Friday, October 9, 2015

Two Heads Are Better Than One...Right?

Everybody knows that two heads are better than one. We’ve known it since kindergarten, where we were taught that cooperation, collaboration, and teamwork are not just socially desirable behaviors—they also help produce better decisions. And while we all know that two or more people working together are more likely to solve a problem or identify an opportunity better than one person doing it alone, it turns out that’s only true sometimes.

Ideally a group’s collective intelligence, its ability to aggregate and interpret information, has the potential to be greater than the sum of the intelligence of the individual group members.  In the 4th Century B.C. Aristotle, in Book III of his political philosophy treatise Politics, described it this way:
…when there are many who contribute to the process of deliberation, each can bring his share of goodness and moral prudence…some appreciate one part, some another, and all together appreciate all.
But that’s not necessarily how it works in all groups, as anyone who has ever served on a committee and witnessed groupthink in action can probably testify.

Groups are as prone to irrational biases as individuals are, and the idea that a group can somehow correct for or cure the individual biases is false, according to Cass Sunstein, Harvard Law School professor and author (with Reid Hastie) of Wiser: Getting Beyond Groupthink to Make Groups Smarter. Interviewed by Sarah Green on the HBR Ideacast in December, 2014, Sunstein said individual biases can lead to mistakes, but that “…groups are often just as bad as individuals and sometimes they are even worse.” Biases can get amplified in groups. According to Sunstein, as group members talk with each other “they make themselves more confident and clear-headed in the biases with which they started.” The result? Groups can quickly get to a place where they have more confidence and conviction about a position than the individuals within the group do. They often lock in on that position, and resist contrary information or viewpoints.

Researcher Julie A. Minson, co-author (with Jennifer S. Mueller) of The Cost of Collaboration: Why Joint Decision Making Exacerbates Rejection of Outside Information agrees, suggesting that people who make decisions by working with others are more confident in those decisions, and that the process of making a judgment collaboratively rather than individually contributes to “myopic underweighting of external viewpoints.” And even though collaboration can be an expensive, time consuming process, it is routinely over-utilized in business decision making simply because many managers believe that if two heads are better than one, ten heads must be even better. Minson disagrees:
Mathematically, you get the biggest bang from the buck going from one decision-maker to two. For each additional person, that benefit drops off in a downward sloping curve.
Of course group decision making isn’t simply a business challenge--our political and judicial systems rely and depend upon groups of people such as elected officials and jurors to deliberate and collaborate and make important decisions. Jack Soll and Richard Larrick, in their Scientific American article You Know More than You Think observed that while crowds are not always wise, they are more likely to be wise when two principles are followed:
The first principle is that groups should be composed of people with knowledge relevant to a topic. The second principle is that the group needs to hold diverse perspectives and bring different knowledge to bear on a topic. 
Cass Sunstein takes it further, saying for a group to operate effectively as a decision making body (a jury, for instance) it must consist of:
  • A diverse pool of people
  • Who have different life experiences
  • Who are willing to listen to the evidence
  • Who are willing to listen to each other
  • Who act independently
  • Who refuse to be silenced
Does that sound like a typical decision making group to you? When I heard that description, I immediately thought of Juror 8 (Henry Fonda) in 12 Angry Men--a principled and courageous character who singlehandedly guided his fractious jury to a just verdict. It is much harder for me to imagine our elected officials, or jury pool members, or even the unfortunate folks dragooned into serving on a committee or task force at work, as sharing those same characteristics.

The good news is that two heads are definitely better than one when those heads are equally capable and they communicate freely, at least according to Dr. Bahador Bahrami of the Institute of Cognitive Neuroscience at University College London, author of Optically Interacting Minds. He observed:
To come to an optimal joint decision, individuals must share information with each other and, importantly, weigh that information by its reliability 
Think of your last group decision making experience. Did the group consist of capable, knowledgeable, eager listeners with diverse viewpoints and life experiences, and a shared commitment to evidence based decision making and open communication? Probably not, but sub-optimal group behavior and decisions can occur even in the best of groups. In their Harvard Business Review article Making Dumb Groups Smarter, Sunstein and Hastie suggest that botched informational signals and reputational pressures are to blame:
Groups err for two main reasons. The first involves informational signals. Naturally enough, people learn from one another; the problem is that groups often go wrong when some members receive incorrect signals from other members. The second involves reputational pressures, which lead people to silence themselves or change their views in order to avoid some penalty—often, merely the disapproval of others. But if those others have special authority or wield power, their disapproval can produce serious personal consequences.
On the topic of “special authority” interfering with optimal decision making, I recently heard a clever term used to describe a form of influence that is often at work in a decision making group. The HiPPO (“Highest Paid Person’s Opinion”) effect refers to the unfortunate tendency for lower paid employees to defer to higher paid employees in group decision making situations. Not too surprising, then, that the first item on Sunstein and Hastie’s list of things to do to make groups wiser is “Silence the Leader.”

So exactly how do botched informational signals and reputational pressures lead groups into making poor decisions? Sunstein and Hastie again:
  • Groups do not merely fail to correct the errors of their members; they amplify them.
  • They fall victim to cascade effects, as group members follow the statements and actions of those who spoke or acted first.
  • They become polarized, taking up positions more extreme than those they held before deliberations.
  • They focus on what everybody knows already—and thus don’t take into account critical information that only one or a few people have.
Next time you are on the verge of convening a roomful of people to make a decision, stop and think about what it takes to position any group to make effective decisions. You might be better off taking Julie Minson’s advice, electing to choose just one other person to partner with you to make the decision instead. Seldom Seen Smith, the river guide character in The Monkey Wrench Game by Edward Abbey, was obviously a skeptic when it came to group decision making, but he may have been on to something when he declared:
One man alone can be pretty dumb sometimes, but for real bona fide stupidity, there ain't nothin' can beat teamwork. 

