Our current economic plight makes me ponder how we can develop leaders who anticipate crises.
According to independent newsgroup ProPublica, the oft-repeated axiom of our recent recession — “None of us saw this coming” — isn’t entirely true. ProPublica reports that in 2005, Alec Litowitz and his team at Magnetar Capital hedge fund not only saw the recession coming, but they fueled the fire by helping to create a market for something they were sure would fail and then betting against it. The ProPublica investigation concluded that Magnetar used its foresight to promote and fully exploit the irrational exuberance of banks and investors for risky bundles of subprime loans. It will be interesting to see what, if anything, happens to Magnetar, Goldman Sachs and others who allegedly capitalized on — intentionally or unintentionally — the current economic debacle.
While the ethics of these activities are highly reprehensible, no one can deny Litowitz’s foresight. He observed what behavioral economists are seeing with increasing clarity and frequency: People are often irrational. Thankfully, there is a silver lining. Although people can be persuaded to make choices that are neither in their own interests nor in the interests of the common good, they also can be influenced to make rational choices that promote general well-being. The fulcrum by which behavior is levered is familiar to us all: emotion.
Years ago I had the privilege of working on a project with Richard Wirthlin, President Reagan’s chief strategist and pollster. Dick said people are persuaded by reason but are moved to action by emotion. If ever there was a president who had the capability to move people to action by using emotional stories, humor and the common touch, it was Reagan. In educating leaders to influence others with integrity and efficacy, we must help them make ethical use of emotion.
There is no situation in which the use of emotion is more important than getting employees to embrace organizational values. Early in my career I worked at the Saturn startup. Shortly after I arrived, Skip LeFauve, the president of the company, assigned me the task of creating the company values. At the time, it was fashionable for companies to have a set of values that could fit on posters, plaques and plastic pocket cards — mottos that could easily be pointed to, but not actively ingrained in the fabric of the organization. When Skip first approached me about the values, he asked me to write up a set and he would apply the finishing touches. Over time, he came to embrace a more robust approach.
Skip recognized the inherent inefficacy of publically announcing values. People infer values from behavior, not mottos. We observed that the greater the gap between espoused values and demonstrated values, the greater the organizational cynicism. We focused on what the behaviors of our senior team demonstrated to employees regarding our real organizational standards. During the next few months, members of the senior team focused on holding each other accountable for behaving in a manner consistent with the values. Just after Saturn launched its first 1,000 vehicles, it was discovered that the engine coolant was contaminated. Skip and the senior team responded first by intentionally considering one of our values: “Engender customer enthusiasm by exceeding expectations.” They immediately recalled every one of the affected vehicles and personally delivered a new vehicle to each owner, including options beyond those for which the customer had originally paid. Those actions brought authenticity, substance and positive emotion to the stated values. The CEO publicly stated that what he and the senior team did with respect to the values was some of the most important work they ever completed.
Nobel Prize-winning economist George Akerlof recently stated that great values form the bedrock for the growth of a strong culture. He said leaders who get employees to identify with the company and its raison d’tre will advance its goals more powerfully than those incentivized with financial rewards.
“Worker identification may therefore be a major factor, perhaps even the dominant factor, in the success or failure of organizations,” Akerlof said.
In this demanding age of uncertainty, employees universally feel overwhelmed. Senior leaders who promote the common good and live the purported values they espouse engender commitment from their workforces and navigate well in a turbulent sea.
