It's the Emotions, Stupid!
by Margaret Heffernan

Gangs mug well-dressed young men, boys change identities, father and son oust outsiders. It's been a wonderful season for drama. Not on television or at the movies - but in business. We've watched agog as CEOs stand trial, TimeWarner changes its name (again) and Murdoch promotes his son. Meanwhile, over in California, the epic battle between macho Larry Ellison's Oracle and nice little PeopleSoft looks set to become one of business's longest running soap operas.

These stories compel attention because they are intensely emotional. Whatever you think of the company and the personalities, the gang warfare waged within the corridors of Time Warner is testament to the fierce loyalties and wounded pride which every merger evokes. Though the settings and costumes may be a bit drab, these stories - complete with supporters and hooligans - represent an intense potage of hope, fear, ambition, envy, hatred and love.

Meanwhile, in business schools around the world, students are at their desks studying accounting, economics, marketing, operations, organizational behaviour and finance. They're filling their vocabulary with business jargon: margins, capitalization, synergies, economies of scale, strategy, returns. Nothing about fear or hate or love or envy. Because one of the prevailing lies about business is that it isn't emotional. Even the phrase "business-like" suggests that behavior that is cool, calm, unemotional. Business, we're taught, is all about numbers. Those are objective and rational, so business is objective and rational too - isn't it?

Of course not. Think about why we start new businesses. We hope it will be more exciting, fulfilling and profitable than the dead end job we hated. We love being our own boss and dream about huge successes. We're thrilled seeing new products roll out and adore the customer who pays on time. We hate our competitor and envy the investment he's just secured. And we all loathe and despise red tape and taxes.

When you deny something, you lose the chance to manage it and I watch businesses fail to manage their emotions every day. We say that people are our greatest asset - but while we spend hours learning to manage assets like cash and inventory, we spend little time learning how to manage the emotions inside our companies. Small businesses are even more emotional than big ones because everyone knows each other and there are fewer places to hide. Big or small, we deny emotions because we are afraid of them - but if we learn to manage them, they can work to our advantage.

It's clear that failing to manage emotions has real, operational consequences. Up to 80% of mergers fail because, while they get the numbers to work, everyone denies peoples' feelings. Talent walks out the door and all that's left behind is a costlier demotivated company. On a smaller scale, most managers hate performance reviews and opt out of them with vague compliments. Why? Because they don't want to confront the unscripted emotion that might gush forth in response to criticism. Rather than say an employee is late, or sloppy, or has low standards, managers avoid or sugar-coat the review process and are relieved when it's over. What's the consequence? The employee can't improve, the manager feels confirmed in his low opinion and both sides dig themselves into silent resentment. It's a mutually assured stalemate.

Another, true example. I sit on the board of a company that nearly died from the downturn in advertising last year. The directors were frustrated because, while they were taking pay cuts and wracking their brains to think of ways to keep the company afloat, the workforce seemed to be doing nothing.

“Have you told everyone where you stand and what the problems are?”

“Not really.”

“Why?”

”We're afraid they'll be scared and leave.”

But their workforce was smart. In the absence of direct information, they either thought the management didn't know how bad things were (so they were working for idiots) or that management was just not telling (so they were not trusted.) Management worried and grew resentful; employees worried and lost motivation. Another mutually assured stalemate.

Managing emotions doesn't mean the entire workforce spends its time in therapy. It just means that we have to think about what emotional undercurrents are at work - and deal with them honestly. One of the best managers I know, Carol Vallone, realized that her company was in danger of internecine warfare because it was divided between two locations. Instead of denying the tribal loyalties this provoked, she organizes regular hockey matches between the two offices. The emotion is there alright - but everyone deals with it and then gets back to work. Like all great managers, Carol thinks about pride, celebration and ambition as seriously as she thinks about her 120% growth rate.

"All learning," said Plato, "has an emotional base." If only he'd been an entrepreneur. When you acknowledge emotions, you can get them to work for you. One of the great advantages of small businesses is they can inspire intense loyalty and dedication because every employee's impact can be seen and felt. This is an emotional strength you have that giant corporations envy. You can recognize emotions or deny them; they can work for you or against you. Which will it be?

This column was originally published in Real Business magazine

© Margaret Heffernan

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