4 Point to the Destination

1.

Crystal Jones joined Teach For America in 2003. She was assigned to teach the first-grade class at an elementary school in Atlanta, Georgia. The school had no kindergarten, so for many of the kids, Jones would be their first teacher.

At the beginning of the year, the skill gaps among her students were daunting. She said, “I had two or three students who could recognize kindergarten sight words, and I also had some that couldn’t even hold their pencils. The ones who had never been to school—their basic behavior wasn’t where it needed to be for them to be in the classroom. I had students that, of course, didn’t know their alphabet or their numbers…. They were all on different levels, and no one was really where they needed to be for first grade.”

Jones felt confident that she could elevate the kids’ abilities. She could create great lesson plans and activities (she could script the critical moves). But to what end? How do you show a roomful of first graders where they’re headed and why going there is worth the effort—in terms they can understand?

Well, here’s a way not to do that, from another Teach For America teacher, who reported her goals for the year as follows:

That ambitious and specific set of goals was probably quite useful to the teacher in her planning. But it obviously won’t be useful in lighting a fire in the hearts of first graders.

Crystal Jones, in contrast, knew that if she wanted to motivate the kids, she had to speak their language. At the beginning of the school year, she announced a goal for her class that she knew would captivate every student: By the end of this school year, you’re going to be third graders. (Not literally, of course, but in the sense that they would be at third-grade skill levels.)

That goal was tailor-made for the first-grade psyche. First graders know very well what third graders look like—they are bigger, smarter, and cooler. You know the feeling you get when you’re admiring the grace and power of an Olympic athlete? That’s the feeling first graders get about third graders.

Jones chose the goal carefully. She knew exactly what the third-grade standards in Georgia required, and she knew where her kids were starting. She genuinely thought she could close the gap.

One of her first efforts was to cultivate a culture of learning in her classroom, calling her students “scholars” and asking them to address one another that way. When people visited her classroom, she introduced her class as a group of scholars and asked them to define the term for the guest. They would shout, “A scholar is someone who lives to learn and is good at it.” The scholars were encouraged to go home and share what they learned with their families.

One day, a scholar was called out of the classroom for administrative reasons, and some of the others in the room started groaning. In most classrooms it would have been a groan of jealousy—Get me out of here, too. Jones realized, to her surprise, that it was a groan of pity—That kid is going to miss some “scholar work.” At that moment, Jones said, “I knew I had them.”

By springtime, the kids’ test scores had reached second-grade level. So Jones threw a graduation ceremony right before spring break. For the rest of the year, the kids took great pleasure in referring to themselves as “second graders.” And by the end of the year, over 90 percent of the kids were reading at or above a third-grade level.

These were some of the same kids who, nine months earlier, didn’t know the alphabet.

Crystal Jones’s challenge is reminiscent of what Jim Collins and Jerry Porras, in Built to Last, their great study of long-lived business organizations, memorably called a BHAG: a Big, Hairy, Audacious Goal. Henry Ford’s BHAG early in the twentieth century was to “democratize the automobile;” Wal-Mart, in 1990, set the goal of quadrupling in size to be a $125 billion company by the year 2000. Collins and Porras defined a BHAG as “an audacious 10-to-30-year goal to progress towards an envisioned future,” and their research showed that setting these big, motivating goals was a practice that distinguished lasting companies from less successful ones.

In creating change, though, we’re interested in goals that are closer at hand—the kinds of things that can be tackled by parents or middle managers or social activists. We want a goal that can be tackled in months or years, not decades.

We want what we might call a destination postcard—a vivid picture from the near-term future that shows what could be possible. That’s the missing piece of what we’ve discussed so far. We’ve seen the importance of pursuing bright spots, and we’ve discussed ways of instructing the Rider how to behave, but we haven’t answered a very basic question: Where are we headed in the end? What’s the destination?

Crystal Jones provided a great destination postcard: You’ll be third graders soon! Notice that the goal she set for her students didn’t only direct the Rider; it also motivated the Elephant. It was inspirational. It tapped into feeling. Collins and Porras knew that goals should have an emotional component—a BHAG shouldn’t just be big and compelling; it should “hit you in the gut.” To a first grader, becoming a third grader in nine months is a gut-smacking goal.

