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Rory Sutherland, Vice Chairman, Ogilvy & Mather Group UK
Rory was appointed Creative Director of OgilvyOne in 1997 and ECD in 1998. He has worked on Amex, BT, Compaq, Microsoft, IBM, BUPA, easyJet, Unilever and won numerous awards along the way. In 2005 he was appointed Vice Chairman of the Ogilvy & Mather Group UK. He was elected President of the Institute of Practitioners in Advertising in 2009 for two years. Rory is also a visiting professor of Warwick University and was recently awarded an honorary doctorate (D. Litt) by Brunel University.  He will be a keynote speaker at the IMI National Management Conference on 8 October 2015   IMI: Based on your current work – if you only had 6 words of advice to give a business - what would they be?

RS: "Think like a biologist"


IMI: What does this mean? RS: There is a dangerous tendency for people to look at businesses and markets as though they were pieces of engineering: and should be managed and understood in Newtonian terms. Today more than ever it's more useful - at least most of the time - to use the mental models we use to understand complex and evolving systems. biologist Source:www.askabiologist.asu.edu IMI: Where should we look for further information? RS: A great first place to start is by reading Robert H Frank's book The Economic Naturalist, and his later work The Darwin Economy. Nassim Taleb's Antifragile is a long but mind-reshaping read. The other areas of worthwhile study are evolutionary psychology and behavioural economics. These seek to understand how (and why) people - often unconsciously - make decisions in reality, and why this may differ from narrow and naive theories of economic rationality. Where to start here? Predictably Irrational by Dan Ariely. Nudge by Thaler and Sunstein. And The Rational Animal by Griskevicius and Kenrick. Sapiens, by Noah Harari, Butterfly Economics by Ormerod, Adapt by Tim Harford and The Origins of Wealth by Eric Beinhocker would also be an essential read.   Rory Sutherland s a keynote speaker at the IMI National Management Conference taking place on Thursday 8 October. This event has now reached maximum capacity however if you would like to be added to the waiting list, please email your contact details and company name to conference@imi.ie. [post_title] => "Think like a biologist" Six Word Wisdom from Rory Sutherland [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => think-like-biologist-six-word-wisdom-rory-sutherland [to_ping] => [pinged] => [post_modified] => 2020-05-11 20:40:33 [post_modified_gmt] => 2020-05-11 20:40:33 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.imi.ie/?p=11950 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 13884 [post_author] => 8 [post_date] => 2016-02-10 09:48:31 [post_date_gmt] => 2016-02-10 09:48:31 [post_content] =>

When faced with a decision, we all believe we are weighing the facts objectively and making rational, thoughtful decisions.

Picture2

Source: www.economist.com

In fact, science tells us that in situations requiring careful judgment, every individual is influenced by his or her own biases. The outcome of this collective irrationality is explored in the movie 'The Big Short'.  The film makes the subprime mortgage crisis of 2008 into a study in human greed and irrationality. The film has a cameo, in Las Vegas, with Professor Richard Thaler and Selena Gomez, in which part of the complicated financial engineering –CDOs - is explained simply.  He explains that people do not like thinking about bad things so they underestimate the probability that they will happen. Overconfidence is the mother of all biases. We watch as bets on a roulette table are accompanied by side bets on the main players and further side bets with everyone believing that they are a winner.  Well, no need to explain how that turns out. At least the world was taught such a severe lesson, with trillions lost from the economy and millions of people losing their jobs,  that it will never be allowed to happen again. Sadly no. The film ends with the launch of a new CDO type financial instrument – the bespoke opportunity tranches – in 2015. People often make poor choices and look back at them in bafflement. After the CIA backed invasion of Cuba in 1961 – a US foreign policy disaster – Robert Kennedy is reputed to have asked “how could we have been so stupid”. Conventional economics assumes that people are super-rational and unemotional. Nothing has really changed.  Regulation and governance reforms will not have the slightest impact unless managers in finance and elsewhere understand the limitations of the judgments on which they rely.

People are rationalizing rather than rational.

The very latest behavioural decision research examines judgement in a variety of managerial contexts and provides important insights that can help make better managerial decisions.  Professor Thaler, who teaches at the Booth Business School in Chicago University, is the co-author of a great book on decision making Nudge: Improving decisions about health, wealth and happiness. It is no surprise that the Christian Bale character who saw through the financial engineering by US banks was a neurologist by training.  Decision-making, persuasion, influencing and negotiation are key skills for managing effective systems and organizations.

