David Pogue, the New York Times columnist, writes in Scientific American this month about the “hostile media effect.” This is a cognitive phenomenon where people who hold strong opinions about something perceive that media coverage of that topic is prejudiced, no matter how neutral the coverage actually is.

The same phenomenon happens in groups. People who hold strong opinions about something perceive that anyone who asks questions is biased against them, regardless of how neutral or innocent the questions are.

I saw it in action this week during a meeting of the executive team of a health care company. Ten people gathered in a large conference room overlooking San Francisco to discuss the strategic issues faced by the organization. I asked each person to reflect on these questions: “How is the health care environment changing in California? What are the most important opportunities for the company? What should be our priorities over the next year?”

For the most part, the ensuring conversation was excellent. One team member talked about the “triple transformation:” the realignment of state government, health care reform, and the emergence of community care organizations. Another said she was worried about trends in work force development and the growing need for people with expertise in integrated care. Yet another talked about the importance of marketing services to public agencies.

Then Michelle spoke. She was vice president of marketing, new to the management team. She started by saying: “In my old job, this would be called channel management.” Eyes turned to her. “In a dynamic environment, we need to look at each customer segment and provide a unique value proposition.“

A team member asked: “Can you give us some specific examples?”

“You’re missing my point,” Michelle said. “We need to think more like a business.”

“In what ways?” said the team member.

“We need to be more business-like with our customers. We assume our customers will be there tomorrow, when that’s not necessarily true.”

There was an awkward silence. I could feel the tension ratcheting up in the room. “Which customers are you referring to?” she was asked.

“All of them,” Michelle said. “It should be obvious.” She stared defiantly at her inquisitor.

After the meeting, the CEO asked for my impressions. “I thought it was a good, productive discussion,” I replied. “With one exception.”

“Are you referring to Michelle?” he asked. “That was classic. There should be a name for what she did.”

“There already is,” I replied. “It’s called the hostile media effect. She’s highly opinionated and perceives innocent questions as hostile to her.”

“Is it curable?”

“Only in cases where you can get them to eat a large piece of humble pie!”

Learn the habits of high performing organizations in my new book: http://leadingatlightspeed.com.

In a world where change is accelerating, where new products and services are developed in ever-faster cycles, the quality of decisions is ultimately the most important test of leadership. Ironically, many managers and leaders are still working with Old World decision-making skills, even while their companies are trying to succeed in a Light Speed world.

A critical skill that leaders must learn in a Light Speed world is how to juggle and manage complex decision processes. As I describe in my latest book, “Leading at Light Speed,” there are five – and only five – types of decisions: autocratic, consultative, consensus, delegated, and democratic.

To be effective in a Light Speed world, more decisions have to be made “consultatively.” In a consultative decision, one person or one group ultimately makes the decision – because it’s their responsibility to do so. In a consultative decision, the leader engages people up front, clarifies that it’s her role to ultimately make the decision, and then gains people’s input. She makes it clear that she is open to different ideas – and she actively creates opportunities for people to speak up. But there’s no expectation that consensus will be reached; instead, people are encouraged to make their case, listen to other arguments, and then listen and answer questions as the leader comes to a conclusion.

There are three keys to success in a consultative decision: First, the leader needs to say up front how the decision process will go and who will make the final call. Roles and responsibilities at each step need to be mapped out. Second, there must be regular updates to remind people when they’ll have opportunities to contribute. Third, it’s key to record the ideas and feedback so that people know their views were heard.

The advantages are obvious: Instead of everyone needing to agree before a decision is made, a consultative decision can flow smoothly to a conclusion. Because people can speak their minds, unfettered by the need to agree with everyone else, unconventional thinking has a better chance to be heard.

Contrast this to a consensus decision. When using consensus, everyone must agree – a much more difficult and time-consuming process. And to what end? Some would say the end is greater “ownership” in the decision. But our experience working with hundreds of different organizations is that people actually lose trust in consensus decisions for several reasons. First, people may have stifled their feelings in order to reach agreement, resulting in a “faux” consensus. Second, people may feel that they had to water down the quality of the decision in the urge to reach consensus. Finally, when people perceive their leaders failing to take responsibility to make decisions, they lose confidence and trust. What’s the point of leadership, they ask, if the people in charge don’t actually manage and make decisions?

