You can’t serve customers if this relationship is dysfunctional.
A Step-by-Step Plan to Improve CMO-COO Collaboration
A traveler arrives in a foreign country and attempts to use his credit card to make a purchase. It is the same card he used to buy the plane ticket and book the hotel. While this would seem sufficient to alert the bank to his impending trip abroad, “transaction denied” flashes across the terminal screen, leaving this longtime customer stranded, fuming, and no longer so loyal.
This all-too-familiar story illustrates the challenge facing companies — especially customer-facing companies. Customer journeys today are a complex series of interactions across multiple channels and platforms, where each point of contact has the potential to encourage the sale or derail it entirely. Coordinating the infrastructure, technology, and messaging in a way that appears seamless and fluid to the customer is, to be blunt, a logistical nightmare.
But getting it right pays off. Delivering great journeys can boost revenues 10 to 15 percent, lower service costs 10 to 20 percent, and increase employee engagement 20 to 30 percent. (For further convincing, see the HBR article, “The Truth About Customer Experience.”) Delivering a consistent experience on the most common customer journeys is an important predictor of overall customer experience and loyalty. We have also found that improving customer experience from average to “wow” is worth a 30 to 50 percent improvement in “likelihood to remain/renew” and “likelihood to buy another product.”
Despite these opportunities, companies have been slow to respond to the customer journey imperative in an organized way. Executives focus on optimizing discrete touchpoints rather than improving the complete customer experience. This is like treating a symptom without bothering to find the cure.
The CMO and COO are the natural partners for turning this around. As Jo Coombs, Managing Director at OgilvyOne, London, observes, “I don’t think it can just be one or the other. If it’s all about the operations then you lose sight of the customer. If it’s all about the customer, then you may not have the infrastructure and back-end to support what you’re trying to do.”
While the CMO and COO have a good track record of collaborating in certain areas, a certain tension has long defined the relationship. Here are our recommendations for how CMOs and COOs can develop a more collaborative working relationship:
1. Develop a shared vocabulary and shared metrics.
When CMOs and COOs talk about the customer decision journey, that language needs to be translated into metrics and key performance indicators (KPIs) that more accurately measure progress. For example, a call center may pride itself on completing X percentage of service calls within 30 seconds, but that’s not a valuable metric for determining overall customer satisfaction – or what the customer then does after that service interaction. The better metric would measure the percentage of calls that were made and required no additional follow up.
Rather than measuring marketing KPIs or operations KPIs, focus instead on the more customer-oriented journey KPIs, such as lifetime margin. On the operations side, metrics should not focus on how quickly the call center can address customer issues, but rather on how successful the call center is at eliminating follow-up calls or how successfully it isolates the root causes of customer complaints.
Once the drivers of the costs of the journey are understood, marketing can work with operations to address them. For instance, at a major bank, the operations group reviewed data on the cost to serve customers and found that certain types of customer acquisition efforts yielded less profitable customers. Based on this data, operations recommended marketing cease actively trying to acquire these customers. This required a change in the media buy metrics to focus on “likely margin” versus “likely sales.”
2. Build a structure for collaboration.
Moving towards a more collaborative approach represents a new way of doing things, which will at first feel strange. The CMO and COO can wield a lot of influence by setting up a regular call, for example, devoted to a specific customer journey, such as the onboarding process. They can also take deliberate actions to involve the other in processes where generally the “other function” has little to no involvement. The CMO can bring the COO into the marketing planning process early on, for example, to help ensure that the company can in fact deliver on the marketing promises it is making to its customers. This as approach helps both CMO and COO become invested in the successful implementation of the plan.
For any change to stick, the CMO and COO need to have joint accountability and create incentives that reward collaboration. Consider how Dutch energy company Essent is redesigning the customer experience. Marketing takes the lead on defining how best to serve customer needs and what sort of service this requires. They then set the initial minimum cost that operations can work with to deliver it. Operations and marketing meet, discuss, and iterate what the final budget will be and what the ultimate goal will be. What makes this process work is that they share both the responsibility and the rewards for meeting the targets. In fact, between 30 and 50 percent of their bonus compensation is based on reaching their joint targets.
3. Work together on a few customer journeys that matter.
Complex analytics can reveal often hundreds of opportunities to improve customer journeys, but the CMO and COO can help prioritize them based on impact. To do that, there is no substitute for a team of marketing and operations people physically walking through a specific journey.
That happened at a car rental company, which had identified the need to get their customers from the front desk to the front seat faster. When sales managers saw a rush of customers, they could put more people on the front desk. But the crews responsible for prepping the cars had no contact with the front desk. Whether it was slow or busy out front, it was always business as usual back in the garage. When the marketing/operations team walked through each of the stages of this particular journey, they quickly developed a greater appreciation for the entire process. They also were able to identify critical changes, one of which was to install a simple system — a light in the garage activated by a switch at the front desk that signaled surges in demand — so that prep crews could respond accordingly.
Importantly, fixing customer journeys is about a mentality rather than a one-off solution. And that means setting up processes to respond rapidly. The CMO and COO should work together to develop, in advance, processes and protocols for addressing negative feedback quickly. The insurance company E-surance, for example, uses a “control tower” system to monitor what is happening in real time. When looking at quote and bind ratios (i.e. the percentage of people who commit once they’ve received a rate quote), they could see those segments where the ratios were poor and immediately shut down the digital advertising in those markets. Operations set up the analytics and marketing was right there to act on what those analytics revealed.
It’s worth bearing in mind that this is more than a “marketing and operations” show. Delivering on journeys requires many different parts of the organization to come together, such as working with the CIO on the technology implications of developing journeys, and providing the CFO with hard ROI data on customer journey investments.
4. See the customer journey all the way through.
Marketing people are good at shaping emotions for customers, but operations folks, not so much. Yet that’s the department that typically takes over once marketing gets customers in the door. That post-purchase onboarding process, often designed to be low cost/high volume, has the potential to reinforce the connection with the product – or conversely, foster buyer’s remorse. Operations plays a key role in making sure those new customers stay loyal.
For example, one financial services company applies a marketing lens to its customer onboarding for many months after signing up a new customer. A personal welcome letter is sent with the goal of both deepening the relationship while still getting necessary paperwork completed. Similarly, bills and call center script guidelines reinforce the same personal tone that’s been established. This focus on solidifying a personal relationship with customers has become a key differentiator for the company and a great asset for marketing and sales.
At its most fundamental, mastering the customer journey is about doing what’s best for your customers, which includes being there whenever they happen to need you. Doing what is best for the customer, as it turns out, is also often what is best for the company. We recognize that the recommendations we are making here represent a real shift in the traditional roles and responsibilities of marketing and operations. But there is tremendous upside for those CMOs and COOs who pool their talents and resources to focus on the customer journey, adjusting systems, processes and, most importantly, mindset, to ensure that each and every customer journey is a rewarding one.
For one, most of them should be video meetings instead.
4 Ways to Make Conference Calls Less Terrible
No one wants to sit on a boring conference call, especially when they have other work to do. But that’s the reality for a lot of people, at least according to recent InterCall research on the rise of mobile conference calls and employee conferencing behavior. With 82% of employees admitting to focusing on other work while on a call (along with other, less tasteful non-work distractions), disengagement — at least during virtual meetings — has started to become standard practice. While some may argue that these employees are still engaged in other work, it raises questions about the productivity and value of these meetings.
The good news is that companies can make their meetings more relevant and productive by making a few simple adjustments — even though many of them go against some familiar office habits.
Stop striving for inclusiveness. Time, not technology, accounts for the majority of associated meeting expenses. Unfortunately, online calendars, scheduling apps and email distribution lists have created a monstrous meeting invite reflex. It’s become too easy to send blanket, one-hour meeting invites to 10 people when only five are relevant to the agenda.
Businesses need to break free of the notion that all attendees should be on a conference call from start to finish. With a little upfront planning around which topics will be discussed at any given point in the meeting, managers can stagger invitations. If the marketing budget won’t be covered until the last half hour of an FY planning meeting, try inviting the marketing team to that 30-minute portion only.
Aside from facilitating more efficient meetings, it puts valuable time and flexibility back in your employees’ workdays. It also proves to your employees that you value their time just as much as your own. Oftentimes managers may worry that employees feel left out or that they are missing something if they are not invited to every meeting. But if you take the time to share relevant information, either through a quick chat in another meeting or via a recap email, you can build trust and save valuable work hours. Chances are, your employees will actually thank you for giving them some time back in their day.
Start using video. In 2014, for the first time ever, 50% of employees used live video and web cameras in more than a quarter of their conference calls, according to recent Wainhouse Research (WebMetrics: Meeting Characteristics and Feature Preferences, 2014). Despite this milestone, video conferencing remains a point of contention, and its adoption curve is a matter of psychological acceptance. The idea that everyone in a meeting can watch what you’re doing deters many workers, as does the dissonance between what we see in the mirror and what’s reflected on our laptop or tablet screens.
But as video becomes more pervasive in our personal lives, we will all have to get over this reluctance to adopt it in our business lives. Younger workers, with their penchant for selfies and inclination to social sharing, are also playing a large role in accelerating video’s acceptance among all members of the workforce. We can already see the impact of video conferencing among those who have adopted it. Wainhouse Research has found that of the employees who use video and web cams during meetings, 74% like the ability to see colleagues’ reactions to their ideas, and nearly 70% feel it increases connectedness between participants.
But don’t abandon the physical conference room just yet. Most organizations’ physical office conference spaces look nothing like they did 20, even 10 years ago. They’ve evolved beyond a long table and phone to include white boards, projectors, flat panel screens, web cameras, and surround sound. Participants may not use each accoutrement in every meeting, but the options for dynamic collaboration are there if they need them.
That said, it shouldn’t take 20 minutes for a presenter to figure out how to use a webcam; he or she shouldn’t have to restart an audio or web-based call in order to distribute multimedia content, either. Digital accessibility works when it’s inherent, intuitive and seamless. This only occurs when employees are trained and comfortable using all the features today’s conferencing solutions are capable of.
Understand technology use versus abuse. Technology is essential to innovating the conference call and boosting staff engagement. When applied incorrectly or misunderstood by end users, it can cripple both efforts. Managers have to use utmost discretion when implementing conferencing tools in a way that’s useful to employees, not abusive to their time or productivity.
In other words, just because you can video conference from your iPhone before boarding a flight doesn’t mean you should. Organizations should dictate a new form of meeting technology etiquette, one that respects staff flexibility, and their right to efficient, uninterrupted work time and collaboration. Part of this decorum includes redefining “full deployment.” Rather than give all employees the same basic conferencing tools, give them what they really need to fulfill their unique responsibilities. Mapping the technology to the user, not vice versa, increases the likelihood that staff will take advantage of these resources and deliver a higher return on investment.
Audio-only conference calls still permeate offices everywhere, but the status quo won’t hold for long. Changes in technology and workforce composition are happening too fast, forcing the rules of business communication to shift accordingly. Remember: Humans are multi-sensory creatures. Meetings aren’t one-dimensional either. In order to better engage your employees when you meet as a group, you might want to start by how you communicate with them.
A manager must decide whether an experimental program is growing too fast.
