The World’s Worst Disease. Is your Company Infected with it?
“Money, it's a crime. Share it fairly but don't take a slice of my pie.”
--Pink Floyd, “Money”
I’ve been thinking a lot lately about “diseases” that affect organizations. That’s why I enjoyed Adam Grant’s LinkedIn post a couple of weeks ago quoting Simon Sinek:
“It's time to stop talking about winning and losing in business. It works in sports because you're playing a finite game, but business is an infinite one. The companies that last aren't the ones that play to win. They're the ones that play to keep playing.”
I couldn’t agree more. Winning and losing dominate our language in business. Look at the books we read. Jack Welch’s book is simply called “Winning”. There is nothing else to say about Jack Welch. Mark Cuban’s book contains both a sports metaphor and a focus on winning: “How to Win at the Sport of Business.” The language of winning and losing also pervades popular culture. Television is littered with contests: Survivor, The Amazing Race, The Voice, Iron Chef, The Bachelor and Cupcake Wars. Even finding the next drag queen is a competition with RuPaul’s Drag Race.
Another problem I see with sports contests as metaphors for business is they are zero-sum games--if you win, I lose. Zero-sum comes from game theory and refers to a situation in which resources gained by one party are matched by corresponding losses for another party. This is in contrast to non-zero-sum, where both parties can win, both can lose, and so on. Zero-sum describes the game, but it also describes a mindset. “Zero-sum thinking” and “zero-sum intuitions” are psychological constructs that reflect how someone perceives a situation and whether or not it has zero-sum properties. We can act zero-sum even though the game we’re playing isn’t zero-sum. Writers like Robert Wright (“Non-Zero”) and Robert Rubin (“Folk Economics”) suggest zero-sum thinking is a legacy of our hunter-gatherer days when we lived in small groups and there were finite resources (food, mates, high-status positions) and there was no guarantee they would be divided equally across members.
While resources are plentiful today, people still tend to behave in zero-sum ways. Psychologist Daniel Meegan conducted a study with students at a Canadian university. The task was to predict the grades of future student presentations after being given a grade distribution for students who already completed their presentations. At this university, grades were assigned by comparing the students work to a predetermined standard, a non-zero-sum practice. The zero-sum practice of assigning grades based on the quality of the work of other students' (grading on a curve) was prohibited. It didn’t matter. When students saw distributions loaded with many high grades, they predicted low grades for future presentations. It’s no different in business. Zero-sum thinking is a survival skill.
Zero-Sum Games in Organizations
There are many examples of zero-sum games in organizations. In the annual business planning process, companies create a target based on projections of next year’s earnings and that target is divided into thousands of little targets. If Group A gets more, Group B gets less. Leaders adapt by “sand-bagging” and “padding” their budgets.
Zero-sum language dominates in marketing as well. Marketers love war metaphors, using language like campaigns, blitzes, assaults, targeting, and defending positions, which suggests organizations are at war with their customers. Many organizations treat interactions with customers as zero-sum games. If customers win (pay a lower price), organizations lose (less profit). A friend of mine worked for a construction company building new homes. He told me a successful project was when you walked into the customer’s house after they moved in and they had no furniture. They had no money left to buy furniture. Maybe we are at war.
Organizations also play zero-sum games with suppliers. They take out the “thumbscrews” negotiating with suppliers, squeezing them on price. To Sinek’s point about playing for the long-term, I knew an IT supplier who had just come through a negotiation like this with a large company and was smarting from it. While the company felt it won by getting a lower price, my guess is they lost in the long-run. My friend’s firm assigned this company their 150th best programmer.
