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Talking to Yourself (Out Loud) Can Help You Learn

May 5, 2017 - 8:05am

When University of Illinois psychologist Brian Ross enrolled in a computer science course, it had been a long time since he’d even taken a class. With his beard and balding dome, he stood out. A decade older than his classmates, Ross was, to all the other students, that guy. He was nervous.

But he had an advantage. Ross is a learning researcher, and he’s familiar with the effective, but often underestimated, learning strategy known as self-explaining. The approach revolves around asking oneself explanatory questions like, ”What does this mean? Why does it matter?” It really helps to ask them out loud. One study shows that people who explain ideas to themselves learn almost three times more than those who don’t.

To help him outperform his younger colleagues, Ross asked himself lots of questions. He would constantly query himself as he read through the assigned texts. After each paragraph, after each sentence, he would ask himself: “What did I just read? How does that fit together? Have I come across this idea before?”

By the end of the course, Ross had found that, despite his relative inexperience and unfamiliarity with computers, he could answer many questions that the other students couldn’t and understood programming in ways that they didn’t. “I sometimes had the advantage,” he told me. “I was focused on the bigger picture.”

In the modern economy, there are few skills more important than the ability to learn. Around the globe, learning is highly predictive of future earnings. Companies may pay for training or reimburse educational courses, but the skill of gaining skills is rarely taught.

Here’s how to employ self-explaining in your own learning:

Talk to yourself. Self-talk has a bad reputation; muttering to ourselves often seems to be a sign of mental distress. It’s not cool to do in public. But talking to ourselves is crucial to self-explaining and generally helpful for learning. For one thing, it slows us down — and when we’re more deliberate, we typically gain more from an experience.

You and Your Team Series Learning

Self-talk also helps us think about our thinking. When we’re engaged in a conversation with ourselves, we typically ask ourselves questions along the lines of: “How will I know what I know? What do I find confusing? Do I really know this?” Whether we hit the pause button while listening to a podcast or stop to reflect while reading a manual, we develop skills more effectively by thinking about our thinking.

Ask why. Self-explaining can give voice to impulses of curiosity that may otherwise remain unexplored. It’s about asking ourselves the question, “Why?” Now, if we really know a topic, “why” questions are not that hard. If I asked you a why question about the town that you grew up in, the answer would come pretty easily. It’s when we don’t know something that why questions become more difficult — and create a way to develop an area of expertise.

To illustrate the practice, let’s examine a query like, “Why are there waves?” Some of us can bumble our way to a basic answer. Maybe something like: “Well, waves have to do with the wind. When wind blows across the top of the water, it creates ripples of water.”

But then comes the inevitable follow-up: “Why does the wind lift the water?” or “Why are there waves when there’s no wind?” Here we draw a blank. Or at least I do, and so I start searching for some sort of answer, spinning through the internet, reading up on how energy moves through water. In the end, I’ve learned much more.

Summarize. Summarizing is a simple way to engage in self-explaining, since the act of putting an idea into our own words can promote learning.

You probably have had this experience in your own life. Recall, for instance, a time when you read an article in a magazine and then detailed its argument for a friend. That’s a form of summarizing — you’re more likely to have learned and retained information from that article after you did it.

For another illustration, imagine that you recently wrote an email describing your thoughts on a documentary that you saw on Netflix. In doing so, you fleshed out the idea and engaged in a more direct form of sensemaking. So, all in all, you’ll have a richer sense of the movie and its themes.

You can do this in your own life. The next time a person — your boss, your spouse, a friend — gives you a set of detailed instructions, take the time to verbally repeat the directives. By reciting everything back, you’ll have taken steps to summarize that knowledge, and you’ll be far more likely to remember the information.

Make connections. One of the benefits of self-explaining is that it helps people see new links and associations. Seeing connections helps improve memory. When we’re explaining an idea to ourselves, we should try to look for relationships. That’s one of the reasons that a tool like mnemonics works. We’re better able to remember the colors of the rainbow because we’ve created a link between the first letter of the names of the colors and the acronym ROYGBIV.

When we spot links in an area of expertise, we can gain a richer understanding. This helps explain why Brian Ross had such success using self-explaining. As he learned about computer programming, he tried to explain ideas to himself, relying on different words or concepts. “A lot of what you’re doing in self-explanation is trying to make connections,” Ross told me. “Saying to yourself, ‘Oh, I see, this works because this leads to that, and that leads to that.’”

Self-explaining should go into the learning tool kit of workers today, as the economy places new demands on making connections and adopting new insights and skills. AT&T CEO Randall Stephenson says technology workers need to learn online for at least five hours per week to fend off obsolescence. They might want to find a solitary place to do so, where they don’t feel abashed about talking out loud to themselves.

Low-Risk, High-Reward Innovation

May 4, 2017 - 2:05pm

Wharton professor David Robertson discusses a “third way” to innovate besides disruptive and sustaining innovations. He outlines this approach through the examples of companies including LEGO, GoPro, Victoria’s Secret, USAA, and CarMax. It consists of creating a family of complementary innovations around a product or service, all of which work as a system to carry out a single strategy. Robertson’s the co-author of The Power of Little Ideas: A Low-Risk, High-Reward Approach to Innovation.

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How to Launch a Successful Portfolio Career

May 4, 2017 - 12:00pm

As the head of a leadership assessment, development, and coaching firm, I spend a lot of time with successful executives talking about their work lives — and in the past few years, many of those conversations have centered on an increasingly popular, and increasingly idealized, imagined next step: the so-called “portfolio career.” Leave behind the strain, messiness and day-in, day-out concerns of full-time corporate life for a curated and interesting medley of part-time roles — board seats, adjunct professorships, consulting roles, some lectures, some writing, maybe even a book contract —and you’ll still be in the career game, still earning money, but happier, more intellectually fulfilled, and with infinitely more flexibility… or so the thinking goes.

In our firm’s coaching and counseling of senior executives who have made, or are actively trying to make, the move to a portfolio career (a maneuver we refer to as “going plural”), we’ve repeatedly seen that the transition itself is much more difficult than most anticipate — and that the reality of the career differs significantly from the imagination of it. Don’t get me wrong: A portfolio career can be rewarding, but there are several things that every smart executive needs to know — and do — to transition effectively:

Make yourself an outlier. Every portfolio has an investment thesis. What’s yours — and how is it compellingly differentiated from the many other portfolios out there? The more specific and unique your skill set and experience, the more valuable your portfolio will be. An expert in banking regulation or solar energy production — or any other niche, challenging area — will find good opportunities to apply their skills. But if you attempt to transition to a portfolio role by marketing yourself simply as a capable, experienced executive, good work will be much harder to come by.

Be clear on why. Have a clear, articulated view on why you’re going plural, and what you want to achieve. Is it flexibility and less travel? The opportunity to give back? The chance to focus on the activity you really love to do — e.g., coach, counsel, write? Without a clear view, it’s all too easy to end up with a portfolio career you don’t enjoy, or even really want. One of my clients recently “downshifted” into a “better lifestyle” (his words) plural career — only to find the consulting roles he was offered required twice the travel as his corporate job, and to parts of the world he had no interest in going. Wherever possible, think ahead and manage around this: be clear on what specific outcomes you’re shooting for, and actively seek ones that fit this profile. And then be prepared to compromise.

Do it before you do it. If you want to peg your portfolio career to board service, get on at least a few boards now.  If you want to write, be sure you’ve published before you make the leap.  Without the track record of success in a function or area, good opportunities will be hard to source — and execute. But our clients who plan at least 3-4 years ahead, and engage in a few relevant extracurriculars — speaking at universities, publishing op-eds, and the like — find themselves in a good position to go plural doing exactly those same activities.

You and Your Team Series Career Transitions

Don’t bank on boards. While board service may feel ideally suited to a portfolio-career life, the executives we work with find it hard to land interesting board roles once they’ve decommissioned. And depending on the organization, boards can be time-consuming, demanding, political, and risky — as one of our clients put it, “a board seat is a job like any other.”

Think “continuation,” not “escalation.” Portfolio careers permit you to continue at a certain career level — but rarely allow you to move up the ladder in terms of compensation, access, or prestige. You won’t be able to parlay board service with a few small, private companies into a seat at the table at G.E.  The smart executives we see who go plural make the leap when they’re fully satisfied with their careers: When they’re content with success and seniority they’re achieved, and wish to continue it in a different way.

Get ready to march to the beat of a slower drummer. After years — or decades — of the incessant intensity, immediately returned phone calls, in-the-moment demands, and urgent decisions of organizational life,  many executives are surprised to find the pace of portfolio life so much slower. Consulting projects have long sales arcs. The university you teach at seems to operate without urgency. The book contract you finally land has an 18-month deadline. Life moves differently — not worse, just differently. Once you’ve made the move to a portfolio career, your success and satisfaction relies heavily on adjusting to this new reality: learning to manage your expectations, work, and time to meet the new environment.

Manage all your assets. Organizational life requires near-total focus and most likely, significant trade-offs in terms of life outside the office. Resist the temptation to replicate this problem in your portfolio career — don’t make your schedule and life so chock-full of consulting gigs, deadlines, and travel that your other assets — personal relationships, hobbies, health — continue to get short shrift.  Remember: the value of the portfolio depends on the value of each of its assets, together.

The when and how of going plural can be daunting — particularly to successful professionals, who feel that by making the transition, they leave much behind. But by adopting a pragmatic approach, being aware of what’s ahead, and planning towards it as you would any other professional goal, you can make the leap effectively, happily — and on your own terms.

Will President Trump Learn on the Job?

May 4, 2017 - 11:52am

Donald Trump’s first 100 days as U.S. president are over. On 10 things he promised to achieve in that span that required legislation to enact, he came up empty, despite Republicans controlling both houses of Congress. His only unqualified achievement has been the confirmation of Neil Gorsuch to the U.S. Supreme Court, something that is likely to leave a lasting legacy but that could have and would have been done by any Republican president. During the first 100 days, traditionally a honeymoon period for a new president, Trump’s approval ratings have been the lowest of all presidents for whom we have data.

The question now is whether this opening act tells us anything about how Trump will handle the office of president for the rest of his term. Any conclusions we might draw should be very tentative. Many have pointed out that Bill Clinton’s first 100 days were widely viewed as a struggle, before he righted the ship and went on to become a two-term president. But fewer have recalled that Clinton’s rebound was aided by his appointment of Leon Panetta, a former congressman and director of the Office of Management and Budget, as his chief of staff two years into his term. It was Panetta, who had been critical of the new president’s (ultimately failed) approach to health care reform, who eliminated much of the chaos that had hindered the Clinton administration’s early performance. There’s certainly the possibility that Trump could make a similar move, although it’s hard to imagine who a willing Panetta equivalent would be, since Trump’s inner circle seems to be primarily made up of political neophytes and family members. Trump would have to identify and recruit a Republican whose opinion he trusted and respected enough to defer to and who was a clever enough political manager to overcome the factionalism of the Trump White House.

This doesn’t mean that improvement is impossible. Even in its first 100 days Trump’s White House has improved somewhat, with the replacement of Michael Flynn by the supremely capable H.R. McMaster and the apparent marginalization of Steve Bannon. In the end, however, the White House revolves around the president. In the absence of a chief of staff powerful enough to make up for the president’s weaknesses (the classic examples are James Baker and Howard Baker in the Reagan administration), the strengths and weaknesses of the president will play a major role in determining the performance and behavior of a White House. Since it’s unlikely that President Trump will hire a sufficiently capable outsider to fill that role, how likely is it that he himself will change? Not very, in my view.

First, while it’s possible that Trump’s behavior might evolve, it’s unlikely, particularly because, at 70, Trump is the oldest president ever elected. To put that in perspective, he’s 24 years older than Clinton was when he was elected. It’s a sensitive subject, but political psychologist Jerrold Post and neurological surgeon and historian Bert Park have shown that as leaders age, rather than mellowing out, they become more extreme versions of themselves, almost becoming caricatures. There are some neurological benefits to an older brain, up to about age 70, but adaptability is not one of them.

Second, Trump’s behavior in the first 100 days fits a clear and repeated pattern from his business career: seeking short-term personal wins (particularly wins that garner him significant publicity) at the expense of much larger, long-term collective losses. Trump’s Taj Mahal casino, for example, raised his public profile enormously but filed for bankruptcy only about a year after it opened. Trump Airlines, similarly, was a front-page splash that turned into an economic disaster within three years. Trump’s involvement in the upstart United States Football League, and his lawsuit against the incumbent National Football League, kept him in the headlines, but ended in the dissolution of the USFL. Trump Mortgage, Trump Steaks, and Trump University all may have gained him some short-term cash flow, but it came at the expense of degrading his brand or leaving him open to lawsuits for fraud. In essence many, even most, of Trump’s businesses fit the pattern of failures following fanfare, with the cycle eventually beginning again when Trump announces a new venture targeted at a new set of customers.

