Notes for Week 2 // Chapters 1 + 2 // September 2nd, 2023 Chapter 1: The Power of Reframing - Both Volkswagen (German carmaker) and Wells Fargo (U.S. bank) trashed their own brand by following the same script. Basically partaking in a three act drama: - Act I: Set daunting standards for employees to improve performance. - Act II: Look the other way when employees cheat because they think it's the only way to meet the targets - Act III: When the cheating leads to a media firestorm and public outrage, blame the workers and paint top managers as blameless. - In Wells Fargo's case, the bank had let go more than five thousand lower level employees but offered an EXIT BONUS of $125 million to the executive(s) that oversaw them - An EXIT BONUS means any payments to be paid to the Manager by the Company in connection with a TRIGGER EVENT. A TRIGGER EVENT is a tangible or intangible barrier or occurrence which, once breached or met, causes another event to occur. - Wells Fargo initially had a reputation of being a family friendly community bank. But in 2010 a federal judge had ruled that the bank had cheated customers by manipulating their customers' transactions to increase their overdraft fee, and in August of 2016 the bank had agreed to pay a $4.1 million dollar penalty for cheating student borrowers. - In September of 2016, news broke that employees in Wells Fargo branches had opened some two million accounts that customers did not want and had no clue about as they were under pressure from their bosses to sell more "solutions" - These are basically just phony bank accounts and are definitely considered cheating when it comes to business. - Back in 2005, employees of Wells Fargo began to call the firm's HR department and ethics hotline to report that some of their coworkers were cheating, this problem was solved by firing the people that called the HR department and ethics hotline. - Martin Winkerton, the at the time CEO of Volkswagen, pleaded ignorance when his company admitted in 2015 that it had been cheating for years on emissions tests of its diesels. Martin had a reputation of being quite the micromanager as well. After this he was replaced by Matthias Muller who claimed he had no clue about the cheating mentioned previously either. - Matthias Muller, the new CEO of Volkswagen, tried to state that Volkswagen wasn't exactly guilty due to it being a technical problem, stating that they did not lie and that they did not "understand the question first" - The examples of leadership above are rather poor; Both the leaders of Volkswagen and Wells Fargo were clueless to both of their businesses' internal cheating and they'd be much worse leaders if they actually knew about said wrong doings and did nothing to lead their employees out of the wrong direction. - Steve Jobs failed initially for the same reason that the executives of Volkswagen and Wells Fargo did; Steve Jobs had to let himself fail before he could succeed, but initially he was running on a very limited understanding of leadership and organizations. Despite being a visionary, he was fired from Apple. But later returned in 1997 and continued working and contributing to the company until his death. - The executives of both Wells Fargo and Volkswagen were very close to achieving excellence but did not abandon their cluelessness. - A CHARACTERISTIC OF A GOOD LEADER IS TO NOT BE CLUELESS. IS TO BE ATTENTIVE. - REFRAMING: Our basic prescription for sizing things up. REFRAMING requires an ability to think about situations from multiple angles which lets you develop alternative diagnoses, solutions, strategies. et cetera. To REFRAME you need to use the four distinct frames being structural, human resource, political, and symbolic; these four frames help you figure out what to do and are of most importance when figuring out what's going on/what to do. - YOU HAVE TO ASK THE RIGHT QUESTIONS - ASKING THE RIGHT QUESTION ENHANCES THE ABILITY TO BREAK FRAMES - ASK QUESTIONS TO SHIFT POINTS OF VIEWS WHEN NEEDED - OUR PREFERENCES ARE FRAME BOUND RATHER THAN REALITY BOUND FAMILIES: - Focus on people and relationships - An organization is an extended family. FACTORIES: - Structures are designed to fit the environment of organizations. - Organizations are supposed to allocate responsibilities JUNGLES: - Power: some people have it, some people don't. - Political frame - Bargaining, negotiations, and compromising. TEMPLES AND CARNIVALS: - Culture, symbols, and spirit - Social construct - Organization is like theater (especially with the three act drama outline above) - Technological and social changes have an impact on organization. What was effective yesterday might not be effective today. - Sérieyx (1993) calls it the ORGANIZATIONAL BIG BANG: “The information revolution, the globalization of economies, the proliferation of events that undermine all our certainties, the collapse of the grand ideologies, the arrival of the CNN society which transforms us into an immense, planetary village—all these shocks have overturned the rules of the game and suddenly turned yesterday’s organizations into antiques” - There is an extreme demand on managers' wisdom, imagination and agility. This creates a massive amount of importance for organizations and leadership. - The proliferation of complex organizations has made most human activities more formalized than they once were; Everything is regulated. Education, religion, romance, family, hobbies, et cetera. - Organizations can frustrate and exploit people with flawed products (parallels include: students failing to learn, families running dysfunctional, patients failing to recover, policies backfiring, losing faith in religion, etc.) - Industrial accidents dump chemicals, oil, toxic gas and radioactive materials into the air and water way too often; corporate greed/incompetence/insensitivity creates pure chaos and disorder for communities, individuals, and the environment. Especially those in power that run enterprises that create products that require mass amounts of electrical/gas power that pollute the air, and products that contribute to plastic waste in excess. Their vices exceed their virtues that they try so hard to shove into the general public's face but truly the general public doesn't care enough to change because they've trusted this brand for eons and they're stuck buying their products whether it be because of their inexpensiveness, high quality, the social status it brings, or other reasons. - Year after year, the best managers maneuver their way to the apex of enterprises great and small; but still let their vices exceed their virtues out of acts of pure idiocy. - HOW DO BRIGHT PEOPLE TURN SO DIM?: Some people say they're too smart for their own good. Feinberg