Monday, April 29, 2019

The WISE Template for Effective Decision Making!

More than 50% of business decisions end in tears, some more spectacularly than others! In today's VUCA world (volatile uncertain,  complex, and ambiguous) business leaders are under pressure to act quickly and make the "right" call. So how do they get it so wrong so often, and how can you beat the odds?

In the early 1970s, Ford Motor Company's charismatic CEO, Lee Iococca wanted a "2,000 pound car for $2,000". The result was the Ford Pinto, a popular compact car designed to beat the Japanese automakers at their own game. But there was a problem. The position of the gas tank meant a rear-end collision could easily rupture the tank and cause a fire. Engineers came up with a fix but it was going to cost about $11 per vehicle, which would amount to $137 million over projected sales of 12.5 million vehicles.
Instead, Ford conducted a cost-benefit analysis on the litigation costs due to likely deaths and severe burns of drivers and passengers and arrived at an estimate of $49.5 million. They decided not to fix the cars. Ford's "profit drives principle" philosophy at the time blocked production staff from voicing the risk.

In the 1990s, Shell wanted to decommission the floating oil storage tank, Brent spar, used in the North Sea Brent oil field. They sought and received government approval to sink the rig in deep water. But just before disposal was to begin, Greenpeace activists began a high-profile publicity campaign. The activists flew to the spar by helicopter and boarded it, prompting a media feeding frenzy. Shell officials successfully argued the economic and legal case for deep water disposal as the best option, but they lost public support and incurred significant reputational damage. In the end they were forced to decommission the rig onshore.

Wells Fargo is the world's fourth largest bank by market capitalization and the third largest bank in the US by total assets. “Eight is great” was a saying that was the foundation of an aggressive cross-selling target scheme advocated by CEO John Stumpf in the Wells Fargo retail-banking division. Employees had to reach “eight is great” targets in order to earn commissions and avoid termination. In 2015, the Los Angeles City Attorney filed a lawsuit against Wells Fargo based on the Bank’s alleged fraudulent and abusive sales practices. They were finally compelled to pay $185 million in penalties. It transpired that 5,300 Wells Fargo employees had been terminated between 2011 and 2016 for sales practice violations that included opening over two million unauthorized deposit and credit card accounts and charging some of their customers fees for these unauthorized accounts.  John Stumpf was forced to resign in 2016. His successor, Tim Sloan was also forced to step down in March 2019 after a further 1.4 million false accounts were discovered.

After 20 years collecting and studying strategic decisions made by senior leaders in corporate, government and non-profit organisations, professor of management at Ohio State University, Paul Nutt concludes that the process by which the decision is made matters more than the eventual outcome. Decision processes driven by a single idea were more than four times likely to fail as those governed by the more time-consuming process of discovery and evaluation of the best ideas to suit a shared outcome. 

As Ikujiro Nonaka and Hirotaka Takeuchi point out, the difference between a good decision and a wise decision is the difference between asking, "what's in it for me?" rather than the question "what's good, right and just for everyone?" This takes time and requires considerable thought. Daniel Kahneman says we don't easily adopt this mode of thinking because it's effortful. Far quicker to rely on experience and "gut feeling", what he calls System 1 thinking. But even when we need to slow down and analyze the data and make reasoned decisions (what Kahneman calls System 2 thinking) we still don't necessarily know how to judge goodness, or grasp the essence and context of the issue before us, particularly when there are no defined right or wrong answers. For this we need a 3rd System of thinking.

The WISE template is a process for applying the 3rd System of thinking to help make effective decisions in complex circumstances. It helps to circumvent logical fallacies and cognitive biases, enables us to consider likely consequences in the short- and long-term, and it challenges our thinking to find outcomes which are good for society as well as the organizations we work for.

Widen your view

Time pressure pushes us into grasping the first viable option. Often, there seems to be a stark choice - choose A or B. It requires much less effort to narrow the field down to a simple duality of options and then choose the least disruptive one. However, the truth is that there are many alternative scenarios that exist in "possibility space". We just have to step back, take some time, and widen the scope of our search for different approaches to the issue.

Useful questions to ask yourself include: 

  • "Instead of either/or, whether/or not, what other options are there?"
  • "What is most important to me right now"
  • "In what ways could my opinion be incorrect?"
  • "Who has solved this problem before (Google it)?"
Interrogate reality

We make assumptions and jump to conclusions too readily. Is the reality I'm seeing the same as the reality you're seeing? Acknowledging the context and the "territory" within which the issue sits is an important prerequisite to knowing how best to evaluate the various options and which tools to use.