If Trump’s first 100 days departed from this pattern, we might expect change, in the form of a regression to the mean, in the future. Instead, his first 100 days conform to and confirm it: attention-grabbing headlines (saying he’ll label China a currency manipulator, pull out of NAFTA, shut down the government if Congress doesn’t fund a border wall, and pass a health care bill that’s both cheaper and better than the Affordable Care Act), followed by failure to follow through (none of these things have actually happened). Even short-term wins, such as favorable media coverage after his military strike in Syria, have remained short-term wins; any larger policy or strategic goals they are a part of remain unclear.

The final reason I don’t expect Trump to change is simply that change takes a lot of work. From things Trump has said, such as that he thought the presidency “would be easier” than it’s turned out to be, I don’t expect him to put in the effort it would take to significantly change his approach. And more fundamentally, he doesn’t seem to see a need to change. He has called his first 100 days “just about the most successful in our country’s history,” filled with a “long list of achievements.”

So, if you like what you’ve seen so far, you’re in luck. If not, brace yourself for about 1,300 more days of the same.

Saving the Planet from Ecological Disaster Is a $12 Trillion Opportunity

May 4, 2017 - 11:00am

How can we create $12 trillion a year in market opportunities by 2030? How about by meeting the UN’s Sustainable Development Goals? The goals, a set of 17 stretch goals and 169 related targets championed by the United Nations, are ambitious. But a recent report concludes that meeting the goals in just four out of 60 sectors (food and agriculture, cities, energy and materials, and health and wellbeing) could indeed open up market opportunities worth up to $12 trillion a year in less than 15 years.

But to get there, we have to break out of the zone of incremental change, or “Change-as-Usual.” Incrementalism has its uses, but it is worrying to see even committed business leaders treating the goals as an incremental change agenda. Their assumption: if we do more of what we have been doing, but a little bit faster and a little better, we can deliver many – if not most – of the goals by the target date of 2030. Mistake. Big mistake. Huge.

Instead, we have to admit that our planet has strict boundaries on the activities it can support, and that by exceeding these boundaries, we’re helping climate change to accelerate at an alarming pace. There’s an urgent and intensifying need to shift toward real breakthroughs.

To help support those moving in this direction, Volans and PA Consulting have joined forces with the United Nations Global Compact, the world’s largest sustainable business platform, with over 9,000 corporate members, to create Project Breakthrough. In the process, we have developed what we call “the Breakthrough Compass” to map the emerging landscape of risk and opportunity. Our conclusion: instead of pursuing incremental goals, we need to start chasing goals that will have 10x or 100x the impact on anywhere between a million and a billion people.

 

The horizontal axis (“impact”) tracks the spectrum of outcomes created by business, from negative to positive. The billion-people-impacted scale may seem far-fetched, but two brothers define the outer limits here. Google’s Larry Page invests in solutions that potentially benefit a billion people, while his brother Carl (at the Anthropocene Institute) focuses on problems that could disadvantage – even kill – a billion of us. The vertical axis (“scale”) moves from incremental change to increasingly exponential outcomes.

To address the realities of climate change and other ways in which we are increasingly overrunning planetary boundaries, we must now shift our mindsets, technologies, and business models from left to right, and from bottom to top.

Mindsets

Visiting organizations like The X Prize Foundation, Google’s X facility, and Singularity University, one is immediately struck by their conviction that our global challenges will not be solved by hitting 1% or even 10% targets, but instead that business must embrace “10X” thinking – aiming for at least a 10-fold improvement. This, we conclude, is the attitude now needed to make real progress on sustainability.

I have been exploring the edges of exponential thinking for quite a while, trying to work out how it could impact the sustainable business agenda. In 2005, I visited Wired magazine’s founding editor Kevin Kelly at his home in California. His books Out of Control and New Rules for the New Economy had helped shift my vision of sustainability from a future of scarcity to one increasingly characterized by abundance.

A few years after our visit, Kelly wrote an influential article on his personal blog that captures the conundrum of shifting to an exponential mindset:

[W]hile progress runs on exponential curves, our individual lives proceed in a linear fashion. We live day by day by day… Today will always be more valuable than some day in the future, in large part because we have no guarantee we’ll get that extra day. Ditto for civilizations. In linear time, the future is a loss. But because human minds and societies can improve things over time, and compound that improvement in virtuous circles, the future in this dimension is a gain. Therefore long-term thinking entails the confluence of the linear and the exponential.

Shifting to an exponential mindset is challenging, precisely for the reasons Kelly gives. It’s also now vital — for those very same reasons.

Technology

Peter Diamandis – co-founder of the X Prize Foundation and Singularity University – has long argued that technology can help create what he calls “a world of abundance.” The world, he has argued, has lots of resources – water, energy, and so on – but we’re hampered because we can’t access it efficiently. But, he says, ultimately “technology is a resource-liberating force.” It could help us solve our resource constraints.

Although technology is central to the exponential and abundance mindsets, much of the sustainability world remains distracted by incremental improvements to incumbent technologies, ranging from gasoline-powered automobiles to energy- and chemical-intensive air-conditioning systems. Moving well beyond that, we now need to do much more to understand and shape the thinking and priorities of those who promise (or threaten) to give us artificial intelligence, the internet of everything, autonomous everything, synthetic biology and, some insist, geoengineering. This is an area that sits at the very heart of the evolving Project Breakthrough initiative.

In terms of the potential upsides, here is an example from Israel, which I visited in April. So great is the pressure for water in the country, with even the Dead Sea dying of water starvation, interesting is growing in aeroponics – which involves growing plants in mist or even air, rather than soil or water. One company is now growing 50 times more plants per meter, and in the process using 20 times less water than traditional agriculture.

In terms of potential downsides, I remind people of Thomas Midgley, Jr. A brilliant engineer and chemist with General Motors and DuPont, Midgley held over 100 patents. He came up with leaded gasoline (a breakthrough in anti-knock technology, but one that had immense unforeseen consequences in terms of children’s nervous systems) and he also synthesized early Freons, chemicals that went on to tear a hole in the stratospheric ozone layer. As a final illustration of the downsides of some innovations, I mention Midgley’s development of an automatic bed, using ropes and pulleys, to get him in and out of bed when he sadly contracted polio. In 1944, the bed strangled him.

Business models

The sustainability industry has labored to identify issues that are “material” across the triple bottom line, not simply in financial terms. It has developed sophisticated tools to help companies build and test the business case for action, or inaction. But the spotlight must expand to business models, the essence of how wealth is created.

Business models need to become exponentially more social, lean, integrated, and circular. The challenge is to ensure that emerging technologies meet difficult-to-reach social goals, while being “lean” across scarce forms of capital, integrated from the point of use right out to the edges of the atmosphere and biosphere, and part of an increasingly circular economy.

One example comes from Patrick Thomas, CEO of the advanced materials company Covestro. In a recent interview by the Project Breakthrough team, he discussed why his firm developed – and then chose to license — a technology for turning carbon dioxide into plastic.

“If you make a breakthrough in innovation, you cannot keep it to yourself,” Thomas explained. “That’s very, very important. It’s a different way of thinking about how you make money. To keep it to yourself runs the risk that it would die. If you license it to everybody else, you guarantee that they change their view, they change their method of operation, and they adopt your technology. And that’s why we went from nothing to commercial manufacture of a product in less than 10 years… That is way faster than traditional innovation technologies where everything’s kept secret. You’ve got to blow things open.”

Only if we make the shift from incremental to breakthrough logic will business realize the huge market values now being forecast – and only if we succeed in accelerating a critical mass of business leaders into the breakthrough zone will the sustainability forecast truly brighten.

Cybersecurity Has a Serious Talent Shortage. Here’s How to Fix It

May 4, 2017 - 10:00am

It’s a refrain I’ve been hearing for the past 18 months from clients all over the world: “We need more skilled people for our security team.”

The need is real and well-documented.  A report from Frost & Sullivan found that the global cybersecurity workforce will have more than 1.5 million unfilled positions by 2020. But the security industry is a fast-growing market, with IDC pegging it as becoming a $101 billion opportunity by 2020. So what’s causing the talent shortage?

One of the big reasons is that security businesses tend to look for people with traditional technology credentials — college degrees in tech fields, for example. But security is truly everyone’s problem; virtually every aspect of personal and professional data is at risk. So why are we limiting security positions to people with four-year degrees in computer science, when we desperately need varied skills across so many different industries? Businesses should open themselves up to applicants whose nontraditional backgrounds mean they could bring new ideas to the position and the challenge of improving cybersecurity.

Insight Center

Other burgeoning industries have been in similar positions throughout history. In 1951 the U.S. accounting industry was poised for growth but was predominantly male, with only 500 female certified public accountants in the country. After recognizing the problem, leaders across the accounting field teamed with industry associations and academic institutions to solve the issue through awareness campaigns and hiring initiatives. Today there are over 800,000 female CPAs in the U.S. Security businesses need to follow this example, taking a hard look at themselves to see what’s holding them back.

There are no signs that the bad guys are limiting their talent pool — and cybercrime is now a $445 billion business. The average company handles a bombardment of 200,000 security events per day. Cybercriminals are becoming increasingly more organized and aggressive, while the teams defending against these attacks are struggling to fill their ranks.

One way IBM is addressing the talent shortage is by creating “new collar” jobs, particularly in cybersecurity. These roles prioritize skills, knowledge, and willingness to learn over degrees and the career fields that gave people their initial work experience.  Some characteristics of a successful cybersecurity professional simply can’t be taught in a classroom: unbridled curiosity, passion for problem solving, strong ethics, and an understanding of risks. People with these traits can quickly pick up the technical skills through on-the-job training, industry certifications, community college courses, and modern vocational and skills education programs.

We began using this approach about two years ago, and its success has been clear: 20% of our U.S. hiring in cybersecurity since 2015 has consisted of new collar professionals. Other organizations can use a similar approach by establishing apprenticeship opportunities, emphasizing certification programs, exploring new education models, supporting programs at community colleges or polytechnic schools, and looking for talent in new places. Some of our recent additions to the security team came from unexpected career fields such as retail, education, entertainment, and law. The two things they all had in common? They were curious about security and motivated to learn the skills.

Building a pool of talent to fill these new collar jobs is also an important part of the equation. A great example of this is the P-TECH educational model (Pathways in Technology Early College High School), which provides a training avenue for students to jumpstart their careers in cybersecurity. Public high school and college students in grades 9-14 get hands-on experience with the most sought-after technical skills. By combining specific elements of high school curricula, community college courses, hands-on skills training, and professional mentoring, these students are primed for successful entry into highly technical career fields. The P-TECH model has expanded to over 50 U.S. schools and 300 industry partners, with the goal of expanding to 80+ schools in 2017.

Of course, cutting-edge technology is going to be at the center of these new collar jobs. Artificial intelligence, for example, is being used in the workplace in a wide range of ways, and in cybersecurity it is already creating opportunities for new collar positions. AI not only provides a way to help overcome the skills shortage, but is also an important step forward in the way employees will work and companies will defend themselves. We’ve found that by using AI to gather and correlate the insights from the 60,000 security-related blog posts each month, security professionals can digest the relevant information much more efficiently, allowing organizations to upskill their employee base. Companies are already using Watson for Cyber Security to connect obscure data points humans can’t possibly identify on their own, enabling employees to find security threats 60x faster than manual investigations.

Companies that are interested in using a new collar approach to fill security positions should consider the following:

  • Re-examine your workforce strategy: Do you know what skills you need today and tomorrow to run a successful security program? Realize that skills and experience can come from a variety of places, and adjust your hiring efforts accordingly.
  • Improve your engagement and outreach: Don’t limit yourself to the same old career fairs and recruiting programs of yesteryear. Get involved in community colleges, P-TECH schools, and other educational programs to start building your recruiting base.
  • Build a local cybersecurity ecosystem: Connect with government organizations, educational institutions, and other groups. Sponsor Capture the Flag security events, and work with local middle and high schools to generate interest in the field. These groups are always looking for willing experts and mentors.
  • Have a robust support program for new hires: Mentorships, rotational assignments, shadowing, and other opportunities help new cybersecurity hires gain experience and learn. Remember, not everyone knows what they want to do right away. Keep new hires engaged by giving them the creative freedom to work on different projects and explore new technologies and services.
  • Focus on continuous learning and upskilling: To retain your new talent, keep employees current on the latest skill sets through classes, certifications, and conferences. Cybersecurity is a highly dynamic field, requiring ongoing education and exploration. And be open to employees from other areas of your business who express interest in cybersecurity career paths. Remember that AI provides employees with more intelligence and contextual recommendations at a speed and scale previously unimagined, so upskilling your workforce is a completely different ballgame these days.

