Behavioral Science At Your Service |
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reality-test your assumptions |
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Hi folks, it's Melina :) A warm welcome to newcomers 😎 A big cheer for devoted readers 🎉 How can you improve something you don’t fully understand? |
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Anne Mulcahy, a 45-year-old, little-known executive, became CEO of Xerox in 2001 and achieved one of the most impressive turnarounds in recent business history. When she took over, Xerox was drowning in a staggering $19 billion debt and had virtually no cash reserves. The company's stock had plummeted by a shocking 90% the previous year, and on the day Mulcahy became CEO, it suffered an additional 15% drop. However, in just six years, Mulcahy accomplished a remarkable feat—she managed to slash the debt in half and increase the company's stock value 4X. One of the major challenges she faced was the disconnection between her executive team and Xerox's most vital customers. To address this issue, she devised a program called Focus 500, which aimed to provide an up-close and personal view of Xerox's customers and the challenges they faced. Through this initiative, each of Xerox's top 500 clients was paired with a senior executive who would serve as their dedicated contact person. Every senior executive across all departments, from accounting to legal, had the responsibility of collaborating with at least one customer. Additionally, Mulcahy implemented a rotation system where executives took turns serving as Customer Officer of the day. This meant that they would handle all customer complaints received on that day. Mulcahy explained: "It keeps us in touch with the real world. It grounds us. It permeates all our decision-making.” While possibly the world’s most expensive customer support department, the Focus 500 program successfully facilitated a reconnection between top executives and the customers, and played a vital role in the company's success. Sources: Stanford Former CEO Mulcahy on Turning Xerox Around, Heath, C., & Heath, D. (2013). Decisive: How to make better choices in life and work. Crown Business. How to reality-test your assumptions |
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In our effort to understand a situation, psychologists distinguish between the “inside view” and “outside view”. By default, we tend to adopt the inside view. This means we focus on the information that is immediately apparent and form quick impressions based on that limited perspective. For example, you are looking to book a hotel in Ayia Napa and focus only on the spectacular photos. However, when we take a step back and zoom out, we embrace the outside view. This involves learning from the experiences of others who have faced similar choices. In the example above, we look at the reviews of other guests about the hotel. The outside view allows us to benefit from a broader understanding and real-world insights. It’s about asking this humble question, “What can I reasonably expect to happen if I make this choice?” When we combine the outside view with a close-up of the situation, we get a very powerful strategy. A close-up is about seeking out additional details that could provide valuable "color" to inform our decision-making process. For instance, asking a friend who visited Ayia Napa to tell us whether the location of the hotel seems convenient for vacationing without a car. This perspective adds texture that may be missing from the outside view alone. How can you improve something you don’t fully understand? You can’t. What you can do is combine the outside view with a close-up. This allows you to develop a more realistic outlook, mitigating the overly optimistic scenarios we tend to envision within our own minds and redirecting our attention to the external world, first with a wide-angle lens and then with a close-up focus. |
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FDR This mixture of the outside view and the close-up was the signature strategy of President Franklin D. Roosevelt. hailed as a master of gathering information. Like all presidents, FDR was wary of the quality of information he received, concerned that it might be tainted by the biases of those conveying it. Driven by his hunger for reliable data, Roosevelt became the first president to heavily rely on polling as a means to stay informed about public opinion. Additionally, he actively sought out "ground truth" by cultivating a diverse network of sources beyond the federal government, including businessmen, academics, friends, and relatives. These individuals served as his eyes and ears outside the bureaucratic system. He encouraged them to witness firsthand what was happening, observe the tangible outcomes of governmental actions, engage in conversations, and gather authentic insights. One of his able collaborators in this endeavor was his wife, Eleanor Roosevelt. She frequently visited projects without prior notice and talked to the staff, compiling comprehensive reports for FDR. Roosevelt was also the first President to recognize the strategic value of using the mail as a source of information. Through his fireside chats, he actively encouraged Americans to share their views with him through letters. As a result, the White House received about 8,000 pieces of mail per day. FDR insisted on subjecting the mail to scientific analysis, categorizing and sorting it by different viewpoints. These statistical breakdowns, known as "mail briefs," provided him with valuable insight into the public's perspectives. However, FDR took an extra step beyond relying solely on the aggregated data. He personally reviewed a sample of the actual letters received. These letters added a texture that numbers alone couldn't convey. It was one thing to know, in statistical terms, how people felt about an issue, but understanding their emotional temperature—whether they were concerned, irritated, angry, or passionately incensed—required a deeper understanding that the numbers often concealed. The wisdom of this close-up approach has been embraced by some organizational leaders, including Anne Mulcahy. |
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Take-aways for reality-testing your assumptions Look for the right kinds of information instead of trusting your impressions (inside view). You can do that by: (1) adopting the outside view, which summarizes the experiences of others, and (2) zooming in to get a more nuanced impression of reality. As engineers diagnosing problems in a factory find it useful to have a close-up view of the relevant process, Anne Mulcahy found it useful to give her leadership teams a close-up view of how Xerox was treating its customers. She looked for answers from the experience of others, like FDR, and then created the right environment for access to close-up information to help Xerox managers create intuition about the problems their clients were facing. If you're interested on Xerox's remarkable turnaround under Mulcahy click below ⬇ |
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Until next time, stay extraordinary. |
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