Category: Dust Off Your Degree

Owen alumni consistently explore and gain lifelong learning. In this issue, Vanderbilt Business turns to Brendan Moynihan, adjunct professor of management, for lessons from his best-selling co-authored book, What I Learned Losing a Million Dollars. Although that book focuses on investing (and losing), the lessons Moynihan imparts are applicable to any type of risk or uncertainty.

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Risk is part of life. How one deals with it—whether in the workplace, on Wall Street or in personal life—can make the difference between anxiety and healthy thinking. Financial risk-takers—business people, entrepreneurs and investors alike—try to mimic successful predecessors in making money, often without realizing those folks made their fortunes in vastly different ways. The Walton billions came from a low-margin business; the Gucci fortune was made in a high one. John Templeton’s advice to “Diversify your investments” clashes with Warren Buffett’s advice to “Concentrate your investments. If you have a harem of 40 women, you never get to know any of them very well.”

While there are a myriad of ways to make money, there are relatively few ways to lose it. And those few spring not from the business model or investment approach, but from psychological factors that relate to any kind of risk-taking.

It’s not personal

First, risk-takers are prone to personalize a loss and thereby internalize what is actually external. Losing one’s keys or money is external; losing a loved one is internal.

People personalizing a loss may exhibit the five stages of internal loss. Originally applied to patients diagnosed with terminal illnesses, these stages relate to any kind of loss: denial, anger, bargaining, depression and acceptance.

Compounding this is that most people equate loss with being wrong, a mistake that starts in childhood when we lose points for wrong answers on tests in school. Thinking of the loss this way internalizes what should be an external loss.

What kind of risk is it?

Second, risk-takers confuse the two main types of risk activities and behave more like risk-makers instead. Inherent risk is associated with the normal course of running a business or investing in the capital markets. Management guru Peter Drucker describes it as risk that is coincident with the commitment of present resources to future expectations.

Created risk arises from people betting or gambling. In betting, the person proved right about the outcome of an uncertain event wins the stakes.

Similar to the first mistake, this personalizes decisions; people want to be right, not wrong. Entrepreneurs and investors sometimes make the mistake of thinking that they are dealing with inherent risk in their ventures, when in fact they are actually creating risk by betting or gambling. In other words, it is a function of why they are making certain decisions rather than the venue which determines whether they are betting or gambling. They become more interested in being right than in making money.

Success can be built upon repeated failures when the failures aren’t taken personally; likewise, failures can be built upon repeated successes when the successes are taken personally.

Avoid emotionalism

Third, be cautious of making emotional decisions. Some risk-takers mistakenly believe that greed and fear are the two driving emotions when committing capital to an uncertain future. Instead, it is hope and fear that drive the risk-taker. Both emotions are at work constantly and simultaneously.

For example if you own a stock and its price is rising, you hope it will continue to rise but simultaneously fear it will not. Whichever emotion is dominant dictates whether you will hold the position or sell it. If fear dominates and you sell the stock, you will immediately start to hope that it will decline (so you can be proved right), but fear it won’t.

The emotions of hope and fear are neither good nor bad; they simply are. Emotions per se cannot be avoided. On the other hand, emotionalism, decision-making based on emotions, can and should be avoided.

Forget right and wrong

The key to understanding how external losses become internalized, why one confuses the different types of risk activities, and why one makes emotional decisions lies in knowing the subtle differences between facts and opinions.

A fact is something that has been objectively verified. Facts are neither right nor wrong; they simply are. Opinions are personal assessments and are right or wrong depending on whether they actually correspond with the facts. Therefore, only opinions can be right or wrong; facts cannot be.

Right and wrong are inappropriate descriptions of business operations and investment decisions, and so are the terms win and lose. These business activities are about making decisions that will prove profitable or unprofitable only in the future. In making decisions and taking risks, avoid thinking of them as fraught with potential loss, as right or wrong. When you characterize decisions as right or wrong, you trigger these three biggest mistakes.

Ask just about any investor what the key to a healthy portfolio is, and you’re likely to get the same piece of advice: diversify. But when it comes to maintaining a healthy sense of self-worth—something that’s incalculably more valuable than any financial asset—diversifying may not be the first thing that comes to mind. That is, unless you’ve had an opportunity to hear Assistant Professor of Clinical Psychiatry David Sacks speak.