2.

Women with breast cancer flew to San Francisco to be treated by Laura Esserman, a surgeon and an associate professor of surgery at the University of California at San Francisco (UCSF). Patients loved Esserman for her warmth and empathy. She gave out her personal cell phone number to her patients, and she sometimes sang patients to sleep in the operating room as their anesthesia took effect.

Esserman’s human touch was in sharp contrast to the usual treatment afforded women diagnosed with breast cancer. As if the diagnosis itself weren’t frightening enough, women were often bounced around from place to place during the treatment cycle, adding stress. In a typical progression, described by a Stanford case study, a woman first notices a lump on her breast during a monthly self-exam. Anxious, she calls a doctor and waits a few days (or weeks) for an appointment. The doctor confirms that the lump should be examined, so the patient is referred to a radiologist at another facility to get a mammogram. Getting the results of the scan takes another agonizing few days.

The mammogram shows something suspicious, so she is referred to a surgeon, who meets her and again verifies that the lump is present. Unfortunately, the mammogram images didn’t arrive at the surgeon’s office before the visit, so there’s another delay while radiology is contacted. The surgeon conducts a biopsy, which is sent to the pathology department to determine whether the growth contains cancerous cells. The woman is sent home to wait by the phone for the answer.

If cancer is detected, she undergoes surgery, and then the surgeon refers her to a radiation therapist for radiation treatment and to a medical oncologist for chemotherapy. Radiation and chemotherapy are conducted at different sites with different booking procedures and delays. In an attempt to smooth the process, a patient might have to collect her own records, films, and pathology slides and carry them around herself, sometimes even within the same hospital. The sequence might take weeks to unfold, and all while the woman is wondering, Am I going to live through this?

This anxiety-filled process appalled Laura Esserman, and she had a vision of how it could be different. What if there were a breast care clinic where a woman worried about a lump in her breast could walk in at the beginning of the day and walk out at the end of the day with an answer—either knowing that the lump was no problem, or if it was a problem, having a treatment plan already in hand?

The main barrier to this vision was the lack of coordination among medical departments. If they could be integrated more tightly, then weeks of agonizing waiting could be eliminated, the patient would not have to leave the building, and the experience would be designed around the patient’s needs, not the departments’. That was Esserman’s destination postcard, and it was an admirable one.

But as an associate professor at a large university medical center, Esserman was far down the totem pole, with few resources at her disposal. Even if she could start a breast care clinic, she would never be able to hire or fire the people who might work for it, and she couldn’t even set their salaries. The medical departments, such as radiology and pathology, controlled the purse strings and the resources. The two most commonly used descriptions of the medical school at UCSF were “bureaucratic” and “political.” “The departments have money, and the departments have turf, and you can’t bring them together,” said Meredithe Mendelsohn, who became Esserman’s chief administrative director.

Esserman said, “The radiation oncologists report to radiation oncology. The surgeons report to the School of Medicine. The medical oncologists report to medical oncology. The nurses and staff report to the medical center. The psychologists and social workers report someplace else. So it’s an organizational challenge to make people feel like they belong to something.” Because Esserman wielded so little institutional power, her best assets for creating change were her own tenacity and her ability to sell a vision of what breast cancer care could be.

Esserman and Mendelsohn started small. They set up the Breast Care Center to operate for four hours one day per week. They cajoled the medical departments to start working together in more integrated ways. It took practice, and it took persistence. “Radiology, which does the mammographies, works like a train station,” says Mendelsohn. “If your appointment’s at 12:15, you’re seen at 12:15 and that’s how they operate.” But Esserman’s goal was to build treatment around the patients’ needs, and those needs weren’t always predictable enough to conform to radiology’s schedule. Esserman worked with the radiologists to figure out how to create some flexibility in their traditionally rigid processes.

“We couldn’t take up too much of radiology’s time,” said Mendelsohn, so they figured out how to improvise. “Dr. Esserman would see the patient in the morning, and she was the only doctor that would do it—she was the guinea pig—and then she would send them off, say ‘Go have lunch. Go shopping. Come back at 1:00.’ And during lunch time she would go to radiology, where she and the radiologist would sit and look through all of the images and decide what needed to happen next.”