In negotiation this phenomenon is called the “fixed pie” bias and it’s seen as ubiquitous and intractable. Negotiators stick with fixed-pie perceptions even when there are obvious mutual interests among the parties. Researchers Leigh Thompson, Kathleen Valley, and Roderick Kramer conducted several experiments to study this effect. In one experiment, participants negotiated with another person and then learned after the negotiation whether the other person was either happy, disappointed, or neutral (assigned experimentally). The results showed negotiators felt less successful when their opponent was happy. Yes, that’s right; you’ve succeeded when the other party is unhappy. This effect was independent of the negotiator’s actual performance on the task. I find this result sobering when I consider the impact of zero-sum games and zero-sum thinking on behavior inside organizations. No wonder so many employees in our companies are unhappy.
The Zero-Sum Games HR Plays
Human Resources departments also set up zero-sum games inside their organizations. Performance management systems for example, require employees to compete for top ratings. Many of you will recall Jack Welch created one of the most famous zero-sum HR practices with GE’s forced-ranking performance evaluation system. Many other organizations quickly followed GE’s lead. While few organizations continue with a strict forced-ranking process, most still provide their managers with guidance on the percentage of top ratings, and they get what they expect.
Compensation and talent management departments also set up zero-sum games. Employees compete for their share of fixed rewards budgets. Best practice calls for maximum differentiation, with few winners and lots of losers. Employees also compete for a small number of high-potential slots and for openings in elite leadership development programs. A quote I read in a recent benchmarking report sums up this philosophy: “We are moving away from a spread-the-peanut-butter approach to one of feed the eagles.” In most companies if you are an eagle you get a disproportionate share of the rewards. More for the eagles means less for the rest of us. This philosophy is based on the assumption that top talent contribute disproportionately to organizational success (a point many researchers would dispute).
Employees also compete for promotions. Most organizations are hierarchies with relatively few leadership positions. Tournament theory suggests employees compete in “tournaments” with higher-level jobs as the prize. Promotion is a zero-sum game and success in many large organizations is measured by the number and speed of promotions. In the end, nearly all of us end up losers in this game. We hold the ladder while top talent climbs to the top.
I attribute many of the zero-sum practices in HR to an over-emphasis on money and extrinsic rewards and to the influence of outdated theories from psychology and economics. Motivation is defined by the opportunity to get a larger share of a fixed pot of goodies (money, promotions, etc.). Research by Chip Heath and by Michael Beer and Nancy Katz confirm this extrinsic motivation bias is hard-wired in us.
Consequences of Zero-Sum Thinking
Zero-sum thinking persists despite widespread recognition that it has harmful consequences. Researchers refer to zero-sum thinking as a bias, a fallacy, an error, or even a disease. The title of this article is a tip of the hat to Rich Karlgaard’s 2006 Forbes article in which he called zero-sum thinking “the world’s worst disease.” Karlgaard attributed the significant rift in our society to zero-sum thinking, writing in 2006 no less. I think the rift has become a chasm. Zero-sum thinking is implicated in many of the most difficult social issues in the US: Race relations (“When blacks gain, whites lose”); income inequality (“when the rich get more, the poor get less”); immigration (“illegal immigrants are stealing American jobs”); and free trade (“opening up trade hurts domestic markets”). Researchers in the behavioral sciences seem to agree, arguing that HR practices like those discussed above are leading to more toxic work environments and lower levels of employee productivity, engagement, and fulfillment. Little wonder employees are increasingly searching for purpose, meaning and belonging outside of work.
Zero-sum practices in organizations are also out of step with the increasingly volatile, complex, and uncertain environments organizations face today. As Robert Wright argues, increasing complexity is unavoidable as technology advances, but it also enables newer and richer forms of non-zero-sum relationships. Wright suggests social structures like organizations will help realize this potential. We can see this happening with new business models, new organizational forms, and new employment relationships. Delivering on this potential however, will require more non-zero-sum behaviors like teamwork and collaboration at a time when organizations continue to embrace zero-sum practices that promote individual self-interest, differentiation, and competition.
