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Is R&D Getting Harder, or Are Companies Just Getting Worse At It?

March 21, 2017 - 12:00pm

We know innovation drives corporate growth. As Strategy& reported in its 2015 survey of 1,757 executives, “innovation today is a key driver of organic growth for all companies — regardless of sector or geography.” According to that report, the top 1,000 R&D spenders invested $680 billion in R&D that year, up 5% from the prior year. Historically, R&D has been viewed as the engine of national economic growth as well.

Despite the importance of innovation to companies, as well as to the broader economy, despite the 250% rise in the number of scientists and engineers engaged in R&D, and despite all the experts dedicated to helping companies innovate, the money companies spend on R&D is producing fewer and fewer results. In fact, my research shows the returns to companies’ R&D spending have declined 65% over the past three decades.

Not coincidentally, this decline in companies’ research quotient or RQ (a metric I’ve developed that measures R&D productivity, or how much output they get for their innovation inputs) mimics the decline in U.S. GDP growth over the past 30 years.

 

One possible explanation is that R&D has gotten harder. This is a theory advanced by Stanford economist Chad Jones. Jones proposed that two mechanisms were behind this: first, a “fishing out” (or cherry-picking) effect — the notion that the most obvious ideas are discovered first, so that the quality of remaining ideas is degrading over time. If you think about recent innovations such as personal computers, the internet, and smart phones, you might be skeptical about this idea, but we’ll examine it more concretely in a moment. The second mechanism is diminishing returns to research labor — the idea that adding more researchers decreases the number of innovations per worker, because it increases the likelihood that researchers are duplicating one another’s efforts. Both of these ideas seem plausible. In fact, Northwestern economist Robert Gordon, in The Rise and Fall of American Growth, makes similar arguments. The dismal outcome if Jones and Gordon are correct is that growth will decline to zero (other than for population growth).

I have a more optimistic explanation, which is that companies have gotten worse at R&D. While companies getting worse may not sound more optimistic than R&D getting harder, if it’s true, and if companies can restore their former RQs, then theory tells us the economy should enjoy perpetual growth as long as R&D investment continues.

So the big question now is whether Jones and Gordon are correct that R&D has gotten harder, or am I correct that companies have gotten worse at it. While the 65% decline in RQ suggests I’m right that companies have gotten worse at R&D, it will also look like companies have gotten worse if it in fact R&D has gotten harder.

How could we test this? One thought is that if R&D has truly gotten harder, it should have gotten harder for everyone. In other words, not only will average RQ decrease each year, but maximum RQ will decrease as well. Thus if I take the best company in each year (the one with the highest RQ), and compare it to the best company the following year, then the later companies will tend to have lower RQs than earlier companies.

That’s not what I found when I examined 40 years of financial data for all publicly traded U.S. firms. I found instead that maximum RQ was actually increasing over time! When you think about all the marvelous companies that have been created as part of the internet economy, that seems plausible, but there is still reason to be skeptical when you’re swimming against the tide. So the next thing I checked was whether the same pattern held if instead of looking at all public companies, I restricted attention to a particular sector, e.g., manufacturing or services.  I found that maximum RQ was increasing within sectors as well. I then looked at coarse definitions of industry, such as Measuring Equipment (Standard Industrial Classification 38), then successively more narrow definitions, such as Surgical, Medical, And Dental Instruments (SIC 384), then Dental Equipment (SIC 3843).  What I found was that as I looked more narrowly, maximum RQ did decrease over time (see the chart below).  Thus, Jones’s theory might hold at the industry level.

 

The implications of the pattern are actually pretty exciting. What the pattern suggests is that while opportunities within industries decline over time, as they do, companies respond by creating new industries with greater technological opportunity. Once I saw this pattern it was easy to think of examples. In fact, many of these examples are referenced in the current debate on disruption. Some common examples are the death of the typewriter and its replacement by personal computers, and the death of landlines and their replacement by cell phones. While there are numerous other examples, what is true in the two cases that came to mind, is that the market for the new technology was actually much broader than that for the technology it replaced.

As an example, personal computers enjoy an installed base in the U.S. of 310 million machines, while the installed base of electric typewriters was only 10 million machines at its peak in 1978. While we can’t say whether this pattern of increasing maximum RQ will continue forever, it has persisted over the 40 years for which we have data.

So the good news is that while industries may be doomed, companies don’t have to be. They can move into industries with greater opportunity, while exiting industries with declining opportunity. That news also provides an important lesson in improving RQ: companies likely have to diversify to avoid diminishing opportunities in their own industry. This general pattern is at least a century old, and in fact was the genesis for industrial R&D. This genesis is captured in vivid case histories of DuPont, General Motors, and Standard Oil in Harvard business historian Alfred Chandler’s influential book, Strategy and Structure.

To summarize where this leaves us, it appears the decline in companies’ (and the economy’s) ability to drive growth from R&D stems from the fact that companies have gotten worse at innovation, rather than because innovation has gotten harder. This is great news, because the problem of companies getting worse is fixable, whereas the problem of innovation getting harder isn’t. The challenge, of course, is knowing what to fix and how to fix it.

Walmart Won’t Stay on Top If Its Strategy Is “Copy Amazon”

March 21, 2017 - 11:30am

Walmart’s recent change to free two-day shipping for online orders, no membership required, is the latest in a series of moves the company has made to fight Amazon and grow its e-commerce business. Last year, it purchased Jet.com and installed Jet’s founder, Marc Lore, as head of its e-commerce division. It has also been acquiring e-commerce niche players, including Shoebuy and outdoor gear retailer Moosejaw, and digital technology companies, such as search experts Adchemy and cloud platform OneOps.

Walmart does need to shore up its e-commerce capabilities, but its attempts to out-Amazon Amazon aren’t a winning strategy. For one thing, by offering the new shipping service, Walmart is really only playing catch-up. Lore himself described free shipping as table stakes.

And the new shipping offer doesn’t even put Walmart on par with Amazon, since it only applies to orders of $35 or more. That may seem like a low hurdle, especially when Amazon’s Prime membership costs $99 per year. But Prime members are likely to forget about the cost after it’s been paid for the year, while Walmart’s policy means money is inserted into the purchase equation with every transaction. Anything that makes people think about the amount they’re spending during their purchase reinforces Amazon’s advantage in delivering no-brainer experiences. Moreover, free two-day shipping already feels like old news. Consider that Amazon also offers free same-day delivery by 9 PM on more than 1 million items in select areas and free two-hour delivery on some products in select metro areas through its Prime Now option.

Importantly, a Prime membership doesn’t only include shipping benefits; members also receive access to movie streaming, photo storage, music streaming, and early access to time-sensitive “Lightning Deals.” In Amazon’s growing brick-and-mortar bookstores, Prime members can buy books for discounted prices, while others have to pay the cover price. Amazon will likely continue adding Prime benefits to the mix, potentially including the holy grail of entertainment: live sports.

For all these reasons, Prime has been described by CEO Jeff Bezos as one of the company’s three strategic pillars. The goal is to make potential customers believe that “if you are not a Prime member, you are being irresponsible.”

Walmart can’t compete with this value proposition, at least not yet. Walmart also can’t challenge Amazon’s existing brand equity in access and selection. With approximately 160 million items for sale, Amazon has become the go-to outlet for anything. In comparison, Walmart.com sells “only” 15 million items — and just 2 million of them are available for the free two-day shipping. It’s no wonder 52% of online shoppers start their search on Amazon, according IHL Group.

Amazon also has the advantage of years of consumer data, as well as the data analytics proficiency to spot trending products, make smarter pricing and assortment decisions, and deliver personalized customer experiences. Walmart’s acquisitions of e-commerce companies and digital technologies, and the talent that comes along with them, enable it to get better at this, but Amazon will continue to improve too.

Trying to beat Amazon at its own game is not only likely to fail, it’s also not in Walmart’s best interests. Walmart has perhaps the best physical distribution and retail network in the world. It needs to be competitive on digital channels, sure. But, more important, it should excel at brick-and-mortar. Improving the in-store experience, promoting omnichannel shopping and fulfillment options, and developing in-person service innovations are avenues that leverage its brand equity and core competencies — and they’re approaches that would put Amazon at a disadvantage. Instead of cutting human resource jobs (which seems counterproductive for a company that employs 2.3 million people) and closing new store formats (which make the brand more convenient and accessible to more people), Walmart should invest to advance its strongest competitive advantage: its physical stores.

The company’s obsession with competing with Amazon also seems to have taken Walmart’s focus off its brand identity in everyday low prices. In its announcements and ads about the new free shipping service, product prices have not been mentioned. Walmart has held a low-price leadership position from its start. Now, in some cases, it can often lower prices than Amazon because Jet.com’s operating model doesn’t rely on holding inventory. But the company has elected to make neither its new pricing capabilities nor its long-standing low prices part of its marketing efforts for e-commerce. Moreover, the company’s new television campaign, which employs a whimsical style more suited to tech startups and was launched during programming more suited to higher-end brands (the Oscars), reinforces the company’s departure from its focus on low prices.

Many companies feel a pull to imitate the practices of successful rivals. But this rarely ends well. Core competencies stagnate, customers become confused, and the opportunity to lead instead of follow is squandered. Instead of gaining on Amazon, Walmart seems poised to lose valuable ground.

When You Agree to a Networking Meeting But Don’t Know What You’re Going to Talk About

March 21, 2017 - 10:27am

For some networking meetings, the agenda is obvious: Your companies are considering doing business together, or you’re looking for a job and this person might help you get one. But many professionals find themselves in networking meetings where the goals are murkier. Perhaps a friend thought you’d hit it off with someone and introduced you, or you met the person briefly at an event and they followed up for indeterminate reasons. In some cases, you’ll decline the invitation (see “5 Ways to Say No to a Networking Request” for my tips on how to do it). But if the connection seems promising, you may decide to say yes and see where it leads.

Here are four ways to ensure your networking meeting is productive and meaningful, even if the agenda is amorphous.

First, it’s important to be clear on your reasons for accepting the meeting. It may be to do a favor — say, a friend asks you to advise his sister-in-law on career opportunities. You might have informational goals (the person works in a field you’d like to learn more about), social goals (you think they could become an interesting friend), or long-term business goals (there’s a possibility you might collaborate someday, but you’re not sure when or how). The possibility of making a friend or learning more about artificial intelligence isn’t an “agenda,” per se, but it can help you keep in mind why you agreed to the meeting and help you steer the conversation accordingly. It will help the meeting feel like a win, instead of a waste of time.

Next, align your personal goals with the type and duration of your meeting. If you’re doing a favor for a friend, spending several hours dining one-on-one with your contact is going above and beyond; a phone call would likely suffice. Alternately, if you think the person could become a personal friend, you may want to invite them to a more relaxed event, where you can get to know them better. Just this week, when I found myself with an extra ticket to a hockey game, I invited a business colleague with whom I’d spent a lot of group time but hadn’t connected much one-on-one.

“Meeting for coffee” has become our professional default, but it doesn’t have to be the only way to get to know someone. Remember that, depending on your preferred level of investment in the relationship, you can suggest a range of options that vary by time and energy investment, including a 30-minute phone call, a 60-minute phone call, a small group gathering (like a lunch or dinner), a large group event (like a cocktail reception), or a coffee or meal for just the two of you.

During the meeting, be sure you’re asking the right questions. Even without a formal agenda, it’s important to draw the person out based on your reasons for accepting the invitation. If you’re doing a favor for someone, let them take the lead; you can simply ask, “How can I be most helpful?”

If you’re interested in learning from them and have an informational goal, let your curiosity shine and have your questions ready. If your new contact works at NASA, for instance, you could ask her: What’s the hiring process like? What projects are you most excited about and why? What’s a typical day like? How do people get selected as astronauts? What do you think of private companies in the space exploration field? People enjoy being asked about their area of expertise, and if your questions are sufficiently nuanced, you can almost guarantee an interesting encounter.

If you’re thinking of someone as a potential friend or long-term business partner, your goal is to get a better feel for chemistry and compatibility. Are they easy to talk to? Does the conversation sustain your interest? Do you get a sense that they’re trustworthy? Competent? Because you’re not planning to rush into a formal relationship, you don’t have to make any snap decisions; the main goal is to start the evaluative process and determine whether you’d like to spend time with them in the future.

Finally, too many networking meetings are wasted because they’re treated as one-offs. If there’s no follow-up, even someone with whom you’ve had an in-depth meeting will be quickly forgotten. If you’re meeting with someone purely as a favor, you don’t need to worry about this, because your goal isn’t to establish a relationship with them — it’s to solidify your relationship with your mutual friend. But for anyone else, if you enjoyed their company, it’s useful to create your own follow-up plan.