For the first year, the Center stuck with the one-day-per-week model. Then, once the work was going smoothly, Esserman expanded to two days per week. More surgeons started to get involved, and then nurses, and counselors, and support staff, and the snowball began.

Eventually, the Breast Care Center achieved enough success that it was offered an entire floor in a new cancer center being constructed by UCSF. “Where’s radiology?” asked Esserman when she saw the layout. The cancer center master plan assumed that the radiology department would remain in its old building. But that would have made Esserman’s “everything under one roof” vision impossible. So she agreed to give up one-third of the Breast Care Center’s space to make room for a mammography unit on the same floor. (Onlookers were shocked—academic departments usually fought hard to secure space, and Esserman was giving up some of hers!)

Now Esserman had two powerful assets: a proper home for the Center and a staff who increasingly embraced her vision for a new kind of care. Patients flocked to the Breast Cancer Center. From 1997 to 2003, the number of patients seen per month skyrocketed from 175 to 1,300. In time, the Center became a major source of revenue for UCSF and a recognized national leader in breast cancer care and research. The Center evolved to be the place that Esserman described in her destination postcard.

Here’s how Esserman describes the way the patient’s experience looks today:

The Breast Care Center also has a relaxing healing garden and a café that serves coffee. The boutique sells not only the usual flowers and gifts but also wigs and scarves for patients undergoing chemo.

“For the first time,” said Esserman, “we put the woman at the center.”

3.

When you describe a compelling destination, you’re helping to correct one of the Rider’s great weaknesses—the tendency to get lost in analysis. Our first instinct, in most change situations, is to offer up data to people’s Riders: Here’s why we need to change. Here are the tables and graphs and charts that prove it. The Rider loves this. He’ll start poring over the data, analyzing it and poking holes in it, and he’ll be inclined to debate with you about the conclusions you’ve drawn. To the Rider, the “analyzing” phase is often more satisfying than the “doing” phase, and that’s dangerous for your switch.

Notice what happens, though, when you point to an attractive destination: The Rider starts applying his strengths to figuring out how to get there. For instance, after Esserman announced her “under one roof” vision, her team could start thinking through the implications of that: Let’s see, we’ll never pull that off unless we have access to radiology, so we’ll need to give up square footage to them …

You have a choice about how to use the Rider’s energy: By default, he’ll obsess about which way to move, or whether it’s necessary to move at all. But you can redirect that energy to helping you navigate toward the destination. For that to happen, you need a gut-smacking goal, one that appeals to both Rider and Elephant. Think of Esserman’s “under one roof” vision or of Crystal Jones’s challenge to her kids to become third graders.

Goals in most organizations, however, lack emotional resonance. Instead, SMART goals—goals that are Specific, Measurable, Actionable, Relevant, and Timely—have become the norm. A typical SMART goal might be “My marketing campaign will generate 4,500 qualified sales leads for the sales group by the end of Q3′09.″

The specificity of SMART goals is a great cure for the worst sins of goal setting—ambiguity and irrelevance (“We are going to delight our customers every day in every way!”). But SMART goals are better for steady-state situations than for change situations, because the assumptions underlying them are that the goals are worthwhile. If you accept that generating 4,500 leads for the sales force is a great use of your time, the SMART goal will be effective. But if a new boss, pushing a new direction, assigns you the 4,500-leads goal even though you’ve never handled lead generation before, then there might be trouble. SMART goals presume the emotion; they don’t generate it.

In looking for a goal that reaches the Elephant—that hits people in the gut—you can’t bank on SMART goals. (There are some people whose hearts are set aflutter by goals such as “improving the liquidity ratio by 30 percent over the next 18 months.” They’re called accountants.) In the 1980s, a major study of corporate change efforts found that financial goals inspired successful change less well than did more emotional goals, such as the goal to provide better service to customers or to make more useful products. According to the researchers, “Effective visions expressed values that allow employees to identify with the organization…. One manager at a glass company suggested, ‘it’s hard to get excited about 15% return on equity.’”