Executive education must incorporate these aspects as fully as finance and operations to avoid further meltdowns of our society.

 
PD and Trainer - Andrew McLaughlin1
Andrew McLaughlin is the programme director of the IMI Diploma in Organisational Behaviour which includes modules on decision-making, negotiation, influencing and persuasion.  He is an experienced executive coach who has worked with national and multi-national companies including Revenue Commissioners, Departments of Industry and Commerce and Defence, OECD and EU.  Andrew is also a Master Practitioner and certified trainer / consultant of Neuro Linguistic Programming. _____________________________________ [post_title] => The Big Short - how our decisions are nudged [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => big-short-decisions-nudged [to_ping] => [pinged] => [post_modified] => 2020-05-11 20:21:49 [post_modified_gmt] => 2020-05-11 20:21:49 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.imi.ie/?p=13884 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 15724 [post_author] => 66 [post_date] => 2016-10-07 10:03:20 [post_date_gmt] => 2016-10-07 10:03:20 [post_content] =>

Almost half of Irish business leaders would be willing to engage in potentially unethical actions to meet financial targets, according to a recent survey by EY. This startling statistic is consistent with another, perhaps less surprising, finding from a survey last year that business leaders are among the professionals least trusted by the general public to tell the truth. It may also help explain why we have witnessed a decade or more of corporate malfeasance not just in Ireland, but globally, and at some of the world’s most esteemed enterprises.

64_Ethics   Source: www.accountancyireland.ie It begs the question: why and how do leaders lose their way and what, if anything, can be done about it? Some subscribe to the ‘bad apple’ theory: managers are good or bad; organisations are powerless to change this fact, and unethical behaviour can be blamed on those few renegades of poor character. Indeed, some alarming research suggested that the psychopathic personality type in particular is three times more prevalent in the corporate world than the general population. Others believe that managers may start out valuing fair compensation for hard work but that over time, the rewards – such as bonuses, share options, power, perks and press coverage – fuel a focus on extrinsic gratification to the detriment of inner satisfaction. So-called ‘careerism’ ultimately leads to a state of emotional detachment that corrodes personal integrity. This ‘dark side’ of leadership may account for some of the more egregious cases of corporate wrongdoing. However, for every psychopathic executive or megalomaniac manager, there are many more well intentioned leaders (at least half, according to EY) who try to do their best but fall short from time to time and lose their way. The reasons are manifold, but can more or less be categorised as follows:
  • Groupthink;
  • Blind spots;
  • Delegated misbehaviour;
  • Wilful neglect;
  • Ill-conceived goals; and
  • Flawed rationalisation.

Groupthink

Have you ever thought about speaking up at a meeting but decided against it because you didn’t want to seem contrary or unsupportive of the team’s efforts? If so, you may have been a victim of groupthink. The phenomenon occurs when a group’s desire for conformity results in irrational or dysfunctional decisions due to a lack of constructive challenge and independent judgement. Organisations by their very nature are highly susceptible to groupthink – their boardrooms especially so. When further facilitated by a general breakdown in governance, the results can be truly catastrophic – Anglo Irish Bank being a prime example.

Blind spots

We all have blind spots and often do not see the full picture. These natural biases can blur the obvious so that, at best, we miss information contradictory to our expectations or, at worst, become so wedded to certain perspectives that our judgement becomes clouded and our decisions compromised. In the workplace, when minor lapses in judgement due to these biases are accepted, incremental transgressions are also likely to be tolerated until – seemingly, all of a sudden – blatant disregard for ethical protocol has become ‘the way things are done around here’.

Delegated misbehaviour

For most executives, the idea of intentionally engaging in corrupt acts is unconscionable. However, sometimes a job has to get done ‘one way or the other’ so, in theory at least, delegating it to someone else might be a highly convenient option. This enables the manager and the company to maintain a veneer of respectability while outsourcing the most unsavoury elements of a business transaction to a third party. The ongoing bribery scandal at Walmart in Mexico is a good example and shows how badly this strategy can backfire.

