The Entrepreneurs’ Organization helps entrepreneurs reach their full potential by facilitating life-enhancing connections, creating shared experiences, and enabling collaborative learning. Dr. Gleb Tsipursky, CEO of Disaster Avoidance Experts, author, and EO 360 podcast guest, empowers executives to avoid business disasters. As a cognitive neuroscientist and expert on the effects of cognitive biases on human behavior, we have Dr. Tsipursky asked what happens to executives who anchor themselves to the wrong pandemic dates. He announced the following:
Have your views stayed the same since the Covid-19 pandemic started in March? Do you know people who, despite evidence to the contrary, continue to view the virus as only a minor inconvenience?
For example, many people are still mistakenly convinced that Covid-19 is not much different from the general flu.
Many top entrepreneurs are still expressing skepticism about Covid: For example, Elon Musk said he would not take a vaccine, doubts Covid tests and is narrowing down mitigation efforts. This is despite scientific evidence of the benefits of mitigation efforts, including masking, and new developments such as the recent call from governors to stay home and telework to slow the third wave of the virus. Similarly, they are ignoring research showing that crowded indoor spaces like restaurants, gyms, and hotels significantly increase the risk of virus infection.
People tend to hold onto their beliefs based on the first information they receive. This is true even when there is strong new evidence that these beliefs are wrong. Behavioral economists and cognitive neuroscientists call this anchoring of the mental blind spot.
Anchoring is one of many dangerous errors of judgment or cognitive prejudice that affects the decision-making process in companies and all areas of life.
When we take steps to remove cognitive biases, we can make better decisions to manage risk wisely. Similarly, we can use research-based steps to address entrenchment in business decisions.
Anchoring in Fintech: A Case Study
Let’s take a look at the case of a fintech startup burdened by anchoring that led to disastrous remote work and, unfortunately, Covid-19 infections in the first few months.
When “Lauren,” an EO member and CEO of a Texas-based startup with 130 employees, first heard about Covid-19, she and her leadership team just shook it off as a nuisance. They weren’t preparing for an extended disruption and chose to follow CDC early guidelines in preparation for a brief hiatus caused by a short-term outbreak.
Because of this, the senior management team urged all employees to report to the office as the states reopen, ignoring news of an increase in cases in Texas.
However, due to the management team’s dismissive attitude towards Covid-19, neither managers nor employees have taken the necessary precautions. Many did not follow social distancing guidelines and did not wear masks in the office setting.
Unsurprisingly, problems soon began to emerge, starting with a virus outbreak that stemmed from a company-wide meeting. Almost three dozen employees and three executives in the C-suite have contracted the virus.
The COO and several employees were hospitalized, and two elderly employees died. This resulted in massive drops in productivity, resignations, and low morale.
Unsure how to go about it, Lauren reached out to me in late April to plan how her company could most efficiently manage the pandemic mayhem.
Adaptation to the new abnormal
In virtual meetings, I advised management to no longer deny the upheavals of Covid-19. Sticking to their dangerous path could ruin the company.
I pointed out that at the beginning of the pandemic, most companies activated business continuity plans and left them month after month.
However, I am firmly against continuing these emergency measures only for the minimum two years of this pandemic.
Businesses need to make plans and take action beyond immediate action in order to survive and thrive for the next several years. This means adjusting to the pandemic and recognizing that ongoing waves of restrictions are the new abnormality.
In essence, you need to change your internal and external business model so that your company is well positioned for productivity during these turbulent years. Examine the elements that drive your business and revise your regular operations and business continuity plan.
Move forward from anchoring
After our counseling sessions, Lauren took action. She and her leadership team immediately verified the facts about the virus. Fortunately, management finally realized the gravity of the situation and led the company to:
- A company-wide virtual town hall exposed false information about the virus to which most employees were anchored.
- Introduction of a teleworking program. All employees received technical and technical support.
- Revised external and internal marketing materials to include critical information on the company’s initiatives to secure its virtual and physical spaces.
- Reaching out to disgruntled customers who were previously unhappy with the company’s slow response to complaints and inquiries. The sales team gave a detailed report on how the company redesigned operations to provide better service.
- Developing an attractive customer loyalty program to prevent more employees from leaving the company.
These steps produced great results and put the company back on a productive path.
Lauren was delighted that they were able to minimize health risks through strict guidelines for working on site. This lowered the risk of the company becoming accountable in the event of an office breakout and eliminated significant concerns. With the clarity these changes brought, the company was able to focus its efforts on strengthening customer relationships and restarting product development.
Lauren also expressed how grateful she is that they took these necessary steps – especially as Covid-19 infections began to rise, leading to yet another cycle of reopenings and restrictions.
The opinions expressed by Inc.com columnists here are their own, not those of Inc.com.
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