The Expectation Gap is the space between what an organization claims it will do for the employee and what the employee expects will happen. The less clear the communication channels, the more likely that gap will be filled with static, garbled messages, and broken promises. The result: resentment and disengagement.
Expectation Symmetry gauges how closely the expectations an organization creates for its employees match what the employees expect to happen. The greater the symmetry, the higher the level of trust. And the more the employees trust that their employer has their backs, respects them, and keeps its promises, the more they will take the risk of becoming fully invested and engaged, transforming the customer experience with their delight and enthusiasm.
In the corporate world, the revolving door for CEOs is constantly spinning. The same seems to be true for coaches of any sport, whether it is soccer, the NBA, or college football. Change is good. Too much change, however, is frustrating; not to mention disruptive and often counter productive.
Why, then, are fans and shareholders often anxious to replace the incumbent? The answer lies in the fact that a change at the top is the fastest way to modify, or even reset, an organization’s contract. Which contract? I am referring to the culture-defining contract that exists between the organization and its employees. This contract is so critical that when we talk about it, we use a capital “C.” An organization’s success is built on the Contract, and the organization’s chief executive officer is primarily responsible for building, maintaining, and modifying the Contract. This is item number one on the job description, and it’s the one aspect of his or her duties that cannot be overlooked.
The Contract is built on the unique relationships that exist between the organization and its employees. Some of those relationships are explicit (e.g., you work these many hours and the organization will you pay you for your services). Yet, like an iceberg, the explicit agreements communicate only a small portion of the story.
Like the ice under the water, it’s the implicit agreements (the psychological contracts) that represent the bulk of an organization’s Contract. When built and managed correctly, an organization’s Contract is foundational in creating great products, great values, great customer experiences, and great returns.
Hopefully, it is self-evident that it’s a risky proposition to hand this crucial obligation over to someone who is new, let alone to someone who is an outsider. Yet, when the wheels start coming off the bus, our instinct tells us that something is wrong with the Contract. And, instead of taking the time to diagnose and find the source of the problems, our knee-jerk reaction is to place the blame on the CEO’s abilities and look for someone new to manage the Contract. Forget about mending the Contract; everyone starts looking for someone new that has an established brand and brings with them a whole new Contract – one that is shiny and fresh.
But, is an outsider always the right decision? Sure, there are notable success stories. Steve Jobs’ second tenure at Apple immediately comes to mind. Nick Saban, the American college football coach who led challenged teams to three national titles, is a demigod in the state of Alabama. The problem is that success stories like these are outliers. They’re not the norm. Because they are wildly successful, popular media makes them a story, which then reinforces the public’s belief that choosing an outsider is the right approach. This is a classic example of the availability heuristic—the phenomenon that explains why our most recent memories impact our decisions1. Likewise, looking for a new CEO, coach, or leader can be neurologically rewarding. Participants experience the thrill of the hunt, secure in their belief that the next “big one” is right around the corner.
Endorphins are everywhere. The potential rewards seem enormous.
Yet, statistical averages tell us otherwise. Remember that most of us are average, and, by definition, half of us work for businesses that are underperforming. Why do we expect the list of game-changing leaders to be long enough to save all the companies that need help? There simply aren’t that many Phil Jacksons to go around to save every team in the NBA.
While choosing the right leader may be the shortest path to success, a CEO change is no guarantee of success. Consider Marissa Mayer’s tenure at Yahoo. Most believed the “wunderkind” from Google would surely save the tech giant’s future. After all, an executive-level Google pedigree is enough to turn any company around, right? The scorecard, however, for Ms. Mayer is incomplete, and there are signs that Yahoo still lacks focus and discipline2. Patience is a virtue that receives more lip service than practice. With the hype and intrigue associated with a new CEO, shareholders, analysts, and boards of directors seem reticent to give the newcomer the time he or she needs to tweak, or even rebuild, the company’s Contract.
