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Become a Better Listener by Taking Notes

March 24, 2017 - 10:00am

Team dynamics can make or break a meeting. Have you ever been in a meeting where people interrupt each other, introduce new ideas when they should be building on the conversation, and repeat someone else’s point just to be heard? These communication issues waste time and energy, and usually lead to more meetings to correct misunderstandings, reiterate decisions, or soothe hurt feelings and interoffice tensions.

But there is one thing you can do that can make a significant difference to improving the quality of time you spend in meetings: Listen. By improving the way you listen and understand others in meetings, you can make that time more productive by reducing repetition and misunderstandings.

You and Your Team Series Meetings

If simply listening can solve so many problems, why is it so hard to practice? One reason is we’re listening to interrupt with our ideas or rebuttals. We listen so we can jump in with our perspective. Or we’re worried we’ll forget what we want to say if we listen for too long. We focus on our own communication, rather than listening to understand others.

Through my work with executive teams, I’ve developed a simple technique that can help anyone listen more effectively in meetings. I call it Margin Notes. You may already take notes during meetings, but unless you’re using them wisely to understand others and plan your response, you may still fall into the same trap of speaking before you think. Margin Notes allows you to think, process information, make connections between points of discussion, and ask effective questions instead of blurting out the first thing that comes to mind.

Here’s how it works:

  • Set your page with a wide margin and take notes when someone else is talking. In the main body of your notes, capture only what the other person is saying. These don’t have to be verbatim; just jot down the key points. You can accurately quote individuals later.
  • In the margin, capture your ideas, judgments, rebuttals, and questions to each of the points you’ve written down. By marking them to the side, you separate your own thoughts from what others say. It lets you set aside (literally) your own voice and gives you space to listen to others. For example, when your boss excitedly outlines idea after idea for a product launch, you might note in the margin, “Ask about budget” or “Remind about CEO memo.”
  • When you speak, only bring up items from your Margin Notes that haven’t already been addressed and are the highest priority, and cross them off as you go. If you’re unable to raise some topics during the meeting and the items are important to you, tag them for follow-up.

For example, Ari is chief of staff to Brenda, the CEO of a 200-person scientific organization that was struggling. Its main source of funding had been favoring its competitor, and some key people had left to start their own ventures. Tensions were high, and some of the remaining team members were trying to one-up each other in discussions. Others were desperate to take any action as soon as possible. The ensuing miscommunications, high-stakes decisions, and panic led to conflict and unproductive meetings.

Brenda gathered her direct reports to discuss how they might sharpen their efforts in the face of dwindling resources. Ari took these notes following the Margin Notes model:

 

Ari assessed his Margin Notes and focused his questions during the meeting on the most important issues he had jotted down: What are the decision criteria for budget cuts, and should cuts be spread across projects, rather than cutting projects in their entirety? He waited until the end of the meeting to also ask about cuts in infrastructure and marketing.

Then, in a one-one-one with Brenda, Ari tackled some of his other concerns: “We’re an action-driven culture. Do we need to slow down? Do we lose possibilities by not questioning assumptions?” He also noted, “The team doesn’t question you; they just jump into action. Are we relying too much on your judgment alone? Should some of these decisions be passed on to others in the team?” Lastly, Ari observed, “I worry we may not be fostering a culture of healthy conflict. Jennifer seems nervous whenever Josh and John seem to argue, and tends to turn to your guidance.” There were also several points that Ari chose not to raise because they were low priority at the moment. He marked these comments, so if they continued to be an issue, he could raise them later.

Ari’s Margin Notes enabled him to make a considered decision on how to guide the conversation more strategically toward business outcomes, rather than further fuel the competition between John and Josh. He was then helpful to Brenda by reflecting some of the dynamics he observed in a separate meeting. This allowed Brenda to approach the next meeting’s agenda more thoughtfully and adjust her own behavior. Based on Ari’s comments about the team’s culture, at their next leadership team retreat, Brenda facilitated a discussion about their implicit cultural norms. They collectively brainstormed changes to become a higher functioning team during these lean times.

As you take these notes, don’t just write down the facts of the discussion. Here are some things to consider when taking Margin Notes so you can listen better:

  • Write down themes from your main notes. When you listen across topics, what is a common theme? How are they related to each other? What’s the bigger story they’re telling? For Ari, his observation about culture was one of these themes.
  • Capture questions and flag them to ask at the appropriate time. Ari held off on asking the question about cuts across infrastructure and marketing in addition to projects until the end of the meeting so as not to take the focus off the hard trade-offs that needed to be made on projects first. He also took some of the personal dynamics to a private one-on-one with Brenda, rather than openly critiquing other team members in the meeting. This helped him to avoid calling out or embarrassing his colleagues, while also providing an opportunity for Brenda to create conditions for better communication in future meetings.
  • Test assumptions. When someone makes a general statement for the first time in a meeting, examine it from all angles before considering action. Ari considered several assumptions about how the budget cuts could be implemented and whether there were ways to expand funds instead of simply cutting the budget.
  • Pay attention to what’s not said. There’s rich data in both what’s unsaid and what is said nonverbally. In Ari’s case, he noticed that no one asked questions or challenged assumptions; they immediately jumped into discussing specific projects and implementing the budget cut. What’s more, he observed some nonverbal behaviors. When John and Josh talked about their projects, they made eye contact with only Brenda and never looked at each other or other team members. It made Ari wonder if John and Josh were competing to lobby Brenda to consider the merits of their projects over others. He decided to raise this concern with Brenda separately so she could look deeper into these projects.
  • Be discerning about what you ultimately share. You don’t have to share everything from your Margin Notes, especially in a meeting setting. Ari simply asked three questions which shifted the tone of the session. He later followed up privately with Brenda about some of his other concerns, and noted some points that could wait until high-priority items had been completed.

Capturing others’ words helps you track what they’re saying, and by writing down your thoughts next to each point, you can ensure you won’t forget important follow-ups while still digesting the conversation. Allowing yourself to listen more deeply to meetings gives you the opportunity to connect the dots, present your ideas more convincingly, and get more real work done in meetings.

When Clinicians Know They’re Being Watched, Patients Fare Better

March 24, 2017 - 9:30am

In the 1920s, a series of experiments were conducted at Hawthorne Works, a Western Electric telephone factory just outside Chicago, to study the effects of lighting on worker productivity.  The researchers found that improved lighting increased manufacturing output – but only until the study ended, when productivity reverted to its previous level, even though the new lighting persisted. The researchers concluded that it was the act of being studied, not the lighting, that made workers increase their productivity.

The “Hawthorne effect,” as it is now known, has been well-documented in social science: individuals, typically research subjects, actively change their behavior when they know they are being observed and monitored. The effect goes beyond productivity. It has been found in many different contexts, from improved hand hygiene among health care workers being studied to increased voter turnout when people’s voter preferences are being assessed.

In a recent study, published in JAMA Internal Medicine, we uncovered a unique form of the Hawthorne effect in hospitals, with important consequences for patients. We analyzed how unannounced hospital inspections affect a hospital’s patient outcomes. These inspections are done by the Joint Commission, a U.S. health care regulatory organization that ensures hospitals comply with patient safety standards. To maintain accreditation, hospitals are required to undergo these unannounced, week-long inspections every 18 to 36 months. Officials assess the hospital’s adherence to a number of quality and safety processes, including hand hygiene, infection control protocols, and proper documentation, to name a few.

The stakes for hospitals are high – loss of accreditation in the review process can harm a hospital’s reputation or even presage closure. So hospital staff are keenly aware of their behavior during the inspection period. Some observers have called these visits “Code J” and noted that hospitals mobilize tremendous resources to deal with these visits. Indeed, two of us (Jena and Barnett) work at large teaching hospitals in Boston and have observed several Joint Commission visits: the inspection week is stressful for hospital executives and staff, starting with a flurry of emails to hospital employees making them aware that a Joint Commission inspection is underway. Despite the level of attention these visits get, their immediate effect on physician behavior and patient outcomes has not been explored.

Research Note

We analyzed data on Medicare fee-for-service beneficiaries who were admitted to U.S. hospitals that were inspected by the Joint Commission during 2008-2012. Overall, 1,984 hospitals were inspected by the Joint Commission during this period.

Our study included 244,787 hospitalizations during inspection weeks and 1,462,339 hospitalizations during the +/- 3 weeks surrounding an inspection week. (We therefore examined a six week total window around an inspection week). We compared 30-day mortality, hospital acquired infection rates, and adverse safety events for patients admitted during inspection weeks versus the surrounding weeks.

We obtained Joint Commission inspection dates for 1,984 U.S. hospitals during 2008-2012, and we matched those dates to hospitalization data for more than 1.7 million Medicare beneficiaries. We compared the outcomes of patients admitted to the hospital during an inspection week against patients admitted to the same hospital in the weeks immediately preceding or following the inspection.

We found that Medicare patients who were admitted to a hospital during a Joint Commission visit had slightly lower mortality than patients admitted during our non-inspection weeks. The effects were most pronounced in large teaching hospitals, where patients admitted during an inspection week had lower 30-day mortality (5.9%) than patients in the surrounding weeks (6.4%), a statistically significant 6% relative decrease. Mortality rates in the weeks before and after the inspection were similar; in other words, the mortality drop during inspection weeks was short-lived. Although observational studies such as ours cannot establish causal relationships, the natural experiment study design that we employed suggests that Joint Commission visits led to mortality declines for patients admitted during inspection weeks.

While a 6% reduction in mortality may seem modest, it is meaningful in aggregate. According to our estimates, it means that approximately 3,600 fewer Medicare beneficiaries would die each year, or approximately 10 fewer per day, if the mortality rates observed during inspection weeks prevailed the rest of the year.

A natural question would be whether patients hospitalized during inspection and non-inspection periods were different. We found that the volume of hospitalizations was nearly identical between inspection and non-inspection weeks, and the characteristics of patients and their reasons for hospitalization were also similar. This should be expected since inspections were unannounced.

At least two explanations for why we’re seeing this inspection effect are possible. First, physicians and nurses may modify their specific behaviors that the Joint Commission inspectors measure, such as hand hygiene and infection control practices. We found no evidence, however, that hospital-acquired infection rates fell during inspection weeks, which would suggest that improved infection control practices during inspection weren’t behind our findings. We also found that other adverse safety events, like pressure ulcers and pulmonary embolism after surgery, did not decrease during inspection weeks, further suggesting that our findings weren’t due to better adherence to the specific protocols that the Joint Commission measures.

Another possibility is that doctors were just more focused during inspection weeks. Heightened scrutiny during visits may raise clinicians’ awareness of certain operational deficiencies, and improve their focus, attention, and vigilance – all of which would lead to better patient care. For instance, being more attentive may produce more careful clinical documentation, which begets stronger communication across staff and ultimately higher quality treatment. Similarly, the presence of inspectors may reduce time spent by hospital staff on non-work related activities that may distract them from patient care – we call this the “Facebook effect.”

Our findings do not imply that the Joint Commission should visit hospitals more often. Inspection visits are incredibly stressful, and we initially wondered if we’d find worse patient outcomes because clinicians may be distracted by inspectors. Rather, our findings suggest that focus, attention, and clinical vigilance can have a significant impact on patient care. This is well known. One reason hospitals have tried to reduce resident physician work hours is because physicians are not as alert 20 hours into a shift as they are in the first two hours. Studies of antibiotic prescribing, for example, have demonstrated that physicians are more likely to inappropriately prescribe antibiotics later in the day, presumably due to increased fatigue.

How might our findings be used to improve patient care?

First, hospitals could analyze their own clinical data to observe which aspects of their normal day-to-day operations change most dramatically to meet inspection standards. For example, are there reductions in inappropriate medication prescribing during inspection weeks? Is there evidence that hospital infections fall? If so, is it because handwashing increases? Identifying these changes may offer opportunities to improve care and patient outcomes.

Second, to the extent that heightened clinical vigilance and attention are behind our observed findings, efforts could be made to build a work environment that enhances these conditions. For example, periods of the day when the majority of clinical decisions are made – typically the morning during patients rounds – could be dedicated “disruption”-free periods, in which pages, calls, and other interruptions to doctors’ and nurses’ workflow are minimized. Creating more quiet work spaces that facilitate focus on clinical tasks may also be effective.

The “Hawthorne effect” is real. Identifying what behaviors change when they’re being monitored, and how they affect patient outcomes, may provide useful insights into how the quality of hospital care can be improved.

