Organizations have bad habits too (and they can be changed)

Organisations have bad habits too (and they can be changed)

“Individuals have habits; groups have routines. Routines are the organizational analogue of habits”, wrote Geoffrey Hodgson, who spent a career examining organizational patterns. And as we know habits can be good or bad. Not just that, they can be dangerous, because while performing routines, employees yield decision-making to a process that occurs without actually thinking, automatically – habit.

Paul O’Neill who is known to have turned around the fortunes of a company called Alcoa – Aluminum Company of America understood this really well. Alcoa was going through troubled times when it hired Paul O’Neill as CEO. Investors, executives and workers were unhappy. Quality was suffering. And competitors were stealing customers and profits.

O’Neill believed that some habits have the power to start a chain reaction, changing other habits as they move through an organization. These are keystone habits. The habits that matter the most. These are the ones that, when they start to shift, dislodge and remake other patterns.

So O’Neill figured he needed a focus that everybody – unions and executives – could agree as being important, so that he could bring people together. He said, “So I thought everyone deserves to leave work as safely as they arrive, right? You shouldn’t be scared that feeding your family is going to kill you. That’s why I decided to focus on: changing everyone’s safety habits.” So he made SAFETY his top priority and set an audacious goal for a manufacturing company of that size: zero injuries.

The approach was brilliant because unions had been fighting for safety rules for years. And managers were happy since injuries meant low productivity and low morale. What most people didn’t realize was that O’Neill’s plan for getting zero injuries entailed the most radical realignment in Alcoa’s history.

According to O’Neill’s safety plan, any time someone was injured, the unit president had to report it to him within 24 hours and present a plan for making sure the injury never happened again. The reward: people who got promoted, were those who embraced and cracked this system.

If unit presidents had to contact O’Neill within 24 hours with a plan, they needed to hear about the accident from their vice presidents as soon as it happened. So vice presidents had to be in constant communication with floor managers, who in turn needed to get workers to raise warnings as soon as they saw the problem. Meanwhile in those 24 hours everyone in the chain had to generate a list of suggestions for their immediate superior, so that there was an idea box full of possibilities for the unit president to choose from. This changed the company’s rigid hierarchy as communication had to make it easy for the lowliest worker to get an idea to the loftiest executive, as fast as possible.

As Alcoa’s safety patterns shifted, productivity skyrocketed, quality improved, costs came down and autonomy improved. If molten metal was injuring workers when it splashed, then the pouring system was redesigned, which led to fewer injuries. It also saved money because Alcoa lost less raw materials in spills. If a machine kept breaking down, it was replaced, which meant there was less risk of broken gear snagging an employees arm. It also meant higher quality products because, as Alcoa discovered, equipment malfunctions were a chief cause of subpar aluminum.

By the time O’Neill retired after 13 years, Alcoa’s annual income was five times larger than before he arrived. Its market capitalization had risen by $27 billion. Alcoa became one of the safest companies in the world – the keystone habit that changed it all.

Source: The Power of Habit by Charles Duhigg

Stop planning. Start testing.

Stop planning. Start testing.

Corporate organizations have a habit of planning, strategizing, forecasting, debating extensively before moving ahead on projects. Entrepreneurs on the other hand care little about market research and more about testing the idea. Corporate executives want to predict the future and control it. Entrepreneurs favor testing. An entrepreneur once said, “Instead of asking all the questions, I’d try and make some sales.”

That’s exactly what Bill Gross did. Bill Gross started Idealab in 1996. Idealab has prototyped and tested hundreds of ideas, and from those, has formed and operated more than 125 companies.

Carsdirect.com was one of ideas that he wanted to roll out in late 90s – early 2000. He was excited about selling cars directly to consumers online in the US. As he envisioned it, customers could search quickly for the exact car they wanted and have it delivered right to their door. He could offer discounted price online, because he wouldn’t have to maintain an expensive car lot filled with inventory, but even a discounted car is still a huge purchase to conduct online. Would people spend so much money online on a car?

He believed the idea could work but it was risky. So he hired Andy Zimmerman and gave him a mission – sell one car online. They put up a website with couple of pages that looked like it would allow you to order a car. But actually the message went to a clerk who looked up the price and sent it back to the user. The next morning Bill discovered we had sold three cars. They had to quickly shut down the site because they were offering a heavy discount.

So rather than debating about the plan and the uncertainty, they simply tested it. Within three years Carsdirect.com became the largest auto dealer in US.

By making decisions through experimentation, the best idea can prove itself. Does your company promote this kind of experimentation?

When rewards backfire

When rewards backfire

 

When we want to motivate people the most common thing to get is dangle a carrot in front of them. Rewards. Mostly monetary and some times non-monetary rewards. But by offering a reward we’re subconsciously giving a signal to employees that the task is actually undesirable. Because if the task were desirable, they wouldn’t need a prod. Here’s one such study that shows how extrinsic rewards kill intrinsic motivation.

