'Behavior' as Comparative Advantage

There is a remarkable consistency with which company CEOs, regulators, academics and consultants seem to have converged on a simple fact: How employees behave and interact with each other play a determining role in both the revenue-seeking and risk-mitigating objectives of corporations.

Professional conduct amongst employees across functional lines is as important as the policies codified in employee handbooks. The aggregation of individual talent can either be multiplicative or degenerative for the company as a whole -- depending on the alignment of behaviors and habits with principles and objectives.

It is telling that one of the successor organizations to the the erstwhile Financial Services Authority in the UK is styled as the Financial Conduct Authority (FCA).

Two areas of behavior that many struggle with -- in both commercial and non-profit domains -- are Conflict and Challenge.


In a world of limited resources (capital, skill, time) and more demand than supply, conflict is inevitable. In fact, conflict can be an effective "clearing mechanism" for settling competing demands.

In addition, at a time of disruptive change in service delivery models (principally driven by development in technology), it is natural for knowledge-workers to carry perspectives that may differ from each other. These differences may give rise to "good-faith conflict."

However, in large, complex organizations where the end-result of individual work may not be directly visible, it is easy to fall into what Sigmund Freud called "the narcissism of small differences" or the related observation that political intensity is strongest when the stakes involved are smallest.

When it comes to engaging in conflict, three rules are sacrosanct:

  1. Firstly, conflict must be issue-based and not personality-based. The fact that you disagree with me does not mean that I should question your intent or your integrity.
  2. Secondly, the fact that you disagree with me on one topic does not mean that I should disagree with you on another topic, just to retaliate! Issues should be compartmentalized with no spill-over.
  3. Thirdly, once there is closure on a topic -- irrespective of whether the outcome goes in my favour or not -- I should not drag it along ad infinitum.


In a world of complex systems and multiple feedback loops, we must develop the habit of challenging assumptions and propositions.

A good place to start is with ourselves: Do we challenge ourselves enough? Do we spend enough time considering alternatives, suspending judgement while we do so? Do we re-look at our decisions when facts change or do we defend them with all our lives?

Beyond ourselves, we are of course entitled to pose constructive challenges to each other. We don't have to agree with everything but in most cases, we are entitled to an explanation. It's important however to do it right:

  1. Firstly, no grandstanding or showmanship. Challenge does not have to be at the expense of courtesy.
  2. Secondly, a 'constructive' challenge is one that seeks to converge to a solution. It's useful to offer "how I would do it differently" as opposed to lobbing a grenade for the sake of it. As Ross Perot is credited with saying, "The activist is not the man who says the river is dirty. The activist is the man who helps clean up the river".
It is also important to
challenge in the right spirit:
  1. Firstly, no foot-dragging or "filibustering" (as they say in the Congress), hoping that the question will simply go away.
  2. Secondly, it's incumbent on the senior professional to foster relationships of professional challenge. Absence of challenge may be misinterpreted as an expression of loyalty and vice versa.
  3. Thirdly, not only should we tolerate challenge, we should actively seek out challenges to our beliefs and positions. Similar to diversity, this can contribute to the resilience of any professional ecosystem and result in better outcomes.

Enhancement of behaviors and habits is a continual quest. However, in order for the modern corporation to evolve to the next stage of effectiveness -- especially with Generation Y making up a growing proportion of the employee base -- behavior needs to be an explicit area of focus.