Destination postcards do double duty: They show the Rider where you’re headed, and they show the Elephant why the journey is worthwhile.

4.

Destination postcards—pictures of a future that hard work can make possible—can be incredibly inspiring. The first graders dreamed of being third graders. Laura Esserman’s team imagined a new kind of breast care clinic that would cater to the needs of the patient.

But what if your team isn’t inspired?

What if, in fact, members of your team are secretly or not-so-secretly resistant to the vision of the future you’ve articulated? This introduces a new enemy: rationalization. For instance, surely we’ve all made a New Year’s resolution to “Be healthier.” We conjure up a mental image of our future selves—fit and svelte—and we like what we see. But, deep inside us, the commitment isn’t there. A few days after January 1, we get hungry, and we see that gorgeous bag of Cheetos in the pantry.

There’s no question what the Elephant wants: a big mouthful of Cheetoian goodness. And when the Elephant wants something badly, the Rider can be trusted to go along—what choice does he have?—and he may actually begin to formulate rationalizations to excuse the breach. Well, we did eat that salad last Thursday. And for Pete’s sake, we bought 1% milk at the grocery store! We don’t want to go overboard on this diet. A few Cheetos is a reasonable reward for good behavior. And presto! We eat the Cheetos! Even more impressive than that, we’ll still be convinced, in our heart of hearts, that we’re being healthier.

A big-picture goal like “Be healthier” is necessarily imprecise, and that ambiguity creates wiggle room for the Elephant. It makes it easy to rationalize failure. One response to this dilemma is to set super-prescriptive goals. Your firm might announce, “We will boost revenue by 14.2 percent this year.” Certainly, that’s much better than just urging employees to do their best. But although numbers themselves are wiggle-proof, the way we deal with numbers isn’t. For instance, if your firm achieved a 12.3 percent increase in revenue, do you really think anyone would get fired? Or is it more likely that a compelling rationalization would smooth over the discrepancy? Team, in this economic climate, we should consider 12.3 percent a huge victory!

The danger is present in our personal lives, too. Imagine that, in hopes of reining in your alcohol consumption, you set a goal of drinking no more than one glass of wine per night. Well, let’s face it, there will come a night when your Elephant is going to crave more than one, and that’s when the boundaries are going to get fuzzy. You’ll “honor” your one-glass rule—by filling your glass all the way to the brim. Or you’ll mentally trade an extra drink now for a zero-drink night in the (speculative) future. We’re all loophole-exploiting lawyers when it comes to our own self-control.

If you’re worried about the possibility of rationalization at home or at work, you need to squeeze out the ambiguity from your goal. You need a black-and-white (B&W) goal. A B&W goal is an all-or-nothing goal, and it’s useful in times when you worry about backsliding. Maybe your B&W goal for your alcohol consumption could be “No wine ever.” No wiggle room there. And what if we changed our New Year’s resolution from “Be healthier” to “Gym every day” or even “No more Cheetos”? Those goals leave nowhere to hide. Either you’ve got damning orange Cheeto dust on your fingers or you don’t.

Note that B&W goals—“No more Cheetos,” “No wine ever”—are not inspiring at all. They’re 100 percent restrictive. Furthermore, they are scripting critical behaviors rather than painting a picture of a destination. Is it possible to combine the emotional power of a destination postcard with the rationalization-squashing strength of a B&W goal? Yes, and to see how, consider the case of British Petroleum (BP). In 1991, BP announced a B&W goal that shocked its employees who had spent years in the oil industry. It was the multi billion-dollar equivalent of “No more Cheetos.”

5.

For most of the twentieth century, oil explorers had trusted their gut, which worked out well, because their gut was pretty smart and oil reserves were largely untapped. In the 1960s, Jim Vanderby, one of the great BP explorers, went to Egypt. The first four or five holes he drilled there were dry. His superiors at BP sent him a telegram and told him to stop trying. He didn’t get the telegram, or so he claimed. Regardless, he drilled again, and on his next try in the Gulf of Suez, he tapped into the world’s first multibillion-barrel oil field.

