Global Value Chains and global decision making - problem solved

Late last week I was working with a post doc from Cambridge University who's research area is Global Value Chains or supply chain management. At the end of the session she mentioned that she was having problems getting a job, which surprised me a bit. She then rattled off a list of interviews she had attended and given presentations at and not been picked. So we sat down for a couple of hours to 'solve the problem'. What came out of this amazed both of us.
The first thing we had to do was to workout what the problem was. So she gave me the presentation she roles out for such occasions and it was impressive research. However we soon discovered that it was (like a lot of doctoral research) so specialist that only a handful of people in the world could engage at any meaningful level with the subject, and I wasn't one of them!
We quickly did a profiling job on her audiences and discovered the same was largely true of them. They were supply chain experts in their own right but not to the level required to really get to grips with her research. As she said, "It's so specialised that it's not important".

So using the principles of solving ambiguous problems we set about getting to grips with this one. Quite quickly she was designing a full page advert for the New Scientist to attract money so that she could continue with her research. This process brought about some key realisations about Global Value Chains and the issues facing developing countries as a result of the activities of globalised companies.

The issues we realised were these:
In manufacturing global companies like source the components from many countries. The decisions about where to get or manufacture the components from are based on a matrix of factors. Some of the factors in the decision matrix include cost, quality, ease of access, stability of the country, labour force and production unit, skills, inducements like tax breaks, transport and proximity to the line of the chain (So if every thing else is sourced from the Asiatic countries sourcing a small component from Europe might not make sense unless there is a good reason for it) etc.
Once the global supply chain is established, countries find that they have a relationship with other countries in the chain through the company. They have close relationships with those links on either side of the chain and more distant but equally reliant relationships with other countries further down or further up the chain. Each country in the chain is in a symbiotic relationship with the others and the company and yet they as a country are in competition with each other and want as big an amount of the pie is possible.
Once these supply chains have been established (Decisions made) they do not remain static. Many things can change or even remove one or a number of the links (Countries) in the chain. The thing to bear in mind here is that many of the links are developing countries. So a large global company setting up in a developing country helps economically. However that country does not have control of this production capability and it can move away as quickly as it arrives, especially in times of market slowdown or when another country offers a better deal.

The issue is that just about all of then decisions make are about what is best for the company. It doesn't take much imagination to work out what happens to a country that has attracted a number of of these links in a number of global value chains, when it is no longer seen as not the place to be, for whatever reason, somewhere cheaper, closer etc. It is very possible to imagine a scenario where a developing country is on the receiving end of a decision to pull out, or reallocate the chain elsewhere. If the country has a number of these chains and they all pull out, the economy of some countries would be dire straights, with the potential for civil or even international conflict.

The problem is that all of the decisions being made are fragmented and based on the health of the company not global stability. This has already happened with the global credit markets. Leaders making moneymaking decisions have created the current credit crunch. It is the lack of systems thinking outside of their own company system that has created a problem that is harming them now.

One of the things mode 4 leaders are really good at is seeing and understanding wider systems. They tend to act with this bigger picture in mind. Unfortunately from our research only about 1.2% of the leadership population are mode 4 leaders.

As for the post doc she (and I)now sees and understands the wider context that her work vitally contributes to. Her research concentrates on the relationships between emerging market countries who are part of global value chains. Her next interview is tomorrow. I'll let you know what happens.

Making great decisions

The infinite variety of people's problem solving capability and the basis of their decision making never ceases to amaze me:

Decision Making Error # 3 The Bias Bias

Today's video looks at a phenomena known as the Bias Bias, or the bias blind spot reported by Pronin in 2002. The full reference is below.

