Blog

Combining Purpose With Profits

Posted on March 02nd, 2014 - No comments yet

February 19, 2014
From the MIT Sloan Management Review 

A sense of purpose that transcends making money can motivate employees. But to sustain both a sense of purpose and a solid level of profitability over time, companies need to pay attention to several fundamental organizing principles.
Photo by Bengt Wanselius
Svenska Handelsbanken, founded in Stockholm in 1871, has built a management model that supports the company’s goal of being customer-focused.Photo by Bengt Wanselius

It’s an old idea: If you want to build a company that truly motivates its employees, it has to have a sense of purpose. Purpose, according to Ratan Tata, the recently retired CEO of the Tata Group, is “a spiritual and moral call to action; it is what a person or company stands for.”1 When such a purpose exists, it provides employees with a clear sense of direction, helps them prioritize and inspires them to go the extra mile — which, the argument goes, should ultimately be good for profit.

Purpose, by its nature, transcends making money: It is about people coming together to do something they believe in and allowing profit to follow as a consequence, rather than as an end in itself. But there is a paradox here. It is hard to fulfill a purpose in the absence of money, so purpose-driven organizations either must rely on donations or benefactors to sustain themselves (as most charities and aid organizations do), or they must become self-funding through their own profits.

Is it possible for a company to strive for a higher purpose while also delivering solid profits? Some have argued that pursuing goals other than making money means, by definition, spending on things that aren’t profit-maximizing. Others have countered that by investing in worthwhile causes, the company is doing something intrinsically valuable that will generate a long-term payoff to all parties.

But, ultimately, this is a well-rehearsed and tired debate, with plenty of evidence available to support both sides of the argument. The important question is not whether there is some tension between purpose and profits; there is. Instead, the question to ask is: How can the tension between purpose and profits best be managed? What structures does a company need to put in place to ensure that its higher-order purpose isn’t squeezed out by short-term profit seeking? How can executives ensure that employees keep these dual goals in mind on a day-to-day basis? And how can this balance be achieved on a long-term basis?

This article is based on research that we have conducted over the last five years looking at the organizational challenges involved in managing two different objectives at the same time. (See “About the Research.”) We have discovered that there are a few fundamental organizing principles that help a company sustain its sense of purpose over time while still achieving a solid level of profitability.2 These principles, in turn, are built on a perspective known as goal-framing theory. Goal-framing theory provides a deep understanding of why pursuing what we call “pro-social” goals — which we define as goals that involve working towardcommon causes that go beyond just making money and staying in business — creates a stronger motivational basis for working in organizations than pursuing self-interest goals that emphasize financial gain or personal enjoyment.

The article is structured as follows: We provide a brief overview of goal-framing theory, then describe three companies that have sustained a balance over time between purpose and profits. Based on this combination of theory and evidence, we then describe some practical ways of applying these insights inside your own company.

How Company Goals Influence Employee Behavior

Understanding how a company’s goals influence its performance requires understanding what motivates employees’ behavior on a day-to-day basis. That individuals are motivated to do their own work well is important, but a company with a higher-order purpose is typically asking them to also take a broader view and influence their joint effort toward common goals. Collaborative effort of this type involves a lot more than just doing a task well; it also takes understanding of and commitment to the common goal, and it takes the flexibility to use one’s wits, especially when new situations arise. For this kind of work, employees must be motivated in a special way.

There are numerous, partly overlapping views on what drives motivation in companies.3However, most have little to say about the links between company goals and individual motivations, that is, what motivates employees to behave in ways that help — or don’t help — the company or group to which they belong. A less well-known but highly relevant view that speaks directly to these issues is goal-framing theory.4

Goal-framing theory starts from the idea that, at any moment, people have a major area of concern that makes them focus on specific aspects of their work and neglect others. When employees are concerned about feeling good, they will look out for the fun parts of their job, for the one activity in their job that really excites them, and they will neglect things that feel boring or a bit uncertain. This is called a hedonic goal. When the major concern is income and/or promotion, an employee will focus on opportunities to earn extra money or make a good impression that helps raise the odds of getting promoted and will neglect other aspects of the job. This is called a gain goal. And when the major concern is to realize a common goal, such as getting a product launched on a tight timeline or delivering on a fundraising campaign, employees will attend mainly to that goal and will downplay concerns for relaxation, making more money or getting a better position. This is called apro-social goal.5 The essence of a pro-social goal is that it motivates the employee to ask, “What should I do to make us succeed?” rather than “What should I do to get ahead?” or “What will be the most enjoyable thing to do?”

