How does money figure into a happy life? Behavioral finance expert Brian Portnoy delivers an inspired answer based on the idea that wealth, truly defined, is funded contentment. It is the ability to underwrite a meaningful life.
His latest work, The Geometry of Wealth, bridges the philosophical and practical gap in managing money in our lives.
“Money does buy more happiness when spent wisely, especially when directed toward experiences, others, and time.” -Brian Portnoy
You point out that millions of Americans have not saved a dime for retirement. Why is this? Will this eventually cause a crisis or is this typical and then people catch up?
The lack of retirement preparedness stems from a combination of opportunity and mindset. In the context of real wages for many Americans having not risen in more than a generation, many are barely able to make ends meet, let alone build a nest egg. Beyond that, financial illiteracy is a major problem. As a society we don’t take seriously the need to understand the many facets of saving, spending, and investing. Further, humans are generally wired with biases that undermine smart money decisions. This mix of factors is at the root of the looming retirement crisis in America. Far too many have saved far too little, and there are no obvious solutions that don’t involve quite painful decisions.
“Nothing is enough for the man to whom enough is too little.” -Epictetus
Your model is in three parts: purpose to priorities to tactics. Part one is purpose, which is not a typical starting point in many financial books. Talk about the importance of purpose in this context.
Let’s step back and ask, “What are we all trying to accomplish here?” I think an answer that mostly everyone would get behind is that we want to be happy; we want to lead a good life. Okay, fine, but how do you do that? It’s obviously a massive question, with countless angles from philosophy and religion and other domains. Money, for better or worse, is an inescapable part of the discussion. There are certain unavoidable practicalities of what we can afford and how those help to underwrite the lives we want to lead. By putting purpose first, by being thoughtful – not just once, but over time – about where we find joy, then we are much better able to have our financial decisions support that quest. This is the opposite of what many unfortunately do, which is let the desire for and experience with money determine what we do in life.
“True wealth is the ability to underwrite a meaningful life.” -Brian Portnoy
They may seem, at first glance, to have nothing in common—different industries, challenges, experiences, leaders, competition, you name it. But there is something about this group of organizations that drew attention and merited study.
How did you arrive at the common characteristics of organizations achieving excellence?
Effectively these emerged gradually through the research. We studied each institution with an open mind and on its merits. Then we shortlisted, at the conclusion of our research in each case, what we thought were the fundamental drivers of that institution’s enduring outperformance. When we compared the lists we had created across several of the institutions, the common characteristics became evident.
Secondly, because our research process was quite extended, we had the opportunity to use some of the later studies to test and validate hypotheses emerging from the earlier ones.
Finally we used some of our client work, which was progressing in parallel, to further refine our thinking.
I often ask leadership experts whether leaders are made or born. You take on that question with regard to high-performance organizations and say that they are made, not born. What leads you to this conclusion?
Simply put, the leaders who we spoke to in the organizations we researched were consistent in articulating and reinforcing that view. Without exception they talked about how they viewed the enduring sources of their advantage as being their people and their organizations, and they each described their roles as being about setting direction and ambition and then facilitating and enabling their organizations to achieve and extend those ambitions over time.
Even more particularly, given that many of the organizations we researched could be reasonably described as “values-driven,” their leaders saw a fundamental aspect of their roles as being about defining, representing, facilitating and rewarding those values in their organizations. The Mayo Clinic, Tata, Doctors Without Borders (Médicins sans Frontières) and the US Marine Corps were particularly strong examples in this regard.
“Overengineered engagement initiatives can become impersonal and feel false.”
Let’s talk about the four-pillars to delivering high-performance.
Copyright Brian MacNeice and James Bowen, Used by permission
Every organization knows it needs a plan. Where do most go wrong?
There are lots of ways in which organizations go wrong when it comes to planning, but for this discussion we will highlight two that we observe again and again in our work.
First, we suggest that organizations go wrong by planning on a basis of “inside-out” rather than “outside-in.” That is to say, their leaders tend to look at last year’s model and last year’s performance and identify tweaks they can make with a view to delivering incremental performance improvements next year. This model of planning tends to be short-term and tactical in nature and anchored in a historic, likely outdated, view of the world.
High performance organizations plan from the outside-in, not inside-out.
High performance organizations come at planning from the outside-in, using a much more strategic, future-oriented approach. They start by looking outside their organizations to understand how the context within which they operate is changing. Sometimes they do this by looking at their organizations through a series of discrete “lenses” – for example industry, market, customer, competitor, technology, regulatory, people – to understand (a) what dynamics they observe, (b) what opportunities and/or challenges arise as a result of these dynamics, and (c) how these dynamics might play out over the course of their planning horizon. Armed with these insights – in particular a much deeper understanding of cause-and-effect – they are better positioned to create strategies that bridge from where they are now to where they want to be over time. Relative to the first approach we discussed, plans developed this way tend to be more ambitious, radical and lower risk all at the same time.