Behavioural scientists Mark Lepper, David Greene and Robert Nisbett’s study – Undermining intrinsic interest with extrinsic rewards: A test of the overjustification hypothesis- Journal of Personality and Social Pyschology 28, no. 1: 129-37 (1979) is a classic and most cited in motivation literature. In their experiment, they divided children into three groups in their free play period. The first was the ‘expected award’ group. This group was shown a ‘Good Player’ certificate with a blue ribbon and the child’s name and was asked if they wanted to draw to receive the award. The second group was the ‘unexpected award’ group. Researchers asked children if they simply wanted to draw. If they decided to, when the session ended, the researchers handed each child a ‘Good Player’ certificate. The third group was the ‘no award’ group. Researchers asked children if they simply wanted to draw, but neither promised them a certificate at the beginning nor gave them one at the end.

Two weeks later researchers secretly observed students in the free play period. Children previously in the ‘unexpected award’ and ‘no award’ groups drew just as much, and with the same relish, as they had before the experiment. But children who were in the ‘expected award’ group who received the award, showed much less interest and spent much less time drawing. Even two weeks later, those contingent rewards – if you do this, then you’ll get that – had a negative effect.

This is one of the most robust findings in behavioural science. In 1999 Edward Deci and colleagues reanalyzed three decades of studies on the effect of extrinsic rewards on intrinsic motivation and came to the conclusion that tangible extrinsic rewards tend to have a substantially negative effect on intrinsic motivation. When institutions focus on short-term behaviour and opt for controlling people’s behaviour, they do considerable long-term damage.

(Edward Deci, Richard Ryan and Richard Koestner – A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation – Psychological Bulletin 125, no. 6:659 (1999))

Get more work done from home

Get more work done from home

Working from home means no pressure of deciding what to wear to work, no skipping breakfast due to hurrying up, no traffic jams, no wasting fuel, no pollution, no wasting time, no wasting money, no late-punching into office, no unnecessary meetings, no pointless brainstorms, no fake smiles, no sucking up, no monkey business. On the contrary working from home means having personal space, being at ease, improved focus and concentration, better ideation and greater creativity.

Christine Durst, founder and CEO of Staffcentrix and author of two books on the subject of telework, says the benefits start with basic cost savings from travel, real estate and utilities to areas such as recruiting and retention — and, yes, productivity. (Since 1999, Staffcentrix has designed and delivered a variety of training programs for such clients as the US Department of State, Air Force, and Army).

Durst says that telework programs can reduce absenteeism and tardiness, and even curb stress-related illnesses. But the one thing she hears again and again from remote employees is that they simply get more done.

Yet very few companies encourage their employees to work from home. We understand its natural for employers and bosses to wonder if you are really working or dozing off at home. But as long as you deliver quality output in the timeframe agreed, should it matter?

However like any other change, it’s going to be met with resistance by your company. So in order to lower the resistance, we think companies could do with 3 helpful interventions. One, companies need to have a clear formal policy on remote working, so that all employees know what’s appropriate and what’s not. Two, they need to provide employees with proper tools for remote working (laptop, internet connection & mobile) not just to ensure smooth work, but also so that managers can communicate with employees in a variety of ways and three; they could start a pilot by choosing result-driven individuals with good communication skills (and perhaps no kids), working remotely for 1 day per week and test it, rather than rely on conventional ways of decision-making i.e. over-analyzing whether it’s a good idea or not and not testing it.

Do also read Richard Branson’s take on it here.

Get over your fear of making a mistake

Get over your fear of making a mistake

Remember making a mistake at work or at home and the feeling attached with it. The word ‘mistake’ itself scares most of us. And that’s because unfortunately right from our childhood our focus has been on being smart, rather than putting our best effort. As a result we’ve learned to see mistakes as stupidity rather than building blocks of knowledge. However reality is just the opposite.

In her famous experiment in New York city schools, Carol Dweck, a psychologist at Stanford, gave more than four hundred 5th standard students a relatively easy nonverbal puzzle. Post test, researchers revealed the scores to the students and praised them. Half the students were praised for their intelligence. The researcher said, “You must be smart at this”. Other half were praised for their effort. “You must have worked really hard.”

Then the students were allowed to choose from two different subsequent tests. The first one was described as more difficult. The students were told that they would learn a lot from it. The other option was easy, like the previous test. Of the group that were praised for effort, 90% chose the harder test. Amongst the group that was praised for intelligence, most chose the easy test.

