[INTERNAL MEMO]

Loss Accounting

Have you noticed every time we make a change, people react in different ways? Some people move past what I call “the resistance" in a few days. Others get stuck in it for months.

The difference actually is NOT about attitude. It's about how well someone handles loss. Most managers don't have a simple way to tell which is which. Here's how to figure it out, and what to do next.

First, you need to get the science behind it, because most managers get this part wrong. A change feels like a LOSS before it feels like a GAIN.

This isn't a mindset problem or attitude problem. It's just how people are built. Our brains like things that are known, comfy, and safe. The less time someone has spent working, the stronger this feeling usually is (they have less evidence to show uncertainty is not bad)

A loss feels about TWICE as bad as a gain feels good. So when you announce a change, people's brains focus on what they're losing first, not on what's coming next. (There are always exceptions, but this holds true most of the time.) The brain can quantify what it has to lose but not what it has to gain.

This is where you hear things like:

  • This shouldn't have happened.

  • I wish things were the way they used to be.

  • Why did we have to do this?

  • I'd be happy if we just went back to how it was.

We call this loss accounting.

Here's another reason this is tricky and STICKY (lol). Our brains want things to feel certain, even when life shows us they aren't.

Ask someone how they think their day will go.

Then ask how it actually went.

It almost never matches.

A kid gets sick. A deal falls apart. Someone calls in sick. A customer is upset.

Life is unpredictable every single day. Yet we still wake up each morning thinking today will go as planned. Change isn't the exception. It's the rule.

The people who struggle most with change are usually the ones who believed things would always stay the same. Part of YOUR job as a leader is to say this directly to your teams, instead of dancing around it.

There are three stages people go through with any change. This comes from a model called Bridges' Transition Model. It's worth knowing beyond just this message.

  1. Ending - This is when someone is stuck thinking about what they lost. The old process. The old team. The old way they got noticed. All the complaining happens here. If you ignore this stage, people check out. They look like they're following the new rules, but inside they're still working the old way.

  2. Neutral zone - The old way is gone. The new way doesn't feel easy yet. This is the riskiest stage because performance visibly dips. Most managers make one of two mistakes here: they panic and micromanage, or they decide the person "can't adapt" and give up on them. Both are wrong. A dip here is NORMAL! It's just part of learning something new.

  3. New beginning - The person is now good at the new way. The gain feels real, not just an idea. This stage often gets skipped by managers, because by the time someone reaches it, they’re already busy with the next problem.

Here's how to check which stage someone is in, instead of guessing off their tone. Ask them directly in your next 1:1: "What do you feel like you lost with this change?"

Their answer tells you the stage. You can also ask:

  • Do you see this change as good or bad right now? Why?

  • What's the hardest part for you?

  • What does this change mean for your role?

Once you know their stage, match your response to it.

Names a real loss (less visibility, less freedom, a skill they were proud of) → Ending. First, tell them you hear that the loss is real. Don't rush to "but this is better for you." Skipping this step is the #1 reason people stay stuck longer than they need to. They need to feel HEARD before they can move forward (I know, how annoying LOL)

Can't name a loss, but seems unsure, slow, or less confident → Neutral zone. Give them clear short-term goals. Check in more often. Tell them it's okay to be bad at this for now. Don't confuse this dip with them being incapable. Assure them this is the learning curve.

Already talking about what's better → New beginning. Say that out loud, in front of others if you can. This locks in the change for them, and shows the rest of the team it's safe to move forward too. Public buy in gets more buy in.

One more thing. Your OWN resistance sets the limit for theirs. If you're still talking about "the old way," your team will notice. They'll use it as an excuse to stay stuck too. Check yourself on this first before you check your team. The leader must always be steps ahead of the team.

This week: Ask that one question, "what do you feel like you lost," to every person on your team going through a change right now. Don't ask "how's it going," that tells you jack shit. Then you can sort their answer into one of the three stages above. Match your response to the stage, not their tone. Check back in two weeks and see if they've moved forward.

- Leila

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