The Rationale of Irrationality

Welcome to the Innovative Leadership Newsletter, brought to you by the Innovative Leadership Institute, where we bring you thought leaders and innovative ideas on leadership topics each week.

This week’s article is written by Greg Moran, a C-level digital, strategy and change leadership executive with extensive global operations experience. It is a companion piece to his interview on Innovating Leadership: Co-Creating Our Future titled The Rationale of Irrationality which premiered on November 21, 2023. 

Link to the entire interview:

Listen to the companion interview and past episodes of Innovating Leadership: Co-Creating Our Future via Apple PodcastsTuneIn, Spotify, Amazon Music, AudibleiHeartRADIO, and NPR One.

Have you ever found yourself looking at a competitor or a co-worker and thought that they were acting irrationally? Very often, when we see behavior we don’t understand, our immediate thought is that it’s irrational and can therefore be dismissed or ignored. Unfortunately, barring a psychotic break, it is rarely true.

Several years ago, upwards of 5,000 employees at Wells Fargo knowingly broke the law and company policy to create fake accounts on behalf of customers without their permission or knowledge. This seems irrational and very risky. Only when we understand that the bonus incentive at Wells was based on ‘share of wallet’ or the number of accounts each customer had can we understand why people would risk firing and jail time to create fake accounts. They couldn’t earn a bonus if they didn’t hit their ‘share of wallet’ goals. In that context, while still very risky behavior, their actions were at least ‘rational.’

A better approach professionally would be to step back and try to understand the context that the competitor is operating within. One of my favorite aphorisms is, “Everyone acts rationally inside the context that they believe they are operating in.” When something important is at stake, starting with the assumption that the competitor is smart and is acting rationally may be critical to you plotting your own strategy and tactics to address the risk.

The first step in this process requires you to suspend judgment. Then, take the time, either individually or as a team, to understand as much as you can about the context that your competitor is operating in so that you can make sense of their actions.

This applies equally at an individual level in both personal and professional relationships. Again, the process starts with offering grace and/or suspending judgment so that you can take the time to learn the context driving the behavior.

As a leader, make sure that you think through the unintended consequences of the structures you put in place for your team. This will help you avoid the Wells Fargo scenario mentioned above.

 

ABOUT THE AUTHOR:

Greg Moran is a C-level digital, strategy and change leadership executive with extensive global operations experience. He led corporate strategy for Ford and designed the plan that Alan Mullaly used to turn around the company. Greg held C-level IT positions in app dev, infrastructure, and core banking applications at Ford, Nationwide Insurance, and Bank One/JPMC, respectively. He began his career in consulting with Arthur Andersen Accenture, working across industries with 100 companies over the course of a decade. He is passionate about leadership and culture, and teaches part-time on the topic at Ohio University.

 

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Check out the companion interview and past episodes of Innovating Leadership: Co-Creating Our Future on your favorite podcast platform, including Apple PodcastsTuneInSpotify, Amazon Music, AudibleiHeartRADIO, and NPR One. Also, stay up-to-date on new shows airing by following the Innovative Leadership Institute on LinkedIn.

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