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Passwords Are Terrible, but Will Biometrics Be Any Better?

May 11, 2017 - 10:11am

Passwords have become a ubiquitous requirement for consumers who want to perform any online activity in a secure environment. It’s safe to say that most of us are overwhelmed by the plethora of passwords (and associated security questions and protocols) we must keep track of just to access our online accounts. It’s become abundantly clear that passwords are an untenable way to secure our data online. And asking your customers to keep track of complicated log-in information is a terrible user experience.

Even when transactions require a two-step verification process — say, a text message delivering a code to unlock your account — there is no guarantee that the information is safe from the prying eyes (and fingers) of sophisticated thieves, hackers and other bad actors, who can easily use “digital signature” patterns to latch onto correct answers, break into people’s accounts, and steal sensitive personal information. Several recent instances of thieves hacking into IT systems at major corporations and cracking customer passwords to steal identifiable personal information underscore a vulnerability where even the most complex passwords provide very little protection.

The threat to security when relying on passwords is one reason businesses are increasingly migrating to biometric systems. Identity verification through biometrics can ensure greater security for personal information, while also providing customers with a more seamless experience in the digital environment of smartphones, tablets, sensors, and other devices.

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What makes biometrics so special is that they are industry agnostic. No matter the technology or device — e.g., fingerprint readers, retinal eye scanners, voice recognition systems, hand geometry, facial recognition, or even a new, “selfie”-based authentication method that MasterCard and USAA have rolled out — the idea is to verify someone’s identity with a high degree of assurance by tying it to multiple mechanisms at once, known as biometric modalities. These modalities, when used in concert, can provide a significantly safer environment for the customer, and are much easier to use.

Biometrics are also harder to manipulate than passwords and other two-step verification processes. While a bad actor could feasibly gain access to your thumbprint on the specific device it is stored on or to your digital voiceprint, if an app simultaneously requires a thumbprint, a retina scan, and a vocal recognition signature, it would be close to impossible for a bad actor to replicate that in the seconds needed to open the app. While this system is a much safer alternative to passwords, executives who are engineering new digital products, apps, and websites will need to find the right balance between security requirements and user experience. This is easier said than done, especially in an environment where customers expect to be able to interact with your product on multiple digital devices.

In our experience and advisory work with clients, we’ve frequently observed companies using a one-size-fits-all approach to the user security experience. When businesses invest in one particular type of biometrics (e.g., thumbprint or facial recognition), there is a tendency to force all of their customers into the same “digital straitjacket.” This offers users no choice in information security. One customer might be very comfortable in using their thumbprint to open social media apps, while another might flat-out refuse. When a company offers only one option, it severely limits its reach. A much better approach is to rethink security from a user’s perspective, offering personalized options.

Consider this example of an omnichannel biometric security experience. Let’s say that a customer uses their thumbprint to log in to their mobile banking app, which knows that the customer is standing only a few feet away from the ATM. Based on the user’s known preference, the app can either ask if the person would like to withdraw money at that ATM or ask them to proceed to the machine and authenticate the traditional way, with chip card and pin. The customer may also want this preference to change based on the dollar amount they would like to withdraw. For example, if under $200, they may feel comfortable with the mobile banking app withdrawing money at the machine. But they may consider a larger amount to be a riskier transaction, and in such cases may prefer the security of inserting the chip-enabled card and entering a PIN into the ATM. It’s all about delivering a seamless digital experience, aligned to the preferences of individual customers, that combines speed, accuracy, safety, and ease of use.

Cyberattacks and fraudulent transactions are increasing in their sophistication and impact, making the balance between customer experience and security more complex and more challenging than ever. Ensuring the proper balance between security requirements and customer experience is key to driving the optimal digital experience and, ultimately, the right business outcomes. Our research has shown that customers are more likely to stay with a company — or switch to another company — that offers better security and transparent communications around how they approach security and remediate problems.

Client-centric security experiences can create value for customers by giving users what they expect from digital security: the ease and convenience of doing business seamlessly in a safe environment.

Obsess Over Your Customers, Not Your Rivals

May 11, 2017 - 9:00am

Dave Wheeler for HBR

The starting point of most competitive analysis is a question: Who is your competition? That’s because most companies view their competition as another brand, product, or service. But smart leaders and organizations go broader.

The question is not who your competition is but what it is. And the answer is this: Your competition is any and every obstacle your customers encounter along their journeys to solving the human, high-level problems your company exists to solve.

When I led marketing at MyFitnessPal and was asked about our competition, I think people always expected me to rattle off a list of other nutrition-tracking smartphone apps and weight-loss programs.

What I actually said was that we were on a mission to make it easier to live a healthy life than an unhealthy one. So our chief competition was anything that makes it harder to live a healthy life. This included biology (fat tastes good, sugar is delicious, and our brains are wired to want more of both); mindless eating; and the billion-dollar advertising and marketing budgets of companies that make fast food, junk food, and processed food. Our competition was the fact that in many situations healthy food is actually more expensive and less convenient than unhealthy food is.

If we had viewed Weight Watchers as our competition, we probably would have spent a lot of time trying to do what it does, just a little better. Maybe we would have raised money to get more-famous celebrity spokespeople, or tried to come up with some sort of next-generation points system.

Sure, someone in your company needs to understand the marketplace: who your competition is, what other products are on the market, and how they are doing, at a basic level. But there’s a point at which paying attention to other companies and what they’re doing interferes with your team’s ability to immerse itself in the world of your consumer. Focusing on competitive products and companies often leads to “me-too” products, which purport to compete with or iterate on something that customers might not have liked much in the first place.

In my recent study of over 2,000 consumers, over 50% of them said that they use digital and real-world products and content at least three times a week in an effort to achieve their goals around living healthier, wealthier, and wiser. The brands that remove obstacles and encourage progress along their customers’ journeys are the ones that win repeat visits, repeat purchases, and word-of-mouth referrals.

Once you’ve redefined your competition as your customers’ obstacles, it’s relatively easy to stop propagandizing the war with another product or company. Stop setting goals by reference to other companies. Minimize how much meeting time is devoted to talking about rival companies and products. Discourage product design approaches that focus on assessing or iterating on what is already out there.

Instead, reinvest your team’s time and effort. Here’s how.

First, rethink what you sell. Most companies think they sell a product. To transcend strictly one-time, transactional relationships with your customers, your company must think about selling a transformation: a journey from a problematic status quo to the new levels and possibilities that will unfurl after the behavior change you help make happen.

A real-estate search engine might actually “sell” wise decision making, through the process of making the largest transaction their customers will ever make. CVS Health “sells,” well, health.

Next, rethink your customers. They are not just the people who have purchased your product or the people who follow you on Facebook. Your customers are all the people who grapple with the problem your business exists to solve.

Now, focus on their problems. Engage in customer research, online and in the real world, to understand and document their journeys. I don’t mean their customer life cycle with your brand. Map out your (redefined) customer’s journey from having the problem you exist to solve to no longer having that problem. That may be the journey from unhealthy to healthy living, or from being broke to being a good steward of their finances.

One of the most important takeaways from your customer insights research should be a deep understanding of the decision traps, pitfalls, friction spots, and quit points that people frequently encounter on their journeys. Look to user data, surveys, ethnographic research, online listening, subject matter experts, and even third-party data to discover roadblocks. Use this information to do a continuous “competitive analysis”:

  • Understand the obstacles your customers face
  • Learn how and where people get stuck
  • Solve those problems
  • Understand how people overcome the obstacles and get unstuck
  • Understand what stops others from achieving this success
  • Solve those problems
  • And so on

Here’s the “competition” rubric we operated under at MyFitnessPal:

Competition is: Everything that makes it harder for people to live a healthy life rather than an unhealthy one.

More specifically: Biology, food autopilot, the cost of healthy food, the tastiness and convenience of unhealthy food, and everything that makes it hard to build healthy habits such as food tracking and home cooking.

Innovations driven by obstacle-as-competition insight:

  • In-app bar code scanner to make it easy to track packaged foods
  • Massive food database, so users never have to enter nutritional data
  • Social features and challenges for support, accountability, and competition
  • Recipe-logging features for home-cooked meals
  • Content, marketing, and PR campaigns featuring user success stories, advice on making and breaking habits, cost-effective recipes and cooking tutorials, and other messages tailored to remove the frictions commonly encountered on the journey from unhealthy to healthy.

And it’s working. People who have even a single friend on MyFitnessPal lose twice as much weight as people who don’t use the app’s social features. MyFitnessPal users who log home-cooked recipes lose 40% more weight than those who don’t. The bar code scanner and food database are consistently mentioned by users who have lost weight despite having been unsuccessful with all manner of diets before. And over 120 million people worldwide now use the platform.

Amazon CEO Jeff Bezos once said, “If we can keep our competitors focused on us while we stay focused on the customer, ultimately we’ll turn out all right.” I take this one step further: If you can stay focused on eliminating the obstacles along your customers’ journeys, your company will turn out much more than all right.

Research: The Rise of Superstar Firms Has Been Better for Investors than for Employees

May 11, 2017 - 8:05am

Few things are stable in economic life. Sixty years ago, Nicholas Kaldor laid down one seemingly immutable fact: The share of the national income taken by labor was constant. In other words, every year workers took home around two-thirds of the economic pie, and the owners of capital took the rest. The stability of this ratio was, as his fellow Cambridge economist Lord Keynes said, “something of a miracle.”

So much for miracles. In America, labor’s share has been on the decline for about three decades, and it has accelerated since the turn of the century. The fall has also occurred in most other countries. In the U.S. the share of income that workers take home each year now hovers around 60%.

 

There’s a lot of debate over the magnitude of the decline, but there is broad consensus that it has happened and that it’s a big deal. The disagreement is over why labor has been losing out.

Maybe the leading story is “Robocalypse Now.” Rapid technological advance in computers and automation has led to a huge fall in the quality-adjusted price of capital equipment. Firms replace expensive people with cheaper machines, and the fraction of added value going to workers falls — or so the story goes.

The problem with this story is that it assumes firms have the flexibility to switch easily between labor and capital. In wonkish terms, the capital-labor elasticity of substitution must be greater than one for this hypothesis to be true, so that a fall in the price of machines spurs employers to spend more on machines relative to workers. The empirical evidence does not suggest that labor and capital are sufficiently substitutable for this to occur.

The other main explanation for labor’s downfall is that Chinese imports have caused employers to outsource employment to Asia, causing a fall in the labor share domestically, even if labor utilization does not fall globally. But the data shows a fall in labor’s share in nontraded sectors like retail and wholesale, not just in traded sectors like manufacturing. Moreover, China itself is experiencing a sharp decline in labor’s share. Thus it’s unlikely that China is the main cause of the decline in the labor share in the West.

In a recent paper, we put forward a different story based on the rise of superstar firms. More and more industries have become “winner take most” over the last 40 years. Firms with a cost or quality advantage have always enjoyed higher market shares. In the “good old days,” more-productive companies would take a bigger slice of the market, but there would be plenty left over for their rivals. By contrast, the new behemoths of our age capture a much larger fraction — if not all — of their market. Think of Google, Apple, and Amazon in the digital sphere, or Walmart and Goldman Sachs in the offline world.

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It’s not that superstar firms pay lower wages; in fact, on average, big firms usually pay more. But wages at superstar firms represent a smaller fraction of sales revenue. Superstar companies make lots of profit per employee, so as they become a bigger and bigger part of the economy, the overall share of GDP going to labor goes down.

Several pieces of data support our superstar theory. First, our theory predicts that markets will become increasingly concentrated, and sure enough that’s what the data shows.

A second implication of the theory is that the labor share in the average firm won’t have changed very much. Our data confirms that this is the case. What’s happened is that the mass of the economy has shifted between firms, toward the superstar companies.

Third, the industries that have become more concentrated are the very same sectors where the labor share has fallen the most. These are the industries where the reallocation toward superstar firms has increased the most.

The rise of superstar firms isn’t simply a reflection of a rigged economy where the incumbents are colluding to rip off consumers and workers. The patterns we document are not confined to the U.S.; they are happening all over the world. That suggests that changes in antitrust law or other policy-specific factors can’t be the primary driver.

If policy isn’t driving rising concentration, what is? One possibility is that the near-frictionless commerce enabled by the internet and globalization enables more efficient firms to be rewarded with higher market shares today than in the past. Indeed, we show that the industries where concentration has risen the most are also those where there has been the fastest growth in productivity and innovation.

Does this mean we should be relaxed about the move to an economy dominated by superstar firms?

No, for at least two reasons.

The declining labor share has been coupled with a slowdown of economic growth, which means declining pay and job opportunities for the average worker. In effect, workers are getting a shrinking slice of a barely expanding pie.

