“Causes no harm to others”

Is it okay to do something that technically breaks the law, but causes no harm to others? Where is the line between what society forbids or restricts and what the individual wants to do anyway? What about doing something legal, and while it isn’t causing harm to others right now, still carries that risk?

Felix Salmon wrote an interesting, ethics-based counter to Randy Cohen’s opinion piece on bicyclists who run red lights. I’ll let you read each and draw your own conclusions about whether one or the other is on solid ethical grounds (you may or may not find it ironic that Cohen was formerly the Ethicist writer for the New York Times and has a book coming out called, “Be Good: How to Navigate the Ethics of Everything.”)

That’s stupid and I’m smart

To me, there was another aspect that is relevant to all of us as well, both as individuals as well as organizations. It relates to people’s chronic underestimation of risk and overestimation of their ability. Cohen touches on it, but I think he falls into a common trap about risk in doing so (seemingly to rationalize his own behavior – a common cognitive error.)

It’s this: “It’s okay what I/we do as long as I/we cause no harm to others.” It’s the philosophical “free-pass” to rationalize breaking rules without having to feel guilty about it. In fact, you can even feel more ethically-intelligent about it!

But there’s more to it. The companion quote is: “And I/we cause no harm to others because I/we are more careful/better than others.” This is a cognitive bias of the first order.

We’ve seen it in environmental disasters and the way the most recent financial crisis has unfolded. We see it in the way some businesses and individuals in those businesses continue to behave even after the consequences of their previous actions have been recognized, exposed, and reported on. In many cases, the rationale is either, “I/we broke no law” or “Even if we did violate a regulation, our actions caused no direct harm to others.”

It’s okay, I’m being very careful

The problem is that laws to stop at red lights aren’t there because we think that people intentionally drive into intersections if they knew they would crash into someone. It’s because even as careful as you think you are, misteaks happen.

It’s to a certain extent about risk. Risk is the bad thing that might happen. It doesn’t mean it will happen. A person could go their entire (natural) life running red lights “when it was safe” and never have an accident. A company could cut corners on pipeline inspections for decades and never have an oil spill. Another could get extremely leveraged on risky loans and never have to ask for a bailout (hey, it could happen!) The list goes on. Things where nothing bad happens even though a law or regulation is broken (or not.)

Checklists serve a similar purpose in reducing risk. Surgeons don’t intend to leave instruments in patients. Pilots don’t purposely ignore instrument readings. It’s easy to think that checklists are an unnecessary burden for you (but maybe not the other guy.) But as all humans are susceptible to errors in thinking and perception, even the most careful of us can think we took out all the retractors, checked all the dials, and examined all lanes heading into the intersection.

There is a whole spectrum here. For instance, we’ve seen that in the financial industry, companies take great effort to find loopholes in existing regulations, invent new financial products that aren’t regulated yet, or redefine existing products so that regulations don’t apply. When it comes down to it, is that really any different than ignoring a law? Is it okay since “everyone else is doing it?”

This wasn’t supposed to happen

Even when you point out the dire consequences *if* something was to go wrong, it’s very easy for people to come up with a back of the envelope calculation about why the % probability of something bad happening times the consequence is far, far lower than what “that other careless guy” or “that other greedy/reckless company” is doing.

So it’s okay. It’s not causing harm to others. Until it does.

Photo by CarbonNYC

Uncertainty, Fear, and Our Response

Since the Great Recession we’ve seen mass layoffs followed by weak rehiring. We’re now seeing possible renewed layoffs in response to the latest indications of a slowdown in the recovery. Government programs are being cut as well.

Two recent news items, although unrelated to each other, highlighted to me different ways organizations can respond to the extreme uncertainty of the world economy today. One, with a bias to thoughtful action. The other, not so much.

The first is Starbucks CEO Howard Schultz’s open letter saying that rather than feed the cycle of fear by announcing layoffs, Starbucks would instead pledge to hire – “to accelerate growth, employment, and investment in jobs.” This is what most agree is needed to return to and sustain an economic recovery.

The second is about the plan to shut down the “Statistical Abstract of the United States.” This is produced by the Census Board and is an incredibly valuable source of data, used by a wide variety of organizations. The savings? $2.9 million, but the cost to consumers of this data (i.e. our economy) could quite easily be a very large multiple of that purported savings as they have to either find all that data themselves or contract with someone who will.

