At the core of Entrepreneurs' Organization (EO)'s mission is an unrelenting commitment to helping entrepreneurs learn and grow in every stage of business. Dr. Gleb Tsipursky, CEO of Disaster Avoidance Experts, author, and EO 360° podcast guest, empowers leaders to avoid business disasters by maximizing unexpected opportunities and resolving persistent personnel problems. We asked Dr. Tsipursky to explain the dangers of the normalcy bias that entrepreneurs experience when deciding how to reopen their companies after closures to reduce the spread of Covid-19. Here's what he shared:
As companies rush to reopen, many are falling into the trap of "getting back to normal." They don't realize we're heading into an era with waves of restrictions due to spikes in Covid-19 cases. Several states that opened early have now reimposed some restrictions, showing that--as I predicted at the start of the pandemic--we may face rolling shutdowns, and therefore need to focus much more on virtual interactions.
To survive and thrive in this new abnormal and avoid the trap of normalcy bias, leaders must understand the parallels between what's going on now and what happened at the pandemic's start.
Reality check in a tech company
Consider Tim, the CFO of a 90-person tech startup based in Texas that provides HR and payroll software. Unfortunately, the company's leadership team, including Tim, believed Elon Musk when he downplayed the coronavirus in March.
Since the C-suite thought the pandemic would blow over, they didn't make the necessary preparations and ended up in a bad place when the shutdowns occurred. Their very basic business continuity plan didn't factor in something as large-scale as a pandemic. Thinking that things would "normalize" soon, they held off on making significant decisions, such as moving all operations to a virtual setup.
Tim contacted me for a consultation after participating in a webinar I conducted for the EO Los Angeles chapter about how entrepreneurial companies can adapt to changes brought by the pandemic. When he called me, his company was embroiled in internal team conflicts and service interruptions, which resulted in clients experiencing problems with the software, and some even threatening to cancel. The company needed guidance to get out of murky waters--immediately.
Facing the new abnormal
When I met virtually with Tim and his CEO and COO--because I had already moved all consultations to a virtual platform--I shared the essential points that they needed to understand for their company to survive the new Covid-19 reality.
First, we won't get anywhere if we don't face the facts. We must acknowledge that Covid-19 fundamentally disrupted our world, turning it upside down in February and March 2020. Regrettably, the virus will not disappear. Believing that it would disappear may have mired us more deeply in this mess.
Then, why did Elon Musk--and even some political leaders--downplay the Covid-19 pandemic?
Like Tim and his leadership team, these globally renowned leaders fell into what cognitive neuroscientists call the normalcy bias. This dangerous judgment error refers to the fact that our gut reactions drive us to feel that the future, at least the next couple of years, will function in roughly the same way as the past: normally. As a result, we tend to vastly underestimate both the possibility and impact of a disaster striking us.
The normalcy bias danger
The normalcy bias is one of over 100 mental blind spots that cognitive neuroscientists and behavioral economists like myself call cognitive biases. Fortunately, recent research shows how we can effectively deal with such dangerous judgment errors.
It's critical to understand the dangers of falling into the normalcy bias and acknowledge the pain you cause yourself and your company by doing so. Then, consider realistic long-term outcomes and plan for a realistic scenario that addresses the likelihood of major disruptions.
It was clear from my first Zoom call with Tim that the company's leadership team suffered from normalcy bias. However, it took until our second consultation for them to admit--begrudgingly--that they had succumbed to this mental blind spot. The refusal to accept reality had less to do with the facts I presented than their initial unwillingness to let go of "gut feelings."
They finally admitted that it was time to prepare their company for a much bigger disruption than anticipated. We used the "Defend Your Future" technique to help plan for a variety of potential futures. They decided to hope for the best while planning for the worst--a wise strategy for addressing the normalcy bias.
From struggling to thriving
When I last spoke with Tim at the end of June 2020, he had shared the points discussed during our coaching sessions with his leadership team. It was a difficult conversation, due to the growing conflicts in the company and mutual recrimination.
However, given the urgent situation, they buckled down and addressed the problems head-on. After outlining the issues and potential solutions, they gained widespread buy-in to do what was necessary to propel their company onto recovery.
The leadership team swiftly addressed internal conflicts, the necessary first step to addressing all the other issues.
They focused more robust efforts on a long-term transition to virtual. The COO led the effort to minimize their physical footprint, with only a few essential employees in the office. Tim, the CEO, and the VP of IT made quick, practical changes to the company's policies and processes to expedite their transition to virtual.
After addressing internal conflicts and processes, the leadership team reached out to the clients who were threatening to cancel due to service interruptions. With sincere efforts, most cancellations were averted.
Tim shared that he and his team were pleased with the results of the changes. They were especially glad they had taken these steps when Covid-19 cases in Texas began to increase in mid-June, prompting a pause in reopening that eventually led to shutdowns again in late June.
During these disruptive times, it's important to be agile and resilient. Keep in mind that even if your company didn't make the best decisions at the pandemic's onset, you can steer back to the right path by making informed decisions to protect your organization against the trap of the normalcy bias.