Rather than staying the course and waiting for the source of the breakdown to reveal itself, the CEO feels he or she needs to act, to do something to overcome the sense of being out of control—reacting to unpleasant events, for example, or blaming someone else for not doing the right thing, Above all, this leader wants to overcome the feeling of loss or avoid a possible failure.
I’ve done that myself, and all the clients I’ve worked with over the past ten years, from solo entrepreneurs to multimillion-dollar CEOs, have shared with me that they experience this helpless, out-of-control feeling when they are confronted by threats to their established plans. Panic sets in due to a drop in quarterly earnings, bad news from a major client, or the disappointment of a promising deal falling through.
It’s undoubtedly happened to you, too. Perhaps one of your most important clients informed you he or she was considering a switch to a competitor. In that case, you might have to lay people off. Sure you could have done something a long time ago to prevent this from happening, but now you have to deal with something you didn’t anticipate.
When you experience the anxiety that you’re not equal to the challenge at hand, you’re in the middle of a chaotic episode. Adrenaline courses through your veins, blood seems to rush out of your face. The shock of the situation makes it feel necessary to do something right now. Making a change and addressing the situation may make you feel better, but it only deals with the symptom and not with the real cause of the situation.
The Danger of the Urge to “Just Do Something”
The biggest mistake I’ve seen business leaders make in chaotic situations is rushing to judgment. They try to make sense of the situation and then immediately react. I say, “react,” not “act,” because to act would mean being “at cause,” being in control of their life after considering the situation and allowing the sense of chaos to settle.
Unfortunately, the first decisions made in incidents like this tend to be the worst decisions. They are the ones leaders have to make amends for later.
Here’s an example: I was sitting with the CEO of a well-established health-care firm. He had just learned that one of the maintenance workers had been seen painting a building for someone else during business hours. As I heard him talk about the incident on the phone to an employee, this otherwise usually unruffled CEO got visibly upset. His personality changed when it appeared to him that this worker was “ripping him off by doing a side job on the clock.” He decided the worker was probably using paint from his company as well, and he immediately called the worker and fired him.
This worker had just received the Employee of the Month award. He was a favorite of all the managers, and he was highly trusted in his job. No matter. The CEO then called the supervisor and brought him up to date; it was now incumbent upon the supervisor to replace the guy. The supervisor strenuously objected, and the CEO threatened him with firing as well.
In the end, the whole thing proved to be a false alarm and had to be undone. The worker had actually been given the day off. The outside paint job was on his own time. Someone had pulled the alarm prematurely, and, instead of calling the supervisor, mentioned it directly to the CEO. Hard lesson learned: Your first reaction is always the worst.
Your reaction might be, “Why was this CEO even getting involved with such a minor issue? Didn’t he have better things to do?” Hands-on management means something different to every CEO, but I had observed this type of irrational behavior with this person more than once. The cost to this man’s company was immense as he repeatedly allowed a meme to take over and generate a panic attack. In the end, all but one of the company’s key leaders, all highly trained professionals in their field, left the company over such episodes. I ended my relationship with the client as well.
What Was the Real Cost Here?
The executive experienced a chaotic episode, and that translated to a perceived loss: In his mind, he was clearly being ripped off. The worker suffered through the chaos of losing his job (albeit temporarily) and being thrown out without the respect he was due for his loyalty. The supervisor was blindsided and had to watch helplessly as one of his best workers was exposed to this CEO’s irrational behavior. And as the rest of the company became aware of what had happened, the conversation that went through the organization was, “Could this happen to me one day if I’m not careful?”
So what’s the cure for this reaction to chaos? It’s five or ten minutes of just sitting quietly. A few minutes of reflection would have allowed him to calm down, look at the situation rationally, and make one phone call to the right person. The CEO would have uncovered the fact that this worker was on his day off. CEOs of breakthrough companies have a higher tolerance for chaos, which has a way of organizing the actions needed into a cohesive effort to stay on track.
Chaos Is the Great Transformer
Chaos has a much greater impact on complex, evolving systems, such as an organization, than it’s possible to cover in this book. If you’re interested in the subject, I highly recommend Surfing the Edge of Chaos by Richard Pascale, Mark Milleman, and Linda Gioja.15 To give you a quick overview, here are what the authors call their four “bedrock” principles:
Equilibrium is a precursor to death.
Living things move toward the edge of chaos.
Components of living systems self-organize in response to turmoil.
Living systems cannot be directed along a linear path.
Even with these overriding principles, your organization has a complexity all its own. There is no other business like it, because it combines your thinking with that of your employees. Since there’s no other you, the way you respond to events and episodes in your business cannot be duplicated.