How Morale Changes as a Startup Grows

March 24, 2017 - 9:00am

When we think about startup cultures, we imagine ping pong tables, kegerators, and Nerf guns. More importantly, we envision an esprit de corps that drives employees to happily burn the midnight oil to build the next big thing.

However, this startup cultural utopia invariably hits a rough patch for about 70% of startups in years three to four, regardless of how happy the team was before.  We call this the “cultural chasm.”

When we examined and how why this happens, we found that growth does not compensate for this cultural chasm. In fact, the faster the startup grew, the deeper the cultural chasm was that they had to overcome. Put another way, a company can’t speed their way through the cultural chasm.

At the same time, companies that cross the cultural chasm see a marked rebound in their culture starting in years five and six, although not returning to the “honeymoon” of the startup’s early days.

 

After researching over 100 early stage ventures, we began to understand why startups hit a cultural chasm and how to navigate it.

In addition to examining surveys of employee happiness, our research included the annual revenue growth rate of companies. Two distinct sets emerged. One cohort reports 0%–20% year-over-year annual revenue growth rates; the second is a faster-growing group experiencing 20%–200% year-over-year growth. The data shows that the faster-growing group usually has a higher cultural starting point in years 0 to 2, but their chasm is much deeper in years 3 to 4 than the slower-growing cohort.

This could be due to the fact that the founders in the faster-growing segment were so busy at the beginning with rapid growth that they simply did not have time to invest in their company’s cultural infrastructure. Then when issues start rearing their heads in year three or four, these problems are exacerbated by the absence of a cultural foundation. It’s easy to run to the urgent at the expense of the important, but founders of all companies need to focus on their culture, especially at the fastest-growing firms (because the chasm drops so deeply for them).

One of the costs of a weak or negative culture is voluntary attrition, or employees choosing leave. By investing in culture early on, one would expect that voluntary attrition would be lower, and our research corroborates that. Founders who rate the importance of culture lower than a 10 on a 10-point scale are 70% more likely to have higher employee turnover rates compared to founders that rank the importance of culture a 10.

Unplanned attrition is extremely challenging for any business, but it’s especially tough for a startup because young, small companies lack the infrastructure and talent redundancies of larger companies. For example, if a CRO or CTO leaves a young company, it can cripple the organization.  But founders can minimize the chances of that occurring by prioritizing culture from the startup’s earliest days.

For founders who are committed to focusing on their culture early on, where should they start? We found that one significant driver of employee happiness is the employee’s rating of management transparency, showing a stronger correlation with company culture then factors like benefits or work-life balance.

What really matters here is the employee’s perception of how transparent management is. For example, one of our clients in the UK scored lower than average on transparency when they anonymously polled their employees. While executives at this company thought they were extremely transparent, employees did not agree. So the leaders decided to use their next “all hands” meeting to respond to anonymous AMA (Ask Me Anything) questions, and committed to addressing every point. This included tough questions that made them sweat a little: for example, someone asked what was the top compensation amount for a certain role. Without revealing the person in that role’s identity (which could have been a privacy violation), the founders shared the amount and how that person had achieved their extraordinary salary and bonus.

Afterward, management re-asked the staff to rate the company’s transparency. This time, the firm ranked in the top quartile of all companies and handily beat our benchmark.

Never take for granted that perception and reality are in sync; management always has to be pushing the bar on how to be more transparent. The silver lining is that transparency is virtually free.

We also discovered, not surprisingly, that recognition improves culture and employee engagement. However, the caveat is that this is not driven only by manager-to-subordinate kudos. It’s also driven by the praise peers give to each other, both to teammates and across the company.

In fact, in a co-authored research report with Microsoft, we tracked how employees gave and received recognition. They uncovered that employees who were prominent hubs of giving and receiving kudos from both inside and outside of their workgroup outperformed their colleagues. In addition, the cheers that were given were all devoid of any monetary compensation, which just underscores how effective an easy-to-use recognition program can be in raising employee engagement.

Many would argue that culture is difficult to quantify. We have found just the opposite. By simply giving employees the opportunity to respond to an anonymous survey regarding how they’re feeling about their company’s culture, management will be able to measure how well they are performing holistically by manager, by office, by function, and so on.

In the chart below, one can see this particular organization’s happiness trend is around the overall benchmark and industry average. However, the sales function’s happiness is markedly lower. Alarmingly, it dips as low as 5; that rate is not sustainable, because employees will voluntarily leave because of the poor cultural environment.

 

 

As a result, the sales leadership devised a proactive plan to reverse this dangerous trend. Some of their tactics included addressing employee feedback head-on, creating a program of formal career paths, increasing levels of recognition, and over-communicating expectations and goals. The data show that in September, there was a huge rebound that sustains throughout the rest of the year. In fact, the sales function average ends up higher than the entire organization — quite a feat. But without measuring to monitor how effective management’s changes were, they would not have been able to see the dire straits and rapid improvement.

As Geoffrey Moore pointed out in his groundbreaking book, Crossing the Chasm, companies need to market to one segment of customers at a time, starting with the early adopters before leveraging that segment to launch into the next.

We see similarities in startup culture. Founders can cherish the culture that they have in the honeymoon period, but must also understand that the culture will have to adapt as the firm grows – and so will the “early-adopter” employees as the next set of employees are added. With growth, companies have to attract more specialists than generalists and incorporate more processes, instead of making decisions informally during happy hour. Founders should set expectations with their early employees that these changes are a natural part of the firm’s success.

By tailoring their message differently for the early adopters who cherished the honeymoon period and for the next group of employees, founders and the companies they lead will be able to navigate the chasm more adeptly. Regardless of how fast the company is growing, the founders will not be able to outrun the chasm. Instead, they should focus on culture during the company’s earliest days, and pay careful attention to transparency, recognition, and monitoring their progress. This is the best way to position the company to rebound higher and quicker out of the cultural chasm.

How to Make Employment Fair in an Age of Contracting and Temp Work

March 24, 2017 - 8:05am

Every day, many of us eat at restaurants, stay at hotels, receive packages, and use our digital devices with the assumption that the company we pay for these services — Hilton, Amazon, Apple, etc. — also employs the people who deliver them. This assumption is increasingly incorrect: Our deliveries are often made by contractors and our hotel rooms are cleaned by temporary employees from staffing agencies.

This phenomenon is what I call the fissured workplace, the cracks upon which today’s economy largely rest, and it leaves so many without fair wages, a career path, or a safe work environment. And while it’s true that low wage workers — an estimated 29 million people in just 10 industries, according to the U.S. Department of Labor’s Office of the Chief Economist — have been hard hit by the consequences of fissuring for some time, those with college and graduate educations, even in professions once regarded as protected from the ups and downs of churning labor markets, are being affected as well.

My exposure to this seismic shift in our economy is not just via my research as an academic. I saw its negative consequences first-hand as President Obama’s head of the Department of Labor’s Wage and Hour Division, the agency responsible for enforcing our nation’s most basic labor standards (minimum wage, overtime, child labor, etc.). What I’ve learned can help both policymakers and business leaders understand why and how this is happening — and what steps we must all take to make work a fair deal for all.

First, a quick look at how we got here. Over the past few decades, major companies throughout the economy have faced intense pressure to improve financial performance for private and public investors. They responded by focusing their businesses on core competencies — that is, activities that provide the greatest value to their consumers and investors— and by shedding less essentially activities.

Firms typically started outsourcing activities like payroll, publications, accounting, and human resources. But over time, this spread to activities like janitorial work, facilities maintenance, and security. In many cases it went even deeper, spreading into employment activities that could be regarded as core to the company: housekeeping in hotels; cooking in restaurants; loading and unloading in retail distribution centers; even basic legal research in law firms.

Like a fissure in a once-solid rock that deepens and spreads, once an activity like janitorial services or housekeeping is shed, the secondary businesses doing that work are affected, often shifting those activities to still other businesses. A common practice in janitorial work, for instance, is for companies in the hotel or grocery industries to outsource that work to cleaning companies. Those companies, in turn, often hire smaller businesses to provide workers for specific facilities or shifts.

Because each level of a fissured workplace structure requires a financial return for their work, the further down one goes, the slimmer are the remaining profit margins. At the same time, as you move downward, labor typically represents a larger share of overall costs — and one of the only costs in direct control for satellite players further from the mothership, so to speak. That means the incentives to cut corners rise — leading to violations of our fundamental labor standards. At my former agency, we saw violations related to fissuring in the form of failure to pay janitors, cable installers, carpenters, housekeepers, home care workers, or distribution workers the wages and overtime they had rightly earned — losses typically equivalent to losing three to four weeks of earnings. For a family struggling to get by, that translates to more than five weeks of groceries, a month of rent, or five weeks of child care.

Being split off from the main firm doesn’t only affect labor standards compliance, however. It can lower wages and access to benefits. When you work as an employee for a major business, decades of research shows your wages and benefits tend to increase over time, regardless of whether that large employer is a union shop or not. But earnings fall significantly when a job is contracted out —even for identical kinds of work and workers. Opportunities for “climbing the ladder” fade because the person in the mail room (or, more likely, at the IT service desk) is now a subcontractor without a pathway. That not only means lower wage growth and reduced access to benefits, but also diminished opportunities for on-the-job training, protections from social safety nets like unemployment insurance and workers’ compensation, access to valuable social networks, and other pathways to upward advancement. Taken together, the fissured workplace contributes to growing earnings inequality.

However, there remains a critical paradox for the companies that shed so many activities to other organizations. If the mothership provides the satellite businesses upon which they depend exquisite detail in the timing, specifications, quality, and of course price for their contracted services — and my research and experience say they do — shouldn’t the company have some responsibility for compliance with laws? Shouldn’t they provide opportunities for advancement for “temporary workers” who may work within their company on a full-time basis, often for years? At the Wage and Hour Division, our view was yes, they should. You can’t shirk your responsibility for employees within your establishment if you also dictate how that work is undertaken at the same time. As a result, we focused our efforts — drawing on the laws we enforced and subsequent court rulings on them — to address the impacts of fissuring using multiple approaches.

We sought to make sure that independent contractors were truly that and not simply misclassified employees. We conducted investigations of businesses that sought competitive advantage through misclassification, often taking them to court and negotiating major settlements insuring that they would correctly classify employees in the future. We worked with state agencies (in both red and blue states) in charge of workers’ compensation, unemployment insurance, and tax revenue to fight misclassification by sharing information on problematic employers and industries, and coordinating enforcement on companies that misclassified workers.

We also aimed to make sure that all parties affected by the fissured workplace understood their roles in assuring compliance. In many circumstances, for example, we used the law and well-established court opinion to assert joint employment, ensuring that both motherships and satellites had responsibilities for their workers. We did so with staffing agencies and the companies that hired them, and in rapidly growing industries like fracking where — in keeping with its name — fissuring practices quickly spread. In these and many other industries we sought to get the businesses that determined much of the working relationship (e.g. shipbuilders hiring staffing agencies, retailers using logistics companies to run their distribution centers) to play their role in compliance.

We also observed that many highly successful businesses were embracing their responsibilities. They chose partners in their supply chains, contracting networks, and franchise systems that complied with the law, and often exceed legal requirements. These firms may benefit from the flexibility afforded by fissured relationships, but they also understand their responsibilities as the center of gravity within those relationships.  The Wage and Hour Division had numerous partnerships with major companies who stood up and accepted their important roles in setting the table for all that happens around them, providing compliance assistance, providing training opportunities, and setting business relationships that allow all parties to do well — and do right by workers.

Take the case of Subway. In an industry characterized by low-wage work and widespread non-compliance, Subway entered into a voluntary agreement with the Wage and Hour Division to raise compliance among its system of 27,000 franchisees.  The agreement involves a combination of training, outreach, information sharing, and joint problem solving to let new franchisees understand their responsibilities — and workers their rights under the law. It also provides both parties with information to identify and address continuing compliance issues, particularly among franchisees with significant and persistent problems. We also worked with companies in the agricultural sector, sometimes arising out of enforcement actions and litigation, to find and keep supply chain business partners who obeyed the law.

These examples demonstrate that common interest in compliance can exist between business and the government. But because those players’ good behavior can be undermined by competitors who choose not to participate, there’s a continuing need for vigilance by government agencies in our fissured world.