BP’s good fortune continued in the 1960s and 1970s, with huge discoveries such as Prudhoe Bay in Alaska (1968) and Montrose in the North Sea (1971), among others. Toward the late eighties, though, the mega-hits slowed down. “What was changing was that fields were getting more difficult to find,” said Pete Callagher, a senior leader at Amoco, which merged with BP in the late 1990s. “The older fields were huge, visible on 2-D seismic technology. Targets became smaller and more difficult to see. So the skill sets changed.”

As the landscape changed, BP’s strategy evolved. In 1989, its leaders locked onto the exploration doctrine that would guide them for the next fifteen years. They would focus only on big fields and stop competing for the smaller ones, thereby avoiding competition with hundreds of smaller competitors. They also decided to attack costs. At that time, BP was considered by many to be the world’s most effective exploration company. Even so, BP’s leaders believed it was spending far too much on exploration. They committed to slash exploration costs from $5 per barrel to $1. People inside the company thought this goal was outrageous.

To reduce costs so drastically, BP needed to minimize the number of “dry holes” it drilled. The historical success rate for drilling a new well was roughly 1 out of 8. BP’s rate was much better: 1 out of 5. To cut exploration costs from $5 to $1 per barrel, though, it would have to go from “good” performance to unprecedented performance. (Some said impossible performance.)

Researchers at BP began to investigate past explorations. One thing they studied was whether explorers were good at predicting the success of their wells. They reviewed wells that had been drilled over a 10-year period and found that, on average, explorers’ predictions were extraordinarily accurate. Their average prediction was that a well had a 20 percent chance of hitting, and on average, 20 percent of wells actually hit.

But the averages concealed some fascinating biases. For instance, when the explorers gave the well a 20 to 70 percent probability of hitting, their predictions were pretty accurate. But when the explorers predicted a greater than 75 percent chance of success, the wells hit nearly all the time. Also, wells that had been given a 10 percent chance of success actually had more like a 1 percent chance. So the explorers’ instincts about the wells were correct—they knew the good ones from the bad ones. But there was information, especially for high-and low-probability wells, that they weren’t using.

Traditionally, the explorers had been salesmen for their wells, pressing top management for the green light to drill. In the 1980s, they had learned that the way to sell management was to use the tools of risk economics—in particular, the concept of expected value.

Expected-value calculations are bulletproof in situations where the risks and returns are well understood. If I flip a coin, you can feel confident that you have a 50 percent probability of winning. But what are the odds of hitting a gusher? And if you hit one, what’s the payoff? Those are subjective estimates. When you feed subjective estimates into an expected-value calculation, a precise number pops out, giving the illusion of scientific certainty. (“Our expected value for this well is $112.8 million. It’s a no-brainer—let’s drill it.”)

It didn’t go unnoticed among explorers that if they really wanted to drill a well, they could simply tinker around with the math in a spreadsheet. If they jacked up the hit rate or the payoff, the expected value obediently inflated. (This tinkering probably wasn’t malicious or even conscious. Remember, when the Elephant really wants something, the Rider can be trusted to find rationalizations for it.)

More subtly, the use of expected value made people think about drilling as a numbers game. As Jim Farnsworth, a top leader in BP’s exploration unit, said, “Explorers think in terms of risk probabilities. People get so caught up in the numbers that they think, ‘Well, if we drill ten of these 1-in-10 wells, we’ll hit at least one of them and we’ll all make a lot of money. But when you do the analysis, you realize that something that is 1 in 10 never works, so it’s a false sense of statistical clarity.”

The odds-playing gave everyone a false sense of comfort. Hey, if we drill some dry holes, one of the other holes will hit and make up for it. Explorers were like venture capitalists, hoping for an eBay or a Google to bail them out of an otherwise lousy portfolio.

If you were an executive at BP, hoping to cut your exploration costs by 80 percent, your first mission would be to remove this false sense of comfort. The ambiguity in the goal is allowing rationalization to creep in. So how could you change your team’s behavior so that every single drilling operation is taken seriously? How could you leave your team’s Riders with nowhere to hide?