Case Study: Can a Work-at-Home Policy Hurt Morale?
Amrita Trivedi couldn’t help overhearing the heated argument outside her office door. As general manager of the Noida, India, office of KGDV, a global knowledge process outsourcing (KPO) company, she had always encouraged healthy debate on her team, but she was surprised that her head of human resources, Vijay Nayak, and her top project manager, Matt Parker, were going at it in the hallway.
“It’s a benefit they earned, Vijay!” Matt said. “And they’re hard workers. It’s not like we’re just picking our favorites and sending them home to watch TV and bake cookies.”
“But we’re creating a two-tier system,” Vijay responded. “The people left in the office are feeling demoralized. They want to work at home too. And they don’t see why they can’t.”
“They can when they earn it!” Matt practically shouted.
Amrita opened the door. “Vijay,” she said, “are you ready for our meeting?”
Matt sheepishly excused himself and walked away.
“What was that all about?” Amrita asked as she and Vijay sat down.
“Matt’s work-at-homers,” he replied.
(Editor’s note: This fictionalized case study will appear in a forthcoming issue of Harvard Business Review, along with commentary from experts and readers. If you’d like your comment to be considered for publication, please be sure to include your full name, company or university affiliation, and e-mail address.)
With headquarters in New Jersey and another office in Manila, KGDV offered a range of services, including market and legal research, but its largest and fastest-growing business was for the publishing industry—converting, indexing, and abstracting journal articles, which its clients, mostly U.S.-based publishers, then sold to libraries, research institutions, and individual subscribers. Like many KPO companies, it compensated employees on the basis of their output. The more they accomplished, the more they earned—and in the case of the library project Matt ran, the more likely it was they’d be permitted to work remotely.
But Vijay wasn’t happy with how things were going. “We’re facing a potentially disastrous situation,” he said.
“What do you mean?” Amrita asked. “Matt’s reports show huge jumps in productivity. He told me last week that he wants to get even more people in the program. And I’ve heard only good things about the work-at-home employees.”
“That’s the problem,” said Vijay. “You only hear positive things about them. Meanwhile, the hundreds of employees who work in the office feel at a disadvantage. Even if they stay late and work hard, they can’t seem to produce as much as their counterparts who work remotely. The productivity gap keeps widening, which means the compensation gap does too. I’m afraid we’re going to start to lose them. Maybe in droves.”
“Wait. Six months ago you and Matt both sat right here singing the praises of this program.”
This was true. A little over a year earlier, the library project had been growing so fast that the company was running out of office space for necessary new hires. Matt had convinced Vijay that they could accommodate more employees over the longr un if some people worked from home. A similar program had been successful in KGDV’s Philippines office, so Amrita felt comfortable approving a test run.
Matt had worked with Vijay to identify 20 willing candidates from the top 25% of performers on his team and set them up with the technology and support they needed to do their jobs remotely. There had been some hiccups at the beginning, mostly around tech issues, but they’d been resolved within the first month. By the two-month mark, the remote workers were generating almost double the normal output. So Amrita had agreed to let Matt move 25 more employees into the program. Four months later they’d increased the number to 75 and filled the vacated workstations with new hires, upping headcount without adding infrastructure costs. Now Matt had 100 people working from home.
“I was fully on board, but that was before I saw the side effects,” Vijay explained. “Every time a top performer is transferred into the program, the shoulders of those left behind slump a little lower. And my team is fielding lots of complaints.”
“You know headquarters expects us to grow the library project by 25% this fiscal year,” Amrita said. “The demand just keeps increasing.” In fact, she was scheduled to present the expansion plans at the quarterly meeting the following week. “We’re at 98% capacity in this building. To meet the numbers New Jersey is throwing around, we’d need to move at least another 200—maybe 300—employees to home offices and fill their seats here.”
“I know. But if morale continues to slip, we’re going to have a whole different set of empty seats to fill. Honestly, Amrita, Matt isn’t seeing the big picture. I really think we should take time to fully evaluate the program before we expand it again.”
“From what I heard through the door, Matt adamantly disagrees with that,” she replied.
“Of course he does,” Vijay said.
Will the Tide Turn?
Late that evening Amrita was headed down to the gym in the basement of the office when she ran into Matt.
“I’ve been looking for you,” she said.
Matt’s face flushed. “I’m sorry about earlier.”
“That’s OK. Do you have time to talk about it now?”
“Why not? I think we’re the last ones in the office.” They sat down on the steps.
“I know Vijay is concerned about retention, but I think he’s being too cautious,” Matt said. “You’ve seen how much more efficient it is to have employees at home. Our output is up and we’re saving money at the same time. And so far, it’s helped with attrition, not hurt. Our rate is down by 5%, which is outstanding. People see the opportunity to work from home as a huge benefit.”
“But Vijay thinks the tide is going to turn. If the people stuck at the office feel like second-class citizens who can’t ever reach the work-from-home goal, why wouldn’t they leave?”
“He’s giving a lot of weight to the comments of one or two disgruntled people—people, I don’t need to remind you, who aren’t top performers. If they can’t reach a level of productivity that qualifies them to work at home, then maybe they’re not suited for this.”
“You’re saying it’s OK if we lose some of your office-based people?” she asked, surprised.
“No, of course not. But honestly, I don’t see the widespread dissatisfaction that Vijay is describing. My job is to run this project profitably with high quality, and that’s what I’m doing. I’m meeting those objectives. What else can I do?”
Amrita thought about her upcoming presentation, the growth that the executive team was looking for. “Just show me that Vijay is wrong.”
From the Horse’s Mouth
Later that week Matt knocked on Amrita’s office door and asked to come in. He had Nisha and Amal, two library project team members, with him.
“I wanted you to meet a couple of my stars,” he said. He explained that Nisha had been in the first wave of employees to start working at home, and she loved it.
“I come into the office once or twice a month for meetings, but mostly I get to make my own hours,” Nisha told Amrita. “If I feel tired, I go for a walk. If I feel energetic at 3AM, I work then. This is the happiest I’ve been at a job in a long time.”
“Nisha’s been our top producer for the past six months,” Matt pointed out.
Then it was Amal’s turn. Matt explained that he’d been hired only two months earlier, so he wasn’t yet eligible to work at home, but he was trying hard to get his output up. “It’s a big part of why I came here,” Amal explained. “Most of the other jobs I considered were entirely office-based and involved a long commute. It takes me 45 minutes to get here, but at least I know I may not have to do that forever. I wanted more freedom.”
If Amrita hadn’t known Matt better, she would’ve thought he’d scripted their lines. But he was too straightforward for that.
“I really appreciate your coming in—especially you, Nisha,” she said.
“No problem—I was in for a training anyway,” Nisha replied.
After the two employees left, Matt asked Amrita what she thought. “I wanted you to hear it from the horse’s mouth,” he said.
“They were persuasive, but they’re just two of 500 employees, Matt. If unhappy employees were as willing to talk to the boss, I’m sure Vijay could get two of them in here too. Why don’t the three of us sit down and hash this out? I’m sick of hearing it from both sides, and I need to figure out what I’m going to say in that quarterly meeting next week.”
They met that afternoon in a fourth-floor conference room that looked out on the city. Amrita reiterated that she would have to make a recommendation to the executive team; if its growth plans were at risk, she said, she needed to tell the team that.
Matt got right to the point. “This is about the India office surviving. Our customers have more work than we can handle right now, and if we turn them away—‘Sorry, we don’t have the capacity, the infrastructure, the people’—they’ll go to our competitors. There are too many KPO companies in Noida, in India—more every day—for us to be turning down work.”
“But we need to grow smartly,” Vijay said. “And this program has expanded very quickly. Maybe we should pause and take stock of where we are before we push it further.”
“Didn’t you hear what I just said?” Matt retorted. “The ship is leaving, Vijay, and KGDV needs to be on it. We’re turning money away right now, and we stand to lose some of our biggest clients.”
“What about adding more in-office employees 20 or so at a time? We could grow the project more slowly,” Vijay asked.
“Where are they going to sit? Should we start putting two to a desk? Assign half our people to the graveyard shift? Or spend a year and more than a million dollars building a new facility—and turning down business in the meantime?”
Amrita looked at Vijay and shrugged. “He’s got a point.”
“But this experiment is just a year old,” Vijay said. “If we double down on it now, before we know how it works over the long term, we’re taking a huge risk. The output increase and cost savings have been impressive, of course. But they’re short-term results. We don’t know yet whether those employees will continue to be as productive in the next year and beyond. And it’s hurting our employee development. We thought this program would create healthy competition, but it has created two classes. The good performers get even better, and the poor performers get worse.”
“You’re hearing more complaints?” Amrita asked.
Amrita caught Matt rolling his eyes. “If they want to work at home so badly, let them,” he said. “I don’t see why more employees can’t take advantage of the program. Let’s lower the output threshold and free up even more desks. We’ve got the proof—not just in our own numbers, but in Manila’s, and in all the research out there. People are more productive at home. Period. This is the future, Vijay: the office-less company.”
Vijay shook his head. “That’s not realistic. Sure, many Indian companies are letting employees work from home, but just one or two days a week. The remote employees on the library project are almost never in the office. We have no connection to them. We don’t even know how they manage to complete so many projects in so little time.”
“You think they’re cheating?” Matt was getting angry again.
“No, that’s not what I’m saying,” Vijay replied. “If we can’t see them, work side-by-side with them, then we don’t know what they’re doing so well. We can’t capture their best practices and share them with others. There’s a business benefit to having people together in the same building, and I fear we’re not reaping it. Instead we’re sending our best and brightest home to work in a vacuum. There’s no cohesion if everyone is spread out in his or her own corner of the city.”
Matt was quiet for a moment. Then he said, “Amrita, you met Nisha the other day. She comes in for trainings and meetings. It’s not like she’s a faceless number. She’s a valuable employee.”
“But for every Nisha you bring in here, I can show you an employee who’s frustrated and increasingly disengaged by being stuck in the office,” Vijay countered. He turned to Amrita. “I strongly feel that we should slow this program down.”
Matt turned to her too. “Amrita, I respect Vijay’s feelings. But the numbers clearly say we should be moving full steam ahead.”
Question: Should the India office expand its work-at-home program?
(Please remember to include your full name, company or university affiliation, and e-mail address.)
It’s a way to test out products that will eventually be sold to larger customers.
Start-ups Should Sell to Small Businesses, Not Big Enterprises
Business-to-business start-ups are an important segment of the entrepreneurial landscape, but many founders hamstring themselves by focusing on the wrong initial customers. They focus on large enterprises, hoping to gain legitimacy from “anchor” customers. This focus can make their path much more difficult, and dramatically reduce their chance of success. Instead, B2B entrepreneurs should focus their efforts on small businesses.
The traditional line against targeting small businesses is that they’re costly to sell to. That’s short-sighted. Selling to small businesses is a great way to start a business, and often sets the stage for selling to larger enterprises later on. In this way, the start-up that initially served only small businesses can disrupt incumbents and come to dominate the large enterprise market, too.
Several examples of this strategy have emerged over the past few years:
Salesforce disrupted expensive on-site customer databases by offering a cloud-based solution that replaced substantial up-front expense with a low monthly subscription.