Dean K. Harring, CPCU, CIC is a retired insurance executive who now enjoys his time as an advisor, board member, educator and watercolor artist.  He can be reached at or through LinkedIn or Twitter or Harring Watercolors

Monday, August 3, 2015

What Got You Here Won't Get You There

That’s the catchy title of a 2007 book by Dr. Marshall Goldsmith, an award winning author, business thought leader, professor and executive coach who heads the Marshall Goldsmith Group of consultants (mission: to help successful leaders get even better) and maintains the free Marshall Goldsmith Library. He has written and/or edited 35 books, mostly about leadership, learning, change and personal improvement. I found a copy of this book at a library sale recently, and I recommend it, but that’s just background.

Some weeks earlier, I had agreed to help kick off a senior management meeting at a company run by some former colleagues of mine who had escaped from an insurance company claims environment nearly 20 years earlier to start up their own specialty claims business. Over the years their business flourished, expanding in scope and size to the point where the founders knew it was time to pull together their management team and discuss what needed to be done to move the company to the next level. They wanted me to help set the proper tone for their meeting by talking about change challenges and reviewing some of the things successful companies do, and don’t do.

Since I was heading off on vacation, I thought I would spend some of my leisure time preparing by re-reading my favorite articles about successful companies, and by reviewing some of the many notebooks I had filled over the years with on-topic material. I also brought along Goldsmith’s book, and read it through one rainy day. If you haven’t read it, I think I can give a quick overview without spoiling it for you. The theme is that most of us have bad habits, and even if those bad habits somehow helped to get us to a certain level, they might just prevent us from moving to or being successful at the next level. When I read through the habits (like delusional thinking, denial, overconfidence, failing to listen, dismissing feedback, failing to plan, blaming failures on external, uncontrollable factors, and allowing distractions to interfere with achieving objectives) I started feeling a bit uneasy, even embarrassed, because at one time or another in my career I knew I was probably guilty of all of them.

But then it hit me—Goldsmith was writing about personal, individual habits, but companies are collections of people so they have their own habits and ways of doing things (their culture.) Entrepreneurs imprint their own habits on their company, so they directly influence their company’s success through their imagination and insights, their willingness to take chances, their resiliency, their commitment, and the unique set of skills, behaviors and attitudes they bring to the effort. Through scrambling, innovating, scraping by, doing without, overextending and even overpromising, the successful ones keep their businesses going, and growing. Of course it’s not a linear path to success--they lurch, they make mistakes, then they recover and learn from them. But one fine day they realize they are actually making it, competing successfully in whatever business niche they selected. At that point one of two things can happen:
  • They celebrate, relax, and begin to suffer from the “complacent lethargy” that Jim Collins and Jerry I. Porras (Built to Last) called the “We’ve Arrived Syndrome”
  • They start to dream about expanding their business, diversifying into other products and services, entering new markets, making know, taking their business to the next level.
Maybe both things happen. But if they get past the dreaming and start in on the planning, they often realize that the skills and behaviors they used to get their business going and help it survive may not be the ones they need to make it thrive at the next level. So what’s a company to do at that point? Of course that’s what my former colleagues wanted to get into at their meeting.

So at the management meeting I ended up sharing with the group some of the most impactful (to me) things I have learned about successful companies, such as their tendency to operate with three perspectives simultaneously: strategic, governance and control, and execution. Sounds reasonable, but juggling those three can be complicated and counterintuitive at a smaller company, where managers often prefer to stay within their comfort zone and focus on execution. But even with flawless execution, a company still needs both a winning strategy and a capable governance/risk management protocol in place to ensure long term success.

Successful companies tend to share certain characteristics:
  • They have strategic clarity
  • They have objectives and performance metrics that encourage behavior that supports their strategy
  • Their rewards are aligned with achievement of those objectives and performance metrics
  • They provide regular, constructive feedback to individuals regarding performance against objectives and metrics
Successful companies share certain capabilities:
  • Talent (knowledge, skill and will)
  • Speed (capacity for rapid, meaningful change)
  • Learning (across silos and boundaries)
  • Shared mindset (on the same page)
  • Accountability (willingness to accept responsibility for behaviors and results)
  • Collaboration (leveraging relationships, sharing work and responsibility)
I had the management team do a quick capability self-assessment from two perspectives, rating themselves as a management team, and then rating their company as a whole on a scale of 1 to 10 in each of those six capability areas (1 means no capability and 10 means industry leading capability) and flip-charted the results. That’s an easy and quick exercise that often produces interesting insights into potential conflicts and barriers to success.