Ask yourself these counter-intuitive questions:
  • "What would have to be true for each of these options to be the best possible choice?"
  • "What's the biggest obstacle to this being the right decision?"
  • "What am I prepared to give up for this option to become a reality?"
  • "In what ways could this response fail?"
Sense what is emerging

Contrary to intuition or System 1 thinking, we need a way to move past the fluttering of emotion and allow a deeper understanding of the nature of the issue. Professor Otto Scharmer from MIT calls this "presencing" - observing the problem and sitting with it to see what insights emerge. The more complex the issue, the more we need to pay attention to emergent properties. Our familiar tools and resources for "fixing it" won't work. 

Take the time to ask yourself these questions:
  • "Imagine it is 6 months from now and this decision is a failure, why did it fail?"
  • "What is the essence of this issue (what is my deep knowing)?"
  • "What is the best possible future that I am bringing about?"
  • "What might other people think or feel who are watching me make this decision?"
Enact a way forward

However, it's possible to be too contemplative about the problem and not do anything about it. We need to take action. The best way is through a series of experiments, pilots, or prototypes to explore what will most likely be the best action to take. This is exactly what entrepreneurs do, they "fail forward and fail fast". Only through taking some kind of action will we learn what works and what doesn't - the essence of innovation.

Here are some questions to ask to shape your action steps:
  • "What can I start doing, now?"
  • "What is an appropriate threshold for me to take action?"
  • "In what ways can I experiment or prototype these options?"
  • "What can I learn from this?"
If the decision you are facing is a big one with significant impacts and multiple ways in which it could go terribly wrong, then the WISE template may offer a way to filter out the noise and deeply consider the consequences. Even if the outcome doesn't always match your expectations, you are more likely to make a wise decision using this process!

Monday, April 8, 2019

How to Lead Millenials!

Herding cats is easy compared to keeping a bunch of smart millennials motivated for long enough to make a meaningful contribution. Yet, fast-growing, agile, entrepreneurial organisations need this kind of sustainable energy to do good things for clients and communities. What's the secret? 

It turns out this is exactly the same problem faced by professional service firms - the McKinseys, Deloittes, and BCGs of the business world. They have to entice a group of disparate professionals to give up autonomy in return for a group share of the profits, while at the same time maintaining the bonds of a matrix-structured organization which threatens to fly apart at any moment under the centrifugal force of massive ego! Have they cracked the code? 

Laura Empson, Professor in Management at the Cass Business School, London, and Ann Langley, Professor of Management at HEC Montreal think they have. Their model of the professional service firm (2015) is an elegant guide in how to use multiple manifestations of influence where direct authority is limited or questionable (think millennials). So how does it work?

It's a 9-box matrix which spells out what you can do to keep millennials corralled yet happily productive. 

Firstly, at the individual and group level you can apply your Professional Expertise through:
  • Coaching and mentoring millennials, which goes beyond a simple transfer of technical skills to encompass more personalized coaching in interpersonal skills. This is a key theme in how to lead professionals, so if you don't have the requisite skills perhaps now would be a good time to get yourself trained!
  • Balancing the competing economic and organizational interests of the company with the expressed need of professional millennials. This requires subtlety and persuasion based on your experience of what and who works best for all concerned.
  • Championing projects undertaken by professional millennials to help get them more embedded into the organization and better recognized by clients and stakeholders.

Secondly, you can utilize Political Interaction at the organizational level through:
  • Nurturing your millennials by making them feel valued, supported and cared for and removing obstacles to getting their work done. The idea is to build trust, loyalty and cohesion through connecting them with key influencers in the company.
  • Enabling their initiatives - without drawing attention to yourself - through removing roadblocks and promoting their entrepreneurialism.
  • Consensus-Building with your peers to help resolve the inherent tensions between the needs of your millennial professionals and the needs of the collective.

And thirdly, you can employ Personal Embodiment at the strategic level by:

  •  Role-modeling what is expected of professionals in the company; demonstrating passion and belief; treating everyone with dignity and respect; demonstrating the highest integrity; giving credit to others and taking responsibility for failure.
  • Meaning Making through framing and defining the reality of the environment and providing personal support and opportunities for millennials to make sense of their surroundings.
  • Visioning - articulating and enacting your vision for the company; building on your own credibility and reputation; and providing a beacon of common values which will entice professional millennials to want to be associated with you.
Don't expect millennials to follow you unless you are willing to devote your personal resources and your energy to supporting and encouraging them. It takes considerable effort, but the rewards to you and your company will be immeasurable!

Tuesday, March 19, 2019

Wisdom and the Rise of AI (Artificial Ignorance)!

