SHAYNE
The destructive ego dynamics Encore Capital Group eliminated from its culture can be readily found in the public sphere. Arguing over who is right, making others bad, ignoring how our own behavior perpetuates the gridlock—all of this fuels many of our most polarized issues. From liberal vs. conservative and business vs. environment, to Main Street vs. Wall Street and black vs. white, we often square off on opposite sides of a dispute, convinced the other side just doesn’t “get it,” without realizing that we are participating in a very predictable Us vs. Them dysfunction.
Although these are sprawling social conflicts, the leaders arguing about them are still just … people. They exhibit the same ego triggers and self-fulfilling prophecy behaviors previously dissected between Dave and Brandon or between Finance and Operations.
Encore faced these larger dynamics because of the industry it operated in. Our norms and political views often cause us to decry certain industries as being harmful: fossil fuels, banking, weapons, government regulation, lobbying, and environmental activism, to name a few. Employees in these industries may or may not perceive a higher purpose, but people at the other end of the political spectrum often prescribe ill intent to them. We forget they are ordinary people just like ourselves, with aspirations, fears, egos, and dysfunctions. They aren’t bad people because they do what they do. On the other hand, how they do it does have consequences.
Brandon and his team, bolstered by the white paper, initially reacted by summarily dismissing the report released by the coalition of nonprofits. You might even notice which group you identify with. If you are more business oriented, you may feel antipathy toward social justice or environmental activists and easily see them as aggressive, close-minded, or holier than thou. If you are more of an activist, you may notice your own set of conclusions about people in big business: selfish, arrogant, willing to sacrifice the larger good to line their own pockets.
Any time we feel this animosity toward another group, it is a sign that we are making them bad through the prism of our judgments. The nonprofits believed that Encore’s business practices were predatory, and Brandon needed to be held accountable. Phrases like “You should be ashamed of what you do for a living,” however, led Brandon to believe his integrity and character were being assaulted. If he hadn’t sorted his pinch ahead of time, he would have just lashed out to defend his honor. The coalition’s concerns about the people struggling in the financial system would have become lost in the escalation. Amy’s story illustrated how the “space” in which we communicate makes the content possible. Inversely, blaming and accusing makes the possibility of dialogue nearly impossible. Every time leaders on one side of a conflict behave in ways that trigger the other’s fight–flight reactions, they help to perpetuate the very problem they want so badly to resolve.
But something fundamental had changed in Brandon over the previous five years. He had seen time and again the destruction that being right and making bad produced inside Encore and knew that nothing useful emerged from perpetuating these dynamics. And so, when he found himself in the crosshairs of a societal Us vs. Them, he took a stand. Not for his point of view or righteous certainty on the subject, but for what he, as a leader of significant power, would no longer perpetuate through his own behavior.
This is another example of a never again. Brandon didn’t have a strategy for how to respond at the Investor Day meeting. But his clarity that he would not prolong dysfunction and distrust dictated what he would not let himself do. As leaders and citizens of the planet, our never again is our own line in the sand. No matter what we perceive others are doing, we are responsible for how we behave and the impact we have.
In fact, it is precisely when we believe others are making us bad that we most need our commitment to make them good. We are the last hope in that moment to create progress instead of regress. This challenge is not intellectual—it is visceral and experiential. Ninety-nine percent of us prioritize our ego’s sense of self-worth 99 percent of the time. In this instance, Brandon took a different path, one of curiosity, learning, even care. He reached across the divide instead of succumbing to the easy, seductive habit of being right.
Such acts of leadership matter because the consequences of our societal breakdowns are more far-reaching than our organizational ones are. If leaders of consumer protection organizations cannot productively talk with financial services leaders, the lives of the people they are trying to protect will not improve. Encore’s industry, for example, will continue to have a poor reputation, making it ripe for bad press and restrictive legislation. The U.S. economy will bear the weight of millions of people struggling to become solvent. Everyone loses. This same dynamic plays out in other industries: oil and gas, with the controversy over fracking; real estate development and environmentalists; banking and regulators; Congress. People on all sides make their counterparts bad, encouraging— almost ensuring that—the other side reacts in kind. Broadly speaking, as a society, we choose being right over making progress.
When Brandon transcended his self-worth drivers, his leadership perspective didn’t become altruistic, but rather comprehensive. A financial CEO can think about profit and the consumer. An oil and gas executive can push for peak production and care about the environment. I’ve seen it. A government policy maker can hold banks accountable and support a fluid business environment. It is our triggered egos and entrenched Us vs. Them dynamics that propel us into extreme positions.
A Rock Can Change the Course of a River
BRANDON
The following week I called Jim, the executive director of one of the nonprofits in the coalition. He sounded surprised to hear from me, but he agreed to contact the other coalition members. We scheduled a meeting for early July.