Consider the alternatives for your new strategic rallying cry: “We’ll double our strikes!” “No more dumb holes!” “Let’s maximize expected value!” Some of them sound promising, but notice the fudge room in all of them. “No more dumb holes” would be easy for any competent Rider to dodge. Would any self-respecting explorer think he was drilling a dumb hole? “Doubling strikes” is better, but there’s still room to rationalize a lot of dry holes. And as for “maximize expected value,” well, let’s just move on.

Ian Vann, BP’s head of exploration at the time, figured out a way to eliminate the fudge room. He announced his new vision: “No dry holes.”

None.

Explorers were irate. They thought the goal was preposterous. Their leaders were asking the impossible. Dry holes had always been a normal and acceptable part of doing business. Remember, the number of dry holes outnumbered successes by a factor of 4. Now Vann was defining them as failure.

“No dry holes” was a painful B&W goal. Probabilistic predictions had always provided a cover for failure. As Jim Farnsworth said, “We wanted to get away from the language of probability, from people hiding behind a notion that if a 1-in-5 well didn’t work, ‘I told you it was 1 in 5 so I was right.’ ‘No dry holes’ was an attempt to make people go to the absolute extreme limit, to make sure they’d looked at every piece of data and done the right analysis.”

As explorers began talking about “No dry holes,” they started taking off their explorer hats and putting on their geologist hats. Lots of things had to go right to create a productive oil field, and geologists had previously devised different tests to evaluate every geologic feature: Was the right carbon-rich substrate available to form oil? Was there a harder, impermeable base layer underneath the oil to capture and contain it if it formed? Even if the oil had formed at some point in geologic history, could subsequent underground pressures or temperatures have degraded the oil?

The idea of eliminating dry holes prompted geologists to become more systematic about mapping and aggregating the information they had. They color-coded maps—green for aspects that might support an oil field, amber for areas where information was missing, and red for clear counter indications. Then they overlaid the color-coded maps on top of one another, each layer representing a different geologic test. They decided to drill only in regions that were green on every conceivable dimension.

“No dry holes” was effective in stamping out two kinds of rationalizations for poorly conceived drilling operations. One was “learning”—the convenient notion that even if a particular well doesn’t hit, the team will learn so much from the process that future operations will be more successful. Vann said, “I can give you a hundred examples where people made a mistake because they didn’t use knowledge they already had, for every one example where we learn something that is valuable for next time.” The other common rationalization was that certain wells had “strategic value.” Callagher said, “The last defense of the charlatan is always that something is ‘strategic.’ ‘This is a strategic well, so we have to drill it.’” “No dry holes” removed the fudge room. A well might be strategic, or it might not be, but either way, it better not be dry.

David Bamford, BP’s chief geophysicist during much of this period, said, “I can think of several examples of where technical teams knew a proposed well would be dry and yet senior management wanted to drill it because of pressure from government or business partners.” Previously it was hard for front line people to object to these decisions. When your manager is the only one who knows what the “partner pressure” consists of, how can you possibly raise a credible objection?

The “No dry holes” goal boosted the confidence of the frontline employees. The Exploration Forum—the peer group accountable for exploration decisions—became more outspoken and pushed back on “strategic reasons” to engage in low-probability explorations. After all, the strategy was “No dry holes,” not “No dry holes unless drilling helps to placate an important partner.” The strategy had changed in a way that gave lower-level employees an equally credible voice in the decision.

The B&W goal worked exactly as the management team had intended. When BP left nowhere for people to hide, its people stopped trying to hide. They tightened up their analyses, and they made fewer “play-the-odds” decisions. They got serious about using every available scrap of data in their decisions. And they toughened up their resistance to governmental and partner pressure.

By 2000, BP’s hit rate was an industry-leading 2 in 3. That’s triple the success rate of 1989. BP was still hitting dry holes, but the goal had stirred improvements that many had considered impossible. BP transformed itself when it eliminated its own wiggle room. When we drill a hole, it better not be dry.

Note that the leaders at BP didn’t say, “Two out of three—that’s close enough. Let’s celebrate!” Every dry hole was a failure, and there was no dodging it. Because they couldn’t easily excuse failure—It was strategic! It was a learning opportunity!—they were left with only one choice: Drill smarter next time.

6.