What factors influence the relative strength of these three types of goals? Obviously, innate differences between individuals plays a part, but a much stronger influence is typically the immediate stimuli employees receive from those around them in their working environment and from their superiors. If all the talk is about the size of the annual bonus, the gain goal will immediately dominate others. But many companies want their employees to help the organization realize common goals, rather than to prioritize personal gain or fun on the job. So the challenge becomes how to make such common goals more salient and meaningful to employees across the company. To a large extent, this is a matter of trying to convey the purpose of the company to employees so they can see how their efforts fit with those of other employees to fulfill its overall purpose. This works best if the purpose is pro-social, because that provides a very direct link from the company goals to a pro-social orientation of the employees.6

Unfortunately, and this is a key point, the motivation to pursue pro-social goals is inherently fragile. It takes a great deal of effort to establish and maintain such goals, and they are easily displaced by gain or hedonic goals.7 There is no simple solution, because gain and hedonic goals cannot be abandoned entirely. Working toward company goals without being rewarded and without feeling good is not a stable long-term proposition. So there is a delicate balance needed here, and goal-framing theory provides some valuable insights into how it might be maintained.8

As a first guideline, the company’s statements should prioritize pro-social goals ahead of financial goals. For example, if a medical-products company is seeking to “put patients first,” then this goal should be center stage in all external and internal communications. Financial goals, in contrast, should be approached in an oblique or indirect way; they should be seen as the natural consequence of achieving the pro-social goals, rather than as ends in themselves. If financial goals are given too much prominence, they will typically displace the pro-social goals.9

Second, the fragility of pro-social goals means that they need reinforcing and supporting on a consistent and regular basis through incentive and reward systems, through informal conversations and discussions, through symbolic management and through formal structures that we call counterweights.10 For example, individual rewards should be linked to the performance of the group, operating unit or company as a whole, rather than just to individual outcomes. And managers should seek to acknowledge and highlight behaviors that support the pro-social goals of the company by, for example, building them into annual reviews and publicly celebrating and rewarding employees who successfully strive to meet the company’s pro-social goals.11 Without such reinforcement, employees will see a disconnect between the demands of their immediate job and the espoused goals of the company, and the pro-social goals will end up being displaced in favor of gain or hedonic goals.

Enduring Pro-Social Management Models

Goal-framing theory provides a useful new way of looking at the challenges companies face in aligning behavior around goals. Our research found many companies with a clear sense of purpose, typically expressed as a set of pro-social goals such as putting employees first or investing in local communities. But, in the majority of cases, there was no discernible impact on the way employees actually behaved. Sometimes the pro-social goal was just a set of words — in effect, a veneer on top of a gain-driven company.12

Sometimes the pro-social goal had been genuine at some point in the company’s history, but over time, its meaning atrophied as other goals became more salient. However, we also found a small number of highly successful companies whose pro-social goals seemed genuine. (See “About the Research” for a list of the 15 companies interviewed.) In talking to employees at multiple levels and in looking at the way they behaved and the things they valued, we could see evidence that these companies’ pro-social goals were influencing employee motivation and behavior. We focus on three cases here.

Handelsbanken.

In the crisis-ridden banking industry, Svenska Handelsbanken, established in Stockholm in 1871, stands out as an extraordinarily resilient and successful operation. Unlike a number of its competitors, Handelsbanken steered a course through the Swedish financial crisis in the early 1990s without government help, and it has sailed through the last five years of turbulence with uninterrupted growth in equity per share and with top ratings for customer satisfaction.

How has Handelsbanken been so consistently successful? Its pro-social goal is not very original: It is simply to be customer-focused. As the company declares on its website: “Since the early 1970s, Handelsbanken’s organization has been strongly decentralized and operations are always based on the customer’s requirements. This means that all business decisions regarding individual customers’ relationships with the Bank are taken close to the customer.”13

But rather than just talk about customer focus, Handelsbanken has built a management model that supports its goals. First, the bank’s structure is highly decentralized. Managers of individual branches have much more discretion regarding loans and employee salaries than is customary in the industry. This reduces the cost of information transfer and supports rapid responsiveness to changing market conditions. The company was also a pioneer of the “beyond-budgeting” movement: It has moved away from setting budgets on a top-down basis, and instead it expects branch managers to set their own targets.14

There is no emphasis on maximizing returns or shareholder returns; the goals are simply to track a moving target by always having higher customer satisfaction and profitability than a weighted average of the competition. These goals are then linked to a combined profit-sharing and employee stock ownership scheme called Oktogonen. Profits are shared equally across the organization (rather than on an individual basis), and when the bank’s after-tax return on equity is higher than the industry average, shares are issued to all employees. This model has been employed since the 1970s, so that today employees own more than 40% of the total equity, and many long-term employees have become millionaires. The equal profit-sharing scheme is an excellent example of how financial rewards can strengthen a pro-social goal rather than displace it.

Tata Group.

 

One of India’s biggest conglomerates, Tata Group had revenues of more than $90 billion in 2012, spread over such sectors as IT services, steel, cars, chemicals and hotels.15 The group was founded in 1868 by Jamsetji Tata, and it has always been strongly influenced by the Tata family. Family-founded trusts hold 66% of the equity capital of Tata Sons, a holding company. Below that sit various Tata operating companies, some wholly owned by Tata Sons, others public companies where Tata Sons has a minority stake.

Tata’s pro-social goal is “to improve the quality of life for the communities we serve.” As stated on the corporate website, “the community is not just another stakeholder in business, but is in fact the very purpose of its existence.”16 As with Handelsbanken, this is not a highly original statement of purpose, but it is backed up with supporting mechanisms that ensure it is taken seriously.