I was both excited and apprehensive. I would be having a conversation with people who seemed to hate me—while key people on my own team continued to insist these nonprofits were untrustworthy. The danger that we would all escalate into an argument, or worse, was high. For anything useful to happen, my hot buttons could not get pushed. I talked the situation over with Shayne, and he asked me what my goals were for the meeting.
“I want to clear up where their venom comes from,” I said. “Their anger doesn’t make sense to me.”
“Do you mean you’re hoping to show them you’re a team of good people and they shouldn’t be frustrated?” he asked.
I saw right away what he meant. If I tried to politely point out where their beliefs were off base, we wouldn’t get very far.
“If we put aside your integrity and reputation, and who’s right or wrong, what are your true goals in meeting with them? What are your intentions for them?”
I paused, searching for what was really at stake in this meeting. “We’ve done focus groups to try to see what the collections process feels like from our consumers’ vantage point. But there’s still a gap, or these activists wouldn’t be so riled up. I really want to learn from this group. What do they see that we don’t?”
Something deeper was coming to the surface as I talked. “I’m so tired of all this fighting,” I told Shayne. “The anger. Judging each other. It doesn’t have to be this way. Even if nothing concrete comes from our time together, I want to create a human connection with them.”
I flew to New York with four executives, including our vice president of Legal Collections, Ashish Masih. We met in a conference room at the same hotel as on Investor Day. The Encore team sat on one side of a long rectangular table, while six leaders from the nonprofit coalition sat on the other.
My team and I introduced ourselves. We each shared some background on who we were and what we did. When it was their turn, the leaders of the nonprofits in the coalition stated their name and organizational affiliation. They offered no additional details, conjuring up an image of soldiers captured in hostile territory. I took a deep breath then began, hoping to set a productive tone for the meeting.
“I am grateful that you took the time to c
ome today. I don’t know what to expect in terms of outcomes, but I do want you to know that we’re committed to having an open dialogue. There’s a lot of emotion on both sides of this issue. I know you have a negative view of our company and believe we target your constituents. At the same time, I personally took offense to your conclusions. It felt like you were indicting my character and that of our entire workforce. I hope to be able to keep those emotions at bay throughout the day. If you ever feel judged or dismissed by anything I say, please let me know. Quite simply, our goal is to learn what is driving your beliefs about us and to begin an ongoing relationship.”
I paused. They nodded their heads but didn’t add anything. We were all trying to appear relaxed, but the atmosphere was tense. There was no road map for such a conversation. After ten long seconds of silence, I continued.
“Let’s start by seeing if we have any common ground. My first question is whether we agree that someone who borrows money should pay it back if they have the means.”
They looked at each other, then one of them answered cautiously, “Yes, but that’s not your business model.”
“One step at a time,” I said. “So, if we are aligned on that, I’d like to review how Encore makes money. It may sound trivial, but if we can all agree on the basic math, it should make the other discussions less emotionally charged.”
“What do you mean by ‘basic math’?” one of them asked. I thought she sounded annoyed. Did basic math sound condescending? I needed to be more vigilant with my choice of words.
“Well, if your constituents only make enough money to pay for food and rent, they certainly can’t afford to pay us anything,” I explained. “Given that, there is no incentive for us to try to contact them. We would just lose money.”
“Companies like yours just call everybody and hope that your threats scare people into paying,” Jim responded.
That was both wrong and insulting. I resisted the urge to tell him that their report and analytical skills were hopelessly flawed. It’s just a pinch. I took another deep breath. My goal is to connect with them and understand their perspective.
“I understand that’s your perception,” I said, “but if we did that, we’d go out of business. Factually, over the lifetime of a portfolio, 80 percent of our consumers pay us nothing. In any given month, we receive payments from less than 1 percent of our consumers. If we expended energy on the 99 percent that don’t pay us each month, we would go broke. This is not a business where you can indiscriminately apply effort. We have spent tens of millions of dollars acquiring and analyzing information to identify who can and who cannot pay.”
“Are you claiming with 100 percent accuracy that you don’t call people who are poor and unable to pay?” one of the other nonprofit coalition leaders asked.
Really? The “100%” test? I felt my face flushing. It was like the shareholder meeting all over again, and I was being told to admit we were terrible people. Perhaps sensing I was going to say something flippant, Ashish answered the question.
“Not at all,” he said. “I am sure we make mistakes. But it isn’t our intent, and we would stop collection activity if we were aware of it. Unfortunately, we rarely get phone calls from our customers so we can’t appreciate their individual circumstances.”
“Well, we’ve spoken to your customers,” Jim stated, “and they have a lot to say.”
This is why we’re here, I told myself. Learn, don’t defend.
The nonprofit coalition had identified consumers who had been contacted by our company. We reviewed each case together thoroughly. While there was no pattern of targeting, I was surprised to discover several important process inefficiencies in the overall collection system. For example, the transfer of ownership from the original creditor to companies like Encore caused a lot of confusion. The bank wasn’t required to send a letter to the individual, so the only communication came from the collection company. Most consumers didn’t recognize our name and some concluded it was some sort of scam. There were three or four examples like this, each with a reasonable explanation. The coalition had concluded that these process inefficiencies were intentional. I had requested this meeting out of curiosity, but I was beginning to understand how unaware consumers were of what was happening with their account. We were unearthing things that could actually improve the process for everybody.
