Charles S. Jacobs is founder and managing partner of 180 Partners, and the author of Management Rewired: Why Feedback Doesn’t Work and Other Surprising Lessons from the Latest Brain Science. For over two decades, he has helped the leadership of corporations around the world improve the performance of their businesses. He numbers among his clients fifty of the Fortune 100, and has worked in Europe, Asia, South America, and the U.S.

His unique approach enables managers to use our new understanding of the brain to comprehensively rethink their businesses, creating more robust competitive strategies and the performance-oriented organizations needed to implement them. His work provides the key to overcome the number one obstacle to meaningful improvement in business performance—the rapid and effective management of change.

His writing has appeared in numerous business publications and he is sought after for print and broadcast interviews. His seminars and speeches offer an overview of the stunning discoveries of brain science and the direct, practical application of those discoveries to management. He completed his B.A., M.A., and PhD work at the University of Michigan.

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Morris: Much has (and hasn’t) happened in the business world since our last conversation. In your opinion, which change has been most significant? Why?

Jacobs: The key development for me has been the rise of self-managed, leaderless groups, fueled by technology and social media. We saw it with the Arab spring, and with the Occupy Wall Street movement. Regardless of how you might feel about the aims and tactics of such movements, they have been wildly successful in attracting both membership and attention, and they’ve done it with a speed that is dizzying.

I recently asked a client of mine that runs a highly successful business how she managed the fifteen thousand millennial software engineers. She told me she didn’t. She went on to describe a self-managed team with an internal social networking site as its hub.

Increasingly over the last year, I’ve noticed my work has been focused on building self-managing organizations. They’re much more productive, people prefer them, and managers are freed up to focus outward on customers and market trends. I think we are seeing a redefinition of leadership for the wired age.

Morris: For those who have not as yet read Management Rewired, what prompted you to write it?

Jacobs: I’ve always been fascinated by how the mind works. When I started working in the business world, I was struck by how most of our management practices, based on behavioral science, weren’t terribly effective. I found that better results came from focusing on the thinking that drives the behavior.

When I sold my first business, I had an opportunity to study the latest research in brain science and I found it really exciting. The invention of the fMRI allowed us to see the brain at work for the first time, and what we learning had more in common with Eastern philosophy and quantum mechanics than behavioral science.

Not only were the discoveries fascinating in their own right, they explained much of what I had observed in my work. They also suggested a better way to improve business performance, even though it might seem counterintuitive. My book is my attempt to communicate the excitement of these discoveries and their practical application.

Morris: Were there any head-snapping revelations while writing it?

Jacobs: There were really two for me that were game-changing. The first is that the brain doesn’t faithfully record our experience of the world, as much as it creates it. Our sense data are processed in the brain with input from the areas associated with our goals, emotions, and beliefs.

Rather than being objective, the world we experience is a unique product of our aspirations, feelings and expectations. To be effective in our interactions with others, we need to appreciate the story they tell themselves, and most likely it is very different than the one we tell ourselves.

The second is that our decision-making is driven more by emotions than logic and we make better decisions as a result. If we get too caught up in the objective data, we lose access to our gut feelings, which in reality are the product of the accumulated experience of our lifetime. We then make worse decisions, even in supposedly objective areas like finance. The data is important, but the feelings put it into context.

Both of these revelations challenge our conventional wisdom about management and give rise to new, more effective approaches.

Morris: To what extent (if any) does the book in final form differ from what you originally envisioned?

Jacobs: The original draft was about twice as long and far more academic. I had a wonderful editor at Portfolio who taught me that an author, just like a business organization, needs to be focused on the customer.

Managers are busy, so a business book needs to be engaging, concise, and immediately applicable. The best ideas in the world will die an obscure death if they’re not presented in a way that compels people to attend to them. I think the same constraint applies to a manager’s communication.

Morris: If you were updating the book (and you may yet), what would be the most significant revisions (if any) in the new edition?

Jacobs: Even in the short time since the book was written, there have been even more substantial advances in cognitive neuroscience, so of course I would want to include those. The same is true of technology.

