Research has shown that that the typical person makes about 2,000 decisions every waking hour. Most decisions are minor and we make them instinctively or automatically — what to wear to work in the morning, whether to eat lunch now or in ten minutes, etc. But many of the decisions we make throughout the day take real thought, and have serious consequences. Consistently making good decisions is arguably the most important habit we can develop, especially at work. Our choices affect our health, our safety, our relationships, how we spend our time, and our overall well-being. Based on my experiences from three deployments as an Army officer and from researching Lead Yourself First, I’ve found the following mindsets to be detrimental to good decision-making. When you have to make an important decision, be on the lookout for:
Decision fatigue. Even the most energetic people don’t have endless mental energy. Our ability to perform mental tasks and make decisions wears thin when it’s repeatedly exerted. One of the most famous studies on this topic showed that prisoners are more likely to have parole approved in the morning than when their cases are heard in the afternoon. With so many decisions to make, especially ones that have a big impact on other people, it’s inevitable to experience decision fatigue. To counter it, identify the most important decisions you need to make, and, as often as possible, prioritize your time so that you make them when your energy levels are highest.
A steady state of distraction. The technology tsunami of the past decade has ushered in an era of unprecedented convenience. But it’s also created an environment where information and communication never cease. Researchers estimate that our brains process five times as much information today as in 1986. Consequently, many of us live in a continuous state of distraction and struggle to focus. To counter this, find time each day to unplug and step back from email, social media, news, and the onslaught of the Information Age. It’s easier said than done, but doable if you make it a priority.
Lack of input. The Kellogg School recently found that in a typical meeting, an average of three people do 70% of the talking. As author Susan Cain articulates so well in her book Quiet, many introverts are reluctant to speak up in a meeting until they know precisely what they want to say. Yet, these members of our teams often have some of the best ideas to contribute, since they spend so much of their time thinking. To counter this inclination, send out a meeting agenda 24 hours in advance to give everyone time to think about their contributions, and work to set a meeting culture that allows people to contribute their ideas after the meeting is over.
Multi-tasking. There aren’t many jobs left in the world today that don’t require at least some multitasking. While that’s the reality, research clearly shows that performance, including decision-making effectiveness, suffers by up to 40% when we focus on two cognitive tasks at the same time. When you need to make important decisions, carve out and commit to several blocks of time during the day to focus deeply on the task at hand.
Emotions. Experiencing frustration, excitement, anger, joy, etc., is a fundamental part of the daily human experience. And while these emotions have a meaningful role in our lives, you probably don’t need to see the research to know that our emotions, especially during moments of peak anger and happiness, can hinder our ability to make good decisions. Deciding to speak or send an email while angry often compounds a tough situation, because the words don’t come out right. To counter this, pay attention to your emotional state and focus on the character strength of self-control. Resist the temptation to respond to people or make decisions while you’re emotionally keyed up. Practice walking away from the computer or putting the phone down, and return to the task at hand when you’re able to think more clearly and calmly.
Analysis Paralysis. While the Information Age has gifted us with an abundance of information, big data, and metrics, there’s also no end to the amount of information we can access. And we know that the more information we have to consider, the longer we typically take to make a decision. While the decision-making process should be thorough, the best way to make good decisions is usually not to take more time or to look at more information. Instead, review the pertinent information you need, set a deadline to make a decision, and then stick to it.
The decisions we make determine our reality. They directly impact how we spend our time and what information we process (or ignore). Our decisions shape our relationships — and increasingly in today’s hyper-connected world, decisions contribute to our energy level and how efficient we are in the various aspects of our lives. Inevitably, we all make some poor decisions every single day. But if we are aware of these six enemies of good decision-making, and take steps to outmaneuver them, we can make better decisions that have a positive impact on the people we work with and lead.
Mike Erwin is the co-author of Lead Yourself First: Inspiring Leadership Through Solitude and CEO of the Character & Leadership Center. He is also the president of The Positivity Project and a Lt. Colonel in the Army Reserve, assigned to the U.S. Military Academy at West Point as an Assistant Professor in Leadership & Psychology.
Written by Phil La Duke – As a part of our series about strong female leaders, I reached out to women CEO’s and had the pleasure of interviewing Elizabeth currently serves as the Founder and Chief Executive Officer of EAG Services, a leading oil and gas IT consulting firm, and EAG 1Source, a full-service IT and business process outsourcing firm. She is responsible not only for both companies’ strategic leadership and vision, but also for providing guidance, direction and expertise to clients and team members.
Thank you so much for doing this with us Elizabeth! What is it about the position of CEO that most attracted you to it?
It was during my first jobs, right after college, working for Andersen Consulting and PricewaterhouseCoopers, where I implemented accounting, financial, and cost-accounting systems for clients of those firms, that led me to my current career path. I’m grateful for that experience because it laid the foundation for what we’re doing today at EAG Services.
Most of our readers — in fact, most people — think they have a pretty good idea of what a CEO does, but in just a few words can you explain what a CEO does that is different from the responsibilities of the other executives?
As the leader at the helm, it’s my job to develop and support successful teams. That means building the right team. From there, create an environment where your team feels safe but push their boundaries. My goal is not for everyone at EAG to stay forever, but when they leave, they should be significantly more knowledgeable and accomplished than when they arrived.
What were your biggest struggles throughout your professional life and how did you overcome them?
Learning to identify individuals within the organization who were not a cultural fit or healthy for morale proved difficult for me. I always tried to see the best in everyone and thought that it was part of my role to encourage employees to become their best selves, but many times, retaining those individuals was detrimental to the organization, as a whole. I had to learn that not everyone is a cultural fit or happy within EAG and that’s ok. As a result, we have spent significant time defining what is the EAG Culture and encouraged those who were not a fit to find new opportunities. This turned out to be best for everyone but mostly for the EAG team. Now, everyone knows that they can rely on everyone else and feel that they are working towards a consistent vision for the company. Since I changed my paradigm on what my role is, our culture has blossomed, and our team seems much happier and engaged.
What are the biggest challenges faced by women CEOs that aren’t typically faced by their male counterparts?
Especially being in an oil & gas industry where men are mostly holding the jobs and in our work environment, a big challenge is creating a warm, comfortable environment. It’s crucial to develop a peer-based organization or environment where your team can feel it’s safe to make those mistakes and learn. Mistakes are a great learning tool and more companies embrace employees — women — in order to develop them and help them grow. Men can face this too, but in our particular industry, it’s more often than not, a male-dominated environment.
What is the one thing that you enjoy most about being a CEO?
When our entire team is in the office together, typically on Friday’s, I get to hear them laugh and collaborate with one another. It’s amazing to watch, and then, to later hear from clients the ideas and problems that they have been able to solve makes me so very proud of their accomplishments. I consider myself a collector of brilliant and team-driven people, and when I see them come together, it takes my breath away.
What are the downsides of being a CEO?
Can you share the most interesting story that happened to you since you began leading your company?