And although superstar firms may have become dominant through competitive means, they may cement their position using methods that are less benign. Large, profitable firms invest heavily in lobbying to protect their advantage, skewing the political system. They may pursue business strategies that make it hard for new challengers to grow and flourish. Microsoft became a near-monopolist in operating systems through innovation and good decisions, but then strove to keep entrants like Netscape out of the market. Even when superstars fail to deter competitors, they can often just buy up the new threat, as Facebook has with Instagram and WhatsApp.

The risk is that the dominance of superstars will eventually contribute to a fall in economic dynamism and productivity that will further entrench their power. Left unattended, this may stoke popular resentment of big business or big government, or both. Arguably, this process is already well under way.

How to Manage a Narcissist

May 10, 2017 - 12:35pm

George, a senior executive of a large internet provider, was a participant in one of my leadership development programs. Although a very talented individual, he was seen as a nuisance within the group. He tended to monopolize the conversation, whatever the topic. All agreed that he was not a good listener. Whenever someone else spoke, he would quickly become impatient and try to change the topic to something closer to his interests. And he had a habit of devaluing others’ work while overemphasizing his own successes. It was quite clear to the other participants that George viewed most people as far below his standards. It wasn’t surprising that most of group did not like George and found it very difficult to deal with him.

Often, it seems that having a narcissistic disposition — grandiose, self-promoting, larger than life — is a prerequisite for reaching the higher organizational echelons. Narcissistic people can be charismatic and manipulative, which helps them get ahead. But although their drive and ambitions can be effective in moving organizations forward, excessive narcissistic behavior can create havoc and lead to organizational breakdown. Envious as they are, narcissistic people always strive to win, whatever the costs. They see themselves as “special,” and only associate with other “special” or high-status people.

Furthermore, narcissistic individuals have a strong sense of entitlement. When they don’t receive the special treatment that they believe they deserve, they become very impatient or get quite angry. Given their self-serving mindset, it’s difficult for them to recognize or identify with the feelings and needs of others. Empathy doesn’t come naturally. As narcissists are quite thin-skinned, they have difficulty handling criticism; they very quickly feel hurt, overreact, and get defensive. Although they may give off an impression of having high self-esteem, the opposite is often the case. Underneath the confident exterior, they are troubled by a deep sense of insecurity. Their bravado is a heroic effort to compensate for their profound vulnerability. They treat positive attention as a kind of painkiller.

This all creates challenges for those who would manage narcissistic individuals. Making matters worse, narcissists refuse to acknowledge that they have a problem. Why would they ask for help, when they think that they are better than anybody else? How can they learn from mistakes if they can’t admit that they’ve ever made one?

Psychiatrists have tried many forms of intervention with narcissistic individuals. All of them take time. Personality traits don’t change quickly, if at all. So what can managers do? From my experience running leadership workshops, I have learned some techniques that offer promising results. Here’s my advice.

Create a strong sense of team cohesion. A group setting makes dysfunctional acting out more noticeable, more controllable, more discussable, and therefore less acceptable. Peer pressure will push the narcissist to adapt to the group’s norms. Thus, it is the peers that will take on the role of “enforcers,” to encourage the narcissist to listen and empathize with others.

Use this strong team to promote peer feedback. For narcissists, it’s often less threatening to receive feedback from peers, rather than from a single person or leader. Of course, feedback from many people is harder to ignore than feedback from one person. If the dynamics of the group are facilitated effectively, the narcissist’s view of themselves will be revealed, mirrored, challenged, and can be modified.

Create a safe, somewhat playful space. This can become an environment where people with a narcissistic disposition learn to develop trust, explore boundaries, accept feedback, and increase self-awareness. In such a setting, the narcissist’s peers will be able to constructively confront problematic behavior while simultaneously offering a modicum of understanding.

Don’t confront the narcissist directly. Instead, support the team. Returning to George, the group facilitator was very careful not to confront him too forcefully when he acted inappropriately in the group leadership development sessions. When needed, the facilitator would empathize with George (showing surprise and hurt) as a result of the confrontations with and feedback given by his peers. At the same time, the facilitator empowered George’s peers not to accept his way of dominating the conversations, to interrupt him when he went on for too long, and thus to make him realize that he didn’t always need to be the smartest person in the room.

As time went by, George learned to empathize with others. As he practiced listening, he learned from their experiences. He discovered that constructive criticism from the others could be helpful, rather than devastating to his self-esteem. George eventually came to realize the inappropriateness of many of his expectations, and that the world didn’t revolve around him alone. He began to internalize some of the behavior patterns of the others, which, he discovered, were more effective ways of dealing with the challenges of life.

Of course, dealing with narcissists will always be a challenge, be it in a group setting or otherwise. Some of these people will not be able to tolerate the pressures from the group. They will not be able to deal with critical feedback from peers, and may decide to quit.

But a manager’s biggest worry should not be losing their narcissist; it should be that other team members will be the ones to resign, tired of the way narcissists need to be catered to. It’s hard to deal with a narcissist’s sense of entitlement, lack of empathy, and need to feel special. But if you can create a group dynamic that keeps those tendencies in check and that helps develop the self-awareness of everyone on your team, you’ll keep your best people — and get the best out of the rest.

How to Get Experts to Work Together Effectively

May 10, 2017 - 12:10pm

How should teams of experts working on knowledge-intensive projects be structured? Should they be hierarchical? Or will flexible, self-organized groups perform better? 

Teams often struggle with how to get the most value from the members’ expertise, to minimize conflict, to integrate their diverse expertise, and to leverage it during all phases of a project.

The traditional approach is to put the person with the most experience and expertise in charge — for example, a head coach or a chief programmer. The assumption is that this person has the expertise to make the best decisions about how to allocate tasks and responsibilities. Teams that adopt this model feature a rigid hierarchy, whereby final decisions are centralized through this single, formally designated individual.

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The downside of this approach is that when projects increase in complexity and team size, the central individual can become a communication and coordination bottleneck for the team.

Another approach is to let teams self-manage. This approach is evident in, for example, agile software development methods. The assumption of this model is that team members are best equipped to match skills with needs and to organize their own tasks accordingly. These teams are characterized by broad, open sharing of expertise and by decentralized decision making. While this approach allows ideas to flow freely, it dramatically increases the number of people who need to frequently interact with each other. Thus the approach increases coordination demands and can reduce efficiency.

Whether centralization (star structure) or decentralization (wheel structure) leads to better team performance has been a long-standing debate in team management. Most managers recognize the inherent challenges in each model. Perhaps intuitively, many seek a spot in between: neither strict hierarchy nor boundless flexibility. But is this really the best way to work?

Our research reveals an unexpected answer.

We studied how expertise was organized in 71 software development teams in a large U.S. high-tech company during the design and implementation phases of projects. A total of 484 individuals participated in our study; they had an average of 12 years of experience. We asked team members to nominate up to four individuals with design expertise on each team and up to four individuals with technical expertise. Next, we asked them to assess how valuable the named individuals’ expertise is to their work. (We calculated a team’s network of expertise by weighing how valuable their expertise was to their work.) We then created a network map of team expertise, based on the nominations and weighted by the reported value. This allowed us to use social network analysis to calculate the centralization of expertise for each team in the design phase and in the implementation phase.

To our surprise, we found that the highest-performing teams were the ones that adopted a different configuration of expertise depending on the needs of the project phase. They decentralized design expertise when identifying solutions, and then centralized technical expertise to build them.

Additionally, if the knowledge required for the project was complex, novel, or otherwise difficult to share, decentralizing expertise during design and centralizing it during implementation became even more important. Teams following this pattern achieved higher ratings on multiple measures of performance: higher coordination success, less team conflict, increased team effectiveness, and higher client satisfaction.

Our findings suggest that different project phases require different ways of organizing expertise. Rather than doggedly following either a strictly centralized or decentralized approach, teams should recognize that the design and implementation phases deal with different kinds of knowledge. Specifically, in complex knowledge work the design phase favors divergent, creative exploration of a broad canvas of conceptualizations and ideas. Decentralized configuration of expertise is appropriate for this phase because:

  • By broadly eliciting and sharing expertise during the design phase, high-performing teams can achieve a better understanding of ill-structured, poorly understood problems, and converge on and design an optimal solution.
  • While figuring out what needs to get done — encompassing requirements, gathering, and design — a decentralized approach reduces team conflict and leads to more effective solutions.
  • Broadly tapping team members’ expertise reduces the risk of myopic, insular thinking that can occur in a rigid hierarchy. This was confirmed by our finding that the more difficult it was to articulate a design problem, the more important it was to involve team members broadly.

Later, as the team moves into implementing that solution, centralizing expertise more narrowly among a few designated experts is appropriate because:

  • Building out a solution favors convergent deep knowledge of how best to concretely implement a solution.
  • Centralizing design expertise avoids the pitfalls of analysis paralysis. During implementation phase, a focus on building leads to increased efficiency.
  • For implementing an already identified and specified design, having centralized expertise and clearly defined roles and responsibilities reduces team conflict and reduces coordination requirements.

This research suggests that when managers are staffing, organizing, and managing knowledge projects, they should embrace flexible organization of expertise — based on the needs of the project phase — in order to maximize team performance.

Preparing for the Cyberattack That Will Knock Out U.S. Power Grids

May 10, 2017 - 11:00am

Cyberattacks are unavoidable, but we’re not going to stop using computerized systems. Instead, we should be preparing for the inevitable, including a major cyberattack on power grids and other essential systems. This requires the ability to anticipate not only an unprecedented event but also the ripple effects that it could cause.

Here’s an example of second-order effects (though not caused by a cyberattack, they’re a good way to think through what could happen in an attack). In February 2017, an area of Wyoming was hit by a strong wind storm that knocked down many power lines. It took about a week to restore power, due to heavy snow and frozen ground. Initially, water and sewage treatment continued with backup generators. But the pumps that moved sewage from low-lying areas to the treatment plants on higher ground were not designed to have generators, since they could hold several days’ worth of waste. After three days with no power, they started backing up. The water then had to be cut off to prevent backed-up waste water from getting into homes. The area had never lost power for so long, so no one had anticipated such a scenario.

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Now think about what would happen if a cyberattack brought down the power grid in New York, for example. New Yorkers could manage for a few hours, maybe a few days, but what would happen if the outage lasted a week or more? For an example of the kind of disruption such an attack could cause, consider the 2011 Japanese tsunami. It knocked out both the power lines and the backup generators at the same time. Either event could have been managed, but both occurring at the same time was a disaster. Without power, the cooling systems in three nuclear reactors failed, resulting in massive radiation exposure and concerns about the safety of food and water. The lesson: We need to prepare not only for an unexpected event but also for the possible secondary effects.

Based on conversations I’ve had with experts in the field, preparedness for a major cyberattack like this is low, regardless of whether you’re talking about the regional or city level, or the private sector. As Lawrence Susskind, a professor in MIT’s urban systems department, described it to me, “Millions…could be left with no electricity, no water, no public transportation, and no waste disposal for weeks (or even months)…. No one can protect critical urban infrastructure on their own. Nobody, though, is showing any leadership.”

In our research consortium at MIT Sloan, we have been studying ways that massive physical damage can happen to power grids and other industrial control systems through a cyberattack. The potential for massive damage is alarming, to say the least. The scenario of losing power for a long time — weeks or even months — is not unthinkable. We went through this recently at MIT when the institute’s cogeneration facility had a turbine failure. It wasn’t due to a cyberattack, but rather to a mechanical failure from a defective nozzle. It took three months to source the necessary parts from Germany and fix the turbine, even though the possibility of such a failure was more likely to be expected than a first-of-its-kind cyberattack might be.

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You may be wondering why a major cyberattack of this nature hasn’t already occurred. There are three necessary conditions for it to happen: opportunity, capability, and motivation. There are plenty of opportunities to launch a cyberattack, as Iran learned when its uranium enrichment facility was attacked by Stuxnet. There is also plenty of capability out there. As I sometimes say, “The good guys are getting better, but the bad guys are getting badder faster.” The tools to accomplish attacks are increasingly available on the dark web at decreasing costs, including troves of cyber tools stolen from the NSA and CIA. Just look at the Ukraine power grid attack in 2015, where the attackers used several different techniques, such as spear phishing and denial-of-service attacks, that were all readily available on the black market of the internet.

So, our saving grace at the moment is motivation. While there are some state actors who might want to shut down a major power grid in another country, the possibility of retaliation acts as a deterrent. But that equation changes when you consider actors like North Korea or ISIS, or any disgruntled group in the world that might proceed regardless of the consequences. Even criminals are an increasing risk. Here in the Boston area, we have seen ransomware attacks on local police departments. How much “protection” might the governor pay to prevent a state-wide shutdown of essential services like power generation? Questions we should all be asking include: If the power grid is breached and all the electric-start generators fail too, what do we do? What’s the backup plan for the backup plan? What happens to our food supply? Our water supply? Our sewer systems? Our financial systems? Our economy?

