Bad incentives are making leaders into followers — Transcript

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1. 0:00today's video is going to be a little
2. 0:01bit different and that I need to rant a
3. 0:03bit about what I think of as the
4. 0:05fundamental leadership problem in
5. 0:07America the root cause if you will
6. 0:10there's an old saying that I think
7. 0:11applies to leadership politics religion
8. 0:13anything really bad incentives make even
9. 0:16good people act badly and boy do we have
10. 0:20some bad incentives in place in
11. 0:22America among the many bad incentives
12. 0:26there was a pivotal moment in American
13. 0:28capitalism that sent us in the the wrong
14. 0:30direction and I'm going to rant about
15. 0:32that in today's video stay
16. 0:34[Music]
17. 0:44tuned let's quickly set up a premise and
18. 0:46then work from there into the topic of
19. 0:48today's video human beings do what makes
20. 0:51sense to them even serial killers are
21. 0:54doing what makes sense to them and when
22. 0:56I say what makes sense I mean our values
23. 0:59beliefs and principles these three Drive
24. 1:02our behaviors we can call the
25. 1:05combination of these three things our
26. 1:06mindset so when you hear me or someone
27. 1:09else refer to your mindset you can
28. 1:11assume we're referring to some
29. 1:13combination of your values beliefs and
30. 1:15principles so again our behavior for
31. 1:19better or worse for our own best
32. 1:21interests or against them stems from our
33. 1:24mindsets we have beliefs and values and
34. 1:27principles that make our Behavior makes
35. 1:30sense to us at least so as a performance
36. 1:33coach I'm often asked to help change
37. 1:35people's behaviors but I can't just wave
38. 1:38a wand and make that happen I always
39. 1:40start with mindsets because if I can
40. 1:43challenge a belief or two or show that a
41. 1:45value isn't serving a person they'll
42. 1:47often just change their behaviors on
43. 1:49their own which is really the only
44. 1:51lasting way to change a behavior anyway
45. 1:53okay so with that basic understanding of
46. 1:55human behavior and mindset let me
47. 1:57introduce you to Milton fredman fredman
48. 2:01was an American Economist born in 1912
49. 2:03in Brooklyn New York he had a long
50. 2:05career and contributed many theories and
51. 2:07ideas to American Economic Policy but
52. 2:10there was one in particular that he
53. 2:12introduced in an essay in 1970 that
54. 2:15would have a huge impact on the American
55. 2:17worker it was called the fredman
56. 2:19doctrine and some call it shareholder
57. 2:22Theory the basic summary of that
58. 2:24Doctrine is that shareholders are the
59. 2:26real owners of a company and as such the
60. 2:29office ERS of that company all the
61. 2:31executives are agents of those owners
62. 2:34and have a primary responsibility to
63. 2:37those
64. 2:38shareholders so when you hear your CEO
65. 2:41going on and on about shareholder value
66. 2:43thank
67. 2:44fredman now there are two problems with
68. 2:47these shareholders as Simon synic points
69. 2:49out in his excellent book that I
70. 2:51consider one of his best the infinite
71. 2:53game shareholders may be owners on paper
72. 2:56but a large proportion of them act like
73. 2:58renters at the first son of trouble
74. 3:01these shareholders will dump their stock
75. 3:04how vested is someone in the long-term
76. 3:05success of a company if they behave like
77. 3:08that as Simon asks his readers when's
78. 3:11the last time anyone you know washed a
79. 3:13rental car never the second problem is
80. 3:18that these shareholders see the company
81. 3:20through a financial lens that purports
82. 3:23to provide a window into the health of a
83. 3:25company but that window is more like a
84. 3:28port hole in a bargain cruise ship cabin
85. 3:31imagine trying to steer that huge Ship
86. 3:33by only being able to look out that
87. 3:35small
88. 3:36window so we've in essence told the
89. 3:39captain of this giant ship that his
90. 3:41primary responsibility and direction are
91. 3:44to come from people who a don't care
92. 3:46about the ship and can easily bail from
93. 3:47it if things go wrong and B are trying
94. 3:50to influence Direction by looking
95. 3:52through a tiny window even worse we now
96. 3:56tie the majority of the Sea's earnings
97. 3:59to to stock performance keep in mind
98. 4:01stock performance is not analogous to
99. 4:03company performance I can make terrible
100. 4:06decisions for the long-term survival of