Artificial Intelligence is already here, we just don't notice it yet. All around us, the invisible algorithms of social media and countless online platforms are shaping our buying habits, our values, and our beliefs. Should we be concerned?

The Power of The Algorithms

The algorithms exploit our cognitive baises and effectively hijack our minds without us even realizing it:

  • Our devices have the same conditioning effect as poker machines, keeping us hooked on content through Intermittent variable rewards.
  • FOMO (Fear of Missing Out) becomes an addiction to living moment to moment online.
  • Our social approval is primed by how many tags and likes we get. 
  • Our need to reciprocate social gestures is exploited to keep us on the platform for longer (looking at you LinkedIn).
  • Automatic feeds and autoplay are like consuming a bottomless bowl of soup - we will always consume more than we need.
  • Message interruptions are an effective way of capturing our attention since we're primed to notice something different or novel.
  • The algorithms want to convert our reasons for using the app into their reason, which is to maximize the time we spend consuming things.
  • It's always easier to subscribe than it is to unsubscribe, so most of us don't.
We tacitly buy into this because the benefits seem to outweigh the costs. The content streamed to us seems to happily coincide with our interests (cat videos, anyone). But the algorithms have a dark side. They steer us toward edgier content, a loop that results in more time spent on the app, and more advertising revenue for the company. Platform incentives polarize opinions, viewpoints, beliefs and ideologies. They nudge us toward a more strident version of our existing beliefs. 

It's unfair to blame the internet for this, but the algorithms behind the platforms inadvertently create and reinforce extremist beliefs. They become a place where people with hateful and violent beliefs can feed off one another. This is an emergent AI, but not some technological dream of a Utopian future. What we are breeding is Artificial Ignorance

AI (Artificial Ignorance)

As Margaret Wheatley observes in her 2017 book, Who Do We Choose To Be?"This is the age of retreat: from one another, from values that held us together, from ideas and practices that encouraged inclusion, from faith in leaders, from belief in basic human goodness".

Artificial Ignorance is everywhere: the lack of political courage, the building of walls against collaboration across national boundaries, self-interest and greed which supersedes compassion. We have seemingly lost the ability to solve the global problems of our time. 

But there is an antidote to ignorance, and the antidote is wisdom. So much is possible if we can step away from the addictive torrent of information and consciously and wisely choose who to be in this moment, and the next.

What we need is a WISE template for making more considerate decisions for ourselves, our communities, our businesses, our government and political institutions, and for the planet. Our survival may very well depend on it.

A Template for Making WISE Decisions

Use this template to guard against bias, assumptions, and fallacies in making critical decisions in times of uncertainty and complexity:

Widen your framework: 

  • Avoid "either/or" and "whether/or not" decisions. Think AND not OR.
  • Ask yourself, "what different outcomes or solutions could there be?" Generate a list of options.
  • Ask yourself, "could my opinion on the situation be incorrect?"
  • Find someone who has solved this problem before, or Google keywords related to the issue.
Interrogate reality:
  • If you think your best option is correct, consider, "in what ways might this be the wrong decision?"
  • Ask yourself disconfirming questions such as, "What's the biggest obstacle to this being the right decision?" "In what ways could I fail?"
  • Ask yourself, "what would have to be true for each of these options to be the best possible choice?"
  • Ask yourself, "can I accept that there may be information to which I do not have access?"
Sense what is emerging:
  • Ask yourself, "what do I notice when I put myself in the other person's shoes?" "What might be that person's perspective?"
  • Ask yourself, "What might other people think or feel if they were watching the situation?"
  • Retreat from the issue and allow time for stillness and reflection; let your awareness redirect itself; allow the inner knowing to emerge.
  • Ask yourself, "what is waiting to emerge into being through this decision?" 
Enact a way forward: 
  • Take the first step in the direction of the decision. Don't procrastinate or wait for more data or analysis, it may be too late.
  • Experiment and prototype, learn through action: "fail forward and fail fast".
  • With each action, ask yourself these four questions: "What just happened? Why do I think it happened?What can I learn from this? How will I apply these learnings?"
  • Take action from the predicted future state, as if you are already there.

We are immersed in a matrix of Artificial Ignorance and it's unlikely to get better. The best we can do is cultivate our own "islands of sanity" in Margaret Wheatley's words. A template for practicing wisdom and making wise decisions may be our best resource!