The charitable trusts that own 66% of Tata Sons spend their profits on charitable causes such as clean water delivery, literacy and health care. The Tata operating companies are then expected to put significant investments into the local communities they serve. For fiscal 2009, the total social expenditure across the group was estimated at $159 million.17

The Tata Group wields influence over the operating companies in a number of informal ways. Group functions provide training and education and quality management services, and Tata Sons’ executives sit on the boards of the operating companies. The Tata Group is also highly visible in its commitment to community development in, for
example, its launch of the Nano car and the low-cost Swach water purifier.

HCL Technologies.

HCL Technologies, with headquarters in Noida, India, was a second-tier player in the highly competitive IT services sector when Vineet Nayar became president in 2005. Nayar, who became CEO in 2007, decided to differentiate HCL through the quality of its management — by putting his employees first and by enabling them to create value in their relationships with customers. He embarked on a major transformation program, first pushing everyone to accept that the company was underperforming and needed to change and then putting in place a series of specific initiatives that were designed to help employees service their clients better. For example, he pushed all managers to place the results of their 360-degree appraisals online to make them more accountable to their employees; he also created a “service ticket” scheme, so that if an employee wasn’t happy about something he could open a ticket to get the attention of the relevant manager. Nayar tracked the number of tickets opened, and the speed with which they were closed, as an indicator of employee well-being.

As these initiatives began to take hold, Nayar captured his philosophy with the slogan “employees first, customers second,” which he announced — with some trepidation — at the annual global customer meeting. Further initiatives were added, such as the Employee Passion Indicator Count (EPIC) survey, which was used to identify the key “passions” of employees and to steer them towards jobs where these could be put to use.

By 2012, HCL had recorded an industry-leading compound annual growth rate of 24%. In our discussions with HCL employees, it was clear that many (though admittedly not all) had bought into Nayar’s “employees first” model and saw the company as a highly attractive employer. Turnover rates were lower than in competitor companies, and the highest ratings on the EPIC survey were around collaboration and client service. (Nayar stepped down from his role as CEO in 2013.)

Making Pro-Social Goals Pay

So what are the insights from these three brief case studies? The basic premise is that what motivates employees consistently to realize company goals also makes economic sense. The companies discussed are in very different industries, and the length of time they have been pursuing their pro-social goals varies enormously. But nonetheless there are some underlying principles here, and from goal-framing theory more generally, that can be applied in many other settings.

Pro-social goals don’t have to be elaborate or novel. The first point is that there are only a limited number of pro-social goals that a company can meaningfully target. For Handelsbanken, it is all about the customer; for Tata, it is about the communities in which the company operates; and for HCL, the pro-social goal is employee well-being. Other common pro-social goals involve a focus on employee safety (mining company Rio Tinto) or the natural environment (consumer products company Seventh Generation). We did not find evidence that companies thrived because they dreamt up a highly unique pro-social goal that nobody else had thought of. Rather, the evidence suggests the successful companies are the ones that were able to translate pedestrian-sounding pro-social goals into consistent and committed action.

Pro-social goals need supporting systems if they are to stick. We know that people take cues from those around them, but people are fickle and easily confused, and gain and hedonic goals can quickly drive out pro-social goals.18 So a key insight is that these three companies have built a wealth of supporting systems to help them operationalize their pro-social goals at different levels, and thereby make them stick. At Handelsbanken, the supporting systems are relatively formal: the highly decentralized branch structure, the removal of budgets and the equal profit-sharing system. At Tata, the supporting systems are more informal and are reinforced through the visible initiatives and pronouncements of the top executives. At HCL, the supporting systems were, initially, Nayar’s personal promotion of the “employees first” agenda plus a set of innovative practices designed to reinforce it. And in the first two organizations, in particular, there has been consistency in these systems over many years, which further reinforces their value. Such consistency matters because it signals that management is sincere.

Support systems are needed to reinforce goals. One important form of supporting system is to incorporate tangible manifestations of the company’s pro-social goals into the day-to-day work of employees. For example, IBM sends future managers to work with NGOs on development projects in Nigeria, Ghana, Tanzania and the Philippines to put substance behind its Corporate Citizen’s Core program.19 We have also seen health care companies bring patients into their offices to talk about how the company’s products have helped them. The world leader in insulin production, Novo Nordisk, requires that all new employees spend a day with a diabetes patient. For employees working on the front lines of their company, such systems are unnecessary, but many back-office employees lose touch with their company’s raison d’être, so this is a good way of making it visible.

Another important supporting system is to find ways of measuring progress on pro-social goals and to report them publicly. For companies that see customer focus as their goal, the Net Promoter Score has become a popular measure; for those that seek to put their employees first, engagement scores are often used; and for those that focus on safety, lost-time injuries are typically a preferred metric. Unfortunately, there aren’t yet established measures for community or environmental pro-social goals, though some companies are experimenting with them; one example is Guardian News & Media’s annual sustainability report. Regardless of the measure used, what matters is that the information is shared in a transparent and consistent way with the relevant stakeholders. HCL’s initiative to share feedback on how well managers are doing for all employees to see is a good example.