Vistaprint disrupted local printing shops by offering web-based design and ordering and centralized production, using economies of scale to dramatically reduce costs.
Stamps.com disrupted traditional mail-processing companies like Pitney Bowes by replacing expensive equipment purchases with an online application and monthly subscriptions.
The pattern continues today with start-ups that are in the early phases of this journey:
Expensify is in the process of disrupting administrative assistants and office managers with an app-based expense reporting product.
HourlyNerd (which was founded by members of my MBA class at Harvard Business School) is disrupting the consulting industry by connecting businesses with independent consultants.
To understand how small business solutions can disrupt large enterprises, I studied HourlyNerd and share here the lessons entrepreneurs can use to create disruptive B2B businesses by starting with small customers.
Because small businesses have similar needs to large businesses, a model that profitably and effectively serves them can be scaled to serve medium and large enterprises with relative ease. Small businesses are also extremely low-risk proving grounds because there are so many of them that failure with any one customer won’t lead to large reputational damage.
Better still, because small businesses desperately want these products but can’t access them, they will be happy with much less functionality than large enterprises that have many products to choose from. This gives start-ups a great entry point for a simple product that can be improved over time to appeal to more demanding customers. Gone are long pre-launch development cycles that attempt to create the optimal product for the most demanding customer. Instead, entrepreneurs can launch quickly with little capital and improve over time. In fact, HourlyNerd was started during Harvard’s FIELD program with only $5,000.
The first step to entering the small business market is to identify opportunities where incumbents are ignoring small businesses because their products are too expensive or complicated. Amazon’s Jeff Bezos recommends looking for opportunities to convert capital and fixed expenses into variable costs. So look for industries where upfront costs are high and new technology could offer similar services with little or no upfront commitment.
Next, create a minimum viable product and work closely with your initial customers to understand what goes right and wrong. For HourlyNerd, this meant individually matching each business and consultant and performing thorough interviews with each before and after the service. It’s important in this phase to temper your growth; make sure your unit economics make sense before seeking to scale.
Keep the product general. Create standardized offerings that many small customers can apply to their unique situation without expensive and time-consuming customization. Similarly, it may be tempting to categorize your customers by attributes like geography or business type, but resist this and instead organize them based on size and sophistication. This will allow you to segment your products and create simple solutions for simple needs and more complex solutions for more demanding customers. Framing your opportunity in terms of the benefits you offer and not customer demographics will help you see opportunities in ever-larger enterprises.
Even once you start targeting enterprise customers, it’s possible to do so without competing directly against the bigger competitors. For example, HourlyNerd recognized that while very few people in large organizations have the money or need to hire a major consulting firm, many people have small but important problems that make perfect small consulting projects and space in their budgets to hire a consultant. Similarly, in the post-recession world, many managers have no ability to hire additional staff but have complete flexibility to hire a freelance consultant on a short-term basis. By serving these people, HourlyNerd is now growing in the enterprise space without meeting resistance from big firms, because they’re growing the category with new consumption rather than stealing existing consumption. `
Every business naturally improves its product over time. As B2B entrepreneurs improve theirs, they will find that they can meet the needs of these underserved constituencies in large organizations. The pattern of disruption continues when more demanding constituencies inside the enterprise see the results from the disruptive product and begin to consider it as an alternative to incumbent offerings. Typically incumbents will ignore the startup because they don’t feel any pain from lost sales until their best customers abandon them for the new offering. But by then it’s too late; the startup has succeeded in the disruption and is too big to defeat easily.
This strategy is not without challenges, including brand perception — remember the adage “No one ever got fired for buying IBM.” But with time this can be overcome. While initially many large enterprises may have balked at the idea of using a web start-up called Salesforce.com, no one today bats an eye at the idea, even in the largest, most sophisticated companies.
An assessment can help you determine which strategy suits you best.
Match Your Productivity Approach to the Way You Work
Within weeks of starting my first job out of college, I was sent to the in-house time management training program. I dutifully attended the class and used the planner as instructed. But as the weeks went by, I noticed that my productivity hadn’t improved. And I wasn’t the only one. As I looked around at my colleagues, I noticed that many of them were really struggling with the system.
The reason is simple: there is no one-size-fits-all approach to productivity. Time management programs focus almost entirely on how to plan and exercise control over the minutes, hours, and days you spend on specific tasks or activities. That might work for some people, in some jobs. But for others, who think, learn, communicate, and execute differently, and deal with multifaceted and dynamic responsibilities, it probably won’t.
Instead, we need to personalize productivity—to employ work strategies that align with our own cognitive styles and to plan and allocate effort in a way that suits our strengths and preferences.
Ironically, most of us do this unconsciously. After all, these are habitual patterns of perceiving, processing, and managing information that guide our behavior. However, because we’re inundated with “proven” programs, tips and tools—backed by a bevy of consultants, academics, and practitioners—we often go against our natural instincts.
This assessment—based on research in psychology and management—is designed to help you identify and embrace your personal productivity style. Are you a prioritizer? A planner? An arranger? Or a visualizer? Once you know, you’ll be able to more effectively manage your work and home life and achieve your goals much more efficiently.
Let me give you an example. Prioritizers prefer logical, analytical, fact-based, critical, and realistic thinking. To increase their efficiency, they might time how long it takes to complete certain tasks in order to more accurately plan and segment their days and weeks. This approach—a well-known best practice—would probably also work well for Planners, who process information in an organized, sequential, and detailed way. But it would stifle Visualizers, who are more holistic, intuitive and integrative thinkers and therefore energized (and made more efficient) by task variety and schedule flexibility. Arrangers, who are more expressive and emotional, would also benefit from a looser time management policy, which allows them to consider their energy levels and attention span capacity, then plan work accordingly, in real time.
The latest app, prioritization plan, or e-mail sorting strategy will not work if it runs counter to the way you think and process information. Your productivity strategies must be customized for you—not for someone else—because your life is waiting.
You never want to receive an unexpected email from a very important client that reads “I need to talk to you at 2:30 today.” Particularly if he’s never sent you anything like that before. But one morning last month, that was the message that landed in my inbox. My heartbeat quickening, I replied, “Of course, I’ll be here.”
In my profession, investment management, we are judged on one of two metrics: performance and professionalism. As CEO, I am our firm’s toughest critic, but I know from examining published data from my peers that our performance has been very competitive. I also think we’re very professional – as far as I knew, we had never been anything but prepared, polite, respectful of, and accessible to this client.
Still, I found myself wondering: had we been lacking somewhere? Now, I had four hours to wait until 2:30, and despite my partners’ assurance that this would be about wiring some money for last-minute needs (a new house?), I didn’t like the smell of it.
In my purgatory hours, I reviewed the client’s holdings, their performance, our previous correspondence, and notes from our meetings; I found nothing alarming, but nothing particularly calming either. The phone rang at exactly 2:30. Stephen, the agent for an extremely wealthy family that hired us to manage a portion of their money, got straight to the point. It took less than a minute for him to fire us from the account, very matter-of-factly, with little attempt to acknowledge the eight-year relationship that had seemed (we thought, obviously, in error) to be very positive. Stephen explained that they had hired another manager with a very strong track record who required a high minimum investment; they were redeeming from several other managers to meet that threshold.
Stephen ended with a description of how he would email me the specific transfer instructions for the assets. We said goodbye, I hung up the phone, and then stared into space for a few minutes. By the time I looked at my screen, the transfer information was already there. I walked out of my office to share the news with my partners.
In the weeks since, I’ve thought a lot about what we could have done to keep this client, and how to respond when a client leaves.
I started by asking the client who they were doing business with instead – I figured it couldn’t hurt to ask. However, despite asking Stephen for details on the family’s new investment manager, but he wouldn’t tell me. Because our conversation was so short, I don’t know for sure why this client left. But my guess is that we hadn’t fully understood their expectations – or that the client’s expectations had changed.
Then I asked myself: did I really understand what the client wanted? What did this customer really desire if it wasn’t steady performance returns? Of course, I can only speculate, but one guess is that we were not “sexy” enough. It kills me to say that, because I hate being typecast as the opposite: “stodgy.” I would rather be Hermes than Gaultier. But in my industry, the “sexy” managers are the guys (no offense to my male-dominated industry, but they are almost always guys) whom people talk about at Soho cocktail parties and the investment meetings of non-profit boards. They invite clients to their skyboxes at NFL games and promise huge returns – and high risks.
This led to my next question: could my firm actually deliver what the client wanted? We’re a relatively small firm; we don’t speak at huge institutional gatherings, don’t do a lot of marketing, and don’t have a huge wining-and-dining budget. Our growth comes entirely from on word-of-mouth and referrals. I now found myself wondering if we should have tried to cultivate a different image that would have better met this client’s expectations. But I don’t think so. We have a solid presence in our market segment. Changing the way we do business could alienate our other clients.
Finally, I took stock of the damage done by losing this client. While losing this relationship did hurt, because the absolute dollars were large, the percent of total revenue it represented was relatively small. If the market we serve suddenly began to crave only the hot new manager, of course we would need to address that shift in taste, and try to publicize our strengths more actively. But it wasn’t worth beating ourselves up about falling short of one client’s expectations.
Don’t kid yourself; I hate losing any business and would love to be the dream advisor for every major client out there. But if you do lose a big account:
Ask the client why, and who they’re doing business with now;
Ask yourself whether you understood their expectations, and if not, whether this was preventable;
Evaluate whether your firm could or should even try to meet their expectations;
And ask yourself if this is part of a larger pattern, or just an isolated incident.
If it’s only one unhappy client, and you like your market niche and feel you’re meeting the goals of the vast majority of your clients – well, tell yourself you were lucky to have had the business “temporarily.” Losing a big client is never fun, and much less than ideal for your bottom line, but it’s as much a part of business as landing a dream account. And it’s sometimes the fallout of staying true to your style and strengths.
By now, we all know multitasking doesn’t work. Our brains are incapable of focusing on more than one thing at a time. We might think we’re multitasking as we scan our email while on a conference call, but we’re not. We’re actually switch-tasking – quickly shifting attention from one thing to another and then back again — diluting our focus and losing precious seconds each time we switch. Those seconds add up to many hours of wasted time every week.
So why do so many of us still try to multitask? We’re too busy with too much to do and too little time to do it in. The temptation to accomplish multiple things at the same time is practically irresistible. Even when we know it doesn’t work.
I was thinking about this temptation as I rode my bike to a meeting downtown, about five miles from my apartment in New York City. As I breathed hard and felt my heart beat, I suddenly realized that I had overcome the multitasking hurdle. I was simultaneously getting 30 minutes of exercise and commuting to my meeting.
In other words, you can multitask as long as you’re doing two things that don’t tax the same parts of your brain. Email while on a conference call? Bad idea. But exercise and commuting? It’s a perfect multitasking marriage.
What makes it so perfect isn’t simply that it’s doable. It’s perfect because each activity is enriched when combined with the other. My commute is shorter and more predictable on a bike compared with a subway and I arrive refreshed and energized. And my ride feels more purposeful when it’s taking me to a destination — commuting is the motivation I need to get on the bike.