Pronin, E., Lin, D.Y., Ross, L., 2002. The bias blind spot: perceptions of bias in self versus

others. Personality and Social Psychology Bulletin 82, 369-381

Common decision making & problem solving errors #1

Lies, Hillary Clinton's Memory and Leadership Issues

A lot is currently being written about H.C.'s memory / lies / stories. Here are a couple more interesting and charitable blogs from a cognitive perspective :

1. http://scienceblogs.com/mixingmemory/2008/03/defending_hillary_clinton_from.php
2. http://www.neurosciencemarketing.com/blog/articles/hillary-kwame-and-our-fallible-memory.htm
   

I think that there maybe other explanations here, and one in particular that I have researched with leaders, particularly when they are reporting on how they see certain situations like the reality of the market conditions for example.
The phenomenon, 'context recollection' incorporates the affect of the emotions on story telling and recounting of memory events. If there is a strong emotional situational context, in which the story is being retold, particularly those contexts that produce euphoria or fear (risk and ambiguity) there is a strong tendency for the story or memory recollection to be molded to the current context to either carry on the euphoric emotions or to mitigate perceived threats.

The tellers of these untruths know and can report that the memory is not real, however the context appears to change the meaning of the untruth to 'not a lie' for the story teller.

Without evidence to the contrary, many leaders will stick to the 'untruth' and force agreement, creating a false certainty, ignoring and filtering out evidence that everyone else knows the veracity of the situation. Denial of this type is typical mode one behaviour.

This has a lot of consequences in situations where leaders are making decisions based on their understanding of the current situation and perceptions of the past. If they make decisions at times of euphoria or fear (even if they are not conscious of the emotion at the time) the decisions are usually awful ones. Their recollection of the success of the decision is likewise altered by the emotions experienced. This is why I place such emphasis on the development of emotional resilience and intelligence for leaders.

Ambiguity, bad showers, and organizational restructuring II

This is (finally) the follow-on from this article. In the that article we were discussing when it is that the decision is made to engage in some form of organisational change process. Now bearing in mind what I wrote previously about the regression fallacy and in particular the issue that things only come to our notice once they have crossed some threshold (usually a very personal and somewhat arbitrary threshold) and put it together with what I wrote about our perchance for action bias.

There are some considerations here:

1. The first is that when we actually notice a problem we don't notice the problem, rather we notice the symptoms.
   
2. Secondly, by the time that we have noticed the symptoms there has almost always been a time-lag between the problem occurring and us noticing it (usually as it passes a threshold).
3. When the symptoms cross our threshold we almost always jump into action mode or solutionizing as it is known - as happened in this situation and evidenced here.

So what happens is like trying to use a shower I have at home:

The shower in question is the type that sits over the bath and is connected, via a long flexible pipe, to the bath taps, just like the picture above.
Have you ever tried to use one of these contraptions to have a stand up shower with??

You tend to find that you were are constantly juggling the taps as the water osculates between ice and steam with about three seconds in between where the water is the temperature you want. If you have such a shower you will undoubtedly know what I mean.

The key here is the water pressure and length and bore of the pipe. If the water pressure is low, the length of the pipe is long and the bore is narrow (like my shower), the lag between what you do with the taps and what the temperature the water is when it finally comes out of the shower head is quite considerable.

The effect of this long lag between what I am feeling and any actions I take with the taps means it is incredibly hard to get the right temperature. You either have to make the changes really slowly and incrementally and wait to see what effect it has had (got the link with organisational change?), or if you are in a hurry (because things are bad and we need action NOW) you find that you end up over compensating and a couple of minutes later end up with scalding water. Which when you try to compensate for this, a couple of minutes later you are back to freezing water with a 3 second period of just right showering.

All organisational change has a long lag between what we do and their effects.

Just to make matters worse there is a lag at the beginning from the problem occurring, us noticing the symptoms and then any action we decide then to take. This is followed by a delay before we notice finally what effect our actions have had, which may be months or more likely years down the line. By which time we have got impatient and turned the taps again!

Ambiguity in Organizations

Click on the graph to make it bigger.

Again some interesting comments from Christine

Here are the approximate distributions of the modes of leadership. As you can see mode 4 leaders are in the minority. (modes 0 and 5 are theoretical at the moment as the research hasn’t been completed on these - these are the latest research distributions however only 1 -4 are accurate populations).

In terms of ability to deal with ambiguity, roughly the closer to mode 4 you get the better things get. Like everything in life every upside has a downside. The downside of this is that the closer to mode 4 you get the less methodical people are and they really don’t like stability too much. So at the moments an organisation needs change these are the guys, however the moment an organisation needs to just settle down and have a period of stability then mode one and two are the people to help here. The approach we take is to give people, particularly leaders the ability to operate in every/any mode depending on the situation and the outcome desired. This is what gives the leaders (and their organisations) their agility. Being agile usually means better decisions and more flexible thinking.

