This week, I have been looking at research on the topic of behavioural strategic planning, which I think is worth sharing.

Many of us are still making decisions in a business-as-usual environment. My client challenged me on this one. He loves scenario planning and, applying his quantitative background, is quite adept at forecasting future economic and business trends. Still, I held my ground. All of your decisions are being affected by a normalcy bias, I contended. If none of us are sure what the new normal is how can we be planning for it?

The point of the research I have been reviewing on behavioural strategic planning is that our decisions are affected by many biases—overoptimism, loss aversion, risk aversion and the illusion of control are some of the most common.  In a more volatile economic environment, this is more true than ever. The environment in which we do business in is changing but we are still applying the same thinking to strategic decision making. Studies report that the majority of leaders today feel that their capacity to understand and manage their external business environment is at an all-time low.

Of course, we can plan for the new normal. The first step to analyzing our external business environment is to become aware of our biases and work towards minimizing them. I have come across some good research from McKinsey on how biases affect strategic decision making and how to counter them. Here is a good read for a lazy summer weekend: The Case for Behavioral Strategy by Dan Lovallo and Olivier Sibony.

I have been following a six-week blog series called Imagining the Future of Leadership running on the Harvard Business Review site.  A common theme that keeps emerging is moral leadership. Since the economic crisis, moral leadership has been a popular topic. MBAs have really taken a beating – ouch!!! Among the thought-provoking questions being raised is whether our MBA programs are cultivating moral values-driven leaders or mass producing greedy Gordon Gekkos who are willing to do anything to improve margins.

In todays’ blog the Carnegie Foundation’s William Sullivan revisits MBA training in Preparing Undergraduates as Business Professionals in what he calls the “misalignment of business school curricula and b-schools’ culture.”  He goes on to lament that MBA training is missing the “sense of professionalism” that we instill in our doctors and engineers – and lawyers??   In sum, Sullivan argues that business schools fail to provide business students with the flexible and expansive thinking and analytical tools they need to make good decisions.

Finger pointing at professions is not the point here. We all deserve a comeuppance. What’s important here is that ethics in leadership is being given more attention. Whether an MBA professor or leader training the frontlines, we should all be asking ourselves this question every day: What steps have I taken today to instill values and encourage ethical behaviour among my peers and employees?

As for changing the MBA curriculum, Sullivan is right to point out that we should place more emphasis on more flexible thinking and social considerations. Here, students may already be driving the change. Social entrepreneurship is one of the most popular courses in MBA programs.

The Imaging the Future of Leadership series is definitely worth a read.

Ah-ha, caught you! — playing a brain game on your computer when you are supposed to be developing project plans.  I can understand the temptation. It’s easy to get lured into brain games. Brain game developers are aggressively planting links all over the Internet to attract the millions of new users onto their sites.  With a full workout in just 10 minutes a day, Luminosity promises to improve your memory and attention and provide clearer and quicker thinking.

Of late, I have noticed more brain game, mind mapping and other mind expanding software in venture capital portfolios (So that’s how the VCs are playing out the economic downturn – playing brain games).  More seriously, the increase in investment in the brain game sector means there are many more brain game offerings coming our way.

Should you buy in? Can brain games improve your leadership effectiveness? At Luminosity, Raindrops will help you show off your prowess with numbers in the next meeting.  At Vivity Labs, Streets of Dreams promises to make you a better multitasker. PositScience’s Brain Fitness Program posits to improve your memory by 10 years and help you participate in conversations more fluidly. For a less rigorous workout, take the Brain Speed Test and find out how fast your brain really works.

Now put the games away and get back to work!  According to a new study, brain games will not make you smarter or improve your mental capacity.  The study, published in Nature last month, involved 11,430 people across the UK and was conducted by the Cognition and Brain Sciences Unit of the Medical Research Council in Cambridge, England. To improve your mental acuity, these neuroscientists prescribe reading a good book or studying a foreign language.

Over the last year, I have been receiving more business communications in the form of doodles from peers and clients.  All use Edward de Bono’s mind map as a starting point – the main idea in the center with related ideas branching outwards. Since the father of lateral thinking started encouraging us to stretch our minds, his mind maps have been in consistent use in the business world in one form or another. Recently, there has been a notable resurgence in mind mapping.  Management theorists are telling us to innovate, develop flexible workplaces and think outside the box. Dr. de Bono showed us how we can accomplish these creative feats.