Last week, I worked with the executive team from a large organization to help them learn how to manage decisions more effectively. The CEO turned to me afterward and said: “I realize now why we have so many problems with decision making in our company: We aren’t clear at all about how we are going to make a decision. So people simply assume it’s going to be consensus, or assume that the team asked to develop some recommendations is going to make the final call. This has been a huge eye-opener for me!”

One of the axioms of being a good consultant is this: Always tell the truth to your clients! Now this may seem like a no-brainer, but every one of us has experienced moments where we’ve wanted to refrain from telling the truth out of fear that we’ll offend. For a professional management consultant, telling the truth carries the additional fear of losing a client, with all of the financial consequences that entails.

I was reminded of this axiom while working with a large non-profit based in Los Angeles. I was hired to help the board of directors get clear on its governance role. The CEO felt the board was asserting too much control. But as I dug deeper, I found that the board had every reason to be concerned. There was no clear vision, no clear strategy, and the only action plans were on paper – no one truly owned them.

I met with the CEO and told him that my goal, above all else, was to help him and his organization be successful. I told him that, frankly, I felt the organization lacked direction. The strategic planning that the Board had done in 2007 had not resulted in a clear strategic plan. Nothing had not been captured on paper. The management team was off on its own, with no sense of coordinated action or accountability. Frankly, I told him, we needed to start at the beginning. I then looked at him, not sure what to expect.

“You’re absolutely right,” he said. “And I need you to say that to the Board – not once, but many times.”

I raised an eyebrow. After all, he was responsible for the lack of a plan, for the lack of coordination.

“You say that to the Board, and then help us develop a plan,” he said. “That will assure them that we’re on the right track.”

“I can’t do that,” I explained. “You have to carry that message. I can support you, but the Board needs to hear your commitment to making that happen.”

He paused, and then smiled. “No, you’re right again. I’ll let them know that we could have done better. And then I’d like to turn it over to you to facilitate a discussion with them. Can you do that?”

“I would be happy to,” I said. And that was the truth.

Here’s the text of an email I sent today to the president of the Board of Directors of a non-profit. I think it speaks to how to do streamlined strategic planning for a non-profit.

“Hi, Meg – The best way to make this process go expeditiously is to prepare a draft plan for the Board to look at. The work we do before hand with the executive committee should be oriented to creating that plan. We’ve already decided on the format for the plan.

“The key decisions the Board needs to make revolve around reaffirming the mission of the organization – and then deciding the specific goals/priorities to achieve – within its resources. The key questions to ask are: ‘What’s our underlying strategy in terms of how we will achieve each goal? How will we re-allocate resources to assure we have the capacity to achieve it?’ Don’t make the mistake of setting goals and then starving the organization of resources to achieve them!

For example, if raising money from grants is a priority, then you’ll need capacity to research and develop grants. If generating revenue from fee-for-service programs is a priority, then you’ll need  capacity to manage those programs. You have to work through the options, decide where the impact will be greatest, and make choices.

For each potential goal, keep asking, do we have the capacity? If not, how will we get it? At what cost? What will be the benefit? Is the return to our mission significant?

I look forward to seeing you all and helping you lead this to a successful conclusion.

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My family and I just came back from four days at Disneyland.  Christmas to New Year’s is always the busiest time at the Magic Kingdom. But despite the huge crowds, people were smiling and having fun. We all know that Disney Corp. is a master of integration, with classic cartoon characters, movies, theme parks, hotels, and cruise ships woven together into a seamless spectrum of products and entertainment. We also know that Disneyland is a place where the child in us can come out and run free. I watched a couple from Japan, both in their 30s, with no children in tow, behave like little kids at the sight of Minnie Mouse.

But what I realized is that Disney is not only in the integration business. It’s also in the transportation business. Disney makes people happy by transporting them back to a state of childlike happiness. There’s no other place that does that half as well. Whether singing along with audio-animatronic pirates or getting your photo taken with Eeyore, every moment is designed to transport you back to a happy memory from childhood.

It got me to thinking that every company needs a similar “transportation” strategy – a strategy for transporting people to a happier place mentally and emotionally. That strategy will be driven by a deeply ingrained vision of how you want to make people feel.