Cybersecurity is a complex career field with extraordinarily challenging problems, but with a diverse pool of experiences and ideas, we stand a much greater chance of successfully defending our assets.

Why Some Digital Companies Should Delay Profitability for as Long as They Can

May 4, 2017 - 9:29am
Nicholas Blechman for HBR

When most of the great companies of the industrial era were founded, even the most brilliant economists believed deeply in the law of diminishing marginal returns. At its core, the principle means that the more of something that is made, the less valuable each incremental unit of that something becomes. If there were one pound of chocolate in the entire world, only the wealthiest individuals could afford to taste its unique flavor. If our oceans suddenly turned to chocolate, the incremental value of that volume would plummet — we’d truly have more chocolate than we really needed. The law of diminishing marginal returns held firm throughout the industrial era. The more of something we made, the less valuable it was to each incremental user down the demand curve.

That all changed in the internet era.  

In the early 1980’s, Brian Arthur began speculating that in an increasingly tech-enabled world, the principle failed to capture something. He speculated that some industries actually demonstrated increasing returns. The more of something you distributed, the more valuable each incremental piece became. Arthur’s thinking ultimately led to our understanding of network effects and feedback loops. In the world of technology: the more of something you make, the more valuable it can become. Facebook becomes more valuable as more people in your network join. Messaging apps become more valuable as more people sign up. Marketplaces like eBay or Etsy become more valuable to each new member every time a new seller signs up and lists their wares.

When Patrick Collison, CEO of electronic payments company Stripe, helped kick off our second-year strategy course at the Stanford Graduate School of Business this year, he observed that this has created one of the most profound differences in decision criteria between leaders in industrial-era and internet-era companies. When your product can become more valuable to your customers over time, the way you prioritize building features and harvesting profits within a business needs to change.

For leaders that truly understand the implications of increasing returns, a natural deprioritization of profit harvesting should emerge. Consider a business like Amazon Web Services. For years, AWS has invested in driving developer and company adoption of its platform by driving down prices and introducing low cost features to make developer’s lives easier. This has led to high levels of AWS specific investment from innovators like CloudHealth Technologies, Qubole, Mapbox, and the like. That ecosystem investment reinforces the value proposition and drives more developer adoption.

While there are likely lists of hundreds of potential ideas for Amazon to “harvest” value from its existing customers, it will always be better to harvest value after further increasing the stickiness of the platform. A smart leader (and AWS’s Andy Jassy most certainly is one of those) would naturally defer these profit harvesting maneuvers if they were to slow down his roadmap of building other features and services that better supported AWS’s vast ecosystem.

This is a hard concept for leaders of industrial-era businesses to understand. How can you continuously defer short term profitability to grow your network effect? When does your business actually make money? But as long as there is stickiness to be created, it’s a sensible strategy. As long as there are strong increasing returns to create, it’s possible that the net present value of my profit harvesting is indefinitely larger if deferred to the future. Today, AWS is a much more valuable business for the company’s long-termism. So is Facebook. So is Google. The list goes on.

Related Video The Refresher: Net Present Value Next time you're deciding about a big investment, NPV can help you make a more informed decision.

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Collison suggested that companies keep a list of ideas that could be pursued now, on behalf of short term profitability, but without obvious benefit to their customers or ecosystem. Call this parking lot “Next Year’s Strategy,” he suggests. Why “Next Year’s Strategy?” The answer is actually pretty simple. Companies with rich customer data and relationship insights can always monetize those assets — but it will be easier (and more profitable) to do so when customers are even more invested in the products they’re using. Invest today to build an ecosystem, demonstrate value, drive network effects, and create customer loyalty. Only then worry about the incremental product introductions that are subject to the law of diminishing marginal returns.

Most companies don’t think this way. Most companies can’t. Most companies have investor bases that demand profit maximization today. They won’t tolerate the patient delay of profitable activity in exchange for potentially more profitable activity in the future. And that is a very important difference driving the behavior of managers in industrial era firms. As long as upstart vendors can secure investor bases and management teams that are satisfied with profitless growth, they can prioritize short term investment that is explicitly designed to undermine their incumbent competitors in the future.

For any CEO pushing a strategy of digital transformation, understanding this change is critical. Understanding the parking lot that is “Next Year’s Strategy” allows a business to focus available investments on the things that deliver long-term results. As long as there is capital to be deployed, a leader can avoid turning towards that parking lot after their increasing return yielding roadmap is depleted. But this also presents a dangerous challenge. If you embrace the parking lot that is next year’s strategy, you’ll inevitably suboptimize on short term profitability, anger your investor base, and risk a revolt. If you play by the rules you’ve agreed on with most traditional investors, seeing all these angles won’t matter… you’ll be forced to underinvest in the things that matter in 10-years and lose focus.

Risk losing short-term. Or almost certainly lose long-term. Most of the companies that have undergone dramatic transformations in today’s business world have chosen the former. But it’s not an easy path and it’s a far from certain one.

The H-1B Visa Debate, Explained

May 4, 2017 - 8:15am

It’s hard to overstate the significance — and complexity — of the H-1B visa system in the U.S. It is the country’s largest guest worker visa program, and an important channel for high-skilled immigration. It allows companies to hire foreign workers for specialized jobs that can be challenging to fill. It has benefited the tech industry enormously, and other sectors, including health care, science, and finance, have also used it to fill gaps in their workforces.

But in April, just after U.S. Citizen and Immigration Services (USCIS) conducted its annual lottery for selecting H-1B visas (it received 199,000 petitions for the available 85,000 visas), President Trump signed an executive order that will put H-1B and similar programs under new scrutiny. Titled “Buy American and Hire American,” it directs federal agencies to review whether existing policies adequately prioritize American products and protect American workers.

The order is the latest development in a long-running debate over how companies use the H-1B program and how it affects American workers. Much of the dispute surrounds whether companies take advantage of the program to hire foreign workers for lower pay, displacing Americans from those jobs. But it’s important to understand the underlying elements of this debate: one level rests on the heavy use of H-1B visas by outsourcing firms; another rests on the disagreement over whether the program increases companies’ access to scarce skills, or merely helps them minimize costs.

The H-1B Visa Process

The H-1B visa was established, as part of the Immigration Act of 1990, to let companies recruit trained foreign workers (with at least a bachelor’s degree or the equivalent) to work in “specialty occupations” for which there are few qualified local candidates. The visa allows guest workers to stay at their sponsoring company for up to six years, and it has become an important pathway to gaining permanent resident status in the U.S.; workers who hold the “dual intent” visa can apply for a green card. Spouses and immediate family members of H-1B visa holders can come to the U.S. upon obtaining an H-4 visa.

The number of new H-1B visas that can be issued each year is capped at 65,000, with an additional 20,000 available to workers with a master’s degree or higher. Jobs at universities, nonprofit research institutions, and government research facilities are exempted, as are workers from certain countries and any current H-1B holders applying for renewal. Because demand for H-1Bs has exceeded the cap in recent years, visas have been allocated through a random lottery. There were approximately 180,000 new H-1B visas issued in 2016, according to State Department data.

Who gets H-1Bs?

H-1B visas are granted through an employer-driven system, meaning employers petition the government for visas tied to specific roles. These must qualify as “specialty occupations,” which typically require a bachelor’s degree (or the equivalent) and are found in fields such as science, engineering, information technology, medicine, and business. Companies have to attest that they could not find a qualified American worker for the position and will not pay the H-1B worker less than they would an American — but it’s often said that this hardly functions as a rule and is not strictly (if at all) enforced. There is also criticism that it opens up various loopholes that firms can exploit. For example, as a Kellogg Insight research summary explains:

The standards for determining prevailing wages are shaky, and companies can take advantage of loopholes, such as hiring the person through a third-party service. In addition, increasing the supply of workers might drive down everyone’s pay over time because employers have more potential employees to choose from and thus do not have to offer high salaries or raises to attract and retain staff.

The program is most often associated with the tech industry, where H-1B workers hold about 12%–13% of jobs, according to a Goldman Sachs report. (For comparison, they hold around 0.6%–0.7% of U.S. jobs overall.) Being able to recruit globally is supposed to help tech powerhouses like Facebook and Amazon find the talent they need.

The companies that bring in the most H-1B workers, however, are not Silicon Valley tech firms but IT services firms, many based in India, that specialize in consulting or outsourcing. These companies, which include Tata Consultancy Services, Cognizant, Infosys, Wipro, Accenture, IBM India, and Deloitte, are contracted by other companies to do IT work. According to an analysis by Ronil Hira, a professor of public policy at Howard University, in 2014 nearly one-third of new H-1B visas went to 13 of these so-called “outsourcers.” (Tata received the most visas, with 5,650, while Amazon, the tech company with the highest number, got 877.)

Compared with Silicon Valley firms, IT services companies tend to hire H-1B workers for lower-paying entry-level work. For example, Axios reported that 72.4% of Tata’s H-1B visa filings were for jobs paying between $60,000–$70,000 a year. Companies like Amazon, Apple, Facebook, Google, and Microsoft mostly filed for jobs that paid well above $100,000.

This difference in pay gets at one of the main criticisms of the H-1B program: Rather than bringing the world’s “best and brightest” talent into the country to work alongside Americans, the system appears to be bringing in cheaper foreign labor that can hurt American workers’ employment and income prospects. It’s a compelling argument: Numerous American IT workers have been laid off (and then asked to train their H-1B replacements) after their employers chose to outsource IT department work instead of keeping it in-house. These decisions by companies have resulted in a few high-profile lawsuits, such as those brought by workers against Disney and Southern California Edison. And a number of studies have found that H-1B workers can have negative effects on American workers, in terms of displacement and lower earnings.

On the other side of the debate, H-1B supporters argue that the program brings needed skills into the labor market, which helps firms remain innovative, productive, and competitive. A wealth of academic literature has documented how high-skilled immigrants, particularly in STEM, and including those who would enter the U.S. on H-1B visas, boost the economy by increasing innovation, productivity, and sometimes even employment.

It is not exactly easy for many companies to obtain H-1B visas, and members of the tech industry have lobbied Congress to raise the cap on H-1B visas to help meet demand. In 2008 Bill Gates testified before Congress to advocate for more H-1B visas to help compensate for “a deficit of Americans with computer science degrees.” (A bill was introduced in 2015 to raise the cap and liberalize other rules around H-1Bs, but died in Congress.) Companies like Tata, Infosys, and Wipro have also lobbied against restrictions on the program, arguing that their services help corporations become more competitive. More broadly, many tech leaders have emphasized the contributions of high-skilled immigrants to the economy — and have spoken out against anti-immigrant actions like President Trump’s travel bans.

Is There a Shortage of Technical Skills in the U.S.?

There is mixed evidence about the existence and the extent of a STEM skills shortage. Companies say they struggle to find qualified workers for specialized positions, suggesting there is a shortage of necessary skills. Some experts say that there are plenty of American workers who could fill these jobs, and that if employers were truly desperate for skills, wages for skilled positions would surge (but they haven’t).

An analysis led by Hal Salzman, a professor at Rutgers University, found that the U.S. graduates more STEM workers than the tech industry needs and that STEM wages have stayed depressingly flat. They write:

For every two students that U.S. colleges graduate with STEM degrees, only one is hired into a STEM job. In computer and information science and in engineering, U.S. colleges graduate 50 percent more students than are hired into those fields each year; of the computer science graduates not entering the IT workforce, 32 percent say it is because IT jobs are unavailable, and 53 percent say they found better job opportunities outside of IT occupations.

A literature review by Yi Xue and Richard C. Larson of MIT found that there is and isn’t a STEM skills shortage — it depends on where you look. In the academic job market, for example, they conclude there is no noticeable shortage; in fact, there is an oversupply of PhDs competing for tenure-track faculty positions in many fields (e.g., biomedical sciences, physical sciences). But the government sector and private industry have shortages in specific areas. In the private sector, for instance, software developers, petroleum engineers, and data scientists were found to be in high demand.

There is other evidence of a strong demand for workers with tech skills. The Economist has reported that the number of unfilled U.S. jobs in computing and information technology could top one million by 2020: “The number of young Americans graduating with qualifications in IT subjects is rising, but nowhere near fast enough to satisfy the burgeoning demand for their skills. Last year, American campuses produced fewer than 56,000 graduates with the sort of qualifications sought by information technology (IT) firms.”