This brings me back to the people left behind by the long economic recovery — and well before. If the Trump administration truly cares about those people and hopes to help them, it must address the fissuring forces that helped create today’s inequality. While we can’t roll back economic history, we can seek ways to balance the benefits of new working arrangements with the interests of millions of workers who create enormous value each day for major businesses, their investors, and their customers. Otherwise, a growing part of the labor force will be left further behind. We can start by honestly recognizing the fissuring that has occurred right under our noses — and beneath the feet of imperiled workers — before the growing divide becomes an unbridgeable chasm.

The Rise of Corporate Inequality

March 23, 2017 - 6:40pm

Stanford economist Nicholas Bloom discusses the research he’s conducted showing what’s really driving the growth of income inequality: a widening gap between the most successful companies and the rest, across industries. In other words, inequality has less to do with what you do for work, and more to do with which specific company you work for. The rising gap in pay between firms accounts for a large majority of the rise in income inequality overall. Bloom tells us why, and discusses some ways that companies and governments might address it. He’s the author of the Harvard Business Review article, “Corporations in the Age of Inequality.” For more, visit hbr.org/inequality.

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When It’s Smart to Copy Your Competitor’s Brand Promise

March 23, 2017 - 2:00pm

Marketers know they should keep their messages simple if they want to cut through the noise and reach customers. The key question is then: Of your product’s attributes, which one should you focus on? New research of ours suggests that companies may want to emphasize the same attribute that their rivals do.

Consider bottled water. Evian, one of the most durable brands in bottled water, has cultivated a strong association with purity. Danone, the company who owns Evian, has established this association by emphasizing the purity of its water source: the ageless, untouched glaciers covering the Alps. If you were entering the bottled water market alongside of Evian, following marketing principles might lead you to differentiate your brand on a dimension other than purity. Lifestyle would be a good point of differentiation, wouldn’t it? Not according to Nestle, arguably one of the world’s most successful marketers of consumer package goods. Nestle chose to ignore this basic principle and launch its brand of bottled water on – you guessed it – purity. And what name did it choose for its new water? Pure Life. Pure Life now has a handsome 30% share of this fiercely competitive market.

Why does it work to market your brand on the same dimension as its rivals? Because in an information-rich world, consumers can be easily distracted; many competing marketing messages can dilute consumers’ attention and undermine perceived differentiation among competitors. We call this the dilution effect. Marketing in the craft beer category illustrates the basic principle. Imagine two brands of beer, Craft Beer A and Craft Beer B. Beer A emphasizes its brewing location while the other emphasizes its lifestyle associations. Now imagine a potential customer, Sally, who first notices that Craft Beer A is brewed in her home town. This excites her so much that she is ready to choose it. But Sally is also aware that lifestyle is an attribute of emphasized in craft beer category. And she notices that Craft Beer A is associated with a funky, party-going lifestyle, which is not her cup of tea. Being aware of two attributes means that her attention is diluted and it makes Craft Beer A’s advantage of brewing location weaker.

But if both brands emphasize the same attribute, say brewing location, Craft Beer A is clearly the winner of Sally’s purchase. As for Craft Beer B? The same thing happens if there is another customer who identifies with its brewing location more than Craft Beer A’s. That is, by emphasizing the same attribute, in this case brewing location, the two brands are sure customers pick them based on a strong, undiluted, attraction. As a result, it decreases the price competition between two brands to acquire customers. This helps explain why breweries like Sierra Nevada, Maine Beer Company, and Great Lakes Brewing Company have marketed themselves principally on location.

For a recently accepted article in Marketing Science, we interviewed five marketing executives from a variety of industries, all of whom expressed concern about marketing to consumers facing attention constraints. They further agreed that, in some situations, it makes sense to emphasize the same attribute as a competitor. Here’s how one marketing exec of an industrial cleaning product put it, explaining that in his industry, only one attribute – cleanliness – really mattered:

We sell sanitizers and cleansers for towels and sheets at hotels and resorts. Our chief competitor went after us, pointing out that our cleaners were harsh and left linens feeling tough and not soft. The competitor, with its household connection, noted that their cleaner left the linens feeling softer and more comfortable. We stuck to our original positioning because our customers were convinced our product left their linens cleaner precisely because of its harshness.

If you’re “hands-down” the best player in the market in a particular attribute, then you should probably stick to the attribute that best accentuates the value you offer. This is why Southwest and Virgin America attach their brands to the attributes convenience and in-cabin experience, respectively. But the marketing managers we interviewed agree that things are not so obvious in more commodity-like categories, such as bottled water.

To rigorously study this problem, we developed a game theoretic model of two competing firms, each of which strategically tries to direct consumer’s attention to a particular attribute. The objective of our analysis was to determine equilibrium decisions about which attribute to make prominent. When neither firm has a clear advantage in any attribute, the equilibrium implies firms emphasize the same attribute. To see why it is in the best interest of both firms to do so, suppose one of them deviates by emphasizing an attribute different than the competitor. Consumers’ attention now is diluted across two attributes, which means less attention is paid to any single attribute and that both brands appear less differentiated. Companies are then forced to reduce prices as a means to maintain market share.

By sticking to the equilibrium strategy, however, managers avoid the dilution effect and consumer choice is driven by an attribute receiving their full attention. This all implies that, if you and your competitor keep consumers’ attention on a single attribute, you will probably lose some customers – but the customers you win will pay more for your product.

Avoiding the dilution effect helps to understand Nestle’s approach to Pure Life. The key is to recognize that purity does not have to come from nature, as Evian’s does. Rather, state-of-the-art filtration technology makes Pure Life water as pure as from the French mountain town, Évian les Baines. Then what prevents intense competition? Consumers have different preferences as to where purity comes from. Some trust the natural purification process while others do not. By avoiding competing on other attributes, consumers’ choices reflect full attention on their preference for natural or technological purity. Had Nestle emphasized an alternative attribute, such as lifestyle, then consumers’ motivation for purity of one brand over the other would be diluted across both the lifestyle and location attributes.

Is Your Team Coordinating Too Much, or Not Enough?

March 23, 2017 - 1:00pm

Effective teams don’t just happen — you design them. And two of the most important elements of that design are a.) the degree to which team members are interdependent — where they need to rely on each other to accomplish the team task, and b.) how you’ll actually coordinate that interdependence.

This issue arose when I presented a leadership team with survey results showing that its team members had very different beliefs about how much they needed to actively coordinate their work to achieve the team’s goals. Several members believed they were like a gymnastics team: they could achieve team goals by simply combining each member’s independent work, much like a gymnastics team rolls up the scores of individuals’ events to achieve its team score. Others — especially the leader — believed the team should function more like a hockey team: they could achieve their goals only through complex and often spontaneous coordination. I pointed out that until the team reached agreement on this fundamental disconnect, they would continue to have a difficult time achieving their goals.

You can tell when a team doesn’t have a good fit between interdependence and coordination. If there is insufficient coordination, team members have difficulty getting information from each other, completing tasks, and making decisions. If there is more coordination than required, team members will spend unnecessary time and effort on tasks, which slows the team down.

You and Your Team Series Collaboration

You can also tell when there isn’t agreement about how much interdependence or coordination is needed. If you design your team assuming that members need to be highly interdependent and need a high degree of coordination, members who believe they aren’t interdependent will complain that others are asking them to attend meetings, do work, and be part of decisions that aren’t a good use of their time.  On the other hand, if you design your team with minimal coordination, assuming that members don’t need to be interdependent, then those who believe that they do need to be interdependent will be frustrated by colleagues who seem uncooperative. They’ll complain that they can’t get the help they need from others, and that the team doesn’t have adequate communication and problem solving processes in place.  In short, poorly designed interdependence and coordination — or a lack of agreement about them — can diminish the team’s results, working relationships, and the well-being of individual team members.

Because the type of coordination required depends on the type of interdependence, you need to design the interdependence first. The organizational theorist James Thompson identified three types of task interdependence that can be used to design your team: pooled, sequential, and reciprocal.

  • In pooled interdependence, the team accomplishes its tasks simply by combining everyone’s separate efforts. Pooled interdependence is an effective design when your team members are doing the same task in parallel (such as procuring different services or responding to customer complaints) or are doing parts of a task that can easily be combined to achieve the overall task (such as entering data to be aggregated or writing discrete sections of a standard report). It works well when the task can be standardized. Your sales team is designed with pooled interdependence if you and others sell individually and combine your monthly individual sales numbers to get the team result. The gymnastics team referenced above is really a group with pooled interdependence. To be a team you need a team task — one that requires that members actively work with each other to accomplish it.
  • In sequential interdependence, your team members rely on each other in predictable ways for the flow of information, work and decisions. Each person’s output becomes the input for the next person in the sequence. Sequential interdependence is an effective design when some parts of the team’s task can be standardized, but other parts need to be modified or customized, depending on the situation or client at hand. For example, in a sales team designed with sequential interdependence, Anil might qualify a client, and then the two of you discuss and agree on how you should best address the client’s needs. You then meet with the client and reach agreement on the work to be produced. Next, you meet with Donna, jointly agree on any modifications that need to be made to the standard agreement, and Donna produces the agreement. In sequential interdependence, each person must complete his or her task before anyone later in the sequence and can complete theirs.
  • In reciprocal interdependence, your team members are sequentially interdependent, but in addition, work back and forth. Team members need to adjust to each others’ actions as the situation changes. For example, a hockey team has reciprocal interdependence. This is an effective design when the nature of the team’s work is inherently uncertain or when the team works in an environment where they need to adjust to changes from customers or managers midstream. You can’t always know in advance which members need to be involved at any given point in the process. For example, in a reciprocally interdependent sales team, after you and Anil agree on how to best address the client’s needs, you decide which technical experts on your team will help craft a proposal for the client. You begin meeting with these experts to jointly decide what you can deliver that meets the client’s needs, while also being technically and operationally feasible, not to mention profitable. As the client provides feedback on your initial proposal, you and the technical experts meet to modify the proposal. As you are meeting, the client adds new specifications, which leads you to bring in another expert to address that issue. This process continues until you have completed the proposal.

After you decide on the degree of interdependence needed for your team to achieve the goal at hand, you select the type of coordination that fits it. As you move from pooled to sequential to reciprocal interdependence, the team needs a more complex type of coordination:

  • Standardization is the appropriate type of coordination for pooled interdependence. By agreeing in advance on a set of rules and processes that everyone will follow, everyone’s output can be easily combined to achieve the task. The standardized process remains unchanged as long as the situation is stable. That’s why in pooled interdependence, you may hear someone say, “Please, all I’m asking is that each of you complete the online forms correctly and on time. It’s not that difficult! If you just do that, we’ll be able to roll up our numbers each week.”
  • Planning is the appropriate type of coordination for sequential interdependence. Planning means coordinating schedules, deadlines, and other relevant information at the beginning of the process, as well as outlining cases where the process might need to change.
  • Mutual adjustment is the appropriate type of coordination for reciprocal interdependence. Mutual adjustment means that at any time, any team member may introduce new information which affects who will need to coordinate with whom moving forward. It can handle the most uncertainty, and it also has the greatest risks.

The fit between interdependence and coordination affects everything else in your team. Design the fit well — and ensure that the team agrees — and you will create a solid foundation on which the team can accomplish its tasks.

The Other Kind of Inequality, Explained

March 23, 2017 - 1:00pm

Pay gaps are rising between companies more than within them.

Why the Lowly Dandelion Is a Better Metaphor for Leaders than the Mighty Banyan

March 23, 2017 - 12:00pm

Banyans are among the world’s largest and longest-living trees — one in India is more than 200 years old and is reported to be the world’s largest tree. Bigger than the average Wal-Mart, it has a canopy of more than 19,000 square meters. Not surprisingly, this visual distinctiveness has come to symbolize magnificence, immortality, and stature — attributes typically associated with strong, stable leadership. Particularly, in South East Asia, where it grows, the Banyan also has deep cultural reverence. It is designated as the National Tree of India.  Leadership Institutes, conferences, and management gurus reference the mighty banyan in their teachings.

There are good reasons the metaphor is so popular. Like the banyan, many well-regarded leaders get their start by capitalizing on a nascent opportunity. Similar to the branches and roots of the banyan, they flourish by surrounding themselves with like-spirited colleagues, bonding around the core. They successfully expand their span of control outward from the center, gathering more influence over time.

However, the same attributes that spawn initial success also expose some intrinsic flaws. As the banyan’s roots grow out from the center, into what resembles a formidable trunk, it completely surrounds and suffocates the original host tree, leaving a hollow core at the center. Correspondingly, leaders who grow their influence like the great banyan can unwittingly smother the initial spark of innovation and disruptive thinking at the core of an organization’s ethos — that magic that made it successful in the first place.

