Category: Management

Why do some people and companies inspire loyalty and dedication from employees and customers? What’s different about them?

Simon Sinek argues in a TED talk that has been watched over 35 million times that it’s because such companies have a pattern of thinking that is inside out.

Many of us can easily say what we do.

That’s our profession, our job, our position in a family – we might be doctors, consultants, accountants, husbands, wives, parents and so on.

In particular, when it comes to work – we can point to the roles we have as what we do.

We also usually know how we do things.

We may have some extent of control and autonomy over the work we do and so design how we work, or we operate in a way set out by someone else.

In either case, we still know how to do something.

Where many of us struggle is in explaining why we do something.

Why are we in this particular profession? Why are we in a particular relationship?

Are we there because it’s something we truly believe in or is it just something we have ended up doing?

Many people make the mistake of thinking that companies exist to make a profit.

That’s wrong – companies make a profit by creating value for customers – profits are a result of good work and not the motivation for good work.

Sinek argues that if we know why we do something – if we have a sense of purpose and belief and mission – then others are more likely to buy into that than there are to buy into any particular product that we try to sell.

Take Apple, for example. Apple was infused by a zen-like focus by Steve Jobs on creating products that could change the world.

Jobs said nearly 40 years ago that “We’re gambling on our vision, and we would rather do that than make “me too” products. Let some other companies do that. For us, it’s always the next dream.”

That vision turned Apple into one of the most uniquely successful companies in history.

Again, from Jobs “you can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. Because believing that the dots will connect down the road will give you the confidence to follow your heart even when it leads you off the well-worn path and that will make all the difference.”

Interestingly – the why is not something that we can logically justify – it’s something that we need to believe in.

It is a matter of faith and and trust – a feeling of having a higher purpose – and perhaps it’s not surprising that people that radiate a sense of purpose and mission inspire us more.

How do we make decisions that may influence our lives for many years in the future?

A surprisingly simple answer may be that it depends on our mindset.

According to Carol Dweck, a Professor of Psychology at Stanford University who researches motivation, what we believe about what we are capable of doing has a huge impact on the eventual outcome – and success or failure.

This starts early. Four year old children given a choice between an easy puzzle and a hard one split into two groups based on what they believed.

The children with what Dweck calls a fixed mindset stuck with the easier puzzle, telling the researchers that smart kids didn’t make mistakes.

The children with a growth mindset took the harder one, finding the easy one boring and apparently more comfortable with the idea that they might not succeed.

The point, Dweck explains in her book Mindset, is that children taught to view intelligence and creativity as innate, fixed characteristics are more likely to view setbacks as permanent.

On the other hand, children that are taught that failing at something simply means that they have not yet succeeded can go on to practice, get better and try again.

Dweck’s is one of an increasing number of scholars that work in the field of positive psychology – studying how to live better rather than the more traditional approach of studying what is wrong.

The work they do, as a result, is based on modern research techniques rather than simple motivational thinking.

A sceptic, after all, would simply argue that it’s obvious that people who think positively do better. Where is the insight in that?

It turns out, however, when you carry out brain imaging scans of people with different mindsets the brain activity of growth oriented people showed more activity in processing meaning and relationships – literally having more neuronal connections firing trying to get to an answer.

The other thing that came out from the imaging studies was that growth oriented people were focused on finding the answer while people with a fixed mindset had more brain activity in regions that dealt with their emotional responses – how they would feel about getting the answer right or wrong.

In summary, a fixed mindset believes that capabilities are innate and fixed – people are born smart, for example.

A growth mindset believes that capabilities can be improved over time – persistence and hard work can make a difference.

This matters, especially when it comes to changing outcomes for children born into deprived areas where there may be a prevailing belief that they are simply less smart than others and will never amount to anything.

Most people will be on a continuum between the two mindsets.

Knowing which one we tend towards, however, may be the first step towards explaining some of the decisions and choices we have made so far in our lives.

Recognising that we can develop a preferred mindset may open up new opportunities – things that we can yet do.