Thursday, February 7, 2019

Bank On It: How the Financial Services sector must bring wisdom to decision making

The Hayne Royal Commission in Australia has upended the central myth of the financial services sector that "greed is good". As if we learned nothing from Gordon Gecko, the central character portrayed by Michael Douglas in the 1987 movie "Wall Street", and by Stanley Weiser in the 2010 sequel. The script is too real to be entertaining any more.

The Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released this week, and it presents an eye-watering litany of misdeeds, misappropriations, mismanagement, and missed opportunities for reform. Both business and government leaders appear to have been sitting on their hands while customers were routinely fleeced of their money. How did this become so seemingly normal?

Cognitive Bias

In 2010, German researchers found strong evidence that cognitive bias most likely contributed to the decision making which led to the global financial crisis of 2007-2009. The Hayne Royal Commission report arrives at a similar conclusion that business-as-usual clouded judgement at best, and at worst led to intentional deception.

While the report's recommendations call for regular checks of culture and performance bias, in practice this goes to the heart of how we make decisions, for whom we make decisions, and the context of our decision making. In 2011, Daniel Kahneman, the father of behavioural economics, popularised the idea that we think both fast and slow about problems before we make decisions. He described System 1 thinking as intuitive and quick to make assumptions, while System 2 thinking is rational and calculating and therefore slower. Both systems are subject to bias, particular when our environment is loaded with cues about how we are expected to behave in order to fit in. But is it possible to exert enough willpower to overcome cognitive bias each time we make an important decision?

The Third System

Contrary to Daniel Kahneman, there is a Third System of thinking, which my colleague Dr Barry Partridge and I discovered while researching decision making bias at the University of Wollongong, 2010-2015. System 3 turns out to be slow and calculating like system 2, but it has some of the emotional characteristics of system 1. Depending on the nature of the decision, it seems we first jump to conclusions based on our experience (system 1), then we analyse the problem to rationalise our conclusions (system 2).

However, if the problem is outside our experience, or is intractable, or if we are faced with a dilemma for which there are no clear right or wrong answers, then system 3 kicks in. This is where we "think from the heart" using a first-person perspective to sift the data through our emotions, discern the reality of the various impacts of the decision on others and ourselves, and consider deeply the wider consequences both short and long term.

Our blindness to this Third System of thinking leads us to either make intuitive leaps of faith, or overly rely on analytical tools when confronted with complex problems. Experience teaches us how to use system 1, and business schools train us in system 2 approaches. But there is no training for how to apply the Third System. Japanese business experts, Ikujiro Nonaka and Hirotaka Takeuchi nominated this deficit in training as one of the foremost reasons for the global financial crisis. We have forgotten it seems, to train for wise leadership, and we need it now, more than ever.

Wisdom > Ethics

Ethics training for business leaders is a necessary but not sufficient prescription when it comes to preventing the kind of ongoing toxicity and corruption unearthed by the Hayne Royal Commission. But it's a system 2 approach to changing corporate behaviour, and so far it hasn't worked, at least not sustainably.

Of greater effect would be training in the Third System of thinking. This is more likely to lead to the type of decision making Aristotle referred to as phronesis, or practical wisdom - the ability to make prudent judgements and take actions based on the reality of the situation, guided by values and morals; to know what is the right thing to do for the right people at the right time. But can practical wisdom be trained?

Yes, it can!
  • Pioneer researchers in the field of wisdom psychology, Paul Baltes and Ursula Staudinger from the Max Planck Institute for Human Development in Berlin developed the "Berlin Wisdom Paradigm" in the 1990s and conducted experiments in how to boost wisdom-related performance.
  • Howard Nusbaum, Director of the Center for Practical Wisdom at the University of Chicago and his colleagues have been researching ways in which wisdom can be developed in professional and public life since 2007.
  • Igor Grossmann, Director of the Wisdom and Research Lab at the University of Waterloo in Ontario, Canada shows how the ability to think wisely varies dramatically from one situation to another, and he presents experimental evidence for ways to buffer thinking against bias.
  • And at the Stein Institute for Research on Ageing at the University of California San Diego, Director Dilip Jeste and his team outline 6 components of wisdom, all of which can be developed over time.
Building on these and other discoveries, my own research and practice in the field of wisdom psychology suggests that system 3 thinking is made up of 9 capabilities which can be developed in much the same way that emotional competencies can be enhanced through training and coaching.

Developing the Third System

The 9 capabilities of the Third System are:

1. Social Advising
Experience is a necessary but not sufficient condition for wise thinking. Martin Seligman launched the field of positive psychology, demonstrating ways in which we can curate our memories and appreciate the course of our own life as a useful guide to what it means to live a flourishing life. By recognising the normal trajectory of human development through our own and others' biographies we may come to be relied on for giving advice about life problems.