We also unpacked the three performance categories often associated with talent in a knowledge-intensive business: KNOWLEDGE, SKILL and WILL.
  • In the claims service business, KNOWLEDGE involves understanding the law, regulations, contracts and policy forms, as well as understanding what customers want and knowing how to deliver it within necessary margins of compliance, speed, service and accuracy.
  • SKILL usually refers to doing, not knowing. Employing best practices, interpreting complicated coverage situations, correctly calculating a business income loss or reinsurance penalty, investigating, evaluating, negotiating, resolution, recovery, communicating with stakeholders, etc.
  • WILL refers to the commitment, desire, discipline, or motivation to do something and do it well.
Finally, I urged them to accomplish four things in their meeting:
  • Create strategic clarity. Agree on what business they are in, and what business they want to be in, and articulate what they need to know and be able to do in order to be successful.
  • Complete a stakeholder needs analysis and develop a shared view of who their stakeholders are (potentially anyone with a vested interest in how well they operate their business) and what those stakeholders need in order to be successful and content.
  • Take another look at the capability self-assessment summary (the flipchart) and do an honest and critical assessment of their capabilities, particularly their talent. Do they really have the talent and the ability to meet stakeholder needs better, faster and cheaper than their competitors? If not, where are the capability gaps and how will they close them?
  • Carefully consider the WILL component of talent within the framework of change and business evolution. Determine what steps to take to influence attitudes and motivation and move their management team, and their company, from compliance to commitment.
I enjoyed seeing my colleagues again, and meeting their management team, and I heard later that their meeting went well. A few days after that meeting I came across this quote I used in an earlier article, attributed to German writer and politician Johann Wolfgang von Goethe (and also, variously, to Leonardo Da Vinci and Bruce Lee):
Knowing is not enough; we must apply. Being willing is not enough; we must do.
In the talent context, it sounds like whoever said this believed in execution. Knowledge and will alone were not enough—he considered skill, the ability to do the necessary things well, to be the critical component of talent. I see it a bit differently, believing that success in almost any human undertaking requires all three elements of talent (knowledge, skill and will.) To me, skill is derivative, developed through the combination of knowledge (understanding what needs to be done, when and how) and will (practicing and perfecting) but I suppose that’s one of the reasons why people find the talent topic so fascinating.

For a thoughtful look at talent management in the 21st century, check out this Harvard Business Review article from professor Peter Capelli. And for an interesting overview of how taking a strategic approach to talent management can help power innovation, growth and market advantage, take a look at this Talent To Win whitepaper from PwC.

Dean K. Harring, CPCU, CIC is a retired insurance executive who now enjoys his time as an advisor, board member, educator and watercolor artist.  He can be reached at or through LinkedIn or Twitter or Harring Watercolors

Friday, June 19, 2015

Just the Facts

“Prejudice is a great time saver. You can form opinions without having to get the facts.” --E. B. White

Years ago I worked with an insurance company CEO who took immense pleasure in putting people on the spot in meetings. First he would ask someone to explain why something was happening, and when they began to answer he would cut them off with this comment:
“That’s not an explanation, that’s an excuse.”
If they tried to argue that point, he’d cut them off again with the same comment. It was an awkward and uncomfortable dynamic, but the first time I witnessed it I couldn’t help but reflect upon the distinction between an explanation and an excuse. Both involve an attempt to describe why something happened, of course, but an excuse has a motive an explanation doesn’t have—self-protection. One definition of excuse:
An explanation designed to avoid or alleviate guilt or negative judgment
According to Jenise Harmon at PsychCentral, excuses are defensive attempts to deny responsibility, and they often emerge when someone feels threatened. Next time you are trying to figure out why something happened, and you realize you have been methodically discounting and discarding any explanation that might implicate or reflect poorly on you, hit PAUSE. You’ve probably been looking for an excuse, particularly if you don’t believe (or don’t want to believe) you are responsible for whatever happened. The urge to protect yourself when threatened is normal—and most of us learn how to make excuses and shift blame when we are children. As we get older, the reasoning error known as confirmation bias enables us to focus on information that confirms our beliefs while we ignore contradictory information. Psychology expert Kendra Cherry describes it this way:
While we like to imagine that our beliefs are rational, logical, and objective, the fact is that our ideas are often based on paying attention to the information that upholds our ideas and ignoring the information that challenges our existing beliefs.
Confirmation bias interferes not only with how we gather information, but also with how we interpret it, which helps explain the attitude polarization that often happens when people with dissimilar values and beliefs look at the same information and interpret it very differently. Experts say the responsible root causes include wishful thinking, ego, memory limitations and our inability to process information effectively. And of course the persistent and undeniable need we humans have to be right:
Another explanation for confirmation bias is that people tend to weigh up the costs of being wrong, rather than investigate in a neutral, scientific way.
In college I studied the natural sciences, so I learned to approach problems using the scientific method , an evidence-based technique to explain how and why things happen. The scientific method has three steps:
  • Observe and collect data
  • Analyze and develop a hypothesis
  • Test and challenge the hypothesis
There’s no room for confirmation bias in science. Scientists are trained to be objective and skeptical, to research a situation, propose an explanation, then test and refine it through experimentation. They follow an iterative, fact-driven process in which the objective is to come up with a solid hypothesis and then challenge it. If peer review and other attempts to disprove it fail, then a well-researched, rigorously tested hypothesis might eventually become a theory—a broadly accepted truth, reliable enough to make predictions that can be validated by experimentation.

Unfortunately, you don’t commonly see anything as rigorous and disciplined as the scientific method being used to address challenges in business. In some dark corners of the property casualty insurance business, for instance, it is entirely acceptable for an executive with a hunch (or a bias, a fear, or even a guilty conscience) to disguise a conjecture or an excuse as a theory. A theory developed with no objective research, no validation, and a healthy dose of confirmation bias. Even worse, such theories are often carelessly advanced. After all, since it’s only a theory, where’s the harm if it is flawed or incorrect? If you manage an insurance claims operation, you know what I am talking about, since you’ve probably squandered innumerable hours debunking theories about claims and the claims handling process that were promulgated by well-meaning (and some not-so-well-meaning) folks.

