Ego Free Leadership

by Brandon Black

  Being right has such powerful sway over us because it plugs into our core self-worth drivers. Our egosystem loves the power and adrenalin of winning, knowing, and feeling superior. We are ready to argue, to take action, to throw caution to the wind.

  It may come as a surprise that feeling powerful, superior, and righteous are attributes of being at the mercy. Yet, notice how we experience each of these sensations as being over something or someone: I am right over you; I am more powerful than this other person; I am in control of this issue or that conversation. We are the ones hung up on the issue, rehearsing arguments in our head and feeling aggravated until the other person admits he or she is wrong—and how often does that happen?! Being right is like drinking poison and hoping the other person dies.

  The danger of these powerful feelings is that when we know we are right, questioning our point of view, or even incorporating other perspectives, is the very last thing we want to do. To Brandon, listening to his directors that afternoon initially felt like a ridiculous waste of his time. I was worried how our conversation might unfold. Arguments between people or groups who want to be right over each other almost never move the needle forward on the actual issue. I pushed back on Brandon during our lunch because I sensed he was agitated, the directors were sincere, and there was something we didn’t yet understand. Had Brandon been at the source at that moment, he would have been more curious: “I communicated clearly; these are intelligent, hardworking people. Something doesn’t add up. What am I missing?” Having such an optimal response would seem self-evident—were it not for all the times in our own life where we don’t do it.

  Brandon’s conscious explanation of his frustration was that he had already addressed the issue several times and that his leadership team was made up of “morons,” their complaints “bullshit.” At an unconscious level, however, the intensity of his reaction came from how his ego was reading between the lines of the directors’ remarks. It was inferring, “You’re wrong; you are a bad CEO; you are stupid and unworthy.” And then Brandon’s ego reacted in kind: “No, they are wrong. They are disrespecting my guidance and authority. They are the ones at fault, wasting time and resources.” This triggered a fear of failure as well as a dreaded image of appearing weak or soft if he let their behavior continue.

  We now begin to understand why—with the unpleasant sensations of being incompetent, failing, and appearing weak swirling inside his head—the fiery, powerful option of dismissing the directors as morons was far more exhilarating for Brandon. Like each of us, Brandon had no awareness of these underlying ego threats, but they are always there. Acknowledging these ego triggers gives us access to why we become invested in being right. They are driving the bus, and unless we identify and defuse them, we won’t be able to get off.

  Time and again I have seen two sides fight dogmatically over an issue. Each pointed to myriad facts that corroborated their point of view and, simultaneously, dismissed the validity of the other. This is the way it is. As their egos became invested in being right, they lost their ability to see that their story, though linked to facts, was no more or less true than their adversary’s.

  THE FALLACY OF BEING RIGHT

  Each side cherry-picks the data points that prove their view. Sometimes these facts are the same as the other side, interpreted differently. Often they are just different facts. Other relevant facts are missed by both sides. “Being right” is a futile pursuit.

  Stepping out of being right does not mean relinquishing our perspective; rather, it means surrendering our one-dimensional certainty. When we can defuse our ego threats, we regain our natural curiosity and ability to integrate multiple perspectives. The result is a greater understanding of reality, more nuanced decisions, and superior outcomes.

  Reversing Downward Spirals

  BRANDON

  The financial results for the first half of 2008 were strong. We posted double-digit growth in collections and profits and experienced a slight decline in operating costs. Not only was the India site increasing its contribution, we were improving our understanding of which consumers would most likely repay their obligations. This increasingly allowed us to contact only those people who could pay while giving other customers time to recover. I enjoyed sharing these developments with our shareholders, who were starting to reap the benefits. The one thing that remained unchanged was the portfolio-purchasing environment. It was getting harder and harder to locate affordable new investments.

  Still, the stock market responded, driving the price up from $8 per share to almost $14 by early fall. Our strong financial performance gave us the momentum to raise an additional $100 million for future portfolio purchases. Although we wouldn’t need to make those purchases in the short term, our board was increasingly wary about the inflated asset prices around the globe. They wanted us to be prepared when the correction occurred.

  It is amazing what a rising stock price will do for morale. Everybody was in a good mood, and the priorities discussion created a level of alignment that hadn’t been in place for years. More and more leaders and teams were operating with an enterprise-wide mindset.

  The past few years had seen significant turnover in my direct reports. With the departure of two executives over the summer, only Paul and Sharon remained from the original team. Getting the “right” people on the bus had taken on a new meaning—I focused on finding people with a willingness to work diligently on themselves and lead by example. It wasn’t enough to be bright and experienced; they needed to fit into the new culture at Encore. In the past I had too often settled on the “best available” candidate. Going forward, I wouldn’t hire somebody unless they were willing to “look in the mirror.”

  The company also had a new board hierarchy. George Lund was elevated to chairman in August, replacing the former CEO and my mentor, Carl Gregory. The change was significant. I had counted on Carl for guidance and I wasn’t sure what to expect from George. At least it was happening while things were quiet.