As any entrepreneur can relate, my entire path was a learning process, but I’d say the most interesting story relates back to my early days of finances in my business. When we went through our first venture, a few years after founding EAG Services, we reached a point where the funds weren’t adding up. It was at this point that we realized our controller wasn’t paying our bills, and we had to figure out how to not only correct the mistake but also learn how to manage with low cash flow. It took about a year to come out of this mistake.
All in all, I wouldn’t change our path because it was something we had to go through and experience. It’s essential to learn about cash flow and how critical it is to manage cash flow when building capital. The next time we had a downturn in cash flow, I was prepared, and we had learned from that first time what we had to do.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
As an entrepreneur always on-the-go, with a very determined mindset, something amusing happened to me when I did everything in my power to attend a meeting in a different city.
I was already traveling from a meeting when I realized I had to re-route my travel itinerary if I wanted to make the upcoming meeting in a different city. The only way for me to get there in the appropriate time frame was to fly straight to that city, Denver. I re-routed my flights, changed my schedule, but my luggage, however, was a different story. My luggage somehow found its way to Mexico City instead of Denver.
I learned that sometimes it’s ok to slow down and reschedule a meeting because it’s probably not best for you to push yourself. In the end, I had to push the meeting by a few hours because I had to purchase a whole new wardrobe.
Certainly, not everyone is cut out to be a CEO, what specific traits increase the likelihood that a person will be a successful CEO and what type of person should avoid aspiring to be a CEO?
Successful leaders develop and support successful teams. First of all, build the right team. Hiring a great resume may get you skills, but is that person going to fit into your team? Eliminate those individuals who erode rather than enhance team spirit. My daily goal is to help my team thrive. Create an environment where your team feels safe but push their boundaries. If you have a talented team, push them to do things that are new with the caveat that they will make mistakes. The right team members will HATE making mistakes, but the outcome should be a constructive learning experience. That’s not to say that you won’t get angry periodically, but that is what the gym is for… to work off your emotions which are usually irrelevant. Your team will never grow if they cannot make those mistakes and learn. Remind them that it’s ok to make mistakes, but to be successful, they have to get back up again the next day and strive to learn. And, of course to make new mistakes in the future. That’s part of growth. It’s essential for members of your team to feel as if they’re a part of an experience, not just an employee. My goal is not for everyone at EAG to stay forever, but when they leave, they should be significantly more knowledgeable and accomplished than when they arrived. Lastly, really listen to people when they’re bringing ideas to the table and let people do the job they were designed to do. Explore people’s ‘zones of genius’ and leverage that in the decisions you make. You can’t know everything or do everything better than everyone else, nor should you. You are their fearless leader (or pretend to be). Give them the strength and encouragement to become the best in their field.
What advice would you give to other female leaders to help their team to thrive?
My top advice for other female leaders to help their team thrive is first to create an environment where your team feels safe. In other words, we all make mistakes, but it’s crucial to develop a peer-based organization or environment where your team can feel it’s safe to make those mistakes and learn. Tell them it’s ok to make mistakes but you must get back up again the next day and strive to learn and do better.
Who inspired/inspires you and why?
My dad was is my biggest inspiration because he’s been through my journey — every step of the way.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
Throughout my journey of success, the person that was always there for me was my dad. He’s always been incredibly supportive, especially in teaching me never give up when things got down. He’d always tell me to buck up and get back on the saddle.
When push came to shove, he would pitch in money or help me with personal expenses or provide me a short-term loan to keep going. It was through this trial and error that I learned how to be better at predicting and how to handle the ups and downs of the energy cycle.
How have you used your success to make the world a better place?
As a Houstonian, it was important for me and only natural to come back and start my company there. It meant a lot for me to add more jobs to my hometown. My impact, as well as EAG Services, is evident by Houstonians, particularly startup oil & gas companies turning to us for advice in streamlining processes & providing support to their businesses. The work myself and the EAG Services team provide to our Houston clients is everything, and it shows at every level in the organization. People are empowered at EAG, not only to mold their career path and accelerate it as such but also in their ability to do right by the client.
It’s also important for us to give back to our community when we can. We have a community service committee that comes up with activities for the company to participate in throughout the year where most of our employees are coming out and giving back.
What are the “5 Things I Wish Someone Told Me Before I Started” and why? (Please share a story or example for each.)
For any new business cash on-hand is critical, and I wish someone had told me to always understand the cash impact of every decision that you make before taking action. I know from talking to other friends in start-up situations that this is a hard lesson to learn on your own. In my case, during our 2nd year of operations, I decided to switch the team from contractor status to employee status. I made offers to everyone who I thought would be a good fit long term and expected a few of those folks to accept. It didn’t occur to me that they would ALL accept. And, I did not think through how much it would cost to pay out the remaining amounts owed for their prior month’s work as contractors as well as their first month of salary and benefits. That overlap unexpectedly tapped me out. From that experience, I learned to always calculate the cost up front, plan accordingly and try to avoid an unnecessary cash crunch.
Work with a bank where you actually have access to a banker who can answer questions and provide advice. When I first started, I used a large bank simply because I had maintained my personal accounts there. However, you need someone to talk to about getting a line of credit established, the difference between the types of accounts available, how to maintain your credit worthiness, etc. With the big bank, I had a basic business account. By moving to Amegy Bank and getting to know my local banker, I was able to get a line of credit in place, different accounts to generate interest off cash reserves, positive pay to protect us if someone tried to deposit a fraudulent check, etc. Those are really important services to have in place.
For every upturn there is a downturn, and you have to take advantage of economic ups and market changes that give you an edge because a downturn is eventually coming your way. I work in the Energy Industry which is very cyclical. I knew that from the day we started, but it was so easy to focus on growth without planning for a rainy day. Because of that, we were low on cash and too dependent on specific customers when we were faced with our first big downturn in 2009. There were days when we only had $4,000 of cash on-hand. The line of credit kept us alive, but we had to cut everything and everywhere to make it through that year. The next big downturn hit in 2014. We were better prepared, and while it was still a struggle, we weren’t wondering if we would have to shut down the business. We learned new lessons on how to survive and feel much more prepared for the next downturn.
Everybody has advice on how to run your business. You will be offered a lot of really terrible advice and a few great nuggets. It’s important to sift through the talk and utilize the advice that is really relevant. When I first started the company, I tried to talk to everyone and listen to everyone which was exhausting and confusing. During the third year, I joined Vistage, a CEO networking group, and that was a game changer. I had folks who were going through the same types of issues to talk to. Others were past my issues and could speak to what they learned and the mistakes they made. I was able to run ideas by a team of folks who actually cared about my success. We also had a facilitator for the group who brought in speakers to discuss different topics such as managing your Key Performance Indicators, Sales, Marketing, HR. It was all extremely helpful.