So, two responses to current conditions.

In one, the harsh reality is acknowledged, but the plan of action is to create positive change (i.e. Leadership.) In the other, a cut is made under the guise of “we must find every way possible to become more efficient.”

Whatever you think of Starbucks and what it may symbolize to you, the hiring pledge is saying, “We do not have to resort to layoffs in response to economic uncertainty – in fact, it’s harmful to the economy as a whole.” It’s saying there are other ways to keep the business viable in tough times. Time will tell if the pledge will be upheld and how well those other measures work.

Whatever your politics and whatever you think of government programs and whether any can provide value comparable to a private venture, the prioritization of efficiency over effectiveness represents a ham-handed approach to cost-cutting. Just as you should always examine the return gained by the next incremental dollar(s) spent when comparing investments, so you should examine the return loss (if any) that results from the next incremental dollar(s) cut.

In the end, we can choose our response to uncertainty. We can take positive steps to make the situation better the best we know how, or we can say our hands are tied and watch value burn down.

You can have your voice heard in saving the Abstract  here or by writing to ACSD.US.Data at census dot gov.

Paragons and Renegades

Recently I’ve been playing Mass Effect, a role-playing game (RPG) set in outer space.  (Feel free to insert your favorite Star Trek related nerd joke here.)  As with many of the sophisticated RPG options in the market today, the game is designed around a series of tasks, or quests, which get more difficult as the game progresses.  For me though, the actual game play – star ships, swordplay or sorcery – is not as interesting as the character development, the role part of the game.  Some of the RPG games I’ve played let you choose the moral disposition of your character, whether you want to be a good guy or a bad guy.  So from the beginning of the game your choices are determined by your role as the hero or the villain.  Accordingly your actions and personality are based on your predetermined nature.  However, some of the more sophisticated games, including Mass Effect, make your character’s nature a matter of nurture – meaning you become either moral or immoral based on the choices you make during the game.  In Mass Effect you develop either as a paragon or as a renegade.  But here is where the game and I started to have problems.

From the beginning I assumed each quest could be solved either “positively” (helping me develop as a paragon) or “negatively” (earning me points as a renegade).  So as the options were presented I made what I believed to be the “right” choice.  In some cases the “positive” and “negative” choices were clear.  But for some of the tasks there was only one choice to make and in almost every instance that choice was “negative” and earned me renegade points.  This not only frustrated me, it also made me question whether there was any point in trying to do “the right thing.”  I also thought it was unfair because in real life we always have more than one choice.  But do we really?  Are there times when “breaking the rules” is the only option?  The more I thought about it, the more I began to see that the game was playing fair – that there are times when the only way forward is to become a renegade.

But here be dragons my friends.  This is a slippery slope that can lead to all kinds of problems, not the least of which being chaos, anarchy and unemployment!  So the question seems to be, when is breaking the rules acceptable, even necessary, and when should it be avoided?  In his book The Way We Are, Allen Wheelis wrestles with this problem and suggests a way forward of sorts.

Does not all creativity originate in boundary violations, in breaking through to realms outside the old limits?  The completely moral life – that is, the meticulous observance of all of the rules – leads, for both the individual and the group, to a rigidity that falls increasingly at odds with a changing world.  Yet boundary violations, if reckless – reckless measurable, usually, only after the act and its consequences – destroy the individual and destroy the social order.  The individual becomes an outlaw, the group becomes a mob.

Creative change in a society issues from violations great enough to alter the social structure, but not so great as to bring it down altogether.  One wants a society of law that allows some laws to be ignored.  It is those violations we let stand that organize the ongoing transformation of social structure.  The observance of rules, with a wise measure of slippage, coupled with the violation of rules, with an ironic measure of prudence, creates flexibility, strengthens the group, and thereby creates the possibility of nonviolent change in the social order.

So the questions we need to consider then are first, whether the breaking of a rule is reckless, that is, does the risk – the potential consequences of our choice – outweigh the hoped for reward; and second, whether our violation of the rules also serves the interest of progress, meaning the way forward can only be achieved if the rules are broken?  I understand this is perhaps an overly simplified way to think about this problem and I’m not suggesting that the ends justify the means. Yet I do think that there are times when progress is utterly blocked by “the rules” – the business processes we’ve had in place “since the company was founded”; our multi-layered bureaucracies with their endless forms and approval chains; the “blockers” in the organization whose raison d’être is to obstruct, obfuscate, and aggravate.  In these instances I believe the judicious breaking of the rules is most definitely in order.  Understanding that the point is not to bring down the system (or your career), but to move the business forward – the end result being a stronger, more flexible organization.