It turns out that commuting time is a great multitasking partner to a number of different activities. And, since so many of us spend a considerable part of our day commuting, it’s worth being strategic about using that time. So what’s the best way to do that?
First, identify the most prominent gap in your life. Do you need more relaxation? More exercise? Are there things you’ve been longing to learn? Are you feeling disconnected from others? What in your life do you feel gets short shrift?
Once you’ve identified the gap, use your commute to close it. If it’s exercise you need, then bike or walk to work, even if it’s just partway. If it’s relaxation you’re missing, then do nothing or read a fun book. If you want to learn something, then read about it or, if you have internet access, watch a video or participate in an online course. If you’re feeling lonely, write some emails that will reconnect you to people you cherish.
You need to factor in your mode of transportation of course. I wouldn’t suggest reading or texting while driving. But an audio book (relaxing/learning) or a hands-free phone call (reconnecting) would work well.
Here’s the point: Don’t simply default to your typical time fillers. Use your commuting time to bring yourself closer to the life you want to live. Make a choice that will leave you feeling more accomplished and refreshed when you arrive at your destination.
And, no matter what gap you’re filling and what mode of transportation you’re using, there are two things all of us should incorporate into our commute every day:
During your morning commute, spend five to ten minutes preparing for your day and, during your evening commute, spend five to ten minutes closing it down.
In the morning, think forward through your day, hour by hour. What will make this day a success? With whom are you meeting? What are you trying to accomplish? What might throw you off? How will you handle it? Do you expect to have any difficult conversations? How will you approach them? Any risks you want to take? How will you initiate them? Your day is much more likely to be productive if you think it through and plan it out.
Then, during your evening commute, think back through your day hour by hour and glean wisdom and connection from it. How did the day go? What worked? What didn’t? What do you want to do the same – or differently – tomorrow? With whom can you share feedback? Who should you thank? What happened today for which you can feel grateful?
Your morning commute will prepare you for a productive day and your evening commute will help you learn, grow, and connect.
Not only will you be productive while traveling, but your work during the commute will also make you far more productive after traveling. That’s productivity times three: triple-tasking.
If you do it all on a bike, you’ll be quadruple-tasking. You’ll have commuted, exercised, prepared for your day, and, since the ride will leave you energized, you’ll also be emotionally ready to face any challenges with courage and power.
When Do Regulators Become More Important than Customers?
While working with a huge Russian hydrocarbon company in Texas last year, our innovation conversation quickly zeroed in on customers. Who was the energy giant’s most important customer? Which customer had the biggest impact on new value creation? What customer would matter most in five years?
The wide-ranging English/Russian debate raged for 20 minutes. Then one of the engineering executives, a fracking enthusiast and unconventional extraction technologies champion, spoke up. The answer, he declared, was now obvious. The company’s most important customer — by far — was Russia’s government. Strategic success required pleasing Vladimir Putin’s Kremlin.
The room went quiet. That single comment rebooted the entire discussion. No one disagreed. The innovation roadmap was hauled out and reviewed less in the spotlight of global opportunities than the cold reflection of domestic politics. State satisfaction mattered more than market disruption.
The unhappy innovation inference? Your most important customers may not be the people who buy your products but the ones who regulate your company and industry. With apologies to Ted Levitt, a new “Marketing Myopia 2.0” has emerged. Instead of rethinking “What Business Are We In?,” the better question may be “What Will Our Regulators Do?.” That’s not cynicism; that’s savvy risk management.
Uber didn’t hire former White House advisor David Plouffe by accident. The regulatory handwriting was on the wall and not just in the United States. The app-enabled car service faces resistance and even protests worldwide. But its miseries enjoy great and growing company. Wherever disruptive innovations have captured mind-or marketshare, regulators — not users and consumers — quickly become the customer most worthy of woo. Incumbents and competitors petition for relief and restraint. Twenty-first century market competition in disruptive business environments quickly becomes regulatory lawfare. Upstart innovators are seen as insurgents; they may not have to be crushed, but can’t be allowed to flourish. May the best lawyers and lobbyists win.
For an Uber, Airbnb, Weibo, Google, 23andMe and most strategically-situated post-industrial disruptors, managing regulatory combat quickly assumes primacy over managing either innovation investment or customer satisfaction. Their managements increasingly have to play the odds: What is more likely to get a better and safer return on investment — a really talented software development team in Bangalore, Bogata, or Cambridge? Or a really good lobbyist or ”fixer”—in Brussels, Beijing, or Washington D.C.?
All companies — innovative or not — must respect and observe the rule of law wherever they compete. But that creates perverse incentives. The more important laws and regulations become, the more incentive there may be to create more of them. Finding innovative ways to change regulations may prove faster, better, and cheaper than innovatively improving products and services. This is the essence of the Nobel Prize-winning work in Public Choice economics — that lawmakers and regulators have incentives to preserve, protect, and extend their influence and reach. The late James Buchanan, the Nobelist father of Public Choice, described this as “politics without romance.”
George Stigler, another Nobel economist, identified and described the concept of regulatory capture — a sort of economics Stockholm Syndrome where regulators supposedly empowered to protect the public good end up protecting the individuals and organizations they are supposed to regulate.
Needless to say, these behavioral pathologies lead directly to crony capitalism — where favors, waivers, and selective enforcement of the rules matter as much, or more, to marketplace success as innovative genius. These phenomena are global. And as disruptive innovators in fields from digital self-expression, health care, retail, tourism, and transportation seek to scale globally, they’ll find regulators scaling right along side them.
As a rule, innovators are interested in creative destruction; regulators are not. As a rule, regulators make the rules. The rise of disruptive innovation guarantees a rise of restrictive rules. Those rules assure that regulators become more important, not less. Will regulators become more important to innovators than customers? Follow the money: if legal and lobbying budgets are growing faster than innovation and research budgets, we’ll know the answer.
It’s the question missing from so much of leadership development: “What kind of leader do you want to be?”
We facilitate and encourage self-awareness among up-and-coming leaders (what kind of leader you are), get them to map their journeys so far (what has made you the leader you are), share knowledge and ideas (what kind of leader you should be), and help them acquire new skills and adopt new behaviors (this is how you can become that kind of leader).
But we don’t focus strongly enough on arguably the most central components to successful leadership – leadership intent (the kind of leader you want to be) and impact (the legacy you want to leave). As a shorthand, I refer to these two components, combined, as your “leadership footprint.”
In my experience, many have thought about their leadership footprint at some point, but few have defined it clearly enough to guide their behavior and evaluate their “success.” Of those who have, fewer give it regular consideration – letting it guide their daily decisions – or share it with others, to get feedback and be held accountable.
Here’s an example of how this looks in action. Gail Kelly, CEO of the Westpac Group, one of Australia’s biggest banks and winner of the “Most Sustainable Company” award at the World Economic Forum in Davos this year, has spoken openly and honestly about her personal leadership legacy goals. She’s described these goals as “generosity of spirit.” There are two key elements to generosity of spirit, according to Kelly. The first is believing in the power of people to make a difference (leadership intent). The second is creating an environment that empowers them to flourish to be the best they can be and thereby make that difference (leadership impact).
Kelly does also think about leadership tactics, but these act in service to the greater leadership footprint she’s defined. She defines leaders who have this generosity of spirit as having humility, listening to others, and demonstrating empathy. They are not selfish, intolerant, judgmental, quick to shoot the messenger or find scapegoats, and they don’t sit on the fence to see which way something works out before they decide if they’re going to support it. They deliver feedback honestly and in a timely manner – you don’t wait six or twelve months for your annual performance review. Poor performance is dealt with quickly. And perhaps most importantly, managers choose their assumptions. As Kelly puts it, “I choose to assume that you (my colleague) want the best for me personally and for others. I am generous in my assumptions of your underlying motivations and your intent towards me. Hard as it may be at times, I will assume good intent.”
This approach seems to be working for Westpac – in their internal engagement surveys, 97% of Westpac Group employees report that they can see how their work is linked to the purpose of the company.
I’m certainly not arguing that the one-stop shop for everyone’s leadership success is this idea of generosity of spirit. It works for Gail Kelly because it’s a footprint she has personally chosen and defined. She builds it into her leadership team and ties it directly to results she wants to see in the business.
We shouldn’t all have the same leadership success criteria. We have to define it ourselves. Leaders must give themselves space, time, and permission, and ask for help where they need it, in order to clearly define the culture of leadership they want to build around them. They must assess – both from their own observations and others’ feedback – how they are living up to it, and make the changes necessary to keep building it on a day-to-day basis.
Central to creating a leadership footprint is:
Defining the kind of leader you want to be.
Knowing clearly how that aligns with, and helps achieve, your organizational vision and purpose.
Fostering self-awareness, reflecting on your own behavior and encouraging others to give you feedback.
Recognizing differences that may arise between your intent and your impact.
Self-regulating. As Emma Soane of the LSE says, “The strength and the challenge of self-regulation is ensuring that you have coherence between your personality, your behavior, and your leadership goals.”
Choosing the assumptions about yourself and others that you need to rely on for your leadership footprint to be realistic and sustainable.
My challenge now to every client, whether established or new to their leadership journey, will be the same as the question I need to regularly ask myself: Do you know — and are you mindful on a daily basis of — what leadership footprint you want to make?
Most of our purchase decisions take place unconsciously.
When to Sell with Facts and Figures, and When to Appeal to Emotions
When should salespeople sell with facts and figures, and when should we try to speak to the buyer’s emotional subconscious, instead? When do you talk to Mr. Intuitive, and when to Mr. Rational?
I’d argue that too often, selling to Mr. Rational leads to analysis paralysis, especially for complex products or services. And yet many of us continue to market almost exclusively to Mr. Rational. The result is that we spend too much time chasing sales opportunities that eventually stall out. We need to improve our ability to sell to Mr. Intuitive.
We default to selling to Mr. Rational because when we think of ourselves, we identify with our conscious rational mind. We can’t imagine that serious executives would make decisions based on emotion, because we view our emotional decisions as irrational and irresponsible.
But what if Mr. Intuitive has a logic of his own? In recent years, psychologists and behavioral economists have shown that our emotional decisions are neither irrational nor irresponsible. In fact, we now understand that our unconscious decisions follow a logic of their own. They are based on a deeply empirical mental processing system that is capable of effortlessly processing millions of bits of data without getting overwhelmed. Our conscious mind, on the other hand, has a strict bottleneck, because it can only process three or four new pieces of information at a time due to the limitations of our working memory.
The Iowa Gambling Task study, for example, highlights how effective the emotional brain is at effortlessly figuring out the probability of success for maximum gain. Subjects were given an imaginary budget and four stacks of cards. The objective of the game was to win as much money as possible, and to do so, subjects were instructed to draw cards from any of the four decks.
The subjects were not aware that the decks were carefully prepared. Drawing from two of the decks led to consistent wins, while the other two had high payouts but carried oversized punishments. The logical choice was to avoid the dangerous decks, and after about 50 cards, people did stop drawing from the risky decks. It wasn’t until the 80th card, however, that people could explain why. Logic is slow.
