Marina Gorbis's Blog, page 1278

Combining Virtual and Face-to-Face Work

Many companies feel they face a conundrum when it comes to determining remote work policies. Perhaps the most common misconception about adopting virtual work is that it is an all-or-nothing proposition, such that once we have networking tools in place, there is no need to come together — or conversely that we have to be in the office all the time. But this paradigm often forces knowledge workers to choose between two strong drives: the need for autonomy and the need for a purpose that inspires and unites them.

It is neither wise nor effective to turn our backs on the benefits of having a virtual work force. But it is also true that in this increasingly digital age, we stand to lose something integral to what makes organizations both humane and productive places to work: the relationships and sense of purpose that can only be built by having in-depth, face-to-face conversations about important issues—what I call collective sensemaking (based largely on the work of Karl Weick).

The way to satisfy both needs is to blend sophisticated virtual tools with periodic face-to-face meetings. This involves what I call the “oscillation principle,” which allows you to tap the best attributes of both virtual work and face-to-face convening.

Virtual work allows for:

Drawing on the global talent pool
Reducing costs from office space
Providing greater autonomy to workers by giving them room to experiment and control their workflows
Being able to respond quickly to local customers
More satisfying integration of work and family life

Convening fosters:

Strong commitment to jointly made decisions
Shared understanding of goals and a larger purpose
The ability for components, developed independently, to smoothly come together into a meaningful whole
Diverse and innovative solutions to complex issues
A sense of community, cohesion, and belonging

One example demonstrates how. Proquest, an information company, has a Research Solutions Division comprised of three remote teams, with members scattered from Amsterdam to San Diego. They are in daily communication with each other using multiple forms of media, but everyone comes together for a three-day Summit every four months to plan the work they will be carrying out virtually. Taco Ekkel, the division manager told me, “We would need four scheduled calls to accomplish what we get solved around a white board in an hour. Without the Summits it would definitely slow things down.”

During the Summit, he creates a culture to foster collective sensemaking. This means: 1) actively seeking members’ input into the agenda, 2) abandoning hierarchy and giving decision-making power to the group, 3) whiteboarding to jointly design features and build group ownership of ideas, and 4) preserving social time to help team members build important relationships. (He makes sure work sessions end promptly at 5PM so they can socialize at 5:30PM.)

Outside of the Summit, he maintains this collaborative culture by holding (almost) daily virtual meetings so everyone is aware of what everyone else is doing.

And they’ve learned which virtual media is appropriate for certain tasks. For example, email works best for requesting or passing on factual information, while a teleconference is typically necessary for a problem solving task, such as deciding who should represent the company a client meeting. A face-to-face meeting might be needed for a brainstorming discussion about ways to alter a product’s design. Proquest usually saves larger conversations about new features for their Summits. “We’d never really effectively get them conceptualized without the richness of face-to-face contact coupled with sketching,” Ekkel said.

In this example, workers are both virtual and remote. But the oscillation principle is equally applicable to organizations where workers spend some of their time working remotely—in a client office, at home, or even at temporary “hot desks” when they’re in the office. If these workers aren’t periodically connecting, in person, around issues that matter, they’ll find themselves disconnected from their colleagues and the driving mission of their unit.

And how frequently your employees come together depends on task interdependence — or the extent to which one person’s work affects what other team members do — and complexity. The greater the interdependence and complexity, the more frequently collective sensemaking meetings need to occur.

The more virtual organizations become, the greater the need for oscillating between being remote and coming together on a regularly scheduled basis. I can conceive of a time when employees will conduct their individual work where it is most convenient to do so. They will come together to innovate, share new experiences, understand issues they are all are facing, solve problems, and develop strategy. There will be an understanding that when they convene it is to make use of all the knowledge and analytical ability that is in the room. Everything else will be effectively conveyed virtually. The normal way of working will be: isolate to concentrate, convene to collaborate.