The memes of every business are different, and the level of chaos and its impact are different in every business as well. That’s one reason why you don’t want to emulate or adopt another company’s business model or strategy. You want your own type of chaos.
The Funnel Process
I first began thinking about chaotic discomfort when things were not going as well or as fast as I had planned. I was in the midst of innovating a new product or service, and the outcomes were harder to produce than I’d anticipated.
I would describe the struggle of that moment—the process of innovation or strategy execution—as my “funnel process.” I began to notice that whenever I was on the verge of a breakthrough, I felt like I had a vise clamped onto my head, and I had a hard time sitting still. I was not allowing chaos to work.
Figure 12.1 Transformation Funnel
Imagine a large funnel something like the one in Figure 12.1. There you are, sitting on the edge of chaos and looking into the great abyss of the inward-sloping “transformation funnel.” You realize the only way to your desired breakthrough is to allow (not force) yourself to drop in and fall through.
As you move through the funnel—the process—you feel claustrophobia, as if the sides are closing in. Your natural reaction is to resist and try to get out of the situation.
What do you do? Do you then change strategies in order to feel more comfortable? Can you climb out of the funnel? Generally, you do anything you can to avoid the feeling of pressure.
I have that feeling as I write this chapter. But the difference now is that I understand the transformative value of embracing chaos. Disequilibrium is a natural feeling that comes with anything that is worth doing and doing well. So I ask myself, “Am I more committed to feeling comfortable, or am I more committed to a breakthrough?” Which is it for you? On your way through the funnel, you have a choice.
Think about a time you have been in the transformation funnel. What did it feel like? What happened?
Are you more committed to feeling comfortable, or are you more committed to having a breakthrough?
This is where the 87 percent of companies that don’t execute their strategy get stuck. In the midst of the transformation funnel process, strategy gets changed or abandoned. The result is that CEO
s of those companies never emerge from the funnel. They get sidetracked by the feeling of disequilibrium and begin climbing out of the funnel to start over.
The best work I have ever done—and the best work you and your organization will ever do—will occur when you literally surrender to the chaos. Allow yourself to drop through the funnel, and when you emerge at the bottom, you will be transformed into a stronger version of you. Only by moving through can you reach a place of innovation and creativity. It makes you stronger and more resilient against the sabotaging memes that infect weaker organizations.
The last thing you want to do while going through the funnel is change your strategy; that will only make getting to the end result longer. You don’t have a flawed strategy. You simply need to embrace the transforming chaos.
Chaos and the Chaordic Process
Chaos has had a bad connotation for a lot of people, including me, before I understood it. When we look at the world, all we see is chaos causing trouble, as countries struggle with their political systems and Mother Nature wreaks havoc in many places on earth. When we hear the word “chaos,” we quickly assume that it means some kind of painful struggle, pandemonium, bedlam, or confusion.
But chaos is a very effective tool when you want to affect the overall behavior of a complex, evolving system. Such systems are susceptible to the butterfly effect, which Merriam-Webster defines as
“a property of chaotic systems … by which small changes in initial conditions can lead to large-scale and unpredictable variation in the future state of the system.”
Complex systems exist in nature, in world economies, in social structures, in weather prediction, and in biological systems. Your organization is another example.
For that reason, leaders who want to build breakthrough organizations can make small changes that have huge impacts on the behavior of the business. That’s the whole point of this book.
One of the ways that chaos can be transformative is through the “chaordic”16 process. The term originated with Dee Hock, the founder and former CEO of the VISA credit card association, and it describes a blend of chaos and order that is distinguished as a harmonious coexistence demonstrating distinctions of each, with neither chaotic nor ordered behavior dominating. Chaordic principles are often used to characterize human systems like family, government, and for-profit and not-for-profit businesses.
To leverage and use chaos to transform the performance of our business—and, believe me, the outcomes can be huge—we can invent a chaordic process that takes our teams to a place of disequilibrium, which is caused by not having the end in sight.
Think about the local “haunted house” at Halloween. This popular attraction brings in mostly young people who want to experience the thrill of being terrified, even though they know that the threat is an illusion.
As you enter the house, it’s usually so dark that you have trouble seeing your hand in front of your face. You bump into a few walls, and then you see a glimmer of something ahead. It’s glowing, so you feel your way toward it. Suddenly a skeleton jumps out with a shriek, and strobe lights disorient you even more.
What makes the haunted house so entertaining for some is the ability to tolerate scary disequilibrium. People who don’t like the haunted house experience can’t stand that, especially the disturbing noises, which prevent them from being able to think through what they need to do next to progress through the terrifying maze. It’s difficult to tolerate your senses being challenged in a way that throws off your ability to control circumstances. In fact, chaotic circumstances can feel physically painful, and dealing with the discomfort of disequilibrium doesn’t seem like much fun either.