Contact management systems, such as Contactually, can help you stay organized, or you can do it on your own with calendar reminders. During the meeting, strive to learn at least one thing about the person that can serve as a cue to reconnect. For instance, if they love sports, perhaps you can invite them to join you for a game in the future; if they want to meet more people in the consulting industry, you could loop back next month with an offer to join you and a friend who’s a consultant for lunch. Those thoughtful gestures, repeated over time, will make even the most tenuous of initial connections stick.

The best networking takes a long-term approach; you can be yourself and get to know others authentically because you’re not fixated on making an immediate “sale.” Agreeing to a networking meeting without a formal agenda may seem like a waste of time, with little ROI. But by using the approach above, you can create your own metrics for success and potentially develop life- and career-changing connections.

Where Both the ACA and AHCA Fall Short, and What the Health Insurance Market Really Needs

March 21, 2017 - 9:00am

The question of whether the United States will have functioning markets where individuals can buy health care insurance lies at the heart of the current debate about repealing and replacing the Affordable Care Act (ACA). Since about 20 million Americans depend on these markets for insurance — and thus access to health care — their functioning is also essential to the future of the U.S. health care system. To understand the ongoing battles about the individual, or non-group, markets and their reform, three points should be kept in mind.

First, these insurance markets were distressed before the enactment of the Affordable Care Act. Second, the ACA improved their functioning but was not sufficient as passed and implemented to stabilize all of them. Neither, however, is the American Health Care Act (AHCA), the repeal and replacement legislation proposed by House Republicans and embraced by President Trump. Third, the reforms that will improve individual markets, which we discuss below, are known. They include greater balance between premium subsidies and penalties for not taking up coverage, using proven mechanisms for stabilizing risks such as reinsurance, and accelerating efforts to control the costs of health care services. To date, the United States has just lacked the political will to adopt them.

Private markets were failing before the ACA

Individual markets were troubled prior to the ACA’s enactment in 2010. One reason was that premiums for these policies were increasing more than 10% a year, on average, while the policies themselves had major deficiencies. They often excluded pre-existing conditions, charged higher premiums for people with health risks and for young women, placed limits on annual and lifetime benefits, or refused to renew policies for individuals who became sick. Many people who tried to buy plans were turned down. In 2010, an estimated 9 million adults who had tried to buy a plan in the individual market over the prior three years reported that they were turned down, charged a higher price, or had a condition excluded from their plan because of their health.

Faced with unsubsidized premiums and flawed products, the majority of consumers who tried to buy a plan remained uninsured. Only healthy people could get policies, and only those with good incomes could afford the premiums. States such as New Jersey that experimented with requiring insurers to take all comers, regardless of preexisting conditions, experienced declining enrollment and rising premiums because they did not adopt needed complementary reforms, including subsidies, to encourage enrollment by healthy individuals. Returning to the status quo ante — before the ACA — is not a viable option for the individual markets.

The Affordable Care Act helped, but there have been challenges

The ACA brought sweeping change to the individual insurance market by establishing federal rules governing the sale of insurance policies, a requirement that all Americans have insurance (the “individual mandate”), and tax credits to make it affordable. Insurers were required to offer a comprehensive health plan to all who applied and could only vary premiums within established limits by age, geographic location, and tobacco use.

The consequences have been dramatic. The size of the individual market — including the ACA’s marketplaces — has nearly doubled since 2010. The share of individual-market shoppers reporting difficulty finding affordable plans has dropped by nearly half since 2010. Most people enrolled in marketplace plans are satisfied with them, and majorities who have used their plans report getting access to care they could not have afforded before.

But achieving insurance market stability over time in this regulatory framework requires robust enrollment. Nationally, enrollment via the marketplaces has lagged initial forecasts. This is because fewer employers than expected dropped coverage, many consumers were unaware that they were eligible for subsidies, and opposition to the law led many states to discourage outreach and enrollment. There have also been real affordability issues for people with higher incomes — above 400% of the federal poverty level — who don’t qualify for tax credits. And penalties for failing to get insurance have been minimal — less than the cost of buying coverage in many cases.

Insurance carriers have also been buffeted by an unstable regulatory and political climate. Multiple and ongoing legal challenges to the ACA and sudden changes in market rules and programs have made it difficult for carriers to price appropriately. Lower enrollment and regulatory uncertainty have led to financial losses for many carriers, and others have simply not been able to compete effectively for highly-price-sensitive consumers. Plan participation declined in 2016 and 2017 after increasing through 2015, though trends in participation are highly variable across states. Premiums in many states rose significantly in 2017 as carriers adjusted premiums to match the risk profile of their enrollment. These premium increases also reflected the phase-out of the law’s temporary reinsurance program in 2017.

Despite this turmoil, Standard & Poor’s projected at the end of December that insurers’ aggregate performance in the individual market would be better in 2016 than in 2015, with many insurers breaking even or becoming profitable in 2017. S&P viewed the 2017 premium increases as one-time pricing corrections and expected that 2018 increases would be much lower. And the Congressional Budget Office also projected in March that the individual markets would be stable under current law. However, enrollment remains lower than optimal, and in some markets, lack of insurer participation limits effective choice and competition.

The proposed AHCA will lead to lower individual-market enrollment

The current version of the Republican repeal and replace plan, the American Health Care Act, is projected to lead to enrollment losses in the individual market. The AHCA would discourage enrollment by replacing the ACA’s income-related tax credits with less-generous age-adjusted tax credits that would significantly increase what low- and moderate-income people pay for coverage. Repeal of the ACA’s cost-sharing subsidies, which defray deductibles and coinsurance for these consumers, would further reduce the appeal of these policies.

The proposed bill would also repeal the individual mandate and replace it with a continuous coverage requirement that would add a 30% premium surcharge for people who let their insurance lapse during the previous year. The CBO estimates that the AHCA would reduce enrollment in the individual market by 9 million people by 2020. But the office also projects that premiums will be significantly lower for young adults compared to the ACA and significantly higher for older adults in light of the new 5:1 age-rating allowances. This will lead to a healthier pool in the marketplaces but large increases in the number of uninsured older adults.

The bill will also provide grants to states to stabilize their markets, which CBO projects will mostly be used for reinsurance. These two factors will lead to some enrollment gains by 2026, but enrollment will remain lower than under the ACA in 2026 by about 2 million people. As with the ACA, CBO projects that markets will be stable under the AHCA, but the AHCA achieves stability in the individual market, in part through reducing the use of insurance by the people who need it most — older, working-age Americans.

What to do

There is no great mystery about how to shore up private insurance markets.

First, we need to create balanced risk pools that include both healthy and less healthy persons in individual insurance markets. This will require two types of actions. Subsidies for young healthy consumers must be increased without decreasing those for older Americans so that so-called young invincibles find the prices of insurance less off-putting but the neediest customers in individual markets can still afford to participate.

However, reducing financial barriers for good risks will not suffice. Unlike many other purchases in our lives, buying insurance is difficult, confusing, and provides little short-term gratification; so healthy young people will always tend to avoid it. That is why creating healthy risk pools for individual markets will require something like the individual mandate that has been so unpopular with conservatives. Unless consumers are required to purchase insurance — or face a meaningful penalty — individual markets may not function effectively over the long term. By meaningful, we mean a financial penalty that equals or exceeds the cost of buying insurance in the first place.

Second, we need to extend subsidies higher up the income scale than the ACA’s limit of 400% of the federal poverty level. This will enable more non-poor individuals — who tend to have lesser disease burdens — to purchase insurance. Unfortunately, health insurance has become so expensive in the United States that even many middle-income families cannot afford to purchase it without the kind of assistance that employers routinely offer their employees.

Third, if we want private insurers to participate in ensuring that Americans have access to affordable insurance, the business of selling this product must be viable. This means managing the inherent uncertainties associated with selling insurance in comparatively unpredictable individual markets. The most effective approaches — used in the Medicare private drug-insurance market without controversy — are reinsurance and risk corridors. The first of these means assuring that reinsurance is available and affordable for plans selling individual and small group products. Risk corridors protect plans that accumulate unexpectedly high risks by giving them access to funds collected from insurers that experience unexpectedly low risks.

Fourth, and perhaps most important, public and private stakeholders must accelerate efforts to control the costs of health care services, which are the primary determinants of the cost of health insurance in all markets, including employer-sponsored, individual, and public. One reason that other countries find it easier to insure their entire populations is that their costs of care are half or less what ours are.

The key to controlling health care costs in the United States is to implement aggressively the payment and delivery-system reforms that were included in the Affordable Care Act but rarely discussed in current debates. Chief among these reforms is holding providers of care accountable for costs and quality of services through value-based payments that reward clinicians and organizations that provide better care at lower costs. Fortunately, the American Health Care Act seems to leave many of these ACA provisions intact, though whether the new administration will enforce them as vigorously as the previous one remains unclear.

The facts are clear. We can revive individual markets that were failing even before the ACA was enacted and are vital to making affordable care available to Americans. But we will have to pay for that revival — politically and fiscally.

Research: Stale Office Air Is Making You Less Productive

March 21, 2017 - 8:05am

How often do you consider the air quality in your office and how it affects employees and their productivity? Chances are it’s not often.

There is a tendency to assume that, as long as commonly used standards for air quality are met, it won’t be an issue. But these standards aren’t very high. One common international standard that governs how much air is brought in from outside, “Ventilation for Acceptable Indoor Quality,” does not even purport to assure “healthy” air quality.

In the 1970s, efforts to conserve energy in the U.S. included tightening up buildings and reducing ventilation rates so buildings didn’t have to bring as much fresh air inside. This inadvertently led to a buildup of indoor pollutants and the birth of a phenomenon known as “sick building syndrome,” a set of symptoms such as eye irritation, headaches, coughing, and chest tightness that is still an issue today.

Study after study has shown that the amount of ventilation, or fresh outdoor air brought inside, is a critical determinant of health. Good ventilation has been shown to reduce sick building syndrome symptoms, cut absenteeism, and even reduce infectious disease transmission.

Given these studies tying air quality to health, we wanted to see whether improved ventilation affects cognitive function, an indicator of worker productivity. Specifically, does better air influence a worker’s ability to process information, make strategic decisions, and respond to crises?

With my colleagues Jack Spengler and Piers MacNaughton, at Harvard University, and collaborators Suresh Santanam at Syracuse University and Usha Satish at SUNY Upstate Medical, I investigated this question. In the first phase of our study, we enrolled 24 “knowledge workers” — managers, architects, and designers — to spend six days, over a two-week period, in a highly controlled work environment at the Syracuse Center of Excellence. Each day we asked them to show up at this location and do their normal work routine from 9 AM to 5 PM. Meanwhile, without their knowledge, we changed the air quality conditions of their workspaces from a conventional environment, which merely met minimally acceptable standards, to an optimized one.

For the optimized environment, we increased the amount of outdoor air brought in to the space (i.e., the ventilation rate), doubling what is required under the “acceptable indoor air” standard, a condition that most buildings can achieve. We also changed the level of volatile organic compounds (VOCs) in the space by controlling the number of common materials that emit these chemicals — e.g., surface cleaners, dry erase markers, dry cleaned clothing, and building materials. We exposed the workers to a typical and a low VOC concentration. Last, we tested three levels of carbon dioxide (CO2) in the air: low levels (600 parts per million) that result from high ventilation rates, a typical level seen in many offices (950 ppm), and higher levels that are commonly encountered in U.S. schools (1400 ppm).

We held everything else constant. At the end of each day, we tested the workers’ decision-making performance using a standardized cognitive function test that researchers have used for decades.

We found that breathing better air led to significantly better decision-making performance among our participants. We saw higher test scores across nine cognitive function domains when workers were exposed to increased ventilation rates, lower levels of chemicals, and lower carbon dioxide. The results showed the biggest improvements in areas that tested how workers used information to make strategic decisions and how they plan, stay prepared, and strategize during crises. These are exactly the skills needed to be productive in the knowledge economy.

We conducted this as a double-blind study to limit the potential for bias. Just as participants were kept blind to the changing conditions of their workplaces, the scientists who analyzed the cognitive function data were kept blind to the conditions. In addition, we controlled for differences among the participants and measured each individual’s performance against their own baseline. We didn’t care if one person was smarter than another; we were interested in how people compared against themselves. To be sure there was no learning effect (if people scored better after taking the test a few times) and no bias was introduced (if our blinding didn’t work), we repeated one of the exposure conditions (high ventilation, low VOCs, low CO2) on the first and last day, nine days apart. Our results were consistent, indicating that there were no learning effects and that the blinding was effective.

