Those impacts can be positive or negative depending on how leaders and managers leverage the effect.
The IKEA Effect is a cognitive bias where people place disproportionately high value on things they helped create, even if the end product is lower in quality. Multiple experiments have been run to validate this in various situations and from the perspective of a seller and a buyer.
Depending on the situation and perspective, the person who helped create something valued it between 50% more and five times more.
E = Q x A
Effectiveness (Return) = Quality (of Idea) x Acceptance (by Team)
Frank Blake who is the retired CEO of Home Depot summarized this formula very succinctly. This is the first thing you have to keep in mind when it comes to leading and managing a team. This formula becomes exponentially more valuable as a contractor navigates different stages of growth and must prioritize improvements.
Since people place a higher value on things they help create, that will increase acceptance and therefore improve effectiveness.
- How many times have you watched the same problems occur over and over on projects?
- How many times have you purchased new software or tools and had them underutilized?
- How many times have you had a new procedure not get traction?
- How many times have you added a new role to the team and had the team fall short on integrating them?
- How many times have you set out to pursue a new market and had difficulty?
We have all had these problems to some degree.
One trait that effective leaders (right mountain, right direction) and managers (consistent outcomes) both share is the ability to engage people collaboratively and align them while not abdicating responsibility. This is wisdom going over 2,500 years, well before the United States was formed and definitely before IKEA:
"A leader is best when people barely know he exists, when his work is done, his aim fulfilled, they will say: we did it ourselves." - Lao Tzu
The Dichotomy - Objective Quality Matters
Leaders and managers must balance this out to optimize the equation for the most effective outcomes.
If too much freedom is given beyond someone's capabilities, you both frustrate them lowering acceptance while also lowering quality. Effectiveness declines rapidly in this situation. It is one of the signs of a contractor at a growth inflection point.
Assuming you have the right leaders and managers in place, they will have the experience to make high-quality decisions very quickly. Akio Toyoda gives a great example of problem-solving capabilities ranging from 3 minutes to 3 months. For those highly experienced managers, they may be at 95% when it comes to the absolute quality of the decision but will fall short on both accountabilities of a manager:
- If they are managing a team of any size, they will fall short of delivering consistent outcomes because acceptance across the team will be lower.
- If they are within a growing business, they will stunt growth because they are not developing others on their team - their succession readiness and promotability will be low.
The Balanced Skillset
Leaders and managers must have a combination of two skills:
- Knowing what to do - to make good decisions within the boundaries of their job role.
- The ability to engage the full range of people they must work with and through, meeting them where they are at, then stretching and aligning them.
The skills for the latter grow with importance as the job role progresses from front-line technical supervision through CEO. It also changes dramatically with headcount.
