I’m hitting refresh on my email, waiting for several executives to get back to me about new projects. One has to rethink its global rollout due to budget cuts. Another has the budget authorized but needs commitment from the CFO before they can proceed. A third is weighing the pros and cons of tackling many issues simultaneously or focusing on one problem to save time and money.
While there’s always a race to ink a few more deals, 2023 feels a bit different so far. Faced with declining revenues, a looming recession, higher costs, and subsequent cost cutting, executives are asking how they can get by with less—less investment in their current and new talent, less investment in tools, and less investment in leaders.
I get it. No business school teaches us how to quantify our impact, model the ROI of having a growth mindset, or forecast the revenue lift created by a climate of psychological safety. Without this Leadership 5.0 course, how do we know where and on what to expend our energy or invest our dollars or time?
Companies with strong cultures achieve up to three times higher returns to shareholders than those with lackluster ones. Moreover, research shows a climate of psychological safety boosts overall financial results by as much as 35% and improves revenue by an average of 19%. That’s why we need to focus on making suitable investments in people instead of shying away from them in times like these.
To understand what it really means to invest in your people, it helps to understand what science says may be going on in our minds. At the most basic level, our brains are built to do one thing: stay alive. That single-minded focus makes our brains good at recognizing potential threats, so it doesn’t take much for us to end up in what’s known as a threat state. Our ability to solve problems, make connections, and communicate plummets. Working in a threat state is like coming to work sick—it’s not good for you or those around you.
For executives, scanning for threats is even more difficult because we’re often asked to balance the constantly changing needs of our teams. Consider an analogy our CEO, David Rock, likes to use: Your brain is like a small theater, with thoughts and ideas filling the seats. The stage is our prefrontal cortex, which controls where you focus at any time. There’s only so much room on the stage—maybe five or six spaces at most—yet leaders today have a circus of ideas parading across the stage all day and every hour. It’s simply exhausting.
To help leaders and employees alike, here are five science-backed ways to help us make suitable investments when resources are limited for whatever comes next.
There are five key social drivers in meeting employee needs: status, certainty, autonomy, relatedness, and fairness, or as we like to call it, The SCARF® Model. This model is like a secret decoder for human brains that allows us to reduce threats and increase rewards in every communication we have.
In action: Imagine you need a team to reduce its budget by cutting one of three projects. Leaders who don’t understand SCARF would likely choose the project to cancel, inform the team, and move on. Here’s what that looks like in the team members’ brains:
- Status: Threat increases because my input wasn’t even considered.
- Certainty: Threat increases because I’m not sure if other projects are going to be canceled.
- Autonomy: Threat increases because I wasn’t given a choice on what to cancel.
- Relatedness: Threat increases because I wasn’t consulted.
- Fairness: Threat increases because I don’t know if our project is the only one.
Leaders who leverage the SCARF method would do something like this and get much better results:
- Status: Reduce threat by asking the team for the input on which project to cancel.
- Certainty: Reduce threat by explaining only one project needs to be canceled.
- Autonomy: Reduce threat by letting the team choose which project to cancel.
- Relatedness: Reduce threat by involving them.
- Fairness: Reduce threat by explaining that all teams are being asked to make reductions.
One of the fundamental flaws of our brain is our limited cognitive capacity, or ability to focus. Consider an analogy our CEO, David Rock, likes to use: Your brain is a small theater, with thoughts and ideas filling the seats. The stage is the brain’s prefrontal cortex, or what controls where you focus at any time. There’s only so much room on the stage — maybe five or six spaces at most — and all of us have a circus of ideas parading across the stage every hour of the day. It’s simply exhausting.
There are four things to keep in mind to reduce the cognitive overload on that crowded stage. Make sure your ideas and projects incorporate FACT:
- Make it FLUENT: When sharing information, make it as easy to understand as possible — use simple language and relevant examples. When working visually, try using high-contrast lettering or images and reduce the “busyness” of the images in use.
- Reduce the AMOUNT of information: Working memory can hold only a few units of information. Managing cognitive capacity involves respecting working memory by“chunking” information into larger units and breaking complex concepts or operations into steps.
- Ensure the COHERENCE of ideas: Make sure new ideas, strategies, and projects are linked to existing ideas and frameworks so the brain can easily make sense of the new information.
- Give it some TIME: The brain needs time to process information and make connections. Don’t ask for a decision right away, but let the brain do its work, consciously and unconsciously, to get the best results.
In action: Microsoft respected cognitive capacity when they replaced hundreds of leadership competencies and with three things all leaders must do each day to thrive: create clarity, generate energy, and deliver success. These principles are embedded in Microsoft’s culture, and have been a critical part of their growth over the past five years.
Research shows we’re incredibly sensitive to power differentials and greatly impacted by its effects — so much so that we’re not even aware of it. That explains why people with power tend to consider others’ perspectives less and become more goal-focused than people-focused, which can sometimes lead to poor decisions that have negative consequences.
In action: The key to not becoming overly goal-focused is to make focusing on people an explicit part of a manager’s role. When leaders are responsible and accountable for the well-being and development of employees, they create prosocial goals tied to the welfare of others. When that happens, there’s no longer a tension between being goal-focused and people-focused. Organizations with people-focused goals outperform those without them. Companies with something as simple as a listening program historically thrive during financial crises. Their stock performance increased 14.4% across the Great Recession years, while the overall market dropped 35.5%.
We know that organizations that foster a growth mindset and climate of psychological safety perform better. While a growth mindset is critical for improving individual performance, most work is done in teams, and the most powerful way to improve team performance is to create psychological safety. Psychological safety encourages speaking up, debating, and actively listening to ensure the best ideas win. Teams with psychological safety are 76% more engaged and 235% more likely to take on new functions in their company. Imagine what you could do during a recession with turbocharged teams like that.
In Action: On January 15, 2009 US Airways Flight 1549, known as the Miracle on the Hudson, landed safely in the Hudson river saving all 155 people on board. Prior to landing Captain ‘Sully” was given guidance and support by air control and his co-pilot but clearly understood that the airline’s policy was for the captain to ‘...use common sense and good judgment’ in deciding how to handle an emergency for which no safety protocols existed. This simple policy statement gave Sully the psychological safety to make the right decision without second guessing himself and save hundreds of lives.
Remember, you aren’t a superhero. Taking time to care for yourself is essential to ensuring effectiveness and overall well-being. Try to weave in some downtime, which isn’t what you think it is and is harder to do than you might think.
In action: My inspiration for practicing downtime comes from the Buddhist monk Thich Nhat Hanh, who eloquently stated: “If while washing dishes, we think only of the cup of tea that awaits us, then we are not washing the dishes to wash the dishes. What’s more, we are not alive during the time we are washing the dishes.”
Mindfulness isn’t just a new-age trick to stay focused; it is a tool to rest your mind. I try to be alive for every moment by focusing on what is in front of me, not what is coming or what happened in the past.
Each time your company or team faces big decisions, remember that conventional wisdom isn’t always that wise. So instead, spend time reducing threats, minimizing cognitive overload, and fostering a climate of psychological safety. You can then build on these investments and unlock agility, innovation, and growth — ultimately, reframe current challenges as bountiful opportunities.