Acknowledging that we may need to play the renegade from time to time is not easy, especially for those of us who, by nature, are designed to play by the rules: We want to do the right thing for the right reasons.  We want to work for companies that value and respect their workers and treat them fairly.  And we want to believe that everyone else in the organization wants the same.  But if we are honest, we know things are not always this way; and if we can learn to make choices based on what we know, then we can also learn to accept that we may have to break the rules so that the world in which we live and work can evolve beyond what it is, to what we want it to be.  Building a bridge to span this gap is only possible when individuals, who are paragons by nature, can also learn to wisely nurture their inner renegade.

Elements of Change

Over the past couple of weeks I’ve looked at the catalysts for change as well as the role choice plays in igniting the transformation process.  And though our failures often inspire us to make a change, motivation alone will not be enough to nurture and sustain our goal over the long-term.  Transformation requires more than just the spark of inspiration, it needs fuel, and this energy source must come from within.  No external source – whether family, friends, or institutions – will ever be strong enough, will ever last long enough, to see us through to the end.  This elemental fuel comes from within and when it is purposefully applied leads us from good intentions to meaningful actions.  These elements are courage, risk, and honesty.

Courage is almost always understood in the context of fear, and whereas courage is understood as a virtue, fear is usually regarded as a weakness.  Courage, however, is not the absence of fear and without fear courage has no value.  A. C. Grayling makes this point in his book, Meditations for the Humanist: Ethics for a Secular Age.  “Moreover, courage can only be felt by those who are afraid.  If a man is truly fearless as he leaps over the enemy parapet or hurls himself into a rugby tackle, he is not courageous.  Because most people fail to recognize this simple fact, the true quantum of heroism in the world goes unrecognised and therefore unrewarded.  The quaking public speaker, the trembling amateur actor, the nervous hospital patient submitting himself to needles and scalpels, are all manifesting courage.  ‘This is courage in a man,’ Eurpides further said, ‘to bear what heaven sends.’  Actually he said ‘to bear unflinchingly’, but by this addition he spoils the sentiment, because if courage requires fear, then flinching is perfectly in order.”

Fear, I think, is a gift and like failure it is often a great motivator.  But motivation is not enough.  We have to act and acting requires courage.  Most of us fear change; but if lasting, meaningful transformation is our goal then we must stand our ground.  We must courageously – not fearlessly – face each new day.  We must act in spite of our fear and not make the mistake of waiting until we are unafraid.

Closely allied to courage is risk.  Risk is frequently associated with chance or with what we cannot see or anticipate; and I think the underlying emotion tied to risk is vulnerability.  Vulnerability, like fear, is often seen as a weakness.  It is something we work very hard to hide from others.  A thousand years ago this was part of our survival instinct.  Living behind walls of stone was far safer than dwelling in a thatched cottage in the middle of a wheat field.  But there’s also a positive, even necessary, side to vulnerability, which I only just discovered this past week while browsing through the presentations on TED.com.  Quite accidently I stumbled upon an inspiring and deeply insightful presentation by Brene Brown on The Power of Vulnerability.  If you have the time I encourage you to listen to this presentation.  In fact, if you’re short on time, I suggest you stop reading right here and just head over to TED.com.  The central idea in Dr. Brown’s presentation is that without vulnerability we cannot be whole, we cannot feel connected, we cannot ever fully be ourselves, and I would add, we cannot really change.  Here again failure presents us with an opportunity – not for shame, which is far too often the case – but an opportunity to be open, to be vulnerable, to risk taking a different path.  But if we shun this feeling, if we reject openness, connection, compassion and courage, then the opportunity for change will be lost.  We will remain stuck in the routines and patterns that lead us back again and again to the same failures.  Courage, then, is not only a friend to the fearful, but also to all those who would embrace vulnerability and risk change.  But courage alone will not be enough.