So ask yourself: “What is our transportation strategy? How do we want to make people feel?” Whether a bank, a restaurant, or clothing store, every company should have one. If not, your customers will see you as a commodity, and value you accordingly. In these economic times, that’s a risk you can hardly afford to take.

It is inevitable that you will at some point in your career face a situation that requires extraordinary courage under fire. For Citigroup, the world’s largest financial services company, that time is now. So far, the response is not impressive.

Part of the explanation may be the insular nature of the Citigroup’s culture. According to The New York Times, Citigroup’s CEO Charles Prince worried about the risk posed by mortgage-backed securities in 2007, but received assurances that Citigroup’s balance sheet was in good shape. How wrong can you be? Now Citigroup’s new CEO Vikram S. Pandit is facing his biggest test.

There are two rules to follow in a crisis. Rule number one is this: Protect other people first; customers, employees and citizens. Not your shareholders or yourself. Protect the public and your customers, and the shareholders will follow. Why? Because the company’s long-term reputation and goodwill are more important than any short-term risk to shareholder value or your own job security. Rule number two is a corollary to the first: Be prepared to reframe and expand your level of responsibility. In other words, accept responsibility even if you’re not at fault. This may feel counter-intuitive, especially when someone else is clearly culpable. But reframing and expanding your level of responsibility will help lead you out of the crisis.

Consider this well-known example. In 1989, the oil tanker Exxon Valdez went aground in Alaska’s Prince William Sound. Eleven million of oils spilled onto pristine shoreline. In the immediate aftermath, Exxon’s CEO Lawrence Rawl was slow to accept responsibility. Instead he issued a flurry of press releases stating that the company was investigating the accident. The opportunity to quickly contain the spill was squandered. Hundreds of miles of coastline were fouled. Public furor built and the company’s reputation plunged. Several weeks passed before Rawl grudgingly announced that the company would take responsibility for the clean up. Eventually, thousands of workers and volunteers were mobilized to mop up the oil, save the wildlife, and minimize the damage to the extent possible. But Exxon’s public image was left in tatters because its immediate response was too slow. William Reilly, then head of the Environmental Protection Agency, said Rawl’s response was “a casebook example of how not to communicate to the public when your company messes up.” Rawl’s reputation never recovered.

In contrast, when a container of Odwalla apple juice contaminated by the bacteria e coli resulted in the death of a child in 1996, CEO Greg Stepensall stepped in right away and assumed personal responsibility. He recalled every Odwalla product. He paid out huge sums to the families affected by the tainted products. He held regular press conferences to ensure the public knew what was going on and how the company was responding. For more than a year, Odwalla retooled its production lines, adding flash pasteurization to ensure no future incidents could occur. Sales fell 90 percent but Odwalla survived with its reputation intact.

As the Exxon Valdez and Odwalla examples show, leaders have a clear choice in how they frame their response to a crisis. On the one hand, they can respond out of a “protect ourselves” mentality, as Exxon did in the Exxon Valdez disaster. Or leaders can think and act out of a larger ethical context, as Odwalla did. Citigroup has committed the financial equivalent of that catastrophic oil spill. Let’s see how they respond.

Next blog article: “Obamas Leadership Style: Lessons in Commanding Attention and Message Control”

In his book “Good to Great,” Jim Collins tells the following story: In the 1970s and 1980s, Bank of America and Wells Fargo Bank had similar revenues and profit margins. Bank of America was led by a strong, egotistic CEO who, by dint of his personality and commanding nature, had assembled a passive team of “yes” men.

Wells Fargo, on the other hand, had assembled one of the most dynamic management teams in the industry. At Wells Fargo, people posed tough questions to one another and weren’t afraid to challenge the status quo. They felt free to challenge each other’s thinking. Their relationships were founded on mutual trust rather than mutual fear.

In the early 1980s, banking deregulation took place, triggering a revolution in the industry. The industry’s traditional profit margins were threatened. Wells Fargo’s management team saw the changes coming and focused on cutting costs. They recognized that banking was becoming a commodity business, with thinner profit margins than before. “Run it like you own it,” became their mantra.

In contrast, BofA reacted slowly. The country club culture prevailed. No one challenged the status quo. The result? Over a fifteen-year-period, from 1983 to 1998, Wells Fargo’s stock outperformed BofA’s by 500 percent.

