Gender-neutral Leadership

Gender-neutral Leadership

A recent article in the Economist, ‘Sex in the boardroom’ (Schumpeter, 6 June 2015) argued that ‘claims that women manage differently from – or better than – men are questionable.’ Drawing on McKinsey articles which are ‘fond of being quoted’ by persons who do think that women manage differently, the article criticizes the studies for firstly only being ‘snapshots’ of managers’ changing opinions which are likely to be influenced by politically correct ‘hokum’; secondly for ‘lumping women bosses together’ which ‘obscures huge differences between them’; and thirdly for overlooking the fact that men and women continually change and adapt their leadership styles according to circumstances. 

They also cite another study from Norway which found that ‘men and women do not have different styles of leadership.’ In that context, the article is promoting a type of gender-neutral approach to leadership, and they cite three further studies which highlight that ‘there is a lack of solid evidence that putting more women into senior jobs improves a business’s performance.’  Here are the three points followed by further considerations and counter counter-arguments (‘et alors’)

Gender-neutral Leadership

To counter the argument that women manage differently from or better than men, Schumpeter cited the following three studies:

Performance

A study of a large sample of American firms by Adams and Ferreira found that ‘the average effect of gender diversity on firm performance is negative.’

Effects

A large study of the influence of diversity on group performance in companies by Hans van Dijk found that ‘gender diversity has no overall effect.’

Results

Two studies of companies in Norway (following the implementation of the minimum 40% female board participation legislation) found that ‘increasing the number of women had a negative effect on profits.’

Et alors

The only thing I find positive about this article is the allusion to gender-neutral leadership. Indeed, why not make leadership and gender two different matters? There are some very good female leaders; and there are some very good male leaders, so why not just take ‘gender’ out of the definition of good (or bad) leadership? It can be argued that leadership is an inter-personal event that is about the adaptability of the leader to the context and the situation of the followers; it is not about who the leader ‘is’ whether male or female. However, the article is very strongly asserting that any gender differences are questionable and appears to have an agenda of ‘balancing’ all the ‘politically correct’ studies and articles that are being published on the matter. I would like to reply to that reply:

Firsts, ‘androgynous’ leadership might be achievable by both men and women; but not everyone can and there are some proven correlations between gender and leadership characteristics. Consider ‘judging’ preferences per the MBTI personality type indicator – significantly more females than males prefer to make decisions using their feelings in preference to thinking. Vice versa for males, but of course, some males prefer to ‘feel’, and some females prefer to ‘think’; but my point is that if we are to achieve ‘best’ leadership, whilst we might need a balance, that balance might be best achieved within a team. A collection of diverse individuals can achieve it more readily than one person. Don’t neutralize gender, benefit from it in a collective sense!

Second, it is not just merit but opportunity that defines careers in organizations. The gender-neutral arguments assume that everyone has the same opportunities. Gender-neutrality might be another barrier since the (predominantly) male senior executives review the merits of their junior female managers and think that they are assessing their merit in a gender-neutral manner. But they are not! They are actually assessing the females on (predominantly) masculine corporate culture and values. Only those females who exhibit these characteristics are promoted, thereby reinforcing the masculine culture, whilst ‘at the top’ the senior executives congratulate themselves on their gender-neutrality!

Third, whilst there are strong arguments for gender-neutrality in leadership, the problem is that these arguments might just be used to close any debate on the matter. Everyone is the same, so it’s ok – nothing to talk about… Well, yes and no – yes, anything that helps overcome prejudice and improve meritocracy; however, no: the corporate world is perhaps not ready for this yet. There is a corrective dynamic in play and that needs to continue until we do have gender ‘diversity blindness’ – until that time, any argument that closes (rather than opens) the debate should be treated with caution…

Why Diversity Matters

McKinsey (a consultancy) has produced a report, “Diversity Matters” (McKinsey Quarterly Feb 2015), which “examined proprietary data sets for 366 public companies across a range of industries in Canada, Latin America, the United Kingdom, and the United States.” The report compared financial results (such as total revenues, earnings before interest and taxes, and returns on equity for the years 2010 to 2013 and the composition of top management and boards (gender information, ethnicity, race, or both).