Choosing what to quit and when to quit it is more important than we sometimes realize.

So, why don’t we quit more often?

Why do we persist with a job, a relationship, growing a moustache and a myriad other activities that we should really just drop and walk away from?

According to Steven Levitt and Stephen Dubner in Think Like a Freak, there are three main reasons why we don’t quit.

First, we’re afraid to be seen as a failure.

Phrases like “Winners never quit and quitters never win” have been seared into our brains from a young age.

The second reason is the idea of sunk costs.

If we have already invested time into a career, energy into a relationship and money into projects and investments, then quitting means effectively writing off all that investment.

Having sunk all that we have into something, we’re afraid of stopping just before the big payoff.

What if we carried on for just a bit longer?

The third reason is our tendency to focus on costs now instead of opportunity costs.

If we do something now with our time, that also means that we have to give up the idea of doing something else with our time, even if that something else might be more valuable.

We have limited, scarce resources of time, money and energy.

For every unit that we spend in one place, something else needs to be abandoned.

It’s easier, however, to focus on what we need to do now than to think about what we are giving away.

For example, we’d rather buy something nice now than put the money into a pension to use in 50 years.

These three reasons are rooted in our past, present and future: what have we invested already, what do we choose to do right now and what will we look like to others in the future.

The point, Levitt and Dubner write, is that we don’t really know. We can’t run experiments that simultaneously test quitting and persisting.

Or can we?

The authors set up a site, now defunct, called Freakonomics Experiments, and asked people to put in their questions and take a decision based on a coin toss.

That mean’t half the participants would quit and half would persist.

The results were eye opening. On almost every question, the people who quit were happier 6 months later than those who didn’t.

As they write in their blog on the topic “We just came up with a basic truth, which is: when you’re not sure what to do, you should quit. This is what the data tells us: if you can’t decide, it means you should have quit already and you should quit right away.”

Perhaps the last word on this should go to W.C. Fields, who said If at first you don’t succeed, try, try again. Then quit. There’s no point in being a damn fool about it.

As companies and as individuals we should be spending time thinking about strategy and the business environment around us but inevitably end up focusing on the here and now – the urgent rather than the important.

That means we tend to be inward looking – spending time thinking about management and control when we should be also looking outward, developing a strategy to follow.

So, what do we need to do in order to develop our strategic thinking skills?

In Developing Strategic Thought: Rediscovering the art of direction-giving, Bob Garratt writes that the Western approach to strategy formulation thought of it as a process of corporate planning.

What this means is that we should follow a series of analytical steps.

First, we decide what our goals and objective are.

Then we look at the internal and external factors around us – doing a SWOT analysis of strengths, weaknesses, opportunities and threats and a PESTLE review – political, economic, social, technological, legal and environmental conditions.

We take all that information and identify the strategic options open to us, analyze them and select the ones we intend to follow.

These selections are then used to decide what resources are allocated, how budgets are developed and the management controls that need to be in place. Once the strategy is set, it is followed.

This is all very linear and logical. And Bob argues that it misses the point.

All of this is very me me me.

Competitors are only seen as threats. Customers are simply revenue sources. Strategic alliances are not considered.

That said, the approach worked for a long time, but in a globalized business environment different models are now in play.

Much of Japan’s success in developing new markets rests with the approach its companies took to developing strategy.

It was a much less tidy approach.

Kenichi Ohmae, writing in The Mind of the Strategist: The art of Japanese business, describes an approach where views and opinions about competitors, customers and allies – their approach and likely strategies is blended with the company’s thoughts – and goals and plans emerge as a result.

It’s less like following a path and more like playing chess, except there are more than two players.

The choices we make depend on the moves other people make and our expectations of how they will move and how they will respond to the moves that we make.

The Eastern approach, therefore, is non-linear and continnual, and strategy emerges rather than being planned.

Both approaches have their place.

Understanding which approach we naturally tend towards, however, may help us when considering what do do in a broader context.

And, a wise strategist will probably combine both approaches to inform one’s own strategy.

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.