Late last year, Sacks gave a presentation to business school students, faculty and staff that drew upon his experience as associate director of Vanderbilt’s Psychological and Counseling Center. Roughly one in five students visits the center during his or her time on campus, and even more attend its outreach and prevention activities.

A prevalent need among students is guidance on how to cope with stress, which is one of Sacks’ areas of expertise. Relying on his background in sports psychology, he often teaches students not just how to cope but how to excel under pressure, much like high-performing athletes. Sacks argues that when stakes are high—whether on the playing field, in the classroom or in the office—one can influence the outcome by taking steps like diversifying one’s life interests. The following are seven such tips that he says anyone can use.
 

1. Engage in deliberate practice.

“You’ll never find an expert in his or her field who doesn’t work hard at it, but there’s a difference between practice and deliberate practice,” Sacks says. “Deliberate practice involves setting goals. It’s not the same as just putting the time in. Ask recreational golfers what they’re working on in their game, and they probably won’t be able to tell you. But a professional golfer will. That explains why some people play golf all their lives but never improve.”
 

2. Focus on what is within your control.

“During times of stress, there’s nearly always something we can control,” he says. “If we attribute outcomes, whether good or bad, to things outside of our control, we’re not motivated to do anything differently in the future.

“When I talk with students about a bad experience they’ve had during an exam, they often say something like, ‘I’m just not as smart as the other people in the program.’ They’re making an internal attribution but an uncontrollable one—‘I just don’t have it,’ versus ‘I didn’t take advantage of the help that was offered’ or ‘I used a poor strategy.’ My work is trying to get them to move toward a controllable attribution.”
 

3. Think about the upsides of success, not failure.

“When things go badly, we often catastrophize the situation, but the truth is failure usually isn’t as bad as we make it out to be,” Sacks says. “I like to use the metaphor of walking on a tightrope. Recognizing that you have a net under you can reduce your anxiety, and it’s not your intention to fall and land in that net. Knowing that it’s not a life-or-death situation can help you keep your focus on your goal of getting to the other side.”
 

4. Follow a pre- and post-performance routine.

“It’s really unfortunate when we worry about a task without working on that task. It isn’t productive, and it ruins our leisure time,” he says. “To combat this, most athletes have a simple routine that gets them from their time off to their time on—like baseball pitchers between each pitch. I tell students to do something similar. Go to the same location each time to study, or during tests, do short breathing exercises between questions.

“Another suggestion I have is that, if it’s unrealistic to ask yourself not to worry, then take control and budget yourself a time for it. If something is occupying your mind, thinking through it can help, but be deliberate in your problem solving.”
 

5. Diversify your life interests.

“When you have tunnel vision and are into just one thing, you’re not necessarily setting yourself up for better performance,” Sacks says. “I encourage people, even when their time allocation is unbalanced, to give at least some thought to a diversity of issues. Besides hobbies and exercise, I’d suggest talking to friends or family members who have no clue what you’re invested in. If their affection for you is not contingent upon how you perform, they become your safety net.”
 

6. Find your optimal level of anxiety.

“Most of us have an optimal level of anxiety that we perform under,” he says. “Past that optimal point, we’re so nervous that we can’t function. One explanation for this is that when we’re highly aroused, our attentional capacity [the brain processing it takes to pay attention and act] shrinks. And when our attentional capacity shrinks, we make mistakes.

“An example is how common it is for a quarterback to throw a “pick six” [an interception that leads to a touchdown] late in the game. The stakes are high, and the quarterback has tunnel vision. If he would just take a step back and relax, he would perceive more.

“Or for instance, have you ever been taking a test when you knew the answer but couldn’t come up with it? And maybe it occurs to you only after you’ve finished? That’s because you’re more relaxed at that point. It’s ironic that caring less about something and lowering the stakes can get you where you want to be.”
 

7. Pay attention to self-talk.

“It’s important to be aware of how we talk to ourselves,” Sacks says. “Sometimes we tend to berate ourselves. Think about it: If that’s the message you’re listening to, then you’re working against yourself. I advise people to talk to themselves as they would to someone they really care about, or as that person would talk to them.”
 