Vulnerability also requires honesty.  Self-awareness is the key to our ability to be honest, both with ourselves and with others.  What we do not know about ourselves we cannot possibly hope to change.  In the first act of Hamlet, as Laertes was setting off for France, his father Polonius enjoins him, “This above all: To thine own self be true, and it must follow, as the night the day, thou cans’t not be false to any man.”  But from the day we are born we are taught the very opposite of this truism: Follow the rules.  Be like everyone else.  Don’t be different.  Go along to get along.  And sadly we do, without even realizing it, until we no longer know who we are or what we want.  And we spend our lives chasing only the shadow of our dreams because we have come to believe that our real dreams are too ambitions, to unconventional, too silly, too impractical, too whatever.  But coming to truly understand who we are, and what we want, and why both of these things are important, opens us to the possibility for real change.  James Hollis makes the following observation in his book Finding Meaning in the Second Half of Life: How to Finally, Really Grow Up.

Some of us, understandably, do not wish to hear even this message of hope and personal growth.  We wish to have our old world, our former assumptions and stratagems reinstituted as quickly as possible.  Most of us live our lives backing into our future, making the choices of each new moment from the data and agenda of the old – and then we wonder why repetitive patterns turn up in our lives.  Our dilemma was best described in the nineteenth century by the Danish theologian Søren Kierkegaard when he noted in his journal the paradox that life must be remembered backward but lived forward.  Is it not self-deluding, then, to keep doing the same thing but expecting different results?

For those willing to stand in the heat of this transformational fire, the second half of life provides a shot at getting themselves back again.  They might still fondly gaze at the old world, but they risk engaging a larger world, one more complex, less safe, more challenging, the one that is already irresistibly hurtling toward them.

Paradoxically, this summons asks us to begin taking ourselves more seriously than ever before, but in a different way than before.  Such self-examination cannot proceed without, for instance, more honesty than we have been capable of.  Living within a constricted view of our journey, and identifying with old defensive strategies, we unwittingly become the enemies of our own growth, our own largeness of soul, through our repetitive history-bound choices.

Change – genuine, meaningful transformation – is hard and often requires heroic effort, which is why the virtues so often associated with heroes include courage, risk, and honesty.  Fear and failure may prove to be the motivation behind our efforts to change, but without these other essential elements we cannot hope to maintain the commitment – the fire – required over the days, weeks, months or years it may take to reach our goals.  Be courageous and stand your ground; choose risk over comfort – embrace vulnerability; and be faithful to yourself and to your dreams.  These are the elements that will sustain and nurture your transformation.

Catalysts for Change

Change most frequently happens for a reason.  Transformation is intentional.  The natural adaptations that take place over tens of thousands of years are driven by something external to the organism – new predators, alterations in the climate, dwindling sources of food – which compel a change and ensure the plant or animal can not only survive, but thrive.  The same is true in chemistry, where the application of a catalyst – reagents[1] of change – can be used to enhance or even accelerate transformation.  Agents that hasten a reaction are called positive catalysts; while those that hinder or block changes are called inhibitors.  In addition other substances can be used in combination with a catalyst to either promote or poison its effectiveness.[2]

Though adaptation and survival are common reasons for change, there are occasions when change is driven not by some external force, but from within – by choice.  We choose to adapt, not because we have to, but because we want to.  And more often than not our choices are fueled and energized by a catalyst – a force that accelerates our will and gets us moving.  The most common catalyst for making a change, I think, is failure.  But almost universally failure is perceived as a negative, something to be avoided, a source of shame and regret.  We laud success and shun those who fail.  We link our value as employees and individuals directly to our successes or to our failures.  But success and failure are two sides of the same coin.  We cannot have one without the other.  To succeed we must fail – at least some of the time.  This means failure too has value; we need to fail if we ever hope to succeed.

The gift of failure is the opportunity to make a change.  As a catalyst for change, failure is unique because its transformative properties are only revealed when we make a choice – whether to persist along the same path until we succeed or to look for a new path because the one we are traveling has proven to be a dead-end.  Transformation – sustained, meaningful change – must begin with a choice.  If we fail and do nothing, then the opportunity for change is lost.  The catalytic power inherent in all failure can only be realized through the application of choice.