Here are the findings which highlight why diversity matters (along with further considerations ‘et alors’):

Why Diversity Matters

Some of the key findings per the McKinsey report (verbatim):

·         Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.

·         Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.

·         Companies in the bottom quartile both for gender and for ethnicity and race are statistically less likely to achieve above-average financial returns than the average companies in the data set (that is, bottom-quartile companies are lagging rather than merely not leading).

The report further states that “the case for greater diversity becomes more compelling. We live in a deeply connected and global world. It should come as no surprise that more diverse companies and institutions are achieving better performance. […] That’s particularly true for their talent pipelines: attracting, developing, mentoring, sponsoring, and retaining the next generations of global leaders at all levels of organizations. Given the higher returns that diversity is expected to bring, we believe it is better to invest now, since winners will pull further ahead and laggards will fall further behind.”

Et alors

The insight is pertinent and the news is relevant, but the message is not new. Not least since this latest McKinsey report is a follow-up from the one they published in 2010 with similar results. Many large corporations have been attempting to increase diversity and inclusion for the last decade, but with limited results: they are trying to ‘win’ but ending up as ‘laggards…’ There are a number of reasons why diversity ‘initiatives’ may not work (lack of accountability, not ‘walking the talk’, having recruitment but not retention targets, etc.), so what can be done now that’s new; what’s the solution?

There was a very interesting interview with Renee James, the president of Intel Corporation, in the Economic Times of India, “Corporate Dossier” (Feb 13-19, 2015) where she highlighted their recent initiative to ‘walk the talk’ by dedicating $300 million to increasing workforce diversity. Part of a two step plan (1/ do the same as before but better; and 2/ ‘go public’ with the initiatives), she highlighted one of the key issues why diversity initiatives did not appear to work in the last decade: ‘micro inequity sensitivity.’ At the ‘macro’ level, companies and their staff are making broad gestures towards diversity; however at the micro level diversity becomes a ‘good cause’ but ‘someone else’s problem’. At the micro level, no one is accountable for their actions. This may not be malicious and/or ‘anti-diversity’ behavior – many staff will at once and the same time subscribe to the macro initiatives but sub-consciously still exhibit micro inequality when it comes to matters such as talent development.

An example might be if there are two candidates for a post, one of whom is ‘diverse’. In line with macro diversity initiatives, the senior manager will be glad to see a diverse candidate but then ignores that diversity: ‘there is no difference between these two candidates except for their experience and qualifications…’ But then the micro inequality starts to take effect when the senior manager selects only according to these criteria. Let’s say the candidates are equally competent but the ‘diverse’ candidate is female (whose experience was interrupted with a few years maternity leave) and is a graduate from a ‘foreign’ university which the senior manager is not familiar with; whereas the other candidate is male (with no interruptions to work experience) and is a graduate from a ‘local’ university which the senior manager is very familiar with. Who is going to get the job? There is therefore the need to highlight ‘micro inequality sensitivity’ principally amongst senior executives… Hence Intel’s initiatives to ‘go public’ (thereby increasing accountability at both the macro and micro levels) and directing funding to continue to ‘find out what is really going on’ when it comes to diversity…

Female Quotas

In “A Nordic Mystery” (Schumpeter, 15.11.14), The Economist picked up on the first “substantial study of Norwegian reforms” principally relating to the introduction of board membership quotas. Since 2003 the board of directors of public companies in Norway must comprise a minimum of 40% women and a minimum of 40% men; moreover any companies that do not comply are simply delisted. Throughout the world, the ‘Norwegian’ model has been heralded as a success (cf. my article of last year diversity quotas) and as an example for others to follow in terms of managing quotas; however has it really worked?