Pick your advisors carefully and use them consistently. Your lawyers, CPA’s, Payroll Service Providers and Accountants are there to help you and keep you out of trouble. Always research their advice and get 2nd opinions if you are uncertain, but do not strike out on your own creating contracts, figuring out payroll and filing taxes if you don’t know what you are doing. This is something that I figured out on my own very quickly, and it paid off. We have great contracts in place. We started off with the right legal entity setup which saved me significantly in taxes (talk to your tax advisor, not your lawyer about legal entity options). Working with a payroll service ensured that we were in compliance with rules that I never new existed. Where I failed was with accounting. I thought that a CPA would make a great Controller, but there is a big difference between audit and small business accounting. You, the owner, need to understand how accounting works and review your books carefully every single month. When the downturn of 2009 hit, not only was I in a cash crisis, but I couldn’t figure out what I really owed because the books were a complete mess. A friend of mine who owned a bookkeeping firm came into the office with me on a Saturday, and we pulled invoices out of drawers and files all weekend. It took us over a week to figure out what was due and what was paid. We had to call vendors and try to discern the status of our accounts. In the end, she took over the accounting so that I could focus on getting us cash flow positive again. Then, she helped me train a very trusted employee to take over the accounting. Now, we walk through the books every month and discuss where we can improve and how to manage cash.
Unless you’re a one-person operation, time management requires you to consider how your practices impact everyone else.
Your time is a precious commodity. It’s your one nonrenewable resource, and it’s something that you can’t get back. As linguists George Lakoff and Mark Johnson have noted, the metaphors we use around time reflect sacred scarcity. We say time is money. We invest, save, protect, spend, audit, give, squander, waste, and budget our time.
It’s unsurprising that time management ranks as one of the biggest challenges in the modern workplace. To maximize efficiency at work, you need to be hard-nosed with your time. And there are a host of productivity tools designed to help you do just that: the Pomodoro Technique, Kanban Board, Eisenhower Matrix, time audits, and so on. However, unless you’re a one-person operation, you can’t rely on these tools alone. You also need to communicate your time-management approaches to your colleagues.
The key is to be ruthless with your time without being ruthless with your team. At LifeLabs Learning, we study what makes unusually productive teams and leaders different. Below are eight tools we’ve collected from our research to help reach that mutually happy quadrant where you can manage your time and support your team at the same time.
1. Do a precheck
If you’re trying out a new time habit, check in with people who might feel the impact ahead of time. Make sure that you explain the reasoning for the change, and do so with empathy.
“I’m trying out X to be more efficient with my time. However, I understand this may impact you and would love to set up a time for us to problem-solve together.”
2. Have a trade-off conversation
If someone asks you to do something that interferes with your current workflow, let them know what that entails and make them part of the solution.
“I can do X, but it means I can’t do Y. I think I should stick to X because it’s imperative to the company at the moment. What are your thoughts?”
3. Show the pie
Create a quick visual of what’s on your plate. For example, one team we studied had a “key lime pie of productivity,” and each project represented a slice. When someone asked for help, they showed their pie as a way to decide which slices they could exchange.
“I don’t want to sound like a jerk, but here is what my to-do list looks like at the moment. Do you see this request as more critical than one of these items? If not, I would still love to help in the future. My earliest available date is . . .”
4. Create if-then rules
This is a set of rules that automate actions. If X, then Y. For example, if you’re the manager who continually gets bombarded with questions, then ask your team to come up with at least one solution before asking for help. This if-then will not only save you time but will also help your employees become more independent.
On the flip side, if your manager regularly “surprises” you with requests, instead of reactively reprioritizing your whole day, then politely ask about urgency and/or share trade-offs.
5. Create “dark time”
This is a term that we use at LifeLabs Learning to describe the times that employees aren’t available to work (usually after 6 p.m. or on weekends). Having such norms also prevents burnout. For leaders, it’s essential to model this behavior and hold others accountable as well.
“I’ve noticed that a few people on the team communicate during off hours. I was wondering if we could establish an explicit norm around when we should/shouldn’t expect people to reply. What are your thoughts on this?”
6. Hold “office hours”
Creating new time habits at work can induce anxiety. People may feel like they’re losing access to a valuable resource. That’s why you must schedule a recurring meeting, or “checkpoint,” when people know they can come to you. This gesture is likely to reduce anxiety and unscheduled shoulder-tapping.
“Some of you may have noticed that I’ve made efforts to be more deliberate with my time. That said, in addition to our regular 1-1s, I want you to know that I’m available to meet and discuss anything you need during these hours [list them].”
7. Model time integrity
“Quick question.” “I’ve got a minute.” “EOD.” “ASAP.” These are all examples of being blurry and unspecific about time. The most effective teams we study do something different. They model time integrity and are specific with their communication when it comes to time. Here are a few examples.
“To make sure I can respond on time, can you please specify by when you need this?”
“I have ten minutes to talk now. Is that enough time? If not, let’s schedule a time that works.”
“To make sure I’m focused on this conversation, how long do you think we need?”
The magic of time integrity lies not only in being specific about your own time but also in respecting the other person’s request and time.
8. Do a calendar cleanse
In many organizations we work with, it’s hard to say “no” or “not now” to meetings. Often, you feel like you’re violating a cultural norm. But at the same time, most people feel like they’re spending way too much time in pointless meetings. If you’re not sure if a meeting is a good use of your time, get in the habit of asking.
“Thanks for inviting me. So that I can contribute well, can you share the agenda or goal of the meeting?”
If, after receiving a response, you feel that the meeting isn’t a top priority, then politely decline.
“Thanks again for inviting me. To stay efficient, I would prefer to collect a summary of what was decided/discussed. Does that work?”
By using these methods, it’s possible to manage your time and maintain a positive relationship with your coworkers. The key is learning to communicate preemptively, set expectations, make people part of the process, and find structured and creative ways to solve problems together.
This article was written by Roi Ben-Yehuda he is a leadership trainer at LifeLabs Learning, where he helps people at innovative companies (like Squarespace, Tumblr, Venmo, WeWork, and Warby Parker) master life’s most useful skills.
More employees are voluntarily leaving their jobs than at almost any other time this millennium. When an employee quits, it can feel like a gut punch, leaving managers scrambling both emotionally and operationally. The loss can be particularly acute when employees “ghost” their organization, simply not showing up to work, sometimes only days after starting the job.
In his New York Times best seller, Principles, Ray Dalio argues that setbacks, like losing a valued employee, provide an important learning opportunity for organizations — as long as leaders are willing to reflect on and identify the root cause of such losses. Too often, though, managers and HR professionals are so busy doing damage control that they fail to conduct a thorough autopsy to help them understand what happened and what corrective action is needed to prevent similar episodes from occurring in the future.
Of course, many organizations have an exit interview process that should, ostensibly, provide insights to help improve employee retention. However, even when conducted well, these interviews have serious shortcomings. Most notably, in cases of ghosting and other acts of impulsive quitting, workers may depart before their organization has the opportunity to conduct one. Even when exit interviews take place, research suggests that a large percentage of employees are not candid. Whereas some departing employees mask critical feedback in order to leave a positive impression, others feel that providing this information is a waste of time because they believe the company is unwilling to change. In addition, departing employees may feel that, because of how poorly their company treated them, management does not deserve to know their true reasons for leaving. In short, exit interviews are often ineffective.