The point for me in developing (at least) tolerance of ambiguity in a wider population is that without it people’s decision making is usually impoverished. By this I mean that if they are reacting emotionally in a knee jerk way to uncertainty or risk for example, they are not usually making great decisions. Developing ambiguity acuity equips people to think clearer, make better decisions, behave better, it enhances problem solving etc. particularly, but not exclusively, in difficult and shifting situations. The very situations others spend most of their time avoiding or denying. They certainly outperform colleagues who don’t have much emotional resilience in a wide range of leadership tasks. These are also the people who will take a risk and try new things.

As you start to increase the numbers of people in an organization who can, as a minimum at least, cope with ambiguity the more agile the organisation becomes, the easier it finds it to navigate difficult times and find advantage where others are struggling. Such organisations also adapt to changing conditions quicker and with a better fit. This is why we do the work we do in companies and organisations. It makes them successful right at the time others are having it tough. To come out of a tough time like a recession for example in great shape, being innovative and having found new markets or other advantages during the difficult times, is like having a spring board into a new world, when others are still just looking up at the board wondering how to get up there.

In short - deal with ambiguity better and you and your organization become more agile, competitive, and swift.

Ambiguity Competencies

The comment Christine left was on the last blog was really interesting. It raises some very important and practical issues about using ambiguity for development in organisations.

Oddly when I ran a department at Cranfield University I used to research and teach competency development as one of my areas of interest. I have come across a couple of competencies for ambiguity I would agree with you that just about all of them miss the point or help others like managers to miss the point!

For me there are a couple of important issues here which broadly fall under four broad headings:

1. Creating ambiguity for advantage
2. Dealing with ambiguous situations to gain the advantage
3. Leading others in times of ambiguity
4. Developing ambiguity tolerance / resilience in organisations
   

1. Creating ambiguity for advantage

The first is that creating ambiguity works in certain situations, mainly those where there is an advantage to be gained from doing so. This requires excellent decision making capabilities, or the ability to know exactly when to create ambiguity and when to create clarity, both of which are different but connected cognitive skill sets. There is then the question about how to create differing levels of ambiguity or clarity for the effect required.

When we are working in organisations we concentrate on developing 6 areas of capability that all contribute to the ability to use ambiguity well:

1. Emotional Resilience
   
2. Decision Making
   
3. Problem Solving
4. Critical Thinking
5. Creative Thinking
6. Development of Autonomy
   

2. Dealing with ambiguous situations to gain the advantage

The second is that the major skill in dealing with ambiguous situations is to find the advantage inherent such circumstances, especially when just about everyone else is heading for the hills or a bunker somewhere nice and safe.
This requires a good level of emotional resilience. This is different from emotional intelligence which is also required. One of the things we do know about ambiguous situations is that with the exception of mode four individuals (See Modes of Leadership) they almost always bring about a change in people's emotional state. Heightened emotional states almost always reduce the effectiveness of cognitive operations (thinking). Therefore what happens is that when a person feels that things are ambiguous they will respond in one of a number of ways. These responses can range from total denial, construction of a new reality, attention being placed less ambiguous items, displacement behaviour and so on. Therefore competency frameworks need to look at emotional resilience as a separate (but linked) skill set from emotional intelligence. Interestingly this is where a lot of our work comes from. Helping organisations develop the thinking and skills to profit from ambiguity and part of that is developing emotional resilience.

As a side note here we discovered that skills or competency development programmes have greater impact when the cognitive side of things are addressed. In other words the thinking needs to develop with the skill which is one of our USP's and is based on the idea of modes of thinking which is embeded in the Modes of Leadership model. The reason being is that the system of logic we apply to any situation changes the way we see things and consequently behave or react, which is inextricably linked with our emotional responses. Which is why when we engage people in our Agile Leadership Programme (pdf) we develop all six skill sets at the:

1. Behavioural,
   
2. Cognitive
   
3. Belief / attitudinal, and
   
4. Emotional levels together.

This holistic approach accelerates the development process and means that graduates of the programme can deal with any situation that occurs, make good decisions are creative and critical and can stand on their own two feet in any situation.