Pro-social goals need a “counterweight” to endure. Goal-framing theory shows how easy it is for pro-social goals to be driven out by gain or hedonic goals, so even with the types of supporting systems described above, it is quite common to see executives bowing to short-term financial pressures. Thus, a key factor in creating enduring pro-social goals is a “counterweight,” by which we mean any institutional mechanism that exists to enforce a continued focus on a nonfinancial goal. For Handelsbanken, the Oktogonen profit-sharing system is the counterweight. For Tata Group, it is the family-endowed trusts. At U.K. retailer John Lewis, the counterweight is the employee council, which represents the employees as ultimate owners of the company. At the Guardiannewspaper, the counterweight is the editor, who is appointed by the ultimate owner of the newspaper (the Scott Trust Limited) and is free to exercise editorial control over content, regardless of the company’s commercial priorities. The counterweight holds the power of the executive office in check and ensures that the long-term interests of the organization are not sacrificed for short-term benefits. The key is that the counterweight has real influence; it must hold the leader to account.

Alignment works in an oblique, not linear, way. In most companies, there is an implicit belief that all activities should be aligned in a linear and logical way, from a clear end point back to the starting point. The language used — from cascading goals to key performance indicators — is designed to reinforce this notion of alignment. But goal-framing theory suggests that the most successful companies are balancing multiple objectives (pro-social goals, gain goals, hedonic goals) that are not entirely compatible with one another, which makes a simple linear approach very hard to sustain.

So an important mental leap to make is the notion that long-term profits are often best achieved obliquely, or indirectly.20 As Ratan Tata, former CEO of the Tata Group, has observed, “Profits are like happiness in that they are a byproduct of other things … [companies] need sustainability strategies that recognize that you can make money by doing good things rather than the other way around.”21 In their best-selling business book Built to Last, Jim Collins and Jerry Porras argue that “visionary” companies with pro-social goals had better long-term profitability than their benchmark competitors, which typically opted for narrower financial goals.22

What does this mean in practical terms? If you want your employees to align around a pro-social goal, you have to eschew narrow, linear thinking, and instead provide more scope for them to choose their own oblique pathway. This means emphasizing the pro-social part of the story on a consistent basis — the intention being that by encouraging individuals to do “good,” their collective effort leads, seemingly as a side-effect, to better financial results. The logic of “pro-sociality first, profitability second” needs to find its way deeply into the collective psyche of the company.

For example, while Carlsberg A/S, a brewing company based in Copenhagen, Denmark, has pursued ambitious profitability and growth ambitions, the majority of its shares are owned by the Carlsberg Foundation. What’s more, the foundations associated with the brewing company have shaped Danish cultural life for more than 100 years. This subtle linking of beer and high-brow culture is very much part of the company’s identity.

Pro-social initiatives can be implemented at all levels. Who is responsible for pursuing a pro-social agenda? If you head up a division or business unit, it is clearly your job to define what your pro-social goals are and to put in place the supporting structures and systems described here. But what if you are lower in the corporate hierarchy? It is tempting to think this is “someone else’s problem,” but actually there is no reason why you cannot follow your own version of the same process. We have seen quite a few mid-level managers make a real difference, and often quite quickly, using the principles outlined here. (See “Pursuing Pro-Social Goals in an Operating Unit.”)

Corporate Purpose and Profitability

In a famous article in Time magazine, Robert Ajemian reported George H.W. Bush’s exasperated reaction to friendly suggestions that he invest time in carefully thinking about his prospective presidency: “Oh, the vision thing.”23 Many CEOs react in much the same way: They know they are supposed to have a corporate vision or purpose, but they secretly think that wordy statements about the purpose of their business are just empty rhetoric. And it doesn’t take long for employees and other observers of the company to figure this out.

The purpose of this article is to help you to understand why and how a corporate purpose matters and to show how it can be realized without sacrificing profitability — and indeed may result in higher profitability. Goal-framing theory shows that a company’s goals make a difference only when they work on the beliefs of employees, and that the most valuable goals are those that support collaborative work — what we have called pro-social goals. However, these goals compete with other goals for individual mind share and are easily driven out by gain and hedonic goals. As a result, corporate executives have to work doubly hard to affirm pro-social goals and to develop systems and structures that reinforce them. And, most fundamentally, establishing pro-social goals requires developing a tolerance for obliquity — that is, the paradoxical notion that if we follow pro-social goals we aren’t actually getting rid of gain goals. Instead, we are realizing them more effectively.

REFERENCES (24)

1. R. Tata, S.L. Hart, A. Sharma and C. Sarkar, “Why Making Money Is Not Enough,” MIT Sloan Management Review 54, no. 4 (summer 2013): 95-96.

2. We acknowledge other studies have provided useful advice to social enterprises, particularly around the notion of shared value, such as M. Pfitzer, V. Bockstette and M. Stamp, “Innovating for Shared Value,” Harvard Business Review 91, no. 9 (September 2013): 100-107. This study starts from a theoretical perspective on human motivation and as a result it offers somewhat different, though complementary, recommendations about how organizations of all types — not just social enterprises — can balance competing objectives.