But choosing is only the first step, the spark that ignites the catalyst.  Change – true transformation – involves far more than just decision-making.  It requires risk, courage, honesty and perseverance.  Bigger, more important changes, may also call for promoters – like optimism, inspiration and collaboration – to increase the power of our actions.  And we must also be careful not to introduce inhibitors or poisons, like doubt, distraction and perfectionism.  Over the coming weeks I want to explore the reagents of change – risk, courage, and honesty – as well as the things that help to promote, inhibit and poison our efforts to change.  But as a starting point I would like to suggest that we must first begin to see failure not as the opposite of success, but as an opportunity for change.  Too often failure is used as a weapon, to demoralize and devalue, and we wield this truncheon against others and ourselves alike.  But we are worth so much more than the sum of our accomplishments; and even when we fail our value is never diminished.  Failure may be the end of an endeavor, or it may be the next step on the path to success.  The choice is ours.

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[1] In organic chemistry, reagents are compounds or mixtures, usually composed of inorganic or small organic molecules that are used to affect a transformation on an organic substrate.  Wikipedia, Reagent.

[2] Catalysis is the change in rate of a chemical reaction due to the participation of a substance called a catalyst. Unlike other reagents that participate in the chemical reaction, a catalyst is not consumed by the reaction itself. Catalysts that speed the reaction are called positive catalysts. Substances that interact with catalysts to slow the reaction are called inhibitors (or negative catalysts). Substances that increase the activity of catalysts are called promoters, and substances that deactivate catalysts are called catalytic poisons.  Wikipedia, Catalysis

Focus on Failure!

No, this is not advice to try to fail, but rather if (and when) you do fail, you’ll want to expend some time, thought and energy into actively learning from that failure. This is hinted at by an interesting finding from some neuroscience research done at MIT, which has implications not only for individuals, but organizations as well.

The research showed that the part of the brain that tracks success and failure appears to change and process more efficiently after success, but not after failure. What does that mean for us? Here’s a telling quote from the HBR article citing the research:

“But after failure,” Miller points out, “there was little change in brain activity.” In other words, the brain didn’t store any information about what went wrong and use it the next time. The monkey just tried, tried again.

In other words, left to its own devices, our brains will likely not learn from failure. Fortunately, we have the ability to recognize that fact and take steps to correct it. We can pause after failure and seriously ponder what went wrong – what was the cause of the failure? But that takes time, thought and energy to figure it out.

Now, consider what you might be short of in an organizational culture dominated by fear. That’s correct; there’s never enough time, don’t stop to think – act, and the energy generated by fear is more typically applied to shift the blame or hide the failure than in learning from the failure. So, without Psychological Safety, as Victorio puts it, you get a compounded problem with failure. First, as we already know, people will be averse to taking risk in general. That means fewer opportunities for innovation, profit, etc. Secondly, when failure does occur, its ability to even have any positive learning effect at all is almost entirely wiped out. No learning occurs automatically and, since more effort is spent hiding the failure or shifting the blame, no learning from thinking through the failure occurs either. Since no one sees any benefit from taking the risk, the cycle is reinforced and even fewer risks are taken and even less learning occurs.

However, if your organization has tolerance for thoughtful risk-taking, the cycle can be turned positive. Just recognize that a bit more effort is required to make a failure become a learning experience. Avoid what happens to the monkeys!

Overcoming My Fear of Failure

Fear of failure has always been a part of my life.

I was eleven years old when I first moved to Australia. By the time I finally allowed myself to speak English, I was almost twelve.

I remember mumbling “How do you do?” to our neighbor Harry one day and he was completely taken back. You see, Harry was teaching us English for over six months and had never heard me speak. (I used to mime so no one could hear how horrible my  pronunciations were.)

Growing up in a family of over-achievers, I set my own expectations so high that I was always truly petrified of failing. When I faced with a challenge, I can successfully talk myself out of it by asking: “What if I am not good enough?”

The worst case scenario is not to even give it your best shot. I have learned to set the right level of MY expectations while I was studying Computing Science: I excelled at subjects like “Project Management” and “Simulation and Modeling”; I was mediocre at Financial Accounting but I was at peace with myself. I realized that it is OK to be average on “some” things. I didn’t want to be an accountant anyway.

The key to overcoming fears for me is to give myself the PERMISSION to do it. (The fear may not go away, but I am not going to let it take control.)

In 2010, I am totally ditching the “What if I am not good enough?” question. After all, there ARE upsides to failures in life.