This fear of failing actually inhibits learning, as seen by his next set of experiments. She gave all the students an even harder test, originally written for 8th standard students. Kids praised for effort, got very involved. Many remarked, “This is my favorite test.” Kids praised for intelligence, were easily discouraged. Mistakes were seen as a sign of failure. After the test, students had to choose between looking at the papers of those who did worse than them or better than them. Kids praised for intelligence, almost always chose to bolster their self-esteem by comparing themselves to those who did worse. Kids praised for effort were more interested in those who scored more than them. They wanted to understand their mistakes, learn from their errors and figure how to do better.

In the third final round of testing with the same level of ease as the initial test, kids praised for effort raised their average score by 30%, while the smart group’s average score dropped by 20%. Praised for effort kids were willing to challenge themselves, even it meant failing at first, ending up performing at a much higher level. While for praised for intelligence kids, the experience of failure was discouraging that they regressed.

Jonah Lehrer, editor, blogger and author says, “This doesn’t apply to only 5th standard students, but to everyone. Unless you experience unpleasant symptoms of being wrong, your brain will never revise its models. Before your neurons can succeed, they must repeated fail. There are no shortcuts for this painstaking process.”

We believe that’s how intuition gets developed amongst experts. Hours and hours of practice and lots of mistakes corrected. Any guess who in the Indian cricket team spends more time in the nets than the rest?

Why we sell the wrong stocks from our portfolio

Why we sell the wrong stocks in our portfolio

For most us, the word ‘stocks’ or ‘shares’ is associated with feelings of it being risky, a gamble, incomprehensible, scary, involving the luck factor and so on. Understandably so, betting on the future value of a stock, is no easy task. Even the experts get it wrong a lot of the times. But I would like to drive your attention to a particular behaviour related to stocks, which shows how we make mistakes when selling stocks from our portfolio.

Consider this situation. You need money for an important event in your life and need to sell some stock. Amongst the stocks you own, say, Mata Power according to you is a winner, because if you sell it today you will have achieved a gain of Rs. 3,00,000. You hold an equal investment in Mata Airways, which you consider a loser, is currently worth Rs. 3,00,000 less than you paid for it. The value of both stocks has been stable in recent weeks. Which are you more likely to sell?

What happens is that our minds see the choice like this: I could close the Mata Power account and score a success for my record as an investor. Alternatively, I could close the Mata Airways account and add a failure to my record. Which would I rather do?

Daniel Kahneman, psychologist and nobel laureate in Economics, says if the problem is framed by us, as a choice between giving yourself pleasure and causing yourself pain, you will certainly sell Mata Power and enjoy your investment prowess. He calls this the disposition effect.

He says, investors set up a mental account for each share that they have bought, and want to close every account as a gain. It is only the very savvy expert, who would take a comprehensive view of the portfolio and sell the stock that is least likely to do well in the future, without considering it a winner or loser.

The disposition effect is a costly bias. If you care about your wealth rather than your immediate emotions, you will sell the loser Mata Airways and hang on to the winning Mata Power. But closing a mental account with a gain is a pleasure, but it is a pleasure we pay for.

Companies fall into a similar trap of continuing to fund a project even though the returns are now less favourable, simply because they have already put considerable amount of money. When faced with a choice of investing money in a new project that is considered likely to bring higher returns, it most often leads to favouring the option of continuing to fund the existing project.

Brainstorms actually stifle creativity

Brainstorms actually stifle creativity

Back in 1940s, advertising executive Alex Osborn argued that it was possible to enhance creativity by putting a group of people in a room and have them follow a simple set of rules, like coming up with as many thoughts as possible, encouraging wild and exaggerated ideas, not criticizing or evaluating anyone’s comments. Not surprisingly it became a hit. Over the years, organizations around the world have encouraged their employees to tackle key problems using this approach, commonly known as brainstorming.

But the scientists aren’t convinced. (Nor am I). Brian Mullen from the University of Kent at Canterbury and his colleagues analyzed twenty studies that tested efficacy of group brainstorming and discovered that in the vast majority of experiments, participants working on their own produced a higher quantity and quality of ideas than those working in groups.

The reason, group brainstorming fails, is because of a phenomenon called ‘social loafing’. Simply put it is diffusion of responsibility. When people work on their own, their success or failure is entirely due to their own abilities and hard work. If they do well, the glory is theirs. If they fail, they carry the can. However, add people to the situation and everyone stops trying so hard, safe in the knowledge that, though they will not receive personal praise if the group does well, they can always blame others if it performs badly.

Years of brainstorming may have inadvertently been stifling, not stimulating, creative juices. So have faith in yourself, work alone, regroup to discuss your ideas with your team and kick ass.

Self-portrait by Mayur Tekchandaney

What you wear can affect how you act

What you wear can affect how you act

We feel confident when we wear good clothes, and may be not that confident when wearing clothes we feel not good enough. Seems intuitive. But did you know that if you wear a white coat that you believe belongs to a doctor, your ability to pay attention increases sharply. While if you wear the same white coat believing it belongs to a painter, you will show no such improvement.

