The following is a sneak preview of the “Organizational Behavior” section of the book I'm crowd funding on Indiegogo. This book will boil down the most valuable MBA skills in a digestible format for entrepreneurs and wantrepreneurs. If you like what you read, please check out the campaign on Indiegogo and tell your friends.

Chapter Outline: Organizational Behavior

Section 1: Self-fulfilling prophecies, interpersonal expectancies, the Golem effect, and Pygmalion in the classroom

People perform as well (or as poorly) as you expect them to

Organizational Behavior has become a bigger and bigger part of many top-tier MBA programs in recent years, though not without struggle or internal politics. While there’s a lot of humor surrounding the “touchy feely” nature of “Poet” subjects like OB, the reality is that interpersonal skills like leadership and management are becoming more valuable than traditional, quantitative skills, at least for more desirable jobs. For entrepreneurs, this is especially true. In the beginning, most entrepreneurs have nothing to stand on but a vision and the prospect of near-certain failure, which they somehow must repackage to motivate would-be employees and cofounders. Whereas the Googles and Facebooks of the world attract top talent with amazing perks, comfortable lifestyles, and high salaries, entrepreneurs have to demonstrate amazing leadership and exercise tremendous interpersonal skills to attract, retain, and motivate early employees.

It’s a marvel, then, that more entrepreneurs don’t invest in learning these skills. Personally, leadership and management were among my weakest skills at my last company, and it’s only be virtue of hiring exceptional people that I was able to succeed despite myself.

Suffice it to say that there are incredible rewards to be had by improving our skills as leaders, and by recognizing the various forces that are at play in the organizations we create and participate in. By understanding some of the key tenets of organizational behavior and behavioral psychology, we can diagnose some pivotal mistakes that entrepreneurs (and leaders everywhere) often make, and begin to understand how they are avoided.

Key Takeaway #1: People perform as well or as poorly as you expect them to

This may sound like some cliché motivational quote, but it’s actually scientifically grounded, and once you realize understand this phenomenon, you’ll never be the same as a leader.

In 1978, Robert Rosenthal and Donald B. Rubin, researchers at Harvard University’s Department of Psychology and Social Relations released a study entitled “Interpersonal expectancy effects: the first 345 studies.” In it, they described the bizarre phenomenon by which researchers often get the exact results they expect, even against all logic. This phenomenon went far beyond any conceivable errors in experiment design or selection bias; they observed profound correlations in various types of experiments and studies - in both humans and animals.

This study opened the door to the realization that those in control are able to subtly and unknowingly alter their behavior in such a way that causes the behaviors of others to coincide with expected results or outcomes. In plain english: you subconsciously cause others to deliver the results you expect, whether this is high performance or low performance. This is called the Golem effect, or the Pygmalion effect. The difference between the two isn’t so important.

Take, for example, a suspicious boss who can’t help but feel that his employees may be stealing from him. Though he tries his best to demonstrate trust and hide his true beliefs, he subconsciously exudes suspicion. While he may believe he’s a fantastic actor, there’s distrust in his eyes, his tone of voice, and his body language. After time, his employees begin to feel spiteful and angry - perhaps without even realizing it - and they start swiping pens and stationary for no good reason. This creates a self-fulfilling prophecy.

Though an extreme example, the effects of the Golem effect are seen everywhere from academia to industry. In another study on the nearly-identical “Pygmalion effect,” researches have proven that a teacher’s completely unfounded or randomly-created opinions of a student’s ability or performance can directly influence that student's actual ability. They found the same to be true of supervisor-subordinate relationships, too. In fact, this is a proposed explanation as to why girls statistically outperform boys in humanities, but the opposite is true of math and science.

Why does this matter?

You hire smart, capable people - don’t you want to know how to drive them to do their best work?

How many times have you developed a low expectation of an employee, only to find that indeed, they aren’t meeting the expectations of the job? How many times have you proven yourself right about a candidate, resulting in a firing - a costly and disruptive hiccup for your business?

While it may seem like smoke and mirrors, interpersonal expectancies are powerful juju. They have the ability to turn star performers into duds - and vice versa. To take Steve Jobs as an example, he often labeled people as “geniuses” or “bozos,” and surprise surprise, the “geniuses” today describe how they were able to create innovations they never thought themselves capable of; the bozos usually disappeared.

How can you apply this lesson in your business?

It might sound simple: have high expectations of your people. Unfortunately, it’s not so easy. You see, because these effects play out on a deep, subconscious level, it’s not enough to simply act. In order to realize the benefits of the Golem effect, you have to truly believe that your colleagues are capable of greatness. This may mean that you have to find reasons to have faith. You may have to practice seeing the exceptional qualities in their work. And you may have to learn to use praise and positive feedback to tease that high quality work out, creating a cycle of positive interaction. We’ll go into detail about feedback in the next section, but for now, let’s try to keep in mind this central concept: if you don’t genuinely believe your people are capable of great work, they aren’t; and that’s mostly your fault.

It’s also no small realization to mention that the Golem effect also plays out in between your own earns. That’s right - the old adage “whether you think you can or you think you can’t, you’re right” is very much true, and very important as we embark on the massive project of improving ourselves as leaders and managers. Perhaps it goes without saying, but you can’t learn to change behaviors until you believe you’re capable of doing so.

What questions should you be asking?

Hopefully, this has got you thinking. Here are some important questions you should reflect on, toss around with your cofounders or colleagues, and keep in mind:

You naturally hold beliefs about the capabilities of the people in your organization: what are they?

Can you find reason to believe - genuinely - that everyone in your organization is a rock star?

How might you be signaling your beliefs and opinions to your colleagues?

What beliefs do you have about your capacity to lead?

Where can you learn more?

There are some fantastic Wikipedia articles, which link to the different research studies by Rosenthal, Rubin, and others: Pygmalion Effect and Golem Effect

Here is a great (short) Harvard Business Review article summarizing basically what we just learned, but it’s great for sending to colleagues: Pygmalion in Management

Another fantastic read, which espouses the idea that “if an employee has to be fired, it’s the manager that has failed” is called “Coaching for Improved Work Performance” by Ferdinand Fournies. It covers a wide range of topics which we’ll be discussing, as well, and I generally recommend checking it out as a great reference manual for how to approach personnel performance problems.

In the next Key Takeaway section of the Organizational Behavior chapter, we’ll be diving deep into how feedback works, and what types of feedback are appropriate for different situations.

Your feedback is very much appreciated as I continue to work on this book. What works? What doesn’t work? How can I help you learn more with less effort, so you can get back to running your business faster and with greater success?

Remember: If you like what you read, please check out the campaign on Indiegogo.