Jim March says there are two very different kinds of logic for making decisions. One is the logic of consequences. We’re great in business at changing behavior by changing consequences. If we want customers to buy more, we lower prices. If we want salespeople to sell more, we increase their bonuses. But the second kind of logic is the logic of identity. Many of the most profound decisions we make in life are made because of identity, not consequences.
That’s useful in business, especially in a change situation: if we can harness the power of identity, it helps motivate the Elephant to undertake a long, arduous journey. In a change situation, you want creativity and flexibility—and that’s more likely to come from identity than from consequences. Consequence-based logic is great at narrowing people’s focus, but it can backfire for the same reason. If you give people incentives to sell a lot of mortgages, for instance, they will do so. But they’re not necessarily selling the right mortgages to the right people.
Authors: Chip Heath, Jim March
Source: McKinsey Quarterly
Subjects: Change Management, Leadership, Management, Motivation
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