So how can organizations respond to resignations in more constructive ways — ways that might transform the pain of employee turnover into progress? Based on our research studying the experiences of hundreds of resigning employees and the managers of recently resigned employees, we offer three recommendations:
Investigate how the employee resigned. People typically resign using one of seven styles, which range from positive and constructive to negative and harmful:
Grateful goodbye: employees show appreciation and provide assistance as they depart
In the loop: employees keep their supervisor apprised of their intention to leave
By the book: employees give standard notice and an explanation for their departure
Perfunctory: employees resign by the book but do not explain why they are leaving
Avoidant: employees indirectly inform their manager or let word of their resignation filter back to them
Bridge burning: employees engage in harmful dysfunctional behavior on their way out
Impulsive quitting: employees walk out without giving any prior notice
These styles often reflect how departing employees feel they were treated by their organization and their manager prior to leaving. Therefore, if many employees within a firm resign by expressing gratitude and giving reasonable notice, this may signal that the organization is a healthy place to work. On the other hand, if bridges tend to get burned during employee resignations, leaders should take this as a signal that they should investigate the cause of these destructive departures.
The first step toward turning employee resignations into a source of organizational learning and improvement, then, is to code them based on style and review them periodically. If leaders find patterns in this data, they can start to identify the source of the problem. Overall, do employees tend to follow company guidelines when they resign (doing it by the book), or is there a great deal of variance in how employees quit? Is walking off the job with no notice more common in particular departments or for certain workers? Do the employees of certain supervisors always resign by providing more notice than is required? Closely examining resignation styles can help organizations clearly identify bright spots and problem areas.
See what the coworkers closest to the employee have to say. Although people will not always be open to divulging their true reasons for quitting, in many cases their peers may have insights and be motivated to share that information in order to help the organization improve. Thus, by having informal discussions with colleagues close to the employee who resigned, companies may be able to ascertain the motives behind their departure. An added benefit of this approach is that it gives remaining employees, who may be disappointed and confused by their coworker’s resignation, an outlet to discuss their thoughts and opinions, which may reduce any feelings of distress.
Of course, some colleagues may feel that the company is asking them to be disloyal to their friend by sharing this potentially private information. As such, we recommend acknowledging the tension that this line of inquiry could create. Leaders should reassure the employees that their participation is voluntary, and make it clear that the information they seek is only for improving the experience of the remaining workforce and the performance of the company. This approach is likely to be most effective when managers possess good working relationships with their employees, such that subordinates feel psychologically safe to share their insights without fear of retribution toward them or their friend. Likewise, such conversations are more likely to be constructive when managers have a habit of listening to employees and acting on their input.
Examine and learn from what the employee does after they leave. HR professionals can do this by tracking where their alumni go. If a large proportion of quitters return to school to pursue graduate degrees, for example, there may be an opportunity for the company to improve retention by offering discounted or free education. If several employees leave to become stay-at-home parents, perhaps more expansive work-family programs would provide employees with healthier work-life balance. If there is a trend of employees’ leaving to work for a particular competitor, then it is certainly worth looking into that firm’s culture, development programs, compensation, and benefits to determine why your organization is losing talent to a rival.
Hearing the words “I quit” is rarely pleasant, but by pushing through the discomfort and using an evidence-based approach to determine the cause and nature of the loss, managers and HR professionals can gain valuable knowledge for their firms. The next time an employee discloses their plans to leave, instead of focusing your efforts on replacing this lost human capital and minimizing the disruption caused by the departure, take the time to reflect on the nature of the resignation, collect data to understand the cause of the departure, and consider its broader organizational implications. Over time, by taking advantage of the learning opportunity presented by even the most painful resignations, voluntary turnover can be a source of continuous improvement for managers and for firms.
Article by – Anthony C.Klotz an Associate Professor of Management at Texas A&M University’s Mays Business School. And Mark C. Bolino is the David L. Boren Professor and Michael F. Price Chair in International Business at the University of Oklahoma’s Price College of Business.
Save or Invest? How Companies Should Navigate Recessions
by Ioannis Ioannou and Caroline Flammer
The financial crisis and economic meltdown of 2007-2009 was disruptive for firms across industries, markets, and geographies. It resulted in the collapse of the financial sector, radical changes in the regulatory and policy environment, and a severe contraction of the world economy. In fact, an economic meltdown of this magnitude fundamentally affects all aspects of firms’ business environment, unsettles their relationships with customers, employees, suppliers, and local communities, and generates a major shift in the competitive landscape. Consequently, companies are likely to fundamentally rethink and reshape their strategic investments to ensure survival and sustain (or even enhance) their competitiveness during and after the crisis.
Indeed, one of the major challenges of an economic meltdown for strategic management is that it exacerbates resource constraints. As a result, companies might need to make fewer investments and divest from at least some of their previous ones in order to ensure survival in the short run. Doing so is a balancing act though, as divesting from too many resources — or picking the wrong ones — could jeopardize a firm’s ability to thrive in the long run.
Despite the severity of economic meltdowns, we know little about how exactly firms adjust their resource base as they navigate through the shifting landscape and new economic realities. To understand this phenomenon and its implications for companies, we set out to investigate how companies adjusted their strategic investments, i.e. their workforce, capital expenditures (CAPEX), R&D, and CSR investments. More specifically, we asked: How did companies adjust their resource base during the Great Recession of 2007-2009? Did they try to “save their way” or “invest their way” out of the crisis? In which direction and to what extent did they adjust their strategic investments to survive or even enhance their competitiveness?
It’s not obvious whether firms would decrease, maintain, or increase their investments, on average, since an economic meltdown presents firms with both challenges and opportunities. On one hand, an economic crisis may severely undermine firms’ ability to undertake investments because they’re short on cash. As a result, firms may lay off employees, divest from their physical assets, postpone or even cancel R&D projects, or eliminate CSR programs in order to maintain cash flows. In other words, firms may try to save their way out of the crisis.
On the other hand, an economic crisis may present an opportunity for firms to expand their investments; that is, they may try to invest their way out of the crisis. For example, an economic crisis might generate opportunities to acquire new equipment at lower cost or hire employees at lower wages. Moreover, firms could invest in their innovative capabilities and CSR to strengthen their competitiveness for when the economy recovers.
Using data for U.S. publicly-traded companies, we find that, overall, these firms significantly reduced their workforce and CAPEX during the Great Recession. Yet – remarkably — they maintained the same level of R&D and CSR. (To construct our sample, we use data from Standard and Poor’s Compustat database. After merging it with the KLD database – our source of CSR data – and with loan data from DealScan, we arrive at a sample of 670 companies for our main analysis.)
These findings suggest that companies, on average, responded to the crisis by following a “two-pronged” approach of simultaneously “saving their way out of the crisis” by reducing their workforce and CAPEX, and “investing their way out of the crisis” by sustaining their investments in R&D and CSR. Therefore, our results imply that innovation capability and stakeholder relationships were seen as instrumental in sustaining firms’ competitiveness during the Great Recession.
Importantly, we observe considerable differences across industries. While we find that on average firms did not reduce their investments in R&D and CSR, we document that some firms did—namely firms operating in less R&D-intensive and less CSR-sensitive industries, respectively. This result makes sense since, in these industries, firms’ competitiveness is less likely to depend on their innovative capability and stakeholder relations, respectively. The takeaway is that industry characteristics matter in understanding how firms adjust their resource base in response to an economic meltdown.