When it comes to being prepared for a significant cyberattack, there are three essential elements. Some are actions that we can take on our own, such as having backups in place for key systems and for secondary systems. Some are actions best undertaken by government, such as guidance on the important steps to take when a major cyberattack happens. Finally, there are things that require public-private collaboration. For example, the NIST Cybersecurity Framework provides companies with guidelines on cyber protection, but companies need to determine what actions to take. Much more is needed, beyond the current NIST framework, to address the specific threats that I have described.

This isn’t rocket science. But it does involve systems-level thinking about how everything is connected, and considering the layers of interdependencies. For example, hospitals might have backup generators, but what about the supply line for refueling? If the refueling stations need electricity to operate pumps, what is the plan? A few states, including Florida, have introduced regulations to address this concern, but only for outages of 72 hours.

We need innovative, systems-level thinking — and a sense of urgency — to mitigate the impact of a major cyberattack. And we need it now.

Research: The More Essential Your Job Is to Your Company, the Happier You’ll Be

May 10, 2017 - 9:31am
Steven Moore for HBR

Say you’re a lawyer, and you’re evaluating competing job offers — one from a law firm, and the other for a general counsel role in a tech company. Which one should you take?

This is a complicated question, and one that professionals face all the time. If you’re a marketer, you have to decide whether you’d prefer to work for a marketing agency or in the marketing department of an organization. If you’re a programmer, you have to decide between jobs in the technology field and technological jobs in nontechnical organizations — law firms, publishing companies, universities, and so on.

While anyone’s choice will be influenced by a host of factors, from work-life balance to salary considerations to company culture, our research suggests that one factor to consider carefully is the extent to which the role is crucial to the organization’s mission. Roles that are “lynchpins” — a lawyer in a law firm, a marketer in a marketing agency, a programmer at a tech company — confer a host of benefits on the people who have them.

Over a series of five studies, we set out to learn what an organizational lynchpin looks like and to understand the benefits and costs of being in a lynchpin role. A core lynchpin position is one that offers critical, irreplaceable resources — that is, without these resources an organization could not achieve its primary goals and mission. A law firm cannot provide legal services without lawyers, for example, but a tech company could continue to operate for a long time without a general counsel. For any given role, the more pervasive its activities are in the company and the more immediately they would cease if the role went unfilled, the more core that position is.

It’s important to note that anyone in any role can be a core employee — someone who possesses valuable and unique knowledge, skills, and abilities. However, even core employees may hold a peripheral position in an organization. For example, a lawyer in a high-tech company (as opposed to a law firm) may be a great asset to the company, but because the job is not critical to the tech company’s mission, the lawyer is essentially peripheral. Conversely, not all employees who are in lynchpin positions become core employees. For example, in a law firm there are both partners (core) and associates (noncore). Both can reap the psychological benefits of being in a lynchpin position.

Across three studies with over 800 participants, we developed and validated a scale to assess four dimensions of a job’s “lychnpinness”: (1) how critical the work produced in the position is to the organizational mission; (2) whether the work can be performed or substituted by another position; (3) if nobody were to do this work, how immediately other work activities would cease; and (4) if nobody were to do this work, how many other work activities would cease (i.e., how pervasive the impact would be). It is these four attributes — criticality, nonsubstitutability, pervasiveness, and immediacy — that make an organizational lynchpin.

However, one might ask whether a self-reported measure of lynchpin status is valid. After all, many of us like to think that what we are doing at work is critical and irreplaceable. We conducted an additional study to assess whether there’s consensus among employees in different positions about which roles are the lynchpin ones. We asked 76 tenure-track faculty and 215 employees who held other positions within the same university to evaluate the lynchpin status of tenure-track faculty. We found a high consistency between the self-reported and other assessments. That is, employees holding other positions (as well as tenure-track faculty themselves) agreed that tenure-track faculty represent lynchpin positions within a university. While it’s possible that the role faculty play in a university is more obviously core than the role played by different employees in, say, a consumer goods firm, our findings tell us that there is a likelihood that employee self-reports are accurate.

The Advantages of Being an Organizational Lynchpin

Is being an organizational lynchpin all that it is cracked up to be? For instance, while being needed and important may enhance job security, it may not always be enjoyable if it results in long hours or frequent interruptions. With our scale in hand, we studied what benefits being an organizational lynchpin may produce. We predicted that being a lynchpin would lead to greater perceived meaningful work and higher emotional commitment to the organization, while at the same time leading to lower levels of perceived job insecurity and less job burnout. Surveying nearly 700 employees in many organizations, we found that criticality, nonsubstitutability, pervasiveness, and immediacy predicted more meaningful work, more emotional organization commitment, and less job insecurity and burnout. We found no downsides.

The major implications of our research for individuals regard career choices. When individuals enter the job market, they should consider whether the job is core or peripheral to their potential employer. Occupying a lynchpin position may offer greater opportunities to experience meaningful work, commitment to the organization, and less job insecurity and burnout. (One caveat is that we only tested these four factors; it’s possible that lynchpin roles may have downsides that we haven’t uncovered yet. It’s also possible that there are some downsides but the upsides make up for them, at least for most people.) Holding all else constant, a person might be advised to work for an organization where one’s position would be a core one.

There are also implications here for intra-company career moves. If your company offers you a transfer to a more core position, it’s worth considering. Although core positions often come with greater responsibility, employees should understand, counter to conventional wisdom, that such a position may be less likely to burn them out. Conversely, accepting a peripheral position may have unanticipated adverse consequences as a result of not being “in the thick of things.”

Most organizations want to keep their employees satisfied, especially employees who do important work in core positions. But our research suggests that organizations may get a better return on their engagement efforts if they purposely target employees in peripheral positions. After all, employees in peripheral positions are less likely to see their work as meaningful, have lower levels of emotional attachment to the organization, and are more likely to feel job insecurity and report burnout. Therefore, they may have the most to benefit from organizational efforts to enhance employee well-being.

To Be More Creative, Schedule Your Breaks

May 10, 2017 - 9:00am

Imagine that on a Friday afternoon, before leaving work to start your weekend, you are asked to solve two problems that require creative thinking. Do you:

  • Spend the first half of your time attempting the first problem and the second half of your time attempting the second
  • Alternate between the two problems at a regular, predetermined interval (e.g., switching every five minutes)
  • Switch between the problems at your own discretion

If you are like the hundreds of people to whom we posed this question, you would choose to switch between the two problems at your own discretion. After all, this approach offers maximum autonomy and flexibility, enabling you to change tracks from one problem to the other when you feel stuck.

But if coming up with creative answers is your goal, this approach may not be optimal. Instead, switching between the problems at a regular, predetermined interval will likely yield the best results, according to research we published in the March issue of Organizational Behavior and Human Decision Processes.

Why is it the case that switching at your own volition, the approach most participants in our study took, may not generate the most creative outcomes? Because when attempting problems that require creativity, we often reach a dead end without realizing it. We find ourselves circling around the same ineffective ideas and don’t recognize when it’s time to move on. In contrast, regularly switching back and forth between two tasks at a set interval can reset your thinking, enabling you to approach each task from fresh angles.

In an experiment, we randomly assigned participants to one of the three approaches. Participants who were instructed to continually switch back and forth between two problems at a fixed interval were significantly more likely to find the correct answer to both problems than participants who switched at their own discretion or halfway through the allotted time.

A second study focused on creative ideation. In this experiment, the problems we posed had no right answers. We wanted to find out whether the benefits of stepping away from a problem at regular intervals transferred to other types of problems warranting creativity, such as brainstorming.

We once again randomly assigned participants to one of our three task-switching approaches and asked them to generate creative ideas for two different idea generation tasks. As in the first study, most people believed that they would perform best if they switched between the two idea generation tasks at their own discretion. We again found that participants who were instructed to switch back and forth between the two idea generation tasks at a fixed interval generated the most novel ideas.

The issue with both other approaches seemed to be that people failed to recognize when rigid thinking crept in. Participants who didn’t step away from a task at regular intervals were more likely to write “new” ideas that were very similar to the last one they had written. While they might have felt that they were on a roll, the reality was that, without the breaks afforded by continual task switching, their actual progress was limited.

The creative benefits of switching tasks have been supported by other research. For example, Steven Smith and his colleagues found that individuals instructed to list items from different categories while continually switching back and forth between the categories listed more novel ideas than individuals who listed items from one category before switching to listing items from the other. In a similar vein, other studies have found that brief breaks during idea generation can increase the variety of ideas generated. These researchers’ findings, coupled with ours, suggest that the hustle and bustle of your daily work life may facilitate your creativity if it leads you to step away from a task and refresh your thinking.

When you’re working on tasks that would benefit from creative thinking, consciously insert breaks to refresh your approach. Set them at regular intervals — use a timer if you have to. When it goes off, switch tasks: Organize your reimbursement receipts, check your email, or clean your desk, and then return to the original task. If you’re hesitant to break away because you feel that you’re on a roll, be mindful that it might be a false impression. We tend to generate redundant ideas when we don’t take regular breaks; ask yourself whether your latest ideas are qualitatively different. Finally, don’t skip your lunch breaks, and don’t feel guilty about taking breaks, especially when you are feeling stuck. Doing so may actually be the best use of your time.

How to Nourish Your Team’s Creativity

May 9, 2017 - 11:00am

CEOs in a recent poll agreed that creativity is the most important skill a leader can have. What seems less clear is how to actually cultivate it. Every leader is hoping for that next great idea, yet many executives still treat creative thinking as antithetical to productivity and control. Indeed, 80% of American and British workers feel pressured into being productive rather than creative.

Leaders can’t afford to have people holding back potential breakthroughs. Knowing this, it is important to recognize that radical, disruptive thinking is not something that can be mandated. Too many leaders try to demand creativity on the spot: They offer cash rewards for new ideas, sequester teams in endless brainstorming sessions, and encourage competitive hierarchies that reward some people for out-innovating others. While all of these strategies are intended to manifest organizational creativity, none do — and they often backfire.

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As Teresa Amabile and Mukti Khaire explain, “One doesn’t manage creativity. One manages for creativity.” Your role as a leader is to create a working environment in which critical thinking, new ideas, and creative solutions can flow unencumbered. Here are a few guidelines for bringing out your team’s creative best.

Define creativity for your organization without making it a formula. Tom Stillwell, CEO of the Clio Award–winning marketing agency Midnight Oil, explains: “Creativity can be very expensive if you aren’t careful. You could dive into work without clarity on what creativity you want, and end up churning time, energy, and money without results.”

So the first step is to define your terms. If you treat concepts like “design thinking” and “disruptive innovation” as mere buzzwords rather than as muscular strategic concepts, you will end up spinning your wheels, and maybe even stifling creativity.

To create growth, idea creation must be directed toward the benefit of the organization and the customers it serves, something that can only happen through a shared clarity on what creativity means and the purpose it serves to differentiate you from competitors. Take care not to overextend that clarity into a rote formula. Too many R&D groups, with the noble intention of creating “innovative efficiency,” try to codify their innovation processes with such precision that they neuter imagination. A clear definition of the role creativity plays in executing your strategy should get everyone on the same page, ensuring that the entire organization is working toward shared goals.

Strike a balance between art and commerce. In a company, creative thinking must occur on a spectrum between art and commerce. New ideas that exist purely in the realm of art, or creativity for creativity’s sake, won’t necessarily drive the organization forward. And ideas that are singularly focused on commerce or profit aren’t likely to break free from the status quo. To strike a meaningful balance, it is vital that everyone on your team understands the spectrum and uses it in shaping their creative thinking. Whereas some people will have a hard time breaking free from financial assumptions, others will feel constrained by the need to anchor their creative expression to commercial realities. Manage this tension by encouraging people to move out of their comfort zones and toward the center of the spectrum. Effective leaders help their people understand this not as a contradiction but as a healthy tension that can yield the most profitable and breakthrough ideas.

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Provide space for both collaborative and individual expression. Too often, we think of creativity as an individual pursuit. However, the Latin roots of the word “creative” — which describe a social, communal experience — reveal a fundamental truth: Creativity is founded upon collaboration. Julien Jarreau, executive creative director at the premier health marketing agency Health4Brands, elaborates: “Individuality plays an important part in what people bring to the creative table. And yet relinquishing that individuality to a greater collective effort is the ultimate work of generating powerful creative results. I am clear in my expectations that I want collective creation while still honoring individuals. I don’t tolerate prima donnas.” People must learn to derive gratification as individual contributors, while balancing it with a collaborative spirit focused on a greater good. A collaborative environment allows a level playing field where good ideas can be challenged into great ideas. It also fosters the emotional safety needed for creative people to risk sharing their most divergent ideas without fear of judgment. The leader’s job is to set that standard and model it.