There are now more women on the boards of public companies; however companies “fled the stock market as the quotas were phased in: Norway’s stock of listed firms fell from 563 in 2003 to 179 in 2008.” Furthermore, only 6% of listed firms had a female chief executive in 2013 (cf. 2% in 2001, but cf. 5% of USA Fortune 500 companies today). Besides quotas at the ‘top’ of the corporate environment, the Norwegian society affords both generous social policies and an egalitarian culture that facilitates equality at the ‘bottom.’ The challenge remains in the ‘middle’ and in particular for women leaders: “visit a typical Nordic company… and you will notice the senior managers are still mostly men.”

The study (by Univ. of Chicago Booth business school) concluded that “there is no evidence that these gains at the top trickled down.” They have not improved the career prospects of highly qualified women below board level; not helped close the gender pay gap; and not encouraged younger women to go to business school. Why? It appears that at the ‘top’ the quotas are “too prescriptive” for only a select group in a select role which does not strengthen the career ladder for women as a whole; whereas at the ‘bottom’ ‘female-friendly’ social policies “makes life easier for women but does not encourage them to aim higher.”

Evidently there is a dynamic in play that needs to be strengthened. Here’s how:

Female Quotas 

The quotas were put in place to redress the balance of women in business. 60% of graduates in Scandinavia are female: the principle is not just to ensure the balance at the top, but at everylevel in the corporate environment. Schumpeter proposes two key ways to strengthen the female quota dynamic:

Leadership Pipeline

If the target is to have 40% female senior leaders, then the leadership pipeline might need to start with 60% female junior leaders. Companies should “include plenty of women among the high-flyers selected for challenging assignments.”

Senior leaders “should take their role as mentors seriously.” Mentoring is vital for leadership development especially when female leaders have to navigate difficult-to-see, negative cultural forces.

Making a Balanced Environment

“Employers should encourage, not penalize, fathers who take parenting breaks, and let them work flexible hours so they can do the school run.”

“Selection committees should stop putting so much emphasis on continuity of service, and penalizing women who take career breaks to care for young children.”

Et alors

Interesting points, but it might be possible to go further already. Within the context of considering female quotas to be a temporary measure to redress the balance, why not have quotas at every level in the corporate hierarchy to strengthen the career ladder? These quotas could be removed once full equity has been achieved; but without which there is likely to be a ‘whole in the middle’ for a while to come. If the female career ladder is not strong enough then the companies might resort to looking to recruit externally to achieve the ‘top’ quotas: this potentially then worsens the situation by demotivating and discouraging internal candidates in the ‘middle’ levels. It may even lead to reduced retention of female talent as they either retreat from the ‘tournament;’ or, to ‘win the tournament,’ they start to change companies themselves.

Regarding absences, it also might be possible to go further. When women have a child, some cultural norms tend to frame the question as ‘child or career’; whereas when men have a child, the same cultural norms do not present the same question: the man may assume there is noquestion and/or a child and a career can both be achieved without any detriment to either. There is a twofold approach to solving this which builds on Schumpeter’s suggestions: 1/ make sure parental absence for either parent is not detrimental to their career, not only avoiding the penalization of absences in career planning but actually promoting, encouraging and rewarding absences; and 2/ more specifically to men – make paternity leave mandatory – this is assuming the first point is fully addressed and might also change the cultural norms…

There is also a possible further key issue to address. How to break the indifference of men who currently hold the senior leadership positions? This is potentially one of the biggest barriers to the promotion of any type of diversity. The male senior managers might not be against diversity per se, but it’s just not on their agenda. Further, if they do stop to think about diversity, then they might suggest that some women will ascend the career ladder if they are ‘good enough’ – a genuine (albeit misguided) belief that there are no barriers and there is equal opportunity… To take male business leaders ‘beyond’ this, female quotas need to be ‘sold’ (and not just ‘imposed’). The benefits of diversity (and the need for quotas) should to be ‘marketed’ so that the current senior leaders know ‘what’s in it for them.’ When the male senior managers themselves start to actively promote diversity, the male-female balance in the workplace might start to be fully redressed!