If you worry about the potential for inaction on your team, or if you worry that silent resistance may slow or sabotage your change initiative, B&W goals may be the solution. But, to be clear, you won’t always need a goal that’s so unyielding. Crystal Jones’s call to become a third grader was not a B&W goal. Let’s face it, if kids got third-grade-level scores on math and science but not on vocabulary, we’d all let them “graduate.” Laura Esserman’s vision for the Breast Care Center wasn’t B&W, and it didn’t need to be.

What is essential, though, is to marry your long-term goal with short-term critical moves. Esserman’s vision was compelling, but it would have been empty talk without lots of behavior-level execution.

You have to back up your destination postcard with a good behavioral script. That’s a recipe for success. What you don’t need to do is anticipate every turn in the road between today and the destination. It’s not that plotting the whole journey is undesirable; it’s that it’s impossible. To think that you can plot a turn-by-turn map to the end, like a leader’s version of Mapquest, is almost certainly hubris.

When you’re at the beginning, don’t obsess about the middle, because the middle is going to look different once you get there. Just look for a strong beginning and a strong ending and get moving.

7.

The average investor might make stock-picking decisions by listening to Jim Cramer or reading news reports or compulsively watching CNBC. But big institutional investors, such as philanthropic foundations or teachers’ retirement funds, get special attention from Wall Street. Historically, investment banks sponsored research departments as a free service to institutional investors. The exchange was clear: The bank hoped that if it made good recommendations, then the investors would use the bank’s traders to buy and sell stocks, bringing in revenue for the bank.

Because research is, in essence, a lure for big investment dollars, it is taken very seriously on Wall Street. Every year, Institutional Investor magazine asks big investors to assess the research they’ve received. Based on those responses, the magazine ranks the research analysts in each industry and also provides an overall ranking for the research departments on Wall Street. These Institutional Investor rankings are treated like holy writ. They drive (huge) bonuses to individual analysts, and they attract customers to the banks with the best research departments.

In 1986, Shearson Lehman’s research department ranked a humiliating fifteenth. Top executives at Shearson wanted a new leader, so they recruited Jack Rivkin, who had built Paine Webber’s research department into a powerhouse. The execs’ expectations for Rivkin were clear: Get us into the Top 5.

Rivkin’s first impressions of the department were not promising. “When I got to Lehman, the research department was a mess. It got no respect.” One of Shearson’s top analysts, Elaine Garzarelli, said, “The department wasn’t disciplined…. People did whatever they wanted to do. They didn’t have to talk at regular meetings; they didn’t have to submit reports at certain times. Absolutely no mention was ever made of the Institutional Investor All-America team.”

Rivkin made many formal changes to the department: He hired a number two, Fred Fraenkel. He successfully petitioned Shearson for a much larger staff and budget. He fired deadwood on the team. He changed the compensation system for the team.

These changes were vital, but ultimately, Rivkin had to influence the day-to-day behavior of the analysts on his team. As an analogy, consider a general manager (GM) running a baseball team. If you have more money at your disposal, you can sign more talented players. You can trade underperformers. You can offer your team a bonus for making the playoffs. These changes are important, but they don’t directly influence the way players play. To do that, you need a coach.

Rivkin was both GM and coach. As a coach, he knew he needed members of his team to improve their work dramatically, and that meant he needed to script some of their early moves. He started by announcing that he expected analysts to initiate at least 125 client conversations per month. He required them to take notes on their conversations and post them to the internal network. Both the quantity and the quality of analysts’ contacts became a matter of public record. One newly hired analyst said, “Once the report card on analyst contacts was electronically pinned up on a board, all the analysts began trying to get to the front section of the rankings; no one wanted to be near the end…. The analysts started asking one another: ‘How do you make so many calls? Where do you find the time?’”

The 125-call benchmark jolted the department, snapped it out of its lackadaisical attitude. Most of the analysts began working 12 to 15 hours per day, nearly every day of the year. (Note the clarity of the instructions—this is Rivkin’s 1% milk campaign.)