Curing this disease will require organizations to change their practices. Organizations can’t simply give lip service to these changes; they can’t ask for non-zero-sum behavior from employees while forcing them to play zero-sum games. This is exactly what’s happening. Many organizations create work teams and develop competency models promoting teamwork and collaboration while pitting employees within the team against one another for top ratings and rewards. This is a sucker’s choice and employees are too smart to take it; employees don’t listen to your words, they watch your actions.
Organizations need to take a cue from Bernard Banks, retired US Army Brigadier General who led the Department of Behavioral Sciences & Leadership at the United States Military Academy at West Point. Banks is now Professor of Management and Associate Dean for Leadership Development at the Kellogg School at Northwestern University. Instead of selecting a few people to invest in and wondering if they made the right bets, Banks had a different strategy: Bet on everyone. Banks’ philosophy at West Point was to maximize the leadership potential in every cadet. This doesn’t mean organizations invest the same in everyone; they certainly don’t. What’s different is Banks starts with a non-zero-sum game—invest in everyone, instead of a zero-sum game—invest in the eagles. What if HR took this approach with other practices? What might it look like? Here are some ideas that are more non-zero-sum to consider.
Create team and organizational incentive programs like profit sharing, gain sharing and stock ownership. These so-called “shared capitalism” programs are very effective and reinforce the message “when we win, I win.“ Use performance management (PM) programs to create purpose and meaning for all employees, making them feel a part of something bigger than themselves. Design PM to emphasize goals, direction and alignment instead of ratings, evaluation and differentiation. Train supervisors to support and enable all employees to make progress against their important objectives.
Design organizations around teams. Make teams—work teams, cross-functional teams, vendor teams, alliance teams, and the like, the foundational way work gets done. Give teams important work to do and give them full decision-making authority. Employees have a deep-seated need to belong and team membership can create high levels of motivation, performance, and fulfillment. Design jobs that are interesting and challenging, that focus on whole pieces of work and leverage people’s strengths. Make sure everyone on the team has interesting and challenging work to do. Give employees the flexibility to expand and craft their own jobs as the work evolves and as opportunity allows.
Go back to narrow banding for jobs with more levels and promotion opportunities. Create technical career ladders that allow for promotion within an employee’s technical discipline. There are few practices that can match the motivational “firepower” of a robust internal labor market. Promote employees at least every five years. My own research shows one of the strongest drivers of employee engagement is employees feeling they can get their career goals met within the organization. Give employees something to look forward to in their careers. Finally, invest in learning and development opportunities for all employees. Many companies expect employees to complete at least 40 hours of discretionary training and development per year. Create budgets for these expenses and resist cutting them when times get tough.
We can’t change these practices until we change our thinking and our language. We can't compete with our employees, our customers, and our suppliers and we can’t embrace practices that create a few winners and lots of losers if we want to succeed in the long-run. We will need everyone to succeed in the future. We’re all playing the same game--create value for our customers, our suppliers and our employees, and it’s not a zero-sum game. And we’re playing to keep playing.
(If you have an example of zero-sum and non-zero-sum games in organizations, I’d love to hear from you. Message me on LinkedIn or email me at email@example.com).
References and Suggested Readings
Grant, A (2018). LinkedIn Blog Post, April 6th.
Von Neumann, J., & Morgenstern, O. (1944). Theory of games and economic behavior. Princeton: Princeton University Press.
Wright, R. (2001). Nonzero: The logic of human destiny. Vintage.
Rubin, P. H. (2003, July). Folk economics. Southern Economic Journal, 70, 157.
Hagel, J. (2006). Zero-Sum thinking. Blog post, January 21.
Bazerman, M. H. & Neale, M. A. (1983). Heuristics in negotiation: Limitations to dispute resolution effectiveness. In M. H. Bazerman & R. J. Lewicki (Eds.), Negotiating in organizations (pp. 51-67). Beverly Hills: Sage.
Thompson, L., Valley, K. L., & Kramer, R. M. (1995). The bittersweet feeling of success. An examination of social perception in negotiation. Journal of experimental social psychology, 31, 467-492.