I am going to focus my energy on becoming a prolific blogger. The fear of writing a blog that suck may not go away, but I am going to stop playing safe and give myself permission to just write, even if some of them will be  bad ones. (Tip: if you get bored with my blogs, you can easily navigate to my favorite bloggers such as Meg,  Mark, Amy, Dan, Jason and many more listed on our blogroll.)

It is hard to fail, but it is worse never to have tried to succeed. – Theodore Roosevelt

May you be blessed with the strength to succeed!

Some Great Books from 2009

Here are some very good books and if you haven’t read them yet, you might want to check them out. The list is restricted to books published in 2009 that I read (there are several others published in 2009 that I still have on my reading list). The list is grouped somewhat by topic. Enjoy!

Enterprise 2.0 / Collaboration

Driving Results through Social Networks: How Top Organizations Leverage Networks for Performance and Growth by Rob Cross and Robert J. Thomas

I referred to this book in Not One of Us, When More Isn’t Always Better, and Is Bacon at the Center of the Universe? It covers the whole range of scale from individual performance and productivity impact of collaboration to the impact of collaboration on organization innovation, projects, and processes as well as the impact of organization culture and strategy on collaboration. There are many solid use cases provided. Cross focuses on social network analysis as a way to understand how information flows through an organization, how it goes into decision making, etc. I wrote about his work being done through manual surveys at Fortune 500 companies prior to leveraging social networking software two years ago in Finding Value in Enterprise Social Networks.

Collaboration: How Leaders Avoid the Traps, Create Unity, and Reap Big Results by Morten T. Hansen

I wrote about this book in When More Isn’t Always Better. It is primarily focused on large-scale collaboration and paints it in the starker colors of “good vs. bad” collaboration, highlighting the hidden costs of collaboration without some kind of business purpose and understanding of tradeoffs. Hansen lays out the hidden traps companies fall into with collaboration, identifies the barriers to collaboration, and three levers to avoid the traps and overcome the barriers. It has many use cases as well. Oliver Marks has a great post about this research and our colleague Christine found this great Economist article about the book. Hansen recently wrote about collaboration failure in the intelligence community due to persistent issues regarding incentives, workforce mix, and talent mobility in this Harvard Business Review article.

Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges by Andrew McAfee

McAfee coined the term “Enterprise 2.0” a while back as a way to identify not just the technologies of Web 2.0, but the way in which organizations would use them to get improvements in productivity, innovation, etc. I wrote about McAfee’s work two years ago in Finding Value in Enterprise Social Networks. McAfee has a great way of presenting four different, real business value based use cases that were not being addressed adequately by existing (pre Web 2.0) collaboration technologies (i.e. “Groupware” and “Knowledge Management”), then sort of leaves you hanging (a great “sticky idea” mechanism), then introduces the concepts of Web 2.0 in an accessible, non-techy way, and finally comes back around to show how the four use cases were successfully addressed by various Web 2.0 tools. Furthermore, each of the use cases focuses on a particular level of interaction from close-knit workgroups out to people with shared interests who may not even know each other.

Social Media at Work: How Networking Tools Propel Organizational Performance by Arthur L. Jue, Jackie Alcade Marr, and Mary Ellen Kassotakis

I wrote about this book being published in Talking about OraTweet in Social Media at Work. This book is similar to McAfee’s in that it is less about the technologies themselves as it is about how companies can best adopt and exploit them to gain competitive advantage through increased productivity, innovation, and engagement. This book is also loaded with relevant, real-life use cases that demonstrate how Web 2.0 tools were able to address a tricky problem, trigger innovation more rapidly, etc. It also addresses the organizational adoption issues head-on, such a threats to power and status quo and offers advice on how to tackle those issues.

Risk

The Failure of Risk Management: Why It’s Broken and How to Fix It by Douglas W. Hubbard

I referred to this book in HR: Why Improve Your Analytical Intelligence? and HR: Why Broaden Your Risk Perspective? Hubbard’s book is an eye-opener about how badly most companies are handling risk, due in large part to misguided comfort in following supposed “best practices.” Hubbard pulls no punches and is especially vehement in targeting “fluffy” risk analysis approaches that use things like “heat maps” that are based on “scoring.” His main objection is that these approaches have no way to be really tested as to whether they work because there really isn’t a testable measurement being used. He refutes those who object by saying that some things just aren’t measureable by providing examples of how to do it (some of which are taken from his previous book, How to Measure Anything: Finding the Value of Intangibles in Business.)