Let’s bring this pervasive problem to life by imagining we are observing an insurance company executive management board meeting. The numbers aren’t looking good, so the CEO turns to the Chief Underwriting Officer (CUO) and asks why the loss ratio is trending higher than planned. “I have a theory,” says the CUO, and he spins an elaborate tale in which the claims department, by setting case-level loss reserves that were too high, was encouraging adjusters to make loss payments that were also too high, artificially inflating the loss ratio. The meeting room goes silent. The CUO holds his breath, mentally bracing himself to try again, when suddenly the CFO mutters “We should look into that.” The CEO nods and instructs the group to go off-line and figure out why case level loss reserves are being overstated. As observers we are surprised, and the Chief Claims Officer is speechless, but the CUO is beaming like a movie character on death row who has just been informed that the governor has granted a last minute stay of execution.

Perhaps you’ve witnessed a scenario like this, or been caught up in the disruptive all-hands fire drill it generated. Now imagine a month has passed, the executive management board is meeting once again, and the cross-functional team charged with determining why case level loss reserves were being overstated reports its findings:
  • No evidence of case level reserve overstatement
  • No evidence of inappropriate loss payment inflation
  • Some evidence that rates being charged were being discounted to levels significantly lower than planned
  • Solid evidence that risk selection guidelines were not being followed consistently by underwriters
Finally, facts! Business discussions are usually more useful and fructuous when framed with facts and evidence instead of hunches and suspicions, so this imaginary follow-up executive management board meeting might actually accomplish something. Perhaps the CUO will agree with the findings and accept accountability and responsibility for the inflated loss ratio, which would probably end the discussion. Or he might stay the course, disputing the findings and offering another explanation. No matter which way it goes, however, hopefully this time around the CEO will be a more demanding and discerning discussion leader. While rejecting half-baked theories with the admonition “That’s not an explanation, that’s an excuse” might be insensitive and provocative, at least it’s a nod in the direction of the scientific method.

To see more about the laws of social behavior, check out Richard Connif’s amusing article in the Smithsonian Magazine, and for a deeper look at the cognitive biases that interfere with rational decision making, check out this article by George Dvorsky. To understand how and why AIG has embraced evidence-based decision making, take a look at this HBR article. Finally, for readers who are Dragnet fans, Jack Webb as Joe Friday never actually said “Just the facts, Ma’am” on the show, but Dan Aykroyd said it while playing Joe Friday’s nephew in the 1987 movie Dragnet.

Dean K. Harring, CPCU, CIC is a retired insurance executive who now enjoys his time as an advisor, board member, educator and animal portrait artist.  He can be reached at or through LinkedIn or Twitter or Harring Watercolors.

Thursday, May 14, 2015

Clarity Affords Focus

I was young, new to the insurance industry and eager to advance my career when I first heard that the best way to get ahead in the business was to change employers every 5 years (3 years now.) Serial job-hopping might not have been an attractive or comfortable strategy for the timid or insecure, I was told, but for those willing to uproot and repeatedly challenge and prove themselves it promised a fast-track shot at superior compensation, more diverse and interesting job experiences and exceptional career growth. I went all in, and over the next 40 years I worked with eight different employers and more than a dozen different CEOs, all in the insurance claims business, and served as the Chief Claims Officer at 5 different companies. Some of my moves were regrettable, and I suffered through my share of intense, character-building experiences, but along the way I learned three things that helped make my overall career experience fascinating and gratifying:  
  • How to think and plan strategically
  • How to identify and manage stakeholder relationships
  • How to design and implement performance measures to support achievement of organizational objectives
I also learned one other thing. In the property casualty insurance business, there is no generally accepted performance profile of claims management excellence, no standardized claims performance scorecard. As I changed jobs I was amazed at how variable (not to mention capricious, ill-considered, unfair or non-existent) the claims performance assessment process was from company to company. Even within a single company it was common for executives inside and outside of claims to evaluate performance of their claims operation differently, often by looking at “key performance indicators” of dubious reliability and value. And in the infrequent situation where everyone agreed on a slate of claims performance categories, they often ranked or weighted them differently. Or they ignored them and focused on some new indicator.

To have any chance at success, a Chief Claims Officer needs to clearly establish, with his/her CEO, exactly how the claims operation can contribute to achievement of the company’s strategic objectives, and how performance will be evaluated. Knowing and communicating those expectations is absolutely essential, since a claims leader who wants employees to perform at their best must do four things:
  • Communicate performance expectations and confirm understanding
  • Use measures of performance and success that are well-designed, explicit and understood
  • Provide the resources and support they need to succeed
  • Give appropriate guidance and feedback so they can produce the best results
Three of those four things demand clarity on key performance indicators, which is why an agreed set of performance indicators is the cornerstone of any claims strategy. I found that evaluation conversations with CEOs could be circular and unrewarding, so I developed a balanced set of claims performance categories and used them to frame those discussions and illustrate options. I also carried that framework with me to each new company, where I reviewed it with the CEO and adapted it as needed to fit the circumstances and strategy of the new company.
Recently I invited a small group (50) of insurance Chief Claims Officers, CEOs and COOs to provide me with some feedback on claims performance categories by asking them to do the following:

Please rank the following claims performance categories in terms of their importance to you when evaluating the effectiveness of your claims operation.
  • Claim loss cost management (average paid, leakage ratio, etc.)
  • Claims expense management (allocated and unallocated)
  • Claims productivity and throughput (closing ratio, cycle time, reopening ratio, aged pending)
  • Customer satisfaction (premium paying customer)
  • Agent/Broker satisfaction
  • Internal stakeholder satisfaction (business units, underwriters, actuaries, etc.)
  • Loss reserve adequacy, accuracy and timeliness
  • Regulatory compliance (avoidance of fines, penalties, negative publicity and other unwelcome surprises)
  • Employee engagement/satisfaction
  • Claims fraud detection and mitigation
The weighted average results showed strong ranking alignment between the two groups:

Performance Category Combined Group Rank CEO/COO Rank Chief Claims Officer Rank
Loss Cost Management
Expense Management
Customer Satisfaction
Agent/Broker Satisfaction
Internal Stakeholder Satisfaction
Loss Reserve Adequacy, Accuracy and Timeliness
Regulatory Compliance
Employee Engagement
Claims Fraud Detection and Mitigation

But the individual responses told a different story. Loss reserve adequacy was ranked as most important by the CEO/COO group as a whole, for example, yet 30% of the respondents didn’t even rank that category in the top three. Employee engagement was ranked 8th by the group, yet 20% of the respondents ranked it in the top 2. The Chief Claims Officer group ranked loss cost management as most important, yet 30% of them didn’t believe it belonged in the top 3. One Chief Claims Officer said the most important performance category was employee engagement, as did one CEO/COO—let’s hope they work together! The individual rankings were all over the place, even for the internal stakeholder satisfaction category, which both groups ranked as least important, although 15% of the Chief Claims Officers had it in the top 5 (no one in the CEO/COO group did.)

What’s the takeaway? Thomas J. Leonard probably put it best: “Clarity affords focus.” If you are a Chief Claims Officer, have a conversation with your CEO/COO and make certain you are aligned on what success looks like and how it is measured in your claims operation. Use the performance category framework in the survey for your discussion, or develop your own, but don’t fall into the trap of assuming that all performance categories are equally important. They may all be important, but they are not equally important, so your job is to identify and deliver on those that matter the most to your organization. Get clarity, and then focus. After all, if your company’s strategy relies upon the claims customer experience as a competitive differentiator, your claims strategy should be designed and your resources deployed to deliver that first and foremost.

The claims performance category survey will be open through the middle of June, 2015. If you would like to participate in the survey, you can do so here.

Dean K. Harring, CPCU, CIC is a retired insurance executive who now enjoys his time as an advisor, board member, educator and animal portrait artist.  He can be reached at or through LinkedIn or Twitter or Harring Watercolors.

Monday, April 27, 2015

A Man, a Dog, and Performance Expectations

"The factory of the future will have two employees--a man and a dog. The man's job will be to feed the dog. The dog's job will be to prevent the man from touching any of the automated equipment."  --Warren Bennis

What a lucky man and lucky dog, stepping into shiny new factory-of-the-future jobs bristling with role clarity and explicit performance expectations. Imagine how happy and fortunate these two employees felt on their first day of work!

Fast forward 12 months to performance appraisal time. While both man and dog are confident they performed well, a new reality emerges during performance discussions. Their boss agrees that the man did a good job feeding the dog, but marks him down for not providing the dog with sufficient water and not washing and walking him enough. Then the boss tells the dog that he did a good job keeping the man away from the equipment, but marks him down for not collaborating effectively with the man on watering and walking and washing tasks. 

Of course the man and the dog are disappointed, and confused. They thought they understood their roles and the performance expectations associated with those roles, only to find out they were actually being evaluated against a different, broader set of expectations.  How could that have happened?

Unfortunately, it happens all the time. Organizations still using an old-school annual appraisal process probably see it more often than those that use an interactive performance management approach (see a thoughtful review of the difference between those two approaches here) but it can happen anytime there’s a performance expectation communication failure. And such failure has consequences. Susan M. Heathfield describes it this way in What's the Big Deal About Clear Performance Expectations?
A lack of clear performance expectations is cited by readers as a key contributing factor to their happiness or unhappiness at work. In fact, in a poll about what makes a bad boss bad, the majority of respondents said that their manager did not provide clear direction. This factor affected their sense of participation in a venture larger than themselves and their feelings of engagement, motivation, and teamwork.
Alyssa Danigelis in How to Communicate Employee Expectations Effectively likens it to the reality show Survivor:
Employee expectations gone awry can practically be spotted from a helicopter miles away. The tension becomes so thick it changes the air. Anxiety spreads. Alliances form. A mutiny brews. At the failing end of the communication spectrum, the workplace resembles a Survivor tribal council.
If you have ever worked in organization operating at the “failing end of the communication spectrum” then Alyssa’s reference to the Survivor reality show may stir up painful memories. After all, if in your workplace the Survivor slogan (Outwit, Outplay, Outlast) accurately characterizes the prevailing operating shared mindset and the gambits you and your colleagues use to interact with one another, it’s probably time to move on. But if you’re stuck in such an environment, and nothing seems to be going well, this classic article by Jean-François Manzoni and Jean-Louis Barsoux in the Harvard Business Review might be of interest to you: The Set-Up-To-Fail Syndrome.

Of course there are many things a company can do to strengthen their performance management process, such as aligning individual performance objectives to their strategy and business plans, clearly communicating performance objectives and associated accountabilities and expectations, insisting on regular performance evaluation and feedback sessions, and holding managers accountable for making it all work. But that may not be enough according to Sylvia Vorhauser-Smith, who in a 2013 Forbes article wondered “Is there any organizational practice more broken than performance management?” Her take: 
  • Everyone hates it – employees and managers alike
  • Nobody does it well – it’s a skill that seemingly fails to be acquired despite exhaustive training efforts, and
  • It fails the test of construct validity – it doesn’t do what it was designed to do, i.e. increase performance

Her solution?  Shift the performance focus from process to outcomes, burn the forms, replace them with dashboards and performance heat maps, and embrace an agile work environment in which: 

