Willie’s Blog Posts

The Truth About Priorities: Five is Probably the Wrong Number

Things that matter most must never be at the mercy of things that matter least — Goethe

Strategy, above all, is about defining the right priorities. For a long time, I assumed, in line with conventional wisdom, that the optimal number of priorities is five. I now believe that I was wrong. Of course, this is not an exact science, but the evidence shows that a lower number is  likely to be much more effective.

The need to prioritize arises from the inescapable reality of limited resources. These resources fall into three categories:

– Material (money, physical assets)

– Temporal (time)

– Human (knowledge, creative energy, commitment)

The law of limited resources forces us into a zero-sum game. Every additional thing we do subtracts energy and effort from everything else.

During Apple’s dark days in 1996, I had dinner with an Apple executive. “What are the chances that Apple will recover from its decline?” I asked. The answer was stunning. “Zero,” he replied. “Apple is as good as dead. We are just awaiting the funeral.”

Steve Jobs returned to the company in 1997 and, against the odds, rescued Apple from its death spiral. Commentators mostly laud him for his innovative flair and aesthetic sensibilities. These no doubt played a role, but above all was Jobs’ ability to focus on very few things and exclude the rest.

The first thing Jobs did was reduce Apple’s bloated product line by 70%  –  to just two desktops and two portable computers. All Apple’s resources and the commitment of its people were focused on that limited range of activities. This convergence of energy was the springboard for the company’s spectacular success. Jobs understood the recipe for harnessing the power of focus: subtract first, then multiply.

The renowned military expert, Antoine Jomini, defined strategy as “The concentration of mass upon critical points.” It is all about leverage.The so-called Pareto Principle explains the logic as follows:

– There is invariably an imbalance between inputs and results

– The majority of inputs typically have little effect

– A small minority of inputs make a disproportionate difference to the outputs

– Identifying and leveraging these “vital few” is essential for success

The Pareto principle has come to be known as “the 80/20” rule. Here are some examples that illustrate this phenomenon:

– 20% of software code drives 80% of the usage

– 15% of the world population uses 80% of the energy

– 25% of the world population owns 80% of the wealth

– 28% of beer drinkers consume 80% of the beer

The key take-away is that there is no 50/50. To have the right priorities, we need to understand the few things that are most important. Then we have to achieve unity of action by keeping those main things the main things. That goes to the heart of functioning strategically.

In my strategy workshops up to now, I have emphasized, “No more than five” priorities. But I’ve noticed that participants fall prey to the “anchoring” effect and become fixated on reaching five. When they get to three or four, they begin to ask themselves the futile question “what more can we think of?” as they stretch to reach five. In doing so, the whole discipline of focus gets lost and it becomes a numbers game. Afterwards, few of them can recite all five without a “cheat sheet.”

Where does this orthodoxy of five priorities come from? One much quoted source is a 1956 article by psychologist George Miller called, “The magic of the number seven, plus or minus two.” This article purported to show that most people can remember about seven items in serial-order memory tasks. Take away two, and you are in safe territory with five!

But Nelson Cowan, Professor of Psychology at the University of Missouri, has pointed out the flaw in this logic. He argues that in Miller’s experiments, people were able to recall seven items simply because of “chunking” into smaller groupings. For example, a seven-digit phone number is more easily remembered as three chunks: 246-89-21. Cowan has studied what he calls “working memory” – “The small amount of information that can be … accessible in order to be used in ongoing mental tasks.” His conclusion? “Our focus of attention is limited. People can follow a maximum of four objects and sometimes fewer.”

There is strong evidence to support Cowan’s conclusion.

  • A survey of 1,800 global executives by Paul Leinwand and Cesare Mainardi found that as the executive team’s priority list grows, their company’s revenue growth declines relative to its peers. The reverse is also true. They found that organizations with a maximum of three priorities were most likely to achieve above average growth.
  • In an article in the Sloan Management Review, Donald and Charles Sull and James Yoder cite a large survey showing that in firms with five priorities, only one-quarter of the managers could list three of them.
  • Finally, in a study of 150 hospitals, Wharton professor Drew Carton found that when hospitals had more than four core values, no improvements were achieved for reducing heart attack readmissions or increasing return on assets.