In the second phase of the study, we moved from the lab to the real world to test for additional factors beyond ventilation, VOCs, and CO2 that might influence cognitive function. We enrolled more than 100 knowledge workers in 10 buildings across the United States, six of which had achieved “green certification.” (Although “green” implies lower energy use and perhaps lower ventilation rates, many buildings do both quite well.) We measured the indoor air quality in each of these buildings and tested workers’ cognitive function.

Controlling for factors such as salary, type of work, building owner/tenant, and geographic location, we found that workers in buildings that were green certified scored higher on the tests. In addition to the air quality, we saw that temperature had an effect on workers. When they worked under a standard comfortable temperature and humidity range, they performed better on the tests of decision making, independent of which building they were in.

What should leaders and building managers take away from these findings? The short answer is that better air quality in your office can facilitate better cognitive performance among your employees. Of course, these are just two studies, but they are wholly consistent with 30 years of science on the benefits of higher ventilation rates.

In most buildings, managers can take action immediately. The first step is to look at your air quality indicators and see whether there’s room to improve. While cost may be a concern, it turns out that the cost of improving air quality through higher ventilation rates are far lower than is widely believed. (One study found that building managers tend to overestimate energy costs by a factor of two to 10.)

We modeled costs under four different types of ventilation systems in U.S. cities that occupy different climate zones and have varying energy sources. Our estimates show that the cost of doubling ventilation rates would be less than $40 per person per year. In most cities, it’s even lower. When energy-efficient ventilation systems are used, the cost would be $1–$10 per person per year.

We also benchmarked the cognitive function scores from our study to the thousands of people who have taken the test in other settings, and we paired the percentile increase in scores to salary data from the Bureau of Labor Statistics. (We used salary data as a proxy for productivity and selected data for knowledge workers, the same population as in our study.) We estimated that the productivity benefits from doubling the ventilation rates are $6,500 per person per year. This does not include the other potential health benefits, such as reduced sick building syndrome and absenteeism.

Ultimately, managers would be wise to routinely incorporate health impacts into all of their cost-benefit calculations. When health is accounted for, the costs for enhancing the indoor environment can be properly weighed against the health and productivity benefits. For example, an executive will clearly see that an enhanced facilities budget will reduce human resource costs. This makes buildings, in essence, a human resource tool.

In addition to managing VOCs, ventilation rates, and temperature, managers can consider other critical aspects of the indoor environment that influence health and productivity, such as lighting and noise.

This research adds empirical evidence to a long-recognized phenomenon. Ben Franklin once professed, “I am persuaded that no common air from without is so unwholesome as the air within a close room that has been often breathed and not changed.” We’ve all struggled to concentrate in a conference room that is stuffy and warm. When a window or door is opened and fresh air comes in, it breathes life into the room. Businesses would benefit from recognizing this and taking action to optimize their air quality for employees’ health and productivity.

Does Work Make You Happy? Evidence from the World Happiness Report

March 20, 2017 - 3:03pm

Since most of us spend a great deal of our lives working, it is inevitable that work plays a key role in shaping our levels of happiness. In a recent chapter of the World Happiness Report — published annually to coincide with the United Nation’s International Day of Happiness — we look more closely at the relationship between work and happiness. We draw largely upon the Gallup World Poll, which has been surveying people in over 150 countries around the world since 2006. These efforts allow us to analyze data from hundreds of thousands of individuals across the globe and investigate the ways in which elements of people’s working lives drive their wellbeing.

Subjective wellbeing – often loosely referred to as happiness – can be measured along multiple dimensions. We look primarily at how people evaluate the quality of their lives overall, something Gallup measures according to the Cantril Ladder, an 11-point scale where the top step is your best possible life and the bottom step is your worst possible life. Gallup then asks respondents to indicate which step they’re currently on. We look at this rating, and also investigate the extent to which people experience positive and negative affective states like enjoyment, stress, and worry in their day-to-day lives, as well as analyzing responses to more workplace-specific measures such as job satisfaction and employee engagement.

Which jobs are happiest?

Eleven broad job types are recorded in the Gallup World Poll. The available categories cover many kinds of jobs, including being a business owner, office worker, or manager, and working in farming, construction, mining, or transport. Which groups of workers are generally happier?

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The first thing we notice is that people working blue-collar jobs report lower levels of overall happiness in every region around the world. This is the case across a variety of labor-intensive industries like construction, mining, manufacturing, transport, farming, fishing, and forestry. People around the world who categorize themselves as a manager, an executive, an official, or a professional worker evaluate the quality of their lives at a little over 6 out of 10, whereas people working in farming, fishing, or forestry evaluate their lives around 4.5 out of 10 on average.

This picture is not only found for overall life evaluation but also for the specific, day-to-day emotional experiences of workers. White-collar workers generally report experiencing more positive emotional states such as smiling, laughing, enjoyment, and fewer negative ones like feelings of worry, stress, sadness, and anger.

These descriptive statistics represent the raw differences in happiness across job types.  Of course, there are likely to be many things that differ across people working in these diverse fields that could potentially be driving these happiness differentials. Perhaps surprisingly, much of the picture remains similar even once we adjust our estimates to take into account differences in income and education as well as a number of other demographic variables like age, gender, and marital status.

 

Self-employment is complicated

Being self-employed has a multifaceted relationship with wellbeing. When we look at global averages, we see that self-employment is generally associated with lower levels of happiness as compared to being a full-time employee. But follow-up analyses indicate that this very much depends on the region of the world that is being considered as well as which measure of subjective wellbeing is under consideration.

In most developed nations, we find that being self-employed is associated both with higher overall life evaluation and with more negative, daily emotions such as stress and worry. It will most likely come as no surprise to anyone who owns a business that being self-employed can be both rewarding and stressful!

Being unemployed is miserable

One of the most robust findings in the economics of happiness is that unemployment is destructive to people’s wellbeing.  We find this is true around the world. The employed evaluate the quality of their lives much more highly on average as compared to the unemployed. Individuals who are unemployed also report around 30 percent more negative emotional experiences in their day-to-day lives.

The importance of having a job extends far beyond the salary attached to it. A large stream of research has shown that the non-monetary aspects of employment are also key drivers of people’s wellbeing. Social status, social relations, daily structure, and goals all exert a strong influence on people’s happiness.

Not only are the unemployed generally unhappier than those in work, we find in our analyses that people generally do not adapt over time to becoming unemployed.  More than this, spells of unemployment also seem to have a scarring effect on people’s wellbeing, even after they have regained employment.

The experience of joblessness can be devastating to the individual in question, but it also affects those around them. Family and friends of the unemployed are typically affected, of course, but the spillover effects go even further. High levels of unemployment typically heighten people’s sense of job insecurity, and negatively affect the happiness even of those who are still in employment.

Job satisfaction around the world

So far, we have discussed how people evaluate and experience their lives as a whole. But what about more specific workplace wellbeing measures, like job satisfaction?

The Gallup World Poll asks respondents a yes/no question as to whether they are satisfied with their jobs. The percentage of respondents who reported to be “satisfied” (as opposed to “dissatisfied”) were higher in countries across North and South America, Europe, and Australia and New Zealand. Specifically, Austria takes the top spot with 95% of respondents reporting being satisfied with their jobs. Austria is followed closely by Norway and Iceland.  We see a moderate correlation (0.28, where a perfect correlation would be 1.0) between job satisfaction responses and life evaluation for individuals in the Gallup World Poll.

To find out why some societies appear to generate greater job satisfaction than others, we turned to the more fine-grained data from the European Social Survey. This can give us more information on job quality by revealing particular workplace characteristics that relate to employee happiness. As might be expected, we find that people in well-paying jobs are happier and more satisfied with their lives and their jobs, but a number of other aspects of people’s jobs are also strongly predictive of varied measures of happiness.

Work-life balance emerges as a particularly strong predictor of people’s happiness. Other factors include job variety and the need to learn new things, as well the level of individual autonomy enjoyed by the employee. Moreover, job security and social capital (as measured through the support one receives from fellow workers) are also positively correlated with happiness, while jobs that involve risks to health and safety are generally associated with lower levels of wellbeing. We suspect that countries that rank high in terms of job satisfaction provide better quality jobs by catering to these non-pecuniary job characteristics.

High degrees of job satisfaction can hide low levels of engagement

The Gallup World Poll asks whether individuals feel “actively engaged,” “not engaged,” or “actively disengaged” in their jobs. In contrast to the relatively high job satisfaction numbers, these data paint a much bleaker picture. The number of people noting that they are actively engaged is typically less than 20%, while being around 10% in Western Europe, and much less still in East Asia.

 

The difference in the global results between job satisfaction and employee engagement may partially be attributable to measurement issues. But it also has to do with the fact that both concepts measure different aspects of happiness at work. Job satisfaction can perhaps be reduced to feeling content with one’s job, but the notion of (active) employee engagement requires individuals to be positively absorbed by their work and fully committed to advancing the organization’s interests.  Increased employee engagement thus represents a more difficult hurdle to clear.

Although we’ve focused here on the role of work and employment in shaping people’s happiness, it is worth noting that the relationship between happiness and employment is a complex and dynamic interaction that runs in both directions. Indeed, an increasing body of research shows that work and employment are not only drivers of people’s happiness, but that happiness can itself help to shape job market outcomes, productivity, and even firm performance. Being happy at work thus isn’t just a personal matter; it’s also an economic one.

Shutting Down Your Business Gracefully

March 20, 2017 - 11:00am

Much has been written about how to grow a business. Sadly, however, given the daunting business survival statistics, most businesses never get an opportunity to scale up. They start small and stay small, and many eventually shut down, whether sooner or later. Of those few that do begin to scale, the effort to scale up often fails to last, and the all-too-familiar roller-coaster of life in business heads, or threatens to head, downhill. Thus, a far more common challenge is that of scaling down: How to gracefully scale down and close a business – with your reputation, trust, and dignity intact – and live build another business, in another arena, on another day.

To examine how key constituencies — clients, suppliers, employees – can be fairly dealt with, we will deconstruct the story of a company (founded by one of us, Andrew Blickstein) that scaled down after 16 years. A strong, transparent, and trust-driven culture plays a central role in driving a scale-down decision and in managing the process as the it unfolds.

Home Run Media’s Turning Point

Home Run Media, a media agency that helped its clients plan and carry out their marketing strategies, had been operating for more than a decade when a key client in the fantasy sports industry began to grow rapidly, thanks in part to Home Run’s work and to a healthy dose of venture capital that was fueling its growth. Home Run’s media billings and its revenue, took off, growing more than tenfold in less than two years.

Alas, as 2015 unfolded, concerns arose that the client’s business, and that of other similar companies, might not be legal in its core U.S. market. The client, which constituted some 80 percent of Home Run’s billings, advised Home Run that its 2016 billings were likely to fall sharply. Hammering home the point, the client added, “It’s probably a good time to terminate our contract.”

As Home Run’s founder and sole owner, Blickstein had been through a regular series of feasts and famines and ups and downs, but over Thanksgiving weekend in 2015, he decided he wanted no more of it. He wanted out.

Making the Decision

Blickstein and his finance team had already begun to analyze the options. At first they considered finding a buyer for the business, but it became clear that selling his still-modestly sized business would take some time. At his current levels of operating costs, its value – and its cash – would likely erode quickly in the face of the expected fall in revenue. And who be interested in buying a business that was losing its golden goose client, anyway? Not a viable option, he concluded.

On the plus side, his company’s healthy book of accounts receivable indicated that if he could stop the cash burn quickly, he stood a chance to walk away with a tidy sum. He could put his kids through college and buy some time to think about what to do next. “But how,” he wondered, ”do I carry out this decision while limiting the damage caused to those who have trusted me?” There were four key constituencies with whom Blickstein would have to deal, he realized: his clients, his vendors, his employees, and himself.

Clients

Home Run’s clients relied on the company to help develop and implement their media strategies. Blickstein couldn’t simply leave them in the lurch. He could not and would not simply tell them he was closing shop and wish them good luck. Not only would such an action breach the trust he’d built with them, but he feared they would be angry and wouldn’t pay what they owed him for services already rendered — or to be rendered as he wound things down. If the receivables failed to come in, Blickstein ran the risk of walking away with little to show for his 16 years of effort.