2. Decisiveness
Paradoxically, an important capability of the Third System is acknowledging uncertainty and ambiguity, yet making quick and effective decisions; not suffering "paralysis by analysis". Under complex conditions decision making is actually a series of experiments in which we learn something new. We should not be fearful of making mistakes but rather accept the entrepreneurial "fail forward" principle. This is also the process of enacting and prototyping advocated by Otto Scharmer in his Theory U.

3. Emotion Regulation
Daniel Goleman popularised the notion of emotional intelligence in the 1990s. It turns out one of the most critical capabilities of the Third System is to recognise your feelings, yet not be overwhelmed by them. Control over emotions is not the same as the absence of emotions but rather having control over the intensity and variation in them, which yields a kind of contentedness.

4. Pro-Social Behaviours
System 3 thinking emphasises understanding how others are feeling, imagining what it must be like for them, and being prepared to take action through a strongly held sense of fairness. Robert Sapolsky from Stanford University School of Medicine leads other Evolutionary Biologists in observing that cooperative prosocial behaviours are more favoured in primate and human groups than competition and violence.

5. Tolerance for Divergent Values
Chris Petersen and Martin Seligman founded the Values In Action Institute after identifying 24 character strengths and virtues we all possess to a greater or lesser degree. Acceptance of diversity allows for our own unique signature strengths, but also opens us up to understand why someone else might rely on different strengths. The key to system 3 thinking appears to be having strong values "weakly held" which means we are more prepared to change our mind if new information presents itself.

6. Self-Transcendence
"Man's Search for Meaning" is a 1946 book by Viktor Frankl chronicling his experience in Nazi concentration camps during World War II, and describing his psychotherapeutic method, which involved identifying a purpose in life to feel positively about, and then imagining that outcome. Finding meaning in the midst of disruption and volatility is about moving beyond the physical and the ego, and knowing the inner spirit essence of life, it is about seeing the world from a universal perspective. Self-transcendence is a spiritual concept that looks at the true meaning of life and the infinite consciousness.

7. Insight
Insight is the capability to see into a situation, to apprehend the inner nature of things. It includes self-reflection, which is the ability to acquire an authentic and meaningful perception of a thing or an individual, including yourself. Leadership experts, Jack Zenger and Joseph Folkman present empirical evidence for why it is important to know yourself in order to make accurate assessments of your impact on others and to make better quality decisions.

8. Mindfulness
In their 2018 book, "The Mind of a Leader", authors Rasmus Hougaard and Jacqueline Carter  highlight the debilitating effects of distraction on decision making effectiveness. Mindfulness is the skill of applying sustained, focused attention to meaningful tasks and activities, balancing mental activity with mental control. Cultivating the ability to find mental stillness in the midst of noise can enhance productivity and creativity.

9. Compassion
According to His Holiness the 14th Dalai Lama of Tibet, compassion is the key to happiness. Compassion is the feeling that arises when we are confronted with another's suffering and feel motivated to relieve that suffering. While empathy refers to our ability to feel the emotions of another, compassion is when those feelings and thoughts include the desire to help.

Taken together, these 9 capabilities represent an altogether different way of thinking and being when faced with complex issues and wicked problems. We still need systems 1 and 2 for simple and complicated problems, but as we face technological breakthroughs and digital disruptions with unintended consequences for ourselves and for the planet, we are going to have to get proficient at fully utilising the Third System.


Through training and coaching I have found it is possible to improve the capability of individuals to successfully apply the Third System of thinking when faced with a dilemma. Although life is uncertain and there are no guarantees that any given decision will work out for the best, accepting that condition is in itself a hallmark of the system 3 thinker.

Part of the Wise Decision Making training program involves practicing a template for protecting against bias and encouraging a slower, more considerate approach to both understanding and potentially solving complex issues:

  • Widen your view: Avoid either/or dualities in framing the issue, expand your options.
  • Interrogate reality: Find ways of disconfirming your assumptions, check your sources of information.
  • Sense what is emerging: Go deeper than immediate emotional reactions, patiently observe the possibilities emerging in the short and long term.
  • Enact a way forward: Experiment and prototype possible solutions, take action and learn from each result.

As we have seen this week from the Hayne Royal Commission report, business, community, and political leaders will need to become more sensitive to the total societal impact of their actions. It's no longer enough to justify decisions based on stakeholder sentiment. From now on, business decision makers need to make sure they deliver social as well as economic value. And to do that they will need to become practiced in the Third System of thinking.

Contact me here to book a Wise Decision Making training program for you and your team.