Three Secrets of Organizational Effectiveness

strategy+business
Preprint 00271
Three Secrets of
Organizational
Effectiveness
How the practices of “pride builders” can help you build a
high-performance culture.
by JESSE NEWTON and josh davis
Forthcoming in issue 76 autumn 2014

Organizations & People
by Jesse Newton and Josh Davis
w
hen the leaders of a
major retail pharmacy
chain set out to en-
hance customer satisfaction, market
research told them that the number
one determinant would be friendly
and courteous service. This meant
changing the organizational culture
in hundreds of locations—creating
an open, welcoming atmosphere
where regular customers and em-
ployees knew one another’s names,
and any question was quickly and
cheerfully answered.
If you’re trying to instill this
kind of organizational change in
your company, then you face not
just a logistical shift, but a cultural
challenge as well. Employees will
have to think differently, see people
differently, and act in new ways:
going the extra mile for shoppers,
helping them articulate what they’re
looking for, and working harder
to keep items from getting out of
stock. Employees also need to con-
tinually reinforce the right habits
in one another so that the customer
experience is on their minds every-
where, not just at the pharmacy or
checkout counter, but in the aisles
and back room as well. Conven-
tional efforts to make this happen
by “changing the organizational
culture” in a programmatic fashion
won’t get the job done.
One method that can help is
known as pride building. This is a
cultural intervention in which lead-
ers seek out a few employees who are
already known to be master moti-
vators, adept at inspiring strategic
awareness among their colleagues.
These master motivators are invited
to recommend specific measures
that enable better ways of working.
It’s noteworthy that pride builders
in a wide variety of companies and
industries tend to recommend three
specific measures time and time
again: (1) giving more autonomy
to frontline workers, (2) clearly ex-
plaining to staff members the sig-
nificance and value (the “why”) of
everyday work, and (3) providing
better recognition and rewards for
employee contributions.
These are, of course, widely ap-
preciated management methods for
raising performance. But they’re
rarely put into practice. Perhaps it’s
because they feel counterintuitive
to many managers. Even the lead-
ers who use them, and whose enter-
prises benefit from the results, don’t
know why they work. So the value
of these powerful practices is often
overlooked.
That’s where neuroscience
comes in. Breakthroughs in human
brain research (using conventional
experimental psychology research in
addition to relatively new technolo-
gies like CT scans and magnetic res-
onance imaging) are revealing new
insights about cognitive processes.
With a little knowledge of how these
three underused practices affect the
brain, you can use them to generate
a more energizing culture.
Autonomy at the Front Line
At the pharmacy chain, the pride
builders were employees with a
knack for exceptional service. When
asked how to spread that knack to
others, they suggested giving clerks
Three Secrets of
Organizational
Effectiveness
How the practices of “pride builders” can help you
build a high-performance culture.
1
IllustrationbyLarsLeetaru
essayorganizations&people

more leeway to do things on their
own. For instance, the clerks could
resolve customer complaints by is-
suing refunds on the spot, and they
could try out their own product pro-
motion ideas. In the past, store man-
agers had been quick to step in and
correct mistakes in an abrupt and
sharp-tongued manner. Now they
would be more positive, collabora-
tive, and interactive with customers
and colleagues.
The company set up a pilot pro-
gram to train some store managers
and track results. Almost immedi-
ately, there were encouraging com-
ments from the front line: “[My store
manager is] now open to sugges-
tions, big or small. I know that my
opinion counts with her.” Customer
ratings and the amount spent per
visit also rose, perhaps because giv-
ing employees the freedom to stretch
and to shape their work directly im-
proved the customer experience.
Why did autonomy make such
a difference? Because micromanage-
ment, the opposite of autonomy and
the default behavior for many man-
agers, puts people in a threatened
state. The resulting feelings of fear
and anxiety, even when people con-
sciously choose to disregard them,
interfere with performance. Specifi-
cally, a reduction in autonomy is ex-
perienced by the brain in much the
same way as a physical attack. This
“fight-or-flight” reaction, triggered
when a perceived threat activates a
brain region called the amygdala,
includes muscle contractions, the
release of hormones, and other au-
tonomic activity that makes people
reactive: They are now attuned to
threat and assault, and primed to re-
spond quickly and emotionally. An
ever-growing body of research, sum-
marized by neuroscientist Christine
Cox of New York University, has
found that when this fight-or-flight
reaction kicks in, even if there is
no visible response, productivity
falls and the quality of decisions is
diminished. Neuroscientists such
as Matthew Lieberman of the Uni-
versity of California at Los Angeles
have also shown that when the neu-
ral circuits for being reactive drive
behavior, some other neural circuits
become less active—those associ-
ated with executive thinking, that
is, controlling oneself, paying at-
tention, innovating, planning, and
problem solving.
By giving employees some
genuine autonomy, a company can
reduce the frequency, duration, and
intensity of this threat state. In-
deed, as Mauricio Delgado and his
social and affective neuroscience
research laboratory at Rutgers Uni-
versity have found, the perception
of increased choice in itself activates
reward-related circuits in the brain,
making people feel more at ease.
In the long run, sustained lack
of autonomy is an ongoing source of
stress, which in itself can habitually
lead the brain to be more reactive
than reflective. Sustained stress can
also decrease the performance of im-
portant learning and memory brain
circuits, as well as the performance
of the prefrontal cortex, which is so
important for reflection.
To return to our drugstore ex-
ample, when a customer complains
about being overcharged, a clerk in
a fight-or-flight state might respond
counterproductively—for example,
by arguing. But a clerk accustomed
to autonomy would be more likely
to understand and to try to solve the
problem in an empathetic way. If the
company leaders try to enforce better
customer service through strict rules
that make clerks feel microman-
aged, the physiological state associ-
ated with the fight-or-flight reaction
would probably lead to the opposite
outcome: driving customers away.
The “Why” of Everyday Work
A regional health insurance com-
pany, adapting to the U.S. Afford-
able Care Act, resolved to create
more brand loyalty in an attempt to
attract customers. One of the first
trouble spots was the call center that
managed claims. Customer satisfac-
tion with health insurance call cen-
ters is notoriously low, often with
good reason. There are not always
good options for resolving claims.
Staff members are typically judged
on how rapidly and economically
they can get people off the phone.
The technology is often unsophis-
ticated, catching callers in irritating
voice-mail loops. At this company,
call center employees saw consum-
ers as their enemies—as complain-
ers who berated the employees and
blamed them for a miserable system
that wasn’t their fault. All the train-
ing in the world could not overcome
their fight-or-flight reaction. This,
in turn, led to low levels of effective-
ness and high turnover rates. From a
neuroscience perspective, the system
couldn’t have been better designed
to bring out the worst in everybody.
Despite all this, some super-
visors in the call centers regularly
managed to mobilize service reps
to deliver great customer care. The
company was eager to learn how.
When they brought these supervi-
sors together, it turned out they had
all, independently, discovered the
same technique: taking the time to
help sales reps and other call takers
see and fully understand the “why”
of their everyday work. This often
took the form of explaining (or, bet-
ter yet, demonstrating) the signifi-
cant value of daily tasks, so that the
2