  It turned out to be the calm before the storm. On Monday, September 15, 2008, Lehman Brothers filed for bankruptcy and Bank of America entered into an agreement to acquire Merrill Lynch. On Tuesday, the Federal Reserve bailed out AIG, and on Wednesday, Washington Mutual announced it was for sale. These failures staggered the capital markets. It was a time of reckoning for the countless industries— including ours—that had benefited from the torrent of easy capital since 2005. The financial collapse was the catalyst that burst the inflated portfolio pricing “bubble,” forcing our competitors to come to terms with years of unprofitable investments.

  In the next few years, 90 percent of our industry would go out of business.

  We, meanwhile, were in the perfect position to ride the tail winds.

  But the chaos and subsequent banking consolidation made it impossible to determine which companies would survive. It seemed like new governmental programs were announced daily, as the drumbeat of discord with the banks got louder and louder. Within a month most financial institutions had lost 50 percent of their market value and were being charged with causing one of the greatest financial crises in history. Acquisitions and consolidations were draining resources, diverting them away from business as usual. We had no idea if the banks would continue selling receivables; it certainly wasn’t their biggest problem. Our calls went unanswered for weeks. Despite having made all the right decisions—staying disciplined, raising capital, and investing in long-term capacity—we were sucked into the vortex of the tornado.

  The market decline completely erased all of Encore’s positive stock gains from earlier in the year. Stock analysts and Encore shareholders concluded that our customers—the individuals we collected money from—would be most impacted by the recession, significantly reducing Encore’s revenues. These conclusions were based on speculation, and we had plenty of evidence to the contrary. But facts didn’t carry the day; there was simply too much fear and distrust in the system.

  Chaos also returned to the company.
We were at the one-year anniversary of the layoff, and the morale boost from our rising stock price had dissipated. Employees read reports predicting the demise of our industry and feared for their jobs. On top of that, many were coping with significant losses in their personal financial accounts. I could feel their stress and anxiety all around the office. It was disheartening how quickly we fell into blaming each other again rather than solving problems. The Operations teams criticized the Business Development team for not finding portfolios to buy. The Finance department accused the Decision Science team of producing inaccurate models. It was déjà vu.

  The difference, however, was how quickly we recognized the return of those dynamics. “Hey,” I heard more than once, “we’re in an Us vs. Them. We need to get in a room and work this out.” The team began making adjustments. Every day, folks across the organization recommitted to maintaining a positive, productive working environment despite what was happening in the macro-economy.

  Wanting to find a way to accelerate the learning process, I talked with Shayne about having our leadership team attend LaL’s seminar in November. Initially, I was hesitant. Who sends a leadership team off for five days in the middle of a crisis? But then I thought back to when Encore’s ownership structure changed and how pivotal our team cohesion had been. Nothing was going to happen in a week that would be more lasting than investing in each other and the team.

  They returned energized and much clearer about what was holding us back. Their main point of conflict during the week had been who held responsibility for two strategic mistakes in the past years: the failure of the healthcare receivables vertical and the underperformance of the 2005 acquisition. If we couldn’t learn from past errors, they told me, how could we be sure we were making the best decisions now?

  If there was one place we needed to be able to analyze past failures, it was in our Investment Committee, where all new investment decisions were made. The IC comprised Paul, Amy Anuk, our director of Business Development, members of our Decision Science team, the leaders of the operating units, and me. The goal of such broad representation was to guarantee that we got everybody’s perspective.

  The discussions in the LaL seminar, however, brought to the surface the cumulative toll that losing so many deals had taken on the people in the room. The Business Development team was tired of our conservative bidding. Several major banks had told them Encore wasn’t a serious buyer and, at one point, had threatened to exclude us from bidding. The valuation team was defensive about being labeled as too conservative, and the Operations team bristled every time they were asked to step up their performance. Too often, our conversations ended in an “agree to disagree” stalemate that I needed to arbitrate. We weren’t really aligned, and “I told you so” seemed to be on the tip of nearly everyone’s tongue.

  I felt a sense of urgency to work through these issues. The banks had begun returning our calls and we anticipated seeing a large number of new opportunities. Given the massive reduction in competition, portfolio pricing was going to decline precipitously. If we got it right, the results would be spectacular. If we stayed locked in an Us vs. Them, we ran the risk of missing our window.

  Shayne and I set up a meeting with the committee members in early December 2008. The IC had two general factions—people responsible for valuing and collecting on portfolios, and the Business Development team plus Paul and me—so we divided into groups along those lines. Shayne led us through a process designed to map out the dynamic, and we identified the judgments each group had of the other. It was remarkable how otherwise sensitive comments became easier to say when we worked together to list them instead of directing them at each other.