and Tarrant label it the self destructive intelligence syndrome. Pride, arrogance, and an unconscious desire to fail infect smart people in power all of the time. Psychological flaws are apparent in brilliant people, but then again brilliant people are just like the rest of us; We're all just people. - When we don't know what to do, we stick to our comfort zones and we do more of what we know. It's human nature; We are prisoners to our routines. - We have a limited ability to understand organizations but we made a noble effort to improve them. - The most universal improvement strategy is upgrading management talent; Modern "mythology" promises that organizations will work splendidly if they are well managed. However this point of view puts too much pressure on the managers shoulders and probably makes it even more likely for something to go awry. Chapter 2: Simple Ideas, Complex Organizations - 9/11 - 19 highly motivated men were able to outsmart the homeland security of America on this day. The USA had MANY resources to prevent this type of thing from happening but this act of terrorism unfortunately happened even with these in place. - These men were (unfortunately) successful, their success came from fanatical determination, meticulous planning, and painstaking preparation. This in itself is a very dramatic way of human error leading to tragedy. - There are almost always systemic causes upstream of human failures. 9/11 is not an exception to this rule. - Other major failures adjacent to 9/11 include: Nuclear accidents at Chernobyl and Three Mile Island, the botched response to Hurricane Katrina on the Gulf Coast in 2005, and the deliberate downing of a German jet in 2015 by a pilot who was known to suffer from severe depression. All of these are basically well-publicized disasters. However, tragedies similar to 9/11 also occur in business. - In business: The fall of giants like Enron and WorldCom, the collapse of the global financial system, the Great Recession of 2008-2009, and several cheating scandals (Wells Fargo and Volkswagen especially) are equivalent to the pattern of human error causing tragedy mentioned previously and found in 9/11. - Each of these events illustrate a chain of misjudgement, error, miscommunication, and misguided action. Human error leading to tragedy. COMMON FALLACIES IN EXPLAINING ORGANIZATIONAL PROBLEMS: Oversimplified explanations 1. Blaming people - Egotism, bad attitudes, big/abrasive personalities clashing with each other - Pinpointing the culprit is comforting so that you can punish the guilty and feel satisfaction in said punishment of the guilty - Individual responsibility 2. Blaming the bureaucracy - Organizations stifled by rules, red tape, or the opposite; No clear rules, goals, roles, or structure. - When things aren't working we shift blame onto the system we work for. - Rules can inhibit freedom, flexibility, creativity, et cetera. So sometimes rules are the problem. - This is a much better way of explaining how organizations should work rather than why they don't work at all. 3. Thirsting for power - When key executives are after money and wealth rather than the best interest of the company - A cruel example of dog-eat-dog logic on the executives' part. PECULIARITIES OF ORGANIZATIONS - When a manager sets a goal too high, it sends the incentive to cheat (Much like how employees of Wells Fargo made phony accounts to cheat as they were under severe pressure from their bosses to sell more solutions) - "An ingrained fear of delivering bad news to superiors" thus giving another incentive to cheat. Nobody wants to get reprimanded when they're giving their all. CHARACTERISTICS OF ORGANIZATIONS 1. Organizations are complex - Human behavior is unpredictable - Almost anything and everything can affect everything else in collective activity; collateral damage 2. Organizations are surprising - What you expect is often not what you get - The solution of yesterday's problems often create tomorrow's obstacles 3. Organizations are rather deceptive - They camouflage mistakes and surprises (potentially creating an incentive to cheat and also instilling the ingrained fear of delivering bad news to superiors) - Information is incomplete or vague SOURCES OF AMBIGUITY - We are not sure what the problem is - We have no idea what's going on/what's happening - We don't know what we even want, we don't know our goals - We don't have the resources we need/we don't know what resources we need - We are not sure who is supposed to do what (a source of ambiguity reliant on roles entirely) - We are not sure how to get the results we want to get - We are not sure how to determine success - Learning is easy when the cause and effect is clear, but in companies the causes is remote from the effect - You have to think long term and not only at the short term profitability. You need to have your head in the future. You need to analyze everything. Your decisions must be calculated - You need to step back and see how the system works COPING WITH AMBIGUITY AND COMPLEXITY - Keep it simple - Develop better systems/technology to collect and process data - Break complex issues into smaller chunks and assign said chunks to specialized individuals and/or units - We need better ways to anticipate problems and wrestle with them once they arrive MAKING SENSE OF WHAT'S GOING ON - Some events are clear and lack ambiguity. But others aren’t. - Will reorganization work? - Was a meeting successful? BOUNDED RATIONALITY (COGNITIVE SHORT-CUTS) 1. Processing capacity - Limits of time, memory, attention 2. Cognitive economizing - Rules of thumb, frames - People cut complexity 3. Cognitive biases - We have existing beliefs, expectations, and values WHEN A PROBLEM ARISES - Look deeper at what's going on - THE ABILITY TO SIZE UP A SITUATION IS AT THE HEART OF LEADERSHIP - "The first responsibility of a leader is to figure out what is going on... That is never easy to do because situations are rarely black and white, they are a pale shade of gray... they are seldom neatly packaged" SHAPING YOUR REALITY -"what we have learned to look for in situations determines mostly what we see" - Mental models shape reality - SEEING IS BELIEVING = BELIEVING IS SEEING - REALITY IS WHAT EACH OF US BELIEVES IT TO BE - Perception and judgment involve matching situational cues with previously learned mental models IMPACT OF MENTAL MODELS - Changing old patterns and mind-sets is difficult and risky - Analysis paralysis - Confusion - What we expect often determines what we get - Placebo effect - When we expect to get better, we get better - Management theory does not have to be fragmented but rather pluralistic - We can use different perspectives for when they are applicable
