POINT OF VIEW

NO ONE WOULD EVER DISPUTE that Cal Chambers was the smartest guy in the room, least of all Cal. As Chief Science Officer of Obsidian Pharmaceuticals, Cal holds multiple patents and has been responsible for developing the core biological platform on which all of Obsidian’s therapies are based. To a researcher like Cal, science isn’t just the focus of his work: The pursuit of scientific truth is foundational to his identity and values. To question his conclusions in any matter, scientific or otherwise, is to betray one’s foolish ignorance and Cal’s response is often withering. A brilliant scientist who has developed clinical breakthroughs, he also produces breakdowns in the workplace, through both his reflexively combative and harsh interpersonal behaviour and his micromanagement-induced bottlenecks in processes and reporting.

Cal’s interpersonal challenges haven’t been limited to his own team: They also complicated his working relationships with the rest of the Obsidian leadership team. Put simply, few on the team would trust Cal to have their back. Cal has often lamented that things would be so much easier if other people would just be as rational and thoughtful as he is. Ironically, despite his considerable intellectual gifts, Cal has been no more exempt from irrationality and biases in making decisions than any of his colleagues.

Throughout this article, I will use the real-life case of ‘Cal’ and ‘Obsidian’ (names changed) to explore applying insights from Behavioural Economics in coaching leaders to greater effectiveness. After a brief orientation to leadership-relevant Behavioural Economics principles, I will describe how we set out to help Cal in two areas: managing his behavioural triggers and building trust among co-workers.

First, though, a question: Has anyone ever met Homo Economicus — that wonderous Economics avatar endowed with perfect information, flawless logic, and a relentless drive to maximize utility? While Economic theories provide useful guidelines in the abstract, our daily decisions are typically coloured by the myriad biases and irrationality described by Behavioural Economics. The application of these principles provides perspectives on both what drives leaders and how to help them.

Managers attend to reliable execution of the day-today, but we look to leaders to take us to new places. What distinguishes a leader from a manager is the leader’s ability to influence and provide direction and perspective. In our ongoing work with leaders, we call the factors that distinguish a leader from a manager ‘Executive Presence’, and it is these factors that organizations typically seek to develop in leaders by having them work with a coach or participate in leadership-development programs.

Most people think of Executive Presence (EP) as ‘charisma’ or ‘owning the room’. While these factors are important, they only tell part of the story. EP encompasses the qualities that help a leader engage, align, inspire and move people to act, and these qualities fall into three broad dimensions. I have already described this framework and Bates Executive Presence Index (EXPI) on these pages [see

“So You Think You Can Innovate,” Rotman Management, Winter 2016], so I will just briefly summarize the three dimensions:

CHARACTER, which affects the connection people feel with the leader and includes a leader’s authenticity, integrity, concern for others, restraint and humility;

SUBSTANCE, which affects credibility, includes a leader’s practical wisdom, confidence or bias for action, composure under pressure, resonance and vision; and

STYLE, or the approach to execution, includes a leader’s appearance and readiness, intentionality in aligning actions, inclusion of others in decisions, the quality and quantity of interactivity, and assertiveness in managing conflicts.

When executives develop fluency in all three dimensions, they distinguish themselves as leaders rather than managers and are able to help organizations capitalize on new opportunities.

Coaching a leader usually begins with providing feedback, often from interviews, but even more powerfully when it includes a quantitative 360 assessment. Frequently, the feedback received includes areas where a leader tends to react impulsively. Helping that leader gain awareness of what triggers these reactions is an important first step to gaining greater control and demonstrating restraint and composure.

In Thinking Fast and Slow, Daniel Kahneman describes two thought processes of the human mind: System 1 thinking is quick and reactive, and involves little conscious thought. It is useful, especially in routine situations, but is prone to error and biases. System 2 thinking is also responsive to the situation, but is much more measured. It comes into play when we are learning to do something or when we are being more deliberate. For example, experienced drivers in North America use System 1 thinking most of the time, but would likely revert to System 2 when driving in the UK for the first time.

In coaching leaders, we always explore, In which situations will they be most prone to reacting unproductively? Ironically, some of the triggers leaders have develop as a result of having an ‘over-strength’ — or too much of a good thing. For instance, high levels of professional competence, particularly in technical areas, and a strong commitment to one’s chosen discipline can result in an individual treating their expertise in much the same way as they treat their values: Questioning their professional conclusions feels tantamount to questioning their integrity. In these situations, leaders often react defensively and may dig in and stall progress.

In our assessment work with the EXPI, we have seen this reflected in relatively low correlations between Integrity (actions consistent with principles) and Confidence (bias for action).

The System 1 reactive process is similar to the Ladder of Inference model by Chris Argyris, which describes how feedback loops from our ‘noble certainties’ can cause us to behave reactively. As with all biases, awareness of the dynamic is the first step in slowing down the process, shifting from System 1 to System 2 thinking, and becoming reflective rather than reflexive to situations.

In Cal’s case, his identity is inextricably linked to his deep technical knowledge. His encyclopedic command of the intricacies of science and drug development compels him take a stand on matters across the organization—including areas outside of his discipline. His strong sense of his own superior expertise has become such a fundamental part of his self-perception that any disagreements with his point of view are experienced as personal affronts, and he reacts bitterly.

In coaching Cal, we worked on developing his awareness of how questions about his opinions act as triggers to his negative reactions. With increased self awareness, Cal was able to recognize situations where he was getting triggered and, with practice, to slow down and respond intentionally rather than reacting impulsively. The result: Others noticed his improved ability to temper his responses, and his colleagues became more open to working with him.