This post is one in a series of perspectives by presenters and participants in the 7th Global Drucker Forum, taking place November 5-6, 2015 in Vienna. The theme: Claiming Our Humanity — Managing in the Digital Age.

What Comes After Smart Products

Companies today are on a journey from digitization 1.0 to digitization 2.0. This means advancing from simply overlaying digital functionality on existing offerings to learning the customer context via connected products and services and adapting them to meet customer needs.

With digitization 1.0, companies create products and services that allow manufacturers to collect data on how their products are being used by customers in different settings and learn to modify them for future use. Digitization 2.0 is about the exchange of “in-context” data on how consumers and enterprises use different interconnected products and services across industry boundaries. This exchange will result in the adaptation of products and services across organizational boundaries to meet customer needs.

Many managers think of digitization 1.0 as the endgame, but the real disruption and value shifts occur at the frontier of digitization 2.0. Here are two examples that illustrate the differences.

Cars in the cloud. Traditional automobiles were designed and differentiated based on physical attributes like size, horsepower, seating capacity, and looks. GM, Ford, Toyota, and others designed, manufactured, sold, and serviced their automobiles through dealers. Since the automakers did not have direct access to data from their cars “on the road,” they relied on dealers to get feedback on the performance of their cars. They could only learn by extrapolating from sample data collected during maintenance checks and repairs and developing insights on the various sub-components.

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Digitization 1.0: smart cars. Over the last decade, the automobile has changed, with more digitization injected by software and connectivity to the cloud. Automobiles have their own proprietary operating system (e.g., Ford Sync and GM OnStar). With cars increasingly connected to the cloud through 4G LTE from telecom operators (e.g., AT&T and Verizon), automakers have direct access to data on their cars “in use” through onboard diagnostics. Every major automaker today has telematics systems for customer service (navigation, communication, and entertainment) as well as a conduit to collect data for faster feedback and product modifications akin to software updates. Tesla recently made a product update by using connectivity and a software download to improve driving performance.

Digitization 2.0: mobility ecosystems. Going beyond individual telematics systems, automakers have opened up their operating system (e.g., Ford OpenXC) to third-party developers to write apps. Now automobiles and mobile phones are able to interconnect without conflicts. At the same time, Google and Apple have announced their intent to be drivers of digital transformation in the automotive sector. Android Auto and Apple CarPlay are in the initial stages of pulling together the different automakers into their ecosystems with many apps for navigation, communication, and entertainment.

As the automotive sector digitizes with electric drivetrains (e.g., Tesla and GM Chevy Bolt), cloud connectivity, and self-driving functionality (e.g., Google and Uber), digital features may override physical differentiators. The digitization of the automotive ecosystem invites participation from companies across different industries (car manufacturers, telecom providers, software companies, app developers, service providers, etc.) and value creation and capture are more likely to make use of context-aware information insights. It remains to be seen whether Google, Apple, Tesla, and Uber will define the winning rules and whether automakers maintain their control over the way people and goods move.

Homes as digital hubs. Early thermostats simply set the temperature to a particular value to help maintain room temperature, with minimal information sent back to the grid. Fixed telephone lines and early generations of cable TV boxes also provided limited two-way interactions and minimal personalization. With the arrival of the high speed internet, Wi-Fi networks, and smart devices, homes are entering the digital age.

Digitization 1.0: smart gadgets. Digital telephony, smart meters, smarter cable, and satellite-television boxes as well as home-automation consoles have ushered in some efficiency and convenience in modern homes. Take the case of the learning thermostat from Nest (now part of Google). Unlike analog thermostats, Nest thermostats “learn” a home dweller’s living habits and provide optimum home convenience like a smart digital butler. These thermostats know when people are home and when they are away and is able to adjust temperatures accordingly.