Making Human Resources Decisions

When decision making concerns human resources, the stakes might be higher than other resource allocation decisions: simply put, there are people involved. An investment decision might involve a certain level of risk and if it goes “badly”, there are consequences, but people move on; however for human resources decisions (e.g. regarding performance improvement, potential development or career choices) then the risk might be considered higher because if it goes “badly”, the person involved will potentially have to carry the consequences for the rest of their lives. Considering this, Korte, in “Biases in Decision Making and Implications for Human Resources Development”, (in Advances in Developing Human Resources, Vol. 5, Nov. 2003, pp. 440-457) researched and concluded on how to optimise decision-making in such an HR context.

Here’s how to make effective HR decisions followed by further implications (“et alors”):

Making Human Resources Decisions

Decision making in the HR context is “a complex process rife with social and political agendas, individual biases and rapidly changing relationships… the decision-making process must include an explicit examination and challenge of the assumptions and biases underpinning the process and a prescription to mitigate the stifling effects of these orientations.” Korte accordingly recommends five optimising processes for decision making in HR:

Bias Analysis

Identify, assess and challenge the orientations and underlying assumptions of the decision-makers.

This is sub-optimal if the assumptions and orientations of the team are “glossed over.”

Information Gathering

Challenge the information gathering process to overcome biases from 1/ visibility, 2/ timing, 3/ limits of understanding, 4/expectations, 5/ comparisons and 6/experience. Do not settle on a definition of the problem or solution until as late as possible in the process.

This is sub-optimal if the sources of information are based on 1/ experience, 2/visible sources and 3/ preferred sources.

Information Processing

Challenge the information analysis process to overcome biases from 1/ inconsistency, 2/conservation, 3/miscalculation, 4/inertia, 5/overconfidence and 6/ anchoring. Explain reasons for processing information and justify the reasons based on the data.

This is sub-optimal if data is analysed 1/ with inconsistent use of criteria, 2/ to support preferences, 3/ with overconfidence on biased data.

Information Response

Enlist several non-aligned sources for reality checks of analysis, definitions and solutions. Attend to the perceptions, expectations and impulses of the stakeholders throughout the process.

This is sub-optimal if you unduly hope for the best and overestimate the degree of control or the ability to fix things later.

General Problem-solving

Consider that the problem can never be completely defined or completely resolved. Avoid the impulse to act early in the process (unless to just as a test of ideas and solutions).

This is sub-optimal if you just focus on a single definition of the problem and the solution or if you follow a linear, mechanistic problem-solving process.

Et alors

That is quite a lot of things to take into consideration all at once; however the points are worthy of consideration if only because the stakes are high when making HR decisions! One of the key messages is to overcome biases in the early stages of the decision-making process; however, these assumptions, orientations and biases might be cultural. Whilst people consider that they are making optimal decisions, in fact, there are underlying cultural references that are (usually) implicit in the assumptions being made by people in arriving at their decision. This might be expedient where the whole context is mono-cultural: “collective programming” or “shortcuts” might be the very definition of culture with the benefit of expediency; however what about in a multi-cultural context? Then there might be a challenge as all the parties in the process might not consider the process (or the solution) to be optimal as it would only be so in one culture or the other (but not both).

So is there an intercultural solution (for example for career management systems in a multicultural organisation)? Potentially not! I have concluded from my research into intercultural leadership that cross-cultural understanding and trans-cultural leadership are possible and feasible when the stakes are not too high and/or the situation is not “personal”. When however, there are individuals involved (such as in decisions relating to HR) and when the stakes are increased because they relate to important human conditions such as love, conflict, power or wealth, then each respective culture tends to revert-to-type. In such cases, cross-cultural understanding tends to evaporate! So overcoming biases etc. in a mono-culture is one thing; whereas it is quite another challenge to overcome biases etc. in a multicultural context when there are “human resources” at stake!