But the researchers tracked the subjects’ anxiety and found that people started to become nervous when reaching for the risky deck after only drawing 10 cards. Intuition is fast.
Harvard Business School professor Gerald Zaltman says that 95% of our purchase decisions take place unconsciously – but why, then, are we not able to look back through our decision history, and find countless examples of emotional decisions? Because our conscious mind will always make up reasons to justify our unconscious decisions.
In a study of people who had had the left and right hemisphere of their brains severed in order to prevent future epileptic seizures, scientists were able to deliver a message to the right side of the brain to “Go to the water fountain down the hall and get a drink.” After seeing the message, the subject would get up and start to leave the room, and that’s when the scientist would deliver a message to the opposite, left side of the brain asking “Where are you going?” Now remember, the left side of the brain never saw the message about the fountain. But did the left brain admit it didn’t know the answer? No. Instead it shamelessly fabricated a rational reason, something like, “It’s cold in here. I’m going to get my jacket.”
So if you can’t reliably use your own decision-making history as a guide, when do you know you should be selling based on logic, or on emotion?
Here’s the short rule of thumb: sell to Mr. Rational for simple sales, and Mr. Intuitive for complex sales.
This conclusion is backed by a 2011 study based on subjects selecting the best used car from a selection of four cars. Each car was rated in four different categories (such as gas mileage). But one car clearly had the best attributes. In this “easy” situation with only four variables, the conscious deciders were 15% better at choosing the best car than the unconscious deciders. When the researchers made the decision more complex – ratcheting the number of variables up to 12 — unconscious deciders were 42% better than conscious deciders at selecting the best car. Many other studies have shown how our conscious minds become overloaded by too much information.
If you want to influence how a customer feels about your product, provide an experience that creates the desired emotion. One of the best ways for a customer to experience your complex product is by sharing a vivid customer story. Research has shown that stories can activate the region of the brain that processes sights, sounds, tastes, and movement. Contrast this approach to a salesperson delivering a data dump in the form of an 85-slide power point presentation.
Rather than thinking of the emotional mind as irrational, think of it this way: an emotion is simply the way the unconscious communicates its decision to the conscious mind.
A No-Layoffs Policy Can Work, Even in an Unpredictable Economy
In today’s economy, organizations are supposed to treat employees almost as free agents, with low expectations of loyalty on either side. The concepts of lifetime employment and generous employee benefits are seen as old-fashioned throwbacks to paternalism.
But paternalism works — even in the twenty-first century, and even in an industry undergoing disruption. My own workplace is an example.
In the 15 years since I joined Scripps Health, we haven’t laid off anyone. That isn’t the norm in my industry, obviously. Hundreds if not thousands of hospitals have responded to trends such as shorter average hospital stays, fewer surgeries, a shift to outpatient and home care, and reduced reimbursements by consolidating or overhauling their operations and laying off staff.
We’ve certainly had to change too. Sometimes that’s meant eliminating positions, but we didn’t tell the affected employees to leave. A small minority voluntarily left Scripps, but most went elsewhere in the organization. When we were aiming to close a small chemical-dependency hospital in 2013, for example, we looked hard into unmet needs in the area. We decided to simultaneously start a new outpatient clinic nearby, and that’s where the hospital staff ended up.
We believe a no-layoffs philosophy is good for employees’ physical and psychological health — it’s well known that job insecurity can be harmful. And it’s with employees’ health in mind that we also offer generous benefits: Our insurance, wellness, and employee-assistance programs are more extensive than those of most health systems. We want our people to focus on patients, and they can’t do that unless their own health or family concerns are taken care of.
We support these policies through three key practices:
A preference for insiders. We rarely hire from the outside. Employees whose positions have been eliminated go through our Career Resource Center, where they’re trained for other open positions. When our marketing department needed two new people, it kept the positions open for a while in order to take on two employees coming through the CRC from departments that were shrinking. Neither had much marketing experience, but we invested in their development, and after retraining they moved over. Our bias toward insiders means sacrificing some flexibility in hiring. But the added employee motivation more than makes up for that shortcoming. And we haven’t suffered financially: Fifteen years ago we were losing $15 million a year and physicians had just voted no confidence in management. In recent years we’ve had a balanced budget, a AA bond rating, and a unified organization.
Serious accountability. Although we won’t fire you if you’re redundant, we will fire you if you fall short of the goals we develop with you. We’ll give you a lot of training and support, but at the end of the day, we’re all about meeting the needs of patients in a sustainable way. We can’t do that if our employees aren’t performing. So we do let some people go. That includes executives. I tell my senior team that they can miss their annual targets once, but if they don’t turn around their operations quickly, they won’t be here to miss them a second time. So far we haven’t had to fire any executives for missing their targets, although one of them did have to report monthly to the board on his remediation plan until the numbers turned around.
Frontline connections. We’ve worked to avoid the kind of blame-driven, watch-your-back culture I’ve seen in some organizations. We do that by connecting the front line with management in a continuing dialogue. We want all of our employees to understand the larger concerns and priorities of their hospital, clinic, or administrative department, to know how their jobs matter, and to feel free to ask questions of their supervisors. We even offer reluctant managers cue cards to help them start conversations. As a result, employees and managers throughout Scripps feel connected not just to their work buddies but to the overall organization, and employees partner with management to solve problems.
There has been a lot of talk over the years about making nonprofit organizations more businesslike. I’m all for giving nonprofits more financial discipline and planning, but that doesn’t mean they should treat employees like quasi-free agents. I’ve seen what it’s like to carry out mass layoffs — I had to do that in the 1990s at a hospital that was in bad financial shape. I vowed never to let myself get into that position again.
Instead, nonprofits need to match institutional discipline with authentic goodwill toward employees, developing effective employee-assistance and wellness programs and eliminating anxiety about job security. Who knows? If enough nonprofits master this balancing act, then maybe we can teach the for-profit world something for a change.
HBR recently ran a special series on managing up, asking experts to provide their best practical advice for navigating this important dynamic. Together, these pieces provide a good primer on how to maintain an effective, productive working relationship with your own boss.
To start, consider the type of manager you have. Many pose a unique set of challenges that require an equally unique set of skills to handle. Perhaps you’re dealing with:
No matter what type of manager you have, there are some skills that are universally important. For example, you need to know how to anticipate your boss’s needs — a lesson we can all learn from the best executive assistants. You need to understand what makes your boss tick (and what ticks her off) if you want to get buy-in for your ideas. Problems will inevitably come up, but knowing the right way to bring a problem to your boss can help you navigate sticky situations.
Perhaps the most important skill to master is figuring out how to be a genuine source of help — because managing up doesn’t mean sucking up. It means being the most effective employee you can be, creating value for your boss and your company. That’s why the best path to a healthy relationship begins and ends with doing your job, and doing it well.
3 Ways Businesses Are Addressing Inequality in Emerging Markets
Last year, the World Bank added a new mission to its original goal of reducing poverty: boosting shared prosperity. The change reflects the state of today’s world: the fraction of the global population in extreme poverty, defined as those earning less than $1.25 per day, has dropped to 12% from 36% in 1990. Yet income inequality is more pronounced than ever. According to a report released by Oxfam International on Monday, the richest 80 individuals in the world hold as much wealth as the poorest 3.5 billion. World Bank President Jim Kim has called this reality a “stain on our collective conscience,” explaining that boosting shared prosperity is the best way to fight inequality. We agree wholeheartedly with that approach. And we believe businesses must play a large role in making it happen.
Unlike extreme poverty remediation, shared prosperity cannot be accomplished solely by government handouts or even the well-meaning initiatives of NGOs. The first is not affordable and the second is often not scalable. Businesses can be a significant part of the solution. But they much more likely step in if they recognize that serving the masses is not about altruism or charity — it can be profitable in its own right.
Business can apply its innovative genius in three ways to create shared prosperity: by supplying quality products at ultra-affordable prices, which will allow the masses to stretch their purchasing power and improve living standards; by creating new opportunities for gainful employment, which will increase their incomes; and by providing access to services that will increase their future earning potential.
Take the case of Safaricom, Kenya’s largest cell phone company and creator with Vodafone of the popular wireless banking product, M-Pesa. As in other developing countries, telephone service and banking were regarded in Kenya as products for the rich, but the emergence of mobile phones and online banking, and the innovative idea of combining them, has brought these services to the Kenyan masses at ultra-low prices. Before M-Pesa, most Kenyans were classified as “unbanked,” and they transferred money in cash, through a friend or via a bus or taxi. This was slow, risky, costly, and inconvenient. Today, a phone doesn’t just give the poor the joy of communication but also a means to enhance their livelihood. One study reports that mobile phone usage increased the income of Ugandan farmers by 36%.
Businesses can also help the poor by enlisting the poor to serve the poor. An inspiring example is Aravind Eye Care Hospital of India. Two-thirds of its staff members are village girls with a high school degree who have been trained by Aravind for two years to perform many tasks, including helping doctors perform surgery. This has allowed Aravind to perform cataract surgery for just $100. (The cost of cataract surgery in the U.S. is over $3,500). As a result, Aravind has created thousands of jobs for village girls, while giving eyesight — and the dignity and employability that come with it — to three million poor. Because the girls come from the same villages as Aravind’s poor patients, they empathize with and serve them better than city-trained nurses tend to. The strategy produces winners all around, including Aravind, which has been able to fund its rapid growth entirely with internal resources.
Finally, businesses can provide income mobility to the poor and help them migrate up the income ladder — for instance, by giving them access to higher education. Kroton Educacional of Brazil is doing just that, in a country where just 57% of children finish high school and 14% of young adults enter college. Kroton started by developing innovative curricula for K-12 education in one province, and then grew to become a national leader in online higher education. Last year it merged with another for-profit firm to become the world’s largest online educator, with 1.2 million students and a market capitalization of $11 billion. Kroton has leveraged technology, such as online courses and satellite broadcasting of lectures by gifted teachers, to educate students across Brazil, including remote parts of the Amazon. Fees are low, quality is high, access is widespread, and the curriculum promotes employability. Kroton’s graduates have seen their incomes grow by a higher multiple than students in any OECD country.
These organizations have fewer peers than they ought to. But their winning formula is not a secret. To innovate for the developing world, companies must deeply understand the customer’s problem before designing solutions; localize R&D, manufacturing, the supply chain, and marketing in the economies they serve; and stick to the goal of providing high-quality products at ultra-affordable prices. We won’t pretend this is easy, but the potential rewards for businesses — and for societies in narrowing income inequality — are too large to ignore.
Don’t waste your breath with absurd questions like: What are your weaknesses?
How to Conduct an Effective Job Interview
The virtual stack of resumes in your inbox is winnowed and certain candidates have passed the phone screen. Next step: in-person interviews. How should you use the relatively brief time to get to know — and assess — a near stranger? How many people at your firm should be involved? How can you tell if a candidate will be a good fit? And finally, should you really ask questions like: “What’s your greatest weakness?”
