We understandably give a lot of attention to leaders who exhibit humility in today’s workplace. My experience has taught me that this quality goes a long way toward forming trust in your workplace relationships and building resilient cultures—both essential ingredients for winning outcomes. Where the need for humility often goes unnoticed is in strategic decision-making.
We tend to celebrate the courage behind risk-taking, especially when businesses win big, but there is probably a far greater number of decisions that we never hear about because they’ve gone south. Our skewed focus on the big wins may have us overlooking how important humility is in our strategy.
I recall that one of my first tasks as CFO at Prologis was helping the company unwind from a risk we took in expanding services beyond our core competencies. Prologis was and is the largest real estate company in the world that invests in warehouse space. If you’ve ever made a purchase online or in a store, chances are that it passed through one of our facilities.
Our business model was focused on real estate, which meant that we owned and maintained the exterior of our warehouses, and once we leased a space to a company, they took over the inside of the building. They owned the inventory they stored, the shelving they used to hold it, even the forklifts and trucks that transported their products.
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At the time, our leadership team had started to look for growth opportunities beyond leasing warehouse space and decided to stick our toes in the water with logistics. In other words, handling business inside the buildings we owned. This was a fundamental shift away from owning only the real estate.
Over the course of the next few years, we decided to invest what turned out to be roughly $1 billion into the logistics industry. We went so far as to explore a niche within the industry where we thought we could be successful: refrigerated logistics. Up until this point, we owned only dry warehouses because more than 95 percent of all goods do not need to be cold. We were in unfamiliar territory. Now we would also be responsible for operating the “inside business”—heavy machinery and inventorying equipment.
It was a disaster.
Many of our customers who leased warehouse space from us saw us as a competitor even if they didn’t operate in refrigerated space. They viewed our move as stepping on their territory and threatened to take away business from us. Some of them, in fact, did just that.
What’s more, we learned that what happens beyond the front door was dramatically different from handling the exterior. Staffing was a pain point. We now had to manage a blue collar work force, which was far different than the white collar employees we were used to. The business was also volatile and it was a capital hog. Our revenues were unpredictable and our buildings required a constant drumbeat of reinvestment due to the refrigeration required to run them. Those financial considerations and the lack of predictability of the business hurt our reputation with investors and the business became increasingly harder to manage.
Looking back, we went into the decision overconfident that we could succeed, and that overconfidence didn’t leave any room for exploring the potential risks. In retrospect, if we had the chance to evaluate this opportunity again, how might humility have changed the conversation? Here are some thoughts on how a humble lens might advance your strategy:
- Explore the outtakes. In the movie business, outtakes are scenes or sequences that are filmed but not included in the final version. Similarly, imagining different scenarios that could evolve based on your proposed direction can mitigate risk and improve the outcome. If documenting the sequence of events presents potential issues, be willing to leave those options on the cutting-room floor. Or at the very least, accept the consequences of your decision if you move forward.
- Avoid confirmation bias. An important layer to the step above is considering who you’ll involve as you evaluate scenarios. This can be a great exercise in avoiding confirmation bias: listening to all the input—not just the information that confirms your leanings. It also means listening to experience over opinion and emphasizing perspective taking. In the case I explained above, the team might even have entertained conversations with current customers to anticipate roadblocks.
- Create a truth-friendly climate. If you genuinely want input before making a strategic decision, create psychological safety to cultivate honest feedback. Soliciting everyone’s experience on the matter requires modeling openness, facilitating candid discussions, and a declaring that solving complex problems requires a variety of insights. Truth sayers help you answer the bigger questions: “How much risk is tolerable? What will it cost the company if it doesn’t work? How many and who will be affected? Can we recover from this decision?”
A leader makes an incredible number of decisions on a given day. Many of them have a significant impact on the bottom line. Leaders who are humble about weighing the risks involved in a decision do a better job of positively influencing their people to do the same. When more people in your company use a humble lens to evaluate their strategic options, your company’s batting average improves, and so do the home runs.