Assumption of the Present

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In investment circles, confidence predicts stock market performance. As it should: Confident investors buy more stocks. This increases demand relative to supply. When demand increases relative to supply, prices (for stocks in this case) go up and the market improves … at least, it does in the short term. In the end, earnings do matter — if they’re bad enough they erode investors’ confidence, making them want to sell their shares, increasing supply, decreasing demand, and lowering price.

It’s an excellent example of self-fulfilling prophecy, which makes the much-lauded ability of “markets” to predict the future somewhat less impressive than market religionists extol in their self-congratulatory exhortations.

In corporate America, many employees prophesize in a similarly self-fulfilling manner — in this case, for the inevitable failure of whatever proposed change the company’s leaders have decided to invest in. Call it the Assumption of the Present. While less smug than the asserted perfection of the wisdom of markets, the Assumption of the Present is equally circular: The organization is as it is because it must be. Otherwise it would be different, and that’s why the proposed change, whatever it is, can’t succeed.

The Assumption of the Present is not, however, entirely lacking in logic. It works like this:

Some dynamic systems are in equilibrium — the forces that make up the system are in balance. The rest, pushed by their out-of-balance forces, change until all forces are in balance, at which point they have reached equilibrium and change stops.

So companies, which are after all, dynamic systems, change until they reach a stable state. Once they do, their employees adapt to the equilibrium and the in-balance structural forces that define the equilibrium state become part of the “air” of the place — invisible and unnoticed, built into everything. Mention any change, no matter how desirable, and everyone explains why the change can’t succeed: Because the structural forces that drove the organization to its current equilibrium are a fact of life, the way they are because they must be. Change? How’s that going to happen? All forces are in balance.

It’s the Assumption of the Present. It’s an assumption because it treats all components of the company as immutable elements, not as changeable components of a design.

Except that sometimes it’s more than an assumption — it’s an inference based on experience. Few business changes of any strategic significance rely on a company’s leaders behaving exactly as they have all along. Supply chain optimization means orders and order quantities are established by algorithm, not by the COO’s gut feel. Customer Relationship Management means replacing policies with guidelines and relying on the judgment of customer service representatives. A redesign of the corporate governance process means today’s top priority is inserted into the master schedule as early as possible instead of stopping yesterday’s top priority so today’s can get immediate attention.

Employees have every right to expect the company’s leaders to behave tomorrow pretty much as they behaved yesterday and today. So if a highly touted strategic program depends on those leaders behaving differently, employees have every right to be skeptical.

If you read the literature on business change, you’ll find lots of helpful advice about management commitment, finding quick wins, consistency, communication and so forth. Here’s something I’ve never read in print: If you want any major change to succeed, find something important for the company’s executives to do differently. Identify it. Define it clearly. Prescribe what they need to do that is visibly different from what they’re doing now. Validate your assessment with employees (but tactfully — you don’t want to create the impression that you’re undercutting the company’s leaders).

And present it to every executive, plainly, succinctly, and directly. Explain that their way of going about things was perfectly suited to the old situation. Demonstrate the connection between the behavior change you’re recommending and the strategic change they’re trying to achieve. Empathize with their instincts.

And above all, make it clear: You aren’t asking them to stop doing something that’s wrong. You’re asking them to change how they address some situations so employees will feel more confident when it’s their turn.

Too often we criticize the lack of leadership provided by business executives. Most are entirely willing to provide every bit of leadership the situation demands. They simply have to overcome the same difficulty everyone else does: Recognizing when the traits that have led to their current success have become the barriers to their future success.

Compared to success, failings are much easier to recognize and address.