As they grow, banyans seek to dominate surrounding trees, discouraging other plants to grow in the dense canopy of their leaves. In the same way, as leaders’ influence grows, success can feed into their egos, encouraging them to surround themselves exclusively with executives who constantly validate and reflect their own beliefs.  Ultimately, this type of growth masks a lack of diversity and fresh thinking in the core of the management ranks causing many leaders, their teams and organizations to lose their way.

In stark contrast to the banyan is a small weed that lives an unremarkable, fleeting life — the dandelion.

From conventional reasoning, you’d be hard pressed to find a management guru who would recommend that we lead like dandelions. But, just as improbable as it sounds, could the small, frail dandelion — a sworn pest of the suburban yard, in fact, offer a better metaphor for modern day leadership?

Further inspection reveals some interesting characteristics that correlate.  Dandelions fall under a class known as beneficial weeds, which help the plants around them. Dandelions do this by sending taproots deep into the ground. These taproots pull nutrients up to the surface, improving the quality of the soil and feeding shallow-rooted plants nearby. Dandelions also attract insects that enable pollination, like bees, which help other flowering plants. Plants that might not otherwise have a chance to germinate or survive get a shot at life because of the nutrients and insects that dandelions send their way. Yes, dandelions are prolific and fight for territory, but they don’t grow large and they fade quickly after blooming, giving other species a chance to thrive. They may not be the showiest plants, but they leave the environment a better place.

The resilient, flexible, nurturing style of the dandelion might be more emblematically better suited to today’s modern digital world and its constant change than the rigid, inflexible style of leadership reflected by the banyan. Faster than ever before, technology-led disruption is wiping out companies that rest too long on the laurels of their past success. Like the dandelion, which knows its time is short, new leaders now have now have months, not decades, to succeed. Like the dandelion, leaders should use a faster, agile, flexible mindset to explore and exploit new opportunities presented by constantly challenging the status-quo, even when they are growing.

A dandelion can find a way to grow with the most minimal resources; who hasn’t seen one popping up between the cracks in a concrete sidewalk? Similarly, today’s most resilient digital companies are lean and dandelion-tough. While in the past, disruptive ideas often starved and died due to lack of capital investments, today, the democratization of technology — in computing, cloud, social, and big-data analytics — let business leaders deploy, test, and scale new ideas more cheaply than before.

The banyan might seem mighty on the outside, but an old banyan has a hollow core. In a fast-changing world, leaders must preserve the personal authenticity, moral compass, and clarity that defines them, especially as their companies grow. Just as the dandelion helps other plants to flourish, leaders must focus not on expanding their own empires (in banyan-like fashion) but on allowing others to thrive. Resilient leaders choose their metaphors carefully, keep their egos in check, and leave their environments richer than they found them, clearing the way for new leaders to take root.

Stop Mindlessly Going Through Your Work Day

March 23, 2017 - 11:00am

How often have you looked at the clock stunned because even though you’ve been scrambling all morning, it’s now noon and you have no idea where the time went or what you’ve actually accomplished? There are sound reasons why it’s so hard for us to stay focused — and fortunately there’s research that shows what we can do about it.

One of the most effective tactics for staying on task is to bring purpose to each moment of your work. That might sound daunting — and it does take work — but mindlessly performing tasks (think about slogging through emails or conducting meetings on autopilot) is a recipe for inefficiency, disengagement, and even poor health. On the other hand, the benefits to our productivity, well-being, and health of having a clear sense of purpose — even in our most trivial tasks — are well established. In one study of 106 male employees at a large Japanese IT firm, a higher sense of purpose as well as a sense of interdependence with coworkers was correlated with lower inflammation as well as a higher viral resistance in the bodies of the workers. Research has also shown a connection between a sense of purpose in our personal lives, and benefits including lower hypertension; reduced risk of stroke and Alzheimer’s disease; and even increased longevity.

If we are clear about what we are meant to be tackling from moment to moment, and understand what our work amounts to, our sense of purpose increases and our stress decreases. To accomplish this, we need to constantly track where we are putting our attention. This tracking is known as meta-cognition, which is a practice that allows us to tap into a sense of purpose within what might seem like the most menial of tasks. Think of this as turning on your own internal project manager.

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This isn’t always easy to do — our mind is easily pulled away from the task, conversation, or challenge at hand, especially if we find it uncomfortable — but you can improve your ability to do it with practice. For those who already take time to meditate at work, tracking your attention allows you to take what you practice in meditation and apply it to your most basic tasks.

The goal is to bring a clarity of purpose to every moment and every task, or at least a higher percentage of them (let’s not try to make ourselves crazy). Here’s how.

Act on purpose. The first step is to understand how your daily work connects to both your personal goals and the goals of the organization. Ideally you already have a sense of this and have even talked about it with your manager. But if you haven’t, it’s not too late.

Let’s start with personal goals. What do you love? What are you good at? And, of course, what were you hired to do? Get clear on why you are in this particular job, what your trajectory looks like, and how you can apply your talents to support your career aspiration. You can employ the principles of job crafting to do this: take stock of your role and reflect on which aspects of it play to your strengths.

Now for the organization’s goals. How does your job map to the overall goals of the company? You can assess this by articulating for yourself how your job contributes to the end game. For example, you may not be responsible for managing the bottom line, but you could make a list of ways that your daily decisions and contributions impact the company’s profitability. Making this tangible connection can be both clarifying and empowering.

Once you’ve done this for yourself, sit down with your boss to discuss the connections you’ve made and get their input. They may have insight into your strengths, role, and the organization’s goals that will strengthen those connections.

Map your plan. Like most people, you likely have dozens of tasks that you can be doing, so you need to understand which tasks, in what sequence, will amount to the greatest output. Create a roadmap where you identify which tasks are critical and which are less immediate. Then estimate how long it might take you to accomplish each task. With this information you can plot out your work so you know what you should be focusing on and when.

Fridays are a good time to check in with your internal project manager. How well were you able to bring your attention to each task? Did you execute the plan that you laid out for the week, bringing a sense of purpose to each activity? Remember, though, that your roadmap isn’t meant to be written in stone. In fact, planning and honing your attention should equip you with the confidence to jettison a plan, say no, cancel, or delegate if necessary so that you can consistently focus your time where it will best serve your end-goals.

Uproot your distractions. When you don’t know exactly where you should be focusing your attention, it’s easy to seek out tasks that bring an immediate sense of accomplishment but don’t actually amount to progress against your goals. For example, you may be in the habit of checking and responding to email before tackling other projects or you might focus on your inbox simply because you’re not sure what to do next. Or maybe you’re letting yourself get pulled into other people’s meetings and projects because you’re falling prey to what David Grady, TED speaker and creator of the viral video on ineffective conference meetings, calls “mindless accept syndrome.” Of course being generous to and collaborating with your coworkers is good, but not when it takes you away from what you should be working on.

By naming your distractions —  and the root cause of them — you can catch yourself and return your attention to those tasks on your priority list that will produce a greater sense of meaning.

It’s too easy to allow entire days to pass in a blur without being able to articulate what you’ve actually done. Instead, realize that your days are made up of thousands of discrete moments passing before you and you can consciously choose to make the most of them. Knowing what you are doing and why allows you to not only feel accomplishment in doing your work well, but also gives you a more fulfilling sense that your days actually matter.

Being an Ethical Business in a Corrupt Environment

March 23, 2017 - 10:00am

Most business leaders hesitate to take a firm stand against corruption, even in environments where it is widespread. Some may see benefits from indulging in corrupt practices such as faster processing of permits or less interference from governmental officials. At the same time, the perceived costs of corruption are low, due to poorly formulated anti-corruption laws and ineffective enforcement, which leads to a very low likelihood of prosecution and punishment. As a result, as much as they may detest corruption, most business leaders end up succumbing to it. Indeed, many see themselves as victims of the endemic corruption rather than as its perpetrators – “Everyone else is doing it,” they may tell themselves, “So we have to do it too.”

This does not have to be the case, and in fact, it should not be the case. Our research in Egypt, Zimbabwe, and India shows that organizations should view the prospect of building a strong ethical reputation in such environments as an opportunity, and consider the costs of resisting corruption as an investment in building such a reputation. Moreover, our research illuminates specific steps companies can take to maintain high ethical standards in environments where corruption seems widespread. We also find that these steps are most effective in countries with a free and plural press, an independent judiciary, and a potential for collective action (such as a community that can be appealed to or organized, such as a religious community, a civic organization, or a trade association). When these conditions are in place, it will be easier for an organization to take a firm stance against corruption, especially political corruption.

Ethics Can Be a Differentiator

Ethical behavior is in scarce supply in corrupt business environments such as Zimbabwe, Egypt and India, relative to highly ethical ones. Therefore, stakeholders — such as customers or investors — place a higher value on ethical behavior in corrupt environments. Moreover, ethical behavior is more noticeable in corrupt environments than it would be in ethical ones; it is easier for an ethical company to stand out in a corrupt environment.

Finally, organizations typically underestimate the latent support for ethical behavior in corrupt environments. They should realize that stakeholders’ silence on endemic corruption does not mean that they are satisfied with the status quo. An organization showing ethical leadership can galvanize ethically sensitive stakeholders into supporting it in its endeavor to fight corruption, which can lead to reputational benefits for the organization.

Resisting Corruption in Corrupt Environments

How should firms go about resisting corruption? First, they need to frame their ethical behavior in a way that resonates with as wide a network of stakeholders as possible. Importantly, we find that it is crucial for organizations to reach beyond the immediate family and friends networks of their company leaders for support. For example, Strive Masiyiwa was able to elicit significant support from the large Christian community in Zimbabwe by framing his commitment to ethics as emanating from his religious beliefs. India’s Infosys repeatedly invoked its “middle class values” to position itself as an ethical organization, which resonated with the young university-educated workforce that it was trying to attract. Ibrahim Abouleish, founder of Sekem in Egypt, found that appealing to a larger goal such as nation-building or leaving a better country for the next generation was effective in justifying his commitment to ethics.

Research Note

Our study is based on 120 semi-structured interviews with the subjects of five organizations in India, Zimbabwe, and Egypt. Our subjects included the founders of the organizations, their employees, former employees, and other external stakeholders. We also had access to vast amounts of archival data on these organizations and the contexts in which they operated. We developed research case studies on two companies and teaching case studies on four companies. We have published research articles in Organization Studies (based on one subject company) and Journal of Management Studies (based on two companies). We published a teaching case on one company in the International Journal of Entrepreneurship Education (now called International Review of Entrepreneurship).

Second, entrepreneurs and managers need to understand that there are gradations of corruption. Often, business leaders of private firms mistakenly assume that all governmental officers in corrupt environments are irremediably corrupt. At other times, the initiators of the corrupt transaction are the private firms themselves; they resort to bribery to incentivize the governmental official to accelerate the approval process or to turn a blind eye to violations of regulatory norms.

Business leaders should instead understand that corruption exists along a continuum. For example, the head of the governmental relations department of Alacrity Housing in India told us that in his fourteen years on the job, 40-50% of the governmental officers he had interacted with had directly or indirectly made it known to him that they were expecting a bribe. While that might sound like a lot, what it shows us is that between 50 and 60% of the governmental officers did not expect bribes — even in the construction industry, which is known for its high corruption due to the multiple governmental departments that need to provide permits and approvals, and in a country where corruption is quite widespread. In any country, there will be governmental officers who perform their duty without asking for bribes or accepting them if offered; others who would not ask for a bribe but will not refuse one either; a third group who ask for bribes but can be persuaded not to insist; and a fourth group that don’t budge until their demands are met. Business leaders should not assume every government official they meet is in this fourth group.

Third, organizations need to acquire a fine-grained understanding of their stakeholders. We classify them into four categories based on their likely response to an organization’s ethical behavior. These four categories cut across the traditional stakeholder groupings of customers, suppliers, employees, investors, regulators, and evaluators, who business leaders tend to segment according to their business operations. Instead, we think ethical companies should segment stakeholders this way:

  • indifferent stakeholders, who are only interested in whether the organization can satisfy their expectations as a supplier, customer, employee, or investor, and who are indifferent to the means that the organization uses to achieve this;
  • pragmatic stakeholders, who find some tangible value in the ethical behavior of the organization;
  • absentee stakeholders, who in the absence of ethical behavior would not participate in the market because of the very high uncertainty caused by the corruption; and
  • ethical stakeholders, who will support an ethical organization even at a cost to themselves.

