Tag Archives: information

2 Heads Are Better Than 1, 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 that 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. Groups 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, 10 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 on 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 single-handedly 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. 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.
  • Groups 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.”

7 Stakeholders for Cyber Risk

Imagine you’re the CFO at a firm involved in sensitive M&A discussions with your bankers, and you receive an email asking for a small bit of non-public information on your company, the kind you’ve passed on before. You send the information – and later find you were the victim of a sophisticated cyber-attack.

Now imagine you’re in charge of operations at a manufacturing facility. Out of the blue, your employees report that they have lost control of key systems. It’s impossible to shut down a blast furnace correctly, endangering the safety of employees and others and threatening massive damage. You, too, have been the subject of a cyber-attack.

These events underscore the new reality in cyber risk management: It is no longer just an IT issue. Everyone – from individual employees to risk managers to your board of directors – now has a stake in managing cyber risk comprehensively, across the enterprise.

Following are seven key stakeholders to consider as you look at your cyber risk management strategy:

  1. Risk manager: Risk managers can ensure various stakeholders are connected in terms of assessing, managing and responding to cyber risk. Understanding the evolving cyber insurance market and overall risk finance options is also important.
  2. CFO: Concerns range from the potential costs of a cyber event and what the impact could be on the bottom line to the security of the office’s sensitive information.
  3. CEO/board of directors: Accountable for overall business and company performance, they have a fiduciary duty to assess and manage cyber risk. Regulators, including the Securities and Exchange Commission and Federal Trade Commission, have made clear they expect companies’ top leadership to be engaged on the issue.
  4. Legal/compliance: As regulations around cyber develop, legal and compliance roles become increasingly important in keeping other stakeholders informed and engaged. And, if a cyber incident occurs, lawsuits often follow within hours.
  5. Operations: Maintaining daily operations, business processes and workplace stability is critical during a cyber event.
  6. Human resources/employees: Simple errors – or deliberate actions – by employees can lead to costly cyber incidents. Training on best practices is critical, especially with the rise in sophisticated “spear phishing” attacks targeting specific employees.
  7. Customers/suppliers: Interactions with customers and vendors can open you up to an attack. You need to understand the protections they have in place so they don’t become the weak point in your cyber defenses.

Protecting your organization’s data and individuals’ privacy is becoming more difficult by the day. Successful cyber-defense strategies are comprehensive and multi-pronged. A critical component is understanding and defining the roles and responsibilities of all key stakeholders.

To participate in a webcast on how to assess cyber risk, click here.

How to Apply ‘Lean’ to Insurance

If you’re like many employers, you say you run your business in this order: people first, process second and profit last. But for employees and customers alike, they feel as if it’s: profit first, process second, then people last. With 60% to 70% of your employees disengaged, it’s not time to change the way they think, but the way you think first.

If you do, you’ll make more money by putting things in the right order.

How you run your business indicates how you sell. With more agents “spreadsheet selling,” just based on numbers, learning how to identify and remove root causes of customer problems has gone by the wayside. One could argue that few producers even know how to sell anything other than spreadsheets. When there are other alternatives for customers, however, spreadsheets add no real value in customers’ eyes.

Toyota’s definition of adding value, along with that of other companies that have adopted the principles of lean manufacturing, is the one to study when trying to improve your business and help customers improve theirs, too. At Toyota, it really is people first, process second and profit last.

Before we get to how to apply Toyota’s thinking to insurance, let’s study how its version of lean manufacturing made its way from America to Japan.

Early on during World War II, America was in desperate need of quality and speedy production to build machinery to fight and win the war. Tanks, airplanes, guns and submarines were in short supply when Japan surprised America at Pearl Harbor.

The U.S. government turned to the Training Within Industries program to educate American manufacturers on how to improve quality and reduce costs while increasing the rate of production. With a crisis threatening to destroy everything we knew, we developed an enlightened sense of purpose. American executives listened and changed the way they looked at people and how they built things. The principles of lean were born.

After WWII ended, Gen. Douglas Mac Arthur was given full responsibility to rebuild the Japanese economy. When he arrived, he found devastation, burned-out cities with no functional capacity and people existing on just 800 calories per day. He also discovered he had no way to distribute propaganda necessary to convince Japanese citizens about what Americans wanted to achieve.