Blickstein knew how difficult it can be for a client to find, select, hire, and onboard a new agency. He decided to break the news to each client himself, and do so first, before addressing his vendors. In doing so, he suggested agencies that could pick up where Home Run Media left off and execute the client’s strategies in a philosophically similar manner, and he offered to support the client in managing the transition. By the end of January 2016, all of his clients had moved on and, happily, no bridges had been burned.

Vendors

Vendors posed a trickier problem. There were media outlets with whom clients’ budgets had been placed, and there were other vendors – an office landlord, software suppliers, and others – with whom Home Run was committed to lengthy contracts. Blickstein knew that the first thing any supplier worries about when a customer closes was whether they’d be paid what was already owed to them. Some such sums were substantial in his case.

With his media vendors, he decided the best thing to do was to advise each of them that the client whose advertising they were running was changing agencies. Agency transitions were not uncommon, nor were month-to-month swings in spending, he reasoned. No problems there.

But landlords, software vendors, and others were another story. They would be losing future streams of revenue to which Home Run Media was contractually committed. How would they react to losing Blickstein’s company as a client, he wondered? Blickstein decided a personal touch was required. He called his primary contact at each of them with a straightforward request. “I’m closing my business. What do we need to do to terminate our contract?”

Invariably, the answer was, “I don’t know.” Seemingly, no one had never called to find out. They’d simply shut their doors and left the vendors holding the bag after a few missed payments. While there were a couple of holdouts with whom Blickstein had to negotiate settlements, most were amenable to and appreciative of Blickstein’s candor, saying they would not refund any deposits or prepayments held, but neither would they require further payments beyond a short period.

Employees

From the beginning, while Blickstein knew he would have to take the lead in dealing with his clients and his vendors, he also knew that the work entailed in transitioning his clients and winding down his supplier relationships was far more than he could do alone. He was also deeply indebted to his 18 people for the work they had done in building his business. From the day he had opened his business some 16 years earlier, he’d built a culture that valued transparency, trust, teamwork, and creativity. He would have to be forthright and creative in dealing with his people as well.

The Friday after Thanksgiving weekend at the company’s normal daily huddle, Blickstein broke the news. Facing the likely loss of its key client, Home Run media would be shutting down and helping all of its clients transition to other agencies. In the same vein, Blickstein would help his people transition into new jobs. “I could not afford to have them keep their jobs,” he recalled, “but I could help them keep their dignity.” Everyone would be given their laptop and a severance package, and to help them find new jobs, everyone would be welcome to keep their company email address and use their desk and the fully-stocked company kitchen through the end of the company’s now-truncated lease. A select few would be asked to stay on for a few months as the company wound down to assist with clients and vendors.

Inevitably, the meeting turned emotional, and tears flowed. At the end of the meeting, the person who’d received the company’s weekly “game ball” for outstanding performance the previous week approached Blickstein and gave him the ball. “You deserve it,” she said.

Come the following Monday, all but two staffers came to work to spend time together beefing up their resumes, updating their LinkedIn profiles, and diving into the job market.

Managing Cash

Blickstein knew that the speed with which his company would scale down was essential. Each week in which his burn-rate continued would knock some $35,000 off the nest egg he would be able to keep at the end of the journey. Keeping a couple of key people on board enabled the scaling-down process to run faster than if he’d managed it alone. On February 26, 2016, barely four months after his decision to scale down had been made, Home Run Media shut its doors, with all clients having been transitioned to new agencies, all vendors dealt with in a mutually agreeable fashion, and with a majority of his people already having found new jobs.

Reflections on Scaling Down

As Blickstein reflects on his company’s history, he sees both disappointment and gratitude. He wishes he’d paid more attention to using the good fortune of a fast-growing client to invest in the business for the longer term. Using some of that client’s proceeds to win a wider set of clients and build a team that could better manage the inevitable ups and downs might have meant that Home Run Media would still be in business today.

On the other side of the ledger, he is grateful for the attention he gave from day one to building transparent and trusting relationships with his team and with the companies with whom he and his people worked. It was trust and transparency that constituted the foundation of his company’s culture, and he knows it’s that culture that that not only got his company through the roller-coaster years, but also made it possible to scale down with his and his people’s dignity intact.

Rethinking the Corporate Love Affair with Change

March 20, 2017 - 10:00am

Managers have a tendency to belittle the people we see as “resistant to change” – the employees who don’t change fast enough.

But this bias toward speed and change – and above all, speedy change — belies humanity’s innate, and often advantageous, embrace of a blend of change and stability. The effective executive knows this to be true, and welcomes change into some parts of the organization, while holding it at bay from others.

Consider Amazon: The company has almost single-handedly transformed major parts of the retail, logistics, and internet sectors in just two decades. It has kept up a feverish pace of change in its consumer offerings, shaping how we shop for everyday goods (online), who influences our purchase decisions (anonymous fellow customers), what we read (ebooks), when we expect to receive orders (same day) and where our purchases come from (warehouses we never see).

Yet for all its innovation, Amazon’s approach to managing its money has changed little in 20 years. It constantly plows capital into its long-term operations — often at the expense of short-term financial results. Similarly, contrast Amazon’s unflinching commitment to its Weekly Business Review (how the company staffs the process for coordinating its sprawling operations) with the idiosyncratic way in which unsolicited emails from individual customers can trigger major internal restructuring.

A.G. Lafley and Roger Martin coined the term cumulative advantage to describe the distinct strategic benefit of not changing. “Holding on to customers is not a matter of continually adapting to changing needs in order to remain the rational or emotional best fit,” they write. “It’s about helping customers avoid having to make yet another choice.”

Yet how often do executives ask, “What are we doing to help our customers avoid having to make yet another choice?” The question I hear too often instead is, “What are we doing to keep pace in these times of rapid change?” The task of the executive managing change today is thus not to turn the entire organization into an intestine by extracting value, and discarding waste, as quickly as possible. It is to ask of change in any one area of the business: At what pace? And to what end?

Effective executives learn to balance the tension between going slow and moving fast by studying the context of their choices. Blackberry’s adoption of the touchscreen interface appears slow in retrospect, having come more than a year after the first iPhone. Yet BlackBerry had previously been beloved in part for its staunch commitment to the full (if miniature) keyboard when its competitors were cranking out flip phones. Looking back, should we call BlackBerry resistant or resilient?

Higher education, a popular whipping boy for being slow to change, has in fact been conspicuously successful in its doggedness. The youngest top-tier American university, Caltech, was founded in the 19th century. Ivy League institutions have remained atop their industry for more than 300 years. Compare that with the Fortune 500: Only 12% of the firms on the original 1955 list were still on the list in 2015. Should we say that U.S. colleges are stuck or standing strong?

Wherever you stand on these examples, this much is clear: Executives should first mind the way they talk about change. Instead of calling an organization or person “resistant to change,” could you imagine calling it “resilient?” Perhaps doing so would help you see a dormant strength, or some untapped potential.

Our ability to manage change thus begins with how we see it: as opportunity, problem, or both.

Successfully managing change in the business also demands that the executive choose an appropriate pace of change for the people in it. “Knowledge, by definition, changes very fast,” Peter Drucker wrote. “And skills, by definition, change very slowly.” People, I would add, change more slowly still, if at all.

The same combination of forces that Lafley and Martin describe as driving consumer behavior (a strong value proposition plus habit-forming design) also drives employee behavior. Your people don’t want to think a lot about how they work. They want to think about it just enough to be sure they trust it; then they want to think about the work itself. If your system for staffing work is basically effective, then changing it too frequently will distract your employees and erode their ability to perform.

There is a tremendous, if largely invisible, cost to chasing management fads when your people could instead be getting their work done. Better to pursue cumulative advantage with your employees, just as if they are your customers: Change slowly through small-scale experimentation, and don’t roll out anything organization-wide until you have evidence that it works.

In short, and as Drucker put it, “change and continuity are poles rather than opposites.” Continuity is the fertile soil in which change takes root. The greater an employee’s or customer’s sense of continuity in the company’s brand, values and culture, the more receptive that employee or customer will be to change. Conversely, the harder it is for an employee or customer to find continuity, the harder it will be for any change to succeed.

It’s so easy to fall in love with change. But sometimes we need to take it slow.

The Pros and Cons of Competition Among Employees

March 20, 2017 - 9:00am

Competition between employees is an inescapable part of most people’s work lives. Whether overtly or otherwise, most companies create a dynamic in which employees compete against each other for recognition, bonuses, and promotions.  After a close look at workplace policies across corporations, banks, law firms, and tech companies, the New York Times called grueling competition the defining feature of the upper-echelon workplace.

Some research studies suggest such competition can motivate employees, make them put in more effort, and achieve results. Indeed, competition increases physiological and psychological activation, which prepares body and mind for increased effort and enables higher performance.

However, employees can achieve their results in different ways. At Wells Fargo, for example, employees delivered higher sales numbers by secretly creating millions of unauthorized bank and credit card accounts — an unethical path toward results that has very high long-term costs.

But employees can also outperform their competition through innovation. If employees compete by finding new opportunities for providing service to clients or devising a way to bring a new product to market faster, then internal competition can translate into a real competitive advantage for organizations.

What distinguishes competitions that unleash creativity from competitions that cause unethical behaviors? It depends on how the competition makes employees feel.

Some competitions elicit fear and anxiety, because they focus employees on the threat of being laid off, losing income, or being publicly humiliated. Other competitions focus employees on winning a coveted bonus or public recognition, which create arousal but make people feel anticipation and excitement.

Anxiety and excitement are very different emotional responses to a competition. More importantly, these emotions make people behave differently.

We have conducted several studies showing that when employees interpret their arousal from a competition as anxiety, they are less likely to select creative behaviors to solve problems, and more likely to be unethical. Conversely, when people interpret their arousal from a competition as excitement, they are more likely to select creative behaviors to solve problems, and less likely to be unethical.

In one study, we asked 204 employees from a variety of industries how different employment policies at their company (such as bonuses, performance management, and promotions) made them feel. We also asked them to think about the behaviors they use to distinguish themselves from other employees.

Some of the behaviors we asked about were creative, such as “Search out new technologies, processes, techniques, and/or product ideas.” Other behaviors were unethical, such as “take credit for your colleague’s work” or “agree to help your colleague but plan not to follow through.”

The results showed that when the employment policies elicited excitement, employees were significantly more likely to use creativity. When managers felt anxious about employment policies, they were significantly more likely cut corners or sabotage colleagues.

In a follow-up field experiment, we focused on how companies can influence whether a competition elicits anxiety or excitement. Although organizations could presumably influence employees’ emotional reactions by re-designing performance management systems and incentive structures, such sweeping structural changes are often hard for individual senior executives to influence. We thus focused on different ways that executives could frame the consequences of competition.

Specifically, we asked 457 managers of an international retail bank to choose a course of action in two customer service scenarios. Managers read the scenarios and then had to decide how to respond. For example, in one scenario the manager needed to:

“Present product options to an important client in response to their request for assistance. You are able to demonstrate that all options provide a ‘fair’ outcome for the client, although some options are more profitable for the bank than others. The bank is approaching year end and you need a big push in order to achieve a top ranking among your colleagues.”

Managers had to select how they would deal with the client. We gave them several options, some of which were unethical (Only present the most profitable options), others were creative (Ask the client if they know any other potential clients who would be willing to have a meeting to discuss this product/solution offering) and some of which were safe options (Present all options to the client objectively with a clear list of risks and potential benefits).

Here’s the twist: For some managers, we highlighted positive consequences that could result (“If you achieve a top ranking, you will receive a substantial bonus this month”).  For other managers we highlighted negative outcomes (“If you do not achieve a top ranking, you will lose your substantial bonus this month”). Of course, both of these mean the same thing, but one focuses managers on losing something while the other focuses on gaining something.

Results revealed that focusing on losing a bonus made managers more anxious, whereas focusing on winning a bonus made managers more excited. More importantly, managers’ excitement significantly predicted their willingness to engage in creative behaviors – even after controlling for their anxiety.  But the more anxious managers felt in response to the scenarios, the more likely they would engage in unethical behaviors (even after controlling for their excitement).

These results suggest that how a competition makes people feel plays a crucial role for how they try to win. The looming negative consequences of lagging behind can trigger anxiety and prompt people to resort to mis-selling, fraud, and lying to customers.

This is an important finding because many leaders, particularly in competitive industries, believe that it is motivating to publicly deride losers of internal tournaments. For example, the sales cultures adopted by many banks in recent years ridicule those who miss targets. One manager described his firm’s weekly “Cash or Cabbages day” where those who missed their bonuses were publically given cabbages instead of cash.