When deciding on how to find the best candidate as your next CEO, you might consider the following before you choose. First, remember that an outsider may be at an immediate disadvantage. Expectations will already be too high. As such, a newcomer may not be afforded the time frame required to understand and define the changes that need to be made to the organization’s Contract. Second, an outsider might be set in their ways and too beholden to what worked at predecessor companies (i.e., forcing a square peg into a round hole). Or, third, statistics will rear an ugly head, and give you a candidate that is no better suited to the task than the three or four internal candidates that are available (and, quite possibly, have already developed a turnaround plan through an in-depth knowledge of the organization).
Extra care should be given when selecting an outsider. Can an outsider be successful? Absolutely! But for every Marissa Mayer, there is a Mary Barra.
Ms. Barra has been with General Motors for years, starting her career with GM as a co-op student when she was 18 years old. She moved through the corporate ranks to become GM’s first female CEO in January of 20143.
Recently, she has been praised for how she dealt with GM’s ignition scandal, and many have suggested that Volkswagen should follow her lead as they deal with their current emissions quagmire4. Success can come both ways – from the outside and from the inside. But, before the allure and appeal of an outsider clouds all judgment, it’s also important not to overlook what may very well be within the walls of the organization. Sometimes, an outsider really is the right option. But, bringing on an outsider also carries a good deal of risk. And it’s precisely that risk that many companies overlook in their quest for the next organizational hero.
Our current research efforts here at DecisionWise are focused on the best way to define expectations in the workplace. We call it “The Contract,” which is the explicit and implicit contract (the psychological contract) that exists between an organization and its workforce. What we have learned in our research is that all successful contracts – whether it’s purchase orders or the psychological contract and expectations you have built with your team – are built upon a clear understanding of the underlying expectations.
So, what does this have to do with the new Star Wars movie? At first the film received near universal praise and acclaim. Then, as time went on, more and more bloggers, critics, and fans began to complain about the film. Their complaints ranged from a lack of character development to the notion that the film was a re-tread of Episode IV. How did the movie go from a “masterpiece” to one that “stinks?” Did the movie itself change? Of course not. But our perceptions of the implied expectations did. And it’s all in the expectations.
The film’s director (and co-writer/producer), J.J. Abrams, was tasked with “re-booting” the most beloved film franchise in history. He needed to create a link between the original film from 1977 and today. That was task number one. Next, he was supposed to set the stage for a variety of upcoming Star Wars films to be released by the Disney Empire (pun intended), which includes episodes VIII and IX, along with other films that are based on the Star Wars expanded universe. Abrams was not tasked with strong character development; nor, was he tasked with creating dialogue worthy of an Oscar.
In sum, his primary job was to send a “love letter” to Star Wars fans everywhere. This was Mr. Abrams’ “Contract” with a large segment of the human population.
In my opinion – job accomplished! The Contract was fully satisfied. As we look at the “contract” Abrams had between the viewer and the film, those that approached the movie from a perspective of satisfying the requirements above, contract fulfilled. In that light, Mr. Abrams should not be judged on a set of expectations outside this Contract. That’s why the movie received near universal acclaim at first. To those fans that mattered, those that waited in line for hours (probably in costume), he fulfilled the Contract. He delivered.
Now, for some armchair Jedi knights and part-time movie critics, there was another implied contract. To them, this contract was not fulfilled. Why? Because their perceived contract was different from the contract created in the minds of fans who felt the film hit its mark.
Now, my comments aren’t intended to be yet another film review to add to the tens of thousands already out there on this movie. Rather, it’s to point out another concept—that of “the contract.” We all go into interactions (movies, relationships, employment, business negotiations, etc.) with a contract in mind. Sometimes, as in the case of a business negotiation, much of that contract is formal and in writing. It’s explicit and clear (“you do this, and I’ll do that in return.”). However, much of the contract isn’t explicit, it’s implicit.
As in the case of an employee, the organization may very well be fulfilling the terms of the explicit contract. But fulfillment of the written contract isn’t what creates engagement. It’s fulfillment of the implied contract—the contract that says, “Look, there are certain requirements that we both know we need to fulfill, but what we’re really both after is _______, and I’m going to make sure we both deliver.” In the case of employment, when this implied contract is fulfilled, the employee engages. When it’s broken, the employee disengages (mentally, physically, or both).
