State of mind

Our state of mind is fluctuating all day, every day. It’s a moment-to-moment phenomenon. When we’re in a low state of mind, whatever’s in front of us looks problematic and we stress over what to do about it. When we’re in a clear state of mind, whatever’s in front of us looks straightforward and we find creative solutions easy to come by.

After spending 15 years working in consulting, private equity and coaching, I can safely say that the corporate world is totally unaware that state of mind is even a performance variable, let alone the number one performance variable around.

The result of this lack of awareness is wall to wall inefficiency, mistakenly blamed on external factors, which causes more inefficiency as businesses go about trying to fix “problems” that aren’t really problems.

Last year, I spoke with a PE firm looking to reverse a sustained period of underperformance. They told me all the reasons they hadn’t been doing so well, which included underpaying staff, market conditions, poor internal processes, and a whole host of other factors.

However, as I spoke to the team it was obvious that everyone was frantic. And frantic people make far more mistakes than those who aren’t frantic.

In their IC meetings everyone had so much on their minds and felt so much internal pressure that they would rush off to the next thing, and nothing would have stuck. It was as if the meetings never took place.

Because they didn’t have enough time to thoroughly discuss the bids they were making, they were either bidding too high or too low. The result was they only won the deals where they bid too high, so they only achieved low returns. And because of the poor returns, they were spending a lot of time working
with struggling investments and reassuring investors about fund performance. This all meant they had even less time and were even more rushed. And the more rushed they got, the more they left out steps in their investment process, which would come back to bite them as they made more mistakes, resulting in more poor investment decisions. Then they’d implement additional risk management processes and internal reviews to make sure they didn’t skip steps. That added on more time, making them more rushed, meaning they missed more steps in their process, eventually leading to more poor investment decisions.

At the same time, their employees were super stressed and burning out, so the culture was toxic, employee engagement and effectiveness was low and staff turnover was high. The upshot of this was they needed more staff to do less work and they had huge recruitment and training costs. So, the fund management company wasn’t maximising profit either and investors were growing distrustful because of high attrition rates.

The bottom-line is, no matter what you think your problem is, the chances are it’s got a lot to do with state of mind. In this case, the low state of mind of the team led to a spiral of mistakes, inefficiency and poor investment decisions. But until they understood state of mind as an independent variable, they couldn’t do anything about it.

When I shared this with them, they understood it because even if an individual couldn’t see it in themselves, they saw it in the people that worked for them. So, what’s the solution? It’s simple; implementing a program to teach healthy psychological functioning and how it’s independent from external circumstances and events.

The amazing thing is that when an organisation understands this, all the “best practice” processes and incentive structures they previously put in place (but never worked) suddenly begin to work perfectly. You see, it’s not that best practices aren’t best practices, it’s just that even the best practices in the world are only successful when individuals and teams have the clarity of mind to use them effectively.