In today's episode, we will examine how the fixed mindset and the growth mindset affect
business.
We will take a look at three business leaders whose growth mindsets turned their companies
around and contrast that with fixed mindset businesses that suffered from groupthink,
fear of failure, and an inability to see and promote growth in their employees.
Just as it is believed there are naturals in sports, it is believed that there are naturals
in business.
Nobody believed in this more than Enron, which became obsessed with talent.
Its employees had to look and act extraordinarily talented, which meant not admitting or correcting
their mistakes.
Eventually, Enron's lies were revealed and the company was finished.
If a fixed mindset can do in a company like Enron, what might a growth mindset company
look like?
Leaders at growth mindset companies aren't constantly trying to prove they're better
than others.
They aren't always reminding those beneath them in the corporate hierarchy of their position
at the top, they don't take credit for the work of others, and they don't feel powerful
by undermining others.
Instead, they focus on improving.
The hire the most able people they can find, they're not afraid to look at their own mistakes
and weaknesses, and they look to the future by asking what skills are going to be needed,
allowing them to move forward with facts.
Not fantasies about their talent.
Dweck used three examples of business leaders who exemplified the growth mindset: GE's Jack
Welch, IBM's Lou Gerstner, and Xerox's Anne Mulcahy.
Under twenty years of Welch's leadership, GE grew from a 14 billion dollar company to
one worth 490 billion - the most valuable company in the world.
Welch nurtured employees, often going straight to front line workers to hear what they had
to say.
Earlier in his career, Welch was arrogant, couldn't take criticism, and depended more
on his talent than hard work and his team.
But his experiences, such as a disastrous purchase of Kidder, Peabody, and blowing the
roof off a building as a young engineer, taught him humility.
He selected employees for mindset and passion, not pedigree and he eliminated brutal bosses.
Productivity would now come from mentoring, not terrorizing employees.
In the late 1980s, IBM was starting to look like Enron would years later.
No teamwork, only turf wars.
In 1993, the board of directors brought in Lou Gerstner from RJR Nabisco, the first IBM
CEO hired from outside the company.
He attacked the elitism, disbanded the management committee and assembled meetings based on
who could solve problems, not based on the management hierarchy.
He fired the politicians and rewarded people who helped their colleagues.
He based bonuses on IBM's overall performance instead of individual unit performance.
In the first 3 months, Wall Street's reaction was that Gerstner had accomplished nothing,
but in less than 9 years, IBM's stock had gone up 800%.
When Anne Mulcahy took over Xerox in 2000, the company couldn't even sell its copy machines.
But Mulcahy turned the company around in just three years.
Her growth mindset made her focus on learning.
She learned every detail of the business.
She was also a combination of tough and compassionate.
When she had to make cuts, she refused to sacrifice what made Xerox culture unique.
Welch, Gerstner, and Mulcahy were all passionate believers in the growth mindset rather than
talent and filled with gratitude for their workers rather than bitterness.
Let's return to Lee Iacocca - poster child for the fixed mindset in business.
Iacocca dreamed of succeeding Henry Ford as CEO of the Ford Motor Company, but Ford forced
him out.
With his fixed mindset, he had thought he was superior.
But with this turn of events, he started thinking that Ford had found a flaw in him and he couldn't
get over it.
Years later, his second wife told him that he should be thanking Henry Ford because getting
fired brought Iacocca to greatness.
Shortly after that, Iacocca divorced her.
He worried that underlings would get credit for successful new designs, so he didn't approve
them.
He worried that underlings would get credit if Chrysler was saved, so he tried to get
rid of them.
He hung on to his position as CEO long past the point where he had lost his effectiveness.
Dweck wrote, "As time went on, Iacocca resorted to the key weapons of the fixed mindset -- blame,
excuses, and stifling of critics and rivals."
Unlike students and athletes who can fail tests and lose games, CEOs have so much power
that they create a world that feeds their need for validation and isolates them from
reality.
People like Iacocca and Enron's Jeff Skilling didn't set out to do harm.
But at critical points, they chose to do what would make them look good and feel good rather
than what served their companies.
They covered up mistakes, blamed others, and silenced critics.
Another downside of the fixed mindset is the tendency for groups to descend into groupthink.
People with the growth mindset are more likely to state their honest opinions and openly
express disagreements.
Fixed mindset people are too afraid of looking stupid to speak up.
This is what led to the Bay of Pigs invasion when Kennedy's advisors believed so strongly
in Kennedy's ability and luck that they suspended their judgment.
Churchill avoided this problem by setting up a department dedicated to giving Churchill
bad news.
Alfred P. Sloan of General Motors, when leading policy-makers who had reached consensus, would
propose postponing further discussion until they had developed disagreement.
The ancient Persians prevented groupthink by taking group decisions made while sober
and reconsidering them while intoxicated.
So there's a good way to prevent groupthink but how do we reduce the amount of other fixed
mindset thinking in business?
We should think about the way we give feedback.
Instead of awarding employees for their performance or for having the best idea, we could praise
them for taking initiative, seeing difficult tasks through to completion, being undaunted
by setbacks, being open to criticism, and for learning new things.
But what if our leaders don't believe personal change is even possible?
Studies by Heslin, VandeWalle, and Latham confirm that managers do not believe in personal
change and judge everyone just on their existing talent.
They do little development coaching and don't take notice when employees improve.
They also are unlikely to seek or accept critical feedback from employees.
But the growth mindset can be taught to managers.
Heslin conducted a workshop where managers participated in exercises in which they considered
the importance of developing people, thought about skills of their own that were once weak,
practiced writing a protégé about skill development, and recalled times they were
surprised to witness others learn new skills.
Coming out of these workshops, managers could now detect improvements in employee performance,
were more willing to coach poor performers, and made more and better coaching suggestions.
Why doesn't this happen more often, given all the training we give managers?
Why do most of them become bosses rather than leaders?
Zenger and Folkman found that when someone becomes a manager, they enter a period of
great learning, are open to new ideas, and think long and hard about how best to do their
jobs.
Then, it stops.
They've learned the basics and they stop trying to improve.
In some cases they become arrogant, defensive non-learners.
If we want this to improve, we need to create organizations that prize development of ability.
Then we will see leaders emerge.
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