In terms of recruiting similar issues abound.

I will answer issues 3 & 4 later

Action Bias in Decision Making & Problem Solving

The blogs have been a little sporadic in the last few weeks as I have been in the Middle East running workshops for a series of universities and agencies on how to develop critical and creative thinking, as well as higher levels of problem solving, decision making, greater levels of autonomy and leadership capabilities in students and employees.

Anyway...

Another factor that alters decisions to make a decision (!) ( or what it is that triggers us to make a decision) and contributes to the decisions we make is a phenomena called action bias. Simply put this means that just about everyone, when faced with ambiguous situations, especially those circumstances associated with risk, gets the feeling that they need to take some action regardless of whether this is a good idea or not. This frequently contributes to misjudgments about when to act (usually too soon or in the wrong direction) and misperceptions of the nature of the problem facing them, which means that people not only make decision too soon but they could often, almost always have easily made a better decision if they had an awareness of the unconscious psychological drivers we have to make decisions.

Simply put action bias states that when faced with uncertainty or a problem, particularly an ambiguous problem we prefer to do something, in fact we are happier doing anything, even if it counterproductive, rather than doing nothing, even if doing nothing is the best course of action. Action bias was noticed by Bar Eli et al (2007) in a study of goal keepers behaviour in soccer games when faced with trying to save a penalty. When they analysed where most penalty kickers place the ball on taking the penalty they found that just over 1/3 of the time they shoot for the middle and the remaining times, just under two thirds they aim for either the left or right corner. And yet when faced with the decision of what to do almost all goal keepers prefer to leap either to the left or the right rather than standing in the middle, where on average they are marginally more likely to save more goals. The thinking behind such a decision is that it looks and feels better to have missed the ball by diving (action) in the wrong direction than to have the ignominy of watching the ball go sailing past and never to have moved. Action bias is usually an emotional reaction based on the feeling that ‘I have to do something’ even if I don’t know what to do.

The same often applies in many other situations. In a study of police officers dealing with minor disorder outside of night clubs in the UK for example, it was noticed that when some (a minority of more mature and often more experienced) officers were present at the scene they were much more likely to be tolerant of minor disorder and hang back and not act. Preferring instead to keep an ‘eye on the situation’ when they considered the behaviour was ‘horse play’ and without consequence to other members of the public. When other, usually less experienced (the majority),police officers witnessed such behaviour they were much more likely to act, engaging with the ‘offenders’ at an early stage of the situations. The result was that where police officers didn’t act, there were fewer arrests, fewer injuries and the situations usually defused itself without intervention. However when officers did intervene early the situations were far more likely to escalate and more people were likely to be sucked into the situation. When the police took action more of a crowd of onlookers usually developed with the result that some of them got drawn into the situation. The police officers who did act early almost all reported that they felt compelled to ‘do something’ and that ‘sitting around doing nothing isn’t an option’.

Action bias frequently draws us into ‘doing something’ when hanging back, observing and exploring the situation for a while is often the best action to take. As you can see action bias can make easily situations worse and is the foundation of a lot of poor decision making in companies and organisations around the world. This is linked to both the illusion of control phenomena and regression fallacy which were the subject of the last two blogs.

It is also worthwhile noting that action bias leads us to jump into developing solutions before we have the problem fully articulated (solutionizing). A subject that has been the focus of previous blogs.

Also there are one or two places left on the March 4th workshop.

Michael Bar-Eli, Ofer H. Azar, Ilana Ritov, Yael Keidar-Levin and Galit Schein (2007) Action bias among elite soccer goalkeepers: The case of penalty kicks. Journal of Economic Psychology Volume 28, Issue 5, October 2007, Pages 606-621

Sleep on it

A small break from risk aversion. I was talking to a friend today about problem solving. She asked me how I solved problems. I said I have a number of different approaches, it depends on the nature of the problem and started to rattle though a few methods. She stopped me and said no, I don’t mean like that. How do you solve the problems you don’t know how to solve?