Dr. Adam Galinsky, a professor at Kellogg School of Management at Northwestern University and his colleague Hoja Adam call this phenomenon ‘enclothed cognition’ to describe the systematic influence that clothes have on the wearer’s psychological processes. That’s a play off the term ‘embodied cognition’, a line of research that examines the ways bodily sensations influence our thoughts and emotions.

As a test of the ‘enclothed cognition’ perspective, their research explored the effects of wearing a lab coat on ordinary people. They had to look at two very similar pictures side by side on a screen and spot four minor differences. It was found that attention (finding more number of differences) did not increase when the coat was not worn or associated with a painter. Attention only increased when the coat was a) worn and b) associated with a doctor. The effect occurs only if you actually wear the coat and know its symbolic meaning — physicians tend to be careful, rigorous and good at paying attention.

“There is a huge body of work on embodied cognition”, says Dr. Galinsky. “The experience of washing your hands is associated with moral purity and ethical judgments. People rate others personally warmer if they hold a hot drink in their hand, and colder if they hold an iced drink. Other experiments have shown that women who dress in a masculine fashion during a job interview are more likely to be hired, and a teaching assistant who wears formal clothes is perceived as more intelligent than one who dresses more casually.”

Illustration by (now you don’t need to wear a labcoat for guessing that)

You should sleep over it

You should sleep over it

Warning: If you are a consultant you may not like this post, but if you are a client you are likely to love it.

That’s because solution providers don’t particularly like to hear the words ‘Let’s sleep over it’, but this phenomenon is proven to be good for complex cognitive skills like decision-making.

In one of the first studies of its kind, Dr. Rebecca Spencer and postdoctoral fellow Edward Pace-Schott investigated the effects of sleep on affect-guided decision-making, which is decisions on meaningful topics where subjects care about the outcome, in a group of 54 young adults. They were taught to play a card game called the Iowa Gambling Task, for rewards of play money in which wins and losses for various card decks mimic casino gambling.

The researchers gave two groups of 18- to 23-year-old college undergraduates a brief preview of the gambling task, so brief that it was not possible for them to learn its underlying rule. Subjects were then asked to come back in 12 hours. The 28 subjects who got the preview in the afternoon went home to a normal evening and their usual night of sleep, while the 26 who received the game preview in the morning came back after a day of normal activities with no naps. On the second visit, subjects played the full gambling task. (You can read the detailed study in the online issue of the Journal of Sleep Research)

Subjects who had a normal night’s sleep as part of the study drew from decks that gave them the greatest winnings four times more often than those who spent the 12-hour break awake, and they better understood the underlying rules of the game.

“There is something to be gained from taking a night to sleep over it when you’re facing an important decision. We found that the fact that you slept makes your decisions better.”, says Dr. Rebecca Spencer.

She believes this sleep benefit in making decisions may be due to changes in underlying emotional or cognitive processes. “Our guess is that this enhanced effect on decision-making is something that depends on rapid-eye-movement or REM sleep, which is the creative period of our sleep cycle.”

Not convinced? May be it’s a good idea for you to sleep over it.

Illustration by Mayur Tekchandaney

Its all about the food, bugger

Its all about the food, bugger

Want your meeting to go well? Want to get that much needed approval from your client in that meeting? Want the participants at your workshop to be in a good mood? Want your wedding reception to be remembered?

You got it. Serve good food.

To understand how food can make you happy, it’s important to understand how the brain regulates mood. The brain uses neurotransmitters as communication signals to communicate with the rest of your body and to issue its commands. Typically, serotonin is the neurotransmitter most linked to happiness. Foods that aid serotonin production include fish, chicken, cheese, spinach and bananas.

While some foods have been proven to physically affect your brain chemistry, others make us feel good just by eating them. These are Comfort Foods.

Psychological studies have turned up evidence that the comfort foods we crave are actually artifacts from our pasts. We all have memories of happier times, and by eating foods that remind us of those times, we symbolically consume that past happiness. Comfort foods can also be linked to specific people in our lives: Eating a specific food that a loved one favored can produce happy thoughts by triggering fond memories or associations of that person. This makes comfort foods fairly unique to each individual. If your childhood birthday parties represented the pinnacle of happiness for you, you’d likely crave birthday cake or some variation of the dessert when you’re feeling the blues.

Although comfort foods (or the events attached to them) vary from person to person, the foods we associate with comforting or happy emotions vary by gender, as well. A 2005 Cornell University survey of 277 men and women found that females tend to seek comfort in sweet and sugary foods like ice cream, while males prefer savory comfort foods like steak.

So know the food that leads to happiness and know the likes of whom you are serving to.  Foods’ the reason for Laughing Buddha’s happiness and could well be the reason for your happiness too.

Illustration by Mayur Tekchandaney

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