When it comes to how much immigrant and native-born U.S. tech workers earn, research by Gordon Hanson of UC San Diego and Matthew Slaughter of Dartmouth’s Tuck School of Business has found that while immigrants usually earn less than native-born workers across most occupations (controlling for factors like age, education, and gender), this difference tends to be smaller in STEM fields. They also found that wages for immigrants in STEM have actually increased: In 1990 native-born STEM workers earned more than immigrants; by 2012, this reversed.

“The workers coming in on H-1Bs are a diverse crowd,” Hanson says. “You have superstar computer scientists at Facebook and Amazon and folks doing back-office IT work. But, on average, the earnings of those [foreign] workers, after just a little time in U.S., exceed [Americans’] in comparable jobs.”

Hanson cautions, however, that their results do not discount the possibility that the arrival of foreign-born engineers is driving down earnings for U.S.-born engineers. “Standard economic models would say that’s happening,” he says. “But more engineers is a good thing. There may be some lower earnings opportunities for U.S.-born engineers, but there’s more innovation for the country as a whole.”

Similarly, an analysis of 2010 H-1B petitions by Jonathan Rothwell and Neil Ruiz, both formerly of Brookings, found that H-1B workers earned more on average ($76,356) than American workers with a bachelor’s degree ($67,301), within the same age group and occupation. (It’s worth noting that the process of petitioning for an H-1B visa costs companies thousands of dollars, which suggests that they pay a premium for foreign workers’ skills.)

Hanson and Slaughter’s paper also noted that although H-1B visas disproportionately go to STEM workers, this is not an inherent feature of the H-1B program. “That most H-1B visas are captured by STEM workers may simply be the consequences of strong relative labor demand for STEM labor by U.S. companies,” they write.

Contrarily, Hira, who has been outspoken about abuses of the H-1B visa system, rebuffs the skills shortage theory. “If there was this terrible shortage, I’d think you’d see different behavior and practices,” he says. “If there was really a skills shortage, you’d see more diversity in the tech industry — they’d hire underrepresented minorities and women, they’d be training people and investing, they’d be retaining incumbent workers, not laying them off by the thousands, and you wouldn’t see rampant age discrimination.”

According to Hira, the skills shortage argument is a red herring that has clouded the conversation about how H-1Bs are used. “The top occupation of H-1B workers is computer systems analyst. These are back-end IT workers. I don’t see how anybody could argue there’s a shortage of those folks,” he says. “Hiring an H-1B should, but doesn’t, require an employer to demonstrate any shortage, so the shortage argument is moot. If there is a severe shortage, then it would be easy for employers to show one. Yet they’ve opposed any such requirement.”

How Much of the Debate Is About Outsourcing?

One of the most consequential criticisms of the H-1B program is its heavy use by IT outsourcing firms such as Infosys, Tata Consultancy Services, and Wipro. Outsourcing has been a trend in information management for years, as companies have increasingly hired contractors (at lower cost) to do tasks such as software programming and data entry, processing, and storage.

Here’s a simplified way to explain how this plays out: Say you’re a big company with your own IT department. To reduce overhead, or to cut costs, or to increase efficiency, you decide to contract out (outsource) some or all of your IT work. So you hire an IT services firm to do that work on a temporary, as-needed basis. That firm sends workers, many of whom are on H-1B visas, to do those tasks. Sometimes, these contract workers supplement your IT staff; other times, you lay off your IT staff and the contractors effectively replace them.

Because these IT firms receive so many H-1B visas, there are fewer for other companies. “No matter what your view on outsourcing is, this was not the original intent of the program,” says William Kerr, an economist at Harvard Business School who has studied the effects of high-skilled immigration in the U.S. “One of the implications of this is it reduces the number of visas available for their original purposes.”

“The outsourcing companies bring lower-level workers than the American tech companies,” Kerr says. “That work has $60,000 salaries, which is not minimum wage by any means, but it’s lower paid than a typical computer scientist at a large U.S. tech employer.”

IT companies in India and the U.S. have lobbied against making the H-1B program more restrictive, arguing that they help American companies become more competitive by handling their IT operations. They’ve also said that the visa programs allow them to keep jobs in the U.S., so reducing the number of visas they’re allowed may result in them shifting work back to India. (However, Bloomberg recently reported that Infosys plans to create thousands of new jobs for Americans over the next two years.)

What Could Change?

Any big changes to the H-1B program would have to be passed by Congress. At least four proposals to reform it have recently surfaced, and USCIS has suspended expedited processing of H-1B applications.

Wider reforms would change the way many companies, especially tech and IT firms, recruit and hire highly skilled talent. Further restricting the number of visas could cost the U.S. a competitive edge in the global war for tech talent.

“This might sound self-serving, coming from someone who works in academia, but one thing that has helped maintain our technological leadership is innovation and technical research, and immigration has helped us do that,” Hanson says. “Immigration is an important part of why the U.S. is able to maintain its elite status.”

Trump’s “Buy American and Hire American” order aims to address some of the concerns surrounding the H-1B visa system. The larger effects on high-skilled immigration — and on the economy — remain to be seen.

Gig Work Doesn’t Have to Be Isolating and Unstable

May 4, 2017 - 8:05am

With the rise of the so-called “gig economy” has come debate about how companies treat the people who “work” for them. Much of this criticism asks whether gig workers are underpaid, overworked, or subject to exploitation and even abuse. More fundamentally, others have asked whether gig work, performed even under the best of circumstances, is something to be celebrated. In short, does gig work equal a good job?

This question is a complicated one. Courts are debating whether gig work is technically a “job” at all. Are Uber drivers, TaskRabbits, and Etsy crafters legally employees, independent contractors, or something in between? As employees, gig workers would be entitled to a minimum wage, overtime pay, and unemployment insurance. Securing those rights and protections is important, but it’s not clear that these changes alone will turn gig work into a stable, well-respected career.

While what counts as a “good job” is in part about the law, it’s also highly relative and dependent on prevailing social norms. The kinds of work that are valued and the types that are disdained vary widely by culture, class, and other divides. For many Americans, full-time white-collar positions with ample benefits were, at least for the last century, the standard against which other jobs were measured. My research on white-collar unemployment, however, found that even those jobs aren’t all that good these days. Dwindling benefits, frequent layoffs, ever-expanding workloads, and a pervasive sense of uncertainty have diminished the allure of these once-sought-after positions.

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So as traditional jobs decline in both quality and quantity, it’s beginning to make less and less sense to define “good work” as a standard that is drifting away. Instead, we should be asking what it would take to make what I call “self-assembed careers” — made up of a variety of work arrangements including part-time employment, contract or freelance work, and “solopreneurship” (starting a small business with few or no other full-time employees) — viable and culturally accepted careers.

Assembled careers, it’s worth noting, are not new. There have long been people who generated income through a mix of different jobs, often because they were denied access to the sort of positions — generally dominated by white, middle-class men — that allowed one to make a living without taking on additional work. Despite their ubiquity, piecemeal approaches to work have often been looked down upon as less respectable ways to make a living; as gig workers know, in most respects, they still are.

That needs to change, and I see three main ways forward. The first concerns how we teach young people about work and careers. In 2001, when I was interviewing laid-off high-tech workers, many were frustrated that schools were still telling students that they needed to choose a single career. They wished someone had explained to them that most Americans will have at least a dozen jobs over their lifetime, rather than one cradle-to-grave profession. A decade and a half later, the college students I teach are still under the impression that by graduation they need to decide “what they’re going to be,” rather than what job they want to do first, before inevitably moving on to other, different jobs and industries. We do young people a disservice by preparing them for a world of work that does not actually exist. And while replacing “Career Day” with “Careers Day” won’t entirely eliminate the problems facing independent workers, it will lessen the stigma around making a living out of “side jobs.”

A second cultural fix to the stigma around independent work is already underway. It involves bringing workers together to help them navigate the many challenges — psychological, social, professional, financial, and legal —of nontraditional work.

Since 2012, I’ve been interviewing and working alongside professional organizers, hired to help clients manage their homes, work spaces, and belongings. While some organizers support themselves by full-time organizing work, many combine organizing with other kinds of work, out of financial necessity and because they enjoy the variety of assembled careers. A young professional organizer who also works as a poet, blogger, tutor, and environmental activist in Los Angeles told me, “I’m someone who doesn’t like going into the same office every day, the same desk, same computer or the same classroom. I like change and variety.  I thrive on that.” Now, she says, “Every day is different.”

And yet seeing the same people, in the same place, day after day is part of what allows people to establish a sense of identity, community, and social cohesion. The good news is that people with assembled careers are slowly but surely finding their own ways to come together to develop connections, something that’s vital in ensuring that independent work isn’t isolating.

Some examples include a Brooklynite I interviewed who described herself as “the queen of side jobs” who began arranging field trips for freelance workers to explore the city together while everyone else was stuck in the office. Others have sought out co-working spaces for proximity to other people in addition to perquisites such as on-site childcare, administrative and I.T. services, and structured networking opportunities. At the other end of the income spectrum, non-profit worker centers are offering low-wage workers a sense of community as well as legal representation, language courses, health clinics, bank accounts, and loans.

Within specific industries, professional associations have also stepped in to replace some of the communal and material benefits once secured through employers. The National Association of Professional Organizers, for example, connects members through local chapters and national conferences, provides training and certification programs, and “leverages the power of numbers so that even sole proprietors can have access to essential business services such as liability insurance and credit card processing.”

This numerical power is as important culturally as it is economically and politically. As independent workers become more visible to one another, they will continue to find ways to become visible to others, too—to their local communities, to their politicians, and, ultimately, to future generations of workers, for whom assembling a meaningful, lucrative, stable career out of short-term gigs may seem as natural, if not more so, than schlepping to work at the same job, for the same boss, day after predictable day.

Third, linking crucial benefits like health care, retirement accounts, unemployment insurance, vacations, parental leave, and a minimum wage to “regular” 9-5 employment no longer makes sense for most Americans, if it ever did. By 2020, the number of Americans working independently  is expected to reach 54 million. And while for some this represents an ideal path, the “choice” for many others is made from a set of increasingly limited and imperfect professional options, one narrowed even further for workers with minimal education or who face discrimination based on race, gender, age, class, or disability. Given this, it makes sense to find ways to safeguard people’s health and quality of life that don’t rely on the elusive promise of stable employment. Solutions that have been proposed thus far include a universal basic income, whereby every resident receives an unconditional annual sum, and  portable safety nets and benefit packages workers carry with them from job to job.

The fact that these ideas are gaining more and more attention suggests a coming change in the way Americans think about the relationship between employment and stability. As a cultural anthropologist, however, I know it takes more than money and benefits to make a job “good” (although those are a good start). Americans may pay lip service to the values of grit and hustle and to the notion of pulling oneself up by one’s bootstraps by whatever means necessary, but assembled careers still carry with them a tinge of illegitimacy, a way to make ends meet, perhaps, but not a real, grown-up career. Changing this will require a change in how society views independent workers, and how independent workers see themselves.

How Managers Become Leaders

May 3, 2017 - 1:49pm

Making the leap from unit-level manager to company-level executive requires some key changes to your leadership style. Learn what they are in this video slide deck. Download a customizable version in Subscriber

Why More Executives Should Consider Becoming a CHRO

May 3, 2017 - 11:24am

Steven Moore for HBR

If you’re a business leader looking for an opportunity to have real impact on your company — and position yourself for the top job — which career path is best? CFO? COO? CMO? What if we told you that the CHRO role might be the best job you could ever have, with real opportunity for reshaping an organization? That the CHRO role, although at first it may look career limiting, can have more impact than any other position reporting to the CEO?

That’s precisely what we found. We interviewed search professionals, CEOs, and CHROs with nontraditional backgrounds to find out what happens when business leaders outside of HR move into the role. We confirmed that CEOs are well aware of the importance of talent, rating finding the best human capital as a top challenge, but that business leaders without an HR background can be reluctant to take the CHRO role, because of their negative perception of HR, their fear that the role won’t have an impact, and their concerns about lacking necessary functional knowledge.

Lucia Luce Quinn is Chief People Officer at Forrester Research. Earlier in her career, she left a position as SVP of business development and emerging businesses to join Boston Scientific in a senior line job. Upon arriving, she flatly refused the CEO’s offer of the CHRO role. He had to ask her four more times, including once on a conference call with the whole executive team, before she finally relented.

Phil Johnston, an executive search leader at Spencer Stuart, confirms that Quinn’s initial reaction wasn’t unusual: “When a CEO asks a business leader to run HR, the most frequent response is ‘What did I do wrong?’ It’s not seen as a desirable role; it’s seen as punishment. Of course, they haven’t had a chance to think it through, but that’s the first reaction.”

