How to Manage Biased People
By now it’s generally accepted that if senior leaders suffer from cognitive biases their decisions can severely undermine company performance. Yet, leaders are not the only members of organizations that exercise poor judgment: Non-leaders are sometimes irrational too. Bearing this in mind, it is imperative that strategy-setters make explicit allowance for just how cognitively fragile their employees might be — or else risk not fully understanding why their “perfectly rational” strategies don’t work.
Take the recent case of JC Penney, which hired and abruptly fired its CEO, Ron Johnson, after the major changes he instituted took the company from bad to worse. Johnson’s critics have explicitly accused the former Apple superstar of having suffered from no less than three cognitive disorders during his tenure, including: overconfidence (for failing to test his risky pricing strategy), representativeness (for trying to force the Apple retail model onto JC Penney), and anchoring (for having ignored pricing-related, cognitive biases amongst JC Penney’s customers).
Yet, the workforce that Johnson inherited at JC Penney seemed no less guilty of having their own mental hang-ups, including: defense-attribution bias (for failing to recognize that JC Penney was a sinking ship long before Johnson arrived), Dunning-Kruger effect (for failing to see their roles in making that ship sink), and status-quo bias (for refusing to acknowledge that change was needed).
Moreover, in a stunning display of large-scale, bounded rationality, more than 4600 of JC Penney’s head office staff used nearly 35% of the company’s broadband for streaming Youtube during office hours in 2012. In other words, a significant portion of the JC Penney workforce failed to see any connection between their loafing activities and the company’s poor performance.
His own cognitive biases aside, it’s unlikely that any of Johnson’s initiatives would have stuck at JC Penney without first making explicit allowance for the judgment lapses and biased mental dispositions of his new employees. For a firm already on a 6-year slide, how else could he have escaped the associations between his presence and the company’s further decline? By what other means could he have shown how much organizational incompetence was already impeding performance?
Johnson should have directly made accommodation for the biases at the outset, while he forged his strategy. Instead, he fell into the common trap of believing his evangelism of the strategy could overcome employee hangups. Perhaps, for example, he felt that firing many of the blatant culprits would solve the problem. It didn’t. Instead, Johnson and new leaders like him need to go deeper into the psyches of lower-level employees. Here are four steps outlining how this might be achieved:
Ensure goal alignment. The key to overcoming biases on both sides is first ensuring you have the same goal. Even if we don’t understand or agree on the journy to a given milestone, we should agree on the objective. Leaders should recognize that the most common employee goals are more personal in nature and that they must phrase the company goals in a personal tone. Employees want job security, good compensation, career progression, etc. Ultimately, the corporate goals should be translated to how these employee goals will be achieved, or something’s wrong with the corporate goals.
Acknowledge bias on both sides and gain trust. Everyone has a bias blind spot (i.e., an inability to see one’s own hangups, but a believed expertise identifying others). Thus. It’s nonsensical to expect to identify the biases that are keeping you, your colleagues and your subordinates at odds. Instead it makes sense to assume certain core biases (e.g., Curse of Knowledge, Confirmation Bias, Anchoring, etc.) are present, and address them by setting aside everything you think you know and starting over. Then set in motion a strategy to build something collaboratively: Only in this way will trust (even in the face of disagreement) overcome bias.
Connect the conquering of biases to achievement of employee goals. Once major misperceptions of reality have been identified, it’s vital for you as a leader to publicly demonstrate that those perverse ways of thinking, if accepted and believed, will not lead to the accomplishment of important goals. For example, your staff may highly value job security and defend the status quo; however, if the current strategic direction is leading the company to disaster (as in the pre-Johnson, JC Penney case), as a leader you need to demonstrate the fallacy of the status quo.
Offer an alternative strategy that will still achieve everyone’s goals. Having demonstrated the fallacies, you’re now positioned to win the staff over to your camp in forging, launching, and executing a better strategy. That strategy should aim to meet — in addition to the standard financial and operational performance goals — feasible goals for employees. Where goals are infeasible the leader should explicitly state the reason and logic behind what’s been omitted.
As Ron Johnson learned the hard way, cognitive biases amongst staff can be deadly for even the best of strategies if they go unchecked. But if they’re identified early, executives have a better chance of overcoming them. By demonstrating their potentially negative impacts on personal goals, gaining trust through alignment and collaborative strategizing to achieve desired outomes, senior leaders can get the buy-in they need and avoid the mistakes of JC Penney’s ousted CEO.
Originally published at hbr.org on October 31, 2013.
