Friday, April 28, 2020

Contrarian Leadership

Investors are often urged to be “contrarian.” To be ready to buy when others are selling (to get the cheapest bargains), sell when others are buying (to get the best prices) and keep their nerve when everyone else seems to be plunged into panic. It’s pretty good advice for leadership too. Whatever seems to be the current fashion or orthodoxy, be ready to take a serious look at doing pretty much the opposite.

In the world of investment, following the herd is usually the best way to make significant losses. That’s what happened in the dot-com bubble: investors piled in at the last moment, paying extravagant prices for stock that was already way over-valued, only to lose their shirts when reality caught up with them. As long ago as 1841, Charles Mackay wrote a classic survey of human folly and financial scandals fired by greed and fed by naïveté: “Extraordinary Popular Delusions and The Madness of Crowds.” Despite the rather archaic writing, it’s still a compelling study of how “the madness of crowds” leads otherwise intelligent and rational folk into trouble on a grand scale. Quick success draws attention, which draws new followers, which creates the appearance of yet more quick, sure-fire success. Then the notion takes off like the proverbial rocket, only to crash and burn when it runs out of its fuel — unthinking optimism and unbounded greed.

Leadership ideas may not make anyone a fortune, but they have a similar tendency to generate fashions that thousands follow without much serious consideration. There’s the same tendency to jump on whatever appears to be a quick-fix bandwagon. Recently, in a book entitled “Hard Facts, Dangerous Half-Truths And Total Nonsense: Profiting From Evidence-Based Management,” two Harvard Business School professors take issue with some of the “sacred cows” of management thinking.

One is benchmarking. They note the “mindless imitation” that results when corporations ape whatever works at top performers, without considering why it works and whether it will work elsewhere. Another is doing whatever seems to have worked in the past; and easy target, but one that is all too prevalent despite its obvious stupidity. As the authors say “Suppose you went to a doctor who said, ‘I’m going to do an appendectomy on you.’ When you asked why, the doctor answered, ‘Because I did one on my last patient and it made him better.’ We suspect you would hightail it out of that office, because you know that the treatment ought to fit the disease, regardless of whether or not the treatment helped the previous patient. Strangely enough, that logical thought process happens less than we might care to admit in most companies.”

What lies behind such cases of mindless idiocy is always the same: the temptation to jump to conclusions and put one’s trust in instant answers; to seek safety by following what others appear to have done successfully, without taking the time to check it out. There’s nothing wrong with learning from other people’s success — nor from their failures — but everything wrong with imitating their actions without fully understanding what’s involved.

Excessive work pressures compound the problem, denying people the time to ask pertinent questions or consider the idea in depth. Fear is another powerful driver. In financial markets, greed for profit goes hand-in-hand with fear of missing out. Together they tempt otherwise rational people into expensive folly. In management, greed for success teams up with the fear of criticism for not doing what, it seems, everyone else is doing so successfully. People grab for so-called “industry best practice” in a kind of reflex action, convinced they’ll be pilloried if they don’t.

Of course, in the real world, the people — and organizations — who truly make a massive success from anything are the ones who got in first, well before the idea became well-known, let alone orthodox. It’s the innovators and the ones with creative vision who produce the iPods and five-dollar cup of coffee. Their imitators rarely make more than a bare living trying to catch up. By the time something becomes “industry best practice,” you can be fairly certain the organization that developed it is making its exit towards something else.

If everyone is offering larger and larger discounts to tempt buyers, maybe offering higher quality and better service instead will make your business stand out from the crowd. When companies are cutting benefits to save money, cutting top executive perks and maintaining — or increasing — sensible employee benefits is far more likely to attract the top quality people you need to beat the competition. Outsourcing call centers overseas may be the rage, but I believe I’m not the only one who feels instantly comforted by a local voice on the other end of the phone.

Contrarian thinking isn’t a panacea. It won’t always produce the right questions, let alone the right answers. But it will guard you from that all-too-human tendency to make a flying leap for whatever bandwagon is currently passing by. Best of all, it’ll force you to stop and think. The essence of “slow” is the willingness to take time to produce a good result — not rush headlong into mistakes because all the other lemmings were running past and you didn’t want to be left out of the mad rush. By the time you reach the cliff edge, it may be too late to turn back.

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