Certain recent discoveries in the field of neuroscience hold nothing less than the potential to improve the performance of their direct reports. The discoveries may point to a completely different approach than the traditional incent/punish model, but they will form a tighter bond between manager and employee, as well as between stakeholder and company. This author, who has written a book on the subject, describes the lessons managers can learn.

Neuroscience may seem far removed from the immediate concerns of running a business, but the fact is that the latest findings in field are transforming management. We’re learning that much of what managers do is self-defeating, and we’re gaining access to new practices that dramatically improve performance.

Neuroscience also gives us a strange new world that takes a bit of getting used to. Not only does it challenge many of our basic assumptions about people, it even compels us to question the nature of reality. It’s as if we’ve landed in Alice’s Wonderland, but in a world of science rather than fiction.

We are in the midst of a paradigm shift that, at times, can be disconcerting. But if we embrace the new worldview that science gives us, we stand to be far more effective managers. The place to start is with an understanding of three fundamental discoveries about how the brain works.

1. Our world is mental, not physical

For most of history, Western civilization has assumed that there is a world that exists outside of us, the nature of which we all know and agree upon. If a tree falls in a forest, it doesn’t make any difference whether we’re there to observe it or not. There’s still a physical tree and it’s the same regardless of who’s doing the observing.

But this assumption runs smack up against what a functional magnetic resonance imaging machine (fMRI) shows us about how the brain processes information. Take vision as an example. The commonly held view is that light bounces off an object and enters the eye, causing the neurons on the retina to fire, and sending a mirror image up the optic nerve into the brain.

But that’s not how vision actually works. The 125 million neurons on the retina don’t register the part of the image reflected on them. Individual neurons are highly specialized and they fire in response to colors and contrasts. Effectively, the image reflected on the retina is digitized and travels up through the optic nerve as 125 million bits of information.

When these bits enter the brain, they are processed by over one billion neurons in two dozen areas of the visual cortex. As the output then travels to the seat of consciousness in the prefrontal cortex, it receives input from the areas of the brain responsible for memory, emotion, and even our desires. What we finally “see” is our unique version of the object, created according to everything going on in our minds.

We don’t have direct knowledge of the physical world. All we can “know” are our ideas about the world. Since our ideas are formed by brains that are shaped by our individual genetic codes and life experiences, we don’t all perceive the same objective reality.

Rather than directly recording our experience, it’s more accurate to say that we create it, according to what we remember, how we feel, and even what we want. And so, when it comes to the relationship between a manager and an employee, conflicts are inevitable.

2. Our reasoning isn’t objective

One way around subjectivity, we assume, is to reason logically, since it eliminates emotion and its validity can be checked. But it turns out that this assumption is wrong as well. Our reasoning is always colored by our emotions, and is anything but objective. There is a reciprocal relationship between the area of the brain responsible for logical thinking in the prefrontal cortex and the amygdala, the seat of emotion.

In an experiment known as the Iowa Gambling Task, subjects are given two thousand dollars to bet on the turn of a card from one of four decks. If they select a card from decks A and B, they can win $100; they can also lose $1250. If they select a card from decks C and D, they can win $50, but their loss is limited to $100.

Normal players start out selecting cards from decks A and B, because of the potential for greater winnings. They then quickly change to decks C and D when they recognize that their losses will bankrupt them. However, players with a lesion in the area of the brain that connects the prefrontal cortex to the amygdala never switch from decks A and B, and eventually lose all of their money.

The neuroscientist Antonio Damasio believes that our memories are marked in the brain by our emotions. When we lose access to our emotions, we also lose what we’ve learned from past experience. Even when it comes to something as “objective” as money, we then end up making worse decisions.

Damasio also measured the skin conductive response of subjects playing the game, and found a spike just before the conscious decision of which deck to choose. He concluded that our decisions are made emotionally and logic is nothing but an after-the-fact justification.

Even if there weren’t emotional input, our reasoning would be suspect because of a psychological dynamic known as cognitive dissonance reduction. Holding conflicting perceptions is uncomfortable, so we do what we can to reduce the dissonance, usually by taking the easiest route.

The neuroscientist Michael Gazzaniga tells the story of a visit to a patient at Sloan Kettering Hospital in New York. This woman had a lesion in the area of the brain responsible for recalling location in space. While the rest of her cognitive functions were fine, when asked where she was, she replied that she was in her house in Freeport, Maine.

When he then asked her how she could explain the bank of elevators outside her door, she replied, “Doctor, you have no idea how much time and money it cost me to have those installed.” Clearly, she was making it up as she went along, but that’s just the point—neuroscientists believe we’re always making it up as we go along.

If we’re not logical, just how does the brain work? According to cognitive neuroscientists, through stories. Young children use stories to explain their experiences before they learn formal reasoning, and the ancient Greeks used myths before they invented logic.

3. Ideas Change the Brain

Ideas are neural networks with lowered thresholds for activation. These networks are arranged hierarchically in the brain, with those responsible for the biggest ideas at the top. When those networks are activated, they key the firing of networks in sync with them at lower levels responsible for thinking and behaving.