What the Experts Say
As the employment market improves and candidates have more options, hiring the right person for the job has become increasingly difficult. “Pipelines are depleted and more companies are competing for top talent,” says Claudio Fernández-Aráoz, a senior adviser at global executive search firm Egon Zehnder and author of It’s Not the How or the What but the Who: Succeed by Surrounding Yourself with the Best. Applicants also have more information about each company’s selection process than ever before. Career websites like Glassdoor have “taken the mystique and mystery” out of interviews, says John Sullivan, an HR expert, professor of management at San Francisco State University, and author of 1000 Ways to Recruit Top Talent. If your organization’s interview process turns candidates off, “they will roll their eyes and find other opportunities,” he warns. Your job is to assess candidates but also to convince the best ones to stay. Here’s how to make the interview process work for you — and for them.
Prepare your questions
Before you meet candidates face-to-face, you need to figure out exactly what you’re looking for in a new hire so that you’re asking the right questions during the interview. Begin this process by “compiling a list of required attributes” for the position, suggests Fernández-Aráoz. For inspiration and guidance, Sullivan recommends looking at your top performers. What do they have in common? How are they resourceful? What did they accomplish prior to working at your organization? What roles did they hold? Those answers will help you create criteria and enable you to construct relevant questions.
Candidates find job interviews stressful because of the many unknowns. What will my interviewer be like? What kinds of questions will he ask? How can I squeeze this meeting into my workday? And of course: What should I wear? But “when people are stressed they do not perform as well,” says Sullivan. He recommends taking preemptive steps to lower the candidate’s cortisol levels. Tell people in advance the topics you’d like to discuss so they can prepare. Be willing to meet the person at a time that’s convenient to him or her. And explain your organization’s dress code. Your goal is to “make them comfortable” so that you have a productive, professional conversation.
Involve (only a few) others
When making any big decision, it’s important to seek counsel from others so invite a few trusted colleagues to help you interview. “Monarchy doesn’t work. You want to have multiple checks” to make sure you hire the right person, Fernández-Aráoz explains. “But on the other hand, extreme democracy is also ineffective” and can result in a long, drawn-out process. He recommends having three people interview the candidate: “the boss, the boss’ boss, and a senior HR person or recruiter.” Peer interviewers can also be “really important,” Sullivan adds, because they give your team members a say in who gets the job. “They will take more ownership of the hire and have reasons to help that person succeed,” he says.
Budget two hours for the first interview, says Fernández-Aráoz. That amount of time enables you to “really assess the person’s competency and potential.” Look for signs of the candidate’s “curiosity, insight, engagement, and determination.” Sullivan says to “assume that the person will be promoted and that they will be a manager someday. The question then becomes not only can this person do the job today, but can he or she do the job a year from now when the world has changed?” Ask the candidate how he learns and for his thoughts on where your industry is going. “No one can predict the future, but you want someone who is thinking about it every day,” Sullivan explains.
Ask for real solutions
Don’t waste your breath with absurd questions like: What are your weaknesses? “You might as well say, ‘Lie to me,’” says Sullivan. Instead try to discern how the candidate would handle real situations related to the job. After all, “How do you hire a chef? Have them cook you a meal,” he says. Explain a problem your team struggles with and ask the candidate to walk you through how she would solve it. Or describe a process your company uses, and ask her to identify inefficiencies. Go back to your list of desired attributes, says Fernández-Aráoz. If you’re looking for an executive who will need to influence a large number of people over whom he won’t have formal power, ask: “Have you ever been in a situation where you had to persuade other people who were not your direct reports to do something? How did you do it? And what were the consequences?”
Consider “cultural fit,” but don’t obsess
Much has been made about the importance of “cultural fit” in successful hiring. And you should look for signs that “the candidate will be comfortable” at your organization, says Fernández-Aráoz. Think about your company’s work environment and compare it to the candidate’s orientation. Is he a long-term planner or a short-term thinker? Is he collaborative or does he prefer working independently? But, says Sullivan, your perception of a candidate’s disposition isn’t necessarily indicative of whether he can acclimate to a new culture. “People adapt,” he says. “What you really want to know is: can they adjust?”
Sell the job
If the meeting is going well and you believe that the candidate is worth wooing, spend time during the second half of the interview selling the role and the organization. “If you focus too much on selling at the beginning, it’s hard to be objective,” says Fernández-Aráoz. But once you’re confident in the candidate, “tell the person why you think he or she is a good fit,” he recommends. Bear in mind that the interview is a mutual screening process. “Make the process fun,” says Sullivan. Ask them if there’s anyone on the team they’d like to meet. The best people to sell the job are those who “live it,” he explains. “Peers give an honest picture of what the organization is like.”
Principles to Remember
Lower your candidates’ stress levels by telling them in advance the kinds of questions you plan to ask
Sell the role and the organization once you’re confident in your candidate
Forget to do pre-interview prep — list the attributes of an ideal candidate and use it to construct relevant questions
Involve too many other colleagues in the interviews — multiple checks are good, but too many people can belabor process
Put too much emphasis on “cultural fit” — remember, people adapt
Case study #1: Provide relevant, real-life scenarios to reveal how candidates think
The vast majority of hires at Four Kitchens, the web design firm in Austin, TX, are through employee referrals. So in November, when Todd Ross Nienkerk, the company’s founder and CEO, had an opening for an account manager, he had a hunch about who should get the job. “It was somebody who’d been a finalist for a position here years ago,” says Todd. We’ll call her Deborah. “We kept her in mind and when this job opened, she was the first person we called.”
Even though Deborah was a favored candidate, she again went through the company’s three-step interview process. The first focused on skills. When Four Kitchens interviews designers or coders, it typically asks applicants to provide a portfolio of work. “We ask them to talk us through their process. We’re not grilling them, but we want to know how they think and we want to see their personal communication style.” But for the account manager role, Todd took a slightly different tack. Before the interview, he and the company’s head of business development put together a job description and then came up with questions based on the relevant responsibilities. They started with questions like: What are things you look for in a good client? What are red flags in a client relationship? How do you deal with stress?
Then, Todd presented Deborah with a series of redacted client emails that represented a cross-section of day-to-day communication: some were standard requests for status updates; others involved serious contract disputes and pointed questions. “We said, ‘Pretend you work here. Talk us through how you’d handle this.’ It put her on the spot, but frankly, this is what the job entails.”
After a successful first round, Deborah moved on to the second phase, the team interview. In this instance, she met with a project manager, a designer, and two developers. “These are an opportunity for applicants to find out what it’s like to work here,” says Todd. “But the biggest reason we do it is to ensure that everyone is involved in the process and feels a sense of ownership over the hire.”
The final stage was the partner interview, during which Todd asked Deborah questions about career goals and the industry. “It was also an opportunity for her to ask us tough questions about where our company is headed,” he says.
Deborah got the job, and started earlier this month.
Case study #2: Make the candidate comfortable and sell the job
When Mimi Gigoux, the EVP of human resources at Criteo, the French ad-tech company, interviews a job candidate, she looks for signs of “intellect, open-mindedness, and passion” both for the company and for the role. “Technical expertise can be taught on the job, but you can’t teach passion, drive, and creativity,” says Mimi, who is based in Silicon Valley.
About two months ago, Mimi opened a requisition for a new member of her team. She was particularly interested in one of the applicants: a person who had previously run talent operations at several top companies in the Bay Area. We’ll call him Bryan.
Before the interview, her team communicated with Bryan about the kinds of questions Mimi planned to ask. “I don’t believe in ‘tough interviews,’” she says. “If candidates perceive a hostile environment, they go into self-preservation mode.” And when Bryan came in for the interview, she did everything she could to make him comfortable. She started by asking him questions about his hobbies and interests, and Bryan told her about recent trips he had taken to Nepal and Australia. “It told me that he was open and intrigued by different cultures”— a characteristic she deemed critical for the recruiting role.
Mimi then moved on to past professional experience. Her aim, she says, was “to find out what inspired him to move from one job to the next.” She also asked behavioral-based questions. “I wanted to see how he identified patterns and problems, how he has managed difficult personalities in the past, and how he worked cross-functionally,” she says.
As the interview progressed, Mimi became more and more convinced that Bryan was the right person for the job. She shifted from asking questions to detailing “how special this company is.” She explains, “I wanted him to walk away from the interview thinking: ‘I want to work at Criteo.’”
Mimi offered the job to Bryan; he accepted but later had to retract for personal reasons.
In The New, New Thing, Michael Lewis refers to the phrase business model as “a term of art.” And like art itself, it’s one of those things many people feel they can recognize when they see it (especially a particularly clever or terrible one) but can’t quite define.
That’s less surprising than it seems because how people define the term really depends on how they’re using it.
Lewis, for example, offers up the simplest of definitions — “All it really meant was how you planned to make money” — to make a simple point about the dot.com bubble, obvious now, but fairly prescient when he was writing at its height, in the fall of 1999. The term, he says dismissively, was “central to the Internet boom; it glorified all manner of half-baked plans … The “business model” for Microsoft, for instance, was to sell software for 120 bucks a pop that cost fifty cents to manufacture … The business model of most Internet companies was to attract huge crowds of people to a Web site, and then sell others the chance to advertise products to the crowds. It was still not clear that the model made sense.” Well, maybe not then.
A look through HBR’s archives shows the many ways business thinkers use the concept and how that can skew the definitions. Lewis himself echoes many people’s impression of how Peter Drucker defined the term — “assumptions about what a company gets paid for” — which is part of Drucker’s “theory of the business.”
That’s a concept Drucker introduced in a 1994 HBR article that in fact never mentions the term business model. Drucker’s theory of the business was a set of assumptions about what a business will and won’t do, closer to Michael Porter’s definition of strategy. In addition to what a company is paid for, “these assumptions are about markets. They are about identifying customers and competitors, their values and behavior. They are about technology and its dynamics, about a company’s strengths and weaknesses.”
Drucker is more interested in the assumptions than the money here because he’s introduced the theory of the business concept to explain how smart companies fail to keep up with changing market conditions by failing to make those assumptions explicit.
Citing as a sterling example one of the most strategically nimble companies of all time — IBM — he explains that sooner or later, some assumption you have about what’s critical to your company will turn out to be no longer true. In IBM’s case, having made the shift from tabulating machine company to hardware leaser to a vendor of mainframe, minicomputer, and even PC hardware, Big Blue finally runs adrift on its assumption that it’s essentially in the hardware business, Drucker says (though subsequent history shows that IBM manages eventually to free itself even of that assumption and make money through services for quite some time).
Joan Magretta, too, cites Drucker when she defines what a business model is in “Why Business Models Matter,” partly as a corrective to Lewis. Writing in 2002, the depths of the dot.com bust, she says that business models are “at heart, stories — stories that explain how enterprises work. A good business model answers Peter Drucker’s age-old questions, ‘Who is the customer? And what does the customer value?’ It also answers the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?”
Magretta, like Drucker, is focused more on the assumptions than on the money, pointing out that the term business model first came into widespread use with the advent of the personal computer and the spreadsheet, which let various components be tested and, well, modeled. Before that, successful business models “were created more by accident than by design or foresight, and became clear only after the fact. By enabling companies to tie their marketplace insights much more tightly to the resulting economics — to link their assumptions about how people would behave to the numbers of a pro forma P&L — spreadsheets made it possible to model businesses before they were launched.”