The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty by Sam L. Savage

I also referred to this book in HR: Why Broaden Your Risk Perspective?. It’s a great companion book to Hubbard’s but takes a lighter approach. The first thing that Savage does is dispense with the arcane terms used so often in statistics that drive most people away. He correctly identifies that as a leading cause for why so many people miss out who could benefit from actually understanding what statistics really has to say about uncertainty and risk. He then goes into a whole series of examples to show what he means about how people get themselves into trouble. The book weighs in at 360+ pages, but it’s divided into 47 bite-sized chapters, some of which he signals can be skipped if you don’t want to do math.

Workforce Strategy

The Differentiated Workforce: Transforming Talent into Strategic Impact by Brian E. Becker, Mark A. Huselid, and Richard W. Beatty

I wrote about this book in HR: Why Improve Your Analytical Intelligence? It is a continuation of their “HR Scorecard” and “Workforce Scorecard” books, although reading them is not a prerequisite, nor is the book a rehash of the previous material. Instead, it introduces enough of the basics from them and expands on them to focus on how to best invest in your workforce so as to maximize its impact on your strategic success. In many ways, I saw this book as a companion to Beyond HR: The New Science of Human Capital by John W. Boudreau and Peter M. Ramstad. Between the two, you’ll have an excellent framework from which to construct or modify your HR strategy.

Photo by by mrkathika

Is it Time to be Optimistic Yet?

Again, a trick question. At the end of the year, especially ones that have had so much turmoil, uncertainty, and economic pain, thoughts turn to whether the next year will be any better. It’s the same psychology behind setting resolutions and so forth, i.e. January 1 presents a “new beginning” or a “fresh start.”

People generally like to know what the future holds so they can either look forward to the good things that will happen or do something to avoid the bad things.* Businesses are the same. We then look at the past to try to spot trends, check what the experts say, do “wisdom of the crowds” investigation, etc. As always, the rule about everyone’s opinions still applies.

At Steve Boese’s HR Happy Hour last night, the topic was “2010: Looking Ahead” and some prognostications were thrown around. Naturally, whether to be optimistic or not also came up and it was interesting to see the different reactions to that. On one end, some folks want proof that it was time to feel good about the future. On the other end, some folks see optimism as the driving force to making things turn out good no matter what. The real answer to the question comes from taking a bit of both and understanding how an optimistic outlook coupled with an acknowledgment of harsh reality is key.**

In other words, realize that there are no guarantees about what the future holds and that waiting until everything is proven is a recipe for constant disappointment and/or missing out. However, also realize that things won’t always just get better on their own either (at least not for you or in the way that you had hoped), so you need to be taking conscious actions that weigh the risks and rewards. This includes the conscious decision to take no action (as described so well by Mark Stelzner.)

These decisions and actions are not always as simple as we’d like them to be and that’s also behind why we always wish for exact predictions. We say, “Tell me what the right move is so I get the most benefit without making any mistakes!” A short reflection on where unemployment is today shows how well predictions have worked out so far.

So now, companies are looking ahead and asking what to do when the day does come that hiring picks up and they worry they’ll lose their top talent. Point solutions like “do more training”, etc. are suggested, but more integrative solutions are called for that take into account the complex interplay of turnover, career development, engagement, talent inventory, and business strategy.

No one really knows what 2010 will hold, so there is no “perfect play.” Instead, companies need to think through the different ways that things are likely to go and take proactive steps today that will leave them options to take when it becomes more clear what conditions really are.

So the real answer perhaps is that there isn’t necessarily a “right time” to be optimistic so much as it benefits you to have an optimistic outlook both to keep yourself going (i.e. believe in yourself and you can prevail) as well as to keep your mind tuned to spotting opportunities (i.e. take prudent risks). At the same time, you need to confront the facts as they stand today and the very real possibility that conditions won’t get better for everybody in the near future.

*”Flash Forward” presents the interesting prospect of what would happen if people really did have a glimpse of what their situation would be in six month’s time. It addresses the classic issues around prophecy without context, determinism, destiny, and free will.

**see the “Stockdale Paradox” as described in Jim Collins’ “Good to Great“:

“This is a very important lesson. You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.” – Jim Stockdale

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HR: Why Broaden Your Risk Perspective?