Diversity Quotas

Back in Norway this week I was reminded of the diversity quotas for publically traded companies: the board of directors must comprise of a minimum of 40% women and a minimum of 40% men. This law has been in force for almost 10 years now and any company that does not comply is simply delisted. The quotas appear to work and they are rarely the subject of debate in Scandinavia. Elsewhere, diversity quotas are not always so readily accepted: on the one hand “talent” wants to be promoted only on merit without “help” from a quota; and on the other hand detractors assert that quotas or any form of affirmative action forces companies to hire or promote less qualified candidates.

Hence it was very interesting to come across a potentially paradigm-changing piece of research in respect of quotas in the article “Gender Quotas Attract More High Qualified Women Applicants” posted online in ‘The Glass Hammer’ on 1.8.13. Referencing work by Muriel Niederle, Stanford University; Carmit Segal, University of Zurich; and Lise Vesterlund, University of Pittsburgh (published in “Management Science” Journal, 2013) the research showed that having female quotas could attract highly qualified women because they “become more willing to compete for positions when they learn that quotas are being instituted.”

Here’s how followed by further considerations (“et alors”)

Diversity Quotas

The researchers designed a series of tests based on mathematical problems where the events and consequential results were in three stages:

1. No affirmative action

For the tests, people could choose 1/ to be paid a small amount for each right answer they came up with (akin to low risk – low reward); or 2/ they could decide to enter a “tournament”, in which they would receive a significantly higher payment for each right answer, but only if they won the tournament; however if they lost the tournament, they got nothing (akin to high risk – high reward). With no affirmative action, the results were:

·         Men were much more likely to chose the high risk – high reward (“tournament”) option

·         Women were much more likely to chose the low risk – low reward (“initial”) option

2. Affirmative action introduced

The researchers then notified participants of new tournament rules: for every male winner, there would have to be a female winner. The affirmative action changed the “tournament” entry substantially (with responses exceeding that predicted by changes in the probability of winning). With affirmative action, the results were:

·         The number of men entering the high risk – high reward slightly decreased

·         The number of women entering the high risk – high reward significantly increased

3. Affirmative action analysed

Monitoring the results of all the tests, the researchers were able to identify “high performing women”. Analysing the results further showed that in the “tournament”:

·         Before the affirmative action, women who could have won weren’t playing; and

·         The institution of the quota increased the participation of high performing women.

According to the authors, the research suggests that to attract a greater proportion of “high performing women” to competitive jobs “companies need to loudly and frequently proclaim their desire to increase the percentage of women they employ, as well as discuss the programs they have instituted to support them.”

Et alors

The focus of the research is in attracting talent and the quota introduced appears to enhance the perception of equality of opportunity for one of the groups of persons, in this case being the women. When the opportunity to advance is perceived to be equitable, participation increases. The other group, in this case being men, appeared to have a similar perception of the equality of opportunity both before and after the affirmative action. This seems to cut to the very chase of the diversity issue (howsoever diversity is defined, whether gender, ethnicity, education, etc.): it is all about equality of opportunity and if that is perceived by the “diverse” group to be unequal, then some of that “diverse” group will actively not participate. According to a separate report by Bain and Co this year, only 15% of women in large organisations believe they are being afforded the same opportunity to be promoted to senior executive positions on the same timeline as men. Considering that it can be the “ones who could have won” who retreat from the “tournament”, this is a worrying consideration for organizations that wish to attract and retain high quality “diverse” talent.

Leveraging Diversity

Put simply, diversity is a source of creativity. Without it organisations are going to struggle to innovate and adapt in an increasingly fast-paced and ever-changing world. So says Groysberg and Connolly in the article “Great Leaders Who Make the Mix Work”, HBR, Sept 2013. From interviewing the CEOs of global companies that had a reputation for “inclusiveness” they concluded that advancing diversity was a business imperative (staying competitive) and a moral imperative (value-driven). So how is diversity leveraged within an organisation? The answer lies in moving from “diversity” to “inclusivity”: diversity is about the mix of people; inclusiveness is about making that mix work. Here are the practices which have been the most effective at “harnessing” diversity:

Leveraging Diversity

Of the 24 companies that had most successfully leveraged diversity (measured by employment statistics, leadership attitudes and third-party recognition), the CEOs cited the following 8 practices as the most effective in leveraging diversity:

<1.       <Measure Diversity

What gets measured gets done. This is not just about diversity targets; this is about inclusion sentiment that can usually be measured through employee engagement surveys.