Bottom line

“If you’re worried that your results are uncontrollable and you think you either have it or you don’t,” Sacks says, “your failures are going to reveal to you that you don’t have it. And if that’s a fear you have, you’re going to hold back in testing your limits because you don’t want your weaknesses to be revealed.

“If, on the other hand, you believe that outcomes are controllable, your weaknesses are absolutely what you want to target because you think that with deliberate practice you can fix them. Every day you can improve something a little bit, and the gap between you and the person just going through the motions will continue to grow.”

How can executives or organizations predict who will become a successful future leader? The skills, experiences, dispositions and motivators that correlate with success in senior executives are different from those for middle management or entry-level roles. These leadership attributes do not simply spring into existence when a person is promoted into leadership; they manifest and grow over the course of a career.

All high-potential leaders are marked by seven essential signposts that indicate their likelihood of future success. Identifying such high-potential leaders early lets an organization deliberately develop future executives so that when a need arises, someone with the requisite ability is prepared to step up to the challenge. This is the only truly proactive way to manage a talent pipeline.

1. A track record of formative experiences

Even though every leader’s career is unique, their paths into leadership follow a predictable course: It starts with managing others and works up to more management responsibility. Each leadership level is defined by challenges and experiences.

Korn Ferry International research has identified key career experiences that build the abilities of high-performing leaders. A leader who has developed a strategy, managed difficult financial situations, or honed external relationship management has much more bandwidth to learn everything else he/she must conquer to succeed when promoted to the next level. The individuals who reach the highest levels of leadership consistently have experience in general management, and handling critical or risky situations and problem-solving challenges.

2. Ability to learn from experience

People who learn from experience not only glean multiple, varied lessons from their experience, they effectively apply those lessons to be effective in new situations. They are able to develop frameworks, rubrics and rules of thumb that will guide them when managing recurring issues, and help them recognize and address the truly new challenge when it arrives.

Those with high potential for leadership take more lessons from their experiences, can describe the insights, and even show how they have applied the lessons.

3. Self-awareness

To achieve high performance, leaders must begin with a clear-eyed view of their existing strengths and their development needs. They need to know where they excel and when they can trust their instincts and abilities. They also need to recognize where they have weaknesses and when they need to rely on the insights and abilities of others.

Being self-aware allows high-potential leaders to understand the impact that people and situations have on them. They also observe the effect they have on people and situations and use that knowledge to manage and influence people.

4. Leadership disposition

All of us are disposed to behave in certain ways, and all (or at least most) of us learn to adjust those behaviors to meet the demands of various situations.

The more an individual’s dispositions align with what is required for leadership success, the greater the potential for future high performance. Some dispositions become more important at higher leadership levels, others less important. For instance, attention to detail may contribute to early career success, but inhibit or even derail a top executive. This shift accounts (in part) for the paradox of a merely satisfactory new manager who simultaneously has the potential to be a superior performing executive. And it explains, in part, why some leaders plateau despite early success.

5. Motivation to be a leader

People with leadership potential find the role of a leader interesting and the work of leading motivating and fun. Leadership becomes progressively more difficult at every level, and the demands upon time and energy increase. People with less leadership potential typically cite the perks of the role (title, pay, prestige) as their primary motives. High-potential leaders, on the other hand, cite the nature of the work as what drives them: the opportunity to make a difference, to have a positive impact on their coworkers and organization and to have a greater area of responsibility.

6. Aptitude for logic and reasoning

Call it capacity, mental bandwidth or logic and reasoning, high-performing leaders have considerable cognitive ability. They are effective analytical and conceptual thinkers. They are astute at spotting patterns or trends in data that others miss. And they solve problems with aplomb, at first individually, and then as leaders, by marshaling and focusing resources on the right challenges.

But there is a subtle trap here: a person’s role changes from being the primary problem solver to ensuring that the problem gets solved. Leaders who cannot shift out of individual problem-solving mode and into the job of coaching and mentoring others to analyze problems will struggle beyond midlevel leadership roles.

7. Managed derailment risk

A perennial business magazine cover topic is the high-level leader who self-destructs, sometimes ruining just his or her career, but other times crippling the entire organization. Careful assessment of an individual’s derailment risk is crucial before moving him or her into a mission-critical role.