With quality Japanese radios in short supply, MacArthur turned to Bell Labs, which turned to employee Dr. Walter Shewhart for help improving radio communications. Shewhart, who was unavailable, recommended that 29-year-old engineer Homer Sarasohn be sent to Japan, to teach statistical quality control. Sarasohn then spent four years working closely with Japanese scientists and engineers, improving their knowledge about how to best manufacture and sell goods and services.

When Sarasohn left in 1950, the reins of teaching continuous improvement were turned over to Dr. W. Edwards Deming. Deming expanded on what Sarasohn began, and lean manufacturing took hold at hundreds of companies, including Toyota, one of the many Japanese companies Deming consulted for until he died in 1993.

Today, Toyota is known for its driving principle; respect for people is the core to the culture. All decisions for improvement are made with this principle in mind. Even when it comes to reducing labor costs, respect for people is at the forefront. For example: Toyota has never laid off a single employee. It has, instead, turned to employees to improve their processes by finding wasteful steps and activities that impede value customers demand.

And when it comes to profitability, Toyota’s profits in 2013, exceeded Ford, GM and Chrysler combined, even though Toyota built roughly half the number of cars.

So, how can you as an insurance agent/risk manager use the same concepts to grow and improve your business?

Quite simple:

  1. Improve capacity by first engaging employees in identifying wasteful activities. Then reduce or eliminate the activities. Activities such as:
    1. (T)ransporting something.
    2. (I)nventory–keeping too much or failing to meet customer demand.
    3. (M)otion–looking, reaching or stooping to get something that isn’t in its best place.
    4. (W)aiting for information. How often do you wait while someone else produces material? How much time is spent waiting for loss runs, proposals, and other data?
    5. (O)verproducing information. For example: sending out copies of emails to multiple parties unnecessarily–emails that take time to be read by each recipient.
    6. (O)veranalyzing information or taking too much time to make a decision.
    7. Creating (D)efective information that must be redone. Certificates, proposals and routinely changing human resource policies come to mind.
    8. Failing to maintain a (S)afe working culture.

These are, based on the initials, the TIMWOODS of waste, and identifying them is your starting point.

  1. As capacity improves, employees have more time on their hands. The first cost you’ll reduce is overtime. That’s because employees will meet production demands better. Remember, you’re looking for reducing, or eliminating altogether, processes and activities that add no customer value. A secondary benefit? Employees won’t feel that their valuable skills are wasted on activities they don’t enjoy anyways.
  2. As capacity improves, share what you learned about your improvement efforts with customers and their supply chain. You’ll be busy with ample prospective opportunities.
  3. Then offer to work with customers and their supply chain to teach them how to use what you’ve learned.
  4. Develop strategies using your new capacity to expand your business. Focus on creating opportunities that reduce risk and improve internal and external customer efficiencies. That’s value through the eyes of your customer.

Don’t believe lead times matter within the service industry? Look at what Western Union accomplished: Lead times were reduced from 22 days to just 19 minutes.

  1. Before improvements
  2. After improvements

Lean has benefits to offer the entire insurance and risk management community. We’ve prioritized profits over processes and people and missed out. It’s time to re-order our priorities.

 

5 Musts for Being a Thought Leader

Your clients and prospects are inundated with information online to help them solve their problems. Some of the information is genuinely educational; most of it, though, is self-promotional or generic. How do you stand out and get noticed as the one they should turn to for help? One way to break through the clutter is to focus on thought leadership.

What is a thought leader, and why do you want to be one? There are lots of definitions, but I like this one from Forbes:

“A thought leader is an individual or firm that prospects, clients, referral sources, intermediaries and even competitors recognize as one of the foremost authorities in selected areas of specialization, resulting in its being the go-to individual or organization for said expertise … [and thereby] significantly profit[ing] from being recognized as such. “

As the go-to expert, you’re likely to profit in many ways. Regardless of whether it directly brings in new business, thought leadership helps to differentiate you from competitors, expand your reach and build relationships and trust with your audience. You’re also educating people and promoting deeper and more informative discussions, which is a public service.

That all sounds great, but how can you be a thought leader?