Organizations need to prioritize the pragmatic, absentee and ethical stakeholders. As for the indifferent stakeholders, the organization should accept that many of them will probably defect to a company that isn’t fussy about the means they use to achieve their ends; ethical firms in corrupt environments actually create more uncertainty for these stakeholders, who may worry about whether the firm can actually deliver. But our research suggests that when a firm shows ethical leadership, many of the stakeholders who were seemingly indifferent  convert to pragmatic and ethical stakeholders. Others who had stayed away from the market (absentee) emerge.

Fourth, ethical organizations need to strategically build partnerships with high-status individuals and organizations, so that their ethical reputations can diffuse as widely as possible. This tactic, referred to as “reputation borrowing,” has been used by startups to build their prominence among a wide group of stakeholders at an early stage in their business cycle when they have limited reputation. In extreme cases, organizations seeking to operate ethically will need to resort to judicial action to further their fight against corruption and work with other like-minded groups to support their cause.

How Utilities Are Using Blockchain to Modernize the Grid

March 23, 2017 - 9:00am

In New York state, neighbors are testing their ability to sell solar energy to one another using blockchain technology. In Austria, the country’s largest utility conglomerate, Wien Energie, is taking part in a blockchain trial focused on energy trading with two other utilities. Meanwhile in Germany, the power company Innogy is running a pilot to see if blockchain technology can authenticate and manage the billing process for autonomous electric-vehicle charging stations.

Blockchain has grabbed the attention of the heavily regulated power industry as it braces for an energy revolution in which both utilities and consumers will produce and sell electricity. Blockchain could offer a reliable, low-cost way for financial or operational transactions to be recorded and validated across a distributed network with no central point of authority. As in the financial services industry, this capability has prompted some people to explore whether blockchain may one day replace a portion of utilities’ businesses by doing away with the need for intermediaries altogether. But that view is too extreme and simplistic.

Insight Center

What is more likely to happen is that blockchain will become part of the answer to updating and improving centralized, legacy systems with a distributed hybrid system made up of a patchwork of both large power plants and microgrids powered by distributed energy resources such as solar power. Such a decentralized energy system would be capable of delivering efficient, reliable, and, in many cases, renewable energy.

This coming shift is prompting the industry to focus on blockchain’s potential to make peer-to-peer energy trading a reality, though it’s unclear how soon the nascent technology can be scalable. For example, in a blockchain microgrid project in Brooklyn, N.Y., each participant trading electricity had to invest in a computer with a blockchain “node” in order for their homes with solar panels to be able to sell power to neighbors. The blockchain network manages and records the transactions with little human interaction. The “nodes” in the computers are needed to validate and share the information to minimize the possibility of downtime or interference with the data. The more data that needs to be bundled into “blocks” and passed along, the more computing power they need.

But it’s possible that blockchain may one day enable the development of an integrated trading system that would permit businesses to trade their option to use electricity during a given time frame. For example, a factory could sell five minutes of unused power during a down time to a different factory that needs the additional power. Trading grid flexibility in this way could provide large efficiency benefits for grid operators.

How Blockchain Works

Here are five basic principles underlying the technology.

1. Distributed Database

Each party on a blockchain has access to the entire database and its complete history. No single party controls the data or the information. Every party can verify the records of its transaction partners directly, without an intermediary.

2. Peer-to-Peer Transmission

Communication occurs directly between peers instead of through a central node. Each node stores and forwards information to all other nodes.

3. Transparency with Pseudonymity

Every transaction and its associated value are visible to anyone with access to the system. Each node, or user, on a blockchain has a unique 30-plus-character alphanumeric address that identifies it. Users can choose to remain anonymous or provide proof of their identity to others. Transactions occur between blockchain addresses.

4. Irreversibility of Records

Once a transaction is entered in the database and the accounts are updated, the records cannot be altered, because they’re linked to every transaction record that came before them (hence the term “chain”). Various computational algorithms and approaches are deployed to ensure that the recording on the database is permanent, chronologically ordered, and available to all others on the network.

5. Computational Logic

The digital nature of the ledger means that blockchain transactions can be tied to computational logic and in essence programmed. So users can set up algorithms and rules that automatically trigger transactions between nodes.

Another area where blockchain could take hold is in enabling customers to switch power suppliers more quickly. Companies are conducting pilots to explore blockchain’s potential to make existing processes, such as meter registration, more efficient and less costly. British startup Electron is developing a blockchain platform that could allow British customers to switch power suppliers reliably within a day without having to rely on the Data Communications Company, the UK’s centralized meter data agency, where a switchover can take much longer.

Finally, blockchain may make existing electric industry processes more efficient by serving as the backbone for utilities’ “smart grid” management systems that automatically diagnose network emergencies and problems and reconfigure in reaction to them. Austrian startup Grid Singularity is using blockchain technology to develop a decentralized energy exchange platform that can host applications ranging from validating electricity trades to monitoring grid equipment, in part because such a platform has the potential to prolong the life of equipment, improving both large and small power-generation system operators’ earnings.

To be sure, as with any new technology, blockchain remains largely unproven, and significant barriers remain. Use cases will need to be more highly developed to convince government-backed programs and regulators that there will not be multiple program delays and possible cost overruns if they agree to adopt the new technology. Common industry standards will also need to be established.

Nevertheless, if it proves reliable and scalable, blockchain technology may ultimately accelerate the transition to what the energy industry calls a “distributed world” made up of both large and smaller power-generation systems for homes, businesses, and communities. To succeed in maximizing the potential of distributed generation and managing less predictable and more volatile renewable power sources, the industry’s infrastructure first must become nimbler and less centralized.

So while blockchain may at first appear to be a form of technological disruption that the power industry should avoid, it could prove to be exactly what is required to keep up with evolving demand for electricity in smaller, lower value blocks and at higher frequency. While there’s always room for startups to move in and disrupt this industry, established utilities are best placed to evaluate and make strategic bets on blockchain technology’s potential applications. If they can seize the moment, centralized incumbents may turn out to be the true disruptors, ushering in a new era of decentralized power.

Incentives Don’t Help People Change, but Peer Pressure Does

March 23, 2017 - 8:05am

What motivates people to change the way they work? When organizations introduce new processes or systems, or when they want to stimulate performance for certain business practices, they often assemble dedicated task forces, assign them specific goals, and identify deadlines and financial rewards.

But once the initiative is completed and the bonus cashed, a question always arises: will behaviors and business practices stick around, or will people drift back to their old ways of working? In a recent study conducted in a California hospital, I found that that the type of incentive matters. In particular, peer pressure appears to go a longer way than money does.

In the study, which is currently a working paper, I used hospital data on hand hygiene to study how a temporary intervention would influence the persistence of performance improvements beyond the duration of the initiative. Hospital workers are expected to sanitize their hands every time they enter and exit a location where they might be in contact with a patient. Hand hygiene is such an important element of infection prevention that hospitals are required to measure their performance and report it to the Center for Medicare and Medicaid Services. Yet many infection prevention officers claim that hand hygiene performance at their hospitals is unsatisfactory. And while communication campaigns and electronic monitoring have scored varied degrees of success in getting people to sanitize their hands, these experiments have not demonstrated whether their effectiveness would survive beyond the intervention period. I wanted to find out if the improved performance would stick around as a habit.

In the case of the California hospital, the hand-hygiene improvement initiative lasted 90 days, at the end of which, conditional upon achieving the target performance, hospital employees would receive a one-time bonus of $1,200. Communication about the initiative made it very clear that this was a one-time incentive. In addition, there were no changes in the way hand hygiene was assessed; in accordance to the guidelines published by The Joint Commission, a nonprofit health care accreditation and certification organization, the hospital employed secret shoppers to observe and report hand hygiene behaviors. The only visible change for the workers was a bi-weekly progress report (prior to the initiative, hand hygiene performance was included, among many other metrics related to infection prevention activities, in a quarterly scorecard). In other words, while the specific goal and monetary incentive was new, as was the frequency of feedback, the information workers had access to about the effects of neglecting hand hygiene, and the way compliance was monitored, was not.

Because hand hygiene performance was measured and reported at the organizational level, every person working at the hospital was responsible in contributing to the campaign’s outcome. But according to California law, physicians cannot be hospital employees (as opposed to, say, nurses or technicians). Because of this, their hand hygiene performance would contribute to achieving the hospital-wide goal but they would not be eligible to receive any performance bonus.

Thus, the employees devised various creative ways to put pressure on doctors, albeit informally and not in the form of cash. Physicians that demonstrated good hand hygiene practices would have their names written on hand-shaped paper cards and posted on a wall, for examples. The chief nursing officer would send physicians “love notes”: celebratory emails underlying good performance, or respectful — but firm — reminders of the importance of their cooperation to achieve the collective goal, depending on the physician’s observed behavior.

When all was said and done, we compared hand hygiene performance data from the quarter before the intervention to the two quarters after the payment of the one-time bonus. On average, bonus-eligible hospital employees improved their performance during the 90 days of the initiative, but then progressively trailed back to levels of performance as low or worse than prior to the initiative. Physicians, on the other hand, demonstrated a slower improvement relative to the other employees, during the 90 days, but maintained a significantly improved hand hygiene performance over the remainder of my observation period. That is, while monetary incentives generated a more pronounced improvement, it was short lived. On the other hand, peer pressure techniques generated a change in organizational behavior that persisted beyond the removal of the incentive.

These findings echo one of the main concerns associated with monetary rewards that sometimes fail to accomplish their goals. Academics refer to this phenomenon as the crowding-out effect of explicit incentives on intrinsic motivation. In other words, associating an economic value with a certain activity changes the nature of the exchange. If health care workers sanitize their hands because it is in the best interest of the patient (and themselves), introducing monetary rewards may change their motivation to a contractual exchange of hand sanitizing for money.

The consequences of this modification are twofold. First, the economic value communicated by the bonus amount might be lower than what that activity was worth in the person’s mind, thus making it not worth the effort or lowering its priority when multiple activities compete for the person’s time. Second, the change in the nature of the exchange creates a contractual expectation, by which the absence of further payments would justify withholding the behavior. Whether monetary incentives can disincentivize desired behaviors altogether or simply reduce the likelihood that the activity persists beyond the bonus payment, managers must take these risks into consideration when they introduce an improvement initiative.

That is not to say that managers should avoid using monetary incentives. Even if hand sanitizing didn’t stick among some bonus-eligible employees, the existence of the monetary incentive helped generate the peer pressure applied to the physicians, leading to longer-lasting success. Additionally, some individuals may react more positively than others to monetary incentives. In my study, for example, I find that those hospital workers who improved their performance the most during the 90-days initiative were more likely to maintain higher hand hygiene compliance afterwards than those whose performance stayed the same or got worse over the same time period. Managers can use the initial reaction to the incentive by specific employees as a predictor of long term effects of the interventions, allowing them to provide additional initiatives for people who are less likely to persist in the desired behavior.

While this study focused on hand hygiene performance in hospital settings, my findings apply to a much larger set of circumstances. Temporary initiatives and one-time bonus programs are common in many industries and include the implementation of new information systems, compliance with new regulatory requirements, or safety protocols, and the adoption of new technologies. In many of these cases, management expects the incentivized behavior to stick. But they would be wise to understand when and why this actually occurs.

Why Being a Middle Manager Is So Exhausting

March 22, 2017 - 1:00pm

There is no shortage of advice for how to navigate power dynamics within organizations — from managing toxic or exceptionally gifted subordinates to dealing with unpredictable and narcissistic bosses. Researchers have devoted entire careers to systematically cataloging the many ways in which those who have power differ from those who lack power with respect to their motivations, behaviors, biases, etc. (a sampling of these findings can be found here, here, here, and here).

The problem is that most of these recommendations tend to focus on the experience of leading or following in isolation, while neglecting the unique challenges inherent in having to do both. Despite our fascination with the extreme ends of the power distribution, the reality is that most employees possess a middling amount of power and must repeatedly alternate between interacting with higher and lower power colleagues. This experience is particularly prominent among middle managers, a group who are defined by their intermediate power levels within an organization.

In a forthcoming paper in the Academy of Management Review, we present a theory of power that moves beyond a static comparison of high and low power actors to consider the full spectrum of organizational power dynamics. From a research perspective, our paper draws from and integrates findings from neuropsychology and the social hierarchy literature to make predictions about the cognitive, emotional, and behavioral effects of power. It updates and extends past academic work, which has been fixated on theorizing and testing the effects of either having or lacking power in isolation. In other words, our framework has something to say not only about the extreme power states experienced by your company’s CEO or new cohort of interns, but also the more complicated relationship to power that characterizes day-to-day life for many middle managers.