reps understood their impact as part
of a larger health ecosystem that
supported people during difficult
and stressful times. In the words of
one pride builder, “I tell my team
that it’s not just a claim on the other
end of the call; it’s a family. You do
more than answer the phone. You
are a part of these folks’ lives.”
Here, too, neuroscience helps il-
luminate why the explicit invoking
of significance and empathy is so
effective. Helping a family member
who is concerned about a medical
issue (generally one with financial
ramifications) is a different chal-
lenge from dealing with a customer
trying to get more money. In neu-
roscience, these would be called dif-
ferent schemas: patterns of thought
that organize experiences.
People do not have just one way
of operating. They have different
modes of social behavior that vary
from one context to the next. The
rules for social interaction are quite
different when out for a drink with
friends than when at a parent–teach-
er meeting. Schemas reflect these
changes of context; thus, when a
call center employee is operating in
a help-a-family schema, the kinds
of behaviors that are appropriate are
quite different from those in a deal-
with-a-customer schema.
Elliot Berkman of the Univer-
sity of Oregon, one of the leading
researchers into the neuroscience of
goal setting and habit formation, has
proposed another reason why expla-
nations of this sort are powerful
motivators. When people know the
reason that a goal exists, it is easier
to form a “goal hierarchy”: a mental
structure in which priorities can be
considered as complements rather
than obstacles to one another. This
makes it more likely that people will
follow through.
Consider the job of helping peo-
ple who call for information about
their insurance policy. The employ-
ee’s goal is tightly connected with
the purpose of the job. If the goal is
to help families, the employee would
ask about the family’s challenges and
describe how its policies could help.
If the goal is to get people off the
phone quickly, the employee would
try to convince callers that the com-
pany was already doing everything it
could. Employees will favor the for-
mer goal only if they see how it fits
the company’s strategy, and if they
are confident that pursuing it will
be regarded as right by their leaders
and peers.
Finally, stressing the “why” to
employees helps companies deploy
the cognitive power of altruism.
Studies show that the brain’s reward
system is directly activated by help-
ing others. At the University of Brit-
ish Columbia, Elizabeth Dunn and
her colleagues found that people
report feeling happier after giving
money to others than after spend-
ing it on themselves. Similarly, when
it’s clear to employees that they’re
helping others through their work,
their intrinsic motivation rapidly
expands. Management by objectives
is a far more limited mental schema
than management by aspiration.
For all these reasons, once the
“why” of their jobs had been ex-
plained to them, call center employ-
ees transformed the way they dealt
with customers. This mitigated a
prevalent pain point and acceler-
ated the changes that the company
needed to make.
Recognition and Rewards
When the global automobile indus-
try began to recover from the severe
slump of 2008–10, the leaders of
one major automaker recognized
the need to refocus their orientation
from survival to growth. Employ-
ees already knew how to make the
production line work better. Now,
could they do the same in their cus-
tomer interactions, particularly with
car buyers in showrooms?
The company found the solu-
tion in its pride builders. North
America, Europe, and Asia had been
affected differently by the recession,
so these master motivators had to
adapt their approach to regional
business conditions, cultural differ-
ences, and employee attitudes. One
theme was common to everyone:
recognizing employee success in a
skillfull and considered way. This
did not mean heaping undeserved
praise on people; it meant celebrat-
ing a job well done while keeping
the bar high. One example is this
note from a team member about
a supervisor: “She is a demanding
manager in a fast-paced job, but she
knows the importance of keeping
the work fun and rewarding.”
The most effective supervisors
all turned out to have similar pride-
When it’s clear to employees
that they’re helping others
through their work, their intrinsic
motivation rapidly expands.
strategy+businessissue76
3