Wilful neglect

Similarly, executives – while not explicitly ordering their subordinates to commit unethical business practices – may, on occasion, turn a blind eye to how certain results are achieved. This tacit acquiescence seems to have been at the heart of the current troubles at Volkswagen, which were compounded by a secondary shortcoming of ethical governance at the carmaker: nobody felt they could speak up about the illegal practices.

Ill-conceived goals

Managers often work by the mantra: ‘what gets measured gets done’. When such ‘measurable’ goals and their associated rewards are fundamentally ill-conceived, in that they fail to properly consider how they will drive employee behaviour, bad outcomes often follow. We don’t have to look much further than the recent financial crisis to see how this panned out for the banking sector.

Flawed rationalisation

This is a catch-all category and is best explained with typical statements that may accompany some of the techniques involved:
  • Devaluing the victims of the wrongdoing: “He got what was coming to him. I had to put manners on him”;
  • Diffusion of responsibility: “Everybody does it. You have to if you want to survive in this game”;
  • Advantageous comparisons: “Sure I kept 5% for myself. Small beer compared to what my boss skimmed off ”;
  • Justifying the cause: “I know we may have broken a few rules, but it was in the company’s best interests”; and
  • Improbability of being caught: “I may as well. Who is going to find out?”

The solution

So what can we learn from these examples of corporate ethical failure and their contributory factors? Is there something about the pursuit of profit that inevitably drives certain people to cross the line? Can the epidemic of enterprise-wide moral flabbiness be cured? The requisite response is twofold and involves the combination of embedded structural ‘antidotes’ in the organisation and behavioural accountability on the part of the organisation’s leadership. In other words: an ethical organisation, guided by an ethical leader. To forge a culture of integrity, organisations must implement policies, procedures and programmes that translate the organisation’s core values into established patterns of behaviour. They need to establish a robust ethical decision-making framework at all levels. They must invest in training and continuous communication to ensure the message is conveyed and understood. And add to this a supportive and effective board. It is not for the faint-hearted, as the process will often require a cultural change that goes to the very heart of the business. It will almost certainly fail unless senior executives, especially the CEO and the board, ‘walk the talk’ and model those appropriate behaviours. As a former ethics lead at a large US corporation once remarked: “We could have had all the ethics workshops in the world. We could have even had Jesus, Moses, Mohammed and Buddha come and speak at them. But if, after all that, someone in a leadership position behaved in a way contrary to our standard, that instance would teach more than all the experts combined.” Therein lies the problem. By the time someone has achieved a position of leadership, they are likely to have received much instruction along the way, but its main focus is likely to have been on the ‘hard’ tasks or mechanics of running an enterprise – determining strategy, assessing opportunities, managing dispersed teams and so forth. Business ethics, if taught at all, is often treated as an arcane subject and related instruction couched in theoretical, even theological, terms. Or worse, it is delivered as part of a ‘tick-the-box’ compliance exercise. Either way, it is too far removed from the day-to- day business of leadership to have any compelling interest or lasting impact. As a result, leaders tasked with steering the enterprise in the right direction may find themselves largely on their own, bereft of practical guidelines and without useful frameworks, tools and skills.

The leader’s challenge

The challenge for leaders is to equip themselves with the understanding and tools necessary to articulate an authentic governance style. This will enable them to set the tone for their organisation and, with the right building blocks in place, embed a culture of integrity. This demands reflection on the part of the leader and a genuine commitment to assess their personal leadership style and competencies as follows:
  • Clear core values: what drives me?;
  • Emotional intelligence: how do I relate to others?; and
  • Authenticity: what makes me unique?
When a leader understands the principles that guide his or her behaviour, has developed a high degree of emotional intelligence and can articulate the qualities that define their authentic leadership style, they can then begin to inspire others to follow their vision. They will also remain sure-footed, even in the face of moral adversity, and will instinctively know the right thing to do. More importantly, they will motivate others to do likewise. This is leading with integrity.
 