You and Your Team Series Thinking Creatively

Provide structural guardrails without constraining freedom. Creativity is messy. It won’t follow strict protocols or processes. At the same time, it needs structure to thrive. How much structure and discipline is ideal? How much freedom will yield optimal results? A leader helps build collective capability by setting objectives and deadlines, providing creative spaces and designated times for diverging, and allowing teams to practice creativity. Put the tools and processes in place, and turn the team loose.

One of the greatest challenges for leaders is determining what role they should play in helping generate creative ideas and solutions. When leaders have more experience or talent than their team, deciding when to insert their own ideas instead of coaching others can be hard. Deadlines and slipping performance targets increase the leader’s risk of imposing their will, which just reinforces self-doubt on the team and perpetuates the cycle of the leader having to insert the “answer.” If you are going to participate in the ideation, take your leader hat off and, as convincingly as you can, inform your team not to treat your ideas any differently. Only do this if it strengthens the process and avoids muting their participation.

There is nothing more satisfying that watching your people fulfill the human need to create and having their creative contributions benefit the organization and the markets it serves. Doing this requires understanding the inherent tensions that come with leading creative endeavor. It takes intentional, thoughtful leadership to help your team unleash their most creative and powerful work.

5 Things New Managers Should Focus on First

May 9, 2017 - 10:00am

One of the most exciting — and frightening — career transitions comes when you face the prospect of a management role for the first time. Over my career of building businesses, advising CEOs, and, most recent, exploring the philosophies and beliefs of 100 of the world’s most respected leaders for my latest book, Good People, I’ve clarified many of the top things a great new manager or leader can do. Whether you’re still in the interview stage or are in the wake of a successful promotion to leadership, there are a few must-know principles that will place you on a successful path. Here are five of them.

Establish a leadership philosophy. Leadership and management are both about getting the right followership, right? I believed that once, until I came across an idea attributed to Tom Peters: Real leadership is about producing other leaders. A great leader, Peters said, is someone committed to bringing others along. That’s why my first recommendation is think very hard about your leadership philosophy. Do you feel excited and empowered because you now have the positional authority to tell other people what to do — or are you more excited by the prospect of helping others reach that same place?

Focus on the day to day of management and leadership. The long-term goal of great leadership is to build a great team around you to create the next generation of leaders who can — just possibly — surpass your own performance. No question, the best leaders are also the best mentors. But the day job of management and leadership involves allocating limited resources, whether it’s dollars, time, or people. Are you budgeting dollars in areas that create the best long-term value? Are you scrutinizing your time in terms of its effects and returns? One of the best exercises I practice is doing an audit of my calendar to see how the time I’ve invested maps (or doesn’t) to my top priorities. Speaking of which:

Be clear about your communication and your top priorities. No doubt, your communication skills have gotten you far, but now they matter more than ever. During meetings, be as clear as possible about your priorities by asking yourself: Is this meeting intended to inform, get input, or get approval? (By stating that right up front, you’ll help others understand the context.) As often as possible during meetings, and also in public forums, take advantage of the opportunity to clarify your overarching purpose and which of your top priorities are required to fulfill that purpose. Be consistent about your purpose and your priorities. Regarding the latter, one of the best CEOs I’ve ever worked with gave me some advice I’ve never forgotten: Never have more than five top priorities. Develop those priorities with your team, but remind them that you won’t be adding another priority to the list until you knock off one of the existing five. (It’s no accident that I’m giving you only five things to focus on in this article! Once these five become comfortable, there will be others for you to tackle.)

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Set common values and common standards. Much can be solved if people agree on and practice a set of common values and standards. To my mind, the most important values, the ones I used to define the “goodness” of great leadership in Good People, are truth, compassion, and wholeness. With a strong foundation in truth, especially self-awareness, leaders and organizations are more likely to develop the capacity for compassion. Compassionate leadership is about holding back judgment with a mindset that is open, empathic, and generous. (It’s a myth that compassion and competition are at odds with one another.) Finally, wholeness. To me, this means redefining success as more than merely winning, expanding it to include the satisfaction leaders feel from knowing their team members performed to the best of their ability toward an agreed-upon set of aspirations.

Remember that it’s okay to be scared and vulnerable. So much of entrepreneurship, management, and leadership involves walking a tightrope between vulnerability and conviction. None of us can ever be completely confident that we’re 100% on the right track, yet from the time we arrive at work in the morning, we’re called upon to inspire confidence in others. “Risk taking” is a handy MBA term and euphemism for a condition of self-imposed vulnerability. By recognizing that vulnerability is a component of all jobs and that it creates the potential for positive change, we come that much closer to losing our fear of it. For new leaders and managers, the challenge and opportunity comes from the humble (and humane) recognition that no one is invincible. It comes from giving team members the confidence that decisions are being made in a balanced, thoughtful way. Finally, it comes from showing that, in the end, the most strategic approach is the one with the strongest foundation and potential for success. Business is no different from anything else in life — you can only control what you can control, and if you can’t accept that leadership can be lonely and self-doubting much of the time, well, you may not be ready to be a leader. Regardless, celebrate and embrace your vulnerability, because if you don’t feel any, you’re probably not pushing yourself hard enough.

How an Online Grocery Platform Could Reshape Retail as We Know It - SPONSOR CONTENT FROM OCADO

May 9, 2017 - 9:55am

One of the more popular business mantras to hit town recently has been: “Forget products, think platform!” The immediate result has been a world increasingly awash with platforms and, if you aren’t operating one, many will label you a strategy Luddite.

So among this melee of platforms, why might there be room for one more — a platform for online grocery delivery? To answer that question, one first needs to understand what makes online grocery delivery so different from other forms of online retail.

Online grocery delivery requires dealing with irregularly shaped products with many different form factors, multiple storage temperature regimens, short shelf lives, and food technology constraints about what can be packed with what. Then there are the many vulnerable products and the ways they can (negatively) interact with each other: if you load a six-pack of beer on top of a box of strawberries, you will most likely end up delivering a smoothie, which is probably not what the customer had in mind.

Then there’s the fact that an average online grocery order is typically fifty items and customers are sometimes ordering more than once a week, both of which have significant implications for how smart and low-friction the ordering process has to enable customers to complete their orders in just a few minutes. Most customers don’t get up in the morning and say to themselves: “Hurray! Today is my online grocery shopping day!” Most people subliminally dream of the day when, thanks to the power of data-fueled machine learning, the right groceries will turn up at the right time, as if by magic, without the customer having to do anything — a broadband of grocery.

Finally, there’s the challenge of creating a profitable ecommerce business: you have grocery products with an average item price of around $3 and typically 30 percent gross margin, leaving only $0.90 to pay for all handling, selling, and delivery. Brick-and-mortar stores are used to their customers doing this work for them; in the online space, that is obviously not an option.

So online grocery is hard, and doing it profitably demands extraordinary levels of efficiency powered by the creative application of technology and automation. For a traditional retailer, building that solution is a massive and daunting prospect. Yet online is also a phenomenon that is here to stay, because customers want the convenience, enjoy the choice, and appreciate the time they don’t have to waste trudging around a conventional store.

The great thing about having an online grocery delivery pipeline into customers’ homes is that, once it’s in place and being used regularly, all manner of other products and services can potentially flow up and down it. If you can do online grocery, then you can do some other forms of online retail; but the reverse definitely does not implicitly follow. The potential size of the worldwide online grocery market combined with these spin-off opportunities is why grocery really is the holy grail of online retail.

That’s the end business case we put forward at Ocado, the world’s largest online-only grocery retailer, currently operating in the UK. Unlike other online retailers, our customers’ orders are picked and packed in huge automated warehouses before being delivered to their kitchen tables in one-hour slots by Ocado’s own delivery fleet. All the technology that powers this disruptive business model has been built in-house over the past 17 years. Ocado has been profitable at an order level for many years but has chosen to invest heavily in building its technology platform.

When considering international expansion, why would we not just launch its service in another country? The answer is that grocery is an inherently local business. It’s an “at scale” game in each local market, and having scale in your home market does not help you enter another one. Branding is local, supply chains are local, and customer behavior and requirements vary.

The smarter alternative is to provide a shortcut to help existing grocery retailers move online fast instead, or grow their existing online operation efficiently. This would follow a model similar to how Ocado helped Morrisons (one of the big four brick–and-mortar grocery retailers in the UK) create its online grocery business using Ocado’s existing platform; Morrisons has since become the fastest-growing online grocery business in the world.

These offline retailers already have their trusted brand, their efficient supply chains, and their loyal customers. What they lack is the time, the technical expertise, and the financial investment required to develop a profitable end-to-end platform for online grocery delivery. Two things are certain, though: some of their competitors will move online and pure-play retailers will enter their markets.

That’s why we built the Ocado Smart Platform (OSP). It’s a one-stop-shop, end-to-end e-commerce, fulfillment, and logistics platform running in the cloud that provides a seamless integrated solution for an offline retailer.

Think of it as a highly configurable Software as a Service (SaaS) platform that also includes the swarm robotics hardware technology needed to build automated warehouses. This combination of cloud-based software and warehouse automation provide the secret sauce of how to make online grocery delivery profitable, and how to deliver enhanced customer delight in the form of massively greater range, greater product life and freshness, lower wastage, very low levels of substitution, and the ability to pick a complete customer order in just a few minutes.

Looking ahead, OSP customers will quickly see the network effects associated with adopting such a platform, including all the data we will collect to optimize the underlying platform and feed our machine learning, while also giving the retailers back their own data. Then there is the increased R&D investment on the back of having multiple customers and creating an ecosystem through easy integration with third-party products and services.

Ultimately, a platform for online grocery is more than just writing smart algorithms, mining customer data, and employing warehouse automation; it is based on understanding and adapting to the realities of the retail market, disrupting its existing business models, and recognizing that customer loyalty is earned through experiences instead of features.

Fifty years ago, customers would telephone their local grocery store. The person at the store already knew what they typically ordered — and would then have someone deliver the groceries on a bike or in a small van. The technologies and formats may have changed, but differentiation through brand, product range, customer knowledge, and customer service are still at the heart of being a great grocer.

Read more about how the Ocado Smart Platform can transform your retail business.

Boards Neglect Cybersecurity at Their Companies’ Peril

May 9, 2017 - 9:40am

The average breach costs around $4 million.

10 Years of Data on Baseball Teams Shows When Pay Transparency Backfires

May 9, 2017 - 9:00am

You’ve probably taken a guess as to how much money your coworkers and others make, compared with you. Evidence suggests you probably aren’t very accurate. In one PayScale survey of 71,000 people, for example, 64% of those paid the average market rate thought they were paid less than average. At the same time, 35% who were paid above market rates also thought they were paid less than average.

Because our perceptions about pay are often wrong, pay transparency has started to gain popularity. Why not simply inform workers of what everyone in the organization makes, in order to stave off speculation?

There are pros and cons to this line of thinking. On one hand, such a policy can guard against discriminating along racial, ethnic, or gender lines while giving people a firm grasp of where they stand in an organization. On the other, firms naturally have differences in pay in some form. When people are made aware of pay inequality (or “dispersion”), it can lead to feelings of inequity that affect satisfaction and motivation, increasing the likelihood that people will quit. Because of this, some question the wisdom of openly informing people that pay differences do exist.

We agree with both arguments. Pay transparency can be a good thing, but it can also be a bad thing if executed poorly. So how does a firm correctly execute a pay transparency plan? By making sure the inherent differences in pay are justified by differences in workers’ performance on the job. Our research, appearing in Strategic Management Journal, shows that if people know how much they make relative to others, and if differences in pay can be clearly tied to how their performance stacks up against coworkers’, harmful effects of differences in compensation can be negated. Pay transparency must go hand-in-hand with performance transparency — something that may seem obvious but, at least in our experience, is lacking in most organizations.

To analyze this, we used data from an industry where individuals’ pay and performance are quite transparent across firms and also, at least for some, are quite unequal: Major League Baseball. We tested how differences in pay and in players’ performance affected the winning percentages of MLB teams from 1990 to 2000, controlling for a host of factors including how much teams spend on players’ salaries, relative to other teams; the ability of the manager; and the overall team talent, which we measured using a comprehensive and comparative player performance metric created by noted baseball statistician Bill James. (While sports are different from other industries in many respects, baseball makes a good test case for this kind of study for several reasons. First, there’s lots of transparency about individual performance and compensation. Second, the format of the game makes it possible to separate, to a higher degree than in other contexts, individual performance from team performance. And third, MLB players’ compensation is less regulated than in other sports, so we can more readily observe the impact of pay dispersion.)

We first show that, as in prior studies, pay dispersion is negatively related to winning performance above and beyond the effects of the other factors. In other words, the greater the inequality in pay, the worse the performance.