Finally, we examine whether companies that sustained their investments in R&D and CSR perform better in the years following the economic meltdown. We find that indeed they do. They exhibit higher operating performance—as measured by the return on assets (ROA)—in the post-crisis years. In contrast, we find that companies that maintained their workforce and CAPEX did not achieve higher performance. We also find that firms that pursue the two-pronged approach of simultaneously maintaining their R&D and CSR while reducing their workforce and CAPEX achieve an even higher performance in the post-crisis years.
Our findings therefore suggest that companies choose to maintain their investments in R&D and CSR as these resources may enable them to address key challenges that arise during the meltdown. First, by maintaining their investments in R&D during the meltdown, companies may find innovative ways to become more efficient—i.e., to do more with less—thereby enhancing their ability to maneuver through the meltdown. Second, communication and collaboration with the firm’s stakeholders are important factors in the firm’s processes. In this regard, firms that continue investing in stakeholder relations are likely better positioned to understand the changing conditions inherent to an economic meltdown, identify concerns and opportunities, and adapt to the shifting needs, demands, and expectations of suppliers, consumers, and other stakeholders, compared to firms that curtail such investments. Third, CSR can help firms differentiate themselves from their competitors, enhance firms’ ability to recover from unfavorable situations, strengthen connections with the local communities, improve labor productivity, enhance consumer loyalty, improve access to government procurement contracts, and lower capital constraints. These mechanisms are likely to be especially important during an economic meltdown, as they can improve companies’ resilience and, as a result, help companies maintain or even enhance their competitiveness.
Taken together, our findings suggest that firms that simultaneously “save their way out of the crisis” (by reducing their workforce and CAPEX) and “invest their way out of the crisis” (by sustaining their investments in R&D and CSR) are better able to adapt to the new and unique challenges brought about by an economic meltdown.
It’s worth evaluating what’s working for you–and leaving everything else behind.
There are many theories about how long it takes to form a habit. Some say 21 days. Others argue it’s more like 60, or more. Whatever the case, some aspects of our routine are beneficial to our personal and professional growth, while others just slow us down. For leaders who are tasked with not only meeting their own goals but also guiding others, paying attention to negative patterns is essential. That’s why these women, across industries, stopped apologizing. Or adding a “maybe” to every sentence. Or opted to do things their way–even if it wasn’t the “right” way.
We asked eight impressive female executives to describe the habits they’re glad they gave up:
“I gave up saying ‘I think’”
Right after college, chief content officer at Hearst Magazines, Kate Lewis, landed a coveted gig at Condé Nast. She spent many years moving from editorial to HR before leaving to join Say Media. It was there that she was introduced to the president of Hearst Magazines, and eventually took on her current role, becoming the second person to ever hold the position. She now directs content strategy for more than 25 publications, reaching 150 million people in the U.S. Her leadership has more than tripled monthly unique visitors.
She says it was a shift in wording that fueled her career growth. Specifically she stopped using the phrase “I think,” after realizing she often started emails that way. “I relish conversation, back-and-forth–even dissent–because those things force me to consider my position more carefully,” says Lewis. “But I don’t need to undercut my own point of view to solicit them. [This change] has forced me to evaluate my statements more thoroughly. Without adding a qualifier before them, I must reckon with how much I truly believe them.”
“I gave up feeling bad about ‘me time’”
Heather Marianna, founder of Beauty Kitchen, makes all-natural skincare and cosmetic products. To date, she’s appeared on more than 80 TV segments discussing clean beauty. Marianna stays busy, consistently working 16-hour days, six days a week.
Like many entrepreneurs, she loves what she does, but says she came to realize scheduling time for herself wasn’t lazy. It was necessary. “I used to feel really selfish when I would take an hour to do yoga or go get a facial. I would always feel a sense of guilt and think to myself about all the millions of other productive things I could be doing.” she says. “On the verge of pure exhaustion, I began meditating several months ago and reminding myself that I need to take time for myself.” Now, she feels more centered and focused. “I’m happier, more proactive, and I’m actually getting more done.”
“I gave up accepting the first offer”
Designed for women, by women, Samantha Dong’s company, ALLY Shoes, creates accessible luxury footwear. The company has a 15% repurchase rate within three months, with top customers buying five or more pairs. When Dong looked back at the experiences that led her to create ALLY, she says she realized how little she previously negotiated anything. Even when she knew she deserved more, she wasn’t brazen enough to demand it.
When she left her second job for business school, she spoke with a coworker who said he negotiated a promotion and a raise every six months. “He typically wouldn’t get everything he asked for, but always ended up better than his prior position,” she says.”That was a wake-up call for me and made me realize: You don’t get what you don’t ask for. I decided to break my habit of not negotiating, because I was only short-changing myself.”
Her ability to negotiate terms with vendors and during fundraising rounds at ALLY has been a saving grace, she says. “I realized negotiation is never about winning or outsmarting the other side, but instead finding common ground and creative solutions that benefit both parties. My business wouldn’t be where it is today without it.”
“I’ve given up micromanaging”
When Vanessa Yakobson, the CEO of Blo Blow Dry Bar, joined the company, she left an 11-year stint in the nonprofit sector. Though she loved the work, she was ready to dig in to a promising startup. Alongside her husband, she’s doubled their business, and created a franchising system that’s allowed the company to expand.
The process has been a life-changing one for Yakobson, who says she’s learned how to step aside and allow her team members to do their thing. “I’ve had to curb my enthusiasm to make way for the talented people around me to bring their skills to the table,” she says. “I’ve learned to get out of their way and trust they are more than capable of achieving success. This has allowed me to stay focused on the things that really need my attention.”
“I’ve given up thinking there’s a right way to do things”
Since starting her line of healthy and conscious snacks that utilize entrepreneurial farmers in Uganda, Renee Dunn has had a few learning curves. In just three years, her company, Amazi Foods, has rebranded. It’s also launched on Amazon Prime, and they’re in talks with a nationwide retailer. She says that she has heard all of the advice there is to hear–and is now opting to do things her own way.
“I’ve had the opportunity to connect with so many real, authentic people in the food space,” she says. “There isn’t one path, even if they’re playing the same game. Beyond that, there’s not just one game to play.”
Even though “industry experts” may mean well, they may not know her company–or her personal values. “I was being swayed in so many ways, losing time and progress as a result,” she says. “[This lesson] has given me the confidence to build the business that I want to build and make decisions that I feel in my gut. . . . Even if it all goes terribly wrong and all the cautionary experts were right, I’d rather fail doing what I believe in.”
“I gave up Facebook”
Sarah Luna, president of Pure Barre, leads the corporate team and the fitness company’s 500 franchises across the country. Her leadership has led to major growth for the company, with 560 studios set to open by the end of 2019 and 680 by 2021. Membership sales have also increased 75% year-over-year, and revenue has increased by 35%. Even with all of these impressive figures, Luna says she developed a bad habit of paying attention to social media trolls, especially on Facebook.
“Oftentimes, my evenings or weekends would be ruined and I found that people’s comments had an intense power over me that was detrimental and unhealthy,” she says. “I became unproductive at work and noticed that I would stop my entire day or project to triage and deal with the social media ‘war’ that was occurring.”