  • You will set dynamic goals and adjust them in response to change
  • Your manager will provide just-in-time coaching wherever you are
  • Skills and knowledge you need will be recommended and streamed to you
  • Your performance journal will continuously capture and cluster feedback, ideas and suggestions from your peers and customers
  • Your formal annual performance review will be permanently deleted from your calendar
  • You will finally be in a position to manage your own career 
I imagine the man and the dog would be thrilled to see Vorhauser-Smith’s approach implemented at the factory-of-the-future, particularly that part about eliminating formal annual performance reviews. But even if that doesn’t happen, they might want to improve their chances of success by asking the boss to adopt a more enlightened performance expectation communication and feedback approach. And if the boss demurs?  Maybe they could get Jack Welch, whose feelings about performance appraisal ambushes are well known, to have a chat with the boss.  Considering past quotes from Welch, it might go something like this:

Jack:         “When you become a leader success is all about growing others.” 
The Boss“OK…”
Jack:         “You have no right to be a leader if someone who works for you doesn’t know where they stand.”
The Boss:   “Ouch. Sounds like you are questioning my suitability for this role.”
Jack:          “Control your destiny or someone else will.”
The Boss:   “Got it.”

Jack’s too busy to have that conversation with the Boss, of course, but the model is so simple and obvious that even the Boss’s Boss could probably deliver the message:

If you want your employees to perform at their best, you need to do four things:
  • Communicate what you want them to do and confirm their understanding
  • Use measures of performance and success that are well-designed, explicit and understood
  • Give them the resources and support they need to succeed
  • Provide them with appropriate guidance and feedback so they can produce the best results

The good news is that this model works well for humans and dogs.  If factory-of-the-future expands and eventually hires a cat, however, they’ll probably need to modify this approach since cats are generally not too interested in guidance or feedback.

 Dean K. Harring, CPCU, CIC is a retired insurance executive who now spends his time as an advisor, board member, educator and animal portrait artist.  He can be reached at or through LinkedIn or Twitter or Harring Watercolors.

Wednesday, March 18, 2015

Magical Thinking

Remember that TV commercial where a wide-eyed guy's favorite football team scores every time he goes into his basement to get more beer, so he concludes he has "cracked the code," leaves his friends and goes down into the scary basement one more time "for the win"? That spot depicted a form of magical thinking, which according to psychologists Leonard Zusne and Warren Jones in Anomalistic Psychology: A Study of Magical Thinking involves believing "that one's thoughts, words, or actions can achieve specific physical effects in a manner not governed by the principles of ordinary transmission of energy or information."

Magical thinking is a normal dimension of thinking in young children, of course. Toddlers routinely make illogical and unsound decisions--they just don't have enough information about the world yet to form more reasonable conclusions (more on that topic here.) At around age seven or eight most children begin to think logically and are better able to grasp cause and effect relationships, so they move away from magical thinking.

Yet magical thinking lives on in many adults--sports fans, athletes, coaches, gamblers, sailors, politicians and even business executives. Think of all the people you know who regularly engage in superstitious rituals-- following lucky routines, wearing lucky items of clothing, carefully avoiding any behavior or circumstance that might curse or jinx an undertaking or outcome. While such rituals might be irrational, they are not generally harmful and some experts even consider them to be potentially beneficial. Perhaps that's why the tagline for the beer commercial described earlier offered viewers this subtle reassurance:
“It's Only Weird if it Doesn't Work”
O course there is a darker side of magical thinking that can be problematic, particularly in business. It has roots in narcissism and can involve delusional thinking fueled by an unrealistic or underdeveloped understanding of causes and effects. Unfortunately, since experts believe we're "more likely to find a narcissist in the C-Suite than on the street" it follows that we're also more likely to find magical thinking in the C-Suite.

Here's the problem: a business leader with even mild narcissistic tendencies can be a compelling and disruptive leadership force even when he or she hasn't the slightest knowledge or understanding of the dynamics, the causes and effects, that shape a particular situation. Such leaders come across as supremely certain, energetic, decisive, strategic, visionary--even charming and charismatic in the short term. But they have a big blind spot: when they are in unfamiliar territory, they are incapable of recognizing and acknowledging their own ignorance or lack of understanding. They are confident, but not competent. Sadly, when they don't have the requisite information (or understanding, or knowledge) to make logical and sound decisions, they fall back into magical thinking--just like toddlers do. So their decisions are informed and driven by biases, superstitions, fantasies and faulty logic rather than by facts and evidence-based thinking.

I worked with a CEO years ago who was, among other things, a rip-roaring magical thinker. One of his more peculiar blind spots involved strategy. He categorically refused to even discuss the topic (he called it the S-word) and he would behave even more scornfully and abusively than he normally did if someone dared to bring it up. He made his magic belief mindset clear--if people just did their jobs, the company would flourish, so it was foolish to waste time thinking or talking or worrying about something as unimportant as the S-word.

I was reminded of that CEO (let's call him S-word CEO) the other day while listening to an HBR Ideacast featuring Harvard Business School professor Frank Cespedes, author of Putting Sales at the Center of Strategy. He was describing how companies often have a vision, or a mission, but they don't have a coherent strategy--because they have failed to make "explicit choices" about markets, customers, value propositions and competitive differentiators. Why is that important? Professor Cespedes:
"’s obviously difficult, if not impossible, for people to execute a strategy that doesn’t exist or that they don’t understand."
Cespedes went on to say that once a coherent strategy has been developed, it's vital for company leadership to ensure that the tasks and behaviors (plans and activities) performed by different company segments (Cespedes talked about Sales, but I took his comments to apply equally to all segments of a company) are focused on delivering value and helping to implement the strategy effectively. In other words, strategy should define the critical tasks and behaviors, not vice versa. Nothing very magical about that.