But when we looked more closely at performance, we found that teams actually perform better (that is, they have a higher winning percentage) when there is a match between pay and performance. In essence, a team could have a high dispersion in pay between players, but if the pay corresponds with their performance, the negative aspects of inequality go away, at least in the form of a team’s winning percentage.

Consider the Oakland A’s as an example. In the late 1980s and early 1990s, they were one of the top-spending and most successful teams, playing in three straight World Series, from 1988 to 1990, and winning nearly 60% of their games in 1992. New owners took over in 1995 and changed strategies, slashing payroll and shifting their emphasis to using younger, cheaper players (as opposed to a roster of expensive veterans), while also focusing their smaller payroll on rewarding a handful of key performers. This approach, famously described in Michael Lewis’s book Moneyball, took time, as the team cycled out existing contracts, so that by 1997 the A’s had a very low match between pay and individual performance.

But then things began to change: The match improved to about league average in 1998, and increased further in 1999. Most important, the winning percentage of the A’s improved along with the improved match in pay and individual performance; the team went from winning 40% of games in 1997, to 46% in 1998, to 54% in 1999. In 2000 they won 57% of their games and were back in the playoffs, with a high match between their dispersion in pay and players’ performance.

There are also examples of pay and performance mismatches, either by having highly dispersed pay or highly similar pay (low dispersion) that is not justified by performance. In 1998, just a year after winning the World Series, ownership of the Florida Marlins (now named the Miami Marlins) engaged in a fire sale, cutting the payroll to one-quarter of its previous total. As with the A’s, certain players and contracts were hard to trade, and the result was that the Marlins had a highly dispersed payroll — the highest in the league, in fact. That same year, the Montreal Expos (now the Washington Nationals), which had been cutting payroll for the previous few years, had a roster full of inexpensive players all paid relatively the same, resulting in the lowest pay dispersion in the league. Yet for both teams, dispersion in individual performance was about average, creating high mismatches for the two teams but in different ways: high dispersion in pay with average dispersion in individual performance for the Marlins, versus low dispersion in pay with average dispersion in individual performance for the Expos. Unsurprisingly, the Marlins won only one-third of their games, while the Expos won 40%.

That same season, however, the New York Yankees set a then-record for wins in a season, and the next winningest team, the Atlanta Braves, won nearly two-thirds of their games. While the former was in the bottom quarter of the league for payroll dispersion and the latter was in the top five, both rated highly in terms of the match between the dispersions of pay and the dispersions of individual performance.

In the end, our analysis points to two general conclusions.  First, the negative impact of high pay dispersion is not about equality but about equity. Or, more specifically, group performance suffers when pay differences or similarities are not justified by individuals’ performance. Relatively high or low dispersion is not in and of itself bad; rather, it is the match (Yankees/Braves) and mismatch (Marlins/Expos) between pay and individual performance that creates problems.

While there are some limitations to the generalizability of our research, including the head-to-head nature of competition in baseball and the openness of pay and performance data, we suspect similar dynamics may be at play in the workplace. Sports data is useful for studying pay and performance since it is widely available, but studies identifying problems associated with pay dispersion appear in diverse contexts, ranging from hospitals to trucking firms and concrete pipe manufacturers, and from administrative professionals to executives in S&P 500 firms.

As such, it is imperative that pay be allocated based on equity, where pay matches performance. If not, firms that pay more or have better overall talent may not perform as well as expected, if high performers are paid the same or less than their lower-performing peers. Similarly, firms with employees who perform similar tasks, and to a similar degree of quality, should all be paid similarly to eliminate any harmful effects of pay dispersion. If not, high performers may lack motivation to continue to outperform their peers who do less but make the same, and low performers may lack motivation to perform better when they can make the same as high performers by doing less work.

Our second conclusion is that it’s important to understand pay transparency as a complex issue. As calls for pay transparency increase, it’s important for companies to understand when it may and may not pay off. Sure, it can be a tool for broader pay equity and for employee motivation. But if pay is transparent and performance does not justify any discrepancies or similarities, pay transparency can have disastrous effects.

Consider the infamous case of Seattle credit card processer Gravity Payments, which, in 2015, set a minimum salary of $70,000 for all employees. Two employees interviewed by the New York Times ultimately quit. One was frustrated with “people who were just clocking in and clocking out” earning the same as he was. Another was upset by the lack of fairness, noting the company “gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.”

The bottom line for companies is that people are going to make comparisons about pay and, more often than not, will make them inaccurately. Rather than hiding pay information or making it accessible without context, organizations would be better off forming transparent performance metrics, matching pay to those metrics, and having open conversations with employees about where they stack up. That, more than anything, is what a truly transparent compensation program would look like.

How to Improve at Work When You’re Not Getting Feedback

May 9, 2017 - 8:05am

Too many managers avoid giving any kind of feedback, regardless of whether it’s positive or negative. If you work for a boss who doesn’t provide feedback, it’s easy to feel rudderless. It can be especially disorienting if you’re new in the role, new to the company, or a recent graduate new to the workforce. In the absence of specific guidance, is there any way to know what the average boss would want you to work on?

While everyone will have different strengths and weaknesses they need to work on, when we examined our database of performance evaluation information for more than 7,000 individual contributors and 5,000 managers, we noticed a reliable pattern. There were five behaviors that managers most often associated with high performance:

Delivering results. The strongest, most consistent correlations were skills that focused on achieving results. When individuals were able to achieve goals on schedule and did everything possible to get results, managers were impressed. Another critical component was the quality of work. The person needed to deliver outputs that met high standards.

Being a trusted collaborator. High performance ratings went with being trusted. Being trusted emanates from good interpersonal skills. Strong collaborators were excellent communicators and were held up as role models. Some individuals strive to stand out by working independently, so that it’s clear who deserves the credit. Our data suggests those individuals typically fail. The highest performers, on the other hand, cooperated with other groups and were trusted in making decisions.

Having strong technical/professional expertise. For both managers and individual contributors, technical/professional expertise drove their performance evaluation. People devoid of a deep understanding of the technical issues facing the organization work at a significant disadvantage. Some come into an organization with fresh expertise but, by coasting, become obsolete over time. Technology changes quickly. Keeping up-to-date is essential.

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Translating vision and strategy into meaningful goals. The best performers understood the organizational strategy and were able to apply that understanding in their job to make a contribution. Those who did not make the effort to connect their work to the company strategy appeared to work in a vacuum. Often, their decisions were based on personal preferences rather than on being aligned with the vision. Understanding the strategy impacted performance ratings for both managers and individual contributors.

Marketing their work well. If someone is frustrated or disappointed with their performance rating, they often lament and think: “My work should speak for itself.” Good products are successful usually because they are not only a good product — they have been marketed well, too. The fact is, good work rarely speaks for itself. Managers are surrounded by hundreds of shiny objects seeking to grab their attention. Good work needs a little marketing.

As you read through this list, think about how you stack up on each of these. Do you have strong expertise but need to work on your collaborative skills? Are you a great team player who needs to learn to toot your own horn? How much output do you generate, compared with the rest of your team, and how is the quality of what you turn in? You can try asking peers for feedback on these areas if you can’t get any feedback from your boss.

If you’re a manager, our data dive revealed two additional qualities to focus on:

Speed. We have been tracking this dimension for several years. It’s become a critical factor influencing individual success. Information is flowing faster, competitors are coming out with new products, global dynamics are changing preferences, and the need to move work at a fast pace is a key differentiator between good leaders and great leaders. In researching our book Speed: How Leaders Accelerate Successful Execution, we found compelling information that leaders who were speedy were rated as being two times more effective as leaders, had significantly more engaged employees, and were more likely to get promoted.

The ability to inspire and motivate others. We have rated the effectiveness of this skill for more than 85,000 leaders, and found that, compared with 15 other leadership competencies, this is rated the lowest. Yet when we asked more than 1 million respondents which competency is most important, “inspires and motivates” ranks number one. Fifty years ago, people might have worked for money alone, but today people want to be inspired.

We might also humbly suggest that if you’re a manager, you try to get a little better at giving feedback.

What the Best Transformational Leaders Do

May 8, 2017 - 10:51am

Companies that claim to be “transforming” seem to be everywhere. But when you look more deeply into whether those organizations are truly redefining what they are and what they do, stories of successful change efforts are exceptionally rare. In a study of S&P 500 and Global 500 firms, our team found that those leading the most successful transformations, creating new offerings and business models to push into new growth markets, share common characteristics and strategies. Before describing those, let’s look at how we identified the exceptional firms that rose to the top of our ranking, a group we call the Transformation 10.

Whereas most business lists analyze companies by traditional metrics such as revenue or by subjective assessments such as “innovativeness,” our ranking evaluates the ability of leaders to strategically reposition the firm. Some companies that made the list were obvious choices; for example, the biggest online retailer now gets most of its profit from cloud services (Amazon). But others were surprising, given their states before embarking on transformation. The list includes a health care company that was once near bankruptcy (DaVita), a software firm whose stock price stagnated for a decade (Microsoft), a travel website that faced overwhelming competition (Priceline), a food giant that seemed to lose its focus (Danone), and a steel company that faced new pressure from lower-cost rivals (ThyssenKrupp).

The team began by identifying 57 companies that have made substantial progress toward transformation. We then narrowed the list to 18 finalists using three sets of metrics:

New growth. How successful has the company been at creating new products, services, and business models? This was gauged by assessing the percent of revenue outside the core that can be attributed to new growth.

Core repositioning. How effectively has the company adapted its legacy business to change and disruption, giving it new life?

Financial performance. How have the firm’s growth, profits, and stock performance compared to a relevant benchmark (NASDAQ for a tech company, for example, or DAX Index for a German firm) during the transformation period?

We recruited a panel of expert judges (see the list below), who evaluated the companies through the lens of their own expertise and gauged which transformations were most durable and had the highest impact in their industries. (For more on our methods, see the sidebars below.) With these criteria in mind, our final list is as follows:

 

Our analysis revealed characteristics shared by the winning firm’s leaders as well as common strategies they employed.

Transformational CEOs Tend to be “Insider Outsiders”

The list is topped by companies headed by visionary founders with no prior experience in their industries; Jeff Bezos came from the world of finance, and Reed Hastings from software. As it turned out, having no predetermined way of doing things turned out to be an asset when it came to reinventing retailing and television, and these leaders kept that outsider’s perspective even through waves of growth.

We see an interesting pattern across the professionally managed companies, those whose CEOs were hired by the board. These CEOs are what we call “insider outsiders.” Make no mistake, they have substantial relevant experience. They had 14 years of tenure on average before getting the top job. That knowledge helped them understand how to make change happen inside an organization. Yet these executives also had an outsider role where they worked on an emerging growth business or consciously explored external opportunities, giving them critical distance from the core. After becoming CEO, that insider-outsider perspective helped them explore new paths to growth without being constrained by yesterday’s success formula.

Satya Nadella, for instance, joined Microsoft in 1992 and worked his way up to running its cloud computing effort, building that business unit into a viable new growth platform before becoming CEO, in 2014. He got the top job because of that, and then as CEO he accelerated cloud-business development to make it the company’s primary strategy.

The same was true of Adobe’s Shantanu Narayen. He joined the creativity applications vendor in 1997, and got the CEO job a decade later largely because he was able to articulate a vision for pursuing digital marketing services as the new growth path.

The Transformation 10 Judges

Chris Chadwick, former CEO of Boeing Defense

Clay Christensen, Professor at Harvard Business School and Innosight co-founder

Scott Cook, founder and chairman of Intuit

Matthew Eyring, Chief Strategy & Innovation Officer of Vivint Inc.

A.G. Lafley, former CEO of Procter & Gamble

Rita McGrath, Professor at Columbia Business School

TEO Ming Kian, Director at Temasek and Chairman at Vertex Holdings

Theodor Weimer, Country Chairman at UniCredit

At Priceline, Glenn Fogel joined in 2000 and became head of strategy. Long before becoming CEO, in 2016, he was searching for new growth in the hypercompetitive travel reservations market, coming across a pair of small European startups with a business model opposite to Priceline’s in two key ways: Instead of taking an up-front 25% commission on a hotel reservation, the startups charged only 15% after check-out. Instead of focusing on major hotel brands, they pursued the long tail, engaging with more than 1 million inns, B&Bs, and apartment buildings in 200 countries. The result was the Booking.com platform. What started with a $200 million investment a decade ago now accounts for most of Priceline’s new growth as well as its rise past $80 billion in market valuation.

And at Danone, Emmanuel Faber, an insider for 17 years, won the CEO job, in 2014, because he was one of the architects of the firm’s 2020 vision to transform from a food and beverage conglomerate into a family health and medical nutrition company that emphasized sustainable agriculture. That vision prompted Danone to divest product lines such as biscuits and beer while broadening its core dairy franchise. For new growth, in 2007 Faber helped form a new business unit called Nutricia, anchored off a $17 billion acquisition, to pursue baby foods, protein bars, and health shakes. Today this unit accounts for 29% of revenue.