All said, we have good reason to contest the efficacy of five priorities. They become a wish-list that few can remember, let alone act on. We vastly underestimate the amount of simplification, synthesis and repetition that is required for employees to buy into even a small set of ideas. The weight of evidence suggests that the degradation of working memory is not linear; it is exponential. Going beyond four prioirities risks a wipeout.

Robert Iger served as the CEO of The Walt Disney Company from 2005 to 2020. During his tenure, the company’s market capitalization increased from $48 billion to $257 billion. He tells the story in his book, The Ride of a Lifetime.

On the lead-up to his appointment, the board asked Iger to define his priorities for the future of the company. He started to make a list, but when he got to five, he realized, “I hadn’t prioritized any of them… My overall vision lacked clarity and inspiration … I quickly landed on three clear priorities. They have guided the company since the moment I was named CEO.”

Here, in summary, are the priorities Iger presented to the board:

1) We must devote most of our time and capital to the creation of high-quality branded content. Great brands will become even more powerful in guiding consumer behavior.

2) We must embrace technology to the fullest extent, first by using it to create higher quality products, and then to reach consumers in more modern, more relevant ways.

3) We must become a truly global company by penetrating certain markets, particularly the world’s most populous countries, like China and India. 

Iger goes on to say, “The future was about organizing the entire company’s mission, all of our businesses, and every one of our 130,000 employees around these three priorities.”

Note the stark clarity and memorability of Iger’s three priorities – content, technology, globalization. They fit together as an integrated story. He doesn’t just list them; he explains their strategic logic. Most important, he doesn’t smother them by adding to them.

Determining the “right” number of priorities is not a mathematical formula, it is a cognitive one based on the limits of working memory. People can more easily internalize and act on priorities when we can weave them together into a compelling story like Iger did. When we we stretch the list, we lose the story.

Let me illustrate the impact of focus with a personal gardening story. I had planted geraniums on the balcony outside my home office in the hope of beautifying my view. Despite giving them plenty of care and feeding, they looked pretty miserable. I’m no gardener, so I appealed to my wife, Laura, for help. She grabbed her gardening shears and cut away large parts of these ailing plants. “What on earth have you done?” I asked her, looking in dismay at the few stems that remained. “I have released the power of pruning,” she replied. “Just wait a week to see the benefit.” Sure enough, one week later I had a bountiful array of geraniums, much admired by my guests and a source of pleasure for me.

The geranium example illustrates a universal law. Whenever you remove the unproductive parts of any system, all its remaining life forces will be concentrated on the few things that matter most and that system will flourish, whether it is your garden or your business.

Posted by Willie Pietersen at 11:41 AM

The Power of Communicating Without Words

“Action expresses priorities” – Mahatma Gandhi

Humans have the gift of language. But words are inefficient and often used to shield our real intentions. As social animals, we communicate more powerfully with our actions, although we are often not aware of this. When our words and deeds come apart, so does our integrity.

There are times when leaders are tested by devastating upheavals – when our very way of life is on the line. The current pandemic is a crisis of this kind. The prospects of a life-threatening illness combined with crippling economic hardship are our daily companions. We are also coping with the psychological consequences of prolonged social isolation, and more recently, with protests in the streets. At this crucial moment, everyone will be watching what their leaders do.

A few years ago, I visited Robben Island off the coast of South Africa where Nelson Mandela was imprisoned prior to his ultimate release and election as South Africa’s first black president. During his incarceration, he and his fellow prisoners were subjected to daily cruelty and humiliation, but Mandela conducted himself with courage, forbearance and dignity. His moral fortitude was a beacon not only to his fellow prisoners but also to his jailors.

Mandela was inspired by his favorite poem, Invictus, by William Ernest Henley. The final verse reads:

It matters not how strait the gate,

How charged with punishment the scroll,

I am the master of my fate,

I am the captain of my soul.

These reflections were churning in my mind while touring the prison. Our guide was a modest, matter of fact man, who had himself been a prisoner at the same time as Mandela.  We peppered him with questions, and he gave straightforward, unadorned answers.

“How long were you a prisoner here?” “Thirteen years.”

“Did you suffer a lot?”  “It was very unpleasant.”

“Are you angry?” “There is no point in that. I try to put it behind me.”

We were not going to get any histrionics from this man. Finally, I walked out front beside him as he led the group and struck up a more personal conversation. “I am interested in the idea of forgiveness,” I told him. “Usually we think of forgiveness as a response to a single injustice. But you were subjected to cruelty every day for 13 years. How on earth did you manage forgiveness in the face of that repeated onslaught?” He stopped, looked at me steadily, and said simply, “Mandela was here.” What was life-changing to this man was not what Mandela said. It was what he did.