Yet business leaders who took the CHRO role, including Quinn, report it is the most impactful role in their career, and many would not accept an organizational leadership position that didn’t come with the CHRO role.

And many CEOs we talked to, like Owen Mahoney of Nexon, agree that the CHRO is one of the most strategic roles someone could have: “Businesses grow or die based on the quality of their people, so the human resource executive role is arguably the most strategic in the company. If I weren’t the CEO now, I’d probably want to be the CHRO.”

According to those we interviewed, there are four reasons why “outsiders,” as opposed to those with a traditional HR background, succeed in the role:

Their focus on business results, not only people outcomes. Nontraditional CHROs see outcomes like engagement or retention as paths to business outcomes, while traditional HR might view such goals as ultimate outcomes. Jacqueline Reses, a former private equity investor who became Yahoo’s CHRO, said, “We should drive HR like a product organization that finds the most critical use cases of our customers and then builds products to solve those needs. We shouldn’t execute programs that don’t serve the business. A lot of HR professionals think in terms of the functions activities, such as, ‘We need to change the organization structure’ or ‘We need to run a training program’; I think in terms of the business outcome I want to get to, then figure out how I’m going to get there.”

Their role in pushing fellow leaders, not just supporting or serving them. Second, nontraditional CHROs see their role as pushing leaders, but they have often found that traditional HR thinks in term of partnering with or serving leaders. As Reses said, “I look at every leader and decide if they are right for the job. I push leaders. I drive them to higher performance.” When Quinn accepted the CHRO role at Boston Scientific, her HR organization planned to implement a program even though they knew it probably would not work. Why? Because organizational leaders wanted it. Quinn insisted that her HR team devise a program they believed would work, and she pushed organization leaders to adopt HR’s better alternative. If you would be the kind of CHRO who thinks in terms of driving success instead of supporting leaders, then you could have a huge impact across the organization.

Their desire to embrace opportunity, not only reduce risk. Third, nontraditional CHROs embrace risks to generate opportunity where traditional HR might exclusively focus on reducing risk. These leaders don’t just tolerate risk; they hunger for it, in the form of important challenges where risk comes with potential upside opportunity. Rick Jensen, who left a big job in marketing to become SVP, Chief Talent Officer at Intuit, recalled a lesson he learned in marketing: “Fall in love with the problem.” Traditional HR leaders might feel compelled to offer conservative solutions, rather than risk trying an unconventional approach to unknotting a problem.

Zabeen Hirji, CHRO at the Royal Bank of Canada (RBC), grew up in retail banking and operations management roles before moving into HR. She says she applies a little self-test: “If I’m not presenting ideas that get turned down by the top team, I know I am playing it too safe. My job is to push the envelope.” One recent example of taking on risk she could easily have avoided was setting up a company-wide online “jam” to involve employees in defining RBC’s purpose and resetting its values. The live event could have failed in many ways; the safe thing to do would have been to back off the project. However, Hirji’s eye was on the potential upside, so she went ahead with the jam. Employees responded enthusiastically (there were over 20,000 participants), but the lesson is not that she got a big win — it’s that she was willing to risk failing.

The personality that embraces risk is best illustrated by Reses. She changed industries from private equity investing to technology; she changed geographies by moving from New York to San Francisco; and she changed functions from M&A and investing to HR. Interestingly, Reses would argue that as an investor she was the ultimate HR lead, as she helped CEOs invest in the right resources and people to build a business. If you find that this kind of challenge fills you with excitement, then a cross-functional leap into HR could be a great career move.

Their application of diverse business skills to the role. Fourth, nontraditional CHROs approach HR with skills and frameworks that reflect a variety of business disciplines, while traditional HR leaders might rely too exclusively on function-specific HR disciplines. “I was surprised by how much I personally enjoyed running the HR function versus taking on a CFO role,” said Reses. “HR was a position where I had a view across the biggest challenges of everyone’s business — leadership issues and how to allocate people across teams. It was vehicle for changing the growth trajectory of the company.”

Quinn said, “I don’t love telling people I’m in HR, but I love leading HR. Many leaders experience HR as administrators who can be barriers rather than enablers. I discovered that HR doesn’t need to be like that, and as CHRO I use every skill I ever learned.”

Our interviews, not surprisingly, also suggest that transformational HR is not the sole province of nontraditional HR leaders. It can be achieved by those with traditional HR backgrounds, too, with the right view of results, relationships with fellow leaders, attitudes toward risk and opportunity, and diverse business skills.

HR, like all professions, requires specialized talent and knowledge. Nontraditional CHROs emphasized that their transformational role was only possible with the support of HR leaders with deep traditional knowledge and capability.

Often underutilized and overlooked as a lever for business impact, a shift into the CHRO role — done correctly — can be a great career move.

How to React to Biased Comments at Work

May 3, 2017 - 11:00am

Bias at work can be overt and insidious. It can be shocking and enraging. But the subtle “Wait, what just happened?” moments are far more frequent. Take these examples: A client assumes you are in a subordinate role because of your age. A prospective customer only makes eye contact with your white colleague. A coworker calls you “angry” while your equally assertive male counterpart gets labeled “strong” (a far too often occurrence for women as one of our previous studies showed).

Moments like these leave you questioning others’ intentions and your own perceptions. The inner dialogue can sound a bit like, “I’m upset. But should I be? Do I have a right to be?” At best, this shadowy bias is exhausting. At worst, it is soul destroying.

Bias’s sometimes slippery nature also makes it difficult to eradicate in the workplace. Leaders implement policies that prohibit discrimination against protected classes, but rules can’t prevent unconscious, unintentional bias. How do you legislate status assumptions, eye contact, and silent perceptions?

Clearly, organizational cultures need to change. But in the meantime, what’s an individual to do who suffers daily from subtle inequities? While it’s unfair to place additional burdens on victims of bias, injustice is amplified if they aren’t provided coping tools for the interim.

We think of this as addressing both the seed and the soil. The seed is the individual who needs to know how to respond to bias and survive and thrive, regardless of the soil that surrounds it.

The soil is the organization that isn’t as unbiased as it wants to be. The soil’s goal is to become a place where diverse seeds can contribute and succeed.

Understanding Bias

Earlier this year, we asked people who felt they had experienced bias at work to describe the incident in detail. Within two weeks, we had 498 rich, passionate, and heartbreaking stories. Most described blatant actions of bias. For example:

“I was dining with my co-workers when two gay men walked by. Several coworkers jeered and displayed disgust. As I am gay, it was very disheartening that these employees who are trained in diversity and acceptance acted both unprofessionally and impolite. A coworker, who knows I am gay, told them they should know their audience but it went right over their heads and they returned to the conversation unashamed and unaware.”

Others illustrated momentary lapses, where the offender tried to recover, though it was usually too late. For example:

“I’m the only woman in a team of ten men. When I was pregnant, I told my manager at 11 weeks. He was exasperated. ‘That’s the last time I ever hire a woman,’ he said. I was gobsmacked. On Monday he apologized for his comment. ‘I was only joking,’ he said. I accepted his apology, but knew he wasn’t really joking. I wish I had stood up for myself.”

You and Your Team Series Difficult Conversations

Paradoxically, the rarest examples are the ones that happen most often: patterns of unintentional, unconscious bias. Their scarcity in our collection is probably because they involve subtle patterns that are tough to recognize, describe, and address.

“I am the only woman on a team of software engineers. The lead engineers, who have a lot of influence over who gets picked for the ‘cool’, new, and ground-breaking projects, typically overlook me. I feel it’s because I’d be a buzz kill in the male-locker-room atmosphere.”

The problem isn’t just that people experience bias. It’s that their experiences are often undiscussable. Victims don’t want to call others bigots or be accused of “playing the diversity card” — these options can be career limiting. Instead, they keep their concerns to themselves.

We asked respondents to rate how permanent, pervasive, and controllable these incidents of bias are at work. These are the three dimensions Martin Seligman uses to assess helplessness and hopelessness — and even depression. The results were disheartening, but hardly surprising:

  • Permanent: 49% of victims said the bias is an enduring part of their workplace and happens regularly and routinely.
  • Pervasive: 66% said it impacts all aspects of their engagement, morale, motivation, commitment, and desire to advance in the organization.
  • Uncontrollable: 60% said they did not feel they could master incidents of bias in the moment or prevent them from recurring in the future.

More than a quarter of the respondents (27%) described their experience with bias as the worst combination of all three: permanent, pervasive, and uncontrollable.

Improving the Seed: Skills for Individuals

Victims of bias need skills to replace ulcers, invective, and silent judgment with open, honest, and respectful dialogue. Individuals should know how to influence their workplace without alienating those they need support from. Below are skills we’ve seen people use successfully to address the subtleties of unconscious bias:

  • Use “C.P.R.”: You can choose to address issues at three levels: Content (a one-time incident), Pattern (a series of incidents), or Relationship (the impact of a pattern on your ability to work productively with others). When an issue is overt and egregious — someone makes an intolerant comment — a content conversation works fine. However, with subtleties, you must gather more data until you can describe a pattern. For example, if the boss repeatedly reaches out to your direct reports and not to you, be sure you can cite a few instances and draw attention to the pattern or else your manager is likely to respond with sincere explanations of the single instance you’re describing. Finally, consider addressing the relationship issues by helping others understand the cumulative effect of their behaviors on trust, cooperation, self-esteem, etc.
  • Know your goal: When we experience injustice, we often feel provoked and disrespected — even angry. Before you speak up, think first about what you really want to have happen. Do you want an apology, punishment, or repentance? Is it enough for the bad behavior to stop? What kind of relationship would you like? The clearer your goals, the more likely you’ll achieve them.
  • State your take: Skilled individuals are careful to describe their concerns absent the judgments and accusations the rest of us hold when we speak up. For example, replace, “What you said about my pregnancy was sexist and abusive” with “Last Friday, you said, ‘That’s the last time I ever hire a woman.’” Describe what really just happened — no apologies, no self-repression, no accusations, and no indictments. Begin with the detailed facts, tentatively suggest what the facts mean to you, then invite others to a dialogue where you both can learn.
  • Make it safe: Is a person who exhibits unconscious bias automatically a bigot? If so, then we’re all bigots. Skilled individuals recognize that what we’re up against is a human condition not simply personal flaws. It’s challenging to describe biased behavior without others feeling attacked. Achieving a better outcome for the future requires that we help others and ourselves feel safe while addressing uncomfortable issues. For example, you might begin with, “I don’t think you realize how that came across…”
Improving the Soil: Strategies for Organizations

Most organizations already have disciplinary procedures for egregious intentional bias, but many are missing strategies that can eliminate unintended, unconscious bias and those “What just happened here?” moments before they occur. The following approaches can influence cultural norms and practices to dramatically reduce unconscious bias.

  • Set challenging goals and track results: Leaders must set challenging goals for results and the behaviors that enable them — and then hold themselves accountable for achieving them. Results include objective measures such as numbers of women, people of color, and LGBTQ individuals in each stage of the pipeline (new hires, supervisors, managers, executives, etc.), performance ratings, internal promotions, compensation, and attrition. Behaviors include leading-indicator measures such as perceived support, perceived barriers, and desire to advance.
  • Identify crucial moments: Locate the times, places, and circumstances when bias are most likely to occur. For example, identify the crucial moments in a:
    • Career path: Job search, interviews, reviews, job opportunities, assignments, development, and promotions.
    • Life path: Marriage, pregnancy/adoption, childcare, elder care, sickness, and relocation.
    • Daily work environment: Poor performance on an assignment, good performance on an assignment, friction with managers, harassment, and an obnoxious coworker.
  • Combine diverse solutions: Most Diversity and Inclusion initiatives employ a single solution. Some rely on training, others on policies, still others on support from the top. Our research shows that combining four or more different solutions makes initiatives ten times more likely to succeed.

Bias, especially unintentional, unconscious bias, is a stubborn problem, deeply rooted in our culture. Eradicating it is exceptionally tough but by nurturing both the seed and the soil, organizations can help individuals cope while simultaneously taking the necessary steps to systematically prevent bias.

Board Directors Should Be Paid Only in Equity

May 3, 2017 - 10:00am

When a corporate scandal breaks – like the recent one at Wells Fargo or earlier ones at Lehman, Enron, or Qwest – the question is always raised: what was the board of directors doing while the managers in these companies were involved in such unprofessional behavior? The answer is that, like most of us, directors respond to incentives. And my research suggests that those incentives need to change.

Director compensation typically consists of a cash component (retainer), smaller cash amounts paid for attendance at board and committee meetings, and incentive compensation in the form of stock and stock option grants which vest over a period of a few years. During the past decade, the prevalence and importance of stock ownership guidelines has increased significantly for the S&P 500 companies.

