Thinking Second-order Effects

💡 I was going to write a longer piece on this topic, but found this article to be helpful.

One of the key elements of being better in leadership, strategy, and organizational changes is being able to think and anticipate second-order effects.

When you want to roll out programs, systematic changes, (re)budgeting, headcount planning, introducing new processes, thinking beyond the first intended first-order, being able to navigate second-order effects will be critical in how successful those initiatives will be. Most outcomes will be lagging and have lasting/trickling effect throughout the organization, so the quality of the decision and the thoughtfulness matters a lot to save a lot of people’s time, effort, and pain.

Being a thoughtful individual is thinking about the delivery of messages and actions to be able to understand the perspective of and have empathy towards the recipient of the messages and actions.

Being a thoughtful leader is thinking not only about the delivery, but also being able to simulate and consider the trickling effect throughout the organization — what challenges does it bring to different teams’ goals and organizational systems, who will feel the increase in pressure, what does the message say to the other teams outside of your immediate org, who will feel more frustrated vs appreciated, and so forth.

So when you are thinking of introducing changes to your team or broader organization, especially one-way door decisions*, being able to plan and anticipate second-order effects will likely to be even more important than the first-order effects.

“We think about one-way doors, and two-way doors. A one-way door is a place with a decision if you walk through, and if you don’t like what you see on the other side, you can’t get back. You can’t get back to the initial state. A two-way door, you can walk through and can see what you find, and if you don’t like it, you can walk right back through the door and return to the state that you had before. We think those two-way door decisions are reversible, and we want to encourage employees to make them. Why would we need anything more than the lightest weight approval process for those two-way doors?”

Amazon way (Quote Source)

How to Cultivate Your Resilience

Practices to strengthen your resilience

 People love a guy who rises from the ashes. Remember that.

Whitey Durham

Resilience is something that many talk about, but is hard to come by. It can be quite useful to have innate resilience in you to overcome the hardships of life, professional career, and even entrepreneurship. Things worth pursuing in life are hard. That’s why it’s rare to see great achievements, and it is that very journey of overcoming the difficult challenges with resilience makes it fulfilling and worthwhile.

There are many words used to describe resilience: perseverance, tenacity, relentlessness, and some even may use the word stubbornness, but they all describe one common theme: not giving up, trying again, being resourceful to achieve a seemingly impossible goal, and ultimately getting to that very success. (Also recommend reading Paul Graham’s essay “Relentlessly Resourceful“)

So how does one harness such resilience?

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The Anatomy of Managerial Initiative

The five degrees of initiative of the managers

Below is an excerpt from "Management Time: Who's Got the Monkey?" (HBR)

There are five degrees of initiative that the manager can exercise in relation to the boss and to the system:

  1. wait until told (lowest initiative);
  2. ask what to do;
  3. recommend, then take resulting action;
  4. act, but advise at once;
  5. and act on own, then routinely report (highest initiative).

Clearly, the manager should be professional enough not to indulge in initiatives 1 and 2 in relation either to the boss or to the system. A manager who uses initiative 1 has no control over either the timing or the content of boss-imposed or system-imposed time and thereby forfeits any right to complain about what he or she is told to do or when. The manager who uses initiative 2 has control over the timing but not over the content. Initiatives 3, 4, and 5 leave the manager in control of both, with the greatest amount of control being exercised at level 5.

In relation to subordinates, the manager’s job is twofold. First, to outlaw the use of initiatives 1 and 2, thus giving subordinates no choice but to learn and master “Completed Staff Work.” Second, to see that for each problem leaving his or her office there is an agreed-upon level of initiative assigned to it, in addition to an agreed-upon time and place for the next manager-subordinate conference. The latter should be duly noted on the manager’s calendar.

👉 Summary: When an employee brings a problem to you, outlaw use of level 1 or 2. Agree on and assign level 3, 4, or 5 to the monkey*. Take no more than 15 minutes to discuss the problem.

* Monkey: It’s from “monkey-on-the-back” metaphor, and means a task that needs to be done/handled/responded to.

The Five Forms of Power

Leadership powers to cultivate

The five forms of power were introduced by John French and Bertram Raven, and depicts different forms of power that exist in organizations. There are ones that are short-lived with limitations and ones that are more sustainable and scalable.

  1. Coercive Power: Being able to force someone to do something (against one’s will)
    • Cause of many problems, poor form of leadership, can be easily overthrown (or abused)
  2. Reward Power: Ability to reward to do something unpleasant
    • Diminishing returns, short-term effect, regularity removes its effectiveness completely
  3. Legitimate Power: Exercise a degree of reward or punishment based on role/title
    • Loses power immediately as the position or title is changed, weak form to persuade/convince people
  4. Referent Power: Respected, approved, admired
    • Highly scalable and effective, but may decrease dramatically based on circumstance (e.g., popular politician getting taken off the show upon scandal)
  5. Expert Power: Knowledgeable and capable
    • Long-lasting, high value, and defensible form of power

Later on, they added 6th power — Informational Power: Ability to control the information that others need to accomplish something which usually comes from a position or a role. This too can be effective, but can also be interpreted as political or gossiping.

One of the most effective ways to build and demonstrate your power in the organization is the combination of #4 Referent Power and #5 Expert Power. By combining the two, leaders can build and demonstrate scalable and long-lasting form of influences in their organization and beyond.

A Guide to Scaling Yourself

How to keep your head above water

I was having lunch with a friend today, and we were discussing how does someone know when a person is scaling or not. Who will scale as the company grow and what stops someone from scaling further?