“While we hear your answers,” Jim said, “it doesn’t explain one fundamental question.” His face said he was still suspicious and clearly dissatisfied. “How could every customer we encounter have a problem but there not be a systematic attempt by Encore to mislead people?”
I paused, realizing our conversation wasn’t about a series of individual discrepancies. To them, the sheer volume of evidence pointed to us doing this intentionally. Looking at it through their eyes, their conclusions did seem self-evident. I felt a wave of empathy. I would believe the same thing!
How could this perception gap be so drastic? “You have to understand,” I began, working it out as I spoke, “Encore works with over 10 million customers. If our models were 99 percent accurate, we would still contact 100,000 people who were unable to pay. If 10 percent of those sought the guidance of a local nonprofit office, that would be 10,000 people. Through our lens, we are incredibly precise, but I totally understand how, seen through yours, we are systematically targeting thousands of impoverished people.”
I was going to stop there but I wanted to do more than hide behind numbers, even if it felt vulnerable to admit. “As Ashish pointed out, our models aren’t perfect and we certainly make mistakes. But I promise you that we are not heartless. We’re doing the best we can inside an enormous system.”
“Consumers just don’t know what to expect,” responded one of the coalition members. Her tone was calmer. “The laws governing your industry aren’t clear and don’t detail how people can reach out and challenge the information you have. They’re paralyzed by fear. What are you doing to make it clearer for them? What makes you different?”
She wasn’t trying to criticize or corner us with this question. It was a genuine inquiry. The answer was that we weren’t doing anything specific to separate ourselves. We complied with the laws, which were admittedly archaic. As evident as it now sounded, it hadn’t occurred to me to expand upon these rules to create clarity for our consumers.
By the end of the day, we seemed to be finally hearing each other, even building on each other. I asked if they were open to further discussions, and to my surprise, they were. I felt a tiny hope that together we might be able to create meaningful change.
After they left, our team reviewed the day. The conversations had given us a deeper sense of the overwhelming fear and confusion many of our consumers felt. We felt inspired to engage with them differently and to separate ourselves from the historical view and practices of our industry.
My friend Greg was right. There was an opportunity to create a company that consumers would want to work with.
SHAYNE
If, to stop perpetuating the Us vs. Them dynamics, Brandon refused to be dominated by defending or proving his self-worth, what could his compass be instead?
Brandon consciously set goals for the meeting with the nonprofit leaders of “creating a human connection” and “truly understanding their perspective.” Viewed through the lens of how we typically interact with opposing social groups, these intentions seem virtuous—but crazy. In Brandon’s shoes, we would enter such a meeting with the goal of winning the discussion through being right. Any acknowledgment of the other side’s perspective would be lost points in a negotiation.
We’ve talked previously about the power and importance of identifying our true goals in shifting out of our dysfunctions. Whatever mind-set we choose will be instrumental to our behavior and the outcomes of any conversation. When we are motivated by learning, connecting with others, and contributing to something larger, our self-worth tension subsides. We feel more inspired, purpose driven, and connected. In Brandon’s ca
se, this approach opened doors to outcomes that would have otherwise been nearly impossible.
Brandon’s goals were not “shoulds”; rather, they were his deep intentions that mattered more to him than did defending his character. He was committed, moment by moment, to a different direction. And when he lost his center, Ashish stepped in, highlighting how creating change is a team effort.
Brandon’s decision to engage the nonprofit leaders was unusual. Most executives in the power position of such a conflict prefer to ignore or discredit their critics. Why would anybody put himself in such an uncomfortable, no-win situation? And yet, this peculiar decision was self-evident to Brandon.
When we as leaders put aside our preoccupation with our value, it opens up a part of our brain that cares about the bigger picture. Empathizing instead of judging taps into our deep reservoirs of caring and belonging. We become committed to the “context” around us.
Think of context as the culture, environment, and underlying conditions in which we operate. The quality of our context is crucial because it significantly influences the choices we believe are possible. In an organizational context of distrust and competition, for example, it will feel risky to be authentic or collaborative. In a societal context of blame and demonizing others, most executives will think twice before publicly admitting a mistake. More broadly, the proving and defensive reactions of our egosystem invariably create contexts of stress, conflict, separation, close-mindedness, and making bad.
If we think about context at all, we tend to see it as external and somewhat static. But, like culture, the countless factors forging our context are almost entirely created by people. As executives, each behavior we model and every decision we make contributes to the context inside and outside of our organizations. When we are able to focus on what we truly want to create, we model a context of authenticity, learning, and connection. We stop perpetuating fear and start offering inspiration.
Ego Free Leadership Page 19