If you’re doing any of these 3 things, you’re leading like it’s still the last century
While research from Pew finds that most people like their bosses, about one in five give their direct managers low ratings—and that can have a significant impact. Gallup reports that only 30% of American workers are engaged in their workplace and that managers account for at least 70% of the variance between motivated and unmotivated employees.
Yet leaders begin their roles with the best of intentions. No one starts out by thinking, “I want to make everyone’s lives miserable and undermine their performance.” Still, we know many do just that. Most are thrust into the role, with very little training or development, because they were good at something else or there was simply a hole to be filled.
The truth is that most leaders fail because they don’t understand how to do their job. They get bad advice or try to emulate “tough” bosses like the ones they see in movies like Steve Jobs or The Devil Wears Prada, giving them misconceptions about what it takes to be effective. You may think you’re a good boss, but if you’re doing one of these things, you’re probably not.
1. View the employment relationship as a transaction rather than a values-based relationshipMany managers take an economist’s view of the workplace. Employees do work for you. You pay them. Neither side is acting out of charity, but in your own self-interest. It is much as Adam Smith wrote in 1776’s The Wealth of Nations: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”
Yet that quote, while accurate, is misconstrued. Smith was making an observation about how market forces help coordinate activity among strangers. He certainly wasn’t making a recommendation about how we conduct our business and personal relationships. In fact, in his other great work, The Theory of Moral Sentiments, he argued quite passionately for the importance of empathy (which he referred to as sympathy).
More importantly, since Smith’s time, we have accumulated centuries of evidence that acting out of pure self-interest can be problematic. Consider the “prisoner’s dilemma,” a famous thought experiment in which individuals acting in their self-interest make everyone worse off. In a wide array of real-world and experimental contexts, people will cooperate for the greater good rather than pursue pure self-interest.
As organizational psychologist and workplace expert David Burkus explained in his 2022 TED Talk, humans are prosocial. We’re more likely to perform when we understand and identify who benefits from our work than when we are driven by financial incentives alone. Evolutionary psychologists have long established that altruism is deeply embedded in our sense of tribe.
Burkus references a study by Adam Grant in which the performance of call-center employees more than doubled when they had regular conversations with people who benefited from their work. Lisa Earle McLeod and Elizabeth Lotardo report in an article in Harvard Business Review that similar results have been found in studies of lifeguards, hospital workers, and sales teams.
2. Focus too much on incentives, rather than norms and ritualsA leader’s most important job is to shape behavior, and most start with incentives. Design the right mix of carrots and sticks, so the thinking goes. Yet human behavior can’t be so easily boiled down to simple triggers. Decades of research show that incentives can often be problematic. They often fail and can even backfire horrendously.
Consider the “ultimatum game,” a popular social science experiment in which one player is given a dollar and asked to propose how it should be divided with another player. If the offer is accepted, both players receive the agreed-upon shares. If it is not accepted, neither player gets anything. If people responded perfectly to incentives, the second player would accept even a single penny. After all, a penny is better than nothing.
But they don’t. In fact, the ultimatum game and related experiments—such as the “dictator game,” the “public goods game,” and the “third-party punishment game”—reveal that human behavior is incredibly complex. These have been repeated countless times in different contexts and they show that people regularly act against their interests to express what they think is fair and right. In the ultimatum game, offers below roughly 30% are routinely rejected.
What is often missed is that there are norms and rituals that underlie behaviors. This helps explain why people from different cultures behave differently in the ultimatum game and its variants, and that’s what most incentive efforts miss. You can’t separate punishments and rewards from the cultural context. Often, there are underlying motivations that extrinsic rewards and punishments fail to account for.
Incentives don’t operate in a vacuum. You can’t motivate people effectively without understanding the culture that shapes what motivates them.
3. Treat talent as innate, rather than something you developIn 1997, McKinsey published a landmark article declaring a “war for talent.” The firm argued that due to demographic shifts, recruiting the “best and the brightest” was even more important than “capital, strategy, or R&D.” The report was enormously influential and continues to affect how leaders manage their teams even today.
I once worked at a company where senior leadership meetings on Friday mornings were meant to discuss critical issues. But no matter the agenda, the conversation always seemed to turn back to talent and the need for “better people.” They would look at our current staff and wish that they could find others who were smarter, more skilled, and more ambitious.
Each time, I remember thinking, “You recruited these people. You trained these people. And you manage these people. If there’s a talent problem, it doesn’t lie with them. It lies with you.” As Burkus puts it: “Talent doesn’t make the team. The team makes the talent.” Their people weren’t failing them; they were failing their people, which is why our employee turnover rate was roughly twice the industry average.
The truth is that we don’t need the best people; we need the best teams. Researchers at MIT and Carnegie Mellon found that group performance is driven more by factors such as group dynamics and social sensitivity than anything else. It’s how your team builds trust, psychological safety, and collaboration that will determine what they can achieve.
If you feel you need “better people,“ you should probably focus your efforts on becoming a more capable leader and creating a better, more supportive culture that empowers people to achieve their potential.
The Role of a Leader Has ChangedWhen Alfred Sloan created the modern corporation at General Motors, he based it on the military. The company was split into divisions, each with its own leadership. Information flowed up, orders went down, and your rank determined your responsibility. The model assumed that leaders had a better understanding than those on the lower rungs. Managers made plans and foot soldiers carried them out.
That model made sense in an industrial economy. In the 20th century, more than 80% of U.S. corporate assets were tangible assets, or things like factories, equipment, and real estate. The role of a leader was, largely, to formulate plans concerning those assets, mobilize them with a specific strategic objective, and direct execution of those plans. Good leaders were supposed to be wise, but firm taskmasters.
Today, however, the script has flipped and more than 80% of corporate assets are intangible, such as licenses, patents, and other intellectual property. The primary purpose of today’s leaders is to manage ecosystems of talent, technology, and information. There is simply no way for a single person to have enough visibility to control all of that.
The role of a leader has changed. It is no longer enough merely to plan and direct action. You need to inspire meaning and empower belief. The truth is that the lunatics really do run the asylum. As a leader, it’s your job to help them run it better.