What’s the lesson for today’s leaders? Know your audience and know your expectations, both explicit and implicit. Then deliver on the contract. The rest will take care of itself.
The new Star Wars movie will make Disney a ton of money. Why? Because Disney and Abrams knew the contract it had with its true fans, and they kept their side of the bargain. You need to do the same with your organization.
There is a scene in the 2008 animated movie, Kung Fu Panda, which makes me think of Steve Jobs. Most pundits compare him to geniuses or narcissists. Not me. I am going to compare him to a fat panda named Po. In this film, a Kung Fu master named Tigress explains to the jocular Po the nature of a messianic character that will save the people – the “Dragon Warrior.” Po had been selected by a wise turtle to become the Dragon Warrior. Tigress’s exchange with Po goes something like this:
Tigress: “It is said that the Dragon Warrior can survive for months at a time on nothing but the dew of a single gingko leaf and the energy of the universe.”
Po: “I guess my body doesn’t know I’m the Dragon Warrior yet. Gonna take a lot more than dew, and universe… juice.”
So, how is Steve Jobs related to this scene? Well, with Steve’s passing it’s as if Steve has become the Dragon Warrior of business – able to drive billions in revenue with nothing more than his yogi mind and the energy of a glowing apple encased in aluminum.
There are a lot of explanations for Steve’s success. Many of them have merit and should be studied. I would like to add another reason to the growing list. My proposition is that Steve’s success was not mystical; it was simple and practical. When he came back for his second tenure at Apple, he changed Apple’s contract. Which contract? Apple has signed thousands of contracts during its lifecycle, and if you consider each consumer sale a contract, then billions. Those are not the contracts I am talking about. I am talking about “the” contract; the one that is written with a capital “C”. I am referring to the tacit three-party Contract between Apple, its employees, and its customers. Some might call it Apple’s psychological contract. Every organization has a Contract, and the parties are usually the same. They consist of the organization, its workforce, and those that buy the organization’s products or services.
Our research suggests that a key driver in an organization’s success is whether the organization’s leaders take the time to build and nurture this ever-important Contract. Sometimes leaders aren’t even aware they have a Contract, let alone understand what it means. Good leaders, however, take the time to understand, build, and carefully define their Contract. They focus not just on slogans and catch-phrases, but also on culture, value propositions, and whether the terms and exchanges contained in the Contract are fair to all three parties. They grasp the concept that their Contract is like an iceberg. Some of the Contract is explicit (i.e. above the water), like the exchange of compensation for an employee’s time and effort at work. But, the vast majority of the Contract’s terms are implicit – or as is the case with an iceberg – below the water. Successful leaders take the time to make sure the implicit terms (the psychological contract) are aligned with where they want to take the organization.
When Steve took over for the second time, nothing much changed, and yet everything changed too. The employees were the same, the inventory was the same, the sales channels were the same, and the pipeline of future products was set. Nonetheless, the moment Steve’s indomitable personality walked through the door everything was transformed. That’s because Apple’s Contract was turned on its head. Steve’s iconoclastic presence made everyone know that the ground-rules for what it means to be an Apple employee were now different. The new requirements were: precision, commitment, love of design and aesthetics, thinking differently, exactness, and a passion for really great products, among other things.
Returning to Kung Fu Panda and the story of Po. Po is able to save the village from the ravages of psychopathic leopard. Not because he became an amazing Kung Fu artist; rather, it was because the people “believed” that, as the Dragon Warrior, Po had the power to save them. For those that know the movie, that was the “secret ingredient” – the belief that Po was the Dragon warrior. I suppose when you look at it this way, Steve Jobs really is the Dragon Warrior of business. Steve made the most of his second chance at Apple by redefining Apple’s Contract. He made his employees believe they were going to build the very best products and that Apple really would become what is now the world’s most valuable company.