Well, that S-word CEO struggled with his biases and his fuzzy logic. He made more than his share of dubious decisions, and he caused some degree of harm and collateral damage in the process, but he was tenacious and persistent and he completed a multi-year run as CEO. As he walked out the door on his last day, I'm sure he was pleased with himself, and proud of how well he had steered the company during his tenure. What about his struggles, his setbacks, his ill-advised decisions, and the collateral damage he had caused? Not his problem. He accepted no accountability for anything that didn't work out well, since in his mind someone else was always to blame.

I've worked with many magical thinkers, but S-word CEO probably provided as vivid a demonstration as any I've ever seen of the power, and the wonder, of magical thinking in business. Maybe the beer commercial was spot on--maybe magical thinking is only weird if it doesn't work--and while it may not have worked for others within S-word CEO's sphere of influence, it sure worked for him!

Dean K. Harring, CPCU, CIC is a retired insurance executive who now spends his time as an advisor, board member, educator and watercolor artist.  He can be reached at or through LinkedIn or Twitter or Harring Watercolors.

Wednesday, February 18, 2015

The Trivialization of LinkedIn

LinkedIn seemed like a good idea when it was introduced in 2003, at about the same time Friendster and MySpace were emerging as pioneering social networking sites. LinkedIn's promise was simple:
LinkedIn makes your professional network faster and more powerful.
Designed to serve as a networking resource for business people who wanted to connect with other professionals, it is still described today as Facebook for business professionals, even though Facebook didn't launch to the public until several years later in 2006. I was an early LinkedIn adopter (2005) and a regular user, delighted to put aside my Rolodex and replace it with a real time, automated network management tool. As a believer in the power of networking, I kept my profile up to date, joined interest groups, methodically established new connections and reconnected with former colleagues, classmates and business partners. Over the years my LinkedIn network expanded steadily, and it has proven to be a useful and helpful resource for me. I have also enjoyed tapping into my network to help folks find or fill jobs, to get information, and to introduce people who have similar business interests.

LinkedIn now has over 300 million users around the world and it has developed a certain gravitas, characterized in Fortune by Jessi Hempel this way: .
Facebook is for fun. Tweets have a short shelf life. If you're serious about managing your career, the only social site that really matters is LinkedIn. In today's job market an invitation to "join my professional network" has become more obligatory -- and more useful -- than swapping business cards and churning out résumés.
LinkedIn founder Reid Hoffman blogged about the company's mission on its 10th anniversary in 2013:
Ten years ago, I co-founded LinkedIn in my living room with the mission of connecting the world’s professionals to make them more productive and successful. Inspired by the invaluable role relationships played in our own careers, we launched LinkedIn with the tagline “Relationships matter.”
Google the question "What is LinkedIn?" and you'll get 928 million results, but right at the top is this one:

Unfortunately, I suspect it's the "Learn and share" capability on the right, which invited users to share news, inspirations and insight, that inadvertently instigated the trivialization of LinkedIn by enabling users who didn't appreciate the differences between Facebook and Twitter and LinkedIn to flood LinkedIn with annoying and inappropriate updates.

What is an annoying and inappropriate update? In the LinkedIn user agreement, users promise to use LinkedIn in a "professional manner" and agree not to act dishonestly, or unprofessionally, or to post "inappropriate, inaccurate, or objectionable content." The terms aren't defined in the agreement so the definitions seem to be a matter of personal taste. While I happen to feel that math problems (99% of people fail to solve this...), holiday greetings, family vacation photos, silly slogans, word puzzles, recipes and goofy pictures all qualify as unprofessional and inappropriate, others obviously don't think so. For example, consider the individuals who posted the "insights" shown below and the hundreds of LinkedIn members who liked and commented favorably about them.

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Of course LinkedIn contributes to the triviality by flogging inane and poorly written Pulse articles, incessantly soliciting skill endorsements, and doing insensitive things like blasting out an announcement encouraging users to congratulate so-and-so on their new position each time a new position is added to his/her profile, even if that new "position" happens to read something like this: Laid off and in transition--looking for new opportunities. That's sad, but what's even sadder is how often so-and-so's connections dutifully pile on, offering their hearty congratulations on the new position. See Donna Sapolin's entertaining description of her experience with this LinkedIn feature here, and Stacy Zapar's energetic take on how users are ruining the LinkedIn news feed here.

What can you do to shield yourself from the trivialization of LinkedIn? Well, you could close your account, of course, or access it less frequently, or perhaps just ignore anything you find annoying. Right now I still believe LinkedIn's positives outweigh its negatives, so I do whatever I can to minimize my exposure to the negatives. Every time I see a post that strikes me as inappropriate or unprofessional, for example, I use LinkedIn's hide capability to block all further posts from that user, and that has helped to decrease the number of what I consider to be inappropriate and unprofessional posts on my home page. Getting rid of the annoying Pulse feature was trickier, since LinkedIn does not provide users with the option to remove the Pulse banner from their home page even though it appears many LinkedIn users would appreciate having that option. The good news is that it is easy to use extensions like AdBlock or Stylish to quickly remove Pulse from your homepage.

For a folksy yet comprehensive view into the history of LinkedIn, take a look here. If you are trying to grow your network on LinkedIn,by all means glance at my profile and consider pinging me if you would like to connect. I am happy to collaborate and help you network, and I promise you won't get a response anything like this!

