Are You Perfect?

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If you’re like most people I know, you’re not perfect – and therefore susceptible to the common causes of failure.

In business strategy and leadership courses, we often focus on Best Practices to help guide students. Some courses now also focus on the flip-side: why leaders commit key errors. For instance, Confronting Reality: Doing What Matters to Get Things Right, includes a chapter on “The Six Habits of Highly Unrealistic Leaders”.  I thought I’d share it with you.

According to Larry Bossidy and Ram Charan there are six common causes of failure to confront changing realities. I add a seventh:

  1. Filtered information. Given the increasing complexity of life and the overwhelming amount of information available, filters help us avoid overload. But in doing so, key information challenging basic assumptions may not get through.
  2. Selective hearing. As humans, we do the same thing: we filter the information to which we attend and often seek information to corroborate our initial decisions
  3. Wishful thinking. In a world of complexity, doubt and uncertainty, people sometimes resort to wishful thinking. The Bay of Pigs fiasco of 1962 is an example.
  4. Fear. Facing uncertainty and the unknown, Kahneman and his fellow Nobel prize economists proved that people prefer to avoid losses than seek out gains.
  5. Emotional overinvestment. Adopting new behaviors and attitudes means giving up older ones; when people are emotionally overinvested, they downgrade the logic of the argument in order to resist change.
  6. Unrealistic expectations of capital markets. Capital markets focus on quarterly changes, even though true changes, such as a product branding or business development effort can take much longer.
  7. Inertia. Human nature, like the real-world, resists change. Once we’re comfortable with what exists, it’s hard to recognize that change may be essential. Think of all the companies that were successfully making a nice profit on products (e.g., floppy disk, buggy-whips and netbooks) while other companies were building new products (flash-memory, cars and ipads).

One of the reasons I agreed to chair a CEO group for Vistage, is that the 12+ members of a typical group know that their job is to provide each other with:

  • Objective perceptions when a member is falling into one of these traps
  • Creative new solutions to overcome business challenges
  • Accountability for taking steps necessary to get quality information, avoiding these psychological traps.

My CEO group, which calls itself the Game Changers, is especially focused on avoiding these causes of failure and facilitating adoption of best practices. If you’re in NYC and want to join, feel free to contact me.