Entrepreneurs' Organization helps entrepreneurs achieve their full potential by enabling life-enhancing connections, designing shared experiences, and providing collaborative learning. Dr. Gleb Tsipursky, CEO of Disaster Avoidance Experts, author, and EO 360° podcast guest, empowers leaders to avoid business disasters. As a cognitive neuroscientist and expert on how cognitive biases impact human behavior, we asked Dr. Tsipursky what happens to leaders who anchor to the wrong pandemic data. Here's what he shared:
Have your views stayed the same since the Covid-19 pandemic started in March? Do you know people who continue to view the virus as just a minor inconvenience despite evidence to the contrary?
For instance, many people are still anchored to the erroneous belief spread earlier in the year that Covid-19 isn't much different from the common flu.
Many top entrepreneurs still express Covid skepticism: For example, Elon Musk said he won't take a vaccine, casts doubt on Covid tests, and disparages mitigation efforts. That's despite scientific proof of the benefits of mitigation efforts including masking and new developments, such as recent requests by governors to remain at home and telecommute to slow the third wave of the virus. Similarly, they ignore research showing that crowded indoor spaces such as restaurants, gyms and hotels significantly increase the risk of contracting the virus.
People have a tendency to stick to their beliefs based on the first information they receive. This holds true even with strong new evidence that these beliefs are erroneous. Behavioral economists and cognitive neuroscientists call this mental blind spot anchoring.
Anchoring is one of many dangerous judgment errors, or cognitive biases, that harm the decision-making process in business and every area of life.
Anchoring in Fintech: A Case Study
Let's look at the case of a fintech startup weighed down by anchoring, which led to a disastrous first few months of remote work and, unfortunately, Covid-19 infections.
When "Lauren," an EO member and CEO of a130-employee Texas-based startup, first heard of Covid-19, she and her leadership team shrugged it off as a mere nuisance. They didn't prepare for an extended disruption, opting to follow early CDC guidelines to prepare for a brief interruption caused by a short-term outbreak.
Due to this, the senior management team asked all employees to report to the office as states reopened, totally disregarding news reports of an uptick of cases in Texas.
However, because of the leadership team's dismissive attitude toward Covid-19, neither executives nor employees took necessary precautions. Many did not follow social distancing guidelines or wear masks in the office environment.
Not surprisingly, problems soon arose, starting with a virus outbreak traced to a company-wide meeting. Almost three dozen staff and three C-suite leaders contracted the virus.
The COO and several employees were hospitalized, and two older employees died. This resulted in a massive decrease in productivity, resignations and low morale.
Unsure how to proceed, Lauren reached out to me in late April to help her plan how her business could most efficiently handle the pandemic chaos.
Adapting to the New Abnormal
In virtual meetings, I advised the company's leadership to stop denying the upheaval brought by Covid-19. Sticking to their perilous path could ruin the company.
I pointed out that at the pandemic's onset, most companies activated business continuity plans and left it at that month after month.
However, I am firmly against continuing with only those emergency measures through the minimal two years of this pandemic.
Companies must make plans and take action beyond emergency measures to survive and thrive in the next few years. This means adapting to the pandemic and acknowledging that ongoing waves of restrictions are the new abnormal.
What does this mean?
Essentially, you need to transform your internal and external business model so that your business is well-positioned for productivity during these tumultuous years. Scrutinize the elements that drive your company and revise your regular operations and business continuity plan.
Moving Forward from Anchoring
After our consulting sessions, Lauren took action. She and her executive team immediately reexamined the facts about the virus. Fortunately, the senior leadership finally acknowledged the gravity of the situation and led the company in taking the following steps:
- Held a company-wide virtual town hall debunking the wrong information circulating about the virus to which most employees had been anchored.
- Rolled out a telecommuting program. All employees were given tech and equipment assistance.
- Revised external and internal marketing collateral to include essential information on the company's initiatives to make its virtual and physical spaces safe.
- Reached out to disgruntled clients who were previously dissatisfied with the company's slow response to complaints and inquiries. The sales team gave a detailed account of how the company revamped operations to provide better service.
- Crafted an attractive retention program to prevent more employees from leaving.
These steps yielded great results and pushed the company back to a productive path.
Lauren was pleased that they were able to minimize health risks with strict policies around working onsite. This lowered the company’s risk of accountability in case of an office outbreak, eliminating a significant concern. With the clarity these changes brought, the company was able to refocus efforts on strengthening client relationships and restarting product development.