September 14, 2008

The Ostrich Effect and Enterprise Architecture

From the financial and credit crisis, to soaring energy prices, job losses, foreclosures, and run-away inflation, people’s investment portfolios are looking pretty darn gloomy these days.

The Wall Street Journal, 13-14 September 2008 reports “Should you Fear the Ostrich Effect?”

What’s the ostrich effect?

“Behavioral economist George Loewenstein of Carnegie Mellon University coined the term, ‘the ostrich effect’ to describe the way investors stick their heads in the sand during lousy markets.

Forget the letter opener when your financial statement arrives and stop looking up the value of your investment portfolio online, because “if you don’t know for sure how your portfolio did, you can always retain the hope that it somehow did better.”

This is a way for people to hide from the reality of their losses. “Turning yourself into an ostrich doesn’t make your losses go away, but it does enable you to pretend they aren’t there.” What a wonderful defense mechanism for our psyches!

Reading and thinking about this ostrich effect, I realized that it applies not only to the way people deal with financial losses, but all sorts of bad news they don’t want to hear or deal with.

I believe in Freudian terms, they call this DENIAL!

Just put your head in the sand and whatever it is you don’t want to deal with isn’t there, right?

We all know that hiding from problems doesn’t make them go away. Yet, this same phenomenon in people’s personal lives is ever present in our enterprises!

How many of the executives in your organizations follow this prescription of sticking their head in the sand when they don’t want to hear about or acknowledge problems in the workplace—competitive, technical, regulatory and so on?

Unfortunately, many of our leaders close their eyes and ears to the problems that afflict our organizations in spite of all the reports, briefings, metrics, dashboards, and subject matter experts they consult.

Why do our leaders ignore bad or challenging news?

I suppose similar to the investor who doesn’t want to face the negative returns and shrinking balances on their account statements, executives often don’t want to or are unable to deal with the harsh reality in their organizations and in the competitive environment. It’s so much easier to pretend problems and challenges don’t exist and continue to report stellar results and returns to their boards, stockholders, stakeholders, regulators, and oversight authorities.

In this election season, there has been a lot of banter of “putting lipstick on a pig.” Sounds a little like how ineffective leaders pretend to lead, by putting rosy colored lipstick on a pretty awful looking pig.

The best leaders will use all the information available to face reality and raise the performance of the organization and its people to meet the challenges head on and truly grow and excel.

The average and worst leader ignore what’s going on around them and see only what they want to see and report up and out what they believe others want to hear.

Where does enterprise architecture come into play with this?

Enterprise architecture is a vital source of information for our CIOs and other leaders. The wise ones see the strategic value of enterprise architecture, commit to it, champion it, and invest in it, using it to identify gaps, redundancies, roadblocks, and opportunities to innovate and improve the business and technology of the organization. I urge all CIOs to avoid being like the ostrich, and take this approach.


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