They Strategically Pursue Two Separate Journeys

Many firms that have tried to transform have failed. A common reason why is that leaders approach the change as one monolithic process, during which the old company becomes a new one. That doesn’t work for a host of practical reasons. An organization that grew up producing newspapers, for instance, not only lacks key skills to build a digital content company but also might actively resist embracing the new in order to protect the business it knows and loves.

Success requires repositioning the core business while actively investing in the new growth business.

Apple serves as the classic model of such “dual transformation.” With the iMac and iBook, Steve Jobs reinvigorated the core Macintosh franchise by injecting a new sense of design and rethinking what computers would be used for in the age of the internet. On a separate track, he launched the device and content ecosystem, starting with iPod and iTunes, that would become the company’s new growth engine.

It’s a strategy that has also worked for others on the list. While Amazon has expanded its core retailing platform into new categories, such as food and streaming content, in parallel it has built the world’s largest cloud computing enterprise. Amazon Web Services CEO Andy Jassy has been with the effort since it began as an internal challenge to scale IT infrastructure. Established as a separate division in 2006, AWS ultimately addressed a long-standing analyst complaint about Amazon — that its core was only barely profitable. Today AWS accounts for just 10% of Amazon’s $150 billion in revenue, but generates close to $1 billion in quarterly operating profit.

German steel maker ThyssenKrupp, facing pricing pressure from Asian competitors, likewise embraced a dual transformation strategy. In 2011 the board selected as the new CEO one of its own members, Heinrich Hiesinger, a Siemens executive with experience supplying technology to many industries. From day one, Hiesinger began executing a plan for repositioning the declining core of steel manufacturing by divesting less profitable product lines, focusing on higher-margin custom manufacturing, and even opening 3D printing centers to fashion components such as parts for wind turbines. For new growth areas that now make up 47% of sales, it moved into industrial solutions and digital services, creating systems such as internet-connected elevators.

They Use Culture Change to Drive Engagement

Microsoft is a case in point. In the four years since Satya Nadella came on as CEO, he has been credited with transforming Microsoft’s cautious, insular culture. In the old world, large teams would work for years on the next major version of a franchise program like Windows and Word, leading to a risk-averse environment. In the new world of “infrastructure on demand,” dozens of new features and improvements would need to be introduced per month — and no one would fully know ahead of time what they might be. This required a culture of risk taking and exploration.

In this way, Nadella was unlike his predecessors, in that he built his reputation as a hands-on engineer, not as a visionary like Bill Gates or a Type-A salesman like Steve Ballmer. Instead, Nadella was known for listening, learning, and analyzing. His idea of how to engage and motivate employees wasn’t by making a speech but rather by leading a company-wide hackathon, and empowering employees to work on projects they were passionate about. This new level of employee engagement has helped drive Microsoft’s expansion into cloud services and artificial intelligence, areas that now account for 32% of revenue.

Methods

We began the process of identifying candidates for the Transformation 10 by screening companies in the S&P 500 and Global 500 according to the following questions.

  1. Has this company exemplified strategic transformation?
  2. Has this transformation had impact on customers and its industry in the past decade?
  3. Does the company show potential to sustain its transformation over the next decade?

During this first phase of the methodology, a small team of Innosight consultants pored over the S&P 500 and Global 500 to arrive at a list of 57 companies that had made a clear commitment to strategic transformation within the past 10 years. Our team rated each company using a set of criteria measuring their financials (notably revenue growth and stock performance), the degree to which they had built meaningful new growth businesses, and the degree to which they had repositioned their core business.

During phase two, we used these comparative metrics to narrow the list to 18 finalist candidates. For each of company, we created a one-page judging profile. We then sent that presentation of profiles along with instructions out to our panel of judges, who scored each company on a scale of 1 to 5, with 5 being the best example of a successful strategic transformation.

The story of Kent Thiry, CEO of the kidney care firm DaVita, also illustrates the role of employee engagement in successful transformations. In 1999 Thiry came with a strong track record in the kidney dialysis industry to salvage a near-bankrupt company called Total Renal Care, whose market cap was sinking below $200 million. In addition to finding ways to stem losses, he led a six-month effort to create a new identity and set of values, to reengage the company’s dispirited workforce and generate enthusiasm for his growth plans.

He chose the name DaVita, Italian for “giving life,” and settled on a list of core values that included service excellence, teamwork, accountability, and fun. As any manager knows, a generic-sounding list of values won’t move the culture needle unless leadership brings it to life. To that end, Thiry and senior managers performed skits in costumes — for instance dressing as the Three Musketeers and leading call-and-response chants of “All for one, one for all.” To honor employee heroism, he became the emcee of awards banquets that had all the music, stagecraft, and emotional speeches of the Oscars, and he celebrated “village victories” around milestones like achieving a five-star quality rating for dialysis delivery from the Centers for Medicare and Medicaid Services.

The success in turning around DaVita’s core business caught the attention of Warren Buffett, whose Berkshire Hathaway became DaVita’s largest shareholder. But it was DaVita’s move into new growth areas that earned it a spot on our list. Starting with an acquisition of 50 physician offices, DaVita worked to build an “integrated delivery network” that contracts for the full spectrum of care, using the value-based care model of being paid to keep patients healthy rather than accepting fee-for-service — resulting in new growth that now represents 30% of revenue.

They Communicate Powerful Narratives About the Future

To change the culture and move into new growth areas, the CEO needs to become “the storyteller in chief,” says Aetna’s Mark Bertolini. That means telling different aspects of the same transformation narrative to all the constituencies and stakeholders in the company.

“The CEO’s responsibility is to create a stark reality of what the future holds,” says Bertolini, “and then to build the plans for the organization to meet those realities.”

In Aetna’s case, this meant building a narrative of how the move away from fee-for-service reimbursement to the new business model of value-based care would change the nature of health insurance, and one day possibly render it obsolete. Instead of simply reinforcing the story about strengthening Aetna’s current businesss, Bertolini developed a narrative about building new skills to help consumers make better health choices — and about building a new organization that can make money doing so.

Telling that kind of story about the future is not a one-time event. “It’s easy to underestimate the amount of communication that is needed,” he adds. “You have to be tireless about it, consistent and persistent, and keep battering the core messages home week after week. Your leaders have to as well, and they have to tailor the message so it has the appropriate level of fidelity relevant to each part of the organization. A person working in a call center might need a different set of messages than a line manager does to understand how he docks into the big picture.”

They Develop a Road Map Before Disruption Takes Hold

Because dual transformations typically take years, we used a 10-year time frame in our analysis. Indeed, transformations often can’t be completed during the average tenure of a CEO. These long time horizons mean that there’s no time to waste in getting started. Many of the most notable disrupted companies — from Blockbuster, to Borders, to Blackberry, to Kodak — ran into their deepest troubles a decade or more after some of the first warning signs appeared. None of their leaders developed effective transformation plans in time to halt the decline.

At the other end of the spectrum is Reed Hastings of Netflix. Even as the original DVD-by-mail business grew quickly to dominate the industry, Hastings believed that a new wave of disruption could be rolling in. “My greatest fear at Netflix,” he says, “has been that we wouldn’t make the leap from success in DVDs to success in streaming.”

That’s why he laid the groundwork for a transformation as far back as 2007, when he started negotiating deals with Hollywood to test online streaming of movies and TV shows. Famously, Hastings moved too quickly to spin off the core and focus only on streaming, when Netflix announced plans in 2011 to create a stand-alone mail-based DVD company called Qwikster. This prompted a backlash from angry customers — and triggered a humbling apology from Hastings.

But the mistake he made was preferable to waiting too long. He reformulated his plan, this time to extend the life of the core DVD business while aggressively rolling out the new streaming service in parallel. It proved to be such a winning strategy that it funded a big move into original content. Now, with membership of 100 million homes in 190 countries, Netflix is the leader of a reconfigured movie and television landscape that it helped shape.

As all these cases show, transformation is not just about changing an enterprise’s cost structure or turning analog processes into digital ones. Rather, it’s about pursuing a multiphase strategy to reposition today’s business while finding new ways to grow. That’s why we believe the companies that made the Transformation 10 list deserve to be seen as models to help other leaders create the future.

 

Editor’s note: Every ranking or index is just one way to analyze and compare companies or places, based on a specific methodology and data set. At HBR, we believe that a well-designed index can provide useful insights, even though by definition it is a snapshot of a bigger picture. We always urge you to read the methodology carefully.

AI Is the Future of Cybersecurity, for Better and for Worse

May 8, 2017 - 9:00am

In the near future, as artificial intelligence (AI) systems become more capable, we will begin to see more automated and increasingly sophisticated social engineering attacks. The rise of AI-enabled cyberattacks is expected to cause an explosion of network penetrations, personal data thefts, and an epidemic-level spread of intelligent computer viruses. Ironically, our best hope to defend against AI-enabled hacking is by using AI. But this is very likely to lead to an AI arms race, the consequences of which may be very troubling in the long term, especially as big government actors join the cyber wars.

My research is at the intersection of AI and cybersecurity. In particular, I am researching how we can protect AI systems from bad actors, as well as how we can protect people from failed or malevolent AI. This work falls into a larger framework of AI safety, attempts to create AI that is exceedingly capable but also safe and beneficial.

Insight Center

A lot has been written about problems that might arise with the arrival of “true AI,” either as a direct impact of such inventions or because of a programmer’s error. However, intentional malice in design and AI hacking have not been addressed to a sufficient degree in the scientific literature. It’s fair to say that when it comes to dangers from a purposefully unethical intelligence, anything is possible. According to Bostrom’s orthogonality thesis, an AI system can potentially have any combination of intelligence and goals. Such goals can be introduced either through the initial design or through hacking, or introduced later, in case of an off-the-shelf software — “just add your own goals.” Consequently, depending on whose bidding the system is doing (governments, corporations, sociopaths, dictators, military industrial complexes, terrorists, etc.), it may attempt to inflict damage that’s unprecedented in the history of humankind — or that’s perhaps inspired by previous events.

Even today, AI can be used to defend and to attack cyber infrastructure, as well as to increase the attack surface that hackers can target, that is, the number of ways for hackers to get into a system. In the future, as AIs increase in capability, I anticipate that they will first reach and then overtake humans in all domains of performance, as we have already seen with games like chess and Go and are now seeing with important human tasks such as investing and driving. It’s important for business leaders to understand how that future situation will differ from our current concerns and what to do about it.

If one of today’s cybersecurity systems fails, the damage can be unpleasant, but is tolerable in most cases: Someone loses money or privacy. But for human-level AI (or above), the consequences could be catastrophic. A single failure of a superintelligent AI (SAI) system could cause an existential risk event — an event that has the potential to damage human well-being on a global scale. The risks are real, as evidenced by the fact that some of the world’s greatest minds in technology and physics, including Stephen Hawking, Bill Gates, and Elon Musk, have expressed concerns about the potential for AI to evolve to a point where humans could no longer control it.

When one of today’s cybersecurity systems fails, you typically get another chance to get it right, or at least to do better next time. But with an SAI safety system, failure or success is a binary situation: Either you have a safe, controlled SAI or you don’t. The goal of cybersecurity in general is to reduce the number of successful attacks on a system; the goal of SAI safety, in contrast, is to make sure no attacks succeed in bypassing the safety mechanisms in place. The rise of brain-computer interfaces, in particular, will create a dream target for human and AI-enabled hackers. And brain-computer interfaces are not so futuristic — they’re already being used in medical devices and gaming, for example. If successful, attacks on brain-computer interfaces would compromise not only critical information such as social security numbers or bank account numbers but also our deepest dreams, preferences, and secrets. There is the potential to create unprecedented new dangers for personal privacy, free speech, equal opportunity, and any number of human rights.

Business leaders are advised to familiarize themselves with the cutting edge of AI safety and security research, which at the moment is sadly similar to the state of cybersecurity in the 1990s, and our current situation with the lack of security for the internet of things. Armed with more knowledge, leaders can rationally consider how the addition of AI to their product or service will enhance user experiences, while weighing the costs of potentially subjecting users to additional data breaches and possible dangers. Hiring a dedicated AI safety expert may be an important next step, as most cybersecurity experts are not trained in anticipating or preventing attacks against intelligent systems. I am hopeful that ongoing research will bring additional solutions for safely incorporating AI into the marketplace.

The Ambition-Marriage Trade-Off Too Many Single Women Face

May 8, 2017 - 8:05am

Even today, research shows that men still prefer female partners who are less professionally ambitious than they are. Because of this, many single women face a trade-off: Actions that lead to professional success might be viewed less favorably in the heterosexual marriage market.

This trade-off can be pervasive and is not limited to big decisions like volunteering for a leadership role or asking for a promotion. Daily activities such as speaking up in meetings, taking charge of a project, working late, or even certain outfits, haircuts, and makeup can be desirable in one market and not in the other.