The way leaders communicate about competition can make employees experience anxiety or excitement about competing. As we have seen, leaders need to invest energy generating excitement by highlighting the potential positive consequences of competition (e.g., recognition and rewards that await outstanding performers) rather than creating anxiety by singling out and highlighting low performers.

How can leaders increase excitement? One powerful example is for leaders to encourage employees to use their “signature strengths” in a way that benefits others as well as themselves. So, when framing a competition, leaders can remind employees to use more of those skills that they are uniquely good at.  Leaders also can highlight how success will help customers and also help to achieve the organization’s purpose.

Competition between employees may be an inescapable part of many people’s work lives and can lead to improved performance. But if leaders want to ensure that competition unleashes creativity and not unethical behavior, they must resist the temptation to lead through fear.

Don’t Let Migraines Derail Your Career

March 20, 2017 - 8:05am
Photo by Karina Carvalho/Illustration by Cat Yu

I’m on a business trip, one I take almost every week. I am sitting in the back of a New York taxi hurtling forward on the FDR Drive. I’ve just landed after a bumpy shuttle flight down from Boston, and as I look down to check my phone it hits me: a wave of nausea, a punishing tightness, and a sense that I am seeing strange colors. Reflexively, I go to massage my neck and shoulders, only to be hit with a strike of pain and even stronger nausea when I do. I know this isn’t just a headache, at least not anything I’ve ever called a headache. It is a migraine.

How am I going to get through my workday?

Almost 5 million people in the U.S. experience at least one migraine attack per month, while more than 11 million people blame migraines for causing moderate to severe disability. The World Health Organization estimates that migraines effect about 30% of the global population, while 1.7–4% experience headaches more than half the time. Headache disorders, according to the WHO study, were the third-highest cause of disability. Migraines occur more often in women (18% of women compared to 6% of men), and are most common in people between the ages of 35 and 55 – prime working years. Ninety-one percent of people who have suffered from a migraine said they had to miss work or otherwise couldn’t function properly. Employers lose billions of dollars each year from lost productivity or employees taking sick days

Because I know I’m not alone in suffering from migraines that can interfere with my work, I asked Dr. Donavon Khosrow Aroni, a craniofacial (sometimes called orofacial) pain specialist at Tufts Dental School for some background information. Dr. Aroni is the doctor who finally “got it” for me and I’m really grateful to him.

Aroni emphasizes that all headaches have different causes and it’s important to source what specifically is causing yours. In the case of my New York migraine, the pain could have been triggered by any number of things: exhaust from a truck, eye strain from staring at my iPhone too long, fluorescent lights, scrolling a lot on my laptop, or even flying.

Stress can also play a major role. It used to be that every work day, at around 3:00 pm, I’d feel the headache begin to build. By 4:00 pm, I’d be useless.

The diversity of these triggers (from iPhones to car exhaust) and their unavoidability (given that I run a business and have three small children, it is unlikely that I can avoid stress, and I am quite an anxious person) make it hard for migraine sufferers to get relief. I tried weekly clinical massages, exercise, Botox. I saw a neurologist. I had my hormone levels tested. I saw an ENT specialist to check my sinuses and an orthodontist who treated me for grinding my teeth in my sleep. When that didn’t work I tried Chinese herbalists, acupuncture, energy healers, chiropractors, you name it.

After almost five years of seeking a solution, it took a skilled dentist and a complicated piece of plastic to manage my migraines, which it turns out are mostly caused by horrendous clenching of the jaw. Years and years of somatizing my stress into TMD (temporomandibular joint disorder, often just called TMJ by most people) caused a major problem and permanent trauma to my jaw joints.

While my case is more extreme than most, lots of information economy workers and smartphone addicts like me are causing ourselves pain without even knowing it. Dr. Aroni explains that because of the way many of us use our devices all day, hunch over laptops and screens, our posture is completely thrown off. Our shoulders, neck, head and jaw muscles (which are all interconnected) are under tremendous strain, and mostly, it doesn’t get released. Strain that never gets released causes muscles that lack blood flow, muscles that are constantly working, and now are hypertonic muscles. Those tight and painful hypertonic muscles can create different types of headaches, with different symptoms.

Much of this stems from a simple but harmful postural adjustment all that “device hunching” causes us: we now hold our necks slightly forward, and we look down. For every single inch forward or down we hold our head and neck, the muscles of the neck gain up to about 10 pounds in weight.

This posture and tightness affects all the neighboring anatomical structures in the face. If muscles are constantly strained without giving them a break to relax and get back into natural resting position, those tight hypertonic muscles through the jaw, neck and upper shoulder can drive up the frequency and intensify severe headaches and turn into a migraine or even a milder form of headache or face pain known as tension headache. And then it can become a vicious cycle, because pain causes us to clench muscles even more.

This can impact our daily performance, quality of life, and also affect the quality of our sleep. Dr. Aroni explains that “if we don’t get a good quality of sleep, these muscles never get a chance to relax.” The muscles stay tight and painful.

That’s why craniofacial pain specialists use a multidisciplinary approach — embracing everything from biofeedback relaxation, physical therapy, different prescriptions including muscle relaxants, sleep evaluation, and the retainer-like devices I now wear almost 24 hours a day to keep my jaw stabilized and allow the muscles in my whole head and neck to unclench and relax. “These oral orthotic devices are mostly mistaken with ordinary nightguard or mouth pieces. These are custom-fabricated devices and are mainly designed to address various musculature problems accordingly” notes Dr. Aroni.

If you suffer from migraines and seeing a craniofacial pain specialist isn’t a viable option for you, a simple technique Dr. Aroni recommends is to work on your posture. Become aware of the triggers that cause you to clench, hunch, or lean forward. Simple mindfulness techniques can help you become more aware of your body. For example: Do certain stressful moments make you clench your jaw? (For me, a major tell was how I feel when flying. My whole upper body locks up.) Stand up: Is your head tilting forward ever so slightly? Are you constantly looking down at your smartphone? The next time you’re working on your laptop or desktop, notice your neck and head posture. Are you hunched over, or are you upright?

Unclenching takes time, and there’s no miracle cure. But for the good of your professional self as well as your health and happiness, start now.

The Busier You Are, the More You Need Quiet Time

March 17, 2017 - 1:00pm

In a recent interview with Vox’s Ezra Klein, journalist and author Ta-Nehisi Coates argued that serious thinkers and writers should get off Twitter.

It wasn’t a critique of the 140-character medium or even the quality of the social media discourse in the age of fake news.

It was a call to get beyond the noise.

For Coates, generating good ideas and quality work products requires something all too rare in modern life: quiet.

He’s in good company.  Author JK Rowling, biographer Walter Isaacson, and psychiatrist Carl Jung have all had disciplined practices for managing the information flow and cultivating periods of deep silence. Ray Dalio, Bill George, California Governor Jerry Brown, and Ohio Congressman Tim Ryan have also described structured periods of silence as important factors in their success.

Recent studies are showing that taking time for silence restores the nervous system, helps sustain energy, and conditions our minds to be more adaptive and responsive to the complex environments in which so many of us now live, work, and lead. Duke Medical School’s Imke Kirste recently found that silence is associated with the development of new cells in the hippocampus, the key brain region associated with learning and memory. Physician Luciano Bernardi found that two-minutes of silence inserted between musical pieces proved more stabilizing to cardiovascular and respiratory systems than even the music categorized as “relaxing.” And a 2013 study in the Journal of Environmental Psychology, based on a survey of 43,000 workers, concluded that the disadvantages of noise and distraction associated with open office plans outweighed anticipated, but still unproven, benefits like increasing morale and productivity boosts from unplanned interactions.

But cultivating silence isn’t just about getting respite from the distractions of office chatter or tweets.  Real sustained silence, the kind that facilitates clear and creative thinking, quiets inner chatter as well as outer.

This kind of silence is about resting the mental reflexes that habitually protect a reputation or promote a point of view. It’s about taking a temporary break from one of life’s most basic responsibilities: Having to think of what to say.

Cultivating silence, as Hal Gregersen writes in a recent HBR article, “increase[s] your chances of encountering novel ideas and information and discerning weak signals.” When we’re constantly fixated on the verbal agenda—what to say next, what to write next, what to tweet next—it’s tough to make room for truly different perspectives or radically new ideas. It’s hard to drop into deeper modes of listening and attention. And it’s in those deeper modes of attention that truly novel ideas are found.

Even incredibly busy people can cultivate periods of sustained quiet time. Here are four practical ideas:

1) Punctuate meetings with five minutes of quiet time. If you’re able to close the office door, retreat to a park bench, or find another quiet hideaway, it’s possible to hit reset by engaging in a silent practice of meditation or reflection.

2) Take a silent afternoon in nature. You need not be a rugged outdoors type to ditch the phone and go for a simple two-or-three-hour jaunt in nature. In our own experience and those of many of our clients, immersion in nature can be the clearest option for improving creative thinking capacities. Henry David Thoreau went to the woods for a reason.

3) Go on a media fast. Turn off your email for several hours or even a full day, or try “fasting” from news and entertainment. While there may still be plenty of noise around—family, conversation, city sounds—you can enjoy real benefits by resting the parts of your mind associated with unending work obligations and tracking social media or current events.

4) Take the plunge and try a meditation retreat:  Even a short retreat is arguably the most straightforward way to turn toward deeper listening and awaken intuition. The journalist Andrew Sullivan recently described his experience at a silent retreat as “the ultimate detox.” As he put it: “My breathing slowed. My brain settled…It was if my brain were moving away from the abstract and the distant toward the tangible and the near.”

The world is getting louder.  But silence is still accessible—it just takes commitment and creativity to cultivate it.

Will the Gig Economy Make the Office Obsolete?

March 17, 2017 - 12:00pm

The gig economy, where independent consultants, contractors, and freelancers create portfolios of work in lieu of one full-time job, is transforming the way we work by disconnecting work from an office. In the traditional jobs economy, employers often require employee attendance in the office five days a week, eight hours a day. Gig economy employers, in contrast, focus entirely on performance, not attendance in the office. It doesn’t matter if the idea for how to solve a problem or the insight to craft a new strategy is generated in the middle of the night, or while showering, or in yoga class. The gig economy employer values the quality of worker results, not the process by which they are created.

The most impactful lesson that traditional companies can learn from the gig economy is to judge all workers, including employees, on their results, not on when and where they do their work.

Not one study suggests that working in an office eight hours a day, five days a week maximizes employee productivity, satisfaction, or performance. In fact, any data that exists on work in an office reveals that most employees aren’t engaged, waste a lot of time in the office not working, and that employee underperformance persists despite the omnipresence of management. Even worse, the direct costs of maintaining the traditional office-based workplace are high. CBRE estimates that the typical company in the U.S. spends upward of $12,000 per employee per year for office space. It’s hard to find a return-on-investment case for office space, and much harder still to find any company that makes a compelling one.

Focusing on employee time and location made sense when most jobs were time and place dependent. Factory workers, manual laborers, and workers in retail stores, restaurants, or hospitals have to be at their place of work at specific times to be productive. Knowledge workers do not. Sitting in an office cube or in a conference room attending endless, poorly-run meetings is unlikely to be how your company’s strategic or product issues are best solved. Nor is it likely to be the most effective way to create your marketing message, manage your back office, or maintain secure information systems. Our greatest insights and most productive work are often generated outside the constraints of the corporate workweek and the cube.

Study after study after study demonstrate that independent, remote workers are more productive, satisfied, and engaged than their office-bound colleagues. Recent surveys of 8,000 workers by McKinsey’s Global Institute and nearly 900 independent workers by Future Workplace and Field Nation find that those workers, freed from the constraints of office life, report higher levels of satisfaction and greater productivity. These results aren’t surprising since remote work eliminates the wasted time of commuting, the stress of constant exposure to office politics, and the death of the workday by a thousand paper cuts of interruptions and meetings. Yet somehow, despite evidence of the many benefits of independent flexible work, our office-based, five-days-a-week, time-in-the-cube approach to work still persists at many companies.

Why is that? Managers and human resource executives at traditional office-based firms respond to this question with narratives and anecdotes about trust, collaboration, and team-building, but offer nothing in the way of evidence – even from their own companies – to support their stories. The evidence that does exist suggests that trust and effective teams are built primarily through interpersonal behavior and communication, not constant proximity from working in the same office space.

At least one reason to maintain an office and require employees to work in it is that most managers enjoy working at a company in which employees are managed by time and place. After all, it’s pretty easy to see who is at their desk between 9 and 5. It’s much harder to develop, measure, and evaluate the specific value and results that each employee produces. Managers will have to work a lot harder under a system that focuses on tracking performance, instead of time in an office chair.