Our assessment of leaders across the 15 facets of the EXPI entails measuring 90 specific behaviours. Looking at data from thousands of assessments over the past couple of years, we have been able to isolate and compare two cohorts of leaders: Those who are highly trusted and those who are not trusted. Comparing these cohorts, we found a statistically-significant difference: Highly-trusted leaders outperformed untrusted leaders in 86 of the 90 behaviours on the EXPI.

Clearly, trust is foundational to a leader’s ability to influence, and each of the 15 facets contribute to building it. Trust comes in the following two forms:

1. RELATIONAL TRUST. Some experiences of trust are almost visceral or automatic. They involve a strong sense of connection or relationship with the other person. This ‘relational trust’ operates through System One: We pick up on initial cues in an interaction and consider someone trustworthy. Relational trust is about interpersonal connection and is affected by behavioural biases such as representativeness (per Kahneman and Tversky), whereby we experience someone as having qualities

we value and this affects the overall assumptions we make regarding that person.

2. TRANSACTIONAL TRUST. Other experiences of trust are more measured, and involve a willingness to put ourselves at risk, based on the other person’s actions. This is ‘transactional trust’, and it often operates through System Two. The risk assessment aspect of transactional trust echoes Kahneman and Tversky’s work on Prospect Theory, which describes our behaviour around risk. Simply put, we are often loss averse and will do what we can to prevent loss — even at the expense of realizing potential gains. Where transactional trust is concerned, we base our decisions on three factors:

• our past experience with the individual;

• our perceptions of their expertise or capabilities; and

• our sense of shared purpose or alignment around goals.

In short, we regularly make decisions to trust or not to trust, and those decisions can be reflexive (System One) or reflective (System Two). In either case, they are prone to biases — like any other decisions. For instance, the loss aversion described in Prospect Theory can contribute to a general reluctance to trust.

The clear differentiation between trusted and untrusted

The loss aversion described in Prospect Theory can contribute to a general reluctance to trust.

leaders serves to illustrate how leaders can build or undercut both relational and transactional trust. Now, let’s return to Cal’s case, to illustrate some of these behavioural insights in action.

Highly-trusted leaders outperformed untrusted leaders in 86 of the 90 behaviours on the EXPI.

BUILDING RELATIONAL TRUST. The subliminal sense of connection that underlies relational trust is facilitated by the EXPI’S character facets and others with a socio-emotional element. Colleagues experienced Cal as authentic in that he was genuine in his interactions, and this contributed to their persistence in working with him; his strong sense of the values of scientific inquiry were unquestionable — though we’ve noted that an over-strength in integrity contributed to a lack of emotional restraint and loss of composure when under stress. Cal’s protectiveness of his team was a demonstration of concern, as was his advocacy for the professional and technical development of some favoured researchers. Consequently, some on his team were fiercely loyal to him.

However, Cal’s almost complete lack of humility was off-putting and damaged his relationships. Although he had sufficient resonance to recognize what others were thinking or feeling, his commitment to his own ideas interfered with any tendency to acknowledge other’s point of view. Meanwhile, Cal’s commitment, energy, and preparation projected an appearance of thorough professionalism. Given this mix of qualities, it is not surprising that people often felt a strong initial trusting connection with Cal that waned as they gained more exposure to him.

BUILDING TRANSACTIONAL TRUST. The contributing elements of transactional trust are present in all three Executive Presence dimensions (Character, Substance and Style), and in each case, Cal’s behaviour within each of these dimensions affected peoples’ willingness to trust him. Research shows that we trust people based on our past experience with them because we believe they are more likely to display that same behaviour again. We noted above that exposure to Cal’s off-putting behaviours decreased initial Relational Trust, because this experience increased the risks associated with trusting Cal in the future. Similarly, past experience with his low restraint and composure led people to expect emotional outbursts, which eroded trust in Cal. While his decisiveness and bias for action in the facet of confidence and his assertiveness in taking a stand enhance trust, Cal’s inability to effectively manage conflicts arising from his assertiveness and difficulty in maintaining a reliable pattern of interactivity in communication worked in the other direction.

Being the smartest guy in the room in sharing his practical wisdom added to perceptions of Cal’s expertise and competence, which bolsters trust. Similarly, Cal’s confidence in making decisions contributed to his perceived expertise: he was visibly committed to a vision of Obsidian’s potential and painted a compelling picture of the promise of their therapies. Cal was also authentically transparent about his passion and commitment, making his intentionality abundantly clear. Others were able to clearly see how they and Cal had a shared purpose and trusted Cal to act in alignment with those goals. On the other hand, Cal’s belief that he alone needed to be the final arbiter on decisions decreased the sense of inclusiveness others felt and bottle-necked the intentionality in work processes, creating execution risks and decreasing trust.

In working with Cal on his relationships with his team and peers, we were able to help him appreciate that trust was something he could build intentionally by working across many of the Executive Presence Index facets. Working across these 15 facets decreased the likelihood of Cal’s triggering risk-averse responses, and from a Behavioural Economics perspective, allowed him to leverage Prospect Theory insights to increase trust. The result: Cal’s colleagues were able to better appreciate his underlying motivations and he was able to build bridges across disciplines during a crucial phase of Obsidian’s growth.

In closing

Behavioural Economics has enhanced our understanding of decision processes and individual behaviour in many areas of business. Going forward, leaders can only gain from insights into the biases and mental habits to which we are all prone. The case of Cal provides a window into how to shift from being subject to those biases, to being able to use them constructively to shape your leadership behaviour.

Andrew Atkins is Vice President of Client Experience at Bates Communications, based in Wellesley, Massachusetts. In 2014 and 2015 he was named a Top 100 Thought Leader by Trust Across America.