That story comes to mind as I contemplate the new financial landscape. Wells Fargo’s takeover of Wachovia gives it the most branches of any bank in the United States. BofA’s takeover of Merrill Lynch makes it the largest brokerage in the world. BofA becomes the number one underwriter of global high yield debt.  Wells is positioned to get new deposits. Both will see their shares purchased by the U.S. government under Treasury Secretary Paulson’s bailout plan.

So which bank will emerge the better? I’d bet on Wells Fargo. In this climate, I’d rather be the country’s largest commercial bank than the world’s largest holder of high yield debt. Stay tuned!

Yesterday was a good day with a client in Los Angeles. It’s a non-profit association with two dozen branch offices. The process was good – I helped them see the situation clearly. They had some key issues to deal with. The authority has traditionally been vested in the local branches, not in the central association office. The first issue they needed to tangle with was how to construct a more rational system that devolved sufficient authority to the central hub to enable the organization to operate efficiently.

Wrapped around the governance question was a financial issue – the organization, though profitable, was declining financially. Something needed to be done to create a sustainable business model. Happily, they had the answers at their fingertips. Many of the pieces were already being conceived – a much bigger fund-raising operation, more vertical oversight of back office operations. But several pieces of the puzzle were missing – most importantly, a strategy for front-loading the investment in new capacity. Where was the money going to come from? Second, they needed to agree on what oversight by the central association office really meant? Did it mean true performance management with consistent expectations tied to both positive and negative consequences? Or did it mean something else?

By the end of the two days, we had the puzzle completely assembled. We figured out which assets would be sold to raise the cash. We figured out a new framework for flexible governance and oversight, rewarding high performing branches with more autonomy, penalizing low performing branches with more oversight. We had the performance assessment piece in place. We’d sharply defined the role of the branch directors. We had worked on the vocabulary and messages to describe the strategy effectively. By the end of the second day, everyone had their assignments. The team was aligned. They were ready to go.

Next blog article: “Strategic Change Management“

I spent yesterday afternoon coaching the CEO of a medical research institute in Boston. Tom is an affable, good-natured man. The institute he heads is a worldwide leader in brain research.

I had recently worked with the institute’s Board of Directors. They complained that the vision of the institute was “muddy.” They wanted more prominence given to clinical treatment rather than basic science. The board’s role was to raise money. “We can’t raise money if we don’t know the vision,” they told me.

Tom had heard the Board’s complaints. “I always seem to have the same argument with the Board,” he confided. “I don’t know if I’m not communicating well or what.”

I asked him if his leadership team was aligned around a shared vision for the institute. “Probably not,” he said. “They are each leaders in their scientific fields, and they collaborate on specific projects. But we don’t meet regularly as a group.”

 I asked him to describe his vision. “We’ve assembled the most talented group of scientists and clinicians in our field in the world. We have the leading people, we have the right processes and scientific approaches, and we have the leading facility. Any breakthroughs in our field are going to occur here. But we have to keep growing if we’re going to maintain our leadership.”

 I looked at him. “That’s a powerful vision,” I said. “Yet I’ve never heard you articulate it to the Board.”

 “I feel I need to listen to the Board,” Tom said.

 I reminded him of the derivation of the word “leader.” It comes from an Old English root word which means “to be out in front.”

“Like a scout,” Tom said.

“Yes,” I said. “The same root word also means to die.” 

“That makes sense,” he smiled. “The scout would be the first to get shot.”

Leaders can’t wait for others to articulate the vision, I told him. The leader has to ante up first. You’ve got to tell your leadership team and your Board your vision, and then let them respond. Some will take shots at it. But that will help you sharpen the vision and make it stronger.

“What if someone else has a stronger vision?” he asked. “I fear that another leader could emerge.”

“That’s a small risk,” I said. “The greater danger is that the institute will lose its focus if you don’t galvanize it with vision.”

 He looked at me. “Okay,” he said. “Where do we begin?”

 I sketched out a process. “Start with three facilitated meetings with your leadership team to hone the vision and related priorities. That would give you a plan to take back to the Board.”

“That sounds good,” Tom said. “Thanks for coaching me on this!”

Related blog article: “Strategic Change Management and the First Five Percent”