There is also a middle ground emerging between office-based and remote work. New studies show that workers who seek the structure of an office-based environment and the camaraderie of colleagues are much happier in co-working spaces than either a traditional office or working at home. Co-working options offer workers the best of both worlds – the control, autonomy, and scheduling flexibility of remote work combined with optional access to the structure and community of an office, if and when the worker wants it. For companies, co-working spaces turn commercial real estate into a variable expense item available at a lower cost.

The rewards are great for companies that prioritize performance over attendance in the office: more productive, efficient, and satisfied workers, management focused on results and deliverables instead of face time, a healthier corporate culture based more explicitly on merit, and lower, more variable real estate and facility costs.

Labor is the most expensive and valuable resource at most firms. Managing this resource by time and place is a crude, empirically unproven, inefficient, and costly approach. The biggest lessons that companies can learn from the gig economy are to separate work from the office, and to measure employees based on what they produce, deliver and solve, not the hours they spend in the office. Put simply, companies need to stop measuring what doesn’t matter, and start measuring what does.

Rolling Back Fuel Efficiency Is a Bad Deal for Everyone — Including U.S. Carmakers

March 17, 2017 - 11:15am

The CEO of a large industrial company recently described the Trump administration as “the most pro-business since the Founding Fathers.” It’s a popular perception in the business community, with or without the hyperbole, and the stock market is reacting accordingly. While some might be enthused by the potential for corporate tax reform or a (promised) $1 trillion infrastructure investment plan, it’s more likely they’re referring to the historic rollback of regulations in the works across many sectors, from fossil fuels to mining, guns, and finance. It’s taken as an article of faith that this is good for business. But slashing our health, environmental, and societal protections is only “pro-business” in the narrowest of terms, and only in the short run.

Sure, regulations can be excessive and unwieldy. In many areas of business, they’ve grown and metastasized. They do cost real money and can slow innovation. But they’re generally there for a critical reason. Well-designed guidelines for business protect our shared resources and people (and ecosystems) who can’t defend themselves.

The idea that these protections are anti-business stems from a huge misperception that business operates outside of a world that needs clean air and water or a stable climate to function. Or that it can thrive without a healthy, educated population, with access to safe food and drugs. William Ruckelhaus, the former head of the EPA under GOP presidents Nixon and Reagan recently pointed out that “a strong and credible regulatory regime is essential to the smooth functioning of our economy.”

Let’s explore the impacts of one of the most prominent examples of regulatory retrenchment in the works: the rollback of auto fuel efficiency standards. In a speech in Detroit on Wednesday, President Trump indicated he would – as the automakers had asked – have the EPA and U.S. Department of Transportation review the previously agreed-to fuel efficiency marks. The process will take some time, but it’s clear that they will weaken the rule that automakers’ fleets hit a target of 54.5 miles per gallon by 2025. As Trump put it, “the assault on the American auto industry is over.”

A weakening of efficiency standards may save the automakers some money in the short-run, and the press is certainly calling it a “victory” for the auto giants. But it likely won’t be in the long run. Specifically, it will diminish their competitiveness, as the rest of the world has continued to raise its standards — China, Japan, and the EU all have equivalent or higher targets. As the majority of the world’s car markets continue to demand more efficient vehicles, how does it help U.S. automakers to slow down their progress?

It’s also a bad deal for everybody else. What about the suppliers that make parts for more efficient or electric vehicles? And industries beyond the auto value chain, where most companies want to see continued advancement in fuel efficiency? Logistics giants like FedEx and UPS spend literally billions of dollars on fuel, so they care deeply about using new technologies and improving fleet efficiency. In fact, the entire economy depends on increasingly efficient movement of goods and people. CEOs from some of the biggest food businesses have spoken out about threats to their supply chains from volatile energy prices and a changing climate (brought on, in part, by auto emissions). And when it comes to consumers, they spend less on gas in more efficient vehicles, saving money while also living better with good air quality. All told, EPA analysis pegs the net benefits to society of the higher standards at $100 billion.

Ultimately, the current emissions standards, which the automakers publicly signed onto several years ago, would produce the single largest reduction in greenhouse gases in history. This matters to all businesses, including carmakers, and for reasons they may not fully realize at the moment. To be blunt: People living in places that are regularly flooded may not buy a lot of cars. If climate change destabilizes the world, the economy and business will sink with it.

The Biases That Keep Good R&D Projects from Getting Funded

March 17, 2017 - 11:00am

Theodora chairs the R&D selection panel at a global professional service firm. She recently had to lead the committee in deciding whether to fund a proposal from an up-and-coming engineer and one of the company’s business leaders. The project focused on how to design rooms in intensive care units to minimize sleep disruption and facilitate healing. Gerhard, from the infrastructure group in Munich, started the discussion: “This project is just too out there. It is not really what we do.” Frank, an expert in water engineering from the consulting unit in Edinburgh, said, “Funding should be sought for client work. This is not going to generate much benefit for the organization.”

But Julie from the London office, who has focused on designing public buildings, countered, “Sure, it is a bit off topic, but the area was mentioned in our R&D strategy last year. My office is getting increasingly involved in design work for hospitals.” Gerhard noticed that the R&D budget was nearly spent for the year and suggested that the project was “a nice-to-have, rather than a need-to-have.” Theodora compromised: “Let’s fund the project at 30%. Is that OK?” The panel members nodded and moved on to the next proposal.

This story is fictional, but it is based on our observations of managers deciding whether to fund new projects. We set out to explore how organizations decide to invest in different innovations. There is little data on this, because these decisions tend to be made behind closed doors. But in studying a large professional service firm with offices in 37 countries, we were able to get access to all of the R&D project proposals submitted by its staff, including information about which projects received funding.

In this company – like in many other large organizations – a panel of different managers and engineers comes together to discuss what they think is worth funding. We studied 556 different project applications, and conducted interviews and observations inside the company. Our findings, recently published in the Academy of Management Journal, are that managers don’t always carefully weigh the pros and cons of each project and that biases can creep into the decision-making process.

The sweet spot of novelty

R&D selection is not always based on objective estimates of a project’s costs and returns. We found that funding decisions in this organization were influenced by how novel a project seemed. Proposals that were deemed either too novel or not novel enough got little or no funding. In other words, there is a sweet spot of novelty that makes R&D committees more likely to fund a project. (This has been found in other contexts too, such as academia.)

If a project strayed too far from the company’s main activities, or if it seemed too difficult to commercialize, it wasn’t funded. If the idea was considered to be too incremental, such as one that aimed to improve existing processes, it met the same fate. However, projects that found a new way to serve increasing client demand, perhaps by stretching existing capabilities, fell into the sweet spot of novelty and received funding.

 

The biases that affect panel members

Projects aren’t simply evaluated on merit. We also found that three characteristics of the R&D panel can influence funding decisions:

Workload: When the selection panel has to evaluate many proposals in one meeting, they are less likely to fund novel projects that lie beyond the sweet spot. This is likely because assessing new ideas takes more time and effort. For instance, one panel we studied had to assess more than 60 project proposals in a single meeting. But when panelists only had to evaluate 30 projects, they funded three times as many highly novel projects.

Diversity:  We measured expertise diversity, or whether people have expertise in multiple areas. The more diverse the panel is, in terms of expertise, the more likely it is to provide funding to a very novel project. Diversity increases the likelihood that the members of the selection panel will look at multiple facets of a proposed project. For example, one of the panels we observed had selectors with backgrounds as diverse as acoustics, structural engineering, sustainable building design, and fire engineering. This panel could assess the value of highly novel R&D proposals that spanned a broad range of engineering disciplines; they were better able to see their potential applications for an equally wide range of clients.

Location: The panel’s willingness to accept novelty decreases when the project applicant is in the same location as one of the panel members. There are at least two reasons that can explain this. First, to avoid being accused of favoritism, members of the selection panel might put proposals from people sharing the same location under more scrutiny, causing them to underestimate the benefits and to overestimate the costs of novelty. Second, panel members shy away from highly novel projects if they’re being proposed by people in their location, because more novel projects have a higher risk of failure and that could potentially harm the panel member’s reputation.

Overcoming biases against innovation

Our findings raise questions about the current practices companies use to select and fund R&D projects. The process in the company we studied is not unique. Many organizations use structured processes for evaluating their innovation projects and deciding which to fund and which to discontinue. But these practices may be limiting the number of groundbreaking ideas that ultimately get executed. History is rife with examples of organizations that have been exposed to novel ideas but failed to invest in them, as well as organizations that over-invested in ideas after failing to evaluate them properly.

The first step to alleviating these biases is to be aware of them, but there are also some actions managers can take to eliminate them. Overcoming some of these biases against novelty can help them better evaluate and spot potentially game-changing ideas.

To avoid the panel workload bias that prevents managers from seeking novelty, companies could limit the number of projects the selection committee has to screen at once. One strategy could involve “binning” projects, which means designating windows for people to submit proposals and then convening a selection panel when a “bin” is full, rather than at a set date or time of year. This way, sufficient managerial attention could be devoted to each project under evaluation.

Creating panels with a more diverse range of expertise can also help organizations look at projects from multiple angles. More diversity can help organizations appreciate new ideas that could turn into big innovations. Research has shown that diversity helps teams come up with great ideas, but diversity may also help people detect and decide to fund novel ideas.

To increase diversity of expertise, companies can involve external experts in their selection panels. For example, almost 10 years ago, GSK set up interdisciplinary Drug Performance Units to discover new medicines and develop them for early stage clinical trials. Each DPU developed a business plan with milestones to be reached within a specific period. A review panel, consisting of senior R&D managers in the company, as well as external experts with relevant expertise, periodically assessed their performance. In 2012, the panel was able to help GSK increase funding for six units that held promise, decrease funding for five units that weren’t yet meeting their targets, and eliminate three of the units that failed to deliver.

Of course, while novelty is important for finding and developing groundbreaking opportunities, managers should seek to balance their firms’ R&D portfolio, so that it includes projects with high and low levels of novelty. Less novel projects are usually easier to implement, less risky, and they generate more immediate benefits. At the same time, many companies under-invest in novel projects simply because managers err on the safe side. This is when it becomes important to think about how projects are being evaluated.

Decisions about R&D projects are signals of an organization’s strategy and its future. To make innovation a part of that, managers need to be aware of these biases and of what can be done to avoid them.

Sales Reps, Stop Asking Leading Questions

March 17, 2017 - 10:00am

Most executives recognize a need for their sales team to act as consultants and sell “solutions.”  But many CEOs would be shocked at how poorly their sales teams execute on the strategy of consultative selling.  I recently had a conversation about this with the director of purchasing at one of my client companies who told me: “I can always tell when a rep has been through sales training, because instead of launching in to a pitch, they launch into a list of questions.” Too often, sales teams trying to “do” consultative selling don’t move beyond the rudimentary application of solution-sales principles: “Get the team to ask questions, and then match our capabilities to what the client has said.” So the sales force sits down and makes a list of questions designed to extract information from their prospective clients, in a kind of interrogation. I’ve sat through many sales calls like this, and trust me it isn’t pretty.

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To maximize the power of consultative selling, we have to move beyond a simplistic view of solution selling. It’s not about grilling the buyer but rather engaging in a give-and-take as the seller and buyer explore the client’s priorities, examine what is in the business’s best interests, and evaluate the seller’s solutions. Asking questions is part of this engagement process, but there’s a right way to do it. Here are some important pitfalls to avoid:

Avoid checklist-style questioning. A few years ago I was working with a financial services firm that hadn’t seen much success in adopting a solution sales approach. When I watched a few meetings it was easy to see why. The sellers I traveled with did a decent job of asking questions and getting answers, but it felt more to me (and to the prospects, based on their responses and disposition) like they were going through a checklist. As a result, their sales calls felt mechanical and staid. While they gleaned some good information about clients’ needs, allowing them to dovetail the products they were selling into the conversation, there was little buy-in from the prospects they were talking to. There was no sense of shared understanding or that the client had confidence that the seller would be able to help them grow their business. I’ve observed this scenario with both beginner and experienced sellers, as well as senior partners in Big Four consulting firms: when they focus solely on asking questions, they rarely get the information they really need.