<2.       <Hold Managers Accountable

Not just about numbers, this is about actions. Each manager should be able to demonstrate that they have done something to leverage diversity (e.g. mentoring, training, sponsoring events).

<3.       <Support Flexible Work Arrangements

For both males and females, balancing personal and professional commitments was considered the biggest barrier to diversity. Flexible hours and working-from-home can help break this barrier.

<4.       <Recruit and Promote from Diverse Pools of Talent

Not just at the entry level; promote diversity from within otherwise senior diversity will never change. Extend quota systems to ensure a diverse pool of candidates to choose from for any post.

<5.       <Provide Leadership Education

Not just at senior levels, leaders should be developed at junior levels where there is generally more diversity. Diversity training should be for the “norm-group”; not just for the “diversity”.

<6.       <Sponsor Employee Resource Groups and Mentoring Programs

With a senior business sponsor, resource groups can provide structured professional development opportunities e.g. internal think-tanks and mentoring programs for affiliation groups.

<7.       <Offer Quality Role Models

Diversity at the top promotes diversity throughout the organisation. One thing is the “talk” but it needs to be seen to be “walked” at the very highest levels.

<8.       <Make the Chief Diversity Officer Position Count

A “CDO” position “institutionalizes the process and the intent.” Once formalized, it can be the anchor to develop metrics and subsequent follow-up (see point #1…).

Et alors?

Some leaders remain undecided about the merits of diversity. Ironically, this can be because the diversity is present in the organisation but it is not yet considered to be “delivering”. Leaders would be right to reflect on their own moral imperative for diversity and their particular business imperative relative to their project; however “diversity” cannot be relied on to “deliver” on its own – leaders cannot stand back and ask diversity to “prove” itself since this will set a new standard for measuring diversity i.e. do the “diverse” talent deliver as good as or better than the “majority” or “norm-group” talent? In such a case, not only is diversity not leveraged but this puts a barrier in place since to “prove” themselves, diverse talent would have to assimilate into the “norm-group” culture thereby losing all the benefits of diversity! Diversity should be included so that all talent can deliver to their maximum potential whilst remaining authentic (and not being measured by “norm-group” references). In short, if a leader is open to diversity, there is a chance that it will succeed; if however the leader is sceptical about diversity, the outcome is already known! In the context of the above 8 steps, it all starts with the leaders’ attitudes…

Organisational Decision-Making

When talking about decision-making biases, (ref. last week’s article), it is one thing to recognize them and then another for an individual to adapt to mitigate their effects; however what about at the organisational level? A recent McKinsey study of more than 1,000 major business investments showed that “when organisations worked at reducing the effect of bias in their decision-making processes, they achieved returns up to seven percentage points higher” (ref. “The Case for Behavioral Strategy,” McKinsey Quarterly, March 2010). How to ensure better decision-making at the organizational level is the main focus of Daniel Kahneman (the Nobel prize-winning economist) along with Dan Lovallo, and Olivier Sibony (two McKinsey consultants) in their June 2011 HBR article “Before You Make That Big Decision...”

Here’s what to do before you make that big decision, followed by further considerations (“et alors”)

Organisational Decsion-Making

At the organizational level, a review process should be put in place so that executives can assure the quality of decisions by thinking through not just the content of the proposals but the biases that may have distorted the reasoning of the people who created them. That review will comprise of the following 12 questions which check for:

Self-interested bisases

·         Is there any reason to suspect errors motivated by self-interest?