Since her focus is on business modeling, she finds it useful to further define a business model in terms of the value chain. A business model, she says, has two parts: “Part one includes all the activities associated with making something: designing it, purchasing raw materials, manufacturing, and so on. Part two includes all the activities associated with selling something: finding and reaching customers, transacting a sale, distributing the product, or delivering the service. A new business model may turn on designing a new product for an unmet need or on a process innovation. That is it may be new in either end.”
Firmly in the “a business model is really a set of assumptions or hypotheses” camp is Alex Osterwalder, who has developed what is arguably the most comprehensive template on which to construct those hypotheses. His nine-part “business model canvas” is essentially an organized way to lay out your assumptions about not only the key resources and key activities of your value chain, but also your value proposition, customer relationships, channels, customer segments, cost structures, and revenue streams — to see if you’ve missed anything important and to compare your model to others.
Once you begin to compare one model with another, you’re entering the realms of strategy, with which business models are often confused. In “Why Business Models Matter,” Magretta goes back to first principles to make a simple and useful distinction, pointing out that a business model is a description of how your business runs, but a competitive strategy explains how you will do better than your rivals. That could be by offering a better business model — but it can also be by offering the same business model to a different market.
Introducing a better business model into an existing market is the definition of a disruptive innovation. To help strategists understand how that works Clay Christensen presented a particular take on the matter in “In Reinventing Your Business Model” designed to make it easier to work out how a new entrant’s business model might disrupt yours. This approach begins by focusing on the customer value proposition — what Christensen calls the customer’s “job-to-be-done.” It then identifies those aspects of the profit formula, the processes, and the resources that make the rival offering not only better, but harder to copy or respond to — a different distribution system, perhaps (the iTunes store); or faster inventory turns (Kmart); or maybe a different manufacturing approach (steel minimills).
Many writers have suggested signs that could indicate that your current business model is running out of gas. The first symptom, Rita McGrath says in “When Your Business Model is In Trouble,” is when innovations to your current offerings create smaller and smaller improvements (and Christensen would agree). You should also be worried, she says, when your own people have trouble thinking up new improvements at all or your customers are increasingly finding new alternatives.
Knowing you need one and creating one are, of course, two vastly different things. Any number of articles focus more specifically on ways managers can get beyond their current business model to conceive of a new one. In “Four Paths to Business Model Innovation,” Karan Giotra and Serguei Netessine look at ways to think about creating a new model by altering your current business model in four broad categories: by changing the mix of products or services, postponing decisions, changing the people who make the decisions, and changing incentives in the value chain.
In “How to Design a Winning Business Model,” Ramon Cassadesus-Masanell and Joan Ricart focus on the choices managers must make when determining the processes needed to deliver the offering, dividing them broadly into policy choices (such as using union or nonunion workers; locating plants in rural areas, encouraging employees to fly coach class), asset choices (manufacturing plants, satellite communication systems); and governance choices (who has the rights to make the other two categories of decisions).
If all of this has left your head swimming, then Mark Johnson, who went on in his book Seizing the White Space to fill in the details of the idea presented in “Reinventing Your Business Model,” offers up perhaps the most useful starting point — this list of analogies, adapted from that book:
Tools borrowed from scenario planning can broaden your view.
An Exercise to Get Your Team Thinking Differently About the Future
Thinking about the future is hard, mainly because we are glued to the present. Daniel Kahneman, the Nobel Prize-winning economist and author of Thinking, Fast and Slow, observed that decision makers get stuck in a memory loop and can only predict the future as a reflection of the past. He labels this dynamic the “narrative fallacy” – you see the future as merely a slight variation on yesterday’s news. A way around this fallacy, we’ve found, is a speed-dating version of scenario planning, one that takes hours rather than months.
Consider the experiment we recently ran with an expert panel to jump-start fresh thinking about the future. Our guinea pigs consisted of life sciences executives from big pharma, biotech entrepreneurs, and academics.
The question we asked: How might a shortage of science, technical, engineering, and math (STEM) talent affect the growth of life sciences companies? The high-speed scenario workshop involved three steps: 1) Identify key story elements or drivers of the STEM talent “story” to be explored; 2) conceive a plausible future by combining the elements; and 3) explore this future to understand its implications for their businesses.
Participants chose three drivers — forces that could be expected to shape the future of the life science industries: Science education, federal investment in life sciences, and private investment. They then identified extremes for each driver that were far from their current state. For example, the group defined the education driver as “the degree to which US elementary through higher education has developed curricula to produce science and technical talent.” Participants decided that in their future story, the US education system would substantially weaken, resulting in relatively few new science graduates, and that government funding, the second driver, would drop precipitously. Meanwhile, the group suggested that large-scale private investment in life sciences would soar.
Building a scenario based on the imagined future state of these drivers, the experts painted a picture of a world in which investor-funded technology companies would transform the traditional life sciences industry. In this world, life-science research draws more on big-data analytics than lab-bench experiments, and virtual talent easily supplants large supplies of scientists married to one location. The result is a more efficient and cost-effective industry.
By helping the group break free of the narrative fallacy, the exercise allowed them to rapidly build a scenario that stood in sharp contrast to their initial assumptions about the future — that a science-graduate shortage could only harm their industry.
Next, we asked participants to consider the strategic implications of this single future story. Here are a few of the provocative ideas the group advanced:
Pharmaceutical and biotech firms will make smaller bets, and more of them. Private money – not government grants – will fuel these bets.
There will be more R&D partnerships between private organizations like the Gates Foundation and biotech firms, as well as Big Pharma. Private foundations will supplement, but not replace, anemic government funding.
Crowd sourcing will become a fundamental R&D engine. This will allow corporations to continue to pursue R&D at near current levels without but at lower cost.
Big Data and analytics companies such as Google will re-shape life-sciences R&D, shifting the emphasis from hands-on laboratory experimentation to virtual research facilitated by ever-increasing computing power.
While a two-hour exercise could never substitute for a full-bore, months-long scenario planning activity, our experiment did get participants out of their usual frame of reference, opening their eyes to a possible future that would require very different types of investment and research. That this shift can happen in a matter of hours shows how workshops like this one can unstick executive thinking.
To make exercises like this work, a disciplined facilitator must prepare and guide the participants. They don’t need to be given a formal write-up, but relevant research materials must be handy (in our case, these included a handful short articles on life sciences growth trends, as well as a few news reports on STEM talent); and the facilitator must serve as an editor, pruning and clarifying the flood of ideas the group will generate. Given the tight constraints on such exercises, the facilitator has to carefully balance the time devoted to imagining a future world, and to “living” in it – that is, exploring how the envisioned future might actually affect participants’ businesses and industry.
Obviously, a brief workshop like this one shouldn’t be used to shape strategy; that requires true scenario planning. But we’ve found that such exercises work well to dislodge narrow thinking about the future, neutralize Kahneman’s narrative fallacy, and kick-start a strategy conversation.
And other lessons from a study of China’s largest travel agency.
A Working from Home Experiment Shows High Performers Like It Better
Marissa Mayer’s move to ban working from home at Yahoo in 2013 caused a media firestorm over the costs and benefits of this rapidly growing practice. People lined up to defend both sides of the argument: Do work-from-home (WFH) policies encourage employees to “shirk from home” or are they an essential way to make our modern work lives actually work?
To answer the question systematically and scientifically, we and two of our students ran an experiment with Ctrip, China’s largest travel agent. Ctrip wanted to test a WFH policy both to reduce office costs (which were becoming an increasingly high percentage of total costs due to rising rents at the firm’s Shanghai base) and to reduce the firm’s high annual rate of staff turnover (50%). Ctrip management was concerned, however, that allowing employees to work from home could have a negative impact on their performance, so they wanted to test the policy before rolling it out to the entire company.
By way of disclosure, one of our research team members, James Liang, is also the co-founder and chairman of Ctrip. This provided us with excellent — and uncommon — access to both the experimental data and to the management’s views on working from home. As such, the experiment provided some insight into how large publicly-listed firms adopt new management practices, and helped shine a light on why so many firms fail to adopt potentially beneficial management practices.
Ctrip decided to run a nine-month experiment with its airfare and hotel divisions in the firm’s Shanghai headquarters call center. All employees with at least six months’ worth of experience with the firm were offered the option to work from home for four days each week. Of the 508 eligible employees, 255 volunteered to work from home and — after a lottery draw — those with even-numbered birthdays were selected for WFH arrangements while those with odd-numbered birthdays stayed in the office to act as a control group.
Both home- and office-based employees worked the same shift period, in their same work groups, under the same managers as before, and logged on to the same computer system, with the same equipment, and the same work-order flow. The only difference between the two groups was the location where they worked. Ctrip keeps extensive, computerized records of the times employees are actually working, the sales they make and the quality of their interactions with customers, and this data allowed us to compare the performance of those at home and those in the office.
So what were the results of the experiment? First, the performance of the home-workers went up dramatically, increasing by 13% over the course of the nine months. This increase in output came mainly from a rise in the number of minutes they worked during each shift, which was due to a reduction in the number of breaks and sick days that they took. The home-workers were also more productive per minute, which employees told us (in detailed surveys) was due to the quieter working conditions at home.
Second, there was no change in the performance of the control group (and there were no negative effects seen from staying in the office). Third, the rate of staff turnover fell sharply for the home-workers, dropping by almost 50% compared to the control group. The home-workers also reported substantially higher work satisfaction and less “work exhaustion” in a psychological attitudes survey.
At the end of the experiment, Ctrip’s management team was so impressed by the success of the WFH policy that they decided to roll it out to the entire firm. They also offered both the original home-workers and the control group a fresh choice of work arrangements.
To their surprise, half of the home-workers changed their minds and returned to the office and three quarters of the control group — who had initially all requested to work from home — decided to stay in the office, as well. The main reason seems to be that people who worked from home were lonely. This unexpected outcome highlights the fact that before these types of management policies are implemented, their likely effects are as unclear to employees as they are to managers. It also helps to explain the typically slow adoption of such practices.
How do our findings compare with previous research? There is an extensive body of case studies on individual firms that have adopted WFH programs, and they tend to show large positive impacts. (See the studies here and here.) But the robustness of these results is hard to evaluate because of the non-randomised nature of the programs, both in terms of the selection of firms and the selection of employees who worked from home. This self-selection effect is evident even in the case of Ctrip: when the firm allowed a general roll-out of home-working, high-performing employees typically chose to move home while low-performing employees chose to return to the office. We suspect that the most driven employees were more willing to work from home, knowing they could stay focused away from the office, while the more distracted tended to worry about the consequences of sitting all day next to the fridge and the television — the biggest enemies of working from home.
What does our experiment tell us about what other companies can expect if they allow employees to work from home? Clearly, Ctrip’s call centers are different from many work contexts: behavior and performance at Ctrip are easily tracked, bonuses make up almost half of salaries, and the work could be done on an individual basis with limited need for collaboration or innovation. While many firms that depend on innovation discourage WFH because they want interaction among employees, many occupations have these same characteristics as at Ctrip. Examples include coding, technical support, telesales, and basic accounting. Moreover, two WFH benefits would probably also transfer to many jobs: the increased productivity that comes from the peace and quiet of home and the large drop in turnover rates due to greater employee job satisfaction.
