Thread by @DellAnnaLuca

COSTLY SIGNALING: THE FORGOTTEN TOOL OF MANAGEMENT

Advertisers, salespeople, and romantic suitors all know very well the importance of costly signaling.

Managers mostly do not; at least, towards their workforce.

This is a shame, because…

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2/ …costly signaling is perhaps the most powerful tool that managers have to drive the adoption of Core Values, and to achieve Operational Excellence in general.

This might seem all very fluffy, but I assure you it is not.

In fact, why are Core Values so hard to get adopted?

3/ The reason is that all Core Values (safety, respect, ethics, attention to the customer, etc.) have short-term costs and long-term benefits.

For example…

4/ For example, taking the time to properly wear all PPEs (gloves, helmets, etc) has an immediate productivity/time cost, but the benefits can only be seen in the future, when the employee is safe and does not get injured.

5/ Employees often do not follow Core Values because they are afraid that their results-oriented manager might criticize them for having incurred the costs, by evaluating them after they incurred the short-term cost but before the long-term benefits materialized.

6/ As an example, yes your boss might tell you that safety is important, but if one day he asks you to quickly perform a very important operation by the end of the day, and you have to choose between doing it safely and being slow, or dangerously and fast, what do you choose?

7/ The previous example is perhaps exaggerated, but good managers know that it is such dilemmas that break the adoption of Core Values and other procedures which have short-term costs and long-term benefits.

8/ Therefore, good managers know the importance of signaling to their workforce that it is acceptable to incur such short-term costs, because the long-term benefits of Core Values are well worth it.

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9/ However, only telling the above to their workforce is not enough.

Every worker had at least one experience in their life where they got "burned" by having done the right thing and later being reprimanded for not having chosen the quick result

And experiences are what matters

10/ Words are cheap, and do not convince people whose experience tells them otherwise.

Instead, actions are costly, and therefore influential.

11/ The most effective way that a manager has to convince its workforce that Core Values are costs worth paying for every time,

is for the manager himself to pay those costs by personally practicing the Core Values in a visible, conspicuous, genuine and consistent way.

12/ If the manager consistently takes the long way and pays the short-term costs by practicing the Core Values, not only he passes the message that these are investments worth making.

It also provides plausible excuse, "boss, I did just like you did, I went for the long-term".

13/ In marketing & management, cost signaling is not about showing opulence, but about showing worthiness and commitment.

Worthiness as in "it's costly for me, I wouldn't do it if I didn't believe in it myself"

Commitment as in "I paid the sunk cost, I'm here for the long term"

14/ I wanted to talk about this concept as it was supposed to be part of my talk yesterday, but got removed due to lack of time.

Also, I describe the concept more practically and in greater detail in my "Best Practices for Operational Excellence", gum.co/opexbook