The investment industry must deal with more complexity now than ever before. Not only does the industry have to think about risk and return in the context of more challenging macro-economic conditions but it must now contend with the great social and environmental challenges that pervade our time. Think inequality, biodiversity, and climate, to name just a few.
We know that if we continue down a “business-as-usual” path, we are on track for 2-3.6C warming by 2100. Adding to this, scientists are warning us that human activity is currently driving a sixth mass extinction of life on Earth. What are we doing to prevent this from happening? There is a lot of talk, some walk, but unequivocally not enough action. Getting to the bottom of why is not easy and there isn’t a simple answer, but one thing is clear: the cultural state of investment organisations is not aligned to deal with change and innovation. To adapt to current times, organisations need teams that are willing to step outside of the box and think creatively.
Building collective intelligence in teams is critical to navigating the complex environment we exist in and dealing with the challenges it throws up. One key ingredient of this collective intelligence is innovation. Despite this recognition, a TAI study on organisational culture found that only 33% of asset owners and managers surveyed felt that their organisation and its associates were open and adaptive to creative and innovative ideas. Are we unintentionally squashing imagination and creativity at the team level and if so, what can we do to reverse this effect?
In 1999 Amy Edmondson, professor at Harvard Business School, introduced the concept of psychological safety. Which is, “the belief that one will not be punished or humiliated for speaking up with ideas, questions, concerns, or mistakes, and that the team is safe for interpersonal risk taking”. Though the concept is now more widely acknowledged, even in the investment industry, these work environments are rare.
Creating psychological safety is difficult because naturally people typically keep ideas to themselves and feel uncomfortable disagreeing with their boss or asking questions. How can you identify if your team environment is psychologically safe? Well, one warning sign is that if you worry about presenting half-baked ideas, this is an issue. Healthy challenge is good and so is healthy disagreement but there is a limit. Do you feel like if you speak up, you’ll be shot down? Do your team members start acting defensive when you challenge the status quo? Well then, you’re in a team that, try as it might, is not psychologically safe. I will caveat this by saying that it is important that all members be self-reflective and bring a dose of humility into team situations.
To build an effective team, or what we at TAI call a Superteam, you must consider; cognitive diversity, inclusion, trust, accountability and a strong framework to shape critical thinking. However, you won’t get the benefits of this best practice unless your team has high psychological safety. Diversity is a good example here, to harness the power of diverse views and get people to work better together, psychological safety is key.
Here is the brilliant thing about psychological safety, it cultivates, among other things, creativity and this is what leads to industry altering breakthroughs. In an industry where there are so many constraints to acting, think; fiduciary duty, investment incentives, an allergic reaction to anything deemed “moral”, we sorely need imagination. And the collective imagination of the team will not flourish without the right environment. Ideas that will truly push boundaries and may allow us to actually meet our climate commitments, for example, may seem risky, like reimagining what fiduciary duty means, but this may be the only way we can realise a sustainable future.
Take for example the Church of England who founded the Investor Mining and Tailing Initiative (IMTSI) in 2019 after a disaster in Brazil where a tailing storage facility killed 270 people. Powered by a small team, with innovative thinking, they convened a coalition of over 100 investors resulting in a global industry standard, the establishment of the Independent Global Tailings Management Institute and a new investor initiative, Mining 2030 which aims to tackle eight systemic issues challenging the sector.
So, what can you do to cultivate more psychological safety in your team? There is a suite of research by experts in this space but here are a few simple things. Get to know everyone in your team and I mean in and outside of the regular work context. Ask people how they are doing and reciprocally be candid when sharing your ideas, feelings, or concerns. This will make team members more comfortable and will encourage them to take risks, ask for help, admit mistakes and ask questions.
Encourage team members to have a voice, acknowledging that there is not one person in your team with all the answers. Ask your colleagues to weigh in with their thoughts, expertise and opinions. And here’s the catch, actually listen. Practice active listening and ask thought-provoking open-ended questions. And don’t shut down an idea just because you have a visceral reaction to it being too “far out” or not relevant. This is where the magic happens. If you reject wild ideas that seem impossible then you are killing creativity before it starts. Not only that but new ideas are rarely generated in isolation, knowledge sharing is key. The initial ideas need encouragement, imagination should be celebrated.
Finally, create a norm of asking for help and giving help when it is asked for. Leaders need to be role models, and this means being authentic and vulnerable. There is also a whole suite of research into the benefits of “humble leadership”. If you are a leader you must pay attention to symptoms of a psychologically unsafe environment, one of them is silence. If one or two team members are always silent this is a pretty good sign that something is awry.
Basically, if you care about adaptation and innovation make sure you also care about psychological safety. That team member who is always quiet might just have a “crazy”, “impossible” idea that could change the way we invest and the world we all live in in the process.
“Reaching out to enemies, embracing complexity, creativity and risk add up to moral imagination in action…They are artists”. – Kwame Anthony Appiah
See more research by Thinking Ahead into the ‘Power of Teams’.