Digitization 2.0: connected home. Homes have had an early start for being nodes on networks — starting with heating and air-conditioning (thermostats), communication (telephones) and entertainment (televisions). By looking at the digital home through a tool like Nest’s eyes, we see homes not as islands of automation but as a network of smart devices. With Works with Nest initiative and the new Brillo platform, Google has opened up its interfaces to connect and communicate with other devices both inside and outside the home. This can be seen in action with the Protect smoke detector. When this device senses smoke in the room, it switches on a camera to take pictures for insurance purposes and switches off the heating system. In short, Google’s seeking to understand the context and take sensible actions. This approach can help create the digital home hub with Android as the software OS and Nest as the lead device.

Many platforms are positioning themselves to dominate in this market. These include Amazon with its Amazon Echo; Apple, whose iOS is embedded in Apple TV, Apple HomeKit, iPhones, and iPads (for now); Google with its Android operating system; and Microsoft with its Windows devices, including Xbox. As these companies structure and evolve their ecosystems, they also become custodians of valuable customer data. Data from multiple devices can help companies understand the customer context better. Firms that learn to collect, interpret, and adapt to this data will occupy leadership positions. Important questions remain to be answered. Whom will homeowners trust with their data? What value do they get in return? Although we are just getting started with digital home, one thing is clear: The traditional demarcation of industries is eroding and ecosystems will enable companies to have multiple threads of interconnections and interdependency.

Here’s how your company can prepare to win in the digitization 2.0 world.

Architect your products for context-awareness. Your company’s product architecture may be analog today but ask yourself: What happens when products become digital and your company can observe, analyze, and correct your products while in use? Similarly, how can you facilitate product adaptation across companies that are collaborating to deliver on a customer value proposition?

Map your digital ecosystem beyond your core industry’s boundaries. Companies are now part of digital ecosystems with connections based on data and interoperability (APIs). Competing and collaborating simultaneously with the same companies will be the norm as rules evolve with different monetization models and cross-subsidization (e.g., value for data). Senior leadership should not only map their own company’s ecosystem. They should also track others, which may help them identify potential entrants that could pose a threat or opportunity.

Develop capability for context-aware insights. Digitization, sensors, and connectivity lead to the generation of large volumes of data. Understanding products and services in use require significant capabilities to capture, store, and analyze data at unprecedented scale. New technologies like Hadoop for storage, tools like R and SAS for analysis, and visualization techniques are starting points for managing in the digital age.

Digitization is the single biggest trend affecting every company. It challenges every company to think about the drivers of value creation and capture as well as modes of differentiation beyond familiar dimensions of cost and quality. Our message is simple: Think first about how your products and services become smart as you observe them in use. Then, understand the context-aware continuous refinements that could significantly enhance the value of your products and services as part of dynamic digital ecosystems. Make sure that your business is designed to move from digitization 1.0 to 2.0.

Signs Your Team Is Too Strong for Its Own Good

We talk about building strong teams as though there’s no upper limit — stronger is always better. But it turns out, you can go too far. It’s possible for a team to be too strong. In fact, one of the primary drags on organizational performance is the natural consequence of managers paying too much — not too little — attention to the strength of their own team.

I first noticed this 30 years ago when I worked with the training department of a large international company. The training manager demanded that my company write an exclusive contract that said we’d be the sole providers of our products and services to all divisions of the organization. I thought the emphasis on exclusivity was strange. I worried that the training manager’s goal was less about organization development and more about kingdom building. Soon thereafter, this training manager learned that some distant division was using some of our public domain IP to teach their managers — without involving the training department. After they refused his “cease and desist” request, he called me to make them stop — by suing them!

Certainly the work of team leaders is to turn a collection of individuals into a productive collective. But if their focus stops there, the larger enterprise will inevitably devolve into a bunch of competing tribes — in which organizational mission is subordinated to team performance and identification with the team is less a function of healthy trust and more of mutual protection.

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Our VitalSmarts global “Cultural Operating System” study involved over 10,000 managers and executives from hundreds of organizations in an attempt to find the cultural “viruses” that most sapped the ability to execute and innovate. We sat up and took notice when we discovered that over-identification with a team dragged execution and innovation down by 11% and 12% respectively.