Avoid asking leading questions. Nothing falls flatter in a sales call than a question that is clearly self-interested, or makes the seller the master of the obvious. I joke about this in speeches using the example: “If I could show you something interesting, would you be interested?” The kind of questions sales professionals are taught to ask typically focus on drawing attention to client problems, pain points, and sources of dissatisfaction, so the client will then view the seller’s offerings as a solution. It can be useful to explore the buyer’s challenges, but when a seller asks a ridiculous question with an obvious answer such as, “What’s the implication of data center failure?” it can backfire. It’s counterproductive to ask patently manipulative questions because buyers immediately put up their defenses and will be skeptical of the seller’s intentions – and intelligence. Instead, ask questions that demonstrate genuine curiosity, empathy, and a desire to understand. Try to go deeper than uncovering a list of problems to be solved: ask what the buyer hopes to achieve with your product or service, and why this is a priority now.

Avoid negative conversational behaviors. When sellers are myopically focused on persuading a prospect or winning a piece of business, it creates a negative vibe in the relationship. In fact, when we look at what happens in the brain during this kind of one-sided selling interaction, we find that buyers may experience that negativity at a chemical level. In her article, “The Neurochemistry of Positive Conversations,” Judith Glaser highlights specific behaviors that contribute to negative chemical, or “cortisol-producing,” and positive chemical “oxytocin-producing” reactions in others. Among the behaviors that create significant negative impacts are being focused on convincing others and behaving like others don’t understand. Precisely the stereotypical behaviors that give sellers a bad name: being too aggressive, not listening, and going on and on about their offerings. Conversely, the behaviors that create a positive chemical impact include being concerned about others, stimulating discussions with genuine curiosity, and painting a picture of mutual success. Masters of the consultative sales approach apply these conversational techniques to their discussions with prospects and clients to create a collaborative dynamic with positive outcomes.

The consultative sales approach may seem simple, but it isn’t easy to execute well. Sales people cannot just go to training for a few days and gain mastery of this skill set, any more than an accountant going to a week-long course can emerge with the skills of a CFO.  Consultative selling is a fundamental business strategy centered on creating value through insight and perspective that paves the way toward long-term relationships and genuine solutions for your customers. When sellers do it right, that strategy comes to life.

When Joking with Your Employees Leads to Bad Behavior

March 17, 2017 - 9:00am

A workplace filled with laughter is generally assumed to be a good thing. Several studies have found that good humor doesn’t just make people feel better, or make the work day seem to go faster; it actually delivers bottom line benefits. Employees who laugh together have been shown to be more creative, more collaborative and as a result more productive and profitable. Likewise, humor has also been shown to boost status — executives who incorporate laughter and jokes in their work (as long as they are appropriate in nature) garner more support for their initiatives, are better at motivating employees, make more money, and get promoted more quickly.

Leaders set the tone for the entire workplace. Employees will observe and interpret what a leader does or says, and will adjust their own behavior accordingly. That’s why it’s so important for leaders to understand the right — and wrong — ways to use humor in the workplace, so the organization as a whole benefits.

My colleagues (Michael Christian, Zhenyu Liao, Jared Nai) and I wanted to understand the impact that a leader’s jokes can have on the behaviors and actions of his or her employees. In a new research paper forthcoming in the Academy of Management Journal, we found that a leader’s use of humor can be a mixed blessing, with sometimes surprising effects on organizational behavior. Indeed, we found that humor can lead to unintended negative behavior among employees.

We collected data from employees in China and the U.S. over three different points in time, each separated by roughly two weeks. In the first survey, we asked employees to report how humorous their leaders are in the workplace. Then, in the second survey, we asked employees to report their relationships with their leaders as well as their perceptions of how acceptable norm violations (i.e. doing something that goes against generally accepted behaviors) are at their workplace. In the final survey, we measured participants’ self-reported work engagement and behaviors.

As we analyzed the data, we applied the concept of benign violation theory (BVT), first developed by behavioral scientist Peter McGraw at the University of Colorado, Boulder. McGraw and colleagues at the Humor Research Lab (HuRL) came up with BVT as a way of answering an age-old question: what makes things funny?

In a nutshell, the theory says that there are three factors for a situation to be humorous: 1) it is seen as a violation (in other words, it goes against accepted norms of the way things should be); 2) it is benign (it isn’t directly threatening); and 3) these factors are occurring simultaneously (it won’t be funny if they happen separately).

Placing this concept into the workplace context, we merged it with another theory, known as social information processing. This focuses on how employees interpret their leaders’ actions as cues for how to behave in the workplace, therefore determining where the boundaries lie in terms of which kinds of behaviors are considered to be “acceptable.”

By combining these theories, we looked at how a leader’s expression of humor signaled the acceptability of norm violations in the workplace. If that acceptability was seen to be high, for example, it could lead to followers engaging in increasingly deviant behaviors, defined in our work as things like being chronically absent from work, ignoring a manager’s instructions, sharing confidential information, falsifying financial claims, or drinking alcohol on the job.

Our analysis found that humor can produce a broad range of effects on organizational behavior. On the one hand, it can improve how team members view their social relationship with their leaders — something we refer to as leader-member exchanges (LMX) — which in turn leads to better work engagement among employees, meaning they become more attached to their jobs, more hard working, more enthusiastic, and more productive. However, some forms of humor on the part of a leader can also act as a powerful signal to team members that it’s OK to break the rules in negative ways.

Our study found that an important factor was the degree to which leaders used aggressive humor, such as teasing staff members or telling dirty jokes. Here our results showed that leaders who are seen as pushing this more risky form of humor were more likely to pave the way for employees to behave badly, and least likely to build a sense of work engagement on their teams.

Our findings shouldn’t be seen as a message to stop telling jokes at work, or even a reason to put humor coaches out of a job. The evidence remains clear that humor is an important tool for bosses to successfully motivate their teams to achieve greater performance. Nonetheless, while humor can be an effective organizational tool, our study reinforces the message that leaders must also be mindful of their status as role models. Due to their position, their actions serve as social cues for their employees, resulting in both positive and negative consequences. Managers should be careful about how they portray themselves to their teams, increasing their self-monitoring skills and becoming more aware of what types of humor are appropriate in different situations.

A joke may start out as “just a joke” — but for managers in particular, its impact can have far-reaching consequences.

Our Brains Love New Stuff, and It’s Killing the Planet

March 17, 2017 - 8:05am

Your brain contains almost 100 billion neurons, each of which, on average, is connected to about 10,000 other neurons. The 1.5 kg marvel we inherited from our ancestors has unparalleled computational power and analytic skills. These have been shaped over hundreds of millions of years by the forces of evolution to favor behaviors that, in the distant past, increased the chances of survival and reproduction.

But although these forces created a brain that can solve highly complex problems, create art, and feel compassion, our clever brains let us down in one key respect: greenhouse gases and other byproducts of our very living now pose an accelerating threat to the future of the planet and its diverse forms of interconnected life, including our own.

How has our amazing brain failed us, in this, perhaps our greatest challenge?

As you read this, thousands of scientists, engineers, policy makers, and advocates around the world are working with all the brainpower they can muster to try to solve this environmental crisis with technological and social approaches. But a number of scientists believe this same inherited neural equipment undermines these efforts because some basic aspects of our brains are designed for a different world than the one in which we find ourselves today. While many behavior experts have focused on our inability to perceive climate change as an immediate threat, others have begun to focus on the major consequences of our excessive consumption. One critical network that may be partly responsible for the latter is the brain’s reward system.

Unlike what its name may connote, your brain’s reward system is not designed to make you feel good. Rather, it is designed to help you learn – specifically, to “wire in” associations that make behaviors more likely to occur that also promote survival and reproduction – or did in the world before climate change. Advances in neuroscience over the past several decades have pushed our understanding of how this amazing system works far beyond the old “reptilian” concept, when it was thought to deal primarily with “primitive” drives. Instead, the reward system is now recognized as a complex and finely engineered set of networks located right smack in the middle of your brain, with connections to nearly all other networks, thus affording a “finger on the pulse” of everything that happens to you second to second, filtered through the vast storeroom of your past experience. While the average neuron is connected to 10,000 other cells, parts of the reward system have cells that make 50 times as many connections each.

The reward system was shaped by what promoted survival during the vast eons of human evolutionary history. For instance, because in general our brains evolved during times when food was scarce, and having a desire to eat when food was available might mean the difference between survival or demise, most humans find food sufficiently rewarding that they easily consume more than their immediate, short-term caloric needs require – in case you might not eat again for two days. That’s why if you’re sitting in a conference room staring at a box of donuts, you may find it really hard to resist eating a donut. For most of us it takes a conscious effort to park the car far away from our destination, bypassing that brief surge of satisfaction when we find the closest empty space in the parking lot – because conserving energy meant survival.

Our brains also evolved to be rewarded by novelty, a tendency exploited by product designers and advertisers. This preference was preserved in our genetic heritage because it gave us a survival advantage; without it, we wouldn’t have explored new things or been able to invent novel solutions to the problems posed by constantly changing circumstances.

This helps explain why when we can consume, we do, even when we don’t need to. As one example, typical Americans throw away 40% of their food – over 10 million tons of it per year. We similarly discard immense volumes of all kinds of “stuff” that we use only transiently and replace. All of this consumption and waste contributes to greenhouse gas emissions and climate change. Those of us living in the high income parts of the world contribute many times larger per capita volumes of greenhouse gas to the atmosphere compared to people living in lower income countries. Even people passionate about saving the environment struggle with this. Why don’t we just stop?

One answer may lie in how our reward system works. Decades of research in fields as diverse as single cell physiology, behavioral economics, and advanced imaging have shown that the mesolimbic reward network of humans, like that of crayfish and rats, responds most strongly to small, variable, intermittent, unpredictable rewards. Miniscule, constantly alerting pulses of dopamine – millions of times faster and more numerous than your tweets and Facebook feeds – help weight your actions in directions that helped with survival over millions of years of prehistory. Yes, we are all different, based on our genes and life experiences, and some people consume far less than others – Europeans, for example, waste less food than Americans – but we share the tendency to find certain choices more rewarding from the dopamine point of view.

For instance, for most of us, the short-term reward your brain provides for eating a piece of chocolate is stronger than the “I’m a person with great self-control” reward you get from passing it up. The great feeling you get from seeing your new living room furniture fades over time, and so in six months you’re ready for a new remodeling project. Throughout human history, it has been useful to have mental rewards that come and go so fleetingly, so that we can learn new associations – a key to our success in populating all corners of the world and adapting to myriad cultures. As a general rule, your brain tweaks you to want more, more, more – indeed, more than those around you – both of “stuff” and of stimulation and novelty – because that helped you survive in the distant past of brain evolution. But at its extreme, this leads to addiction – to substances, gambling, internet games, even shopping.

Although our brains have inherited tendencies that push our behaviors in certain directions, each brain is different – otherwise we would all react the same way to everything, and like and dislike the same things. It’s also true that your brain reward system is changeable, and that learned facts can alter the equation for something that was rewarding to becoming aversive – ex-smokers providing one example. But relying on information alone to tweak the reward system is a difficult process, slow, and unreliable (otherwise, losing weight would be a snap).

Instead, organizations and companies that want to promote more sustainable consumption have taken a different approach: rather than trying to change the reward system’s equation with factual information, which has been shown to have limited success, try working with the things we evolved to find rewarding, providing alternative choices to help draw people towards sustainable behavior. In essence, this approach uses the environmental side of the reward as “frosting,” but the choice is framed as a pitch to something most of us already find rewarding – the “cake” itself. Local food often does taste better – and it has a lower carbon footprint. Want new furniture?  Making pre-owned furniture “chic” gets you the “something novel” reward, plus the satisfaction and creativity of the hunt, plus you did something better for the planet – triple reward!  If the travel agent pitched the vacation spot in the next state as luxurious, relaxing, exclusive – and a great deal, plus you don’t have the expense (or environmental cost) of a long air flight, you might feel smug about getting such a terrific package – not because you’re a good person (smaller reward) but because you’re in the know about something really wonderful (bigger reward).  Most people who are drawn to Teslas think they’re cool, sleek, and have great performance; the ecologic side is frosting.

Many of us want to make environmentally conscious choices or incorporate these into our organizational goals but struggle to do so.  More success may be found by hitching the conservation benefit to something people’s reward system evolved to want – even if those people don’t necessarily prioritize sustainability. Things that work better, have social cachet, or make life more satisfying in some tangible way are more likely to find acceptance and a market.

The good news is that our brains also tend to find problem-solving gratifying; if people who embrace environmental goals treat our evolutionary desires as a puzzle to solve, perhaps we’ll get better at working with them to promote sustainability. It’s a goal worth pursuing; estimates are that 40% of our per capita greenhouse gas emissions come from choices under our individual control. Perhaps a bigger challenge is figuring out ways to make the rewards of work within businesses and institutions – praise, advancement, salary, satisfaction – also align with environmental goals – to start working on that other 60%.