But the gradual evolution of director compensation doesn’t go far enough. I propose that compensation of corporate directors should consist only of restricted equity. By “equity” I mean stock and stock options. By “restricted” I  mean that the director cannot sell the shares or exercise the options for one to two years after their last board meeting. I believe corporate directors should not be paid any retainer fees or other cash compensation. Of course, this change wouldn’t prevent every scandal or solve every problem with corporate governance. But it would help channel director attention toward longer-term profitability.

My research supports such a change. In two recent studies, my co-authors and I looked at the relation between director stock ownership and company performance for the largest U.S. companies. In one study, we looked at the performance of the 1,500 largest public U.S. companies during the period 1998-2012. We measured performance using the company’s return on assets, adjusted for the company’s industry and size. And we controlled for the company’s leverage, R&D intensity, board size, and its transparency to analysts. In the second study study, we considered the S&P 500 companies during the years 2003-2007, using the same controls. In both studies we found that companies in which directors owned more stock performed better in future years. We also found that directors who own more stock are more likely to discipline or fire the CEO when the stock price performance of their company has been sub-par in the previous two years.

There are drawbacks to this proposal, but they can be mitigated. If directors are required to hold restricted shares and options, they would most likely be under-diversified, and would be concerned with lack of liquidity. The proposal could also lead to early director departures, as directors seek to convert illiquid shares and options into more liquid assets (after the one- to two-year waiting period). To address these concerns, I recommend that directors be allowed to liquidate 10-15% of their awarded incentive restricted shares and options each year.

If we want directors to further the long-term health of the companies they serve rather than falling asleep at the wheel while malfeasance spreads, we need to provide them with the right incentives. If we pay directors solely in restricted equity, they’re more likely to do their job.

Why You Really Need to Stop Using Public Wi-Fi

May 3, 2017 - 8:05am

In today’s busy world, convenience seems to outweigh consequence, especially with how people use their mobile devices. Using free public Wi-Fi networks, for example, comes with any number of serious security risks, yet surveys show that the overwhelming majority of Americans do it anyway. In a study by privatewifi.com, a whopping three-quarters of people admitted to connecting to their personal email while on public Wi-Fi.

It isn’t hard to see that a few moments of online convenience are far outweighed by your money or financial information being stolen, or by suffering the embarrassment of your personal information being publicly released. According to a recent opinion poll, more people are leery of public Wi-Fi networks than of public toilet seats (a promising sign). But an interesting experiment, conducted at the 2016 Republican and Democratic National Conventions, showed attendees’ true colors. At each convention, private entities provided visitors with free public Wi-Fi networks (for social science purposes). Around 70% of people connected to the nonsecure Wi-Fi networks at both conferences.

Security consultants often find that sex can be an attention-grabbing metaphor to get a client’s attention. When we lecture businesspeople about cybersecurity, we compare the dangers of using public Wi-Fi to the risks of having unprotected sex. In both cases, not taking the necessary precautions can lead to lasting harm. For mobile devices, the harm is digital: the theft of your personal data, such as passwords, financial information, or private pictures or videos. You’re rolling the dice every time you log on to a free network in a coffee shop, hotel lobby, or airport lounge.

Insight Center

Think the problem is being exaggerated, or that cyber theft only happens to large corporations? Consider that over half of the adults in the U.S. have their personal information exposed to hackers each year. Furthermore, Verizon’s annual Data Breach Investigation Report has found that 89% of all cyber attacks involve financial or espionage motives.

There are dozens of online tutorials showing hackers how to compromise public Wi-Fi, some of them with millions of views. The most common method of attack is known as “Man in the Middle.” In this simple technique, traffic is intercepted between a user’s device and the destination by making the victim’s device think the hacker’s machine is the access point to the internet. A similar, albeit more sinister, method is called the “Evil Twin.” Here’s how it works: You log on to the free Wi-Fi in your hotel room, thinking you’re joining the hotel’s network. But somewhere nearby, a hacker is boosting a stronger Wi-Fi signal off of their laptop, tricking you into using it by labeling it with the hotel’s name. Trying to save a few bucks, and recognizing the name of the hotel, you innocently connect to the hacker’s network. As you surf the web or do your online banking, all your activity is being monitored by this stranger.

Still not convinced of the risks? Here’s a story that should worry business travelers in particular. In 2014 experts from Kaspersky Lab uncovered a very sophisticated hacking campaign called “Dark Hotel.” Operating for more than seven years and believed to be a sophisticated economic espionage campaign by an unknown country, Dark Hotel targeted CEOs, government agencies, U.S. executives, NGOs, and other high-value targets while they were in Asia. When executives connected to their luxury hotel’s Wi-Fi network and downloaded what they believed were regular software updates, their devices were infected with malware. This malware could sit inactive and undetected for several months before being remotely accessed to obtain sensitive information on the device.

What is the best way to protect yourself against these kinds of Wi-Fi threats? Although antivirus protection and firewalls are essential methods of cyber defense, they are useless against hackers on unsecured Wi-Fi networks. Consider the following seven security tips to keep prying eyes out of your devices:

  • Don’t use public Wi-Fi to shop online, log in to your financial institution, or access other sensitive sites — ever
  • Use a Virtual Private Network, or VPN, to create a network-within-a-network, keeping everything you do encrypted
  • Implement two-factor authentication when logging into sensitive sites, so even if malicious individuals have the passwords to your bank, social media, or email, they won’t be able to log in
  • Only visit websites with HTTPS encryption when in public places, as opposed to lesser-protected HTTP addresses
  • Turn off the automatic Wi-Fi connectivity feature on your phone, so it won’t automatically seek out hotspots
  • Monitor your Bluetooth connection when in public places to ensure others are not intercepting your transfer of data
  • Buy an unlimited data plan for your device and stop using public Wi-Fi altogether

The more you take your chances with a free network connection, the greater the likelihood that you will suffer some type of security breach. There is a saying in the cybersecurity industry that there are three types of people in the world: those who have been hacked, those who will be hacked, and those who are being hacked right now and just don’t know it yet. The better you protect yourself, the greater your chances of minimizing the potential damage. Remember: Falling victim to public Wi-Fi’s dangers is a question of when, not if.

How to Capture Value from Collaboration, Especially If You’re Skeptical About It

May 2, 2017 - 11:37am

Vincent Tsui for HBR

Many of us recognize intellectually that we need others’ knowledge to solve big problems, yet we still lack the motivation to collaborate.

Teamwork all too often feels inefficient (search and coordination costs eat up time), risky (can I trust others to deliver for my client?), low value (our own area of expertise always seems most critical), and political (a sneaky way of self-promoting to other areas of one’s firm). Lurking behind these reservations may be concerns about losing relevance, becoming one of those “charismatic” leaders so often criticized as “all form, no substance.”

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We’ve found in our research that clarifying what collaboration is (and what it isn’t) and gaining firsthand experience with one or more collaborative projects is the only way to combat these common apprehensions. Only after seeing collaboration’s value for yourself will you put in the effort required to seek out cross-disciplinary projects and hone the skills necessary to collaborate effectively.

Know What Collaboration Is — and What It Isn’t

Collaboration is a way of working that attracts and involves people outside one’s formal control, organization, and expertise to accomplish common goals. Understanding what collaboration is not is a crucial part of getting better at it.

Collaboration is not a style. Many people naively see collaboration as a leadership style in which relationships take precedence over the task at hand. But collaboration is not consensus. On the contrary, clarity about where the buck stops is one of the most critical enablers of efficient teamwork.

Collaboration is not “cross-selling.” Another common misconception is that collaboration is cross-selling, the practice of suggesting new services or products, usually under another colleague’s purview, to an existing client. But this sort of simple hand-off is a far cry from working across organizational or disciplinary silos to holistically tackle sophisticated problems.

Collaboration is not always the answer. Former Ogilvy CEO Charlotte Beers was famous for saying, “Collaboration is highly overrated when you don’t have the right thing to do.” Collaboration is suitable for certain tasks and unsuitable for others. Too often, people will try to collaborate on everything, and wind up in endless meetings, debating ideas and struggling to find consensus.

Gain Firsthand Experience

It’s one thing to acknowledge the value of collaboration intellectually; it’s another to internalize its potential so fully that you proactively seek more collaboration opportunities and that collaborative skills become central to your professional identity. Neither the true benefits of collaboration nor the required skill set adjustments, however, become apparent until you’ve made a go of it. Here are a few ways to get started.

Contribute to someone else’s project. Coming to know how and when to collaborate is a learning process. Working with old hands before you forge a project of your own helps you pick up the routines, processes, and tools that make collaboration efficient. This insider knowledge can also help you identify future situations when collaboration is smart and most likely to pay off.

For example, one earthquake engineer, Stuart, had a career breakthrough when he joined a large structural investigation project led by a team of senior partners in his firm. He applied his specialized expertise to help this team evaluate the impact of construction-induced vibration on surrounding public transportation infrastructure. In the process, he and the whole team came to realize how valuable his knowledge could be to projects outside his narrow space.

Work on your network. Two of the biggest barriers to collaboration are ignorance about others’ expertise and mistrust in their ability to meet your expectations. Building your network can help solve both problems. A crucial asset is your relationships with “connectors,” people who already bridge specialty domains and organizational boundaries and who can refer you to potential collaborators. Not only do connectors help you identify the expertise you need — they also serve as “honest brokers,” vetting potential collaborators’ competence and character. In much the same way, your network builds your reputation as a trustworthy person, attracting projects and colleagues to you that you otherwise would not have sought out.

You and Your Team Series Collaboration

Be a good citizen. Most firms have projects that cut across lines of business, hierarchical levels, and functional specialties. These temporary assignments are well worth the time investment. They allow you to acquire new skills, gain a big-picture perspective, increase your connections, and may very well spark ideas for future collaborative opportunities.

Take Maaike, a newly appointed partner in a global consulting firm. Despite having a full plate of client projects, she signed up to work on a massive survey to understand the concerns of chief operating officers. Reflecting on her experience, she says: “I’m astonished by what I learned that I could immediately use to upgrade my own work. I never realized that we have behavioral economists on staff who can apply psychological and cognitive research to help clients with technology implementation projects. Working with them to develop the COO survey showed me how valuable they are, and we later teamed up to pitch — and win — a major new project. I also developed a mutual appreciation with other service lines, like our outsourcing and risk advisory groups, and have been invited onto pitches with them.”

Be strategic about what projects you take on. More isn’t necessarily better — in fact, it’s often worse. Some professionals end up taking on too many small projects, often where they’re routinely applying their specialist knowledge to a small slice of the engagement. They incur the high switching costs of constantly coming up to speed on a new project, but few of the benefits. They’re not a core member of the team, so they get lower exposure to others’ knowledge and therefore are less likely to be in the room when the real “aha” moment happens. And because they’re deployed with such a restricted scope, they probably get less credit for the project’s success.

Many of today’s most important challenges are so complex and multifaceted that they can only be tackled by teams of experts from disparate domains. To solve them, professionals must be able to harness ideas, people, and resources from across disciplinary and organizational boundaries. Finding a first project to work on is the best way to start.

Why Do So Many Managers Avoid Giving Praise?

May 2, 2017 - 11:00am

One of the most difficult parts of a manager’s job is giving feedback. In a survey of 7,631 people, we asked whether they believed that giving negative feedback was stressful or difficult, and 44% agreed. When talking with managers about giving feedback we often hear comments such as, “I did not sleep the night before,” “I just wanted to get it over quickly,” “My hands were sweating and I was nervous,” and “They don’t pay me enough to do this job.” We find that because of this anxiety, some managers resist giving their direct reports any kind of critical feedback at all: when we asked a different group of 7,808 people to conduct a self-assessment, 21% admitted that they avoid giving negative feedback.

Given how unpleasant giving critical feedback can be, perhaps that isn’t surprising. But what we were surprised to see is that even more people admitted that they avoided giving positive feedback! 37% of the people who took our self-assessment conceded that they don’t give positive reinforcement.

We can only conclude that many managers feel that it’s their job to tell their direct reports bad news and correct them when they make a mistake, but that taking the time to provide positive feedback is optional.

We think this is a mistake. Our research suggests that colleagues place a great deal of emphasis on receiving positive feedback – and that it colors their relationship with one another even more than does negative feedback.

We compared 328 managers’ self-assessments with results from 360-degree feedback surveys. Each leader was rated by an average of 13 respondents on a variety of behaviors, including “Gives honest feedback in a helpful way.” The raters who thought a person was effective in giving feedback were most influenced by the leader’s comfort and willingness to give positive reinforcement. Whether the manager gave negative feedback did not make a big difference — unless the leader avoided giving positive feedback. This was also true when we looked only at the ratings of direct reports.

