Daily Lesson from Life 09 March 2009

"The Business Times Published March 9, 2009

Leaders need to re-think attitudes

RICHARD ARVEY, a Professor in the NUS Business School, looks at how the current global downturn is expected to affect the behaviour and perspectives of top business executives

What are the effects of the crisis on business executives and leaders? Will any adjustments occur regarding their attitudes and behaviour as a result of this crisis? I argue that such leaders will undergo the following changes in regard to their perspectives and behaviour:

Self-examination. Executives will examine how and why they personally engaged in 'excessive risk-taking' in their decision-making processes.


Executives will try to understand the dynamics themselves. They should and will be frightened - they face possible job losses, personal financial losses through the withdrawal of pay premiums and bonuses and salary decrements, not to mention possible prosecution of criminal behaviour. Leaders will be asking 'Am I vulnerable?' to these possibilities.

Better decision-making under risky conditions. Executives will try to do a better job of 1) understanding the range of possible outcomes of the decisions made, 2) gauging the probabilities of these outcomes, and 3) assessing the potential consequences of such outcomes. Executives did not adequately forecast that housing markets would fall (i.e., a rare event), nor understand the enormous damage that developed due to the cascading nature of the debt crisis.


Leaders need to develop some degree of humility about their successes rather than become over-confident from them.

Recognition of factors that led to excessive risk-taking. Executives will begin to look at such external factors as yielding to stakeholder pressure, ignoring and/or discounting risks, doing what everybody else was doing (following the herd), regulatory lax, etc. as potential external factors that led to these decisions.


Understand that the public is outraged. The public is clearly outraged. The public is outraged by the executive pay packages received by some bankers; executives should, and I hope do, reduce these packages. The name of the game up to this point has been a 'heads I win, tails you lose' proposition for the public. Executives have a role to play in managing and changing their own pay packages and becoming less self-serving. There is some empirical evidence that executives now take home some 10 per cent of the income of the firm, compared to a much smaller amount 10 to 15 years ago. CEOs and boards of directors must curtail these practices or other regulatory mechanisms will.

Understand that they are not 'Gods'. In his book The Black Swan, Nassim Nicholas Taleb argues that there is enormous randomness in our environments that shapes successes and failures. We tend to attribute success to ourselves and failures to external forces and chance.


Recognition of the biases that influence their own decision making. Leaders will need to develop greater objectivity as a result of the crisis.

My research has shown that financial risk-taking propensities are partially influenced by genetic factors - over 50 per cent of the differences among individuals in their risk-taking attitudes towards financial investments is based on their genetic make-ups. Thus, executives need to clearly examine their own propensity to take on excessive risks and evaluate it against more conservative alternatives.


There are many other potential repercussions for leaders in the aftermath of the crisis. I hope that leaders will go forward along the lines I posit above."

The Professor said a lot of what the leaders need to change. He is long on the theory. So, here I offer some practical TO DO for any leaders who REALLY want to change!

1. Develop a Personal Integrity that provide a solid foundation for you to stand on:
Ask yourself why do you want to be a leader? For fame or fortune? For the chance to create a greater good for the majority of people who are not able or not in the position like you to effect change? It is ok to do it for fame and fortune but it should be the consequence of doing the right things instead of the primary focus!

2. When you have personal integrity, you will ask yourself is it reasonable to be taking home 100x the fixed salary of the lowest paid employee in your organization? Overpaying oneself if also a form of corruption in my mind! So, ask for fixed pay of 20x or 30x the lowest paid employee but also ask for a variable pay portion that tie to X% of profit generated from the business and get shareholders' approval to pay to everyone in the company!

3. Do not believe all the GOOD things you hear and read and see from the poplolar media. Be it newspapers, magazines, or TV! Each time you receive good reviews, ask yourself what 3 things you could have done better?

4. Surround yourself with some critics who will tell you, in a respectful and constructive manner, the truth that may hurt. Be prepared to accept that diverging views are needed before one can arrive at certain 'selected' views. A good idea can only be a good one after picking through many ideas! Hire 'insultant' instead of only 'consultant' as consultant may be pressured to tell you what you want to hear!

5. In review meeting, always has an agenda item called: "What 3 things can go wrong with our best plan and ideas? Or how can we improve on 3 things we are doing well?"

6. Guard against the 'entitlement mentality'. Just because we were successful in the past, we believe we deserve better! Well, everyone need to EARN his keep and continuously do so! If we earn our keep, we will be alright. Don't ask for gold-plated water tap or big gigantic office room that can accommodate a 50 people party!!

These are some specific actionable suggestions that any leaders who want to change their behaviors can put into practice immediately. Otherwise, just thinking and contemplating about what attitudes to change will NOT bring you closer to making them a reality!