Strategy is founded on risk and risk is inherently subjective to the views of the people involved, including employees and management. As a result, HR has a great opportunity to improve the way in which risk impacts strategic success for the business, going beyond the more tactical or operational perspective HR has previously taken.

All economic activity is by definition “high risk”. And defending yesterday–that is, not innovating– is far more risky than making tomorrow.
Peter Drucker

HR and Risk Up to Now

Although it might be over-generalizing, for quite some time, HR has mostly focused on risk in terms of how to identify and address workplace risk items such as harassment claims, EEOC violations, health and safety liability, etc. These are all vital areas to be risk-managed, but to be more strategic, HR needs to broaden that perspective to include how it can positively impact business risk.

Risk is frequently misunderstood and mismanaged[i]. This misunderstanding and mismanagement can have unexpected, even dire consequences due to people’s varying comfort with risk and the complex ways that people in general react to it. Here’s a sobering real-life example of just how that can happen[ii]:

Blowing It on Business Risk and People – an Example

In oil & gas exploration, the odds are high against finding anything, let alone a find suitable for extraction. People working in this field apply their diverse expertise towards figuring which locations are most likely to be profitable. In addition, there is the added pressure to locate larger, more profitable reserves, which are even harder to find.

The decision on whether to bid on a lease and then drill is based on “pessimistic/low, likely/medium, and optimistic/high” estimates[iii] for how much can oil or gas can be extracted. If the “likely” estimate is large enough, then a bid is made and if that succeeds and drilling is approved and the actual output is on track to meet that large estimate, the folks behind that estimate are very happy as they can expect some kind of bonus.

However, it’s easy for a manager to only see the “optimistic” estimate and let that “frame” their expectations. Then, when in fact the more realistic “likely” value does result instead, the manager perceives a “loss” and they can end up taking it out on the troops. This did happen to a team and they were told they wouldn’t get a bonus because “the company wants those higher outputs” i.e. the optimistic level.

And here’s what happened next. The team then saw that only results that met the “optimistic” estimate get praise, so they naturally became more conservative in their estimates. They lowered their “optimistic” estimate to be closer to what they normally would have given as the “likely” estimate. In turn, the “likely” estimate was lowered as well. Because of these more conservative estimates, when budgets were decided, the allocations didn’t go to that team as much because their estimates are now lower than those of other teams. With a lower budget, that unit couldn’t bid as much on the leases (especially the riskier but higher potential ones – remember that the competition is bidding higher because they have higher, non-distorted estimates) so they missed out on more of the big finds.

Since there were fewer large finds returns were lower for the whole company. Investors were expecting higher returns when they chose the company, since they already understood it was higher risk. As a result, lower earnings and less capital were available for the company, it couldn’t compete, and eventually it was acquired.

What HR Can Do

All of this happened because management didn’t understand the relationship between the company business risk and the incentives and motivation of the people working there. If HR had an understanding of the strategic impact (e.g. company survival) of this relationship and had a role in making sure that managers understood it and practiced it as well, this poor management decision could very well have been avoided.

This was just one example from oil & gas exploration, but the same scenario plays out in a multitude of “high-risk” businesses ranging from software development and airplane manufacturing to drug development. However, the difficulty that management in particular has with dealing with the interaction of risk and incentives can even disrupt the competitiveness of “low-risk” enterprises. HR’s ability to apply its expertise with people coupled with a broader, strategic perspective of risk can bring huge advantage to a company.

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[i] The definition of risk is not well agreed upon, but we will use the following: the existence of more than one possible outcome where some of them are undesirable (e.g. loss or catastrophe). Risk only has real meaning when a decision must be made and human decision makers are decidedly not “risk neutral.” That is, they will not simply choose the highest “expected values” with cold logic, but will favor certain choices over others depending on factors such as current wealth, level of possible loss, gain, framing, ownership, etc.

[ii] Credit goes to “Why Can’t You Just Give Me the Number?” by Patrick Leach, an excellent, succinct book that shows executives how to manage risk and make better decisions using probabilistic thinking. Also recommended is “The Flaw of Averages” by Sam Savage and as previously mentioned, “The Failure of Risk Management” by Douglas Hubbard.

[iii] The medium or likely value has about a 50% chance of finding at least that amount. The high or optimistic value has only about a 10% chance of finding at least that amount. In other words, they might happen occasionally, but not on average.