101. 4:08a company that will make the share price
102. 4:10go up the stock market has the attention
103. 4:12span of aat with a labotomy and the
104. 4:15longterm view of Mr Meo look him up kids
105. 4:19rewarding Executives for behaving like
106. 4:21shareholders is making those who can see
107. 4:23the iceberg try to shave a few seconds
108. 4:26off the arrival time by going
109. 4:28faster so the fredman doctrine forces
110. 4:31Executives to act in the short-term
111. 4:33interests of the companies they lead and
112. 4:36rewards those Executives monetarily for
113. 4:38doing so to tie this back to mindsets
114. 4:42the fredman doctrine is a mindset about
115. 4:45company leadership it has values beliefs
116. 4:48and principles that all favor
117. 4:50shareholder value over well anything
118. 4:53else employees customers the environment
119. 4:56Society if you're a leader who has the
120. 4:58shareholder Theory mind mindset you will
121. 5:00lead very differently from someone who
122. 5:03doesn't it will make complete sense to
123. 5:05you and you'll be just as wrong the
124. 5:08fredman doctrine didn't make people
125. 5:10greedy we've been dealing with greed and
126. 5:13the negative effects of it for centuries
127. 5:15what fredman did was give greedy people
128. 5:18justification and permission to act
129. 5:21without shame and now entire industries
130. 5:24of vendors allow Executives to treat
131. 5:26employees like cattle their downside ing
132. 5:29vendors who will happily help Executives
133. 5:32make the books look better by ruining
134. 5:34the lives of several thousand employees
135. 5:36at the swipe of a finger no eye contact
136. 5:39needed the fredman doctrine was a
137. 5:41pivotal moment in the history of
138. 5:42American capitalism that began in the
139. 5:451980s for many people watching this
140. 5:47video you may have been the speck in the
141. 5:49eye of your parents at that point so you
142. 5:51may not know any other reality but there
143. 5:54was a time when companies understood
144. 5:56that long-term investment in employees
145. 5:58made them a a stronger more resilient
146. 6:01company it created loyalty that went
147. 6:03both ways this is why your Boomer
148. 6:05parents or grandparents are likely
149. 6:07supplementing their social security with
150. 6:09a pension or retirement plan what will
151. 6:12the rest of us do without
152. 6:14those until we fix this shareholder
153. 6:16Theory mindset until we make it shameful
154. 6:19again to be greedy and self-serving at
155. 6:21the expense of human beings and the
156. 6:22planet we all share companies and the
157. 6:25people who lead them will continue to
158. 6:27consciously make short term decisions if
159. 6:31those decisions happen to benefit
160. 6:32employees that is almost certainly an
161. 6:34accident because Leaders with these
162. 6:36incentives will always do what makes the
163. 6:38share price go up when employees or the
164. 6:41environment are in the way of that
165. 6:43employees or the environment will lose
166. 6:46every
167. 6:47time I often ask leaders I'm coaching
168. 6:50what's the one thing all leaders have
169. 6:53and usually I hear courage wisdom
170. 6:56tenacity or some other Hollywood trait
171. 6:59but it's a trick question because the
172. 7:01answer is followers all leaders have
173. 7:04followers if no one is willingly
174. 7:06following you if people are only doing
175. 7:08what you tell them to do because they
176. 7:10have to you're not a leader you're just
177. 7:12in charge you will never attract
178. 7:15followers when people perceive that they
179. 7:18don't matter to you would you follow
180. 7:20someone who didn't care about you who
181. 7:22would kick you into the pit Sparta style
182. 7:25if it look better on their financial
183. 7:26reports for a single quarter this
184. 7:29F
185. 7:32off of course you wouldn't so if you
186. 7:35have the fredman doctrine mindset you're
187. 7:37in charge but you likely have no
188. 7:40followers if you want a competitive
189. 7:42Advantage then what you want is a smart
190. 7:44dedicated loyal Workforce who cares
191. 7:47about your company and its Mission you
192. 7:49get that from treating employees like
193. 7:51human
194. 7:53beings if you found yourself nodding in
195. 7:56agreement to this video maybe others you
196. 7:58know will too like subscribe and spread
197. 8:00the channel to others and if you know
198. 8:02someone with the fredman doctrine
199. 8:03mindset who needs to see this send it to
200. 8:06them from an anonymous email account
201. 8:08I'll see you next time