Business Cycles and Zero Sum Thinking

Written By David Macauley

It’s no secret that business cycles are a lot more fun to talk about on the climb up than they are on the way down.  Who doesn’t love to speculate on how high sales will climb, how hot the market will get, or imagine a new normal in which growth is sustained indefinitely?  It sure beats wondering whether sales will recover in time to prevent layoffs, if investment values have finally bottomed out, or how long it’s going to take before we can get back to gaining ground and celebrating achievements! But mental stress and depressing workplace conversations are not the only psychological toll that times like these exact from us.  Economic downturns can undermine the very skills and behaviors that are most needed to turn things around and build the path to better times. 

Research has shown that economic downturns encourage employees and organizational leaders to embrace zero-sum thinking or the belief that for one person to succeed, someone else must fail.  This drives individuals to undermine the success of others to preserve a better chance at success for themselves.  Unfortunately, this tendency is not unique to any one country or single economic crisis.  In one study alone the trend held across 51 countries, over 17 years, and nearly 60,000 respondents.  The findings have been reproduced in both real world testing and laboratory conditions as study participants repeatedly shift their mental framework away from collective success in response to both real and perceived downturns. 

The fact that helping behaviors, collaboration, and organizational citizenship behaviors get suppressed during economic down turns has enormous implications.  Leaders must continually remind themselves that the capacity for organizational teamwork and collaboration is being undermined just when it is needed most. Leaders must consider and evaluate their own and their peoples’ psychological state in order to ferret out the flaws in their own decision-making that may undermine performance.  The influential writer and business commentator Simon Sinek frequently addresses leadership decision making that rejects zero sum logic and allows for more than one person or firm to win.  One YouTube video alone of a presentation on The Infinite Game (done for the New York Times) has been viewed almost half a million times. So, now that you know about the gravitational pull of zero sum thinking during downturns, let’s examine to use that knowledge to benefit you and your firm.

  • Focus on the vision and mission: bringing these to life is among the most potent leadership weapons available to fight zero sum thinking.  An active, living, breathing vision and mission grounds work in a larger context.  It focuses everyone on the bigger picture and clarifies the underlying reasons why the firm does what it does and directly inform the goals, objectives, and performance measures of the business.  While performance-related discussions commonly borrow phrases from sport such as the desire to “beat the competition,” downturns force us to be more transparent about short term goals and the firm’s financial health. 

 Be clear about your objectives and their relationship to bigger picture: it’s not about winning or losing a game.  You can’t “win” in the marketplace against a virus and economic downturns do not come with referees and a halftime show.  It is about continuing to make progress toward the long-term vision and ensuring the continued survival of the firm so that it can keep working toward that higher purpose. 

  • Courageous leadership: leaders must be willing to address zero sum thinking directly. You cannot afford to ignore the issue; don’t let it fester. Create strategies to recognize it, disable it, and reward those who reject it. Actively focus on the collective welfare of employees, your job is to take care of your people so that your people can focus on the job to be done.  If they do not believe that you are taking care of them, they will embrace the tendency to look out for themselves, creating additional opportunities for zero sum thinking to take hold.

  • Build organizational trust: military veterans often talk about bonds formed under pressure when a group successfully rises to the challenge of difficult times.  A decade from now, employees will certainly tell “war stories” about their role in the depths of the Coronavirus pandemic, but only if the firm survives.  If business leaders need those relationships and the mutual trust and collaboration that goes with them now.  Take an active role and don’t wait for trust to develop organically. 

Creating psychological safety is one of the fastest ways to build trust at work.  Show employees that you are safeguarding their jobs by finding ways to cut cost from operations before cutting staff. Conduct post-mortem analysis on process as well as results.  If the decision-making was sound, recognize it even when good decisions fail to generate desired outcomes. Don’t compound mistakes; reward employees that actively document and share what they learn from them.  Affirm and support employees who can clarify and express their needs in ways that you can address.

  • Benchmark strategically: downturns affect everyone, so it is entirely possible to outperform your benchmarks and still go out of business. Growing market share and better than average unit costs will not guarantee the long-term health of your business.  Benchmarks serve the same role as fashion awards, establishing trend setters and recognizing firms with influence. Regardless of current trends, you are the one that decides how to use that information when its time to dress yourself.  In a downturn, the fashion awards don’t matter.  When you are lost in a blizzard, aesthetics and reputation are out the window.  What matters is whether you are warm enough to avoid death. 

Downturns provide an opportunity to ensure that you have selected the right long-term measures and examples against which to compare and evaluate progress, rather than assessing performance in absolute terms. Don’t compare yourself to the trend leaders in every category. Focus on what matters by finding examples of other organizations that are producing the kind of results called for by your mission and vision.  Benchmark those processes and leading indicators most closely tied to your business model.  Don’t try to copy those organizations but use them as examples to show your team that the kind of success you are striving for is possible for those who work together.  Demonstrate that zero sum thinking is not needed by strategically selecting your aspirational examples.  In a downturn, it is important that benchmarks provide equal parts inspiration and progress report. 

  • Embrace change: there is a natural tendency in a downturn for leaders to hunker down and wait in the hope that things will blow over and return to normal.  This tends to work for short term issues or events such as the economic fallout from the September 11th attack.  However, it is generally a mistake to do so during downturns with longer-term systemic causes. It took roughly a decade for unemployment caused by the great recession of 2007-2008 to return to pre-recession levels and the Covid crises of 2020 shows no indication of being a short-term issue.

Firms whose business model is no longer working will need to change and do so quickly. Businesses that seek safety on the sidelines and try too hard to preserve outdated business models will face a continuing series of strategic retreats and cutbacks.  These decisions will buy time but will also prime the pump for zero sum thinking as employees and executives are left to wonder who or what will be cut next.  Simply put, if your business is struggling, stop waiting for normal to return.  You need to find new ways to succeed as you inspire your team to work toward the vision and mission of your firm.

Today’s leaders must understand the connection between macro-economic trends and individual decision making. Those that use this understanding to focus their team on the vision and mission of the firm, demonstrate courageous leadership, build trust within their company, benchmark strategically, and embrace change will put themselves in the best position to succeed.  It won’t be easy but outside perspective and knowledgeable guidance can help.

Let’s get to work! 

David Macauley
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