Rivkin also sought to build a team mentality in the department, fighting against the traditional culture of self-interested cowboys. He demanded that, when analysts were making presentations to clients, they cite their colleagues’ work at least twice. “I don’t want to hear ‘I—I—I’ in the presentation. I want to hear ‘we,’ and I want to hear other people’s names.” The forced (at first) sharing of ideas and credit made the team as a whole better, but it also benefited the individual analysts by exposing them to information they otherwise wouldn’t have encountered.

Rivkin didn’t just script the critical moves—Make 125 calls, and cite your colleagues’ work—he also pointed to the destination: We’re going to crack the I.I. (Institutional Investor) Top 5. That was something everyone in his department understood and aspired to.

In fact, there was a joke that circulated in the department: “I.I. or Die.” But the aspiration was serious. Within eighteen months of the turnaround, a full 95 percent of one group of newly minted analysts broke onto the individual I.I. analyst rankings for their industry. Customers were noticing the extra attention they got from Shearson analysts, and for the first time, Shearson analysts were top-of-mind when Institutional Investor magazine called investors to ask who they relied on most.

The direction set by Rivkin prepared the department for a contrarian bet that left the department alone on Wall Street. It was a bet that would cement Shearson’s place in the I.I. rankings.

In 1988, a Shearson analyst began investigating a drug called Epogen, made by Amgen and distributed by Johnson & Johnson. Epogen is a synthetic version of a hormone called erythropoietin, which increases the body’s production of red blood cells. Red blood cells are responsible for ferrying oxygen to all the cells of the body. Epogen would give them a boost, making the drug the perfect treatment for various types of serious anemia—for example, in patients whose blood cells were damaged by chemotherapy. At the time, the drug was winding its way through the drug approval process. With its release imminent, stock investors began to make their bets on how the drug would sell, which would in turn drive Amgen’s stock price.

Other research departments had identified one major market for the drug, but Shearson analysts thought there might be others. Surely, they reasoned, there’d be other uses for a drug that increased red blood cell production. So they dived into the research process. Fred Fraenkel said, “Every analyst and every assistant made calls. They called about 100 hospitals and pharmacies around the world, estimating the market potential for the drug. Once they had the data together, they knew Amgen had a multibillion-dollar drug on its hands. No research department could have possibly made this estimation with just one analyst and an assistant.”

Shearson’s analysts defied the conventional wisdom by predicting that Amgen had a blockbuster on its hands. Shearson’s team was so confident, in fact, that it published ads touting its findings in the New York Times and Wall Street Journal.

They were right. Epogen became Amgen’s first blockbuster drug and, at that time, was the most successful drug of the whole biotech industry. In 1990, Shearson was ranked at the top of the Institutional Investor All-America Research Team. In just three years, Shearson had leapfrogged from fifteenth to first.

The call on Amgen was something that Rivkin never could have anticipated, and it would have been pointless to try. He focused on what he could control: He provided a destination postcard (“I.I. or Die”), and he scripted some moves that would give his people a head start. He had the beginning right and the ending right, and when the Amgen situation popped up in the middle, the team was ready.

8.

So far we’ve learned a great deal about the Rider and his many strengths and weaknesses. On the plus side of the ledger, the Rider is a visionary. He’s willing to make short-term sacrifices for long-term payoffs (which is why he fights so often with the Elephant, who generally prefers immediate gratification). He’s a clever tactician, too—give him a map and he’ll follow it perfectly. But we’ve also seen plenty of evidence of the Rider’s flaws—his limited reserves of strength, his paralysis in the face of ambiguity and choice, and his relentless focus on problems rather than solutions.

Here’s the good news: The Rider’s strengths are substantial, and his flaws can be mitigated. When you appeal to the Rider inside yourself or inside others you are trying to influence, your game plan should be simple.

First, follow the bright spots. Think of the Vietnamese children who stayed well nourished against the odds, or the Genentech sales reps who racked up sales against the odds. As you analyze your situation, you’re sure to find some things that are working better than others. Don’t obsess about the failures. Instead, investigate and clone the successes.

Next, give direction to the Rider—both a start and a finish. Send him a destination postcard (“You’ll be a third grader soon!”), and script his critical moves (“Buy 1% milk”).

When you do these things, you’ll prepare the Rider to lead a switch. And you’ll arm him for the ongoing struggles with his reluctant and formidable partner, the Elephant.