Damn good question. I thought about it for a minute and then realised I sleep on it. I have a note book by the bed and before I go to bed I ask my mind to solve the problem I am working on. I then go to sleep. I usually awake with an answer. This also works for when I loose something. If I don’t have it by the next morning I usually have the answer in a couple of days.

I then came across this report later on about an inventor who dreamed a solution. Sleeping on it can be considered to be a viable and valid method of solving problems.

I just wonder if this is better for certain types of problem than others and if it works for everyone.

Emotional Inteligence 2 - Resilience part one

A series of studies in the early 2000's concentrated on the role of human emotional resilience as a useful set of abilities when dealing with crisis and ambiguous situations.
The higher the level of emotional resilience an individual has the better they are likely to handle disadvantageous and ambiguous situations. Emotional resilience is also a strong indicator of a number of attributes, including:

• a person's ability to solve problems in emotionally charged and ambiguous situations,
  
• their level of persistence, especially in difficult circumstances,
  
• their latitude towards diversity, both of other people and differing situations
  
• confidence,
• the ability to analyse, weigh up and take risks,
  
• the ability to collaborate,
• as well as an individuals level of autonomy.

A lot of work was conducted in the Australia and the UK in the early 2000's around Bernard's You Can Do It! educational ideas aimed at improving children's attitudes towards life in general. Based on Cognitive Behavioural Therapy, Bernard developed a series of educational interventions which increased positive attitudes to education and problems solving in deprived areas.
Simultaneously similar work was being carried out by the author in 2002 - 6 whilst training disaster managers in a number of countries around the globe. The aim was to develop a system to improve the reactions and problem solving abilities of individuals and teams given the job of managing and leading in natural disaster and post terrorist attack incidents. These are situations which by definition are high in ambiguity, emotional stress and often personal physical danger. Not the ideal environment for high quality problem solving, however one in which such quality is required as people's lives often depend on the solutions.

The importance of emotional resilience in problem solving, especially when any solutions derived are critical to an individual, company or group, can not be understated.

Emotional resilience comprises of

• Emotional Regulation - the ability to recognise and control (reduce or increase) our emotions at will, (yes it is possible!)
  
• Behavioural Control - the level of ability to be able to determine and regulate our outward behaviours especially when we are in a heightened emotional state,
• Emotional - Cognitive Switching (ECS) - the ability and speed at which we can move from our awareness of and concentration on internal emotional events to engaging with logical, cognitive (thinking) and meta-cognitive processes.

Our Ambiguity Advantage Practitioner Workshops develop emotional resilience and exquisite problem solving skills for all.

Something is missing

I was working with a group of senior leaders in a very large national institution last week. For 90% of the 2 day long meeting the leaders were all working on the problem of how to develop better leadership underneath them and create a more agile and ambiguity tolerant workforce.
The main problem they mused was that people were following orders blindly, not challenging and that there was a total lack of creativity in the workforce.
Solutions abounded about how to fix 'them' and what should be done to solve the problem.

When asked what it is they are doing to increase their own tolerance to ambiguity, develop their own creativity and challenge people in a developmental way there was silence. Indeed if any of us honestly ask ourselves what we are doing to increase our own tolerance to ambiguity and increase our creativity and critical thinking we would draw a blank.
The first issue probably is that we just hadn't thought about it. Once you do start to think about it the second issue then naturally comes forth - just how on earth do you develop your tolerance to ambiguity? Over the next few blogs I will be exploring just that. How can we all get better at dealing with ambiguity?

Back to the meeting - we explored the effects and affects of emotions on problem solving, ambiguity, perceptions of us and them and critical thinking - evidence based thought. It was widely agreed that the key to al of this was understanding our own emotions and the effects they have on our reactions and thinking; emotional intelligence if you like.

So 90% of the meeting was talking about leadership and how to create a more agile, ambiguity tolerant leadership below the board. The other 10% of the time was spent at the end of the meeting reacting to the news that the responsibility for training of new recruits was being removed from this group and was being given to a central agency.

"Our founder would turn in his grave if he knew what was happening"

"We need to stop this before it goes any further"

"They need to be shown the red card"

"This is outrageous how can we indoctrinate them with the right culture if we are not doing it - we need to do something about this now."

The next blog will concentrate on emotional intelligence - what is it and what does it do for us?