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Psychology Is the Key to Building a Winning Culture

How to go from theory to practice.

Key points

  • Psychological tools like ego management, radical empathy, and avoiding diffusion of responsibility are the key to building a winning culture.
  • Building an empathetic culture is the key to attracting and retaining top talent.
  • Decisive action to field the best team and directly communicating around goals, plans, and results are antidotes to diffused responsibility.
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Profitable organizations are a key to providing innovative products and services, good jobs, and tax revenue for roads and schools.

Organizational culture creates the environment for talented, diverse, goodhearted people to join, who create and provide great products and services to customers. And culture is all about psychology.

So it all starts with psychology. But what are some clues from the field of psychology that leaders can use to build a winning culture?

Before I reveal three observations, please allow a couple of sentences to earn your trust and credibility. I feel tremendous gratitude for four mentors at Claremont, where I earned my Ph.D.: culture pioneer Mihaly Csikszentmihalyi (who authored Flow: The Psychology of Optimal Experience), Stewart Donaldson, Vijay Sathe, and last but not least, Peter Drucker, the Father of Management. “Culture eats strategy for breakfast” was Drucker’s mantra.

3 psychological tools to build a winning culture

1. Ego Management. A culture is made up of people. The selection methods used to choose talented, diverse, and good-hearted people are key. But just as important as the selection is the willingness of leaders to manage their ego to be willing to hire people who are, in many respects, more talented than they are. In my experience, only about 20 percent of leaders are willing to manage their egos sufficiently to hire top talent.

Eighty percent of leaders would rather hire people who are about as talented as they are or less talented so they can boss folks around. This is not based on a large sample of data—it’s my estimate after nearly three decades of watching leaders behave across thousands of companies. The second opportunity to check one’s ego is after the hiring decision is made.

Great leaders largely “get out of the way” of their talented colleagues. Because of the need to feed their ego, poor leaders claim credit for wins, micromanage, and demean their teammates. The practical implication is (a) hire well (by keeping your ego at bay) and (b) get out of their way (because they don’t need you as much as your ego thinks they do).

2. Radical Empathy. My mother, Mary Smart, is one of the most empathetic people I ever met. She truly “feels” what other people feel out of kindness and a desire to make a difference in others’ lives.

When I founded ghSMART in 1995, a deliberate culture design requirement was to build in “radical empathy” for clients and colleagues to encompass their dreams, needs, and worries.

Building a culture of empathy means you don’t have to remind people that we are here to serve each other, to serve clients, to go out of your way to reliably execute what you commit, and to give people gifts of “unexpected delight” along the way. For example, one colleague recently contracted COVID. Another colleague Instacarted a “pulse oximeter” to his house within the hour, along with a note to “make sure your oxygen stays above 90 percent or call for help.”

Another colleague created a set of deliverables for a client that had never been designed prior, based on listening intently to the client and empathizing with the problems they were facing. Another colleague whose spouse suffered a sudden illness was brought to tears when not one but many colleagues offered to drop everything and fly to his home and help watch his kids so he could be with his wife at the hospital.

Another colleague said she wanted to sharpen her “storytelling” skills, and a teammate researched a Hollywood screenwriter’s seminar and bought her a ticket. Radical empathy brings an understanding and actions to bear in taking great care of colleagues and clients.

3. The Avoidance of Diffusion of Responsibility. We’ve all seen it: A fly ball to the outfield drops between three softball players, each assuming someone else would catch it. That happens in organizations all the time. At ghSMART, the company I founded, we have an explicit value to attempt to counteract this insidious “diffusion of responsibility.” The value states, “When in doubt, lead.” That means we encourage not just the obligation to dissent or speak up. We encourage colleagues at any level, on any functional team, to take action to solve problems rather than be paralyzed with fear about decision-making.

Have you worked with organizations that suffer from a diffusion of responsibility? Our dataset on more than 30,000 successful and unsuccessful careers yielded the insight that leaders who are good at prioritizing, hiring, building relationships, and focused on results were twenty times more likely to achieve their goals than leaders who were weak on any one of those skills. The diffusion of responsibility is the opposite of prioritizing.

Taking decisive action to field the best team and then very directly communicating around goals, plans, and results is what we call running at “full power” and the antidote to diffused responsibility.