in a playbook.

How did this happen?

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We often want to know how something happened – what was the story behind it?

This approach to looking the world is powerful because it takes everything that happened and puts it into a sequence.

Most storytellers, as a result, follow a linear format – like unrolling a carpet.

First, this happened. Then that. And so, this happened in the end.

Even if you don’t know the ending, it’s going to happen one thing at a time. History is what happens, tomorrow.

This kind of thinking is also dangerous.

It leads us to think that things can only happen in the way they happened.

The extreme version of this is a complete belief in fatalism – the belief that all events are predetermined and inevitable.

This is almost never the case.

It is tempting to think that success for some people was inevitable. For every Zuckerberg and Facebook, however, there are people with similar ambitions, resources and opportunities who didn’t make it.

With hindsight, all the moves that he made were obvious. Anyone could have done it. Except they didn’t.

Taking an issue that has had a much greater impact for longer, the economist reports on a dispute between historians and economists, where there is disagreement how to look at slavery in the American economy and its impact on the industrial revolution.

A historic view might say slavery was important in the industrial revolution – it clearly happened, and therefore had an impact.

An economist might argue that because slavery happened, it does not mean it needed to happen. The industrial revolution would probably have happened anyway, just with different methods – for example with more mechanisation.

History describes what happened – it’s a story.

Just because it happened the way it did, however, it doesn’t mean it was the best way for it to happen, or that alternatives at the time were more expensive or unlikely.

To really understand something, it’s not enough to look at what happened.

We also need to look at the counterfactual – what did not happen, or what was not the case.

What’s your story?

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In his book One Up on Wall Street the investor Peter Lynch writes about six stories one can associate with companies.

Every investor wants a ten-bagger, a company that shoots up and multiplies their investment many times over.

Fast growers are usually small or are building a completely new market, which lets them get bigger fast.

They might have the potential to grow 20-25% a year or more for a number of years.

Stalwarts are larger companies, with a profitable market and room to build business.

They might double in a while – say five years.

Slow growers are the established companies that have pretty saturated markets.

They may grow at a little more than the growth rate of the economy as a whole.

Cyclicals experience the ups and downs of business cycles.

Commodities and shipping, for example, tend to go through cycles of oversupply and reduced investment followed by lack of supply and increased investment that makes the price of their products, and therefore their earnings, go up and down.

Turnarounds are opportunities where new management, new owners or a change in the environment make a previously unprofitable or failing company viable.

On the other hand, they might never grow at all – or have to change radically to remain relevant. Textile mills, for example, might move from cotton products to increasingly high-tech fibres now.

Asset opportunities are companies that have value hidden in places the market misses.

If that value then comes to light later, it should result in a rapid increase in valuation for the company.

Peter Lynch came up with these categories a number of years ago and used them mostly to select listed companies for a stock portfolio.

They are, however, fairly universal patterns and can be applied to a number of circumstances.

Take a career or a startup project for example.

Is it slow growing or fast growing? Is someone working on a project that, when realised, will skyrocket their value?

The point is that the story you tell will decide the investment you get.

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