  This is how the valuation team saw us:

  1.Not being concerned enough about emerging trends and relying too often on dated information

  2.Overly simplifying the operational complexity of some deals

  3.Rejecting data that didn’t fit our hypothesis

  4.Having a selective memory—only recalling the deals that did well and forgetting the ones that failed

  5.Being overly optimistic

  On the other hand, this is how we saw them:

  1.Making things overly complex to avoid doing challenging deals

  2.Having the memory of elephants—only remembering the deals that went wrong

  3.Always being negative and quick to point out other people’s mistakes

  4.Unwilling to take risks, even calculated ones

  We were struck by how our beliefs and frustrations were mirror images. More startling was how these judgments drove almost identical behavior: Both sides tended to disengage, to discount the impartiality of the other side, and to vent and seek alliances with others. We were inadvertently dividing the team and undermining our ability to make good decisions together. It was sand in the gears.

  With prodding, we talked about how our egos were driving our respective positions. Both groups were driven to succeed—defined as “not being seen as failures.” The fear of being blamed was causing the data-driven folks to play not to lose rather than strive to win. Not buying anything was more comfortable than taking calculated risks. For us, success meant “winning”—the argument in the meeting, the bid—even if the deal was unwise for the company.

  Besides missing our growth and profit targets, we identified other costs for Encore if we didn’t change our behaviors: the demotivation and potential loss of key members of the team; an overall deterioration in the corporate culture; and the real likelihood that the dysfunction at work would spill over into people’s personal lives. The members of the IC influenced the vast majority of the employees. Our collective morale would help determine how far the company went in 2009 and beyond. Recognizing what was at stake helped us go beyond our judgments and mistrust. We made commitments to break the current paradigm and eliminate the factions. We were ready to have each other’s backs and take calculated risks, knowing some deals would not be profitable. When that occurred, we would look to identify the root causes—not to point fingers but to ensure that the same mistake wouldn’t happen again.

  I walked out of our meeting with a feeling of accomplishment. In just one afternoon we had identified collaborative solutions for a major problem that had festered for a long time. How many other challenges could we handle this effectively if we committed to this type of open dialogue and exploration?

  SHAYNE

  Even when we grasp what proper collaboration looks like, if we don’t recognize when our ego has been triggered during a workplace interaction, we will contribute to mistrust and discord through our frustration and agitation. So the first indispensable step in creating change is to sort our pinch. Then, applied earnestly and consistently, certain strategies can transform dysfunctional teams into highly productive ones.

  1.Name the dynamic together rather than blame one another. Here are three practical ways to keep your team focused on the problem, not the imperfect people trying to solve it:

  •Avoid inflammatory and judgmental language. Express your observations, not your conclusions. Rather than use words like “never” or “always,” or make blanket statements to emphasize your frustration, briefly, clearly state what you see. This moves the conversation away from character assassination and toward observable behavior.

  •Describe the reinforcing communication loop you create together. When someone simply states, “this is what is playing out between us” rather than “this is what you are doing to me,” it helps everyone see that each side’s judgments are often mirror images of the other.

  •Recognize your impulse to be right. Your analysis of any situation is a collage of beliefs, not fact, and is always incomplete and biased. By proactively questioning your conclusions, your perspective can expand to include a more accurate picture of reality.

  2.Identify your ego threats and communicate them with vulnerability. Most of us have a major blind spot in our professional and personal relationships: Our fear of others’ judgment thwarts us from r
ealizing that others feel just as afraid as we do. Disclosing your fears vulnerably to others shatters this facade.

  Although this can feel uncomfortable, these anxieties are only potent when we keep them to ourselves. Expressed collectively, our fears dissipate. Time and again, I have witnessed the majority of the tension in a room vanish when a team member—particularly a leader—frankly admits his or her fear of being judged. A reinforcing cycle of mutual empathy replaces the downward spiral of mutual judgment.

  3.Acknowledge the consequences of your Us vs. Them dysfunction. When we are caught up in our Us vs. Them dynamics, our frustrations with the other side lead us to ignore the damage we are causing with our gridlock and accusations. The IC team named close to thirty discrete costs, such as “missed growth/profit goals”; “make bad decisions because we’re not objective”; “I don’t want to work here unless this changes”; “I’m failing other people in this company by not contributing to our success.” Confronting the brutal truth of their dysfunctional interactions was a rude shock. When we acknowledge, on an emotional level, the consequences of our behavior, it inspires us to challenge our certainties about the conflict.

  4.Seek to understand how you are contributing to the problem. Another classic symptom of Us vs. Them dynamics is that we view ourselves as the well-intended, competent party and the others as the problem. This is almost universally untrue.

  Shifting these dynamics requires challenging both biases. Where is our side not as perfect as we profess? What valuable contribution and valid perspective are we dismissing from the other group? What is true about their frustrations with us? Are we blaming them for something that is a mutual or company-wide problem?

  By talking openly about your biases, it becomes easier to trust another group’s input as a “net balanced view’” coming from a different perspective. Of course, it works much better when both sides are committed to transparently questioning their assumptions. There are cases, however, where one side starts rebalancing and inspires the other side to do the same.