Flawless execution and consistent innovation can’t happen unless managers see their job as building “the team” rather than “my team.” Otherwise, tribalism trumps mission.

Here are four questions to ask to assess whether you are a carrier of the tribal virus or whether you’re contributing to enterprise health:

Tribe or Team?

Do I frame our budget and resources as property or stewardship? If you follow the “use it or lose it” dictum with your budgets and engage in budget planning defensively — you’re building a tribe.


Do I describe team goals as means or ends? If you spend little time reminding team members how your tasks connect with the company’s mission — you’re building a tribe.


Do I refer to outsiders as competitors or teammates? If you refer to colleagues in other departments in derogatory, dehumanizing, or categorical terms (“Just blame upper management,” “Engineering did it again,” or “Good luck getting approval from the bean counters”) — you’re building a tribe.


Is outside contact beyond your team free or monitored? If you require teammates to check with you before or immediately after connecting with those above you or outside your boundaries — you’re building a tribe.

Tribalism is natural. Humans have a natural conservative bias in assessing threats — mistrust is the default condition. Thus, we have a difficult time thinking good thoughts and feeling a sense of connection with those outside our immediate experience. The only thing team leaders need to do to create a culture of competing tribes is: nothing. In order to break down tribalism, though, they need to actively and intentionally foster three vital behaviors:

Frequent exploration. People can’t care about what they don’t experience. It’s only through frequent contact with colleagues working diverse problems associated with the company’s mission that people come to identify with and feel responsible for larger goals. Great team leaders enable and require frequent connection with the larger “team.”


360 accountability. The best expression of commitment to the company’s mission is the willingness to raise problems — even interpersonally uncomfortable ones — that fall outside their smaller “team” stewardship.

The best predictor of the health of an organization is the average lag time between identifying and discussing problems — especially team problems. Tribalism dissolves when people are convinced that if they see something they can say something — whether to a senior executive or a manager in a distant division; no one is bigger than the mission. This kind of enterprise-wide accountability norm dramatically accelerates both problem solving and change.

Organizations that want to pivot rapidly and execute flawlessly can’t afford to wait for accountability to happen from the top down. They depend on a culture that rapidly connects awareness with responsibility no matter how far separated they are on an org chart.

Periodic sacrifice. The second most important expression of identification with team rather than tribe is the frequency with which you sacrifice a team need to an enterprise need. If this isn’t happening, you’re building a tribe.

I once watched an instant transformation of tribe into team. During a combative capital budgeting exercise amongst a group of executives in a financial services company, one VP made the following statement: “It’s clear there is more growth opportunity in Andrew’s division than mine. Let’s talk about how much capital we should shift from my division to his.”

An embarrassed silence was followed by guilty reciprocity when two others grudgingly, then genuinely, joined into the new ethic of enterprise over tribe by making similar offers.

Frequent self-examination for the four indicators of the tribal virus — and intentional promotion of these three behaviors — will help you strike the right balance in building your team.

Don’t Set Process Without Input from Frontline Workers

You know those guys with the clipboards and checklists? Those annoying folks who drone on about compliance and procedure? Those sticklers who find reasons why things can’t be done? Every large institution has them. They are the process nerds. And within many companies, a tribal war is raging between these nerds and everyone else. But the world’s best organizations are calling a truce: They are learning how to turn the potentially destructive power of process and procedure to everyone’s benefit.

How did the war start, and why is it important? It began with Frederick W. Taylor, the founder of scientific management who died 100 years ago. He transformed the world with the idea of the “one best way.” Mostly looking at individual workers, he figured out that standardization and optimization of work processes could lead to astonishing improvement in productivity. Over the last century, this idea of the standard procedure has taken hold not just for the work of the individual laborer but also for complex processes that span global businesses. Standardizing has become part of the DNA of large organizations to address such issues as safety and probity as well as efficiency. Specialists began to wrest the design of work from the workers.