Meegan, D. V. (2010). Zero-sum bias: Perceived competition despite unlimited resources. Frontiers in psychology, 1, 1-7.
For a discussion of the impact of psychology and economics theories on organizational life and especially performance management and rewards, see Chapter 3 of my book: Paradigms: The natural laws of performance management: Colquitt, A. L. (2017). Next generation performance management: The triumph of science over myth and superstition. Charlotte: Information Age Publishing.
For a nice treatment on the “talent myth” see Groysberg, B. (2011). Chasing stars: They myth of talent and the portability of performance. Princeton, NJ: Princeton University Press.
Heath, C. (1999). On the social psychology of agency relationships: Lay theories of motivation overemphasize extrinsic incentives. Organizational Behavior and Human Decision Processes, 78, 25-62.
Beer, M., & Katz, N. (2003). Do incentives work? The perceptions of a world-wide sample of senior executives. Human Resource Planning, 26, 30-44.
Karlgaard, R. (2006). Worlds worst disease. Forbes, January 9.
For the implications of zero-sum thinking on a number of societal issues, see the following:
Norton, M. I., & Sommers, S. R. (2011). Whites see racism as a zero-sum game that they are now losing. Perspectives on psychological science, 6, 215-218.
Dorfman, J. (2014). Dispelling myths about income inequality. Forbes, May 8.
Bazerman, M. H., Baron, J., & Shonk, K. (2001). You can’t enlarge the pie: The psychology of ineffective government. New York, Basic Books.
Davidson, A. (2015). Debunking the myth of the job-stealing immigrant. The New York Times, March 24.
For more information on volunteering and the benefits to employees, see:
Bureau of Labor Statistics (2014). Volunteering in the United States, 2013. Economic News Release, Tuesday, February 25. http://www.bls.gov/news.release/volun.nr0.htm.
Rodell, J. B. (2013). Finding meaning through volunteering: Why do employees volunteer and what does it mean for their jobs? Academy of Management Journal, 56, 1274-1294.
For a nice article documenting future trends facing organizations, see: Abbatiello, A., Agarwal, D., Bersin, J., Lahiri, G., Schwartz, J., & Volini, E. (2018). The rise of the social enterprise. Deloitte Human Capital Trends 2018 report. March 28.
For more details on the changing nature of work and employment relationships, see: Boudreau, J. W., & Jesuthasan, R., & Creelman, D. (2015). Lead the work: Navigating a world beyond employment. Hoboken, New Jersey: John Wiley & Sons.
KelloggInsight (2017). Four Strategies for Cultivating Strong Leaders Internally. July 5.
Kruse, D. L., Freeman, R. B., & Blasi, J. R. (2010). Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-Based, Stock Options. National Bureau of Economic Research. University of Chicago Press.
Edmondson, A. C. (2012). Teaming: How organizations learn, innovate, and compete in the knowledge economy. San Francisco: Jossey-Bass.
Baumeister, R. F., & Leary, M. R. (1995). The need to belong: Desire for interpersonal attachments as a fundamental human motivation. Psychological Bulletin, 117, 497–529.
Cross, R. (2011). The most valuable people in your network. Harvard Business Review, March 08.
Wrzesniewski, A., & Dutton, J. E. (2001). Crafting a job: Revisioning employees as active crafters of their work. Academy of Management Review, 26, 179-201.
Berg, J. M., Dutton, J. E., & Wrzesniewski, A. (2013). Job crafting and meaningful work. In B. J. Dik, Z. S. Byrne & M. F. Steger (Eds.), Purpose and meaning in the workplace (pp. 81-104). Washington, DC: American Psychological Association.
Hackman, J. R., & Oldham, G. R. (1980). Work redesign. Reading, MA: Addison-Wesley.
Candice Ma, C., & Reidy, S. (2016). How Do We Create a Robust Internal Labor Market so that Employees can Move Freely into New Roles? Digital Commons, ILR School, Cornell University.