Middle managers have a complicated relationship with power because power is activated and experienced in the context of interpersonal relationships. When interacting with our superiors, we naturally adopt a more deferential low-power behavioral style. When interacting with subordinates, on the other hand, we adopt a more assertive high-power behavioral style. Failure to conform to these role-based expectations can lead to social conflicts and confusion, so people are very good at learning how to play the part that is expected of them.

Middle managers, however, are expected to play very different roles when moving from one interaction to the next, alternating between relatively high and relatively low power interaction styles. By virtue of their structural positions, they are simultaneously the “victims and the carriers of change” within an organization, receiving strategy prescriptions from their bosses above and having to implement those strategies with the people who work beneath them. As a result, middle managers often find themselves stuck in between various stakeholder groups, which can produce “relentless and conflicting demands.”

According to Arizona State’s Blake Ashforth and colleagues, these types of micro role transitions in the workplace can produce exactly the type of role conflict that we propose middle managers are disproportionately likely to experience. In many cases, the norms and expectations associated with being a leader (e.g., assertiveness) are incompatible with the norms and expectations associated with being a subordinate (e.g., deference). This becomes problematic when one is called upon to play both roles at work because humans are notoriously inefficient when it comes to task switching, as evidenced, for example, by research showing mood spillover effects from work to home and vice versa. Simply put, it is psychologically challenging to disengage from a task that requires one mindset and engage in another task that requires a very different mindset.

This vertical code-switching, as we call it, can take a toll, according to a wide body of research. On the emotional side, conflicting roles lead to increased feelings of stress and anxiety, reflecting the tension between incompatible social expectations. Physically, the high stress levels that accompany such conflicts are risk factors for a large number of health problems, from hypertension to heart disease. As if that weren’t enough, conflicting roles can disrupt cognitive performance and the ability to focus on a task without getting distracted. In a large-scale epidemiological study involving survey responses from 21,859 full-time employees across a wide range of industries, for instance, researchers from Columbia University and the University of Toronto observed that employees in mid-level organizational positions had higher rates of depression and anxiety than employees who occupied positions nearer either end of the hierarchy, findings that can be added to the long list of reasons why middle managers are so unhappy.

There are some ways to ease the burden however. Here are our recommendations:

  1. Simplify the reporting structure to reduce upward and downward interactions. This may include eliminating unnecessary meetings that force employees to interact across role boundaries, or structuring workflow to minimize frequent shifts in relative power.
  2. Conduct a network audit to determine how employees across role boundaries connect to each other in person, via email, etc., and what implications this network structure has for feelings of power.
  3. Help middle managers see their various role-based identities as integrated, as opposed to segmented, through effective onboarding and training. This may be achieved by directly tying the responsibilities of middle managers to the broader organizational mission, thus helping middle managers to re-frame their self-identity from “sometimes a supervisor and sometimes a subordinate” to “a middle manager who is important to this company.” Keep in mind that some middle managers are inherently comfortable switching between high and low-power mindsets, while others will need help to view the seemingly incompatible aspects of their jobs as parts of a coherent identity.
  4. Don’t micromanage your middle managers. This creates unnecessary role switching from their perspective. It is better to provide your strategic input to middle management and then allow them the freedom to implement those strategies with a high-power mindset.
  5. It may be especially challenging to negotiate vertical role transitions in hierarchical organizational cultures. Thus, embracing more egalitarian organizational cultures and structures may minimize these challenges, effectively reducing the behavioral discrepancies between high- and low-power roles.
  6. Try sticking to a script. The burden associated with vertical code-switching may be reduced when employees develop an effective role transition script, which is an established routine for moving from one role to another. With enough practice, middle managers can develop effective strategies for switching between high and low power roles without feeling the lingering effects of their previous interactions.

Some people may believe that they will just be “passing through” middle management on their inevitable march to the executive suite. The reality, however, is that most companies need effective middle managers over the long haul. Google infamously tried to eliminate their engineering managers only to learn that managers mattered — a lot. Other researchers have similarly found that middle managers can make a big difference to organizational performance. Ethan Mollick at Wharton, for example, recently conducted a large-scale analysis of the computer game industry and determined that the behavior of middle managers accounted for 22.3% of the variance in revenue. The Boston Consulting Group reached a similar conclusion, calling middle managers a “neglected but critical group” after surveying thousands of employees about the drivers of success at their firms.

All of this suggests that it is critical to understand the unique psychological pressures that are faced by middle managers, along with strategies for easing the burdens that come along with their structural positions.

Blockchain Could Help Artists Profit More from Their Creative Works

March 22, 2017 - 12:00pm

Anyone who follows the cultural industries — art, music, publishing, theater, cinema — knows of the tussles between artists and those who feed off of their talents. The traditional food chain in movie-making, for example, is a long one: Between those who create a film and those who pay for it — movie goers, cable subscribers, pay-per-viewers, advertisers, rights licensees, and institutional sponsors such as the National Endowment for the Arts — is a multitude of middlemen: online retailers (Amazon, Walmart), streaming video services (Netflix, YouTube, Hulu), theatre venues (Wanda’s AMC, Regal, Cinemark),  product placement and media agencies (Propaganda GEM, Omicom’s OMD), film producers (Columbia Pictures, Marvel Studios, Disney-Pixar), movie distributors (Sony Pictures, Universal, Warner Bros.), home marketers (Fox, HBO), cable and satellite services (Comcast, DirectTV), video syndicators (PMI, TVS), film libraries and archives (Eastman House, Getty Images), and talent agencies (WME, CAA, ICM), each with its own contracts and accounting systems. That’s a staggeringly long list.

Each of these middlemen takes a cut of the revenues and passes along the rest, with the leftovers typically reaching the artists themselves months later, per the terms of their contracts.

Insight Center

So concentrated is the power in this feeding frenzy that many actors have taken themselves off the menu by launching their own companies within the existing industry model. The same is true in music, too. For example, Grammy-award winning singer-songwriter Imogen Heap has been a pioneer in the field with the launch of Mycelia, a think-and-do-tank whose goal is “to empower a fair, sustainable and vibrant music industry ecosystem involving all online music interaction services,” using blockchain. Artlery, a company founded by technologists and artists, is attempting the same thing for physical art such as sculptures and paintings.  But for most artists and creators, that’s not an option.

How Blockchain Works

Here are five basic principles underlying the technology.

1. Distributed Database

Each party on a blockchain has access to the entire database and its complete history. No single party controls the data or the information. Every party can verify the records of its transaction partners directly, without an intermediary.

2. Peer-to-Peer Transmission

Communication occurs directly between peers instead of through a central node. Each node stores and forwards information to all other nodes.

3. Transparency with Pseudonymity

Every transaction and its associated value are visible to anyone with access to the system. Each node, or user, on a blockchain has a unique 30-plus-character alphanumeric address that identifies it. Users can choose to remain anonymous or provide proof of their identity to others. Transactions occur between blockchain addresses.

4. Irreversibility of Records

Once a transaction is entered in the database and the accounts are updated, the records cannot be altered, because they’re linked to every transaction record that came before them (hence the term “chain”). Various computational algorithms and approaches are deployed to ensure that the recording on the database is permanent, chronologically ordered, and available to all others on the network.

5. Computational Logic

The digital nature of the ledger means that blockchain transactions can be tied to computational logic and in essence programmed. So users can set up algorithms and rules that automatically trigger transactions between nodes.

Enter blockchain-based platforms and programmable templates called smart contracts. Blockchain is a new technology platform, running on millions of devices and open to anyone, where not just information but anything of value — money, titles, and deeds, but also music, art, scientific discoveries, and other intellectual property — can be moved and stored securely and privately, where trust is established not by powerful intermediaries like movie studios, streaming services, banks, or other companies, but rather through mass collaboration and clever code.

Combine this powerful new technology with an artistic community that values inclusion; integrity; transparency in deal making; respect of rights; privacy; security; and fair exchange of value, and you’ve got yourself a new ecosystem for motion pictures, video games, and other creative pursuits.

“A lot of untapped creative energy is wasted on the practicalities that living in a centralized paradigm foster,” writes Zach LeBeau, CEO of SingularDTV, a blockchain-based digital content management and distribution platform. His vision is to decentralize the entertainment industry so that creative individuals can profit from the films, videos, games, and art they help to make. He expects decentralization to “realize a world that utilizes the greatest potential of every person.”

LeBeau’s vision is not a pipedream. Various companies are already collaborating on the blockchain to develop an ecosystem with artist-friendly features, such as:

  • Value templates to construct deals that respect the artist as an entrepreneur and equal partner in any venture. LeBeau considers the engine of SingularDTV to be its smart contract system, which continually directs the flow of funding to, and revenues from, projects per the automated terms of agreement.
  • Funding mechanisms whereby artists can raise venture capital. For example, actor Mitzi Peirone plans to use WeiFund, a blockchain-based crowdsale platform, to fund part of her debut thriller, Braid. Unlike Kickstarter or Indiegogo, WeiFund turns supporters into investors who share in the profits, should a film become profitable.
  • Inclusive revenues that use self-executing smart contracts to divide profits fairly and without delays according to each person’s contribution to the creative process. This benefits not just actors, screenwriters, and directors, for example, but also other artists and engineers.
  • Transparent ledgers distributed on the blockchain so that everyone can see how much revenue a film is generating and who is getting what percentage.
  • Micrometering and micromonetizing functionality to stream the revenues immediately to the artists and contributors, the way a film itself streams to online viewers. For example, filmmakers can monetize their content directly by making it available through Wiper, an encrypted messaging app that comes with a bitcoin wallet. Consumers can view films on their mobile devices in exchange for bitcoin.
  • Usage data analytics in the hands of artists at last, to attract the right merchandisers and distributors, plan promotions, and crowdfund resources for future creative collaborations with other artists.
  • Digital rights management (DRM) — that is, the deployment of smart contracts to maximize the value of digital rights in a database. For example, SingularDTV represents film, television and software projects on the blockchain as SNGLS tokens.
  • Piracy protection though public key infrastructure, which enables artists to exchange their assets securely with consumers over networks. For example, Custos Media Technologies, a South African startup, has deployed the bitcoin blockchain to track media piracy by incentivizing the file-sharing community to police pirated content.
  • Dynamic pricing mechanisms to experiment with promotions and auction-style schemes that could even tie pay-per-view and advertising rates to the online demand for a film.
  • Reputation systems that cull data from a token address’s transaction history and social media, to create a reputation score for that address. Artists will be able to establish their own credibility as well as that of prospective partners and refrain from doing deals with entities that fall short of reputational standards or lack necessary funding in their accounts.

In this new ecosystem, we see a place for Netflix and YouTube; a place for studio curation; and a place for fan-generated content. The film industry will still need people to sift through the hundreds of millions of hours of video created every day all over the planet. The key point is that the artists themselves will finally be feasting at the center of their own ecosystem, not starving at the edges of many others.

When Your Toughest Conversations Are the Ones You Have with Yourself

March 22, 2017 - 11:00am

Martin leads the largest division of a global company. You feel his presence immediately when he walks into a room. Not because he’s flashy or full of ego, but because he’s neither. Instead, it’s the unshakable confidence that comes from knowing exactly who you are, and the star power that accompanies a certain kind of seniority. It’s hard to imagine him in a moment of self-doubt.

And yet on the inside, he does berate himself. If something catches him by surprise, he’ll think, “You should’ve seen that coming.” After giving a keynote, he tells himself, “Lousy talk!” If a client turns down a proposal, he asks himself the aching question: “What’s wrong with you?”

Dominique, an executive at a European company, has a similar kind of inspiring confidence — and critical inner monologue. I’ve seen rooms full of people stop talking and turn their attention to the door when she shows up. She’s a force of nature, but they look up to her with admiration, not fear. She’s tough but fair. She hears people out. Still, at the end of the day, it’s her team, and no one is confused about who makes the final calls.

But despite her hard-earned stature, she’s pulled down by an inner voice that questions her every move. Though her team talks to her with respect, the way she talks to herself is far from it.  “Why should they listen to you?” she sometimes thinks. “Why didn’t you prepare more?” And other times, “You’re a fraud.”