3. As a research field, this is often called “work motivation research.” G.P. Latham has an excellent summary of the various work motivation theories. On goal-setting theory, E.A. Locke and G.P. Latham also emphasize the importance of goals but mainly focus on the effects of having goals explicitly stated by the organization, rather than on the changing salience of major concerns. The same can be said of the work of Adam Grant: Even though it has put much emphasis on pro-social behaviors and is thus in some ways akin to our perspective, it does not deal with the dynamics of competing concerns. See G.P. Latham, “Work Motivation: History, Theory, Research and Practice” (Thousand Oaks, California: Sage, 2012); E.A. Locke and G.P. Latham, “Building a Practically Useful Theory of Goal Setting and Task Motivation: A 35-Year Odyssey,” American Psychologist 57, no. 9 (September 2002): 705-717; A.M. Grant and S.K. Parker, “Redesigning Work Design Theories: The Rise of Relational and Proactive Perspectives,” Academy of Management Annals 3, no. 1 (2009): 317-375; and A.M. Grant, J.E. Dutton and B.D. Rosso, “Giving Commitment: Employee Support Programs and the Prosocial Sensemaking Process,” Academy of Management Journal 51, no. 5 (October 2008): 898-918.

4. See S. Lindenberg and N.J. Foss, “Managing Motivation for Joint Production: The Role of Goal Framing and Governance Mechanisms,” Academy of Management Review 36, no. 3 (July 2011): 500-525; and K. Keizer, S. Lindenberg and L. Steg, “The Spreading of Disorder,” Science 322, no. 5908 (December 12, 2008): 1681-1685.

5. Strictly speaking, goal-framing theory talks about normative goals that underlie employees’ motivation for joint production rather than pro-social goals. Normative goals are goals held by individuals. However, company goals with a normative orientation are often called “pro-social.” To simplify the terminology here, we use the term pro-social for both levels: Pro-social goals of companies activate pro-social (“normative”) goals in employees.

6. In a game where people would be individually better off (in terms of money) not cooperating, the experimenters saw a much higher percentage of participants cooperate when it was called “community game” compared to when it was called “Wall Street game.” Labeling the game with “community” or “Wall Street” simultaneously expressed the purpose of the game, what kind of behavior is expected and how other participants are likely to behave. See V. Liberman, S.M. Samuels and L. Ross, “The Name of the Game: Predictive Power of Reputations Versus Situational Labels in Determining Prisoner’s Dilemma Game Moves,” Personality and Social Psychology Bulletin 30, no. 9 (September 2004): 1175-1185.

7. See A. Fuster and S. Meier, “Another Hidden Cost of Incentives: The Detrimental Effect on Norm Enforcement,” Management Science 56, no. 1 (January 2010): 57-70; and S. Lindenberg, “Cognition and Governance: Why Incentives Have to Take a Back Seat,” chap. 3 in “Handbook of Economic Organization: Integrating Economic and Organization Theory,” ed. A. Grandori (Cheltenham, U.K.: Elgar, 2013).

8. See Lindenberg and Foss, “Managing Motivation.”

9. N.J. Foss and S. Lindenberg, “Microfoundations for Strategy: A Goal-Framing Perspective on the Drivers of Value Creation,” Academy of Management Perspectives 27, no. 2 (May 2013): 85-102.

10. See Lindenberg and Foss, “Managing Motivation.”

11. B.S. Frey, “Giving and Receiving Awards,” Perspectives on Psychological Science 1, no. 4 (December 2006): 377-388.

12. It appears that many companies use pro-social goals language in their annual reports as a smokescreen to hide unethical practices. See T. Loughran, B. McDonald and H. Yun, “A Wolf in Sheep’s Clothing: The Use of Ethics-Related Terms in 10-K Reports,” Journal of Business Ethics 89, no. 1 (May 2009): 39-49.

13. “Handelsbanken in Brief,” n.d., www.handelsbanken.us.

14. There is plenty of evidence that traditional budgeting processes are flawed. See, for example, M.C. Jensen, “Paying People to Lie: The Truth about the Budgeting Process,” European Financial Management 9, no. 3 (September 2003): 379-406.

15. The Tata Group case study is based on data collected through interviews with company executives as well as on A. Graham, “Too Good to Fail,” Strategy + Business 58 (spring 2010).

16. “Values and Purpose,” n.d., www.tata.com; and “The Quotable Jamsetji Tata,” March 2008, www.tata.com.

17. Graham, “Too Good to Fail.”

18. Keizer et al., “The Spreading of Disorder.”

19. M. Useem and S. Palmisano, “Always Put the Enterprise Ahead of the Individual,” January 18, 2013, http://knowledge.wharton.upenn.edu.

20. The concept of obliquity is developed more fully in J. Kay, “Obliquity: Why Our Goals Are Best Achieved Indirectly” (London: Profile Books, 2010); see also J. Birkinshaw, “Setting Objectives: From Alignment to Obliquity,” chap. 5 in “Reinventing Management: Smarter Choices for Getting Work Done” (San Francisco: Jossey-Bass, 2012).

21. Tata et al., “Why Making Money Is Not Enough.”

22. See chapter 1 of J. Collins and J.I. Porras, “Built to Last: Successful Habits of Visionary Companies” (New York: HarperCollins, 1994).

23. R. Ajemian, “Where Is the Real George Bush?” Time Magazine, Jan. 26, 1987, 20.

i. S. Sinek, “Start With Why: How Great Leaders Inspire Everyone to Take Action” (Portfolio/Penguin, 2009).

A key to transformational leadership in business

Posted on March 02nd, 2014 - No comments yet

From Leadership Hub, The Guardian

The key to transformational leadership in business is self doubt.