We should all be thankful to Dr. de Bono. The much anticipated IBM 2010 Global CEO Survey is out today. More than 1,500 executives were surveyed across 60 countries and 33 industries. The bad news is that only 50 percent of CEOs feel competent in the task of managing a more volatile and complex global business environment. The good news is that CEOs feel that creativity is the foremost skill required to succeed in a more challenging business world.

This is good news because we are getting good at creativity. Think of creativity as a natural resource that we are just starting to tap.  Mind mapping is expanding with new knowledge on how the brain works, software tools and social media to help us unleash and effectively apply our creative thinking. A good place to start is with Edward de Bono at www.edwarddebono.com.  According to de Bono’s most recent comments, we should be making those with “life experience in design and constructive thinking” – our scientists and engineers – leaders. Hmm, is that why we have so many overnight, yet sustainable, success stories in science and technology industries?

More on the IBM study Capitalizing on Complexity.

A happy Canadian employee - Apparently, sitting for photographs for the nickel is not too tough a job

Canada has one of the highest ratings in employee confidence surveys, according to Kenexa, a human resources consultancy that regularly conducts global EE surveys on 12 leading countries, representing 70 percent of global GDP.  At 97.5%, Canada is on par with Brazil, and only falls behind Italy, in its ability to engage employees.  Employees are surveyed on their attitudes toward company’s operations, future prospects, leadership abilities and quality of products and services.

Overall, with the exception of Spain, all countries surveyed registered a drop in employee confidence in the first quarter of 2010, including Canada. Kenexa’s consultants suggest that employees may be tiring of the recession and are putting more pressure on businesses to return to business as usual. With the recession officially over, employee confidence may pick up as the global economy bounces back.  Indeed, a number of local country surveys are starting to show positive upticks in employee engagement surveys.

Companies, however, should not ride out the economic pick up to higher employee engagement levels.  As one of the hottest topics around, there are endless resources. Here are a few that caught my attention:

The Employee Engagement Network – A new Ning network doing EE the Canadian Way

Hewitt & Associates’ 2010 Best Employers in Canada credits EE with helping these Canadian companies ride out the recession on top through:

-          Support for improving productivity

-          Willingness to make trade-offs, such as flex-time

-          High trust and confidence in leaders

And … an Ivey Business Journal article on The 10 Cs of Employee Engagement (2006, a few years ahead of its time).  I have come across this paper before in my research. It must be good – number two in the Google search engine.

3M says is has been engaging employees in innovation since the 1950s. Although “employee engagement” was not a management buzzword until recently, the long success record on innovation proves that 3M got the concept a long time ago. In fact, the maker of the indispensable PostIt®  Note and scotch tape claims that it allows technical employees to spend 15 percent of their time innovating on projects of interest to them.

Similarly, Google’s 80/20 innovation rule has garnered a lot of attention and, fortunately, copycats. The leading search engine allows employees to work on technical development projects of their choice for 20 percent of their time, the remaining 80 percent of time is focused on Google’s core projects.

Time to innovate is important but the real employee engagement factor in the 80/20 innovation model is the opportunity for employees to grow. Importantly, these leading technology companies have given their technology workers autonomy and decision-making authority.  Survey after survey tells us that employees with more control over their workplace environment and the factors that influence their satisfaction levels perform at a higher level, in terms of innovation, productivity and retention. Equally important, workers with decision-making authority suffer from fewer stress-related illnesses, the number one occupational health expense of the global workplace.

“An engaged workforce means increased productivity, innovation and competitiveness.”

Department for Business, Innovation and Skills (BIS), UK

Closely monitoring the UK election while writing this blog, I could not help but wonder if the close election – all three candidates are hovering around 30% in the polls – means that they are equally engaging the electorate, or possibly, they are not really engaging anyone; thus, the three-way split.  As none of the candidates are campaigning to split up the Commonwealth, we Canadians are indifferent, or not engaged.  I can’t speak for the UK or the rest of the Commonwealth, though.

What is apparent is that the British government holds engagement in such high regard that it has published a comprehensive report, guides and tools on employee engagement to help British companies engage their workforces, which it reports leads to productivity, innovation and competitiveness.