For example, smartphones are keeping us more connected and speeding up the pace of business. At the same time, there’s less face-to-face human contact, which has been the basis of our relationships for hundreds of thousand of years. Managing in an environment with different rates of evolution for technology and the human brain is a huge challenge.

I would also add more of the view from the trenches. I am fascinated by ideas–they change the brain, the mind, and our behavior. But managers don’t have the time or the bandwidth to answer the “so what?” More war stories illustrating direct applications would help them utilize the power of the latest brain research.

Morris: Presumably you have received substantial feedback from those who have read Management Rewired. The book’s subtitle asserts that “feedback doesn’t work.” What is the “feedback fallacy”

Jacobs: Embedded in our culture and supported by behavioral science is the notion that feedback is essential to improving performance, but the issue is not as simple as it seems. When a manager gives critical feedback to an employee, it gets distorted by the conflict between their differing perceptions.  What may be constructive to the manager is often perceived as punishing by the employee.

It then becomes in the best psychological interests of the employee not to accept or act on the feedback. A classic study at GE in the late nineteen sixties established that seemingly constructive feedback, rather than improving performance, diminishes it. But if managers use questions to encourage self-feedback, the dynamic is turned around and there is a strong motivation to improve.

Morris: When and how should constructive criticism be provided?

Jacobs: Constructive criticism based on objective measures or self-generated by a manger’s questioning is effective. But if the employee blithely refuses to acknowledge it, then a direct message is necessary, but only as a last resort. We want the psychological dynamic working for us rather than against us.

Morris: There have been several other books published in recent years that also discuss one or more “surprising lessons from the latest brain science.” Many of them are indebted to K. Anders Ericsson and the research that he and his associates at Florida State University have been conducting for almost three decades.

Here’s my question. Of all that their research has revealed about the relationship between talent and peak performance, what do you think is most significant? Why?

Jacobs: It’s what Ericsson calls “deliberate practice.” There’s an overwhelming body of research establishing the link between years of practice and the development of expertise. But the practice needs to be focused, guided, and stretch current capabilities.

We know that such practice builds and reinforces networks in the brain, so that the skill becomes virtually automatic. For me, the takeaway for business is that leaders are made, not born, but only as the result of a lot of hard work.

Morris: As you know, in recent years there has been severe criticism of MBA programs, even those offered by the most prestigious business schools. In your opinion, what is the one area in greatest need of immediate improvement? Why?

Jacobs: I believe there needs to be much more of a focus on people and their thought processes. When I work with clients, I find it’s relatively straightforward to analyze a business and produce a passable strategic plan, but its quality is dependent on the thinking and collaboration that goes into it. And the strategy is only as good as its execution.

A solid plan requires people to synthesize data and reach consensus on the way forward. Effective execution demands an in depth understanding of people and what it takes to get them to work together. These human issues are the most complex aspect of a business.

To be effective as managers, newly minted MBAs not only must understand people and themselves, but have access to the management processes that will compensate for our human fallibility. It’s not about the numbers; it’s about the people behind the numbers.

Morris: Opinions are divided (sometimes sharply divided) on the importance of charisma to effective leadership. What do you think?

Jacobs: History is rife with examples of leaders that used their charisma for the wrong ends and have failed as a result. For me, the foundation of leadership is clarity around what needs to be accomplished, a plan to accomplish it, and structure and processes to ensure execution. But a charismatic leader can build on this foundation and more thoroughly engage people, improving performance.

Charismatic leadership can be deconstructed into a way of thinking and a set of behaviors that can be learned through the deliberate practice I mentioned earlier.

Morris: For those who may suspect that their own organization’s management needs to be rewired, how best to determine where and to what extent current management is in greatest need of transformation?

Jacobs: Because of a rapidly changing environment and a legacy that is often at odds with it, few organizations operate as effectively as they could. Build in the inevitable people issues and the flaws in our conventional management wisdom, and one can assume all businesses could benefit from transformation.

