The Secret to Building a Stronger Business

Last Updated Aug 9, 2010 1:55 PM EDT

What are the key factors that make or break your business? Your product or service? Your customers? Capital? Just plain luck?

Sure, those are all important. But I'd argue that ultimately it comes down to people, and more specifically: you. As chief executive, you impact every aspect of your business. Even when you delegate, your personality and decisions influence everything. It stands to reason that leaders who are psychologically in tune -- meaning resilient, agile, and aware -- are not only more effective, they also bring an unmatchable competitive advantage to their businesses.

How can you make that happen?

Many leaders -- even those who run businesses with people-centric cultures -- tend to prefer a straight-ahead, hit-the-ground-running, just-make-it-go approach to managing people. The alternative I recommend is an inside-out -- rather than outside-in -- view of managing people. When an employee makes a mistake or a bad decision, your first question should be "Why did he do that?" not "What can we do about it?" In the long run, this more psychologically savvy management tactic pays dividends. If you want to motivate someone, you better understand first what motivates her.
To me, this is common sense, but, of course not everyone in the business world agrees. A recent article in The Economist would have managers believe that trying to understand a worker's psychology amounts to meddling. Worried about an employee's emotional state or stress level? Careful, that may very well cross a privacy boundary! In fact, the article refers to the business world's "new-found interest in promoting mental health" as if that were a bad thing. It questions the assumption that "promoting psychological wellness is as axiomatically good as encouraging the physical sort," and worries that a "mental-wellness movement" will inevitably attract "charlatans and snake-oil salesmen."
I can't post the word that captures my true opinion of all that; "bunk" will have to do. Think of the issue this way: If your copy machine is broken, you fix it; if your delivery system is gunked, you grease it; if your shop is dark, you light it. Why treat the human factor less responsibly?

Obviously, understanding and changing people is more complex than copiers and light bulbs. But the same principles hold: If, say, your sales team's performance needs your attention, you attend to it; and the right procedure follows a good diagnosis.

And by the way, dysfunction shouldn't be your first clue to pay attention. Like world-class athletes, top business leaders improve on excellence by understanding what already works well. The more you know about yourself and the underlying forces that push and pull you, the better equipped you'll be to make even better decisions going forward.

What to Do:
Strengthening your business by investing in "psychological capital," as I call it, doesn't happen overnight. But here are two key pointers to get you started, culled from my experience advising entrepreneurs and senior executives navigating complex circumstances and looking to refine their leadership capabilities:
1. Understand that we all naturally assert the vexing tendency to try to keep things the same, notwithstanding good intentions and recognized imperatives to make things different. Have you ever resolved to lose weight, quit smoking, be more patient, or otherwise try to change yourself? How did it work out? My point exactly. So long as this potent streak of irrationality is left unchecked, your magnificently designed and deployed blueprints for business success are in constant danger of becoming irrelevant.

First step: Identify the issue -- say, become a better listener, feel more confident at board meetings, get your SVP to micro-manage less, understand why morale is low.

Next: Start thinking about what the issue is made of, not how to change it. Talk about your ideas with a spouse or trusted colleague, confidante, or consultant.

And remember, dismantling and reconfiguring entrenched systems requires time, thoughtful attention, and heavy lifting.

2. Change isn't about finding easily opened doors. Whatever your desired outcome, what's most crucial to geting there is identifying and unraveling the tangle of ingredients, understanding how and why they got there, and then putting something new in motion.

Consider the co-founders of a music production and distribution business. The partners, Frank and Darryl, thought they were on the same page about all the important things. Business was good, and they were good friends. But when I first met them, I found two guys at loggerheads over nearly every decision. Already behind schedule on several high-value projects, they felt pressured and wanted me to help them resolve things yesterday.

The deadlines were real enough. But the pressure was synthetic; they'd deferred addressing their conflict until it was nearly too late. Now they were making instant resolution my responsibility.

Here's what we did: With me and then together, they aired out their simmering frustrations and resentments so that eventually, the temperature lowered enough for them to actually move ahead on time.

The job wasn't done once I'd helped them achieve on-time completion. That was only a temporary flight back into the good working stasis they already knew.

Getting Frank and Darryl's partnership, and their business, truly solid required navigating through the substance of their discord, learning why it was there, why things had finally gone south after years of apparent harmony, and helping them know how to unstick themselves in the future.

  • Alexander Stein

    Alexander Stein, Ph.D., business psychoanalyst, advises entrepreneurs and senior business leaders on the psychological dimensions of management, business innovation and development, and organizational change. He helps executives strategically harness the complex underpinnings of high-stakes decision-making, and assists large and small companies with leadership, boardroom and senior team dynamics, succession, expansion, conflict resolution, hiring assessments, and partnership negotiations. Alexander also acts as a specialist advisor to multi-national legal counsel, law enforcement, and institutional victims in high-value economic fraud and asset recovery operations, and is an internationally recognized author and speaker on the psychology of serious fraud. He is a principal in the Boswell Group, a New York-based consulting firm focusing on the psychology of business, and previously wrote a monthly column for FORTUNE Small Business magazine on the psychology of entrepreneurship and leadership.