Our research, forthcoming in the American Economic Review, examines the effects of this trade-off for students in an elite U.S. MBA program. Graduate school is a natural place to study this, as many students are both investing in their professional careers and looking for a long-term partner. Our results come from two field experiments, a survey, and an analysis of students’ grades.

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Our first experiment concerned whether actions with positive labor market consequences but negative marriage market consequences were expected to be observed by classmates, and hence potential partners. On the first day of the MBA program, during a career advising session for the new class, a career counselor asked students to complete a questionnaire about their job preferences. The questionnaire included a number of questions about desired compensation, hours of work, and days per month of travel. It also asked students to rate their leadership abilities and professional ambition. In total, 355 people (241 men and 114 women) took the survey.

From the students’ standpoint, this questionnaire had substantial stakes. It was the first information the career center collected on their preferences, and they were told the information would be used to place them into summer internships, the key stepping stone for their post-graduation job. The career office informed us that students’ reported preferences would indeed have impacted their placement. For example, lower willingness to travel or not wanting to work long hours would likely not lead to being placed in consulting or investment banking, respectively. (After learning of our study’s results, however, the career center decided not to use the questionnaires in making these decisions.)

Students randomly received one of two slightly different versions of the instructions. Both stated that a career counselor would see their answers. In the public version students were told that their answers would be discussed among their class, while in the private version students were told that anonymized answers would be discussed.

When students thought that their answers would only be viewed by their career counselor, women who were single and women who weren’t answered similarly. However, when single women expected their classmates to see their answers, they portrayed themselves much less favorably to the labor market. They lowered their desired yearly compensation from $131,000 to $113,000, on average, and reduced their willingness to travel from 14 days per month to 7 days. They also reported wanting to work four fewer hours per week. Finally, they reported significantly lower levels of professional ambition and tendency to lead. Women who weren’t single did not change their answers when they expected classmates to observe their choices, and neither did men, regardless of their relationship status.

To rule out an alternative interpretation, that single women are simply more humble in public, we included a placebo question on self-reported writing ability. Writing skills are valued in the labor market but carry no penalty in the marriage market. Thus, if single women are generally more humble in public, we should see that rating decline as well. However, single women (and all other groups) rated their writing skills equally in the public and private treatments. These results indicate that single women, but not women in a relationship, avoid actions that could help their careers when these actions have negative marriage market consequences.

A second experiment shows that single women present themselves less favorably to the labor market, and more favorably to the marriage market, when they believe their choices will be seen by men. During a career class, 174 of the MBA students were asked to make choices about three pairs of hypothetical jobs. They were asked to choose the job they would prefer, and were told there were no right or wrong answers. Students were told that if there was time at the end of class, they would discuss their answers in the small groups that they’d already been assigned to for the rest of the class’s activities. These groups change from day to day; on this day, some single women had been assigned to all-female groups, while the remainder were in all-male groups. They were told that their forms would be collected at the end of class, so they knew the career center would see them. Because this was a natural activity during a session discussing job fit, students did not know it was an experiment.

When placed in all-female groups, 68% of single women reported that they would prefer a job that paid a higher salary and required 55–60 hours of work per week to a job that paid a lower salary and required 45–50 hours per week. But when placed with male peers, only 42% of single women did so. Similarly, in all-female groups, 79% of single women reported preferring a job with quicker promotion to partner but substantial travel to a job with slower and less certain promotion but no travel. When placed with male peers, only 37% of single women chose that option. Moreover, single women were less likely to choose the career-focused option when there were more single men in the group. Single women’s answers to a placebo choice between a job with a positive social impact and a job with collegial coworkers were not affected by the gender of the students in their group.

Lastly, we conducted a student survey and an analysis of participation grades. Our survey asked 261 of these same first-year MBA students whether, in their previous work experience, they had avoided certain actions that they thought would help their careers, because they were concerned it would make them look “too ambitious, assertive, or pushy.” Sixty-four percent of single females said they had avoided asking for a raise or a promotion for that reason, compared with 39% of women who were married or in a serious relationship and 27% of men. Over half of single women reported avoiding speaking up in meetings, compared with approximately 30% of women who weren’t single women and men.

Our analysis of participation grades indicated that unmarried female students had substantially lower class participation grades than married ones. Class participation is observable to peers and may signal students’ ambition or assertiveness. Consistent with our hypothesis, male participation grades did not differ by marital status.

Many of our additional analyses suggest these differences in behavior between single women and women in relationships are likely driven by the marriage market concerns, not inherent differences between the two groups of women. For example, it is not the case that unmarried women, in general, are worse students than married women; both groups had similar grades on their exams and problem sets (grades that classmates can’t see). Similarly, relationship status did not affect women’s reported preferences and skills when they were kept private from classmates.

Taken together, our results suggest that single women avoid actions that would help their careers because of marriage considerations, and that marriage considerations may be an additional explanation for gender differences in the labor market. Many schooling and initial career decisions, such as whether to take advanced math in high school, major in engineering, or become an entrepreneur, occur early in life, when most women are single. These decisions can have labor market consequences with long-lasting effects.

While extrapolating to other settings is beyond the scope of this paper, elite female MBA students are a select group, one that presumably places a higher value on career success than the general female population does. This suggests that the effects of marriage market signaling are perhaps even larger in other contexts. We hope that future work will assess interventions that may mitigate the negative effects that marriage market concerns have on women’s careers.

How to Convince Your Boss to Let You Work from Home

May 5, 2017 - 11:22am

Stephen Smith for HBR

More and more people are working remotely, and many say it improves their productivity and satisfaction — while also saving them time and money. If you’re commuting to an office every day but would like to work elsewhere on a weekly basis, how can you convince your boss to let you do so? What arguments or evidence should you use? And what factors will increase your chances of securing a regular work-at-home schedule?

What the Experts Say
The 9-to-5, Monday-to-Friday schedule has its “origins in the Industrial Revolution,” says Nicholas Bloom, a Stanford University professor. “But times, they are a-changin’. We live in a different era.” Still, working from home has a bad rap. “Some people are deeply skeptical about it,” he says. “They refer to it as ‘shirking from home’ or ‘working remotely, remotely working. They think it means goofing off and watching cartoons.” But, in fact, research suggests the opposite: Working from home increases productivity, efficiency, and engagement. “It is possible to be as, or more, productive” at home as in the office, says Karen Dillon, coauthor of several best-selling titles, including How Will You Measure Your Life? Not only does working from home eliminate your commute, which for most people is “total wasted time,” but it also “allows you to be more focused and efficient.” Of course, “you’re only going to get this opportunity if you’re already valued and trusted,” Dillon says. So be sure you’re in good standing with your manager before making the request. Here are some strategies to convince your boss to let you work remotely.

Reflect on your motivations
Before broaching the subject with your boss, be clear on why you wish to work from home in the first place. Perhaps your motivation is purely professional. Back-to-back meetings, a constant stream of conference calls, and obligatory break room chitchat make it next to impossible to complete important tasks. Working remotely, on the other hand, “gives you the time and space to concentrate without distractions,” Bloom says. Or maybe your reasons are personal, Dillon adds. You’re feeling “the tugs of your life,” whether they’re child care responsibilities, fitness goals, or caring for aging parents, encroaching on your time and sanity. Working from home on a regular basis could “change the dynamics of your week.” Whatever your motives, you need “to be honest with yourself about what you’re asking for” and make sure your intentions are pure, she says. It would be unfair to “do a bait and switch” with your boss “by saying you want to work from home to be more productive, but really it’s that you want to be at home with your child and check email only occasionally.”

Devise a plan
Next, Dillon says, you need to consider what a realistic remote work schedule would look like. What do you want? Is it to work Tuesdays and Thursdays from home? Every other Friday? Or would flex hours suffice? And try to “imagine how your boss will hear your proposal.” Consider what will worry your manager, and then think of ways to preempt those concerns. For instance, you might need to have a backup plan for flexibility. “There should be no absolutes,” Dillon says. “Your boss needs to know you can make it to an important Friday meeting, even if that’s your work-from-home day.” You should also strategize about how you’ll manage “the optics” of working from home in terms of “being present on email and available by phone,” she says. “Your manager needs for other people to not see your schedule as a four-day week.” A tip: If you’re proposing to work from home a single day per week, try for Wednesday. This way, your boss won’t perceive your request as a means to elongate your weekends, Bloom says. “Wednesday is not a slacker day,” he says. “It’s the middle of the week, and it’s a day for concentrated work, like detailed analysis.”

Talk to your boss
Your proposal should be simple and straightforward, Dillon says. Explain to your boss, “Here’s what I am thinking, here’s why, and here’s what the organization will gain.” That last point is critical. “Don’t steamroll your boss with research, but there’s no harm in using empirical evidence” to make your case more compelling. You might say, for instance, “I read an interesting article in HBR that shows how allowing employees to work from home improves results.” After all, “it’s hard to argue with someone who is reasoned, reasonable, and prepared.” Even though it’s effective to frame your argument in terms of the benefits to your company, the personal gains derived from working from home, that fact that you’ll be less stressed and therefore happier in your job, are also worth highlighting, Bloom says. “Many managers understand that people find working from home valuable and motivating,” he says. It’s a “cost-effective way to retain” your best people.

Give your boss time
As much as you’d like to leave your manager’s office having made the sale, it’s important “not to push for a yes or no right away,” Dillon says. If your initial conversation goes well, “present your boss with a one-page proposal — nothing elaborate — that details your plan.” And then back off. “Your manager needs time to think about the implications, or maybe get approval from HR. “Give them the time and space to do that.” Take solace in the fact that if you’ve made a convincing argument, “your boss will not want to lose a good employee.”

Be willing to experiment
One way to get your boss to warm to a regular work-from-home schedule is to suggest a three- or six-month trial period, Bloom says. “A pilot is a low-risk way to see whether an arrangement like this can work,” he says. “Ask your boss if you can roll it out for a few months; if it doesn’t work, you can roll it back.” If your manager agrees to the plan, Dillon suggests “overcommunicating in the beginning” and “presenting your boss with a list of what you accomplished last week and your to-do list for the coming one.” After the trial ends, she recommends having “a calibration conversation” to discuss whether “your mutual expectations were met.”

Push for organizational change
“Allowing employees to work from home is increasingly a standard practice” at organizations around the world, Bloom says, but not all companies are so enlightened. If your request is denied, don’t take it personally, Dillon adds. It’s likely that there are “bigger cultural issues” at play; maybe your boss thinks, “If I do it for you, I’m going to have to do it for everybody.” So think of “constructive ways to take no for an answer.” You might talk to HR about implementing a new workplace policy or form a small group of colleagues “to investigate how other organizations handle this.” The goal is to “remove the burden of making the decision” from one single manager.

Just do it
There is an argument for “just taking the plunge” into remote working without explicitly asking for permission, Bloom says. “Luck rewards the brave.” The next time an opportunity presents itself — a bad snowstorm, a disruptive event (such as your city hosting a large sporting event or convention), or even a planned home visit from your local cable company — “seize the day” and be as “effective as possible” in your remote work. Demonstrating that you can be productive is “a successful backdoor strategy” to getting your manager to sign off on a permanent arrangement, Dillon says. “It proves that you can manage it.” Don’t be sneaky, though. “You don’t want your boss to think you’re abusing their good will.”

Principles to Remember

Do:

  • Be honest with yourself about your motivations for wanting to work from home
  • Make your case with empirical evidence. It’s hard to argue with someone who is reasonable and prepared
  • Experiment with a three- or six-month test run, after which you and your boss discuss what went well and what needs fine-tuning

Don’t:

  • Bother with an elaborate presentation of your argument; a conversation followed up with a one-page proposal is appropriate
  • Be deterred if your request isn’t granted. Form a group of colleagues to investigate how other organizations handle employees working from home, and present your findings to HR
  • Be sneaky. Take advantage of opportunities to demonstrate that you can work from home effectively and productively

Case Study #1: Propose a pilot and then ace it by being responsive and productive
Two years ago, when Mark Scott took the job as chief marketing officer at Apixio, a digitized medical records company, he knew that his commute would be bad. “But I didn’t realize quite how brutal it would be,” he says.

The 40-mile commute from his home in the East Bay to his office in San Mateo typically takes about an hour and a half — each way.

After about six months at the company, this “wasted productivity” was getting to him. In a previous job he’d worked from home four days a week, and he knew he needed to ask his current boss if he could do something similar in the new role.

While Apixio didn’t have a formal policy on working from home, Mark was confident that the company’s culture was “open, supportive, and adaptable” and that his boss would sympathize with him. But he also knew that he would need to “quell any concerns” about him not being physically present. “I lead the marketing team, and I am on the executive team,” he says. “Face time in the office is important.”