The ability of the new technocrats to control organizations was, however, pretty limited. Reliant on paper charts and physical manuals, their control over how people actually behaved was relatively loose. Then came the new frontline: enterprise-wide computer systems. Over the last 25 years, organizations’ processes have become increasingly tied to complex IT systems that specify each step of a task. The nerds’ power was sharply amplified: Massive investments required the centralized engineering of business processes, putting all the control in the hands of a cohort of experts. Steadily growing out from its origins in manufacturing, the standardization of process and workflow moved to virtually all industries and sectors. In the face of the resulting massive improvements in productivity and service, dissenters who pointed out high profile failures and dysfunctional systems had little impact.

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In recent years, the war has entered a new phase: In the wake of all those financial scandals, governments around the world have imposed increased requirements for standardized central control. Michael Power of the London School of Economics describes the resulting explosion of bureaucracy as “the risk management of everything.”

But here’s the problem for operations: Standardized processes that work are great. But if the folks at the head office get it wrong, then operations around the world can be locked into systematic dysfunction. To see the dynamics of this, here are two stories.

A bank. A few months ago I opened a new account at a well-known UK bank at a brick-and-mortar branch. For many years, we’ve all understood that opening a new account requires a pile of personal identification for security clearance; identity theft and money laundering are big deals. You need photo ID, utility bills, details of your employer, and so on. So I lugged along a briefcase of paperwork and a wallet stuffed with cards. The teller was a model of charm and efficiency as she clicked through the questions on her screen. After 10 minutes, voilà! I signed some documents and had a new bank account.

But as she gave me the paperwork and the passbook, I paused. “You don’t seem to have checked that I am who I said I am?” I said. I had told her my address, age, and employer, but at no stage had  she asked for any of the paperwork I’d brought along. The only thing I’d handed over was a check for the initial deposit (made out to me from someone else). The teller looked puzzled for a moment and then explained, “No, you’ve been checked. The computer did it!” She explained that the bank was using a newish system that could “run the check in real time.” It became clear that what had happened was that the system had run a credit check on the person I was claiming to be; but the process had not questioned if I was actually that person. All the information I’d provided would be pretty easy for anyone to find out. I spelled out the problem to the teller. She summoned a colleague. After a quick discussion, they declared that they’d followed all the steps of the procedure, but they’d be happy to look at my photo ID if it made me feel better. I thanked them and left.

Back at my office, I did a bit of digging and found that the use of the light-touch credit check had been introduced across this bank quite recently to speed up customer service, especially for people taking out loans. As I thought about what had happened, I began to guess that the process had been rolled out across different products: this was a problem of process design and not sloppy execution at the branch. So I wrote to the CEO and explained what had happened. I said I wasn’t complaining and was just pointing out a flaw in the system.

I got a series of letters from the bank saying that the matter was being investigated, ending with a letter from the complaints department. “We understand that you didn’t make a complaint,” it said, “but because this looked serious, we thought we’d treat it as a complaint anyway. And we can’t uphold your complaint, because the staff in the branch were correctly following our procedures… .”

What’s happened here is actually pretty serious: If criminals can open a bank account in someone else’s name, then all sorts of bad stuff can happen. The nerds at the bank’s headquarters process had got it wrong, and the problem with their new process must have been missed. But even when alerted to the problem, the bank seemed to find it difficult to address the problem; the people handling the complaint are only empowered to see if a process was followed, not if the process is flawed. The lessons are two-fold: No one at the branch seemed to have any ownership of the process, and (maybe) the process nerds at the center were too distant from the action to see the problems with what they’d designed.

Medicine. A few years back, drawing on an increasing body of evidence, the World Health Organization endorsed the use of a pre/post-surgical checklist. You may have read about this in Atul Gawande’s best-selling The Checklist Manifesto. The idea is that before and after any surgical procedure, the doctors and nurses run through a basic checklist of really simple questions, including obvious things like “do we know each other’s names?” and “what antibiotics are being used?” Various investigations showed the extraordinary power of the checklist in helping avoid medical errors and improving patient safety. In nearly all U.S. and UK hospitals, use of the checklist has become mandatory.