While the networks are initially created by chemical changes in the synapses at the junctions of the neurons, repeated firing causes structural changes to occur. Ideas cause physical changes in the structure of the brain, and thus change the experience of the world it creates.

What does this mean for managers?

In light of this new understanding of how the mind works, conventional management practices no longer make sense. For example, consider the time-honored practice of giving feedback to employees to improve their performance. Contrary to the conventional wisdom, feedback doesn’t work, at least according to a study of GE’s performance appraisal system conducted over 40 years ago.

Researchers studied the performance-review discussions of a sample of managers and employees, and then tracked subsequent performance. They found absolutely no correlation between praise and improvement in performance. This was to be expected, given that people are intrinsically motivated to achieve and are already doing the best they can.

But the next finding was more of a surprise. The areas that were criticized the most showed the least improvement, leading the researchers to conclude that criticism actually had a negative effect on performance. Although this seems counterintuitive, it can be explained by cognitive dissonance reduction.

People strive to maintain a positive self-image, and so they are driven to reduce any feedback that may be at variance with it. They ignore, discount, or rationalize it away. If it’s experienced as particularly punitive, it summons up aggression toward the source and it becomes rewarding to punish in return. The best way to do that is to persist in the behavior that is being criticized.

It’s not that feedback isn’t necessary for improvement. It’s just that when it comes from the manager, it‘s colored by perceptual conflicts. The manager may be operating with the best of intentions, but that’s not necessarily how the employee striving to maintain esteem sees it.

Nor is reward any more effective at motivating performance. Brain scans show us that the pleasure neurotransmitter, dopamine, is released in the brain, not when we’re rewarded, but when we’re fully engaged in the work that leads to the reward. In fact, studies of using rewards to improve the problem solving of children have shown that extrinsic rewards lessen intrinsic motivation.

Rewards also fall victim to the vagaries of perception. The effect of a reward depends on the value that the person receiving the reward places on it. A five percent salary increase in tough economic times may seem generous to a manager, but appear so small to an employee as to be insulting.

If employees receive the same percentage several years in a row, they become accustomed to it and it loses its value. One study even showed that employees evaluated a reward based more on their perception of the manager’s motivation in giving it than on its intrinsic worth.

If feedback, punishment, and rewards are ineffective, how about using reason to motivate employees? It’s not anymore effective because decisions are driven by emotions and we’re subject to cognitive dissonance. Many studies have shown that people will work against their rational self-interest and like Gazzaniga’s patient, are capable of using reason to justify unreasonable positions.

Turning management inside out

It’s not that we don’t like rewards, fear punishment, or don’t appreciate logical arguments. It’s just that all three, coming from the outside, are run through our perceptual filters. Since we’re all genetically driven to pursue our own self-interest, any attempt to motivate us to do otherwise will fail.

So rather than pushing on people as if they are inanimate objects subject to Newton’s laws of motion, we’ll be more successful if we use an approach that encourages people to willingly do what we want. Rather than tell them what to do, we should ask them.

Since questions aren’t assertions, they don’t run up against cognitive dissonance reduction. We’re forced to fit the issue they raise into our worldview so that we can respond. And when a decision or action comes from us, our self-esteem is tied into making it successful.

Instead of telling people how they’re doing, we should ask them. By using questions, we should enable them to honestly reflect on their performance. If corrective action is required, it should be self-generated. GE found that active participation in the review process, starting with an employee self-appraisal, improved performance significantly.

In a non-threatening environment, most employees will actually be more critical of their performance than their managers would be. For those that aren’t and gloss over performance problems, the manager should be directive, but only as a last resort. The goal is to leverage the way the mind works as much as possible.

From management to leadership

The mind works through ideas, with those at the highest level creating a mental environment that selects out thinking and behaving in sync with them. In the mental world we live in, ideas are much more powerful than material rewards or punishment.

In one study, when subjects hooked up to a fMRI were shown a picture of a woman crying, there was heightened activity in the emotion-generating amygdala. When they were told that the woman was not upset, but rather was shedding tears of joy because it was her wedding day, the activity immediately abated. A simple idea overcame the emotion that drives decision-making.

But ideas also have the power to change performance in the physical world by creating a self-fulfilling prophecy. Elementary schoolteachers were told at the beginning of the year that their students were “bloomers” and would show a significant jump in IQ. When tested at the end of the year, their score on the Stanford-Binet IQ test went up fifteen points on average. Actually, the students were no different than others—it was the teachers’ expectations that caused the increase.

While ideas can change the way people think and perform when they are asserted as fact, they are still subject to cognitive dissonance reduction. But if they’re packaged in a story to fit with the way the mind naturally works, they become immediately accessible.

Stories don’t assert fact, so they don’t summon up cognitive dissonance reduction. Because they’re the way the mind works, we identify with them, trying out, so to speak, the perceptions and values they embody. Because they convey both ideas and experience, they address both the intellect and emotion.

If we offer a more attractive counter-narrative to the one people are currently telling themselves, they’ll adopt it as their own and it will drive their decision-making and behavior. Great leaders are storytellers.