Some companies have early members scaling beautifully as the organization grows, while some don’t. A lot of smooth scaling happens typically when the company is growing organically and the growth rate is relatively modest (< 50% YoY). When a company is growing > 50% YoY, and in some cases, doubling or more, it becomes incredibly difficult for people to keep up with the scale of the company, as humans grow linearly, yet companies grow exponentially.

Below are a few questions to ask yourself to check if you are scaling with the growth needed and some tips and strategies to continue on the fast growth trajectory.

1. Am I “going horizontal?”

I came across the concept of “Going Horizontal” during 10xCEO program and we discussed extensively on how to make sure the executive team is continuing to scale at the right capacity level for the growth needs of the company.

The team internally might already be “over capacity” if the company’s growth rate is modest and the team is experienced. But if the needs for the leadership capacity emerging from growth out weigh the current capacity, then it will hurt the growth rate and the potential upside of the company as long as the leadership team is not fully built to handle the needs.

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Family Core Values

The information and knowledge I know today will quickly become obsolete as years go by, so instead of focusing on the transfer of knowledge, I came to believe that providing a useful set of core values and life’s frameworks are more scalable for the generations of family members. So here is the 1st version of family core values.

Purpose

The core value is to help our family live and grow with a purpose and meaning in life. It will help us prioritize, make decisions, stay genuine and consistent, maintain integrity, with a long-term perspective.
This is a living document and we should continue to evolve it throughout the generations.

Theme: Entrepreneurship

The theme of the core values is “Entrepreneurship (企業家精神, 기업가정신)”. Entrepreneurship is a mindset and a way of living as a leader, that involves identifying problems and opportunities, coming up with solutions to those problems, and executing them resourcefully and tenaciously to create significant value to the world.

Our Family’s 4 Core Values

1. Positive Tenacity

Positive tenacity means we’re being tenacious towards positive missions and goals. It means we look at the future with optimism and execute with high energy. We are biased towards action and we believe in positive changes. We get things done by being resourceful. We work smarter and harder to achieve our goals. We are tenacious and pursue our dreams relentlessly.

2. Leadership

We are the leaders and we take responsibility in any situation regardless of the circumstances. We embody first-principle thinking and decision making. We uphold our integrity and always do the right thing. We are able to think both strategically and tactically. We are independent thinkers. We also know the importance of great communication and being positive examples to others. We believe the good in people and focus on their strengths and positives, rather than their shortcomings and negatives. We inspire people to take action and lead towards a positive future.

3. Learn & Adapt

The world and the universe is constantly changing and the only way to survive and grow is to adapt to the changing world rapidly. We continuously learn and adapt to any environment. Adaptation is not a single event, but a continuous and never-ending state of being. It means to learn anything as quickly as possible, stay curious throughout our entire lives, never get complacent, always pursue becoming better than the best.

4. Think Long-term

We are long-term forward thinkers. We aspire to a positive future and make that dream become a reality. We live with a long-term perspective and are patient through our lives, stay generous and resilient, and are able to embrace the challenges with a long-term view.

The Art of Setting Personal Annual Goals

People tend to be a bit skeptical about setting a personal annual goal. Plans often don’t align with your reality and we’ve all experienced the frustration of setting a goal and giving up a few months into the year, unintentionally hurting your self-esteem.

But, if we don’t have a goal and a plan, we don’t really know whether we are headed in the right direction nor whether we’re making a progress towards a goal or not.

I deeply believe one of the core purpose of personal goal setting is not only to achieve them, but to build up your confidence and increase your self-esteem.

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Scaling Leadership through Two Management Frameworks

As an organization reaches certain scale, it is inevitable, at least due to the current limitation set by human interaction mechanisms (e.g. verbal communication, synchronous meetings, groups, hierarchies, physically independent) that there is a certain level of structure that needs to be put in place to manage the organization.

There is a few frameworks that can be useful when scaling the leadership. It’s local applications of the general management frameworks, so let’s explore how they can be relevant to scaling leadership.

1. Convergence <> Divergence framework

This framework demonstrates how to navigate within the horizontal layer (x-axis) of management.

As your organization scales, one thing you constantly run into is the overall increase in diversity within the organization. The proportion of diversity may increase or decrease, but the absolute number of diverse entity (in this case, employees) will simply increase as your headcount grows.

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The Zone of Sustainable Commitment

I was first recommended the book “Leadership and Self-Deception” from Stewart Butterfield during Y Combinator Growth program late last year. I finally got the chance to open the book recently and the story resonated so much that I recommended this book to our entire company.

A high-level summary might go like this: if you get into self-betrayal, you go “in the box” where your perspective of the world starts to distort in your favor. By self-justifying, you find ways to blame others, while inflating your own virtue.

The result is making your relationship worse and inviting others into the box along the way, starting a vicious cycle. Below diagram shows the inside of Bud’s mind, one of the characters in the book. Bud’s baby son David wakes up in the middle of night. The diagram shows what goes through Bud’s mind as he thinks about whether to get up and tend to David or not, while his wife Nancy is asleep besides him.

Continue reading “The Zone of Sustainable Commitment”

Situational Leadership Matrix (Simplified version)

After managing different teams of various background and scale over the years, I’ve always thought the question “what is your leadership style?” is almost a trick question. An executive from another company once shared with me a framework he learned at one of the leadership classes he took at Harvard.

It seems like the original version of Situational Leadership is a bit more complex, but the simplified version he shared made more sense to me and felt more applicable to everyday managers.

Continue reading “Situational Leadership Matrix (Simplified version)”