that hard work will be fairly recog-
nized. Most people’s neural circuits
will respond directly to these, and
the automakers were no exception.
This, in turn, made it more likely
that they would continue behaving
in productive ways. The auto sup-
plier thus laid the cultural founda-
tions to support a shift from finan-
cial peril to growth.
Pride and the Imitation Process
The three management approaches
described here—autonomy, pur-
pose, and recognition—can create a
climate of trust that spirals upward
through the ecosystem of the orga-
nization. That’s because people in
just about any social setting tend to
pick up the mood and attitudes of
others nearby, generally to a degree
that they don’t consciously realize.
This process, which neurosci-
entists call imitation, has been stud-
ied extensively. For example, Elaine
Hatfield’s work at the University of
Hawaii on “emotional contagion”
has shown how one person’s emo-
tions can rapidly influence those of
a group. The brain also has a pro-
cess known as mirror neuron activ-
ity: When people see others act in a
certain way, circuits in their brain
are activated as if they had taken
the actions themselves, even if they
don’t directly imitate that behavior.
Moreover, according to research
led by Andreas Olsson, now at the
Karolinska Institutet in Stockholm,
observation can at times substitute
for personal experience. Watching
someone else in a situation can have
an impact on the brain similar to
that of experiencing it directly.
The workplace is a natural me-
dium for viral behavior, transmit-
ted through observation. As long as
people see the difference it makes, a
change in a few individuals’ neural
patterns can move rapidly through
the enterprise. Social scientists some-
times refer to this phenomenon as
social proof or the bandwagon effect,
and it has long been documented as
a vehicle for social change. Indeed,
this could be why the pride building
method itself is so effective.
There is enormous potential
for combining neuroscience theo-
ry with efforts to help companies
improve the positive impact of their
culture.Themorepeoplewhounder-
stand the value of fostering autono-
my, purpose, and recognition—and
who translate these principles into
practice—the more others will mir-
ror them and the more widespread
these practices will become. By
providing scientific evidence of the
power of the pride builder behaviors,
neuroscience can help leaders see the
value of constructive organizational
culture change, and deploy more ef-
fective ways to accomplish it. +
Reprint No. 00271
Jesse Newton
jesse.newton@strategyand.pwc.com
is a senior associate with Strategy&
based in Chicago, and works with the
firm’s Katzenbach Center. He specializes
in organizational culture and change
management in industries such as finan-
cial services, energy, engineered products
and services, and consumer goods.
Josh Davis
joshdavis@neuroleadership.org
is an assistant professor of psychology
at Barnard College of Columbia University,
and director of research and lead professor
for the NeuroLeadership Institute. His re-
search deals with adaptive emotional state
control and mind–body connections.
Also contributing to this article were David
Rock, founder of the NeuroLeadership
Institute; Jonathan Gruber, former Booz &
Company principal; and Jon R. Katzenbach,
senior executive advisor at Strategy&.
builder-style approaches for convey-
ing recognition and, where possible,
rewarding people for good customer
interactions. They relayed positive
feedback from customers; they took
care to contact each team member’s
manager when giving thanks and
recognition; and they personalized
the messages. “Maria knows what
kinds of recognition each person
appreciates most,” a team mem-
ber observed about his boss. “She
might take one person out to coffee
or lunch as a form of recognition.
Or she might encourage people to
work from home one day per week
so they can spend more time with
their kids.”
Neuroscience explains the im-
portance of the personal touch in
delivering recognition that matters.
When a manager recognizes an em-
ployee’s strengths before the group,
it lights up the same regions of the
employee’s brain as would winning
a large sum of money. Rewards of
all kinds, including social rewards,
tend to release the neurotransmit-
ter dopamine, which produces good
feelings. These reward circuits en-
courage people to repeatedly behave
the same way.
One framework of social mo-
tivators is the SCARF theory: Da-
vid Rock, cofounder of the Neuro-
Leadership Institute, proposes that
people at work are highly motivat-
ed by five types of social rewards:
status boosts (S); increases in cer-
tainty (C); gaining autonomy (A);
enhancing relatedness (being part
of the group) (R); and demonstrat-
ing fairness (F) (see “Managing with
the Brain in Mind,” by David Rock,
s+b, Aug. 27, 2009). Public personal
recognition provides three of these
rewards. It increases social status,
enhances the sense of being a valued
member of the group, and shows
4

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