1. Understand your sweet spot. In his book, Epic Content Marketing, Joe Pulizzi defines the sweet spot as “the intersection between your customers’ pain points and where you have the most authority with your stories.” Take the time to really research your audience’s needs and concerns. Then consider what expertise and insights you can offer to help them. Don’t spend time talking about areas where you are not well-informed and don’t have much value to add. Focus on what you know best that can assist your clients.

2. Differentiate your message. Your strongest competitors will be trying to do the same thing you are doing – providing valuable content. Know what they are saying and doing and look for ways to be even better or different. For example, focus on a narrow niche, survey the industry and share research, have an opinion, identify trends and provide insights. Give specific and actionable strategies taking into account whatever new developments are occurring. The point is to go beyond sending out a typical client alert that sounds just like the ones from every other firm. The Forbes article provides a great example, but we’ve all seen examples of thought leadership. We know who is going above and beyond.

3. Have a strategy and goals and align the two. Being a thought leader is a lot of work, and you want to be clear about what you’re doing, why you’re doing it and what you hope to get out of it. Seems pretty obvious, but the reality is that too many firms start down a path without thinking it through. For example, you have an attorney who happens to be a prolific writer and speaker in a specific area of the law. The problem is that area is not very profitable or high-priority for the law firm. How much effort do you want to put behind promoting expertise that isn’t a good fit for the firm? Or maybe the thought leadership is great and would be good for the firm, but it’s not being seen by the right niche audiences. Sometimes, firms focus on getting the content piece right but spend less time making sure the promotion and distribution is getting to their target market. You need to bring both parts together in a strategic way; otherwise, how are you going to profit from being a thought leader?

4. Write, speak and share information consistently. You can’t be a thought leader if you don’t put your thoughts out there. Write articles, blog posts, whitepapers and books. Curate and comment on other people’s content. Speak at online and live events. Create video. Use social media. You don’t have to do them all, but put out content in different formats to maximize your reach and appeal to different audiences. And do this regularly. Thought leadership is a long-term strategy. People have to hear from you on a consistent basis. An occasional article or speech isn’t enough, even if it’s really great. Of course, there are lots of ways to repackage that great content to get more life out of it, but make sure you’re doing that. You must be visible on a regular basis.

5. Cultivate relationships with other experts, influencers, industry professionals and media. As you develop your thought leadership, reach out to other authorities. Gather and share their insights with your audience, make introductions and give referrals and offer to help them with their content. By assisting others, you’re getting your name out to key contacts in your field and developing deeper relationships, and it’s likely at least some people will reciprocate by helping you. It will also make your thought leadership better-informed because you’re incorporating insights from others.

Becoming a thought leader is a long-term commitment and a lot of work. However, successful firms know the investment is worth it, to not only survive but thrive against the competition.

Stop Muzzling Important Voices

Are there “muzzlers” in your company? People who stifle the flow of valuable information or use their influence to create secrecy, increase political advantage or reduce transparency?

When valuable and timely information cannot flow freely within and external to an organization, not only is the company’s innovation, collaboration and talent development dampened, but its external relationship ecosystem suffers, as well. What I call “muzzlers” are cancer cells lurking inside your enterprise. Their destructive behavior is almost certainly damaging the brand you’ve worked hard to build. And yet, like a cancer that hasn’t yet manifested symptoms, you may be completely unaware of the danger.

Information muzzlers believe information is on a “need to know” basis — and you don’t need to know. Too many initiatives become massive secrets; too few function as test beds whose results are disseminated in useful ways. I believe information muzzlers are an unintended byproduct of scarce resources. More and more, departments and functions have to compete for resources. This has created an internal competitive force, with jockeying for mindshare and internal wallet share. Scarcity creates a fear-driven culture that causes information muzzlers to multiply.

The cost of information muzzling is huge. It prevents collaboration and wastes resources. Worse yet, it inhibits leveraging the collective intelligence of the organization. Like cancer, information-muzzling spreads and begins to affect the entire culture. Just one example: I go to a conference, I learn something really cool, but because we have an information-muzzling culture, I don’t tell anybody anything about it. Now that best practice isn’t documented, shared or spread throughout the company, and the value of sending me to the conference is a tenth of what it might have been. Down this path lies higher operating costs and lost competitive advantage.