Derailers get amplified for a few reasons: 1) the strengths that propel leaders to the top often have corollary weaknesses; and 2) increased demands and higher expectations yield more focused scrutiny. Derailers undermine trust in and willingness to follow a leader and are, therefore, considerably more damaging.

In seven different, measurable ways, high-potential employees are indicating their ability to become high-performing leaders. It’s up to organizations to pay attention to the signs, and which way they are pointing.

Adapted from a white paper by Bruce Sevy, Vicki Swisher and J. Evelyn Orr, Korn Ferry Institute. Read the full white paper.

The workplace today is different from the one our parents knew—and it’s different from the one in which many senior executives began their careers. With that change comes different challenges—one of which is recruiting, managing and retaining millennials—typically, those workers born in the 1980s and 1990s.

If you have responsibility for hiring and supervising younger employees, then you probably already know that what worked 20, 15 or even 10 years ago might not be appropriate for working with today’s young professionals.

When Eileen Stephan, managing director and head of graduate recruitment and program management at Citi, visited Owen, she shared insights on recruiting and retaining top talent among today’s millennial generation.

Stephan, who oversees Citi’s university recruiting programs, pulled some facts about what motivates today’s talent pool from a millennial source: MTV. According to MTV’s “No Collar Workers” study:

Millennials on the job

• 83 percent of millennials are “looking for a job where my creativity is valued.”
• 95 percent are “motivated to work harder when I know where my work is going.”
• 76 percent believe “my boss could learn a lot from me.”
• 65 percent say, “I should be mentoring older coworkers when it comes to technology and getting things done.”

Those types of attitudes point toward a kind of “emerging adulthood” phase among millennials, she says. That means employees in this generation tend to continue searching for their personal identities, making them wary of firm career commitments.

“This is opposed to previous generations who said, ‘All right, I’ll take this role, do it for a few years, establish a platform and a network, and I’ll see where it takes me,’” Stephan said. “How do you manage expectations around a two-year training program where you don’t even know what your job will be at the end of it? Millennials can’t wrap their heads around that idea.”

Different priorities

Targeting the millennial mindset requires adjustment in everything from a company’s recruiting materials to the type of training human resource professionals receive.

For example, Stephan said that today’s recruiting videos aimed at millennials tend to feature college-age students talking about a typical day in the office, including the mentors they work with and after-hours social activities they participate in with co-workers. That compares to 15 to 20 years ago, she said, when a similar video might have involved a senior executive extolling the firm’s financial stability.

Those in recruiting and hiring need to make further adjustments. Stephan said it’s important for today’s recruiters to spot the difference between job-hopping—which she views as someone who has failed at a job and been forced to move on—versus millennials who are moving on to new opportunities.

“Don’t be alarmed if you interview someone who has had four different jobs by the time they go to business school,” she counseled. “You cannot make hiring decisions based on whether this candidate will stay or not. You’d never hire anyone.”

A study by the Pew Research Center backs that up. It found that nearly six in 10 younger workers say it is not very likely or not likely at all that they will stay with their current employers for the remainder of their working life.

So why millennials?

According to a study by the Young Entrepreneurs Council, millennials are idealistic, diverse, digitally enabled, social and perhaps most important, ambitious. Millennials will be roughly 36 percent of the U.S. workforce in 2014 and 75 percent of the global workforce by 2025.

Which brings up another point. Stephan said that the same trends don’t necessarily hold true for international applicants in the millennial generation if the person was primarily educated abroad. “We see Europe lagging about 18 months behind the U.S. in these trends,” she said. “And in Latin America and Asia, it’s much further behind.” If most of a person’s education occurred in the U.S., however, Stephan said they tend to exhibit the same millennial characteristics as their U.S.-born peers.

Millennials are connected, confident and ready to change. They also value the contributions and connection with other generations—75 percent of millennials want a mentor and 90 percent want senior people in their company to listen to their ideas and opinions. This comfort with different age groups may come from the closeness millennials have with their parents … and their parents with them.

“We are seeing companies in many industries actively including parents in the recruiting process,” Stephan says.

To learn more about the Millennial generation and how closely your attitudes align with those you might be hiring—or working for—take this quiz from the Pew Research Center at vu.edu/ew-millennial.