So, a year ago she disabled comments and logged off. The goal was to be more strategic with her time and level of engagement on social media. In return, she’s noticed a dramatic shift in her ability to focus on leading a team and driving a business. “Not worrying about who will be displeased by the decisions made has allowed me to make better decisions, heavily rooted in fact and analysis, not in emotional turmoil.” she says. “My energy lasts longer throughout the day and I am able to stay much more positive and upbeat.”
“I gave up saying ‘I’m sorry’”
Raise your hand if you’ve apologized at work (or in a texting convo) in the last 48 hours. If you’re like many women, your five fingers will be dangling in the air. Apologizing is a habit that many female professionals develop–and one that cofounder and CEO of TRUWOMEN Erica Groussman says she’s kicked.
Her company offers vegan, gluten-free, non-GMO, and sugar-free protein bars and powders in the form of desserts like doughnuts or cookie-dough bites. As she was getting her brand up and running, she realized how often she would say “I’m sorry” when asking for something she needed, like an update on a client.
A friend pointed out this habit and she figured out she was trying to subdue her strong and confident work persona. But what she was actually doing was misrepresenting her performance as a leader. She wasn’t sorry; she was doing her job. “Becoming cognizant of how often I say ‘I’m sorry’ has forced me to truly consider my use of words and how people on my team are interpreting my communication,” she says. “Instead of joining a conference call two minutes late and immediately apologizing, I’ve now reframed by verbiage to ‘thank you for waiting.’ These small adjustments have allowed me more opportunity to express gratitude, while also giving other women within the company permission to do the same.”
“I gave up living in my comfort zone”
Melanie Huscroft, cofounder and chief visionary officer of Younique, started the company alongside her brother. Their social media-based business sells a variety of products, with 4,000,000 sales of their signature product, Moodstruck Epic mascaras, in less than two years.
Huscroft says she’s had to get comfortable taking greater risks. “It takes real courage to work through the fear that holds us back, but courage isn’t the lack of fear, it’s the gaining of perspective,” she says. “I learned that you have to do things that no one else is doing, things that frighten you and that make you question how much longer you can hold on.”
To get to the next level, we need to improve. Whether it’s improving your skills, your performance or even your attitude, it can be hard to accept this blunt fact of life.
See, improvement speaks to the closing of a metaphorical gap. Where we are now and where we want to be is separated by ground we have yet to cover. At first, it’s tempting to believe we just need commitment to achieve our goals.
But there’s a problem. Something’s missing. We haven’t changed in any meaningful way. We’re still the same person, just with a new sense of discipline. We inevitably fall into the same traps or hit the same ceilings.
Closing the gap requires a change to the system, opening it up to new things. We need new sources of energy and intelligence to transform how we approach our goals.
Einstein is often credited with defining insanity as doing the same thing over and over again expecting different results. The same applies to the science of improvement. Simply trying harder and willing ourselves to get to the next level always fails. We get tired, discouraged and ultimately demotivated.
The fuel we really need is positive support. The connections we have, our teams and relationships, must fill us with the belief and confidence that we can improve. Intelligence is key. We need to know what we don’t know. Then we need to fill those holes with new information, intelligence we didn’t have before.
By applying new intelligence to our goals and surrounding ourselves with a strong support team, we equip ourselves with a better arsenal to bridge the gap. To improve.
I always like to pick out a bunch of books to bring with me whenever I get ready to go on vacation. More often than not, I end up taking more books than I could possibly read on one trip. My philosophy is that I’d rather have too much to read on a trip than too little.
If you’re like me, you’re probably starting to think about what’s on your summer reading list this year—and I can’t recommend the books below highly enough.
None of them are what most people think of as a light read. All but one deal with the idea of disruption, but I don’t mean “disruption” in the way tech people usually mean it. I’ve recently found myself drawn to books about upheaval (that’s even the title of the one of them)—whether it’s the Soviet Union right after the Bolshevik revolution, the United States during times of war, or a global reevaluation of our economic system.
If you’re looking for something that’s more of a typical summer book, I recommend Graeme Simsion’s The Rosie Result. (And if you haven’t read the first two books in the Rosie trilogy, summer vacation is the perfect time to start!) I also can’t resist a plug for Melinda’s new book The Moment of Lift. I know I’m biased, but it’s one of the best books I’ve read so far this year.
Here is my full summer reading list:
Upheaval, by Jared Diamond. I’m a big fan of everything Jared has written, and his latest is no exception. The book explores how societies react during moments of crisis. He uses a series of fascinating case studies to show how nations managed existential challenges like civil war, foreign threats, and general malaise. It sounds a bit depressing, but I finished the book even more optimistic about our ability to solve problems than I started.
Nine Pints, by Rose George. If you get grossed out by blood, this one probably isn’t for you. But if you’re like me and find it fascinating, you’ll enjoy this book by a British journalist with an especially personal connection to the subject. I’m a big fan of books that go deep on one specific topic, so Nine Pints (the title refers to the volume of blood in the average adult) was right up my alley. It’s filled with super-interesting facts that will leave you with a new appreciation for blood.
A Gentleman in Moscow, by Amor Towles. It seems like everyone I know has read this book. I finally joined the club after my brother-in-law sent me a copy, and I’m glad I did. Towles’s novel about a count sentenced to life under house arrest in a Moscow hotel is fun, clever, and surprisingly upbeat. Even if you don’t enjoy reading about Russia as much as I do (I’ve read every book by Dostoyevsky), A Gentleman in Moscow is an amazing story that anyone can enjoy.
Presidents of War, by Michael Beschloss. My interest in all aspects of the Vietnam War is the main reason I decided to pick up this book. By the time I finished it, I learned a lot not only about Vietnam but about the eight other major conflicts the U.S. entered between the turn of the 19th century and the 1970s. Beschloss’s broad scope lets you draw important cross-cutting lessons about presidential leadership.
The Future of Capitalism, by Paul Collier. Collier’s latest book is a thought-provoking look at a topic that’s top of mind for a lot of people right now. Although I don’t agree with him about everything—I think his analysis of the problem is better than his proposed solutions—his background as a development economist gives him a smart perspective on where capitalism is headed.
From Volkswagen’s emissions fiasco to Wells Fargo’s deceptive sales practices to Uber’s privacy intrusions, corporate wrongdoing is a continuing reality in global business. Unethical behavior takes a significant toll on organizations by damaging reputations, harming employee morale, and increasing regulatory costs—not to mention the wider damage to society’s overall trust in business. Few executives set out to achieve advantage by breaking the rules, and most companies have programs in place to prevent malfeasance at all levels. Yet recurring scandals show that we could do better.