 

When we looked only at the managers’ self-assessments, however, we saw a different story. There was a strong correlation between people who believe they give “honest, straightforward” feedback and those who give negative feedback, regardless of whether they also give positive feedback.

 

Leaders obviously carry some incorrect beliefs about the value and benefits of different forms of feedback. They vastly underestimate the power and necessity of positive reinforcement. Conversely, they greatly overestimate the value and benefit of negative or corrective feedback. In all, they misjudge the impact negative feedback has on how they are perceived by their colleagues, bosses, and direct reports. Giving only negative feedback diminishes a leader’s effectiveness in the eyes of others and does not have the effect they believe it has.

Perhaps in an effort to provide employees with what they believe is direct, honest feedback, managers who prefer giving negative feedback may come across as only looking for what’s wrong. Some employees have described this as, “Quick to criticize and slow to praise.” While our findings don’t tell us why managers are so hesitant to give positive feedback, our work with leaders suggests that there could be a variety of reasons. Perhaps it starts with the perception that the really good managers are the tough graders who are not afraid to tell people what’s wrong. Possibly they believe that giving people positive feedback will encourage a subordinate to let up or coast. Maybe they are emulating their prior bosses who gave little praise, but who pointed out any mistake or weakness. Some may believe it a sign of weakness to praise subordinates. Maybe they just don’t know how to effectively deliver appreciation or praise. Or maybe they intend to give kudos, but feel so busy that the days slip by and they never quite remember to send out that note of praise for a job well done.

Giving positive feedback is really quite simple. It’s OK if it’s brief – it just needs to be specific, rather than a general remark of “good job,” and ideally occurs soon after the praise-worthy incident. Of course it’s also best when it’s sincere and heartfelt.

Our findings suggest that if you want to be seen as a good feedback-giver, you should proactively develop the skill of giving praise as well as criticism. Giving positive feedback shows your direct reports that you are in their corner, and that you want them to win and to succeed. Once people know you are their advocate, it should also make giving criticism less stressful and more effective.

How Corporate HQ Can Get More from Innovation Outposts

May 2, 2017 - 10:30am

In March 1848 San Francisco newspaperman Samuel Brannan announced that gold had been found in California. In the gold rush that followed, more than 300,000 people headed to the area to make their fortunes. Over 150 years later, there’s still a gold rush in California — now re-located to Silicon Valley. Even organizations that remain headquartered in other cities have set up innovation outposts there in the hope that high-tech silicon dust will rub off on them.

Setting up innovation outposts in global technology clusters, such as Silicon Valley, Boston, and Tel Aviv, is highly popular among Fortune 500 corporations. The logic is that if you are present where new trends, ideas, talents, and start-ups are generated you might be able to recognize and assimilate them into your firm’s innovation pipeline. And, of course, it looks cool — both inside the organization and to outsiders.

Persuaded by such logic, companies agree to make the investment and set up their innovation centers. People are relocated or hired locally to staff the outpost. It’s expensive, but you agree to pay an innovation premium because you appreciate that in innovation clusters the search for talent is fierce.

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Unfortunately, all these grand ambitions and substantial investments are likely to have limited returns. Being close to the action doesn’t guarantee a piece of the action. My experience suggests that outposts fail for a variety of reasons. Perhaps the most frequent is the isolation of the outposts and their detachment from the rest of the company. So, even if the outposts manage to absorb local value they usually fail to propagate it back to the organization, which means they fail on the ultimate reason for their existence.

Consider a European energy company that decided to open an innovation outpost in Silicon Valley a number of years ago.  It started by sending out a few high potential young employees for scouting and networking. They received generous expat remuneration packages and the tremendous opportunity to create their own social capital by meeting entrepreneurs and venture capitalists and being exposed to the frontier of ideas and technologies. They worked with little coordination and control from HQ. Unhindered, they quickly amassed valuable social capital through an array of personal and professional relationships, as well as local intelligence and insights. For the employees involved, this was a huge opportunity.

But for the organization? There were no processes and systems in place to integrate the outpost team with the company HQ and the rest of the organization. That meant that although the outpost team had struck gold, there was no means of sharing it among the rest of the firm. The company risked losing the value it had invested to create. And, indeed, that is what happened. Some of the outpost team were hired by local companies or joined startups. Most of the absorbed knowledge — local contacts and relationships, intelligence, insights, and so on — left with them. The company no longer has any operations at all in Silicon Valley.

To make innovation outposts work successfully, companies need to do two things simultaneously. First, they need a “sense and capture” approach in the outpost itself. Second, they must set up “integration and propagation” processes to make sure that all that value is transferred back and properly used by the wider firm.

In my experience with large multinationals the typical pitfall is to overlook the second element, the integration and propagation model. Frequently, this is not even designed, much less implemented. Without one, all the social capital, ideas, intelligence and opportunities of the outpost are not fully leveraged by the company. This is one of the main reasons why many initiatives fall short of expectations and fail to deliver the excepted returns.

An integration and propagation model should address three objectives:

  • Map out local relationships. Mapping the local team’s network makes social capital relationships explicit and avoids the risk that it stays with the local team. As an analogy, think of sales and marketing and the rise of CRM. Among other reasons, companies build CRM systems to avoid contacts, histories, and networks of relationships leaving the company together with the salesperson.
  • Propagate intelligence and insights. Detect, capture, evaluate, and channel the intelligence and insights from the innovation cluster through the organization. The tacit knowledge should be codified and shared through formal processes and protocols to avoid the risk that valuable information absorbed by the outpost doesn’t reach the mothership. For example, the outposts of a pharma company develop and distribute a company-wide newsletter of the latest trends and news from the hotspot. A utility company has set up a community of people on the intranet with conversations triggered and moderated by the outpost team on the latest trends and intelligence from the outpost.
  • Speed up corporate deal making processes. When the outpost scouts a potential deal — a research, licensing, startup investment, or M&A — there must be processes to integrate the local opportunity with the company’s existing deal processes. The flow and speed of decision making must be reviewed as typically decisions need to be made much faster in a hyper-competitive environment such as an innovation cluster. Otherwise, a company runs the risk of missing opportunities due to delays caused by standard corporate processes. Shortcuts and priority lanes must be thought of. Accountabilities, transfer protocols, and decision bodies must be reviewed and properly designed to capture value on locally sourced deals.

Amidst the hype and enthusiasm about having an outpost, CEOs and Chief Innovation Officers must look for ways to create a return on investment, not just a return on coolness. If companies want to reap the benefits for their innovation pipeline it is not enough to send a few smart employees overseas and wait for the magic to happen. They need to think carefully and strategically about how to shape and implement a two-sided model, in which integration and propagation is key. Otherwise, they may just find themselves sitting by as the next gold rush happens.

Why Germany Still Has So Many Middle-Class Manufacturing Jobs

May 2, 2017 - 9:00am

Only about 1.1% of the world population is German. However, 48% of the mid-sized world market leaders come from Germany. These firms, which I call “Hidden Champions,” are part of what makes German economic growth more inclusive: by my calculations, they have created 1.5 million new jobs; have grown by 10% per year on average; and register five times as many patents per employee as large corporations. And they are resilient: my estimate is that in the last 25 years no more than 10% of them disappeared or were taken over, a distinctly lower percentage than for large corporations. Nearly all of them survived the great recession of 2008-2009.

Moreover, Hidden Champions have also contributed to the sustainment of the German manufacturing base, and it is in large part thanks to them that nearly a quarter of the German gross domestic product continues to come from manufacturing. The percentage in most other highly industrialized countries such as the U.S., the UK, or France is only about half of this. The effect on employment is enormous. Manufacturing creates jobs at home and at the time same allows companies, through exports, to participate in the growth of emerging countries.

Given this success, it’s not surprising that many non-German policymakers and economists have looked to the Hidden Champions, or more broadly, the Mittelstand, to try and chart a path to more inclusive growth in their own countries. But how replicable is their success? While other countries could try to emulate aspects of what makes the Hidden Champions so successful, the reasons for their success are the result of a complex network of factors, many of them historical.

A Hidden Champion is defined by three criteria: 1) a company has to be among the top three in the world in its industry, and first on its continent; 2) its revenue must be below €5 billion; and 3) it should be little known to the general public. Germany seems exceptionally good at creating these companies; I have identified 2,734 Hidden Champions worldwide and no less than 1,307 of them are based in Germany. You might argue that my research is deeper in Germany than in other countries, and most likely I wouldn’t be able to prove you wrong. But researchers in other countries have also examined this phenomenon and found far fewer Hidden Champions in their countries. A colleague who looked for Hidden Champions in Japan for years identified only 220 companies, a researcher in France has come up with only 100. With the exception of Switzerland and Austria, the per capita number of Hidden Champions is nowhere near as high as it is in Germany.

Of course, success of individual Hidden Champions is based on their leadership and strategy. The most important difference is the continuity of the leadership. The leaders of the Hidden Champions stay at the helm for an average of 20 years; according to Strategy&, which collects data on the world’s largest 2,500 companies, in large firms the average CEO tenure from 2012 – 2016 was only seven years, and the median was even shorter, at five and a half years. The leaders of Hidden Champions are also more likely to come into power at a young age and are more often women than in larger companies.

But the reasons they are a predominantly German phenomenon are many. This includes the German history of many small independent states (until 1918 Germany consisted of 23 monarchies and three republics), which forced entrepreneurs to internationalize early on in a company’s development if they wanted to keep growing. In addition, there are traditional regional crafts, such as the clock-making industry in the Black Forest with its highly developed fine mechanical competencies, which developed into 450 medical technology companies, most of them makers of surgical instruments.

Scientific competencies also play an important role. The cluster of 39 measurement technology companies in the area of the old university of town of Göttingen are the result of the leading role Göttingen university’s mathematics faculty had for centuries. The Fraunhofer Institute continues to function as a transmission belt between science and practical applications. The Munich-based Hidden Champion Arri, world market leader in professional film cameras, used the expertise of Fraunhofer to navigate the transition from analog to digital technology, and was thus able to defend its leading market position.

A further pillar of the Hidden Champions’ competitive strength is the unique German dual system of apprenticeship, which combines practical and theoretical training in non-academic trades. The Hidden Champions invest 50% more in vocational training than the average German company.

Tax advantages are another reason. The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector.

Finally, the international openness of a society is an essential factor in the globalized world of the future. Germany is far ahead of other large countries with regard to mental internationalization. This includes language competencies, international experience from student exchanges, and university studies. Countries such as France, Italy, Japan, and Korea lag far behind in these respects.

Why is this mental internationalization so important? Because while Hidden Champions may be small, they compete on a global scale. They achieve world-class quality by keeping their focus narrow; focus is the most important element of a Hidden Champion’s strategy. Flexi, for example, makes only one product — retractable dog leashes — but has the claim to make them better than anyone else. This has allowed them to reach 70% of market share in this category. But focus makes a market small. How can you make it bigger? By globalizing. Today, the Hidden Champions are present in their target markets with 30 subsidiaries on average. Despite their medium or small size, they are true global players. About one quarter of German exports comes from the Hidden Champions.

I do think the Hidden Champions provide a model of inclusive growth that are worth emulating. But any foreign policymaker or economist seeking to foster a community of such companies in their own country should tailor their approach to that country’s own unique conditions.

This post is one in a series leading up to the 2017 Global Drucker Forum in Vienna, Austria — the theme of which is Growth and Inclusive Prosperity.

Does a Woman’s High-Status Career Hurt Her Marriage? Not If Her Husband Does the Laundry

May 2, 2017 - 8:05am

While women who win the Academy Award for Best Actress are celebrated for reaching a pinnacle of career achievement, several of them also share another distinction – divorce. Known as the “Oscar Curse,” Best Actress award recipients are more likely to file for divorce than are their nominated counterparts or Best Actor winners. Sandra Bullock, Julie Andrews, Joan Crawford, Bette Davis, Halle Berry, Emma Thompson, and Kate Winslet all share this experience. Patterns like this led us to ask whether womens’ high status careers affect marital stability, and if so, why. Our research on the matter was recently published in the journal Organization Science.

While men continue to occupy the upper echelons of most organizations, women have made considerable progress in acquiring high status roles in organizations. According to U.S. Department of Labor Data, women now hold at least 50% of management and professional positions, outnumbering males in roles such as financial managers, accountants, and medical and health services managers. These workplace changes have affected household roles as well: whereas U.S. women were the primary breadwinners in 18% of marriages in 1987, that number rose to 29% in dual-income marriages by 2014.