Studies have shown that successful social movements are accompanied by a narrative, in the form of a romance. People come together, change their thinking or behavior, and achieve a desired future as a result.

In business, the story should posit a future that is more attractive than the present, and demonstrate clearly how the desired change in mindset or behavior will enable people to accomplish it. Improving returns to shareholders isn’t that future, but building a great company, being part of a high-performing team, and achieving more than they thought possible is.

Leaders need to figure out what story works both for themselves and for their people. While it’s got to be inspirational and exciting, it also must be realistic and achievable.

Leaders don’t only tell their stories starting with “Once upon a time.” While they may articulate a vision of the future, they tell their story with everything they do and say, every moment of every day. Because human beings are bad liars and good detectors of lying, leaders can’t fake the story they’re telling. The walk wouldn’t match the talk.

The science of performance improvement

The world according to neuroscience is very different than the one we believed we were living in. Because they are mental rather than physical, traditional management practices such as feedback and rewards or punishment don’t produce the results we expect. In this world, ideas have the power.

It may take awhile to get used to leading minds instead of managing behavior. While it is a significant change, it’s one for the better. It’s much more fulfilling being inspirational than wielding the carrot and the stick. In the end, it’s the only way to improve performance.


 Q&A with Charles S. Jacobs

1. What do you mean by “brain science is turning management on its head?”

Now that we know so much more about how the mind works, it’s imperative that we apply this knowledge to how we manage. If we do, many of the most commonly accepted management practices will be abandoned, because brain science teaches us that most of what we do as managers produces the opposite of what we intend.

2. Is there really anything new here?

Most of our management practices just rely on theories or the way we’ve always done things. Brain science gives us good, hard, scientific data to show what works and what doesn’t. It challenges virtually everything we’ve come to take for granted, and gives us a new set of practices, which while they may seem counterintuitive, produce much better results.

3. What fundamental management practices has the latest brain science proven wrong?

Virtually all. We now know that a manager’s performance feedback and the use of rewards to motivate produce the opposite of what we intend. Organizations waste resources vainly trying to thwart our natural inclinations. Our quantifiable objectives cause us to focus on the short term at the expense of the long term.

4. Armed with this new knowledge of brain science, what are some ways we can manage better?

We need to manage both mind and behavior. Managers shouldn’t direct their employees but instead should use questions to engage them. They should stop worrying about the right incentives to motivate good performance and should instead leverage the universal human desire for meaningful work. Last but not least, we ought to design our organizations to channel our innate selfishness rather than attempting to counter it.

5. How can findings from brain science guide today’s managers as they face such challenges as laying off workers and motivating those that remain despite low morale?

The fear people feel during layoffs slows down the brain, diminishing the number of connections made, and narrowing vision. The result is that people become less productive. So when we cut expenses, we need to focus on managing the mindset of our employees, helping them feel confident in their ability to weather the crisis, and perhaps even benefit from it. By soliciting their participation in coming up with ways to cut expenses, they will feel more in control and be more engaged.

6. What are the implications of your notion that we all experience different versions of reality in our work lives?

Our versions will almost assuredly not agree with those of others. We can’t count on correctly interpreting the actions of others, or others correctly interpreting ours. The result is that we don’t get the results we expect. But the more we manage with an awareness of these differences, the better chance we’ll have of eliciting the results we want.

7. How can metaphors help us manage better?

Metaphors change our view of the world, and the actions and decisions we take as a result, so they overcome the biggest obstacle to improving performance. They also bring both the emotional and intellectual brain into play, making us smarter. For example, thinking of an organization as an orchestra prompts us to ensure that our actions are in sync with those of others. The metaphor changes the role of the manager, shifting the focus to encouraging cooperation.

8. What about stories?

Since they’re the way the brain naturally works, we immediately identify with them and take them as our own. Because they can capture where we are, where we need to be, and what it takes to change, they’re particularly useful for transforming a business. When we think in stories, our decisions and actions are in sync. One client told the story of everyone coming together to overcome the mistakes of the past and move from autocracy to democracy, echoing the spirit of the American Revolution. It inspired people to change.

9. What are mirror neurons and what do they have to do with how we manage our relationships with our customers, suppliers, peers and boss?

Influencing others requires that we understand where they’re coming from. Since mirror neurons fire when we observe the actions of others and they capture intent, they enable us to empathize. We essentially become the other person and so know how to garner their support. It’s much more effective to proactively manage our bosses by imagining the pressures they’re under and how they view us. We then know what to do to ensure their support and approval.

 10. What’s the first thing managers can start doing tomorrow to rewire their management practices according to brain science?

The beauty of what we’re learning is that there are no complex algorithms to master. You just need to think about the insights of brain science, such as using stories, acting with integrity, and engaging rather than directing. Once the ideas are embedded in the mind, you’ll know both what to do and what not to do. If you’re willing to learn from mistakes and ask for feedback, you’ll continuously improve. It takes discipline and practice, like any physical or mental exercise, but once you get the hang of it, you’ll find it easy and you’ll notice measurably improved results.