Mark suggested a pilot that involved him working from home every Tuesday. “Our staff meetings are on Mondays, so Tuesdays made a lot of sense,” he says. “I told my boss I’d like to try it out for a few months and see how it goes.”

He added that he would, of course, come in on any Tuesday he was needed. “I wanted him to know that I was committed to the team and that I would be flexible.”

His boss agreed to the trial. All Mark had to do was “kill it” as a remote worker. “The best way to get traction is to demonstrate that you are accessible, productive, and responsive. The proof is in the pudding.”

The new arrangement was indeed successful, and Mark continues to work from home regularly, with support from his boss. “We never had a formal conversation about it, because it was going so well,” he says. “He said, ‘Just work from home when you need to. It’s fine.’”

Mark encourages his team members to work remotely on projects that require intense concentration. “Now even our CEO and CFO work from home from time to time,” he says. “Sometimes you just need a break from the water cooler chat.”

Case Study #2: Present evidence to make your case, and then be flexible and committed to the job
Wade Vielock had worked as a manager at Employer Flexible, a Houston-based human resources and recruitment company, for a year before he was transferred to San Antonio. At the time, the company had only a modest presence there, and Wade’s business agenda included making hires and building out the sales and service teams.

Two years later Wade earned a promotion, and his boss asked him to come back to corporate headquarters. But returning to Houston was not something Wade was prepared to do. “I have a wife and two kids, and I really didn’t want to pick up and move back” so soon, he says.

So he devised a plan. Wade would continue to live and work in San Antonio, both at the company’s office and at home, but he would spend three days in Houston every other week. He would also make himself available for special meetings at headquarters, even on short notice. “I realized that it’s a sacrifice for the company, so I have to be flexible,” he says.

To build his case to his boss, Wade used internal examples of successful remote workers. For instance, he pointed to his own direct reports, who often spent days at home when they need “heads down” time to write surveys or handbooks, and were getting high marks from clients as a result.

Wade’s boss agreed to a yearlong trial. “He said, ‘Let’s see how the role develops and reevaluate.’”

Wade stayed on schedule. When he was at headquarters, he often worked 12-hour days and made sure to have lots of one-on-one meetings with his team. When he was working remotely, he made sure he was “overly accessible.”

“I wanted to make sure [my colleagues] would see no difference in my delivery, regardless of whether I was sitting at my desk in Houston or my desk in San Antonio,” he says. “When you work remotely, you have to produce at 110%.”

After the year was up, Wade received a positive performance review. “My boss said, ‘You’re hitting your numbers and the [remote work situation] is a nonissue.’” Wade was even told that he might not need to commute every other week and could cut it down to every three weeks instead. But he hasn’t made that switch yet. “I like the face time with my team,” he explains.

Should You Name Your Company After Yourself?

May 5, 2017 - 10:00am

When entrepreneurs start a business, they often grapple with whether to use their name in their company’s name. It’s one of the most important and visible decisions they may make; it also seems a highly subjective one. So, should you do it? According to two recent research papers, the right answer may be: It depends.

The two papers, one by academics at the University of Oklahoma and the other from Duke’s Fuqua School of Business come to opposite conclusions on how eponymous firms perform relative to those that use names other than their founders’. One says eponymous firms generate a three-percentage-point-higher return on assets than those with other types of names. The other paper says founder-named firms are 8% less valuable than their counterparts, and founder-named-and-managed firms are 21% less valuable.

Why the difference? One reason could be that the reports use different measures of firm performance. Return on assets indicates how efficient management is at using assets to generate earnings. Value is defined in the other paper according to the Tobin’s q ratio, which indicates the market value of a company’s assets. The former is considered an accounting-based measurement and depends largely on how capital-intense the company is. The latter is a market-based measurement, which may be better for evaluating firm performance in the long run, but can be influenced by accounting methods.

The papers also use different data sets. The paper that showed a positive correlation between an eponymous firm name and financial results looked at a data set of 1.8 million European firms (for over 6 million firm-years of data, from 2002 to 2012). The other paper uses a sample of roughly 8,000 firm-years of data from U.S. family firms (from 1993 to 2009). It could be that eponymous firms are more valued in Europe, or that family firms are somehow different from all eponymous firms, or that something has changed since 2009.

But what most interested me was the difference between how the two papers explained their findings. The team behind the first paper believes that eponymy creates a stronger association between the entrepreneur and their firm — and that it increases the benefit or risk to the founder’s reputation, so they are more driven to succeed.

The writers of the second paper, the one that found a negative correlation, agree that eponymy results in firms being more concerned about protecting founders’ reputations, but they also test the endowment effects hypothesis, which suggests that the possessor of an object places a higher value on its current personal use than on its potential market exchange. The endowment effect helps explain, for example, why someone trying to sell a used coffee mug asks a higher price for it than a buyer is willing to pay; just owning the mug makes you think it’s more valuable. In the case of an eponymous firm, the founder may be more likely to view their companies in terms of personal use value, as opposed to investor-oriented, market-exchange value. As such, they don’t maximize the value of the firm as much as those who seem less personally invested.

So, what’s an entrepreneur to make of these findings?

First, think about the customer. An eponymous name makes a firm seem more personal or familial to customers. That’s a benefit if personal service or a family feeling is an important brand attribute, but it can detract from firm appeal if customers want to do business with a company of global scale and a more professional character. An eponymous name can also set expectations that customers will be doing business directly with the founder. Depending on the business model, an entrepreneur may or may not want to give that impression.

Also think about the competitive context. Every company must establish strong differentiation, and a distinctive name can help distinguish a firm. Most companies in an industry sector tend to adopt a similar naming convention: Banks have traditionally been named after their founders, as have law firms; tech startups usually use invented words as names; restaurant chains tend toward descriptive or evocative names. An entrepreneur should consider breaking with convention and using a different naming approach, eponymous or not, to support their brand differentiation. The paper that found a correlation between eponymous firm names and superior performance suggests that if you have an unusual name, you’ll see an even greater effect in using it to name your firm.

Next, consider the long term. An eponymous name is usually a limiting factor in future ownership and management options — or at least a confounding one. If a founder wants to sell the business, take on a partner, or cede day-to-day management of the firm, an eponymous name influences the company’s appeal among potential buyers, partners, and managers. In some cases, the founder’s name is so reputable that it attracts future stakeholders, but more often an eponymous name limits the new guard’s ability to signal their involvement.

Finally, remember endowment effects: If you really want to maximize the value of your firm, you’ll have to be objective about it. At least one academic paper suggests that might be harder if it’s named after you.

Bottom line, the decision of whether to use the founder’s name remains subjective. And as with all brand naming decisions, it matters less which name an entrepreneur chooses than what actions they take to make it mean something that’s relevant and compelling.

Men Shouldn’t Refuse to Be Alone with Female Colleagues

May 5, 2017 - 9:38am
Vincent Tsui for HBR

When U.S. Vice President Mike Pence said that he would never have a meal alone with a woman who was not his wife, he was invoking the well-worn “Billy Graham rule”; the evangelical leader has famously urged male leaders to “avoid any situation that would have even the appearance of compromise or suspicion.” Translation: Men should avoid spending time alone with women to whom they are not married. Graham has been known to avoid not only meals but also car and even elevator rides alone with a woman. The reason? To avoid tarnishing his reputation by either falling prey to sexual temptation or inviting gossip about impropriety.

Think Pence’s quarantine of women is unique? Consider a recent survey by National Journal in which multiple women employed as congressional staffers reported (and male colleagues confirmed) the existence of an implicit policy that only male staffers could spend time one-on-one or at after-hours events with their (male) congressmen. Cut out of key conversations, networking opportunities, professional exposure, and face time with career influencers, female staffers naturally are underrepresented in leadership positions and — not surprisingly — earn about $6,000 less annually than their male peers.

The Billy Graham — and now Mike Pence — rule is wrong on nearly every level. Lauded by some as an act of male chivalry, it is merely a 20th-century American iteration of sex segregation. When women are, in effect, quarantined, banned from solitary meetings with male leaders, including prospective sponsors and career champions, their options for advancement, let alone professional flourishing, shrink. The more that men quarantine women, excluding them from key meetings, after-hours networking events, and one-on-one coaching and mentoring, the more that men alone will be the ones securing C-suite jobs. The preservation of men and the exclusion of women from leadership roles will be perpetuated everywhere that the Billy Graham rule is practiced. Score another one for the old boys’ club.

Whether codified or informal, sex quarantines are rooted in fear. At the heart of it, policies curbing contact between men and women at work serve to perpetuate the notions that women are toxic temptresses, who want to either seduce powerful men or falsely accuse them of sexual harassment. This framing allows men to justify their anxiety about feeling attracted to women at work, and, sometimes, their own sexual boundary violations. It also undermines the perceived validity of claims by women who have been harassed or assaulted. Although thoughtful professional boundaries create the bedrock for trust, collegiality, and the kind of nonsexual intimacy that undergirds the best mentoring relationships, fear-based boundaries are different. By reducing or even eliminating cross-sex social contact, sex segregation prevents the very exposure that reduces anxiety and builds trust.

To build closer, anxiety-free working relationships with members of the opposite sex, thoughtful men will be well-served by having more, not less, interaction with women at work. In a classic series of studies, psychologist Robert Zajonc discovered that repeated exposure to a stimulus (such as a gender group) that previously elicited discomfort and anxiety helped reduce anxiety, and actually increased the probability of fondness and positive interaction. Termed the mere exposure effect in social psychology, the principle has been particularly useful in changing negative attitudes about previously stigmatized groups. Excellent leaders initiate positive developmental and collegial interactions with as many types of people as they can — deliberately, frequently, and transparently.

Perhaps the most disingenuous and deceptive quality of the Billy Graham rule and other forms of sex segregation at work may be their superficially honorable and chivalrous nature. This “benevolent sexism” includes evaluations of women that appear subjectively positive but are quite damaging to gender equity. In their pioneering research on the topic, psychologists Peter Glick and Susan Fiske discovered that women often endorse many benevolent forms of sexism (e.g., that women are delicate and require protection, or that sex quarantines at work help preserve women’s reputations), despite the fact that the sexism inhibits real gender equality. This may explain why many women applauded Pence’s stance as evidence of his character and commitment to his marriage. But sexism always diminishes and disadvantages women at work; even benevolent sexist policies, which lack transparent hostility and appear “nice” on the surface, lead to lower rates of pay and promotion, regardless of how many women support them.

Here is something most men fail to consider when invoking sex quarantines at work: What does their unwillingness to be seen alone with a woman say about them and males more generally? When a man refuses to be alone with a female colleague on a car trip or in a restaurant, owing to fear of something untoward happening, we must ask: Dude, do you, or do you not, have a functioning frontal lobe? Sex quarantines reinforce notions that men are barely evolved sex maniacs, scarcely capable of muting, let alone controlling, their evolved neurological radar for fertile mates of the opposite sex. Sex quarantines paint men as impulsive, sexually preoccupied, and unable to refrain from consummating romantic interest or sexual feelings if they occur in cross-sex relationships. The “sex-crazed” male stereotype is often reinforced in the process of male socialization, and there are plenty of men who, at least on some level, fear breaking rank and violating these expectations of male behavior. This is where moral courage comes in. The fact is, many men choose not to fulfill this stereotype; many men have close, mutual, collegial relationships with women and never once violate a relational boundary.

Of course, the Billy Graham rule and other efforts at quarantining women suffer from a number of logical inconsistencies. For instance, there is the efficacy problem: Rigid efforts to eliminate cross-sex interaction in the workplace have not proven effective. Even in the most conservative religious denominations, nearly one-third of pastors have crossed sexual boundaries with parishioners. Then there is the uncomfortable truth that the Billy Graham rule denies the reality of LGBT people and that sexual and romantic feelings are not limited to cross-sex relationships. The logic of sex quarantine thinking would dictate that a bisexual leader could never meet alone with anyone! Finally, the truth is that sex-excluding policies are rooted in deeply erroneous dichotomous thinking: Either I engage with women at work and risk egregious, career-threatening boundary violations or I avoid all unchaperoned interaction with women.

So what’s an evolved male leader to do? In the simplest terms, become what we call a thoughtful caveman. Healthy, mature, self-aware men understand and accept their distinctly male neural architecture. If they happen to be heterosexual, this means they own the real potential for cross-sex attraction without catastrophizing this possibility or acting out feelings of attraction, to the detriment of female colleagues. Thoughtful cavemen employ their frontal cortex to ensure prudence and wise judgment in relationships with women and men.

Here is a final reason why even devoutly Christian men like Mike Pence and Billy Graham should be dubious about isolating and excluding women at work: Jesus himself was known to meet alone with women (e.g., the Samaritan woman at the well). It seems that showing kind hospitality and elevating the dignity of women was more important than any threat of gossip.

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