The Effective Executive – The Law of Unintended Consequences

 

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This is the 39th episode of the Effective Executive podcast. In this episode, Tripp Babbitt discusses the law of unintended consequences and counter-intuitive discoveries. Download our Effective Executive Starter Kit.

Show Notes

[00:00:00]
The Effective Executive – Episode 39

[00:00:21]
The Law of Unintended Consequences

[00:02:02]
The Thinking Lens

[00:02:25]
Motivation – Rewards

[00:07:03]
Control Creates Unintended Consequeces

[00:07:16]
The Unintended Consequences Story

[00:10:24]
Focus on Costs

[00:11:16]
Analytical vs Synthetic Thinking

 

 

Transcript

[00:00:00] This is the 39th episode of the Effective Executive podcast and YouTube channel this week, I wanted to talk about something that I see and hear about in conversations with executives and what’s going on at their organizations.

 

[00:00:21] And it’s the law of unintended consequences. And I also kind of equate this with counterintuitive types of findings, because unintended consequences can be both good and bad and so can counterintuitive things can be good or bad. This fits into my whole mindset and what I am coaching and working with executive teams on is developing theories for the organization. And my belief is that organizations should be constantly challenging what they’re doing on a very small scale at first to kind of learn what is going to happen and what unintended consequences, good or bad or counterintuitive findings that you get when you experiment with different theories in your organization. And this bleeds over into innovation, too. They’re constantly looking for not only new ideas, but you’re also looking for new products and services that your organization could be utilizing in the future. Now, there are really two things to me, and this goes into my training component, which is there’s a customer lens and then there’s a thinking lens. And I’ve talked in other podcasts and YouTube videos about the customer lens and the importance of looking at your organization through the way the customer sees.

 

[00:02:02] And again, this is a lot of the effective executive training that I’m doing, so with that, there’s also a thinking lens. And the two primary things in organizations that affect your thinking lens or have an impact on your organization are motivation and control.

 

[00:02:25] And when we talk in terms of motivation, I’m usually talking about rewards with within organizations because rewards have a lot of unintended consequences associated with them. You know, we’ve talked before about them being extrinsic, meaning that they come from outside you. If they’re not self motivating, you’re asking somebody to do something that you think is the right thing to do. And so you’re going to reward them either through commission or a bonus or some other avenue. And I’ll be the first to tell you that they work. You will get people’s attention when you give rewards of any sort, as long as there’s something that that that person is interested in. But the problem is, is that you lose sight of purpose, and most of these schemes, as I might say, are derived from analytical thinking. In other words, breaking down the pieces, you know, the hole into pieces and then saying, well, let’s optimize this particular piece or this person, even with this reward or this team with a reward, or this executive with a reward or executive team with reward and on and on.

 

[00:03:44] So you can become hyperfocused. If your boss is telling you that’s what’s important to the organization, then by virtue of a reward and and if it’s in conflict with what the purposes of your organization and what is good for the customer, as you look through the customer lens, then you’re going to have unintended consequences on a very large scale. And so a lot of unintended consequences are derived from the analytical thinking where we’re trying to optimize each of the pieces. Teamwork is one of the things that falls apart, associated with analytical thinking and rewards, because if we’re rewarding, especially an individual, then they don’t really care. And so it depends on the individual right, then they’re not going to be as aware of what the team’s doing as opposed to what they’re being rewarded on. And so they become hyper focused on themselves. And to me, this is a lack of synthetic understanding. And obviously, this channel. This podcast is mostly about developing your synthetic thinking skills so that you can gain understanding. You know, I seen and worked in organizations that are trying to hit some target at the end of the month in order to achieve maybe a quarterly bonus or a monthly bonus or something like that. And, you know, they’ll ship product early to a customer just to achieve that, even though they know that the goods will come back and it may upset the the customer system because, geez, I only need, you know, ten thousand more dollars this month.

 

[00:05:36] So if I ship this out and I bill the customer, then there we go. I’ve hit my bonus. And so you see a lot of schemes of the sort end badly with these unintended consequences associated with rewards. Now, we also might see a salesperson that may hold back a sale because they’ve maxed out their commission. I’ve seen this before on multiple occasions where there’s these schemes associated with trying to cap the amount of commission that a sales person can do. I’ve seen a commission on gross revenue and not profit. And, you know, I’m not here to judge. You have to find out what works for your organization. My theory is that I usually suggest to organizations is just cutting them out. But your organization may be from a completely different spot. And so you’re going to need to experiment with different things to figure out what works best within your organization. So that’s some of the rewards associated with the problems, the unintended consequences associated with motivation and mostly rewards.