·         Review the proposal with extra care, especially for over-optimism

The “Affect Heuristic”

·         Has the team fallen in love with its proposal?

·         Rigorously apply all the organisation’s quality controls

Groupthink

·         Were there dissenting opinions within the team? Were they adequately explored?

·         Solicit dissenting views, discreetly if necessary

Saliency Bias

·         Could the diagnosis be overly influenced by an analogy to memorable success?

·         Ask for more analogies, and rigorously analyse their similarity to the current situation

Confirmation Bias

·         Are credible alternatives included along with the recommendation?

·         Request additional options

Availability Bias

·         If you had to make this decision again in a year’s time, what information would you want, and can you get more of it now?

·         Use checklists of the data needed for each kind of decision

Anchoring

·         Do you know where the numbers came from? Can there be unsubstantiated numbers, extrapolations from history and/or a motivation to use a certain anchor?

·         “Reanchor” with figures generated by other models or benchmarks and request new analysis

“Halo Effect”

·         Is the team assuming that a person, organisation, or approach that is successful in one area will be just as successful in another?

·         Eliminate false inferences, and ask the team to seek additional comparable examples

Sunk Cost Fallacy

·         Are the recommenders overly attached to a history of past decisions?

·         Consider the issue as if you were a new CEO

Overconfidence

·         Is the base case overly optimistic (eg. “planning fallacy” and “competitor neglect”)

·         Have the team build a case taking an outside view. Use scenarios

Disaster Neglect

·         Is the worst case bad enough?

·         Have the team conduct a pre-mortem. Imagine the worst has happened and develop a story about the causes

Loss Aversion

·         Is the recommending team overly cautious?

·         Realign incentives to share responsibility for the risk or to remove the risk.

Note: the goal is not to create bureaucratic procedures; rather it is to stimulate discussion and debate. For sundry reasons, the review is best performed by “ad hoc” critique teams assembled from a diverse pool of talent within the organisation.

Et alors

To accomplish any of the above, as the authors state, “organizations must tolerate and even encourage disagreements”: hence the need for the persons conducting the review to be independent of the executives responsible for the decision. It is not only independence which is required but diversity. If everyone thinks, acts and behaves the same way then the review process is going to be limited in effectiveness. To implement all of the above checks is incredibly challenging but also very rewarding when done “properly”: organizations that have achieved such discipline have not only yielded better returns for shareholders but also consider their decision-making process to be a competitive advantage in itself!

Minimising decision-making biases

Managers like to think that the decisions they make are objective and rational and have been executed taking into consideration all the pertinent facts. In reality, many other forces come into play when making a decision such that most decisions are usually subjective, irrational and have been made with only limited information. As Wolf explains in his HBR blog post of September 2012, “How to minimise your biases when making decisions”, it is mainly inherent biases which cause decisions to be sub-optimal. Accordingly, in order to optimise decisions, biases have to be recognised and then minimised.
 

Here’s a summary of decision-making biases and how to overcome them followed by further considerations (et alors).

Minimising decision-making biases

Drawing on studies from Rosenzweig, Kahneman and Schoemaker, there are six principle decision-making biases noted as follows:
 

Anchoring

If expecting the same outcome as before, contradictory data tends to be ignored or omitted. This becomes more acute with numbers which are difficult to “adjust away” from.

·         To overcome anchoring, “seek diverse outside opinion to counter overconfidence”.

Framing

How a situation is presented affects the decision. In addition and generally, the pain of losing is perceived to be more powerful than the pleasure of winning.

·         To overcome framing, inverse the perspective from positive to negative or vice versa.

Availability Heuristic

Vivid and easily imaginable events (even if uncommon) along with recent events are weighted disproportionately higher than unimaginable or past events.

·         To overcome availability heuristic, “search relentlessly for potentially relevant or disconfirming evidence”.

Confirmation Bias

Initial decisions become self-fulfilling prophecies. Data is collected after the event to justify the decision (similar to anchoring).