Interventions to encourage ethical behavior are often based on misperceptions of how transgressions occur, and thus are not as effective as they could be. Compliance programs increasingly take a legalistic approach to ethics that focuses on individual accountability. They’re designed to educate employees and then punish wrongdoing among the “bad apples” who misbehave. Yet a large body of behavioral science research suggests that even well-meaning and well-informed people are more ethically malleable than one might guess. When watching a potential emergency unfold, for example, people are much more likely to intervene if they are alone than if other bystanders are around—because they think others will deal with the situation, believe that others are more qualified to help, or fail to recognize an emergency because others don’t look alarmed. Small changes to the context can have a significant effect on a person’s behavior. Yet people in the midst of these situations tend not to recognize the influence of context. In Stanley Milgram’s famous obedience experiments, participants who were told by an authority figure to deliver increasingly powerful electric shocks to another person progressed to a much higher voltage than other people predicted they themselves would deliver. Context is not just powerful, researchers have learned; it is surprisingly powerful.
Pillars of an Ethical Culture
Creating an ethical culture thus requires thinking about ethics not simply as a belief problem but also as a design problem. We have identified four critical features that need to be addressed when designing an ethical culture: explicit values, thoughts during judgment, incentives, and cultural norms.
Strategies and practices should be anchored to clearly stated principles that can be widely shared within the organization. A well-crafted mission statement can help achieve this, as long as it is used correctly. Leaders can refer to it to guide the creation of any new strategy or initiative and note its connection to the company’s principles when addressing employees, thus reinforcing the broader ethical system. Employees should easily be able to see how ethical principles influence a company’s practices. They’re likely to behave differently if they think the organization is being guided by the ethos of Mr. Rogers, the relentlessly kind PBS show host, versus that of Gordon Gekko, the relentlessly greedy banker in the film Wall Street. Indeed, in one experiment, 70% of participants playing an economic game with a partner cooperated for mutual gain when it was called the Community Game, but only 30% cooperated when it was called the Wall Street Game. This dramatic effect occurred even though the financial incentives were identical.
Even well-meaning people are more ethically malleable than one might guess.
A mission statement should be simple, short, actionable, and emotionally resonant. Most corporate mission statements today are too long to remember, too obvious to need stating, too clearly tailored for regulators, or too distant from day-to-day practices to meaningfully guide employees. A statement can’t be just words on paper; it must undergird not only strategy but policies around hiring, firing, promoting, and operations so that core ethical principles are deeply embedded throughout the organization. Patagonia’s mission statement, for instance, is “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Its Worn Wear initiative implements its mission by enabling employees to help consumers repair or recycle their products. Patagonia also developed a standardized metric, posted on its website, to evaluate the environmental impact of its entire supply chain. Zappos says its number one core value is to “Deliver WOW through service” to customers, according them respect and dignity. It implements this value by not measuring the average length of customer service calls (the industry standard), so employees can spend as much time with customers as necessary. Mission statements like these help keep an organization’s values crystal clear in employees’ minds.
Thoughts during judgment.
Most people have less difficulty knowing what’s right or wrong than they do keeping ethical considerations top of mind when making decisions. Ethical lapses can therefore be reduced in a culture where ethics are at the center of attention. You might know that it’s wrong to hurt someone else’s chances of being hired but fail to think of the harm you cause to unknown applicants when trying to help a friend, a family member, or a business school classmate land a job. Behavior tends to be guided by what comes to mind immediately before engaging in an action, and those thoughts can be meaningfully affected by context. Should someone remind you that helping a friend necessarily hurts the chances of people you don’t happen to know, you might think twice about whether your advocacy efforts are appropriate.
Incentive programs must provide a variety of rewards to be effective.
Several experiments make this point. In one, people were more likely to tell the truth when an honor code came at the beginning of a form—thereby putting ethics top of mind as they completed the form—than when it was posted at the end. In a large field experiment of approximately 18,000 U.S. government contractors, simply adding a box for filers to check certifying their honesty while reporting yielded $28.6 million more in sales tax revenue than did a condition that omitted the box. And in a simulation that asked MBA students to play the role of financial adviser, having them complete an ethics checklist before recommending potential investment funds significantly decreased the percentage who recommended what turned out to be the Madoff feeder fund. When ethics were top of mind, the students were more alert to the possibility that the fund was too good to be true.
As a counterexample, Enron was notorious for its constant focus on stock price, even posting it in the elevators. Reflecting on his own misdeeds, its former CFO Andy Fastow said, “I knew it was wrong…. But I didn’t think it was illegal…. The question I should have asked is not what is the rule, but what is the principle.” People working in an ethical culture are routinely triggered to think, Is it right? rather than Is it legal?
It is a boring truism that people do what they’re incentivized to do, meaning that aligning rewards with ethical outcomes is an obvious solution to many ethical problems. That may sound simple (just pay people for acting ethically), but money goes only so far, and incentive programs must provide a variety of rewards to be effective.
Along with earning an income, employees care about doing meaningful work, making a positive impact, and being respected or appreciated for their efforts. In one experiment, hospital staff members were more likely to follow correct handwashing procedures when a sign above the sink reminded them of consequences to others (“Hand hygiene prevents patients from catching diseases”) than when it reminded them of personal consequences. Nevertheless, managers may easily overlook the importance of nonfinancial incentives. When asked how important such incentives were to employees, customer service managers at one Fortune 500 firm tended to dramatically underestimate what they meant to their reports.
In addition to aligning financial incentives with desired outcomes, ethical cultures provide explicit opportunities to benefit others and reward people who do so with recognition, praise, and validation. If, for instance, your employees are making people’s lives meaningfully better in some way, pointing that out will encourage future ethical behavior. It may even improve performance, because the reward is aligned with ethical motivation. In one experiment, salespeople for a large pharmaceutical company performed dramatically better after participating in a prosocial bonus system, which encouraged them to spend a small award on their teammates, compared with a typical “proself” bonus system, in which they spent the award on themselves.
This approach to incentives may have ancillary HR benefits. People tend to underestimate both how positive they will feel about connecting with others in a prosocial way and the positive impact their behavior will have on others. In a field experiment with Virgin Atlantic pilots, a bonus system for increasing fuel economy was structured so that the bonus went to a charity of their choosing. The resulting increase in their job satisfaction was similar in magnitude to the effect of moving from poor health to good health. Companies that use prosocial incentives are likely to produce happier, more satisfied, and more loyal employees. An ethical culture not only does good; it also feels good.
Most leaders intuitively recognize the importance of “tone at the top” for setting ethical standards in an organization. Easily overlooked is “tone in the middle,” which may actually be a more significant driver of employees’ behavior. Good leaders produce good followers; but if employees in the middle of the organization are surrounded by coworkers who are lying, cheating, or stealing, they will most likely do the same, regardless of what their bosses say. So-called descriptive norms—how peers actually behave—tend to exert the most social influence. In one field experiment conducted by a UK government agency, 13 versions of a letter were sent to delinquent taxpayers, including versions that referenced moral principles, the ease of paying taxes, or financial penalties. The most effective letter compared the recipient’s behavior with that of fellow citizens: “Nine out of ten people in the UK pay their taxes on time. You are currently in the very small minority of people who have not paid us yet.”
People often fail to appreciate the power of social norms. When researchers were interested in determining how best to encourage energy efficiency among a group of Californians, for instance, they first asked a group of nearly 1,000 residents to predict the effectiveness of various approaches, including appeals to environmental protection, personal financial benefits, societal benefits, and social norms (what percentage of neighbors conserved energy by using fans). These residents expected that the environmental appeal would be most persuasive and the social norm appeal least persuasive. But when the researchers sent about 1,000 other residents one of the four appeals, the social norm had by far the biggest effect on reducing energy use.