The telltale signs are a failure to meet plan, a disaffected workforce, and an inability to attract and retain talent. But most managers can also “feel” that there is a need for transformation. There’s no buzz, no energy, and no challenging goals that the organization coalesces around.

Morris: By what process should the management of an organization be rewired? For example, where to begin?

Jacobs: One of the changes I made when I had the chance to revise my book for the paperback edition was to include an appendix that describes the process. It starts with just going out and talking with people. You quickly get a sense of how focused, aligned and engaged the organization is, and what the key stumbling blocks to better performance are.

The next step is to bring together the key leadership of the organization, help them become a highly functioning team and then lead them through a participative strategic planning process. The outputs of the process are consensus on a vision for the business, a strategy to achieve the vision, and the organization needed to implement the strategy. A detailed action plan cascaded down through the organization makes it all a reality.

There also needs to be a structured process to ensure the execution of the plan while effectively managing the change. This process should be as participative as possible and it should be flexible. You want to maximize engagement and adjust the plan in real time.

While this sounds like a tall order, in my experience it can be accomplished relatively quickly and measurable improvement will be seen within a quarter.

Morris: How best to measure the progress of the rewiring initiatives?

Jacobs: The ultimate measure is the success of the business. If the process can’t move the needle on the key business metrics, it’s not a worthwhile investment of time and energy. By its very nature, the process will also improve employee-centric measures such as turnover and employee opinion survey scores.

Morris: Most change initiatives either fail or fall far short of original expectations and, more often than not, the resistance is cultural in nature, the result of what James O’Toole so aptly characterizes as “the ideology of comfort and the tyranny of custom.”

Here’s my question: How best to avoid or overcome such resistance?

Jacobs: Resistance to change is to be expected because our minds are inherently conservative. They’re wired to automatically process the expected and tend to not even register the out of the ordinary, unless it becomes highly significant. So change is psychologically uncomfortable.

The key to dealing with the inevitable resistance is to first signal a change is underway by establishing a marker that grabs attention. This may be an event like missing the quarter, a change in leadership, or a merger.

In the absence of such an event, a bit of creativity might be called for. A utility client held a wake to symbolize the departure of the old culture and the beginning of the new. A steel mill relaunched itself, complete with an opening ceremony and new signage.

People are more willing to embrace change if they understand what the change is leading to and see a benefit in it. An aspirational vision paints a picture of a more desirable future. Such a vision should clearly specify what’s in it for those being asked to change

Lastly, people are more likely to change if they have a hand in designing and implementing the change. The more participation, the better, for it also eliminates uncertainty and our resistance to being controlled by others.

Morris: I have been a film buff since childhood and am among those who believe that films can dramatize especially important business issues such as leadership (e.g. Twelve o’clock High and 12 Angry Men) and teamwork (e.g. The Sting and The Great Escape). Of all the films you have seen, which do you think best portrays what you characterize as “the self-perpetuating nature of paradigms”? How so?

Jacobs: Those are all great movies, but my favorite has got to be Kenneth Branagh’s Henry V. I use a clip of the speech Henry gives before the battle of Agincourt. Shakespeare couldn’t have written a better one if he were designing it specifically to teach leadership.

It starts with Henry overhearing one of his commanders wishing for more men because they are so outnumbered. Henry responds that he doesn’t want more men because if they lose, they will just lose more men, and if they win, they will have to share the glory. Talk about a paradigm shift–what had been a clear liability is transformed into an asset, and isn’t that the core of what a transformational leader does?

Henry continues the transformation by describing the wounds his men fear receiving as badges of honor, and the men not there to fight that day as the unlucky ones. He then creates a vision of a feast at some time in the future where the men will about their deeds, and a broader vision about how they will all be remembered until the ending of the world.

After references to how the men are free to leave if they don’t want to fight and how they are a band of brothers, the speech ends with the line, “All things are ready if our minds be so.”

It’s only three minutes long but it’s the best recipe I’ve come across for leadership. It’s also incredibly inspiring.

Morris:  Here are two separate but related questions: “What is fMRI technology?” and “What is its greatest potential value to achieving strategic objectives such as increasing the percentage of employees who are positively and productively engaged or achieving and then sustaining a competitive advantage?”

