Friday, June 7, 2013

Leadership and Markets

Much has been written on leadership in Project Management, but almost every line is about the tip of the iceberg. Did you know there’s a huge amount of stuff beneath it? One of the things you’ll find beneath is the market where relationships lie. Have you ever heard about social and business markets?
We'll start by explaining these concepts from Behavioral Economics and then explore its impacts on Project Management, in particular on leadership.
If I got your attention, please keep on reading!

How does this market thing works?

Imagine you're going to a wedding. It probably won't shock you if the grooms have put a list together of things they'd like to get so people attending to the wedding can buy them stuff they actually need. And you'll probably find it natural you give the grooms money instead of actual presents.
But what happens if the context is changed?
Suppose you invite someone over to dinner. Instead of bringing a bottle of wine, when your guest arrives he hands you over $30 and says “Here you have to get yourself a nice bottle of wine that you really enjoy. I considered bringing a bottle myself but even if I spent $40 I could never choose better than you”.
Are you laughing by now? Good! But think about it: your guest has a perfect rational argument set: you'll both be better off this way (you can choose a wine better suited to your own taste and your guest spent considerably less money for your pleasure). So why did you find money for a wedding as a natural gift and why did you find so awkward someone coming over for dinner giving you money?

The Social Market

Relationships can be set in a continuum where you have social norms on one side and business norms on the other. When social norms are in place you act and expect the relationship to be like the relationship you have with your friends and family, namely:

  • You enjoy their company, and expect they enjoy your’s
  • You're happy to help them out, and expect them to help you when you need them
  • You occasionally offer them gifts (like birthdays and Christmas), and the gifts you offer are always something you know they like or need - not money.
  • You easily excuse their faults and expect them to excuse yours.
  • Love and fun rules.

The Business Market

Relationships in the business market are the ones you have with your suppliers, co-workers, and alike. With each and everyone of them:

  • You work with them, either you like it or not.
  • Everything you do for them is framed into a kind of cost-benefit analysis context.
  • Gifts are a touchy thing: they can be viewed as anything from being nice (like when you open a bank account and the bank offers you tickets for a concert) up to a bribe.
  • When people misbehave you’ll most likely end the relationship (if your supplier is late you stop buying from him)
  • Money rules.

But it’s a continuum

Few relationships are exclusively in the social domain or the business domain, almost every relationship is somewhere in between: occasionally you invite a co-worker over for dinner; or plan a trip with some friends where main expenses are split to the cent.
Moreover, it’s pretty easy to move towards a business domain but it takes time and effort to move a relationship towards the social domain.
And people feel differently in each domain. Suppose you just got the services of an internet provider and the company offered you a tablet in return. You probably felt happy about it and you probably thought the company was really nice to offer you a tablet. But if you miss a payment for some reason and they cut your internet access you'll be really mad. In fact, if they didn't offer you a tablet you'd think that would be a natural attitude: no pay, no service. But because your internet provider moved the domain a bit towards the social side (and cutting the internet access is by no means part of the social norms), now you're really mad. Probably this helps explain a bit the crimes of passion: when people get really mad at someone they love, they can do really awful things. Things that they probably couldn't do to a stranger that means nothing to them. Isn't that strange? You can hurt more easily those you love that those that don't mean a thing to you...

What about Leadership?

The norms you use as a leader (either social or business norms) are usually so natural that we don't even question them: you can’t be a CEO acting like a father or a father acting like a CEO, can you? So when you think of the extreme poles on this continuum, things seem pretty clear. But what about when you have someone in your team you really like, how does your behavior affect your relationship with her/him?
In this particular case, some of the questions you can ask yourself are:

  • Are you favoring your team member friend in any way, like assigning to him the tasks he enjoys doing the most?
  • Even if doing nothing wrong, like going out for lunch with your friend or setting the details for next weekend dinner party, do other team members feel that somehow you're setting them aside or neglected?
  • Are you neglecting your job as a leader and a project manager because you're not assigning to your friend the tasks he does best?
Somehow things don't seem so clear now, do they? If you're not very conscious about this, you'll have a hard time thinking about it and trying to recall past situations. So at the very least, you won't be sure if you're in fact acting for your team the way you were supposed to act.
This is just an example, a situation that can actually happen. Most daily situations you experience at work as a Project Manager are subject to adapting your behavior to the market in question, either a social market or a business market.

Do the Right Thing

Doing the right thing is necessary to leadership, that is to say you can't possibly lead with doing the right thing. But remember the bottle of wine example from the beginning of this article? It’s logical, rational, and it would give both parties the greatest benefit. But is it the right thing to do?
Definitely not. You have to take into account the context of the situation at hand and use the corresponding set of norms: either social or business norms. In many cases it is so clear what the domain is that you'll do it naturally, like you've always done. But in some cases, when things aren't crystal clear, this extra effort could be a lifesaver. And the same could be said about walk the talk, vision and many other leadership skills.


So the building blocks for this market and leadership start at the domain. Is it social? Or business? How much social? Then you apply the according set of norms (eg, if social no money gift). This may help you to do the right thing (seeing beyond the economic value, or the most rational option). And by doing this you'll be supporting your role as a leader.

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