 

[00:07:03] The second thing is control. And I’ve told the story a number of times, just because, you know, when you do speaking engagements or you’re coaching someone or whatever, stories have a tendency to resonate with people.

 

[00:07:16] But, you know, for me, it’s this story of working with a tech company. They centralized everything. Everybody was their own profit center. And there’s this control element. They want to control the cost of telecom in the case of the organizations working with. So they centralized it. It became its own profit center. And ultimately what happened was the division that I was working with relied heavily on telecom for ATM machines. And because they were jacking up the price and this centralized location, the unintended consequence became that the customer was paying more for the line. They were losing business because, you know, people don’t think in terms of the whole system, they, oh, this is a great idea. If we centralize things, it was idiotic. So anyway, all of these this story and others are going in more detail and in the online training. But when I also think of control, I also think in terms of micromanagement. And when you get micromanagement, I’m seeing more and more of this today than I’ve ever seen previously, and I thought I worked with some pretty wild micromanagement executives before, but now everybody seems to because they think they have the data and they think they have a and they’ve got all these things that, well, we can micromanage the employees. Well, the first thing you’re going to lose is you’re going to drive out the enjoyment.

 

[00:08:53] You’re going to drive out the purpose. The focus is now on the manager as the purpose as opposed to what’s supposed to be good for for the customer or for your entire system. And then this creates tremendous stress and employees in neuroscience. I was listening to a podcast today where one of the people said we’re going to need to go through one of the greatest transformations ever because people are just tired of working in these organizations and they hate all this centralization and micromanagement from executives. And, you know, data. I got to have this data here and you go right. You know, it’s it’s getting really out of hand. And I, I can’t tell you how ridiculous it is to the extremes. I’m seeing micromanagement in order. Sometimes it’s the unintended consequence of just getting data. And people don’t understand why are we collecting these data. But it goes off into multiple areas where the employee is under a lot of burden to hit a either a target or do something in a certain way. And if they don’t, then they get in trouble, even though they don’t think that that way is the best way. And it may not be because they’re closer to the work than than an executive that’s telling them how to do their job.

 

[00:10:24] So anyway, this is becoming a bigger problem with some of the well, a lot of the executives that I’ve either worked with or working with now and along with control are things like a focus on costs. You’ll hear me say often that a focus on costs increases costs and and it happens from my experience, it happens like 90 percent of the time. Well, where you need to cut costs, well, then the unintended consequences start to leak and all these counterintuitive bad things begin to happen. I rarely see anything good come out of somebody who says now we’re going to cut costs or focus on costs and almost always ends and increasing costs. So, as I mentioned earlier, this comes down to a couple different things.

 

[00:11:16] This is this analytical versus synthetic thinking. And if you’re going to be an effective executive, you’ve got to do both. You’ve got analytical becomes. It’s very natural for an executive to do breaking down the pieces. Humans are this way. So synthetic thinking is something you have to train yourself to do. And your ability to look at the whole and to see the whole is something that is not as natural as an analytical thinker. And analytical thinking has lots of unintended consequences. When you try to optimize one piece of the organized organization, whether it’s an individual, a team department, you know, it doesn’t matter.

 

[00:12:04] You’re going to really lack of a better term suboptimized your system because it’s the interaction of the parts, as we know from synthetic thinking that that makes a difference and being able to be effective. And, you know, with synthetic thinking, you’re going to have fewer unintended consequences now, as I said, you’ve got to develop this as a skill and in order to develop it as a skill, you’re going to be learning, but you’re going to have as you start to see the whole along with your analytical component, you’re going to be able to. Well, what you’ll be able to do is you’ll be able to avoid these unintended consequences, you’ll just have fewer of them to understand what your purposes you understand what the customer creed is. So those I’m not saying eliminate Atlanta analytical thinking. You need to be a synthetic thinker, especially as an executive. You need to be able to see the whole of how your organization interacts with the customer. And that’s a system you need to understand your industry and how you fit in with the industry. All of these things play into you being more effective. So to be an effective executive, you have to be both analytical and a synthetic thinker, and you need to develop the skills and synthetic thinking that most executive and when I say most executives don’t have.

 

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