Despite these organizational and economic changes, societal norms still suggest that in heterosexual marriages, husbands “should” hold higher job status relative to their wives. When this norm is violated, and wives hold the higher status job, negative consequences can follow: Women are disparagingly referred to as having “married down,” are more likely to be targets of husbands’ aggression, and the risk for divorce increases. With these findings in mind, we wanted to examine whether and how womens’ high status jobs might impact the quality of their marriages and whether wives’ perceptions of, and feelings about, their husbands’ job status led to marital instability.

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To do this, we proposed that when wives see themselves holding a higher job role than their husbands, their feelings about their own statuses might change. Typically, when individuals and organizations affiliate with others of higher status than themselves, they elevate their own status (something researchers call “status leakage.”) And on the flip side, when people affiliate with others in lower status positions than themselves, they may experience status anxiety or the fear of losing status, which can be both economically and personally threatening.

Bringing this closer to home, when wives believe that the statuses they worked so hard to achieve at work are at risk because of their husbands’ lower job status, they could experience a different kind of status spillover, which would include feeling embarrassed by or resentful of their spouses’ lower job status, and fearing that their status could be compromised by that of their husbands.

To explore this, we developed a 9-item scale to assess wives’ feelings about their status relative to their husbands. We then surveyed 209 women from executive leadership networks who held high status roles and were in heterosexual married or common-law relationships. Our results controlled for a number of variables such as age, whether they had children, and initial status levels when they first met their partners. We also asked the women if we could contact their husbands, and were able to obtain data from 53 of them.

A 9-Item Scale to Measure Feelings on Job Status

Women in this study rated the following statements on a scale from 1 (strongly disagree) to 5 (strongly agree).

I am embarrassed by my spouse’s job.

My spouse’s job impedes my future career success.

I wish my spouse had picked a job that gets more respect.

I am embarrassed when my spouse accompanies me to work events.

I feel that my spouse should find a more respectable job.

My spouse’s job takes away from my own job status.

My spouse is not proud of his job status.

My spouse’s work makes me look bad.

My spouse’s job does not bring me status.

Source: “When She Brings Home the Job Status,” by Alyson Byrne and Julian Barling, Organization Science, Volume 28.

We found that wives who believed they held higher status positions than their husbands were indeed more likely to experience feelings of resentfulness or embarrassment, feeling that their status was decreased by their husbands’ lower status position, which in turn had a negative impact on their marital satisfaction — and even increased the likelihood that they were thinking about divorce. Husbands, however, were unaffected by their wives’ status spillover feelings: They only experienced greater marital dissatisfaction and thoughts about divorce if their wives’ were outwardly unhappy with their relationship.

However, when wives felt that their husbands provided them with high levels of instrumental support, such as helping with domestic responsibilities or child and elder care, holding higher status positions than their husbands was not associated with marital instability. This was not the case if their partner simply provided emotional support, suggesting that it is the tangible support that husbands provide to higher job status wives that matters more. We suspect that providing this type of tangible support not only allows wives to focus on their careers, but also denotes respect.

Do wives’ higher status positions exert long-term effects on their marriages? To investigate this, we again contacted our original sample of high status wives three years after our initial survey. Of our original female participants, 90 responded. Our analyses then showed that wives’ initial higher job status and feelings of status spillover predicted marital instability (but not necessarily divorce) three years later, reinforcing the importance of understanding this dynamic.

Notwithstanding our findings, other questions remain to be answered in future research. For example, might women who hold higher job status than their husbands be penalized for violating gender role prescriptions in their workplaces? And would we find the similar effects of status spillover on marital instability for LGBTQ couples?

Still, these findings are relevant for organizations and for individuals. First, it’s a useful reminder that women who seek a successful career and family life still find it challenging to achieve both. Some may choose to exit high status careers in an attempt to find happiness at home, while previous research shows that others might downplay their career paths so as not to threaten their partners, both of which would negatively affect the development of organizational talent.

Second, our results suggest that receiving instrumental, tangible support from one’s husband buffers against the negative effects of wives’ status anxiety. Organizations have an important role to play by providing family-friendly policies to all employees, and reducing any perception of a penalty against those, either male or female, who use those policies.

Third, it is critical for those in dual-career couples to have open and honest conversations about their career ambitions and their expectations about mutual support — however uncomfortable those conversations might be. We also see a role for business school educators to help ensure that students enter the workplace fully aware of the pressures and opportunities involved in seeking to balance career advancement and family relationships.

Finally, perhaps our findings speak less to an “Oscar curse” and more to an “Oscar gift” in which successful, high status women are in a position today to make life and relationship choices less constrained by fear of financial repercussions and more as equal partners in a mutual relationship. Thinking of our findings this way would be consistent with viewing and valuing women as equal members in marriage, work, and society at large.

The Debate on Corporate Tax Reform Just Started for Real

May 1, 2017 - 4:30pm

President Trump’s announcement of his proposed tax reforms, as skeletal as it was, is better news than most commentators have suggested. First, it signals that the administration is coming to the view that tax reform is the most important agenda item for the first term — and that is great news. Second, the fact that the corporate piece of the proposal did not embrace the plan proposed by House Ways and Means Chair Kevin Brady and Speaker Paul Ryan, and its so-called border adjustment tax, is also good news. So, there is some good news in what it signals and what’s not in it. What about what is in it?

As for the details, such as they are, it’s a very mixed bag. Let’s take the individual and corporate parts of the proposal in turn.

On the individual side, there are several important pieces to Trump’s announcement:

  • Fewer brackets and a lower rate on the top bracket
  • A doubling of the standard deduction
  • Repeal of the alternative minimum tax
  • A restriction of deductions, particularly the state and local tax deduction
  • Repeal of the estate tax
  • Repeal of the additional tax on investment income that was part of the Affordable Care Act

The president’s proposal is right to focus on brackets — the proposal just goes in the wrong direction. We do need bracket simplification, but we also need a new higher bracket. Because high incomes have risen faster than inflation, today 1% of Americans are in the top bracket. Historically, it’s been closer to 0.1% of Americans. As a result, the highest tax bracket lumps together people in vastly different circumstances, from those making $450,000 to those making tens of millions of dollars. Creating a new tax bracket at a higher rate of 45% on income above $1.25 million would raise considerable revenue and would make it less necessary to rely on stealth tax increases such as phasing out deductions and exemptions. That new bracket would also help address the growing appetite for redistribution in a more focused way.

The proposal to double the standard deduction is being positioned as an effort to provide tax relief to the middle class by increasing the number of people who owe zero income tax after deductions. This is a very costly and inefficient way to help the middle class. More than half of Americans don’t pay the income tax, so a generous expansion of the standard deduction would go largely to people in the upper middle class and above. It would also be available to high-income folks and, because it’s a deduction, is most valuable to people facing a high tax rate, meaning people with high incomes.

A better way to help the middle class would be through a significant expansion of the earned income tax credit. This would help lower-income Americans who need it most, provide excellent work incentives, and not reward high-income individuals. Even if the goal is specifically to expand the number of people who pay no income tax, there’s a much easier and cost-effective way than doubling the standard deduction: Do it explicitly by exempting Americans below $100,000 from taxes altogether.

Repealing the Alternative Minimum Tax (AMT) and limiting most deductions other than mortgage interest and charitable contributions is relatively good news. The restriction of deductions is an important step toward the goals of simplifying the tax code and raising more revenue, and it is relatively progressive. Repealing the AMT would reduce complexity considerably. And they have nicely offsetting effects. People in coastal (and largely Democratic) states are more likely to both pay the AMT and have the largest state and local tax deductions, so they win a little and lose more than a little. Repealing the surtax on investment income and repealing the estate tax are nice simplification measures but are largely targeted toward very high-income taxpayers.

The news on the corporate side is better. The U.S. corporate tax system is woefully equipped for current global realities. The statutory rate of 35% is dramatically higher than that of many of our trading partners, while the average rate — what firms actually pay — is considerably lower than the statutory rate. Such a system creates distortions without collecting as much revenue as the high rate would suggest. Finally, the U.S.’s worldwide system of taxation is also out of step with the rest of the world; unlike many of our peers, we tax profits made overseas by U.S. companies. That has led firms to leave the country, either explicitly or by being bought by foreign firms and redomiciled.

The administration’s recent announcement is also good news because it appears to be turning away from the more radical business tax reform envisaged in the Brady-Ryan plan. That plan has dominated tax reform dialogue for the last six months, and unfortunately so. The Brady-Ryan plan is based on a “destination-based cash flow tax” (DBCFT) that is also mistakenly labeled a “border-adjustment tax” and has five critical features:

  • A reduced rate, down to 20%
  • Expensing of all capital investments
  • No net interest deductibility
  • The exemption of export revenues and the nondeductibility of imports
  • An effective shift away from a worldwide income tax

What does all that add up to? Well, no one really wants to say it, but it’s effectively a value-added tax (VAT) with a wage subsidy. VATs are employed around the world, but wages are typically not deductible. So, it’s a tax on consumption rather than income, which is good. But it uses corporate cash flows to do it, rather than the way the VAT works around the world: through the so-called credit invoice method, where businesses are taxed on sales but deduct taxes paid on inputs.

In other words, the Brady-Ryan plan imagines using the U.S. tax system to experiment with a set of reforms that haven’t been tried anywhere else around the world. It would bring enormous risks including, but not limited to, (1) a very sharp exchange rate movement that could lower the value of all the assets held by U.S. citizens abroad, (2) the possibility of considerable financial instability, triggered by the increasing value of dollar-denominated liabilities, (3) a trade war initiated by the World Trade Organization, which likely will rule that the tax is not WTO compliant, (4) a wave of mergers, triggered by the presence of companies with structural losses (exporters) and companies with enormous paper profits (retailers), and (5) considerable uncertainty over how pass-throughs and financial institutions would be treated.

These risks might be justified if there were commensurate rewards. But many of the rewards of the DBCFT are oversold. A cash flow tax like the one in the Brady-Ryan plan might actually raise the tax rate on marginal investments, compared to the status quo of interest deductibility and accelerated depreciation. And, most notable, the key element of the reform is the accounting gimmickry that it relies on: Its treatment of exports and imports means that the bill is scored, to use the Washington parlance, as not costing nearly as much revenue as it really does. In fact, that gimmickry is a leading reason why many in Washington, D.C. like this plan.

So it’s good news that that we seem to be moving away from this more radical approach to tax reform. The bad news is that the outlines released by the Trump administration are skinnier than most campaign proposals and don’t resemble anything like a real legislative effort. The timing seems clearly motivated by the 100-day marker, and so the proposal appears to have been rushed out without thoughtful elaboration. The proposal does get two big things right — a reduction of the rate and a move away from taxing the worldwide income of multinational firms domiciled in the U.S.

It also gets one big thing very wrong: It creates a very low rate for business income on pass-through entities, a category that includes sole proprietorships, partnerships, and S corporations. This is being framed as a way to bring the rates on pass-through entities in line with corporate activities, but is really just a massive tax cut for higher-income folks who use pass-throughs. As such, it falls prey to the ridiculous rhetoric that excessively valorizes “small businesses” and equates small businesses with pass-throughs. Moreover, it can create a large hole in the income tax by creating incentives to disguise labor income as business income by creating pass-throughs. If anything, we should be considering a small tax on pass-throughs at the entity level. That would be progressive and would counteract the tremendous advantage that pass-through entities currently enjoy compared to corporations.

Fortunately, the outline of the Trump plan points toward a reasonable path forward. The last really serious effort at corporate tax reform was undertaken by former U.S. Representative Dave Camp when he ran the House Ways and Means Committee. The broad outline of that reform was a reduced rate, a shift away from territoriality, some revenue increases by adjusting investment incentives, and some efforts to curb transfer pricing. That corresponds to my own efforts to reimagine the U.S. tax system, and I believe it is the right approach to reform.

Taken together, and most important, the reform plan the administration has offered is fiscally irresponsible, and it relies on heroic assumptions about the economic growth that the tax cuts would trigger. Given the U.S.’s long-term fiscal challenges, this is not acceptable. And it points to the fact that, in the near future, we will need a traditional VAT consumption tax and/or a carbon tax. These are excellent tax instruments, which raise revenue efficiently and counteract the considerable externality associated with carbon emissions. Finally, if the administration were really interested in simplification, iy would embrace the “ready return,” a plan in which the government would prepopulate tax returns for taxpayers, considerably reducing complexity and compliance costs.

But the proposal by the Trump administration is an opening gambit and little else. It won’t resemble where we end up, but it signals an appreciation for the importance of tax reform to the future of economic growth in the U.S., and that is a good place to start.

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