Advising Martin, Dominique, and other C-suite executives, I’ve learned that for successful senior leaders like them, the hardest difficult conversations they have are the ones they have with themselves.

When it comes to having tough conversations with their colleagues, clients, or direct reports, they often take them in stride, seeing them as just “part of the job.” A common reaction is, as one leader told me: “We have an opportunity to build something truly special here. I don’t shy away from tackling anything — including “people issues” — that stands in the way of our mission.” To be sure, none of the people I work with enjoy confronting people on performance issues, or delivering bad news. Yet, they tell me, it comes with the territory. They expect it.

You and Your Team Series Difficult Conversations

Though these executives are comfortable dealing with topics most people would find stressful to discuss, they still struggle with how they talk to themselves. What I’ve learned, however, is that leaders whose gravitas runs deep don’t run away from this struggle. The ones who make it to the top learn to deal with the universal voice of self-doubt head on.

When I ask executives how they think about difficult conversations with others, they say things like, “We’ve built a culture I call ‘high challenge, high support.’” So I build on that, encouraging them to apply the same standard to that critical inner voice.

The negative voice in your head wants something. It wants to be heard. It needs something, too: a bit of compassion and friendly reassurance. When you provide these, the conversations with yourself start to go a lot better. Instead of silencing or denying that inner voice, respond to it. Here’s how it sounds:

  • Lousy talk! “You know what? No one hits it out of the park every time.”
  • Why should they listen to you? “Some will, some won’t. All you can do is your best.”
  • Why didn’t you prepare? “Focus on the present moment. Your experience will see you through.”
  • You’re a fraud. “Almost everyone feels this way. Breathe deep and get on with it.”

Other techniques you use for difficult conversations with others can also work when contesting with your own inner voice. With other people, you ask yourself “is this battle worth fighting?” Pick your battles with yourself, too. You know best practice is not to lecture someone, but rather to have a dialogue. Embrace the tone of dialogue in your inner speech as well. Hostile confrontation is rarely the way to go, with other people, or with yourself. Do you give people second chances? Do you forgive a small mistake? Then give yourself a second chance, too. Forgive yourself when you miss the mark. If you expect the people around you to learn from their mistakes and move on, then you can, too.

What makes conversations difficult is the desire to avoid them, and the way we lose our cool when we have them. Practice makes powerful. The same is true whether you’re talking to someone else, or to yourself.

What Creativity in Marketing Looks Like Today

March 22, 2017 - 10:00am

What makes marketing creative? Is it more imagination or innovation?  Is a creative marketer more artist or entrepreneur? Historically, the term “marketing creative” has been associated with the words and pictures that go into ad campaigns. But marketing, like other corporate functions, has become more complex and rigorous. Marketers need to master data analytics, customer experience, and product design. Do these changing roles require a new way of thinking about creativity in marketing?

To explore this question, we interviewed senior marketing executives across dozens of top brands. We asked them for examples of creativity in marketing that go beyond ad campaigns and deliver tangible value to the business. Their stories — and the five wider trends they reflect — help illustrate what it means to be a creative marketer today.

1. Create with the customer, not just for the customer

Everyone likes to talk about being “customer-centric.” But too often this means taking better aim with targeted campaigns.  Customers today are not just consumers; they are also creators, developing content and ideas — and encountering challenges — right along with you. Creativity in marketing requires working with customers right from the start to weave their experiences with your efforts to expand your company’s reach.

For example, Intuit’s marketing team spends time with self-employed people in their homes and offices to immerse themselves in the customer’s world. Through this research, they identified a pain point of tracking vehicle gas mileage. Based on these marketing insights, Intuit created a new feature within its app that combines location data, Google maps, and the user’s calendar to automatically track mileage and simplify year-end tax planning.

Brocade, a data and network solutions provider, created a “customer first” program by identifying their top 200 customers, who account for 80% of their sales. They worked with these customers to understand their sources of satisfaction and identify areas of strengths and weakness. Brocade then worked with sales teams to create and deliver customized packages outlining what Brocade heard is working or not working, and what they would do about those findings. Later, Brocade followed up with these customers to report on progress against these objectives. The results? Brocade’s Net Promoter Score went from 50 (already a best in class score) to 62 (one of the highest B2B scores on record) within 18 months.

2. Invest in the end-to-end experience 

Every marketer believes the customer experience is important. But most marketers only focus on the parts of that experience under their direct control. Creative marketers take a broader view and pay attention to the entire customer experience from end to end. This includes the product, the buying process, the ability to provide support, and customer relationships over time. That takes time and resources – and it also requires bringing creative thinking to unfamiliar problems.

Kaiser Permanente believes that as health care becomes more consumer-oriented, the digital experience becomes a key differentiator. The marketing team instituted a welcome program to help improve the experience for new plan members. Members are guided on how to register for an online member portal, which provides access to email your doctor, refill prescriptions, make appointments, and more. The welcome program required coordination with many areas of the business. As a result of this program, about 60% of new members register within the first six months. These members are 2.6 times more likely to stay with Kaiser Permanente two years later.

Like many retailers, Macy’s has traditionally spent 85% of its marketing budget on driving sales. Each outbound communication is measured individually for immediate ROI. However, recently they began to take a more holistic approach, focusing on lifetime value and their most profitable segment, the “fashionable spender.” This group looks across the business to gather behind-the-scenes information on the runway, newest clothing lines, and aspirational fashion content. The metrics also changed. Macy’s started evaluating engagement per customer across time and platform instead of per marketing message per day. The results? In the last year, customers in the top decile segment increased digital engagement by 15%, cross shopping by 11% and sales by 8%.

3. Turn everyone into an advocate

In a fragmented media and social landscape, marketers can no longer reach their goals for awareness and reputation just through paid media and PR. People are the new channel. The way to amplify impact is by inspiring creativity in others. Treat everyone as an extension of your marketing team: employees, partners, and even customers.

Plum Organics gives each employee business cards with coupons attached. While shopping, all employees are encouraged to observe consumers shopping the baby category. When appropriate, they ask a few questions about shoppers’ baby food preferences and share business cards with coupons for free products as a gesture of appreciation.

For Equinix, surveys revealed that a third of employees were not confident explaining its company story. The company introduced an internal ambassador program for its more than 6,000 employees. This program gives employees across all disciplines and levels tools to educate them on the company, its culture, products and services, and how they solve its customer’s needs. More than 20% of employees took the training online or in workshops in the first few months of the program, and employee submissions to its sales lead and job candidate referral programs were up 43% and 19% respectively.

Old Navy has traditionally dedicated their media budget to TV, particularly around back to school. However, over the past few years, they’ve focused on digital content to engage kids around positive life experiences and giving back. Through this approach, the 2016 #MySquadContest led to 32,000 kids sharing their “squads” of friends for a chance to win an epic day with their favorite influencer, creating 3 million video views, a 60% increase in social conversation about @OldNavy, and a 600% increased likelihood of recommending Old Navy to a friend (versus those that viewed TV ads only). In addition, the program led to record breaking donations for their partner, The Boys & Girls Club.

4. Bring creativity to measurement 

The measurability of digital engagement means we can now know exactly what’s working and not working. This gives marketing an opportunity to measure and manage itself in new ways. In the past, marketing measured success by sticking to budgets and winning creative awards. Today, the ability to measure data and adjust strategies in real-time enables marketing to prove its value to the business in entirely new ways.

Cisco has created a real-time, online dashboard where the entire marketing organization can look at performance. The leadership team conducts a weekly evaluation to assess, “Is what we’re doing working?” This analysis can be done across different digital initiatives, geographies, channels, or even individual pieces of content. The result is an ability to quickly adjust and re-allocate resources.

Zscaler, a cloud-based security platform for businesses, created a Value Management Office. The Office helps each client define, quantify, and track their unique business goals associated with Zscaler implementation. Zscaler and their clients hold each other accountable to specific, measurable, time-based results.

OpenTable recently launched a companion app just for restaurants to make better use of the data they’ve been collecting through their reservation system. Restauranteurs can now get a handle on their business right from their smartphone, allowing them to easily answer questions like “How did your last shift perform?” The app can tell them if they are running light on bookings, and soon they’ll be able to activate marketing campaigns to increase same day reservations. More than 50% of restaurant customers on OpenTable’s cloud-based service are already using the app, visiting an average of 9 times a day, 7 days a week.

5. Think like a startup

In the past, marketers needed to be effective managers, setting goals well in advance and then working within budget to achieve those goals. Today, creative marketers need to operate more like entrepreneurs, continuously adjusting to sustain “product/market fit.”

The start-up Checkr represents a trend we are seeing more of in the Bay Area in particular. Marketers are adopting the business practices of entrepreneurs such as lean startup and agile development. For its background check solution, Checkr wasn’t getting the results it wanted from traditional sales and marketing tactics as it expanded into new market segments. They realized they had to think beyond marketing as promoting an existing product. Adopting an agile method of customer testing and rapid iteration, they worked with engineering to rethink the product and bring a “minimum viable product” to market for these new buyers. As a result of this integrated, agile approach, the company easily hit some early 2017 revenue targets with conversion rates that are four times what is traditionally seen in the industry.

The changes happening in consumer behavior, technology, and media are redefining the nature of creativity in marketing. The measure of marketing success isn’t the input, whether that’s the quality of a piece of content or a campaign, but rather the value of the output, whether that’s revenue, loyalty, or advocacy. Marketers of the past thought like artists, managers, and promoters. Today’s marketers need to push themselves to think more like innovators and entrepreneurs — creating enterprise value by engaging the whole organization, looking out for the entire customer experience, using data to make decisions, and measuring effectiveness based on business results.

Research: Junior Female Scientists Aren’t Getting the Credit They Deserve

March 22, 2017 - 9:02am

According to the U.S. National Science Foundation, women earn about half of the doctoral degrees in science, yet they represent a mere 21% of the faculty at the full professor level at research institutions in the United States.

In explaining these numbers, a great deal of attention has been given to the “glass ceiling” – the idea that women reach a level near the top of their organizations beyond which they simply cannot advance. But women often meet barriers well before they have climbed to the upper echelons.

Our research focused on the advancement of women in the academic life sciences, chiefly biology and medicine. Similar to science more broadly, women earn about half of life science doctorates, but only 21% of them land full professorships and a mere 15% serve as department chairs at medical schools, for example. This under-representation at the senior levels is surprising, because we found evidence that women, on average, may perform better than men in the early stages of their careers.

Many have attributed the lack of senior women scientists to a “leaky pipeline,” in that women leave the field more frequently than men at every career stage. This view, however, obscures the fact that many women stall on the life sciences career ladder early on. For example, women make up only one-third of associate professors (the approximate equivalent of middle management) in academic medicine. This suggests that about 10 years after entering the profession, many have not advanced. (While these statistics don’t necessarily mean women leave the field – for instance, they may stay in lower-level positions – the academic life sciences are an up-or-out setting, and it’s hard for scientists to have a “career” without clearing the necessary hurdles, such as becoming an associate and then a full professor, and winning grants to fund their research.)

We explored why many women aren’t advancing in their early careers by looking at gender differences in publications and research funding. We have two studies that are currently under review at scientific journals.

Our first study, in collaboration with Dr. Carolin Lerchenmueller from Massachusetts General Hospital and Harvard Medical School, examined the rate at which women earn first author or last author positions on academic articles from U.S.-based laboratories. These authorships are key performance indicators in the life sciences. A first authorship, usually allocated to the leading junior author, signals that the researcher led the team in performing the research and in writing the manuscript. Last authorship, by convention, goes to the senior principal investigator who funded the research and who may have conceived of the project.

Previous research has counted the number of prestigious authorships by men and women and found that women are underrepresented in both positions. But that approach confounded women’s rate of earning prestigious authorships with their participation in medical research. It did not account for the fact that men still represent the majority of life scientists. Not considering how many women and men were eligible for these authorships can give a misleading picture of women’s success in science.

To address this issue, we estimated the relative likelihood of earning prestigious authorships for women versus men. (We divided the rate at which women received first and last authorships by the rate at which men received them.) This measure accounts for the fact that there are fewer women than men doing research in the life sciences, and that women tend to publish a little less frequently than men. We focused our analysis on scientific publications recorded in PubMed (the most comprehensive database of life science articles) that acknowledged financial support by the National Institutes of Health (to consider articles of similar quality).