Mandela, of course, was an icon. But the power of example is as true in our personal leadership roles as it is for our national leaders.

My father was a steady, deliberate man with a sturdy moral foundation. He was a man of few words and he lived by his values without fanfare or self-righteous declarations.  

In a prior article I wrote about my father’s patriotic act during World War Two. There was no conscription in my native South Africa, yet he decided to volunteer for the Allies and leave his young family to serve a cause he believed in. I vividly remember, as a young boy, watching the train pull out of the station as he started off on his long journey to Europe. Even then, I was aware that he was doing this for the simple reason that he believed it was right.

One great lesson endures for me. Watching my father’s quiet example taught me the crucial difference between purely physical courage and moral courage. The former can be done as an adventure, such as sky diving. The latter involves acting resolutely on principle and accepting the risks involved.

The power of communicating without words played out in an interesting way during my time as a CEO. I had occasion to appoint a new director of financial planning – an important role requiring a high level of critical thinking and analytical rigor. The HR department put forward two outstanding candidates, both of them women. Let’s call them Mary and Isabelle. During the first interview, both candidates showed they had superb professional qualifications and great experience. I could flip a coin and not go wrong. Afterwards, my assistant, Joanne, asked me, “What did you decide?” “I just don’t know,” I said. “Both would be excellent in the job. I need more information. Please arrange a second interview.”

In the second interview, I asked the candidates a different question: “Why do you want this job?” Mary folded her arms, sat back in her chair, and eloquently expressed her wish to make a meaningful contribution to the department’s priorities. When I posed the same question to Isabelle, she leaned forward eagerly, while voicing sentiments similar to Mary’s. But by sitting forward her whole body communicated enthusiasm and commitment. This gesture was totally in tune with what she was saying. That clinched it for me.

After the meetings, Joanne asked again, “Which one did you choose?” “It’s Isabelle,” I said. Joanne asked why. “Because she sat forward,” I replied. For a minute, Joanne looked perplexed. Then she smiled as she understood the significance of Isabelle’s body language.

As a CEO, I learned that there are other deliberate gestures that speak more loudly than words. One is deciding what goes to the top of the agenda in progress review meetings. We emphasize that there is nothing more important than our company’s priorities. But a speech is not enough. My golden rule was always to place the review of these priorities as item one on the agenda. This fortifies the message, “There is nothing more important than these.”  Items at the bottom of an agenda convey a silent message downgrading their importance, “We will get to these if we have time.” Another is the critical communication role of an organization’s measurement and reward system. There is a simple formula that spurs action without words: what gets measured gets done; what gets rewarded gets done repatedly.

A leader’s reactions speak volumes when confronted with bad news. Organizations can learn and improve only if they address reality and don’t bury their mistakes. It is vital that the unvarnished truth travels swiftly to decision-makers. Of course, it is natural to feel disappointment when bad news is conveyed to us. But we underestimate the impact of our non-verbal cues. Gaping with astonishment, rolling our eyes, scowling – these all project disapproval, even if we don’t say a word. The result is that the messenger feels personally indicted and discouraged from delivering bad news again. This habit of “shooting the messenger” through our gestures can lead to a breakdown in organizational learning.

At a recent workshop with a global company, I noticed how the CEO practiced the habit of asking probing, non-threatening questions that yielded more insightful discussions. His energetic curiosity was remarkable. In subsequent workshops, the participants followed the CEO’s example of pursuing questions to enrich their dialogue, even though the CEO was not present. The art of learning through questioning had become embedded in the culture of the firm. There were no instructions from the CEO to do this. An inspiring example motivates us to embrace change in ways that words alone cannot accomplish.

Navigating the current crisis requires leaders at every level to take tough, well-informed decisions that call on people to endure harsh sacrifices in the common interest. To succeed, leaders must serve as an unwavering role model for the behaviors they are advocating. Only then will they earn the credibility to deliver a message that will calm, fortify and unify their followers.

In the final analysis, what all this boils down to is authenticity – a seamless connection between our expressed values and our actions. To quote Ralph Waldo Emerson, “What you do speaks so loudly that I cannot hear what you say.”

Posted by Willie Pietersen at 5:16 PM