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Why is personal change so hard? Consider the Endowment Effect

Humans are complicated.  While some of our base emotions and behaviors are easy to understand, there are times when we appear to make irrational decisions when faced with personal change.  For example, behavioral economists have identified a specific instance when we apparently place a very different value on something depending upon whether we own it or not.  Consider the following scenario.

Imagine a team performed an analysis on the layout of a work area.  The team concluded that a significant amount of waste of motion and waste of transportation would be removed if the work stations in the cell are re-arranged.  With a proposed new floor layout, each of the operators would walk shorter distances as they moved among the stations.  It would make it easier for them to accomplish their work each day. The location of the new work stations would be comparable in every way to the existing workstations – tools, space, lighting, climate, proximity to the work. This sounds like a positive outcome for everyone!

However, when the proposed plan is shared with the crew, it is met with surprising resistance by some of the operators.  This would seem to be an illogical decision.  These operators would rather walk further (and therefore work harder) than accept these minor personal changes to their work flow!  How can this be?

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Fear! Social phobias can cripple talented people

“Do one thing every day that scares you.”   ―     Eleanor Roosevelt

 

fearAll of us have a fear of some kind.  It is only a matter of what causes our fear and to what degree we are affected.  We are acutely aware of the presence of these fears in our lives.  As leaders, we should also be mindful of potential fears as we encourage others to engage in learning, self-discovery, and continuous improvement.  The following story brought this to life for me.

 

I was working with a group and helping them to learn how to use a structured approach for leading a project team.  One of the elements of using this specific approach (Rapid Action) is that the team leader and all the team members take turns reading aloud a script that walks them through the process.  While unorthodox, it has proven to be a very effective method for getting everyone engaged and in using basic project management techniques.  As the three-day workshop was winding down, one of the participants came forward and wanted to speak with me privately.

Clarence was an operator who had signed up for the class with the intent of using this method to work on a problem with a small team.  I had noticed that he was not participating in the class exercises and I wanted to speak to him about this anyway.  His body language clearly indicated that he was uncomfortable.  I soon learned why Clarence was not engaged.  It was fear.  As he spoke, his words came out in halting phrases…

“I just…just wanted to let…you know that…I really…really want to do this…but…but…I have problems with…with reading…in front of people…and…and…I’m not sure…that…that I can do this,” Clarence stuttered.

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How leaders use symbolism to drive action

Symbolism can be a powerful method to align an organization to a new way of thinking.  Transformational leaders know that everyone will be looking at what they say and do.  One of the basic tenets of effecting culture change is to create experiences that will reinforce the beliefs that you want people to hold.  These experiences can be small words of support, a well-written sincere note, or a key policy decision.  But they can also be bold acts that create a lasting impression and become the basis for stories and legends.  Consider the following symbolic acts – one in world politics and one in business.

  • At the 1995 World Cup rugby final, Nelson Mandela put on a jersey of the South African Springboks, which under apartheid had been the exclusively white national rugby team.  Mandela purposely chose to wear the uniform of the sport that black South Africans had always seen as that of the oppressor.  The symbolism was unmistakable.  It was an overt statement to millions of South Africans that he sincerely believed in reconciliation in the new democratic South Africa.symbolism
  • Gordon Bethune, CEO of Continental Airlines, was trying to send a message to all his employees that the old rigid rules were history.  He wanted everyone to make whatever decision they thought was right for the company and the customer.  To make this clear, he staged a book burning, where the previous “rules manual” was ceremoniously set afire in a 55-gallon drum in the parking lot.  This story soon spread among the employees.  Message received.

The use of symbolism is not only within the purview of world political leaders or company executives. Creating experiences is only limited to your imagination and the thoughtful consideration of the message you want to send.

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Why fewer choices can provide higher profits

How many variations of products or services does your company offer?  A few?  A dozen?  A hundred? More?  Are all of these products really required to meet customer demand?  Does it make sense to provide all these choices to your customers?

choiceMany companies have embarked on a journey of product proliferation.  In an effort to capture more market share, we have seen an explosion of customization and niche marketing.  A trip to your local grocery or large retail store confirms this. For example, 352 distinct types of toothpaste were sold in 2010. There are entire aisles dedicated to cereal, dog food, and toilet paper. Have these companies enjoyed increased profits by offering all these new products?  Not necessarily…

In this post, we will briefly discuss the implications of having too many products (choices) on both (1) revenue and (2) costs.

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Is it OK to be foolish?

Innovation, Risk, Creativity, InnovativeWhen was the last time that you or someone on your team proposed a crazy, unique, absurd, outlandish, or otherwise unconventional idea?  Has this ever happened?  What kind of reception did the innovative idea (and the person who proposed it) receive?

William Barnett, Professor of Business Leadership, Strategy, and Organizations at Stanford, discussed this topic as part of a recent webinar.  He described a “thought experiment” that helps us to consider what happens when someone comes up with a novel idea.  This concept aligns with the notion of how the fear of failure can influence whether innovative ideas are surfaced.

Barnett asked the hypothetical question, “When you have a good idea, does everybody have to agree with that idea for it to be correct?”  (Most people would say, “No”).

Barnett then asked, “When we have an innovative idea, what is often the first thing we do?  We ask others, ‘What do you think?’  “If the people we ask don’t like our innovative idea, what do we do then?  We often ask someone else.  Basically, we are looking for affirmation that the idea that we have is a good one.”

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Control Plans are not very sexy, but are necessary!

It’s human nature to feel good about effecting positive change.  Perhaps you have removed some unnecessary steps from a process and now it is easier to perform a task.  Or you have modified the way that work was being done and now there is less rework.  Maybe your team has agreed on a more effective way to communicate and share information among various working groups.  It could be that you identified some “critical X’s” to control and now there is less variation in the process.  In any case, making small improvements that have a large effect can produce a great deal of satisfaction.  After all, this is why we invested time and effort – to become better at whatever we do.  It’s time to celebrate!

Unfortunately, improvements can be temporary.  After the team disbands, the process can revert back to the previous condition or people drift back to the old way of doing things.  Without something to prevent this regression, it is only a matter of time before any improvements (and the associated benefits) are in the rear view mirror. In the Lean Six Sigma world, the tool that is most often used to maintain the gains is a Control Plan.  It is the centerpiece of the “C” step in the DMAIC methodology.  A control plan should be used whenever you want to keep hard-won improvements in place.

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