https://www.imi.ie/media/Ros-O-Shea1-300x300.jpg
Ros O’Shea is the Programme Director of the IMI Diploma in the Management of Governance and Compliance   Ros lectures on the topic of ethical leadership and governance on a wide range of IMI programmes. She is also an independent director and a partner in Acorn Governance Services.  _____________________________________   [post_title] => Why leaders lose their way [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => leaders-lose-way [to_ping] => [pinged] => [post_modified] => 2020-05-11 19:50:57 [post_modified_gmt] => 2020-05-11 19:50:57 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.imi.ie/?p=15724 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 19882 [post_author] => 100 [post_date] => 2017-06-07 17:42:18 [post_date_gmt] => 2017-06-07 17:42:18 [post_content] => [post_title] => Key Insights From IMI Leadership and Beyond Masterclass with Manfred F.R. Kets de Vries [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => key-insights-imi-leadership-beyond-masterclass-manfred-f-r-kets-de-vries [to_ping] => [pinged] => [post_modified] => 2020-05-15 13:44:04 [post_modified_gmt] => 2020-05-15 13:44:04 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.imi.ie/?p=19882 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) )
Cariona Neary

Cariona Neary

18th Oct 2017

Cariona Neary is an IMI associate on the Mini MBA Programme, IMI Diploma in Strategy & Innovation and IMI Diploma in Management. 

Related Articles

"Think like a biologist" Six Word Wisdom from Rory Sutherland
The Big Short - how our decisions are nudged
Why leaders lose their way
Key Insights From IMI Leadership and Beyond Masterclass with Manfred F.R. Kets de Vries

Nobel Prize Celebrates the Irrational Consumer – again!

 

We’ve known for a long time that as consumers, we make a lot of irrational decisions. But we also – unconsciously – make irrational decisions in business and then look for research to back up our choices. This year’s Nobel Prize Winner for Economics, Richard Thaler, has done some fascinating work in the area of Behavioural Economics, where the disciplines of Economics and Psychology combine to help us understand the factors that lead to consumers buying one product over another. He also came up with the term ‘Nudge Theory’ to explain how we can prompt consumers to behave in a particular way.

Irrational customer (Photo source)

He follows in the footsteps of Daniel Kahneman, who won the Nobel Prize in 2002, for his work on the influence of bias on our decisions not only as consumers but as voters, scientists, doctors, policymakers and investors. No one is exempt because we are unable to understand how bias is working not only our decisions but on the facts we look for as inputs to those decisions (that’s ‘Confirmation Bias’, by the way!).

When it comes to market research, Kahneman suggests that it is also a most unreliable field. The grandfather of advertising, David Oglivy once said:  Consumers don’t think what they feel, don’t say what they think and don’t do what they say. They simply cannot give a reliable account of why they choose one product over another because they don’t understand their own hidden biases.

Kahneman’s Findings on the Power of Bias:

  1. On risk aversion: We hate to lose more than we love to win. According to Kahneman’s research: “An investment said to have an 80% chance of success sounds far more attractive than one with a 20% chance of failure. The mind can’t easily recognize that they are the same.” And the lesson for marketers: a message framed as a loss if the buyer doesn’t buy is more persuasive.
  2. On emotions trumping reason: According to Kahneman, “The confidence people have in their beliefs is not a measurement of the quality of evidence but the coherence of the story the mind has managed to construct.” The narrative matters more than the fact as our decisions are driven by our emotional rather than rational brain.
  3. On thinking: Don’t make your customers think! As buyers, we are cognitive misers and will not thank you for complicated value propositions. Think Ryanair’s cut-through ‘No Frills Airline’ slogan. Simple.

Remove Bias: Build a Market Intelligence Dashboard

The best way to overcome the influence of bias on decision making is to develop a system for scanning and analysing your business environment. This is particularly important for companies as they gear up for exporting to new markets in a post-Brexit landscape.

At the IMI, working with colleague, Gráinne Kennedy, a specialist in market research, we recently ran a workshop on how companies can build a Market Intelligence Dashboard to underpin decision making. A typical dashboard should have no more than 4 – 5 Target Market Indicators, such as market size and share, consumer sentiment, competitor activity, trends and investments in the specific segment, currency fluctuations if outside the eurozone. Done!

The value of tracking these market movements gives great focus and yes – rationality – to decision making. Not only can the Marketing Dashboard save you from making a big mistake but it also steers your decision making to the market sweet spot. Nobel!


Cariona Neary is an IMI associate on the Mini MBA Programme, IMI Diploma in Strategy & Innovation and IMI Diploma in Management.  Cariona is a consultant in Marketing Strategy and works with organisations to improve customer engagement and retention using digital and traditional marketing channels.

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