Break Out of Your Managerial Bubble

March 16, 2017 - 5:48pm

Hal Gregersen, executive director of the MIT Leadership Center at Sloan School of Management, says too many CEOs and executives are in a bubble, one that shields them from the reality of what’s happening in the world and in their businesses. The higher you rise, the worse it gets. Gregersen discusses practical steps top managers can make to ask better questions, improve the flow of information, and more clearly see what matters. His article “Bursting the CEO Bubble” is in the March-April 2017 issue of Harvard Business Review.

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Blockchain Will Help Us Prove Our Identities in a Digital World

March 16, 2017 - 1:00pm

“Who are you?” may well be the world’s most frequently asked question. On a website, in a nightclub, at an airport, or in front of a bank counter, everyone wants us to prove that we are who we say we are.

But 2.4 billion poor people worldwide, about 1.5 billion of whom are over the age of 14, can’t answer that question to the satisfaction of authorities. While they certainly know who they are, they are often excluded from property ownership, free movement, and social protection simply because they can’t prove their identity. They are more exposed to corruption and crime, including people trafficking and slavery. (Insightfully, the United Nations is aiming to change this, with UN Sustainable Development Goal #16, Peace, Justice, and Strong Institutions, aiming to “provide legal identity to all, including birth registration, by 2030.”)

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Globalization and population growth increase the pressure to find cost-effective solutions to prove identity. Recent advances in biometrics, from iris scanning to DNA analysis and voice pattern recognition, are likely to play an important technical role in “fixing” this, yet identity is not necessarily something that is fixed. Our identities are records of our past behavior, and they change over time. Our identities can also vary depending on who is doing the identifying. For example, the tax office probably has little interest in your school report cards, but may care enormously about the days you spent out of the country as an adult.

Proof of identity can be a problem for rich and poor alike. For the rich, regulations around anti-money laundering, know-your-customer, and ultimate beneficial ownership increase legal and regulatory costs and hassles. Ninety percent of businesses responding to the International Chamber of Commerce’s 2016 Global Survey on Trade Finance pointed to anti-money laundering as the most significant impediment to trade.

For the poor, Hernando de Soto, the Peruvian economist famous for his work on the informal economy, observes: “Without an integrated formal property system, a modern market economy is inconceivable.” Thus a modern market economy is inconceivable without proper identification, because there are no proven holders of property rights.

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.

While hassles for the wealthy are a world away from the daily toils of the “great undocumented,” the solution to their problems may be the same: mutual distributed ledgers (MDLs), or blockchain technology. MDLs are unalterable registers that allow groups of people to validate, record, and track transactions across a network of decentralized computer systems. The computers follow a common protocol that allows individuals to add new transactions and distribute them using peer-to-peer architecture. MDLs are multiorganizational databases with a super audit trail. Whereas a central database can lead to a natural monopoly that everyone has to use, the fact that MDLs are mutual — i.e., held in common — means they are hard to exploit as natural monopolies. You can’t charge me for my copy of the ledger, because you don’t own it. No one does.

A common question after two decades of MDLs is “What is the killer app?” Since the 2009 launch of bitcoin, the short and somewhat shaky answer has been cryptocurrencies. Bitcoin has had its ups and downs. It stirs up economic controversy with its community’s libertarian “new currency” agenda and high price volatility. Bitcoin also stirs up social controversy as rumors of heavy criminal trading of drugs and guns rightly attracts the attention of law enforcement agencies. Yet this decentralized cryptocurrency and its underlying MDL technology works, and some regulators grudgingly allow financial firms to use it.

Now a more fundamental killer app for MDLs is emerging: the secure storage and transmission of digitally signed documents with a super audit trail. These immutable document exchange networks are emerging in trade finance, shipping, and insurance, where everyone has a big problem validating the identity of people and assets. An identity document exchange typically has three parties: (1) the subject, which is an individual or an asset, (2) the certifier, which is usually an organization that notarizes documents, like a government agency, an accounting firm, or a credit referencing agency, and (3) the inquisitor, which is an organization conducting know-your-customer/anti-money laundering (KYC/AML) checks on the subject.

Typically, there are two distinct MDLs: a content ledger holding the individually encrypted documents, and a transaction ledger holding encryption key access on a series of “key rings,” which are folders for documents such as identity, health, or academic qualifications. The subject can give the identity certifier permission to put digitally certified documents on the subject’s key rings. For example, a law firm might provide digitally signed copies of documents it has notarized to the subject for them to keep and use. A government might provide each of us with a digitally signed copy of our driving license for us to control. Certifiers have no further access to the data, but inquisitors rely on the data being stamped by a trusted third party, much as a notary public notarizes a physical document.

Insight Center

The subject gives controlled key usage to inquisitors to inspect the documents with smart contracts, pieces of code recorded on the MDL. The network can restrict the number or timing of inquisitions and record them all for the subject. Third parties such as banks, insurers, or governments can get permission to access documents based on the permissions framework coded into the MDL. Commercial certifiers, such as accountants, lawyers, or notaries, may provide indemnities, such as insurance of validity, to inquisitors for a fee.

Tellingly, since 2007 Estonia has been operating a universal national digital identity scheme using blockchain. All government data about individuals is stored on a distributed ledger that individuals control and can pass to others. This digital identity system powers a low-paperwork society using digital signatures. The scheme is so useful that nonnationals use it for their personal digital signatures elsewhere in Europe.

Both high-net-worth and low-net-worth customers expect to have a sensible, inexpensive, global way to prove their identity, whether it is for payments, credit, government records, health records, or academic qualifications. MDL technology is ideally suited for immutable identity document exchange networks, and there are many initiatives under way to realize their potential. Empowering individuals to store, update, and manage access to their data seems rather obvious, including exercising their “right to be forgotten” by canceling their keys.

Proving your identity today is an expensive process. Each identity document validation takes a lot of time and uses low-tech paperwork. People would like to get more use from expensively validated identity documents. One way is to increase the number of uses. For example, in Estonia, banks realized that account access could be given on the national ID as well as a bank card. The rise of many-use IDs could in turn drive consolidation toward a few competitive global systems.

But this is no panacea. The ultimate question surrounding an immutable identity ledger is this: Will it become a lifeline for people, or a burden? Using ledgers that never lose data could materially alter the way society views identity, privacy, and security. Bureaucratic slips such as a mistyped name can be corrected, but the slip can never be forgotten. Behaviors will change, and societal conventions will alter as a result. For example, we may be more tolerant of other people’s histories when they can see our own unpaid fines or misdemeanors. Perhaps we will be more intrusive with important issues such as lying about academic qualifications, and more forgiving with lighter matters such as a few mediocre grades.

And think of our permanent legacies. Perhaps we will act more responsibly if our legacy is indelible. For example, we might choose to donate our health data to research through smart contracts triggered by our death certificates. When our identities are forever etched in immutable stone, “Don’t you forget about me” may prove to be a more enduring tune than we ever could have imagined.

A 5-Step Process to Get More Out of Your Organization’s Data

March 16, 2017 - 12:04pm

“My best employees are leaving,” Daniel told me, “and I can’t seem to figure out why.”

Daniel (not his real name) was a VP human resource manager at a Fortune 500 company. I asked him whether he had collected any data that could provide him with insights into systematic patterns. “I made sure we get exit interviews done with every single employee who is leaving us,” he replied. “I even personally conducted some myself! But no consistent pattern is emerging. I’m not sure how I can prevent my best employees from leaving us in the future.”

Here is the problem with exit interviews: People aren’t honest about the reasons why they quit. And even if they were, such post hoc rationalizations rarely reflect the true reasons employees quit.

Daniel’s conundrum is one many HR managers encounter in their organizations. Why are the best employees leaving the organization? Why are some employees more productive than others? How can employees become more creative? Often, the information that can help answer these questions already exists within the company, hiding in plain sight.

Although companies collect a great deal of data about their employees, most of them don’t do a great job of leveraging it for insights to answer these questions. If companies could improve their data practices at five important stages, they could become much more effective at solving some of the most pressing problems they face.

Step 1: Improve data quality. After listening to Daniel’s problems, I asked him what kind of data his company collects. A lot, it turns out. His department sends out a survey for all employees to fill out every six months. Managers conduct annual performance reviews that they log in a centralized system. The HR department keeps track of every promotion, while the operations department monitors which employees leave the organization.

However, when I asked to take a closer look at how Daniel’s department was collecting data, I was aghast. The survey did not collect data in a reliable, validated way. The performance reviews weren’t structured, and only 55% of managers filled them out. And the promotion and turnover data didn’t include dates.

Before you can use your data to get answers, you have to improve the quality of the data you collect. Design a more rigorous survey with better measures. Create a performance review system that makes it easier for managers to log their reviews. Think through what kind of data will be useful to collect, and then collect it — systematically. Have regular conversations with people from throughout the company to identify what questions are pressing and what kind of data you may need to answer those questions.

Step 2: Link different data. To answer a question like “Why are my employees are leaving?” you need to compare employees who’ve stayed with employees who’ve moved on. (Which is another reason exit interviews often don’t work — you’re only getting half the story.)

To do this, you need to link the data from different sources throughout your organization. In Daniel’s case, the data was championed by different departments. Performance reviews and employee surveys were managed by the HR team, whereas data on turnover was held by the operations team. Neither team realized which data the other team held, so they needed to change their processes to ensure they could connect the employees who’d left with their survey responses and performance reviews.

Find out what kind of data is being collected in the organization. Design processes that make it easier to connect the dots between individuals to get as many data points on each employee as possible.

Step 3: Analyze your data. Simply put, data analysis requires data processing abilities. For example, in some cases your performance outcomes might be at the group level: the success of a team project, or a successful outcome for a client team. Is it possible to deduce what made the project successful from the individual-level responses from each team member?

The answer is yes, but it’s not easy to do. In statistical terms, you may need to nest responses at the group level and run a random or fixed-effects model. What this means is you investigate the variability of individual-level responses to predict group-level outcomes. However, this goes far beyond the capabilities of what Microsoft Excel can do. To decide what kind of data analysis techniques to use, and more important, to conduct the analyses, you need skilled data analysts capable of using advanced data processing software, such as R or Stata.

The third step to leveraging your data, then, is to be competent in your data analysis. Think through what kind of analysis techniques are most suitable, given your type of data. Ensure that you have staff available who can conduct the necessary analysis; if you don’t, recruit or contract with experts who can help.

Step 4: Infuse your data with theory. Although many problems might seem pressing, you are not the only one faced with them. A lot of attention has been spent in the last few decades investigating the predictors of employee performance, turnover, and creativity. Academic researchers have documented what relationships exist and developed a wealth of theory that explains why they do.

This is important because theories can help us predict what will occur in the future, given a set of considerations. Hence, while data analysis is often retrospective, trying to understand after the fact why a group of employees has left, strong theory can facilitate organizations forecasting who is most likely to leave in the future. In addition, strong theory can help identify what kinds of questions an organization should be asking when it is faced with a problem, such as rampant staff turnover.

The fourth step to leveraging your data is to infuse your data with theory. Investigate past research that has attempted to provide answers to similar questions you may be asking yourself. Look through what this research has investigated, how the researchers investigated it, and what theory they developed to explain the relationships they found. You may not have the time and resources to do this — that is fine. Academic researchers, in many cases, are more than happy to serve as advisors on projects and can help guide you along the way.

Step 5: Implement changes and keep track of outcomes. You have done it all: You increased your data quality, connected disparate data sets throughout the company, recruited strong data analysts, and consulted the research on relevant theory. You have a working model of why your employees are leaving the organization. Now that you have this insight, you need to turn it into an intervention. For example, in Daniel’s case, we found that many of the company’s best employees left because they did not feel they had sufficient autonomy over how they carried out their jobs.

This is a crucial step of the process: testing whether what you have learned can provide actionable insights that improve your organization. Daniel and I tried an intervention where we gave some employees, but not others, the chance to make their schedules more flexible. This type of split-testing was important because we wanted to have a control group. The intervention had no effect the first time we ran the experiment. That was obviously disappointing, but the good news was that our improved data practices allowed us to understand why that was the case and enabled us to optimize our intervention until it had the intended effect.

The fifth and final step is therefore to implement changes and keep track of relevant outcomes. The intervention may require several attempts to have the intended outcome. Some interventions might not work at all, and others may even backfire. But the best way to find out whether the insights you have gained are accurate is to put them to the test.

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