Influence muzzlers can be just as costly to an organization. Influence is about strategic relationships within a professional network. Any time we’re faced with a challenge or an opportunity, we tend to think about what we should do and how we should do it. We seldom think about who— who we need, who we know or how we might connect the dots from the relationships we have to the relationships we need.

Insurance is typically sold through brokerage firms — a vast, strategic, relationship network. Yet influence muzzlers don’t see its utility. Who in that network really understands high-net-worth individuals? Who in that network knows exactly how to value priceless artwork? Who in one of these agencies “gets” Millennials and their digital behavior? Making those connections is good for all concerned, but influence muzzlers don’t want to share. Fundamentally, they are undermining the value in the organization’s biggest asset, which is its portfolio of relationships.

So far, we’ve talked about inside the organization. But muzzling, of information, influence or both, is just as harmful outside an enterprise. External resources are a huge asset to any organization: the advisers, consultants, coaches, speakers and others who bring cross-industry knowledge and an independent lens.

As an outside adviser and a professional speaker, I run across muzzlers when I am engaged by an organization. Their passive-aggressive behavior signals that they want others to think they have more information or influence than they do. As a mentor drove into me years ago, “Real power doesn’t corrupt; powerlessness corrupts!” These people don’t have real power, so they use muzzling instead. Their behavior, whether fueled by lack of self-esteem of self-confidence, or political jockeying, or ambition, comes down to 1980s tactics of information hoarding and Rolodex hiding. They make everyone else’s job more difficult, but that’s just one small aspect of their cancerous qualities.

One of the promises I made to myself when I started consulting and speaking professionally more than a decade ago was that I wasn’t going to be a “pull-string” expert for hire — the kind who takes any stage, you pull the string, and you hear the same canned recommendation or speech over and over again. I prefer to bring a unique, contextually relevant perspective to every engagement. Above and beyond interviewing the CEO or the board who hired me, I dig around to learn more about the real challenges or opportunities within the organization. I reach out through contacts on LinkedIn. I ask for interviews with key leaders down to front-line contributors. I read industry articles or analyst reports. If the firm has physical locations, I may go visit some of them to really understand the customer experience and how the value is delivered. I’m not seeking access to confidential information that should clearly be kept as such, but for inputs that will allow me to integrate the key challenges and opportunities into my content. It’s this kind of outreach that occasionally brings me in contact with an information or influence muzzler.

As an independent outsider, I’m in a unique position to see that destructive behavior and call it out. If I encounter one muzzler, it causes me to wonder whether this is actually a cancer that is spreading within this organization. And, crucially, does the CEO or the board know of this person’s behavior? Would they consciously choose a muzzler to be an ambassador of their brand? It makes me ask what other cancerous behaviors are going around this company.

If you are a senior leader, the legacy you leave in your organization is in large part the bench you have developed, through your intentional actions. Every time a senior executive moves on, the next generation of leaders steps up. Will an information or influence muzzler get promoted even higher up? If that is the culture you built, it dilutes not only your legacy but endangers the entire organization. You have not just tolerated but encouraged cancer to grow.

Consider how we deal with cancer: Either radiation to keep it from growing, or surgery to remove it completely. That’s exactly what you have to do with information or influence muzzlers — either call them out on their behavior and take explicit steps to fix it, or cut them out. Otherwise their dangerous behavior permeates the rest of the organization.

To avoid the organizational cancer spread by information or influence muzzlers, I recommend three actions for senior leaders:

  1. Build a culture that’s unafraid of retribution, where you can highlight and celebrate “non-muzzler” behaviors.
  2. Build feedback loops so that your internal and external relationships can inform you if they encounter a muzzler on your team.
  3. Never stop improving your bench, because the legacy you leave in your organization is the team and culture created on your watch. You want knowledge curating and influence sharing to be your mark, not hoarding and hiding.

Takeaways

  1. Like a silent cancer, information and influence muzzlers act in destructive ways that senior leaders may not know about.
  2. The presence of a muzzler indicates a cultural norm that may be a cancer — and it’s probably spreading.
  3. Safeguard your legacy: Constantly improve your bench by cutting out any cancer — including muzzlers.