Leaders need confidence, but businesses that can transform the world require curious leaders that question their own certainties
Nelson Mandela, Wembley Stadium 1990

‘The leader who is willing to allow self-doubt … that leader I could trust,’ said a former senior leader of the ANC. Photograph: Richard Young/REX

A colleague preparing an academic paper was contemplating the hypothesis that transformational leadership was less likely in hostile expedition environments than the less physically life-threatening environment of business – the harsh exacting nature of wilderness necessitating a more traditional command and control leadership style.

Clearly much depends upon our interpretation of the term transformational, but my initial response was to think of Ernest Shackleton, who displayed extraordinary and inspirational leadership. His famous trans-Antarctic expedition was transformational for those accompanying him.

Certain military leaders also come to mind. Julius Caesar’s legions were devoted to him and I believe, would have considered their experience with him to be transformational. Admiral Nelson was a legend in his own time. And, imprisoned on Robben Island, Nelson Mandela’s comrades found the experience of his moral leadership, transformational.

My colleague’s paper rekindled questions of my own. Extreme experiences in nature, war, or any other truly hostile environment take us close to the imminent possibility of injury or loss of life. A very bad end in business, however, looks more like a collapsing market, tumbling share prices, site closures and redundancies – extremely stressful and challenging, but rarely life threatening.

Loyalty in expeditions is visceral and trust is the bedrock upon which lives depend. Loyalty and trust in publicly owned businesses is conditional, often highly selective, and likely to evaporate if performance persists in failing to meet shareholder expectations. It seems to me that transformational leadership is not just less likely to occur in the business sector but very unlikely to occur at all without an essential missing ingredient.

The possibility of leadership being experienced as transformational necessitates those involved in perceiving profound meaning in the purpose of the organisation. This is the challenge and opportunity offered to business leaders today. Create businesses that genuinely serve the needs of people and seek to support the emergence of a just, equitable, and environmentally sustainable world, and transformational leadership within business will emerge abundant and celebrated.

Such a world is within reach, but first we need our business leaders to experience another phenomenon unfamiliar, even feared, and certainly un-admitted by most. Some years ago I had the privilege of accompanying a group of business leaders to South Africa. It was a learning journey and involved many potentially transformational experiences, not the least of which was a meeting with Mac Maharaj.

Maharaj held senior leadership positions in the ANC during the war against apartheid. Alongside many of his now famous contemporaries, he was obliged to make many decisions that would endanger the lives of the men and women he led. We asked him: “With your experience of leadership in such harsh and uncompromising circumstances, what insight could you offer us that might relate to our own world of business leadership?”

He paused and considered before answering, and then very softly replied: “self-doubt”.

We leaned back in our seats, also taking time as we absorbed a reply none of us had expected. Not self-confidence, but self-doubt. He continued: “I’ve had it up to here with leaders who have no self-doubt. Leaders who have no questions, no curiosity, no questioning of their own certainties and self-evident truths. At one time I had a deputy like that. I believe his unwillingness to question his own assumptions and accept the likelihood of his personal fallibility, led to the death of many good freedom fighters. Leaders need confidence, of course, but the leader who is willing to allow self-doubt to invite tough questions and profound listening, that leader I could trust.”

It is self-doubt that might lead to questions that challenge the assumptions underpinning business as we currently know it; questions that challenge growth and profit as the purpose of business. Imagine the society we could create if we chose to serve the wellbeing of people and nature first, and the generation of profits second. The first would be the purpose, the second would be the means. Businesses would still thrive and compete, and shareholders would receive their rewards, yet now business becomes the engine that transforms our world. Transformational leadership is the enabling and generous practice of a profession that has found it’s true vocation.

Tim ‘Mac’ Macartney is the founder of Embercombe and is the author ofFinding Earth, Finding Soul: the Invisible Path to Authentic Leadership.

 

How To Think

Posted on March 02nd, 2014 - No comments yet

 

From the Farnam Street Blog
 by 

 

chess

Sebastian Garcia made a mistake but he couldn’t figure it out. At the 2011 National Junior High Chess Championship he was looking strong and heading towards a victory. Then he made a mistake, squandering his advantage. A few moves later the collapse was complete. Sebastian shook hands with the boy who had beaten him and walked back to Union B, the conference room down the hall. Union B was the makeshift home for his chess team from Intermediate School 318 in Brooklyn.

Elizabeth Spiegel, the school’s chess teacher, was waiting. It was customary to come back to the room for a postmortem. Sebastian, feeling sorry for himself, slouched into the room, his head held low, and approached Spiegel. “I lost,” he announced.

“Tell me about your game,” Spiegel said. Sebastian flopped into the chair and handed her his notepad, where he’d recorded all the moves for both players in the game.

Sebastian explained that the other guy was simply better. “He had good skills,” he said. “Good strategies.”

And this is the point where many of us would simply say something along the lines of “did you do your best?,” in which case the likely response is “Yes.” Everyone is at least let off the hook. The teacher for ensuring students try their best, the student for having lost to someone better. Spiegel did not take this approach.

“Well, let’s see,” said Spiegel as she started to re-create the game on a chess board. At one point Sebastian fell into a trap. His opponent quickly pounced and took a pawn just four moves into the game. He was already down a piece.