Dean K. Harring, CPCU, CIC is a retired insurance executive who now spends his time as an advisor, educator and watercolor artist.  He can be reached at or through LinkedIn or Twitter or Harring Watercolors.

Tuesday, January 6, 2015

Vacation Risk Management

I grew up in Massachusetts, but I haven't been to Cape Cod for ages, so I thought it might be fun to rent a vacation home on the Cape for a week or two this summer.  Using Vacation Rental by Owner  (VRBO), I found a place that seemed to fit the bill.  I reached out to the owner (let's call him Duke) to reserve the property, and Duke advised me all I needed to do was sign and return his rental contract along with a 50% deposit and he would mark it as rented. Simple enough, until I saw his rental contract.

Full disclosure here--I am one of those people who reads most contracts before I sign them. I have a healthy respect for contracts, developed initially during my claims training at Liberty Mutual and steadily strengthened throughout the forty years I spent in the insurance business.  Maybe my life would be simpler if I could just learn to smile and sign on the dotted line once I've been presented with a "standard" contract, but I am not comfortable doing that.  So I read most contracts.

Duke's Vacation Lease Agreement did look pretty standard, at first, until I got to section 11, which opened with this declaration:
Tenant waives any right to allege deficiency in the premises or to otherwise claim that Owner or Owner's Representative has misrepresented the property.
Since I wouldn't be seeing the property in person until July when I arrived for vacation, it seemed a bit unreasonable for Duke to be asking me to waive my rights to allege deficiency and/or misrepresentation now, but I kept reading until I hit the showstopper two sentences later:
Tenant will indemnify Owner's Representatives and the Owner for any injuries, accident(al) or otherwise, that may be incurred or suffered upon the premises by tenant and guests or anyone associated with tenant for any cause whatsoever during the term of this contract even if caused by gross negligence on the part of the owner.
The emphasis in the last line above is mine. Requiring a tenant to agree to reimburse the owner for any loss associated with any injuries that might occur on the premises, even if those injuries were caused by the owner's gross negligence, seemed to border on the outrageous.  Imagine Duke had been warned that his electrical system was so old and poorly maintained that it represented an imminent fire hazard, or that his house was at serious risk of collapse because of severe structural termite damage, yet he failed to do the necessary repairs and continued to rent it. Then imagine the house collapsed and/or burned and injured the tenants and others in the house, who had no knowledge of the potential danger.  According to Duke's Vacation Lease Agreement, the tenant would be required to reimburse him for any sums Duke was required to pay to the injured people.  Somehow that didn't seem fair, to say nothing of the probability that it's against public policy, and might be void and unenforceable, even in Massachusetts. Remember, gross negligence is distinctive, since it embodies a materially greater lack of care than ordinary negligence.  The definition: 
...carelessness which is in reckless disregard for the safety or lives of others, and is so great it appears to be a conscious violation of other people's rights to safety.
So I wrote back to Duke and told him I wouldn't be able to sign the Vacation Lease Agreement unless he was willing to tone down the indemnification language. Duke responded immediately, saying he needed to keep the language intact in order to:

...add some shared responsibility onto otherwise unconcerned and unattached weekly renters who we are entrusting with our very expensive property. 

Shared responsibility? He also told me his rental contract was "very standard, very boilerplate" and that no one had ever raised the issue I was raising in the seven years he had been renting the property. That intrigued me, so I took a look at the standard, boilerplate rental contracts available for owners who list their properties on VRBO to use, but I couldn't find an indemnification clause as broad and deep as Duke's.

Thinking that perhaps Duke wasn't familiar with the concepts of indemnification, gross negligence and public policy, I wrote back to him and outlined my concerns more fully.  He responded that the risk/reward ratio in life isn't always equal, explaining:

As it pertains to our house, 99% of our guests think that the reward of spending time with family and friends in a great house, outweigh the lack of recourse they may give up in a rental agreement that they sign.
Why didn't 100% of his guests think that way, I wondered, particularly since they couldn't become guests unless they signed his contract?  What about the other 1%? Did they disagree with the balance of risk and reward but still sign the Vacation Lease Agreement?  We'll never know, since I decided to end my correspondence with Duke and make different vacation plans.

I did briefly wonder whether Duke's tenants had actually read his Vacation Lease Agreement and fully grasped the nature of the liability exposure they were assuming. Probably not. Most people don't read contracts, and of course the penalty for not reading and comprehending potentially adverse contract clauses is zilch, unless and until something bad happens and triggers those clauses.

Does it make sense to do a risk evaluation on something as mundane as a vacation home rental?  As a potential short term vacation home tenant, do you really need to analyze the rental contract, identify exposures, try to secure more favorable terms and conditions, and make sure you have insurance coverage or other risk transfer mechanisms in place that will protect you if things go wrong? 

Since risk management is often described as a process of identifying, assessing, and reducing risk to an acceptable level, the answer depends upon the mindset you bring to the transaction, your risk tolerance, whether you believe things might go wrong, and your ability to deal with the financial consequences if they do go wrong. I decided to pass on Duke's house because I didn't like his attitude or his contract, so for me the potential risk associated with signing the contract was greater than the reward.  But Florencia Marotta-Wurgler, a professor of law at New York University, says people usually don't change their behavior simply because of what's in a contract.  In Alina Tugend's article Those Wordy Contracts We All So Quickly Accept, Marotta-Wurgler explains why:

For the most part it [what's in the contract] doesn’t matter. Things don’t usually go wrong — except when they do. And then it matters.

I know one thing for certain, however.  Once a contract matters, it really matters, and suddenly everybody wants to read it.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on property casualty insurance claims and operations.  He can be reached at or through LinkedIn or Twitter.