Innovation is a key debating point in the UK election, with the Lib Dems and Conservatives accusing Labour of failing to stimulate innovation. In fact, Labour is supporting innovation by making the connection between innovation and employee engagement in its newly launched program.

The program is targeted to “UK Business Leaders” but I am sure they do not mind sharing it with everyone in the Commonwealth. The information, including video case studies, appears to be available to everyone and can be found here: Effective Employee Engagement is Central to Business Success. The part that most concerns we leaders can be found here: Becoming a more engaging manager.

More on employee engagement and innovation later in the week …

On the heels of Canada and other G7 countries, the US has officially announced that, following three consecutive quarters of growth, the recession is over. Now we can start writing the books on how to manage through an economic downturn. Let’s take stock of what we have learned.

Management theorists tell us that our competitive advantage erodes faster in a recession. Accordingly, companies who relied solely on cost cutting to ride out the recession eventually hit a wall. Those who innovated and jumped outside the box have excelled. Korea provides a good case study.

In Asia, a funny thing happened during the recession. Japanese management experts were spending less time disseminating Japan’s globally emulated management practices and more time studying the competitive advantage of Korean companies. While Japan was sharing lean manufacturing practices, a few Korean companies were out-strategizing Japanese incumbents in several industries.

In electronics, for example, LG Electronics has become a market leader in India and is gaining leading market share in parts of Europe.
Korean companies are relying on innovation to strengthen their competitive advantage. LG expanded globally with a localization strategy and a focus on innovative design capabilities and marketing and brand management, according to a study by the economics department at Tokyo University. Daewooo, the world leader in shipbuilding, distinguishes itself from its competitors based on its ship building design, production and infrastructure management technology, which it develops in-house. Japan still remains king of the Economist’s rankings of most innovative countries; it has taken top spot three years running (2010 rankings should be out within the month).

So perhaps it is not so much lessons learned but reminder lessons that came out of the recession. Companies are now placing a razor sharp focus on innovation. There are a lot of books on innovation expected to hit the press over the coming months. As I make my way through the ebooks (my part to save a tree!) and research studies, I look forward to sharing what I learn. Hope to share some interesting research on innovation and employee engagement later this week.

(BTW, Canadian consumers consider RIM to be the most innovative Canadian company, according to the May 10th edition of Canadian Business).

Yet CK Prahalad seems to be one of the few who has come close to succeeding, according to the many tributes to this leading management thinker since his death last week.  Prahalad espoused a business model that focused on feeding the huge demand for consumer products from the billions of poor of the world in his book “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits.” Undoubtedly, he was influenced by his childhood as one of nine children of an Indian judge and Sanskrit scholar.  He ended up at Harvard and eventually as an academic at the Ross School of Business at the University of Michigan where he spread his views of “inclusive capitalism” around the world in the shadows of the big auto companies.

Whether or not you actively followed this global management thinker, you no doubt have been influenced by his thinking and use his terms: “core competency,”  for example. Today, the concept of making money while doing good is called social enterprise, and like CK Prahalad’s classes, social enterprise courses are the most sought after in business schools.

Fast Company captured a glimpse of his life and work in this 2001 article: Can CK Prahalad Pass the Test?” in which he puts his own management principles to the test.

The ethical leadership of European governments was truly tested this past week. They were under enormous pressure from airlines and their employees and customers to open up the skies to air travel despite the ongoing risk posed by the ominous volcanic cloud from Iceland.  Did these leaders practice ethical leadership? If there are no accidents over the next week, then they will be deemed ethical leaders.  If an engine sputters in the ash, they will be accused of selling out to corporate interests.

Perhaps the real question should be: Were the airline bosses pushing to fly their planes in the early days of the volcanic ash coverage practicing ethical leadership?  As the newly released 2010 World’s Most Ethical Companies rankings show ethical leadership is a tough business. Of 100 companies in 2009, 24 have dropped off the 2010 rankings.  The rankings are published by Ethisphere — a good source of information, advice and tools on ethical leadership.

An article on Pay for Performance from the chairman of Aflac, Dan Amos, is worth a read at a time when pay for performance is becoming a growing component of our compensation packages.  Alfac is being recognized in ethical circles for its “Say-on-Pay” shareholder vote.