·         To overcome confirmation bias, accept a “chief contrarian” as part of the team.

Commitment Escalation

It is difficult to accept “failure” and start again from scratch; instead, previous commitments tend to influence current decisions.

·         To overcome commitment escalation, ignore the old problem by clearly redefining the new problem.

Hindsight Bias

Once something is known, it is difficult to remember when it was not known. This can make it more difficult to learn from failures (as it is now “obvious”).

·         To overcome hindsight bias, reward due process (and in particular “lessons learnt”) rather than penalising failure.

Et alors

How many organisations do not penalise failure in one way or another? The above decision-making biases are compiled at the individual level but despite the best efforts of any individual, decision-making biases can easily become “institutionalised” in an organisation. All of the biases noted above can reinforce organisational culture: for example, it would be a very brave individual who could go to the board of Kodak in the early 1990s and tell them that photographic film was doomed and they should start preparing for an exit (yet look what happened)! On a collective basis, a lot of the biases could be compiled into one key tenet, namely “groupthink”. On the other side, the one concept which seems to appear as the solution on a collective level is “diversity”! To optimise the decision-making process and overcome decision-making biases, make sure the team making the decision is diverse! The process might seem to be more "painful" but the end-result should be a higher quality decision!

Leading across Cultures

In Singapore this week I attended a very interesting lecture by Prof. Yee of Nanyang Technologicial University regarding Cultural Intelligence. In essence, in order to lead across cultures it is not only “local” cultural knowledge which is required but “global” cultural intelligence. Comprised of “drive”, “motivation” and “action” (as well as “knowledge”), cultural intelligence is particularly pertinent for global leaders who may have to adapt to many different and varied cultures, by either location and/or by team composition. In this context, Prof. Yee further referenced an article from Rockstuchl et al, “Leader-Member Exchange (LMX) and Culture: a Meta-Analysis of Correlates of LMX across 23 Countries”, 2012, American Psychological Association.

Rockstuchl et al. performed a meta-analysis of the quality of leadership (low, medium or high) as per various LMX studies according to the national cultural values of where the study had been conducted. The results were further synthesized according to “horizontal-individualistic” cultures (low power-distance acceptance and individualistic, read “Western”) and “vertical-collectivist” cultures (high power-distance acceptance and collectivist, read “Asian”). In summary, the quality of the leadership has a higher impact in Western rather than Asian cultures regarding the followers’ sense of justice, leader trust, job satisfaction and turnover intention (being mainly attributed to collectivist tendencies in Asian cultures). Moreover, focusing on cultural intelligence, there were some further observations…

Here’s a summary of leadership quality assessment which was NOT different according to culture, followed by further implications (“et alors”):

Leading across Cultures

The research showed “three intriguing” findings which highlighted that “the way in which cultural values affect the leader-member relationship is very complex.” The findings were that the relationship between LMX and the following three items were NOT different in Western and Asian cultures:

1.       Task Performance

The results showed that members of both cultural configurations appear to require the necessary work-related information and resources afforded by higher quality leadership to perform well.

2.       Commitment

It appears that followers from both cultures perceive their leaders to be acting as agents of their organizations, thus commitment appears to be inspired by the quality of the leadership.

3.       Transformational Leadership

The conjecture is that because of their “appeal”, transformational rather than “transactional” leaders are more effective across cultures. Accordingly, leader-member relations are good in both cultures.

Et alors?

The central tenet of the LMX is that leaders do not treat each subordinate the same. This is the very essence of leadership both by and with diversity. Cultural intelligence is therefore very important even if it is to be aware that good quality leadership does NOT necessarily increase the sense of justice, leader trust, job satisfaction and turnover intention amongst all followers in collectivist cultures. This in itself is useful information for global leaders to know so that they can adapt accordingly! When it comes to task performance, building commitment and making transformations, the leadership has to be of good quality in all cultures. The challenges for the global leader are therefore twofold: having to be both a good leader and culturally intelligent!