So our advice is that firms — at the very least — ought to be open to employees working from home occasionally, to allow them to focus on individual projects and tasks. We encourage companies to do a trial the next time an opportunity presents itself — like bad weather, traffic congestion from major construction, or a disruptive event (such as a city hosting the Olympics or the World Cup) — to experiment for a week or two.
We think working from home can be a positive experience both for the company and its employees, as our research with Ctrip showed. More firms ought to try it. And our advice to Yahoo is to give working from home a second chance — it is critical for retaining and motivating your key employees, and is an essential part of the 21st century office.
When customers subscribe or pre-pay, everyone benefits.
What Netflix and Starbucks Know About Cash Flow
Netflix just announced its best quarter ever. Its subscriber count went up 13 million worldwide, and investors are enthused. Its U.S. business ended 2014 with 39.1 million subscribers, not far off our 2012 prediction that there were at least 40 million U.S. households who seemed likely to sign up for its streaming video service.
The success Netflix is enjoying was far from certain if you recall the summer of 2011. That’s when the company suffered through the Quikster controversy and a protest over its price increase. I was in the minority when I wrote that the price increase was a good thing. I wrote that not as a growth strategist, but as a loyal, happy Netflix consumer. I was very pleased with my decade-long relationship with Netflix. I trusted the brand. I knew my demand for streaming would go up over time. And I felt certain that Netflix would take my extra $1 per month and invest it wisely for my benefit.
And it did. It took my dollar, combined it with many dollars from like-minded customers, and invested it in things like original content, including “House of Cards,” for which Kevin Spacey won the Golden Globe.
Netflix’s ability to make a big bet like this stemmed from its certainty of latent demand—in other words, that people signing up for a monthly service showed a real commitment not only to become customers but to stay customers. For that to happen, consumers must know their demand for a product or service is predictable and likely to go up. The consumer must also have sufficient trust in the brand’s willingness and ability to understand, predict, and invest in meeting that demand.
Both of these were true for Netflix. Americans’ demand for media is very high. As Steve Hasker, Nielsen Global President, says, American consumers now have a second 40 hour per week job: consuming media, much of which now streams over phones and computers. And consumers could be confident that Netflix, with its recommendations engine, could reliably meet that demand.
When customers can foresee their demand for a product or service rising and trust a company enough agree to a monthly payment (thus providing regular cash flow), they are essentially enabling the company to build what customers want. Think of it as Kickstarter for established companies and their consumers.
Converting consumer certainty into consumer cash flow is a key part of making money from digital business models, many of which use subscription models. From a consumer standpoint, digital payments can be more convenient and are potentially safer. But mostly it taps into the wisdom from Mark Cuban of creating as much transactional value from cash as possible. When consumers are certain about their latent demand, they are increasingly willing to provide positive cash flow in exchange for better value or more benefits. “Saving 30 to 50% buying in bulk — replenishable items from toothpaste to soup, or whatever I use a lot of—is the best guaranteed return on investment you can get anywhere,” as Cuban says.
Improving cash flow is extraordinarily healthy for any business. If you can better predict consumer demand with more certainty, whether via subscription business models like Netflix or Amazon Prime, you can improve forecasting. This allows you to better manage operating and capital expenses. It can also improve working capital. Consider the Starbucks loyalty card, which consumers buy pre-loaded with cash. In early 2014, Starbucks said consumers loaded $1.4 billion to those payment platforms. According to Bloomberg Businessweek, in 2013 Starbucks made $146MM on interest investing the float, or 8% of total profit.
Digital payment innovations that tap into consumers certain about their latent demand are at the heart of successful digital business models. And brands that have earned high degrees of trust with great loyalty and passion—whether in a sexy category or not—are in the best position to capitalize on it.
Despite studies showing that succession is an essential part of strategic planning, many companies ignore leadership development to focus on more immediate challenges. But your organization’s future success depends on identifying and developing the next generation of its leaders.
According to a 2014 survey from Deloitte, 86% of business leaders know that their organizations’ future depends on the effectiveness of their leadership pipelines — but a survey of 2,200 global HR leaders found that only 13% are confident in their succession plans, with 54% reporting damage to their businesses due to talent shortages. To improve your leadership development strategy, look at the criteria you’re using to identify potential leaders, what you’re doing to assist with their development, and how you’re measuring their success.
Establish a set of clear and defined leadership competencies, so HR and other stakeholders know whom to fast track for leadership. Too often, companies demand a laundry list of vague qualities, such as creativity and innovation, which fail to align with organizational needs. Or they rely on subjective metrics, such as likability, loyalty, whether someone is “due for promotion,” etc. This puts you at risk of missing out on true top talent and promoting the wrong people. And it confuses young, promising managers about what skills and behaviors they need to develop to advance their careers.
A McKinsey & Company report also said, “Too many training initiatives we come across rest on the assumption that one size fits all and that the same group of skills or style of leadership is appropriate regardless of strategy, organizational culture or CEO mandate.”
Senior leaders must determine the specific leadership skills and behaviors needed to successfully execute the company’s strategy. Whether your organization is planning a merger, entering new global markets, ramping up sales operations, or creating a flatter corporate structure, it’s important to first think about what skills are needed to successfully execute the initiative. For example, when a U.S. company promoted someone to head its product and content development unit in India, it assessed what skills would enable him to succeed: cultural sensitivity, an ability to build multicultural teams, a flexible communication style, and a high tolerance for uncertainty. With executive coaching and targeted leadership development, the executive was able to transition with the necessary competencies.
Aside from the skills needed to execute on specific strategy initiatives, research has noted that high-potential leadership talent generally demonstrates a drive to excel, a “catalytic learning capability,” and an enterprising spirit, coupled with the ability to sense real risk. Focus your leadership development program on strengthening employees’ ability to deliver strong and credible results, to master new types of expertise, and to uphold behavioral standards that reflect the company culture and values. Credibility is especially important, as building trust and confidence among colleagues leads to an ability to influence a wide array of stakeholders.
Consider how leadership talent is fast-tracked within your organization.Studies have shown that leadership development is most effective when high-potential employees are formally identified as such. Organizations must be clear about whom they’re eyeing for leadership and how much they’re investing in them. This investment can take the form of enhanced development opportunities, such as special assignments or training, rewards and incentives, greater authority, additional resources, and increased feedback.
Pair potential leaders with mentors and executive coaches to aid in their development. Give challenging job-specific assignments that tie in to the overall business strategy, and then provide more frequent feedback so adjustments can be made in real time. The key for these interventions is to keep the momentum going. These aren’t one-off initiatives or stand-alone workshops without follow-up. You want to sustain and expand your development program to address business challenges in real time.
Create a process for measuring overall performance and growth. Once the necessary leadership competencies have been determined, targeted assessments at various stages of a development program can help keep future leaders on track. There are numerous assessments that measure everything from problem-solving and decision-making styles to emotional intelligence to identifying one’s approach to innovation. Using 360-degree assessments throughout the program can show you whether employees are learning the desired leadership competencies or whether adjustments need to be made.
Some companies have proven themselves to be models of effective leadership development. Look at P&G, IBM and GE — the top three companies for leaders, according to a ranking by Chief Executive. P&G and IBM both make developing leaders from within a priority and invest heavily in training, and IBM has a standardized leadership track. GE has shifted its leadership development focus under new CEO Jeff Immelt, putting greater emphasis on drawing innovation and new ideas out of its high potentials.
Organizations that fail to develop strong future leaders will inevitably see that high-potential talent — already in short supply — head elsewhere. By then, expensive executive searches may need to be repeated, there may be a loss of strategic momentum and investor confidence, and the company may flounder with a CEO who is out of step. It’s time to protect your company from inadequate leaders, who, at best, hurt a company’s bottom line, and at worst, threaten its legacy.
The disorganized accumulation of papers and coffee cups scattered across your desk may help you project the impression that you’re working at full throttle, but in fact it’s probably dragging you down. We’ve found that people sitting at messy desks are less efficient, less persistent, and more frustrated and weary than those at neat desks.
But wait, you may say. No one who has worked in a busy office for more than a week can possibly keep a neat desk — the work comes at you too fast. Or you may say that you like your mess, that it’s as comforting as a little nest. To which we say yes, it can be challenging to keep a desk neat. And yes, a mess can be comforting, even freeing, in a sense: You don’t have to worry about things becoming disordered, because they’re already disordered.
But look at the data:
In one of our experiments, more than 100 undergraduates were exposed either to an uncluttered space or to a work area where papers, folders, and cups were scattered over shelves, a desk, and the floor, like so:
Measuring the impact of mess. Source: Boyoun (Grace) Chae and Rui (Juliet) Zhu
Measuring the impact of mess. Source: Boyoun (Grace) Chae and Rui (Juliet) Zhu
Then, in a separate room, they were asked to undertake what was described as a “challenging” — actually, it was unsolvable — task that consisted of tracing a geometric figure without retracing any lines or lifting the pencil from the paper. Those who had been exposed to the neat environment stuck with the task for an average of 1,117 seconds before giving up, more than 1.5 times as long as those who had been exposed to the messy space (669 seconds). Other experiments produced similar results.
Persistence in a frustrating task is a classic measure of what’s known as self-regulation, which is essentially your ability to direct yourself to do something you know you should do. Self-regulation can be undermined by depletion of mental resources, and that’s exactly what we think was going on. The mess posed a threat, in a sense: It threatened participants’ sense of personal control. Coping with that threat from the physical environment caused a depletion of their mental resources, which in turn led to self-regulatory failure.
The evidence for this chain reaction comes from another aspect of the experiment: If participants wrote about their personal values, an exercise known to restore mental resources, the disorganized environment had no effect on their persistence on the fiendish task.
So even though it can be comforting to relax in your mess, a disorganized environment can be a real obstacle when you try to do something.
And although we don’t have data to back this up, we conjecture that a mess of your own creation may affect you even more strongly than a mess that’s been imposed by someone else. A self-created mess can become overwhelming because it serves as evidence that you’re unable to control your environment.
We’re aware that other researchers have found there’s a benefit to a disordered environment: It seems to help people break from convention and be more creative. A team led by Kathleen D. Vohs of the University of Minnesota found that people in a room where papers were scattered on a table and the floor came up with five times more highly creative ideas for new uses of ping-pong balls than those in a room where papers and markers were neatly arranged.
The two sets of findings aren’t necessarily contradictory. In fact, it could be that the depletion effect of disorder caused people to engage in primarily affective or divergent thinking, which enhanced creativity.
In any case, our research has made us think about other factors at work that may deplete employees’ mental resources and therefore undermine their self-regulation and persistence. One possibility that comes to mind is extreme self-consciousness — ruminating about others’ perceptions. Employees might find it depleting to wonder: What do people think of me? Of my work quality? Of my appearance? It’s very possible that this kind of thinking hurts performance.
It can be challenging to turn off rumination. In comparison, solving the messy-environment problem is relatively easy. Because of our research, both of us have become more aware of the value of an ordered environment. We both keep our desks neat, and one of us (Chae) makes sure to maintain an orderly home. The reasoning: A neat environment at home allows her to head into work on Monday morning feeling fresh and restored.