Second we would suggest that organizations go wrong because they view planning as a task rather than as a capability. They view it as a chore to be endured once a year to fill a template, and which brings with it a significant cost in terms of time away from the frontline. Their engagement and investment in planning reflects this attitude – for them it’s about getting to the end of the process as quickly and painlessly as possible.
The approaches we observe in high performance organizations, by contrast, are more consistent with Eisenhower’s famous mantra that, “Plans are nothing, planning is everything.” They understand that their organizations, and the worlds in which they are operating, are always changing, and as such they develop planning as a dynamic, enduring competence. They operate “with their heads up,” tracking changes in their context all the time, taking on board the lessons of their experience and factoring insights into their plans on an ongoing basis. Some of these organizations have moved away from a traditional, annual model of budget-based planning towards a more continuous, iterative model of strategy development and deployment.
“Plans are nothing, planning is everything.” -Dwight Einsenhower
If you are constantly juggling priorities and trying to keep it all together, you may not just need time management. You may need a new model. One that increase confidence and allows you to lead from a position of strength.
Jeremie, your newest book, 5 Gears: How to Be Present and Productive When There is Never Enough Time, coauthored with Steve Cockram is a thought-provoking new model of work-life balance. How did you develop it?
The book is a metaphor that we created to explain what we were seeing in each other as we were forming our company several years ago. Steve is British, and we had just moved to London, where I was learning how to smoothly drive a left-handed stick shift vehicle. As I lunged and ground the gears in our vehicle I used the analogy of why we are so often in the wrong gear at the wrong time socially and why we tend to disconnect and run people over figuratively.
Copyright Jeremie Kubicek and Steve Cockram, Used by Permission
This is a guest post by friend and mentor Bruce Rhoades, who retired after having run several companies. He often helps me with strategy. I am delighted that he is a regular contributor.
New Leader Challenges—A Review
Since this is the second post about tips for new leaders, let’s review the challenges. Achieving a new leadership position is both rewarding and challenging. It acknowledges that you are someone who can make a difference, lead others and get things done. On the other hand, it is perhaps another step toward more responsibility and provides greater visibility of your actions and style.
Whether you are new to a department, new to a company or just received a promotion, the challenges are very similar. It is important to establish your style, values and culture effectively and quickly. As the saying goes, you only get one chance to make a first impression. So what are some techniques to quickly establish your leadership style and lead effectively?
“Never underestimate the effect of taking action on small things.” -Bruce Rhoades
Much of my career has been serving in interim executive positions or as interim CEO for various companies, where I often entered the organization as the “new guy” in charge. Here are the fundamental areas that I have found helpful for your initial focus to be an effective leader:
From a foundation of reliable information, relationships at all levels and open communication, here are some tips to establish a culture of decisiveness, empowerment, action and accountability.
First Impressions—A Reminder
Whether you are in a new leadership role as executive, department manager, product manager, or team leader, people will watch closely to understand your style. A few of the things people will evaluate include:
How do you think about customers; how do you treat them?
How do you gather information?
What are your values?
As the organization’s employees and customers observe these traits, it is important to remember: They will listen to what you say, but it is what you do that counts the most to establish culture.
So, where do you start? I suggest you initially focus on these characteristics as the most important:
Gather reliable information
Delegate and empower others when possible
Here are some tips on how to set the tone for decisiveness, empowerment, action and accountability.
Decisions, Delegation and Empowerment
The job of a leader is to make decisions happen—not necessarily make all the decisions, but to ensure they happen. In fact, it is better for the strength of the organization if the leader does NOT make most of the decisions. When others are involved, empowered and delegated the task of making decisions, everyone learns, people are more engaged and the organization begins to have a culture of deciding instead of just identifying problems to discuss endlessly.
One of the best times to establish a decision culture is when you are a new leader. First, you certainly do not know all the answers, and you need input from others. Second, people will be open to helping you. Here are some tips:
Look for Small Things: In various interactions within the organization, be alert for small items that are frustrations, inefficiencies or items holding people back. Ask “Who needs to be involved in changing the item?” Then delegate and empower the two or three people named to make the decision and take action. If the people involved cannot agree, then they can come back for guidance, but if they do agree, then it is done. Many times, there are small decisions that do not need senior management involvement. After all, those involved know more about it anyway. Delegating small decisions will set the tone for the organization, encourage others to decide and help establish an empowerment culture. Never underestimate the effect of taking action on small things.
“Delegating small things creates a decision and empowerment culture.” -Bruce Rhoades
Take Immediate Action on the Obvious: When you are the new leader, after many discussions you will find that there are some very well-known and recurring issues that have been around a long time. Many times everyone agrees about what needs to be done—so do it! If possible, delegate the responsibility. If delegation is not appropriate, then gather input from many, test your decision with them and decide. These items can be large or small, but deciding quickly will establish your style and send a message to the organization that decisions are encouraged.