Jacobs: fMRI is Functional Magnetic Resonance Imaging, a technology that produces computer-generated images of the brain at work by tracking the flow of glucose to aroused areas. It shows us what areas of the brain are involved in a given cognitive task, and it shows how those areas are networked to other ones. So for example, we can see that while people are thinking logically, the emotion-generating amygdala is aroused and sending signals to the supposedly “reasonable” prefrontal cortex.

Some of what we’ve learned from the fMRI, we already knew, but now we’ve got hard data to prove it. We can see that when people are more engaged, their brains function at a higher level, while when they’re feeling threatened, their thinking slows and their perspective narrows. We can also see that people experience greater pleasure when they are engaged in their work than when they receive a reward. It really is the work that is motivating.

Correlating this data with specific management practices tells us what managers should do to get the most out of their people. While some of these practices have been around for years, the hard data of the fMRI makes a more compelling case than theory.

Morris: Here’s a follow-up question. Despite the fact that today’s C-level executives have more and better information than ever before, many of them suffer from what Jeffrey Pfeffer and Robert Sutton characterize as “The Knowing-Doing Gap.” How do you explain that?

Jacobs: Because the brain creates rather than records our experience and because we discount information that conflicts with our beliefs, particularly about ourselves, humans are not reliable judges of their own behavior. We may think that we’re being eminently reasonable when we’re not, that our view is objective and shared by all when it can’t possibly be, or that we’re a living model of Shakespeare’s Henry V when we’re the farthest thing from it.

Knowing what to do is easy, but pulling it off is hard. In my mind, it requires an ego kept well under control, an acceptance of our own fallibility, and lots of that deliberate practice we talked about.

Morris: In Chapter Six, you explain how to think strategically. Briefly, what specifically do you suggest?

Jacobs: There is a straightforward logic to strategic thinking. You start with the trends in the macro environment that affect your business, analyze your customers’ needs and wants, the competitors’ strengths and weaknesses in meeting those needs and wants, and your own strengths and weaknesses in meeting the needs and wants better than the competition. You then identify your unique competitive advantage and come up with a strategy to leverage it.

The problem is that logical thinking is best at dealing with things and tends to ignore relationships, but competitive advantage requires attending to your position relative to the competitors and the customers. Even more important is the relationship between the strategy and the organization’s capability to execute it. All too often the strategy that logic gives us can’t be effectively implemented, so there needs to be an iteration between capability and strategy.

Add in the fact that managers are inundated with operational issues that take urgent priority and it becomes very difficult to rise above the fray and think strategically. I’ve found that it can also be a challenge for managers to identify their competitive advantage or even think it’s important to. They’re just focused on keeping the trains running and are not concerned about where they’re running to.

This is why it’s so important to have a well-facilitated strategic planning process. By being guided through the process and having their conclusions tested at each stage by someone that is not buried in the operational details, there’s a greater chance of success.

Morris: Here are two of my favorite business quotations. Please respond to each. First, from Peter Drucker: “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”

Jacobs: Too many companies focus on efficiency, because it’s a more immediate concern and easier to measure than long-term effectiveness. And measured behavior drives out unmeasured behavior, particularly when it’s incentivized. So we do what we’ve always done, with incremental improvement, rather than asking in a changing market whether we’re doing the right things.

Morris: Next, from Michael Porter: “The essence of strategy is choosing what not to do.”

Jacobs: Porter’s model is simple but powerful: allocate your resources to what is value-added in the eyes of the customer and reduce your investment in those activities that don’t add value. If you have limited resources, place your bets where you’ll get the best return, and that’s on your competitive advantage.

If your customers value the ease of doing business with you over the advanced features of your products, redirect your investment from product enhancement to simplifying and streamlining your customer interactions. This doesn’t mean letting your competition leapfrog your offering. You have to achieve parity.

Morris: Please explain your reference to “the illogic of change.”

Jacobs: I mentioned earlier the need for a marker that proclaims things are changing to get the attention of the brain. Otherwise the change will be ignored. Since the conscious mind operates through logic, the best way to stop its automatic processing is to do something illogical or unexpected.

