Building a valuable business is hard. Ensuring that it doesn’t fall prey to the umpteen different variations of painful decline is harder.
A large part of this descent into irrelevance comes from the infallibility of human nature. Spend any amount of time in a large enough organization and you will be surprised at how inane the inner workings of a successful company are.
This isn’t surprising to me, because the bitter truth is that many of us are still a bunch of status-seeking monkeys. When put in any sufficiently large group, we default to exercising Neanderthal logic, oftentimes with deleterious results (at least for the group, if not ourselves).
In a society that has perfected the art and science of value transfer, no investigation of complex human behavior can be complete without uncovering the social dynamics that inform them. As Eugene Wei once remarked:
“Social capital is, in many ways, a leading indicator of financial capital, and so its nature bears greater scrutiny. Not only is it good investment or business practice, but analyzing social capital dynamics can help to explain all sorts of online behavior that would otherwise seem irrational.”
Individuals, in an attempt to seek social capital (however they define it) tend to fall prey to their base instincts. Within companies, this translates to increased incidences of bad decisions. Make enough of those and your company is as good as dead.
Some of these mistakes — at least in the context of hiring — are perfectly avoidable, but only if we anticipate them and put measures in place to guard against them. Many stem from deeply held biases, and I’m listing a few that I’ve come across.
Favoritism threat
Imagine that you’ve been running a moderately successful software business for a little over 5 years, and are now actively seeking to diversify your business to an adjacent domain.
You realize that your company has over-indexed on a certain type of persona, and you’re finding it difficult to adapt to the mindset required to build and operate a business in a domain that is unfamiliar to you.
You think about it for a while and decide that you want to inject fresh ideas into the organization and decide to hire new talent. You bring in an experienced executive from a slightly larger organization with proven operating prowess. Let’s call this person A.
This is where things can start to get dicey.
You are now in a position where your small and scrappy startup, staffed with underdogs who worked their way up from nothing, is attempting to go up the food chain. In the process, you have co-opted a professional who brings solid experience to the table, but also a set of beliefs and principles that emerged in the context of a larger organization.
Person A could approach the dilemma of assembling a team in one of two ways.
The first way is that they start hiring clones and go about building their own fiefdom within your company (thereby changing the cultural makeup of the org). The second way is that they are hyper-aware of your organization’s proclivity towards hiring offbeat personas and start to actively filter for such traits, sometimes at the expense of actual competence.
Both of these approaches are variations of favoritism, the only difference being the motive underpinning each of these approaches.
Worry not, I’m not here to decry favoritism and preach to you about the gospel of DEI and suggest some ‘proven methods’ to guard against such biases.
However, I would urge you to think deeply about what kind of favoritism you are going to allow in your organization, and how it could alter the course of your business.
Favoritism is largely discussed in the context of the professional prospects of minorities and marginalized groups, but they’re just as relevant to ideological and philosophical grounds as well.
Taking these things into account will not only allow you to shape your organization to your liking but also ensure that you don’t lose sight of your core principles while in pursuit of more business.
Competitive threat
This one’s relatively straightforward and once again boils down to your philosophy of organizational design.
If you have a nuanced perspective of meritocracy, you would know that shifting from a competence-based hiring process to a credential-based hiring process can introduce untold amounts of friction within the organization.
If your organization begins to accumulate a lot of careerists who prefer managing optics over getting work done, it’s likely that you’ll start to lose a good chunk of doers and learners that made things tick in the beginning.
Excessively pruning one’s reputation to suit an ideal will inevitably result in some form of competitive threat whereby competent, talented folks tend to get passed over for sycophants who’d rather look like they’re working than actually work.
Founders, managers, and subordinates beware of the competitive threat. It will creep in at some point and it will distort incentives. Managing this is key to ensuring that your organization doesn’t accelerate its decline due to too many careerists in your ranks.
Black-sheep effect
Some of you might have observed a strange phenomenon when you were kids. Any deviant behavior (like staying late, or spending too much time in front of the television) would result in your being harshly reprimanded by your parents.
The same behavior from a cousin or friend would elicit a slightly muted reaction from your parents. Any attempt to point out this glaring incongruity would result in an unconvincing response such as
“It’s not our concern.”
This is the black-sheep effect at play, where members of a group are much harsher on deviants when they belong to their group, and not as harsh when they belong to a different group.
Within a sufficiently mature company, this could result in greater incidences of ideas being shot down when they originate from within the organization.
Remember, you want to develop sticky mindsets, not adversarial ones.
Role Incongruity
This is a trap that we all fall into.
Role incongruity is when you perceive an individual to be a good fit for a certain role, only if your stereotype of them aligns with the social roles that are commonly associated with said stereotype.
This is most commonly used to codify the problems faced by female leadership, especially in firms that have historically had more males than females in their rank and file. Being extra critical of a certain trait when it’s found in women, as opposed to men is a direct implication of the role incongruity theory.
This could just as easily be applied to anything else. If you have a content marketing (read: writing) role, and the ability to multitask is seen as a characteristic of success, you’re likely to look over those who prefer to isolate themselves for long stretches of time, staunchly refusing to “be available.”
Your perception of what it means to be successful, in conjunction with your ideas about work will always produce blind spots. You will then quickly jump to reasons such as “bad culture fit” to disqualify candidates solely because they don’t fit your mold.
The human mind is a generalization machine. It loves to construct, categorize and build narratives around events and experiences, even in the absence of concrete information. In this process, a lot of detail is abstracted, often to the point of obscurity.
But at the same time, we also have the rare ability of metacognition: thinking about how we are thinking. And the only way to get rid of any bias is to be aware of when it is in play and actively work against it.
Knowing common biases that could get in the way is just the first step.
What are some other biases that you think could sabotage entrepreneurial endeavors? Let me know, I’m always on the lookout for mistakes that other people have made.