Surprisingly, we found that women had a 10-15% higher likelihood than men of earning first authorships, on average, across more than 100,000 articles published between 1985 and 2009. In fact, women have been achieving first authorships at higher rates than men since the mid 1990s. However, women have remained substantially underrepresented in the last author position during the same time frame. First authorships have not been translating into last authorships for women, which suggests they have been faltering to transition from junior to senior scientist.

One potential reason for this disconnect is that while women in our sample performed better in earning first authorships, on average, they were about 11% less likely to publish in journals with the highest impact, such as Science and the New England Journal of Medicine. It’s not clear why we see this difference, but it could place women at a real disadvantage if hiring and promotion committees focus on publications in the most visible journals.

We conducted a second study that followed the careers of more than 6,000 life scientists who received funding from the National Institutes of Health (NIH), the largest funder of the life sciences. Because scientists depend on federal grants to fund their work, and the government reports these grants, we were able to use this data to determine who entered and progressed in the profession.

Our sample comprised of early-career scientists who received a postdoc grant from the NIH between 1985 and 2009. We followed their subsequent careers (e.g., analyzing publications and grants) to see how many went on to receive an R01 grant, which marks the transition from junior scientist to principal investigator. Being awarded an R01 grant has essentially become a precursor for a faculty career at a research-oriented university. We analyzed how the odds of obtaining one’s first R01 grant varies with gender and with differences in publication records.

Overall, we found that about 1,000 of these individuals transitioned to an R01 grant, but the share of women to do so was 20% lower compared to men. And the women who did get R01 funding typically required more time to accomplish the transition from postdoc to principal investigator. (We accounted for postdocs who did not pursue R01 funding, which would include, for example, those who left academia.)

About two-thirds of this gender gap appeared due to differences in publication records, such as women publishing less frequently than men and receiving somewhat fewer citations on their papers. The rest of the gap, though, appeared to result from women systematically receiving less credit for their work. For example, while doubling the number of citations per paper reduced the transition time from postdoc grant to R01 by about 20% for men, the same increase in citations per paper only reduced the time to R01 by roughly 13% for women. Even after controlling for a large number of other attributes, such as the journals they published in and whether they specialized in particular areas, a woman will take about one year longer to receive an R01 grant than a man with the same number of citations.

Our findings from these two studies show that women face real barriers to advancing in the life sciences. While they’re entering the field in similar numbers as men, they’re less likely to transition to important R01 funding and prestigious last authorships—both of which matter for achieving a senior scientist position.

While we examined how differences in publication may contribute to the gender gap in early career transitions, we could not determine why these differences exist. Our future work seeks to look at how women’s access to mentors and other organizational resources compares to men’s, as this could influence their research topics and ability to publish in important journals. Of course, other factors may contribute to gender differences in scientists’ career development. But to achieve equal representation among senior scientists, women first have to be able to advance during the earliest phases of their careers.

Rethinking Your Supply Chain in an Era of Protectionism

March 22, 2017 - 9:00am

Most U.S. and European companies have spent the past 20 years concentrating more and more of their manufacturing in East Asia to reduce costs by exploiting labor-arbitrage opportunities and address the promise of that rapidly growing market. It’s time for them to rethink their supply-chain strategies. Adjusting to new economic realities as well as political and economic uncertainties will require making their supply chains much more resilient.

There are three reasons a rethink is due:

East Asia’s shrinking cost advantage. The fraction of global manufacturing done in Asia (measured by value added) jumped from 29% in 2000 to 45% in 2015. We’ve been warning for years that this shift had gone too far and had urged global companies to rethink their manufacturing and sourcing footprint (see Made in America, Again and Shifting Economics of Global Manufacturing).

 

Our argument has been that a number of trends have leveled the playing field around the globe. They include years of 15% to 20% annual increases in labor costs without compensating productivity growth in manufacturing titans such as China, cheap energy in North America unlocked by hydraulic fracturing, and the increasing complexity and cost of managing global supply chains. In 2004, the cost of manufacturing on the east coast of China was approximately 15 percentage points cheaper, on average, than in the United States. In 2016, that gap was down to about 1 percentage point. This trend has triggered significant interest in reshoring production to and sourcing from North America. One high profile example is Walmart’s commitment to source an additional $250 billion in products made, assembled, or grown in the United States.

Advances in manufacturing technology. Manufacturing is on the cusp of a robotics revolution. We estimate that robotics could cost effectively replace or augment 50% of the tasks done in a plant today. As robotics and other advanced manufacturing technology are deployed over the next 10 years or so, global manufacturing cost differentials will shrink further, accelerating the “relocalization” of supply chains – which means many companies will serve regional markets with goods largely sourced within that region.

A shift toward protectionism. Exhibits A and B are the United Kingdom’s vote to exit the Europe Union and Donald Trump’s victory in the U.S. presidential election. But there may be more to come. All this adds up to an unprecedented level of uncertainty about trade policies and their effect. Take the idea of a U.S. border tax, which President Trump has floated. Such a policy alone could have a major impact on companies operating in the United States. Some retailers that are big importers could see their net profits plummet by almost 80%, while exporters of manufactured goods could see their net profits soar by 50% or more (see these exhibits). Yet whether and how such a policy will be implemented remains uncertain; so does its impact on exchange rates and a large number of other policies that could influence trade economics.

With all of the changes and uncertainty, companies in a wide range of industries – from autos and chemicals to electronics and appliances – are moving quickly to rethink supply chains and make them more resilient. However, they are encountering some formidable challenges. For companies looking to produce in the United States, one of the most significant is the decimation of the U.S. supply base: The United States suffered a net loss of nearly 19,000 manufacturing firms between 2001 and 2015, according to our analysis of U.S. Bureau of Labor Statistics and U.S. Census Bureau data. Many sectors saw 30% to 50% of firms close their doors, which has added complexity to manufacturing in the United States. Of the major manufacturing sectors, only chemicals, food, and beverages and tobacco products saw a meaningful increase in the number of firms.

 

One firm that appears to be creatively addressing the challenges is CY TOP, a mid-sized company that makes stainless-steel, indoor trash cans. While the bulk of its production is still in Asia, it has started building production in the United States in the last 24 months — in part to support Walmart’s initiative to buy more U.S.-made products. CY TOP has been able to do this while maintaining its low manufacturing costs by aggressively reengineering and automating its U.S. production lines: It only uses seven to 10 people on a line that would have 80 people in Asia. (It also saves money because transportation costs on those U.S.-made goods are lower.) Its medium-term goal — if its first U.S. facility is successful — is to add as many as three more U.S. manufacturing sites. In the longer term, the company might supply global demand from the United States.

CY TOP has not been able to find U.S. suppliers of some key inputs (e.g., the specialized coating that prevents stainless steel from showing finger prints, which it continues to source from Asia). For now, that means extra shipping cost and logistics costs. Over time, however, its goal is to develop its supplier ecosystem in the United States — either by persuading its existing Asian suppliers to produce in the United States or by sharing its plans to increase its own production in the United States with potential domestic companies that could enter the business. Other firms in the same boat are using a variety of creative approaches to persuade potential suppliers to produce things that are now not made in the United States: helping them finance new plants, sharing the savings on freight and logistics, and even collaborating with competitors in the hope that their combined volume will draw suppliers’ interest.

Given this emerging new world, manufacturers should take these steps:

  • Evaluate your existing and future customer footprint and map it against your existing manufacturing and supply chain capabilities.
  • Analyze the total costs of supply for each alternative location.
  • Explore advanced manufacturing technologies and possibilities, especially flexible robotics and automation and understand how these change the equation.
  • Proactively try to rebuild your atrophied supply-chain ecosystems, if possible in conjunction with similar manufacturers and large customers.
  • Engineer your supply chains to be resilient to further shifts and instabilities in trade policies and exchange rates.

Taking these actions may challenge your conventional corporate wisdom on how to configure and optimize your supply chain. But in these uncertain times, even the most fundamental assumptions must be questioned.

Why You Should Make Time for Self-Reflection (Even If You Hate Doing It)

March 21, 2017 - 1:00pm

When people find out I’m an executive coach, they often ask who my toughest clients are. Inexperienced leaders? Senior leaders who think they know everything? Leaders who bully and belittle others? Leaders who shirk responsibility?

The answer is none of the above. The hardest leaders to coach are those who won’t reflect — particularly leaders who won’t reflect on themselves.

At its simplest, reflection is about careful thought. But the kind of reflection that is really valuable to leaders is more nuanced than that. The most useful reflection involves the conscious consideration and analysis of beliefs and actions for the purpose of learning. Reflection gives the brain an opportunity to pause amidst the chaos, untangle and sort through observations and experiences, consider multiple possible interpretations, and create meaning. This meaning becomes learning, which can then inform future mindsets and actions. For leaders, this “meaning making” is crucial to their ongoing growth and development.

Research by Giada Di Stefano, Francesca Gino, Gary Pisano, and Bradley Staats in call centers demonstrated that employees who spent 15 minutes at the end of the day reflecting about lessons learned performed 23% better after 10 days than those who did not reflect. A study of UK commuters found a similar result when those who were prompted to use their commute to think about and plan for their day were happier, more productive, and less burned out than people who didn’t.

So, if reflection is so helpful, why don’t many leaders do it?  Leaders often:

  • Don’t understand the process.  Many leaders don’t know how to reflect. One executive I work with, Ken, shared recently that he had yet again not met his commitment to spend an hour on Sunday mornings reflecting. To help him get over this barrier, I suggested he take the next 30 minutes of our two-hour session and just quietly reflect and then we’d debrief it. After five minutes of silence, he said, “I guess I don’t really know what you want me to do. Maybe that’s why I haven’t been doing it.”
  • Don’t like the process. Reflection requires leaders to do a number of things they typically don’t like to do: slow down, adopt a mindset of not knowing and curiosity, tolerate messiness and inefficiency, and take personal responsibility. The process can lead to valuable insights and even breakthroughs — and it can also lead to feelings of discomfort, vulnerability, defensiveness, and irritation.
  • Don’t like the results. When a leader takes time to reflect, she typically sees ways she was effective as well as things she could have done better. Most leaders quickly dismiss the noted strengths and dislike the noted weaknesses. Some become so defensive in the process that they don’t learn anything, so the results are not helpful.
  • Have a bias towards action. Like soccer goalies, many leaders have a bias toward action. A study of professional soccer goalies defending penalty kicks found that goalies who stay in the center of the goal, instead of lunging left or right, have a 33% chance of stopping the goal, and yet these goalies only stay in the center 6% of the time. The goalies just feel better when they “do something.”  The same is true of many leaders. Reflection can feel like staying in the center of the goal and missing the action.
  • Can’t see a good ROI.  From early roles, leaders are taught to invest where they can generate a positive ROI — results that indicate the contribution of time, talent or money paid off.  Sometimes it’s hard to see an immediate ROI on reflection — particularly when compared with other uses of a leader’s time.

If you have found yourself making these same excuses, you can become more reflective by practicing a few simple steps.

  • Identify some important questions. But don’t answer them yet. Here are some possibilities:
    • What are you avoiding?
    • How are you helping your colleagues achieve their goals?
    • How are you not helping or even hindering their progress?
    • How might you be contributing to your least enjoyable relationship at work?
    • How could you have been more effective in a recent meeting?
  • Select a reflection process that matches your preferences.  Many people reflect through writing in a journal.  If that sounds terrible but talking with a colleague sounds better, consider that.  As long as you’re reflecting and not just chatting about the latest sporting event or complaining about a colleague, your approach is up to you.  You can sit, walk, bike, or stand, alone or with a partner, writing, talking, or thinking.
  • Schedule time.  Most leaders are driven by their calendars. So, schedule your reflection time and then commit to keep it. And if you find yourself trying to skip it or avoid it, reflect on that!
  • Start small.  If an hour of reflection seems like too much, try 10 minutes.  Teresa Amabile and her colleagues found that the most significant driver of positive emotions and motivation at work was making progress on the tasks at hand. Set yourself up to make progress, even if it feels small.
  • Do it. Go back to your list of questions and explore them. Be still. Think. Consider multiple perspectives. Look at the opposite of what you initially believe. Brainstorm. You don’t have to like or agree with all of your thoughts — just think and to examine your thinking.
  • Ask for help. For most leaders, a lack of desire, time, experience, or skill can get in the way of reflection.  Consider working with a colleague, therapist, or coach to help you make the time, listen carefully, be a thought partner, and hold you accountable.

Despite the challenges to reflection, the impact is clear. As Peter Drucker said: “Follow effective action with quiet reflection. From the quiet reflection, will come even more effective action.”

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