Leaders can encourage an ethical culture by highlighting the good things employees are doing. Although the natural tendency is to focus on cautionary tales or “ethical black holes,” doing so can make undesirable actions seem more common than they really are, potentially increasing unethical behavior. To create more ethical norms, focus instead on “ethical beacons” in your organization: people who are putting the mission statement into practice or behaving in an exemplary fashion.
Putting Ethical Design into Practice
A leader designing an ethical culture should try to create contexts that keep ethical principles top of mind, reward ethics through formal and informal incentives and opportunities, and weave ethics into day-to-day behavior. Precisely how this is achieved will vary among organizations, but here are a few examples.
First impressions are inordinately powerful. For many employees, an organization’s values were revealed during the hiring process. Although interviews are typically treated as opportunities for identifying the best candidate, they also begin the acculturation process. At one Fortune 100 firm, for instance, interview questions are designed around a core value, such as putting customer needs first. In one interview script, candidates are told of this value and then asked, “Tell me about a time when you uncovered an unmet need of a customer that you were able to address.” We don’t know if this question identified people who are good at treating customers respectfully, but that’s not necessarily the point. Highlighting values in the interview reveals their importance to the organization. It is one piece of a broader system that draws attention to ethics.
Ethics can also be woven into the design of performance evaluations to highlight their importance to an organization as well as to reward and encourage good behavior. At Johnson & Johnson, for instance, each executive’s 360-degree evaluation is built on the four components of the company’s famous credo, which expresses commitment to customers, employees, communities, and stakeholders. In one version of the evaluation we saw, each executive was rated on items such as “nurtures commitment to our Credo,” “confronts actions that are, or border on, the unethical,” and “establishes an environment in which uncompromising integrity is the norm.”
Aligning financial incentives with ethical outcomes may sound easy in principle, but it is tricky in practice. This is where a mission statement can help. Southwest Airlines has used an executive scorecard to tie compensation to its four core values: every employee matters, every flight matters, every customer matters, and every shareholder matters. Each value is demonstrated by an objective measurement—“every employee matters” by voluntary turnover; “every flight matters” by ontime performance. This scorecard highlights how well core ethical values align with business success, helps keep employees’ attention on them, and suggests the behaviors needed to realize them.
Leaders can reward ethical actions by showing employees the positive impact of their work on others and recognizing their actions in presentations and publications. They can also create opportunities within the organization to behave ethically toward colleagues. In one recent field experiment, managers were randomly assigned to perform five acts of kindness for certain fellow employees over a four-week period. Not only did this increase the number of kind acts observed within the organization, but recipients were more likely than controls to subsequently do kind things for other employees, demonstrating that ethical behavior can be contagious. These acts of kindness improved well-being for those performing them as well as for recipients. Perhaps most important, depressive symptoms dropped dramatically among both groups compared with the control condition, a result that continued for at least three months beyond the initial one-month intervention.
Ethics, by Design
No company will ever be perfect, because no human being is perfect. Indeed, some companies we’ve used as examples have had serious ethical lapses. Real people are not purely good or purely evil but are capable of doing both good and evil. Organizations should aim to design a system that makes being good as easy as possible. That means attending carefully to the contexts people are actually in, making ethical principles foundational in strategies and policies, keeping ethics top of mind, rewarding ethical behavior through a variety of incentives, and encouraging ethical norms in day-to-day practices. Doing so will never turn an organization full of humans into a host of angels, but it can help them be as ethical as they are capable of being.
A version of this article appeared in the May–June 2019 issue (pp.144–150) of Harvard Business Review.
In January of 2018, I reached out to the head of a local CEO group and inquired about joining.
After a one-on-one phone call to learn more about me and my business goals, he invited me to their next session. The group met for a full day each month. Half the day was spent discussing a specific topic, the rest of the time was spent helping each other with individual issues. I quietly observed the morning session. At the lunch break, as we sat around the table together, the group leader asked me to share my story and more about my business so the other members could get to know me better. Then, he asked, “Do you have any questions for us?” I looked at them all, took a deep breath, and said,
“Can I call out the elephant in the room? I’m the only woman here. You all are clearly very close and this is a private formum where you can be truly honest about what’s going on in your personal and professional lives. So, I have to ask, do you even want me here? Because I would understand if you wouldn’t, given all that’s going on in the world today.”
I realize that was overly direct, but I wanted to see their initial reactions. Some looked down and away, others looked right at me with a blank face, and a few clearly had a twinkle of a smile in their eyes, laughing at the directness of my question. After what seemed like a really long pause (to me!), one said something to the effect of, “Actually, I’d like to have more women in the group. We need your perspective. Both from your HR and recruiting expertise and from the female point of view.” At which point, a few others nodded and agreed. I then asked the follow-up question:
“Why aren’t there any women currently in the group? Have you ever had any?”
This response was a little bit disheartening. They explained there had been two women in the group previously, but both of their businesses had ultimately failed and they had to quit the group. Not the most reassuring response. But, at the same time, entrepreneurship is hard and many businesses do fail. Plus, they were honest and pointed out there had been several male CEOs who had failed and left the group too. Running a company isn’t easy. That’s why you join a CEO group – to help you feel less isolated and to try to reduce the risk of failure by accessing additional persepctives that challenge you to make more informed business decisions. However, it doesn’t guarantee to make you successful.
I went home that night and told my husband I guessed they likely wouldn’t want me and that I could understand why.
And then, something wonderful happened…
I started to get individiual emails from the CEOs in the group. Each one shared why I should join. They were personal and sincere. It made me really happy. Why? I have lots of amazing female colleagues. I’m talking insanely successful professional women who I adore and respect. But, I don’t have many who have bootstrapped their businesses to the size of mine. Which means, they can’t really offer advice or guidance the way other CEOs who are at the same level as me can. The reality is, there are more male CEOs I can relate to at this stage in my business then female ones. I told the group leader this was the one thing I was most drawn to about the group. And for that reason, I joined.
A year later…
Those meetings were instrumental in taking my business to the next level. Company revenues grew by 50 percent. I learned so much. I had smart people to bounce ideas off of. I was introduced to some new resources and key networking contacts. But honestly, the most important thing this group gave me was the confidence to push the business to the next level. These guys made me feel capable. They showed me I wasn’t alone and that I didn’t need to be perfect. This particular group of male CEOs was much more comfortable with competition and failure than I was. Listening to them work through their own business challenges helped me be less emotional and hard on myself. They never treated me like a woman, they treated me like a peer. And for that, I am truly grateful.
So, when I see the statistic that came out this week that says 60 percent of men are avoiding mentoring women due to the #MeToo movement, I am sad.
I want men and women to find a way to work together. This movement wasn’t meant to build a divide between us. It was meant to help us work better together. We have so much to learn from one another. While I wish I had some suggestions to fix it, all I can offer is this story in hopes it inspires men out there to find a way to mentor women who need it.