In 2006, the company renewed its commitment to move to the next level in fulfilling its strategic objectives in serving customers more effectively. Corporate leaders described some major behavioral, structural, and cultural changes that were needed — in effect, a major shift in “the way we do things around here.” This initiative sparked a new interest in understanding and working with the realities of the human brain.
Ameriprise: Cultivating the Counterintuitive
Around the same time, the leaders of Ameriprise Financial — a US$7 billion company that is the leading source of financial advice in the United States — began taking a fresh, dispassionate look at their own behavior. In 2007, an annual investor performance study from the research firm Dalbar showed that most investors consistently did less well as individuals than the market as a whole. Their instincts led them to miss some of the gains inherent in a volatile market. For example, when stocks fall sharply, a fully rational investor should step back and wait for a signal of what is going to happen next. But many investors rush to sell, fearing a further downturn, and move their money into cash or related interest-bearing products. This exacerbates their losses, because stocks often rise again soon afterward.
Ted Truscott, CEO of U.S. asset management at Ameriprise, stated it this way: “Remember, when you have the price, you don’t have the proof, and when you have the proof, you don’t have the price.” In other words, by the time investors felt comfortable with a stock (the “proof”), it was probably already priced too high to be a good investment. By seeking reassurance, investors were undermining their own portfolios.
The Ameriprise leaders prided themselves on building a better future for their customers, and the study results suggested an opportunity to enhance their own practices. Their advisory teams (either on staff or franchise holders) were not consistently giving clients the advice that would have helped them avoid this trap. “Being a great financial planner and advisor requires not only technical expertise,” concluded Kris Petersen, then the Ameriprise senior vice president of financial planning, “but an understanding of how people make decisions. Our clients are misbehaving with their money, and we have to do a better job of helping them.”
Jeff Marshall, a franchise leader in the Pacific Northwest, moved rapidly to put in place a new training program to change the company’s approach. But response was very limited at first. Of the 12,000 Ameriprise advisors, only several hundred signed up for that first round of training in 2007. Even many who were initially enthusiastic expressed doubt when they discovered that the training would take several months. Interest grew broader in late 2008, of course, after the financial crisis began. By then, Ameriprise leaders had recognized that they needed to confront deeply ingrained habits of thought, which required a thorough understanding of the limits and capabilities of the human brain.
The Principles of Change
A viable approach is emerging today that applies neuroscience to organizational change at dozens of companies like Cargill and Ameriprise. Specific practices vary from one workplace to the next, but they are always based on principles grounded in brain research:
• Habits are hard to change because of the way the brain manages them. Many conventional patterns of thinking are held in circuits associated with deep, primal parts of the brain that evolved relatively early. These include the basal ganglia, or the brain’s “habit center,” which normally manages such semiautomatic activities as driving and walking; the amygdala, a small, deep source of strong emotions such as fear and anger; and the hypothalamus, which manages instinctive drives such as hunger, thirst, and sexual desire. Information that is processed in these parts of the brain is often not brought to conscious attention.