Dysfunctional Momentum Can Undermine Company Values | Strategy + Business
Every time a great business crashes and burns, we are reminded of a simple truth of human behavior: dysfunctional momentum eats values for breakfast. First defined by safety researchers Michelle A. Barton and Kathleen M. Sutcliffe, dysfunctional momentum occurs when people persist in working toward a goal despite evidence that their course of action will fail. “It was like riding a tiger, not knowing how to get off without being eaten,” confessed Satyam Computer’s then chairman, B. Ramalinga Raju, in 2009. He was describing how he inflated revenue over a prolonged period, in an escalating effort to bolster his company’s stock price. Eventually, he was arrested and imprisoned.
Although we normally blame greed and financial incentives for such short-sighted madness, behavioral ethicists and social psychologists have found it can be caused by a wide variety of factors, including time pressure, groupthink, mental shortcuts, “normalization of deviance” and “goals gone wild.” In 2007, Volkswagen set a goal to surpass Toyota as the largest carmaker in the world. Did this ambition contribute to VW’s current troubles? Toyota itself attributes its acceleration recalls partly to a focus on rapid growth and expansion above all else. Of course, examples of pressure leading to misbehavior can be found just about everywhere, from U.S. ratings agency Standard & Poor’s to camera and medical equipment maker Olympus. Whatever the specific cause, dysfunctional momentum can erode your company values, damage your business, and turn unethical behavior into a habit.
For leaders serious about putting their values into action, this is a critical issue. Every company has the potential to get caught up in a whirlwind of activity — short-sighted compromises or conflicts of interest that temporarily raise profits, but in the long run damage customer relationships, employee engagement, stakeholder trust, and the value of the business. Yet as leaders such as Bill George, Michael Porter, and Paul Polman have shown, values are more important than ever in tumultuous times, when cynical actors feel free to take advantage of trust. In fact, in a complex global economy driven by big data, telemetry, and “black box” software, customers, employees, shareholders, and civil society need to be able to trust how you make decisions when no one is looking.
One solution comes from high-reliability organizing, a field established with the study of wildland firefighting, electrical power grids, and aircraft carriers. Researchers found that these operations carry a high potential for catastrophic failure yet sustain a nearly error-free performance record by addressing certain pressures that can push otherwise skilled and motivated people to make mistakes. High-reliability organizations (HROs) actively prepare for dysfunctional momentum by adopting a few key principles designed to interrupt a downward spiral at the first sign of trouble. Here’s how you might apply these principles more broadly, to live your values in every aspect of your business.
1. HROs are preoccupied with failure. They continually investigate problems and near-misses, and use them as opportunities to learn. They encourage and reward employees for noticing and acting on small errors before they escalate. Applied to your business, this principle would mean, first and foremost, getting the dysfunctional momentum out in the open. What are the pressures that might cause your employees to compromise? Give your values more muscle by creating guiding principles that specify what you will and won’t do under pressure.
What are the pressures that might cause your employees to compromise?
2. HROs have a reluctance to simplify. People dig beneath glib labels and abstract numbers to understand the nuances that make the difference between safety and catastrophe. They refuse to minimize or explain away problems. In your organization, try crafting goals that reflect a more complete picture of your aims, including the capabilities you want to grow. Your staff will be less likely to sacrifice the means for the ends.
3. HROs show a sensitivity to operations. Leaders and employees are deeply interested in how work gets done, how the parts of the organization fit together, and how the current situation is unfolding. The key here is for leaders to make themselves available to employees and to invite a diverse range of views about what is working and where there are problems — or signs of a slippery slope.
4. HROs demonstrate a commitment to resilience. Leaders adopt an attitude of situated humility, rather than blindly staying the course or overreacting to bad news. That is, they appreciate the inherent unpredictability of their situation, and welcome interruptions that prompt them to reevaluate plans as conditions change. They know that, in complex, dynamic organizations, no one has the whole picture, and what we don’t know can cause a lot of harm.
5. HROs display a deference to expertise. That is, they migrate authority to those who know the most about the current situation, not those with the most status. They encourage employees to speak up and make it easy to raise a red flag. For example, under crew resource management, aircraft teams learn protocols for surfacing safety issues without breaking the chain of command. You need similar processes in your business that enable employees at all levels to expose mistakes or wrongdoing. The fact is, you need employees to be able to hold the line against you if your directives would push them to compromise. In some cases, deference to expertise means seeking external changes to incentives to promote real value creation when markets are distorted, as some oil companies are now seeking with carbon pricing.
Living your values is not a trivial victory. We are almost all moving too fast, and it is easy to be pulled into the vortex of dysfunctional momentum if we are not willing to interrupt our plans when we see the potential for harm — whether our business is building cars, financing homes, making peanut butter, or developing software. By adapting these principles from high-reliability organizing, you enlist your employees in a shared, ongoing, and difficult responsibility.
Source: Dysfunctional Momentum Can Undermine Company Values | Strategy + Business