Spiegel looked at him. “How long did you spend on that move,” she asked.

“Two seconds.”

Spiegel’s face tensed. “We did not bring you here so that you could spend two seconds on a move,” she said with an edge in her voice. In the face of this obvious challenge to what he did, Sebastian looked down. “Sebastian!” He looked up. “This is pathetic. If you continue to play like this, I’m going to withdraw you from the tournament, and you can just sit here with your head down for the rest of the weekend. Two seconds is not slow enough.”

Her voice grew more understanding. “Look, if you make a mistake, that’s okay. But you do something without even thinking about it? That’s not okay. I’m very, very, very upset to be seeing such a careless and thoughtless game.”

Then the storm passed. Spiegel resumed moving pieces and examining the game. She pointed out his good moves. “Very clever,” she said when he took the knight. As the game progressed, Spiegel praised his good ideas and asked him to come up with alternatives to others. “You were playing in some ways an excellent game,” she told him, “and then once in a while you moved superfast and you did something really stupid. If you can stop doing that, you’re going to do very, very well.”

By the thirty-fifth move Sebastian recovered completely from his early errors. The position on the board favored him. He pushed his queen forward, checking the white king. His opponent countered, drawing a pawn up to block the path. Sebastian moved his queen ahead: check. His opponent moved his king one square, out of the queen’s range.

Rather than keep the pressure on, Sebastian went for an easy score: taking a white pawn with his queen. But in this move he had missed the threat. On the other side of the board, his opponent took his bishop and Sebastian’s advantage started to slip away.

“You took the pawn?” Spiegel asked. “Come on. What’s a better move?”

Sebastian didn’t answer.

“What about check?” Spiegel suggested. Sebastian stared at the board evaluating the move.

“Think about it,” Spiegel said. “Remember, when I ask you a question, you don’t have to answer right away. But you do have to be right.”

Suddenly a light went on his head. “I could win the queen,” he said.

Spiegel looked at him and said “Show me.”

Sebastian made the moves, understanding how one more check would have saved his bishop and sealed the game.

“This is the thing,” Spiegel said, moving the pieces back to the point where they were when Sebastian had gone for the easy pawn. “Think back on this moment. When you made this move”— she captured the white pawn, as Sebastian had done—“ you lost the game. If you had made this move”— she put the white king in check—“ you would have won the game.” She leaned back in her chair, her gaze fixed on Sebastian. “It’s okay if the loss hurts you a little,” she said. “You should feel bad. You’re a talented player, but you have to slow down and think more. Because now you have”— she checked her watch—“ four hours until the next game, which means that you have four hours to think about the fact that you got beat by this kid.” She tapped the board. “All because of this one time when you could have slowed down but you didn’t.”

* * *

A version of that story appears in Paul Tough’s incredible book How Children Succeed: Grit, Curiosity, and the Hidden Power of Character. Spiegel’s story is straight out of Hollywood — inner-city teacher and low-income students, against all odds beating the pants off private school students. Often when you look into these stories you find an asterisk. But in this case Tough “couldn’t find one.”

Take a look at this tournament, held only a few months before the tournament that Sebastian Garcia was playing in:

Kindergarten Oak Hall School, a private school in Gainesville, Florida
First grade SciCore Academy, a private school in New Jersey
Second grade Dalton School, a private school in New York City
Third grade Hunter College Elementary, an exam school in New York City
Fourth grade Tie between SciCore Academy and Stuart Hall School for Boys, a Catholic school in New Orleans
Fifth grade Regnart Elementary, a public school in Cupertino, California, home of Apple and dozens of software companies
Ninth grade San Benito Veterans Memorial Academy, in southern Texas, a public school whose student body is mostly Hispanic and low income
Tenth grade Horace Mann, a private school in New York City
Eleventh grade Solomon Schechter, a private school in a New York City suburb
Twelfth grade Bronx Science, an exam school in New York City

With the exception of Grade nine, the winning team , “came from a private school, an exam school, a parochial school, or a public school populated by the children of Apple engineers,” Tough writes.

Except, that is, for middle school grades, the space where Elizabeth Spiegel teaches.

Sixth grade IS 318, a low-income public school in Brooklyn
Seventh grade IS 318, a low-income public school in Brooklyn
Eighth grade IS 318, a low-income public school in Brooklyn

These students didn’t win just one grade, they won every grade they entered. “The roster of schools they beat,” Tough writes, “reads like a wealthy parent’s wish list of the most desirable private schools in the country: Trinity, Collegiate, Spence, Dalton, and Horace Mann in New York City, and exclusive private schools in Boston, Miami, and Greenwich, Connecticut.”

The chess program at IS 318 is one of the best in the country. But why?

…they win tournaments because of what Elizabeth Spiegel was sitting in Union B doing that April afternoon: taking eleven-year-old kids, like Sebastian Garcia, who know a little chess but not a lot, and turning them, move by painstaking move, into champions.

“Most of the major academic studies of chess miss much that is essential to the way that chess-player thinks and feels,” Jonathan Rowson wrote in his book The Seven Deadly Chess Sins. “They are guilty of thinking of chess as an almost exclusively cognitive pursuit, where moves are chosen and positions understood only on the basis of mental patterns and inferences.” In reality, he wrote, if you want to become a great chess player, or even a good one, “your ability to recognize and utilize your emotions is every bit as important as the way you think.”