It might be as simple as a manager that’s used to issuing directives soliciting participation by asking questions, or for executives to deny themselves the traditional perks of reserved parking spaces and larger offices. The unexpected also activates the part of the brain responsible for seeing the big picture.

Morris: What is the “muliple-drafts theory” and what is its special significance?

Jacobs: Despite our belief that the brain works logically, neuroscientists now believe that the brain works through stories. We are constantly telling ourselves stories about the situations we find ourselves in.

The brain is a physical organ that operates through natural selection. Multiple stories embedded in neural networks exist in the brain at any given moment, and the one we become conscious of is the one that best fits our current mental environment.

If we believe that our manager is venal and greedy, we will interpret his or her behavior as venal and greedy even if it’s not. If on the other hand, we believe our manager is caring and solicitous of our well-being, we will interpret the same behavior as caring and solicitous.

Neural networks at a high level in the brain key the firing of those in sync with them at lower levels, and the same holds true for the ideas they produce. In practical terms, this means that we want to shape the mental environment of those we interact with.

Deeply held values and an aspirational vision are at the highest level of the brain’s hierarchy. When values and vision aligned with the business are inculcated, people will tell themselves a story that will drive the behavior the business needs.

Morris:  Please explain the significant differences between transactional leaders and transformational leaders, then cite a prime example of each.

Jacobs: Transactional leaders manage an equitable exchange with their followers, such as a fair day’s work for a fair day’s pay, or employee commitment for organizational loyalty and job security. Most managers will fall into this category.

Transformational leaders offer a different deal. The promise is that if you sign up to follow them and pursue their vision, you will be fundamentally transformed in the process. Your life will take on greater meaning and your aspirations will be realized.

Winston Churchill, Martin Luther King, and of course Henry V were transformational leaders. A number of studies have established that transformational leaders dramatically outperform transactional ones in business environments.

Morris: Here’s a follow-up question. Which type of leader, transactional or transformational, is more appropriate to efforts to rewire an organization’s management. Why?

Jacobs: Transformational, because rewiring is all about change.

Morris: You and I agree that all organizations need effective leadership at all levels and in all areas. How best to develop that leadership without disrupting operations? In fact, is it possible to embed leadership development within operations? If so, how?

Jacobs: Earlier we discussed the importance of deliberate practice, and transformational leadership has been deconstructed to a set of behaviors that can be mastered with practice. It’s important that leaders have ample opportunities for training and coaching, but those are increasingly hard to come by in organizations during tough economic times.

The alternative is what I’ve dubbed the strategic execution process. The leader and his or her team follow a process for formulating and executing a strategy that includes creating the vision, engaging employees, and establishing a set of enlightened leadership practices and cultural norms. Targeted education is provided at key times during the process.

Perhaps it can be thought of as on-the-job training. The process guides the leadership to do the right thing, and hardwires the appropriate practices into the way the business operates.

Morris: Looking ahead (let’s say) 3-5 years, what do you think will be the sig le greatest challenge that CEOs will face? Any advice?

Jacobs: The business world is going to get more competitive and move at an even faster rate, driven both by the rise of developing countries and technological advances. At the same time, as we’ve seen with the Arab spring and OWS, there is going to be a greater demand for self-determination.

This will all take place in a far-flung global environment made up of a diverse workforce with infrequent face-to-face contact at best. The old models, even those of just a few years ago, are not going to work anymore.

But I believe the new model is already emerging and it’s based on an understanding of the human brain and how best to leverage it. Going forward, it is going to be the mind that is the source of all competitive advantage.

My advice for CEOs is to accept their inherent inability to directly control people or events. The best they’re going to be able to do is channel the inclinations of their people. They need to become students of other cultures and the younger generations, and propagate the story that will select out the kind of thinking and behavior they need.

Given the exponentially increasing rate of change and the speed of business, they have to do it now.

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Charles Jacobs cordially invites you to check out these websites:

Managementrewired.com

180Partners.com