This explains why so many companies are managed to avoid chaos. It’s like a haunted house, but it’s real life, and there’s no assurance that we are going to make it to the other end. What if we get lost along the way and we never see the light of day again?
How people feel about the haunted house often mirrors how they feel about life. Some people just want to get to the end; others keep coming back for more. The return visitors are the ones who are most likely to benefit from the transformative power of chaos.
Embracing Chaos Is Healthy
If you want to create an organization of innovation and creativity, you need to allow and even introduce the tension that comes with or causes chaos. Noted scientists G. Nicolis and I. Prigogine have shown that when a physical system is pushed away from equilibrium (in balance, symmetry, and stability), it survives and thrives, while if it remains at equilibrium, it dies.17 Systems that are out of equilibrium are forced to explore their space of possibilities, and this leads to new patterns of relationships and structures. An organization that embraces chaos is healthier than one that hangs on to equilibrium, and it can achieve a new level of performance.
Years ago in my own software and telecom businesses, I needed to build an organization where creativity and innovation would move us toward technology breakthroughs. I was confident my team of talented software developers could develop the system I had come up with. I assumed I should get them to follow my thinking and produce the software that did what I was looking for. And so I held a series of meetings where I got up and told them how I wanted it done. I related my vision for an information system to alter the way people saw their organizations, and I let them know what it was going to take to get it there.
In reality, I was dealing with very talented people who could come up with innovative ways to design software that would do exactly what I wanted, but I didn’t trust them to do it. My biggest fear was that if I took the time to look at any different approach to the problem, I would have to wait longer to market the software and generate revenue. I was running the business to manage my own fear of disequilibrium, thinking that if I controlled the input, I would also have control of the output. I was getting really good at avoiding the chaos that would transform the way my employees worked and give me what I was looking for. Instead, all I was creating was bad software.
There was no connection for my programmers between the issues that I was trying to solve for my customers and an actionable plan to design and build a software system that we could market to our clients that would support their growth.
I had to learn the hard way. One day one of my clients asked me to fly to Atlanta to meet with the company’s management. There they told me as nicely as they could that they were losing confidence that our software would ever turn out to be what I had promised. We had sixty days to show them that the software could perform as we had promised.
Sometimes it takes an experience like this to change your perspective and open up new possibilities. I did what almost any normal business owner would do under the circumstances: I panicked. I flew back to Houston. I went into my office, closed the door, and I sat there in fear. Then I took a straightforward, personally confronting look at what I was doing to keep everything under control, balanced, and in equilibrium.
Just because I was the owner of the company didn’t mean that I had all the good ideas. Instead of limiting the software designers, I had to let them contribute—and they did.
In the end, I surrendered to the chaos and went through the funnel—but in the process, in my fear, I had almost killed the company.
“Chaos often breeds life, when order breeds habit”
— Henry Adams
(American historian)
Believing Your Own Hype
Some call it ego, and some call it idiosyncrasy. It seems even the most visionary leaders at some point get mesmerized by their own success—so much so that they sometimes fall into the trap of actually believing their own shtick.
I’m continually amazed by how many great companies, led by the smartest people, plummet from their peak into the pit of paralysis. When businesses don’t hold up due to conditions in the changing marketplace, most leaders realize what happened only after it’s too late.
It’s not that they didn’t know what they’re doing. Far from it: It’
s that they thought they had discovered their winning paradigm—the one and only model for their success—and they stuck with it for far too long. In fact, they may have been relying too much on their successes of the past to point them in the direction of a future. They acted on what they thought they “knew,” believing their “success formula” to be the answer for their future as well.
Time and time again when the overly confident have to confront changes in their marketplace, many of them fail to respond appropriately—or respond at all. When they rely on the old practices of the past to respond to their competitors’ new technology or strategies, their sales drop, their best employees leave, and their bottom lines shrink.
Of course, there are always a few who manage to pick themselves up, dust themselves off (and often gut their workforce), and make it back at least to some degree—though usually as a shell of their former self. But let’s face it: Most do not.
Why do so many great companies fail to execute their strategies? Experience shows us the companies that fail often appear to be operating under full sail. There’s lots of action, but most often it’s not the right kind of action because it’s what earned success in the past. Leaders think that if it worked well in the past, then it’s got to work again and more of the same can only be better, and they go out of their way to convince themselves that it is working—especially when it isn’t. Old-world thinking and practices aren’t going to cut it in the new world of business we find ourselves in now. And you’ll never become a THIRTEENER thinking this way.
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