Most of us probably think that Spiegel was teaching the kids chess. Of course she often passed along specific chess knowledge: how to weigh the comparative value of moves, etc. “But most of the time,” Tough writes, “it struck me whenever I watched (Elizabeth Spiegel) at work, what she was really doing was far simpler, and also far more complicated: she was teaching her students a new way to think.”

Two of the most important executive functions are cognitive flexibility and cognitive self-control. Cognitive flexibility is the ability to see alternative solutions to problems, to think outside the box, to negotiate unfamiliar situations. Cognitive self-control is the ability to inhibit an instinctive or habitual response and substitute a more effective, less obvious one. Both skills are central to the training Spiegel gives to her students. To prevail at chess, she says, you need a heightened ability to see new and different ideas: Which especially creative winning move have you overlooked? And which potentially lethal move of your opponent’s are you blindly ignoring? She also teaches them to resist the temptation to pursue an immediately attractive move, since that type of move (as Sebastian Garcia found out) often leads to trouble down the road. “Teaching chess is really about teaching the habits that go along with thinking,” Spiegel explained to me one morning when I visited her classroom. “Like how to understand your mistakes and how to be more aware of your thought processes.”

Before she was a a full-time chess teacher, Spiegel taught an eighth-grade honors English class. She taught them the same way she taught Sebastian: ruthlessly analyzing everything.

When students turned in writing assignments, she went through each assignment sentence by sentence with each student, asking, Well, are you sure that’s the best way to say what you want to say? “They looked at me like I was insane,” she told me. “I would write them these long letters about what they’d written. It would take me the whole evening to do six or seven of them.”

Although her teaching style might not have been the right fit for English, this helped her better understand how to teach chess. Rather than follow a set curriculum, she decided to construct her calendar as she went, focusing “entirely on what her students knew and, more important, on what they didn’t know.”

For instance, she would take her students to a weekend tournament and notice that many of them were hanging pieces , meaning they were leaving pieces undefended, which made them easy targets. The following Monday, she would organize the whole class around how not to hang pieces, reconstructing the students’ flawed games on the green felt practice boards hung on hooks at the front of her classroom. Again and again, she would go over her students’ games, both individually and as a class, analyzing exactly where a player had gone wrong, what he could have done differently, what might have happened if he had made the better move, and playing out these counterfactual scenarios for several moves before returning to the moment of error.

Sensible though this process might sound, it’s actually a pretty unusual way to teach chess, or to learn it. “It’s uncomfortable to focus so intensely on what you’re bad at,” Spiegel told me. “So the way people usually study chess is they read a book about chess, which can be fun and often intellectually amusing, but it doesn’t actually translate into skill. If you really want to get better at chess, you have to look at your games and figure out what you’re doing wrong.”

Calibrated Meanness

At the heart of Spiegel’s job was a complex balancing act. She wanted to build up her students’ confidence, to make them believe in their own ability to overcome stronger rivals and master an impossibly complicated game. But the exigencies of her job— and the particularities of her personality— meant that she spent most of her time telling her students how they were messing up. It’s the basic narrative of all postgame chess analysis, in fact: You thought you had a good idea here, but you were wrong.

“I struggle with it all the time,” she told me one day when I visited her class. “Every day. It’s very high on my list of anxieties as a teacher. I feel like I’m very mean to the kids. It kills me sometimes, like I go home and I play through everything I said to every kid and I’m like, ‘What am I doing? I’m damaging the children.’”

After the 2010 girls’ national tournament (which IS 318 won), Spiegel wrote on her blog:

The first day and a half was pretty bad. I was on a complete rampage, going over every game and being a huge bitch all the time: saying things like “THAT IS COMPLETELY UNACCEPTABLE!!!” to 11-year-olds for hanging pieces or not having a reason for a move. I said some amazing things to kids, including “You can count to two, right? Then you should have seen that!!” and “If you are not going to pay more attention, you should quit chess, because you are wasting everyone’s time.” By the end of round three I was starting to feel like an abusive jerk and was about to give up and be fake nice instead. But then in round four everyone took more than an hour and started playing well. And I really believe that’s why we seem to win girls’ nationals sections pretty easily every year: most people won’t tell teenage girls (especially the together, articulate ones) that they are lazy and the quality of their work is unacceptable. And sometimes kids need to hear that, or they have no reason to step up.

Slowing down, examining impulses, and considering alternatives sounds reasonable but it’s “quite rare in contemporary American Schools.”

If you believe that your school’s mission or your job as a teacher is simply to convey information, then it probably doesn’t seem necessary to subject your students to that kind of rigorous self-analysis. But if you’re trying to help them change their character, then conveying information isn’t enough. And while Spiegel didn’t use the word character to describe what she was teaching, there was a remarkable amount of overlap between the strengths David Levin and Dominic Randolph emphasized and the skills that Spiegel tried to inculcate in her students. Every day, in the classroom and at tournaments, I saw Spiegel trying to teach her students grit, curiosity, self-control, and optimism.

How Children Succeed: Grit, Curiosity, and the Hidden Power of Character is an amazing book. Highly recommended.