But when my colleagues and I assessed the compliance with the checklist in UK hospitals, we found some interesting things going on. Although the checklist was nearly always used, it was often done badly: Sometimes bits were missed, sometimes not everyone in the operating could hear when the questions were read out, and sometimes the audit box (“we’ve done the checklist”) was ticked in advance of it actually being done. We discovered that the key issue was that surgical teams often 1) felt that the checklist was a procedure that didn’t quite fit with the details of their particular activity, and 2) saw it as a top-down imposition that was more about symbolic box-ticking than improving safety. However, by giving surgical teams the opportunity to customize the procedure — tweaking it to make it work for them — we found that real compliance improved dramatically. The key to making the global standard effective was to ensure engagement by the people who had to implement it.

Engage and empower. Both of these stories hold lessons for operations now and in the future. They echo lessons we’ve already been taught by Deming and Toyota and which apply to both manufacturing and knowledge work. If process management means cumbersome bureaucracy devised by distant experts, disaster awaits. But organizations that get their central nerds to engage consistently with the people who do the work, then process problems can come to the surface quickly and be tackled head on. Even better, empower workers at all levels to participate in process design and experimentation — to connect with their inner nerd. Process thinking becomes a part of everyone’s job.

The guys with the clipboards are an easy target for mockery and disdain, but there are great opportunities buried in those flowcharts and manuals. There’s no arguing with the onward march of process. The challenge is to bring the nerds back to the front line and to make process design a distributed activity. Only then can we get systems that work properly and intelligent compliance.

Thirty-five years ago, it would have been absurd to imagine that IT skills would become so widely spread in organizations. Only a handful of visionaries understood that we’d all be walking around with hyper-connected supercomputers in our pockets. We all do things today that only a few years back were the domain of the expert. The same kind of revolution in process thinking lies ahead.

Vacation Policy in Corporate America Is Broken

There is a growing body of evidence about the benefits of vacation to our physical, mental, and fiscal health. New research from Shawn Achor, author of The Happiness Advantage, also shows that contrary to conventional wisdom, vacation just might be great for our career, too. Coinciding with this is recent discussion in the business media that since “work” no longer adheres to the traditional 9-5, and technology allows us to be connected anywhere and everywhere, perhaps those longer work hours should be reconciled with more time off.

All of this has culminated in the new trend of eliminating vacation policies, so that employees can make work-life balance decisions that work for them. Companies like Virgin, Netflix, Evernote, Expedia, and Motley Fool are leading the charge on these types of policies. But an unlimited-vacation-days perk misses the point. American workers already forfeit a large percentage of their existing paid time off (Project Time Off says it was 169 million days in 2013.) And when they do take vacation, they don’t really disconnect from the office. A 2014 Glassdoor report says that 61% of employees work while on vacation. People are usually still expected to be available.

So what I often hear from my clients is something like, “Why take a vacation at all? What’s the point when I have to check email from the beach just to keep up with the constant stream of work and avoid a massive backlog when I return?”

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The success of company leaders, and all knowledge workers, depends on the wisdom, experience, and unique perspectives that they bring to work. But your supply of motivation and creativity is not endless. A vacation renews the perspective, creativity, and clarity of thought that gets buried by the fast pace of your everyday life.

You can’t get distance from work if you set aside time during your vacation to check in at the office. You may think it’s only for a minute, but the truth is that reconnecting to work during your time off keeps your mind at the office. You effectively forgo that opportunity for gaining a fresh perspective and replenishing your motivation and creativity.

The U.S. Travel Association has deemed reasons for not taking time off, and for working on vacation, as symptoms of being a “work martyr.” They found that:

40% of employees are afraid of the mountain of work they’ll face when they return to work after time off.
35% say they are the only ones who can do their jobs.
25% are afraid of losing their jobs or fear being seen as replaceable if they take time off.

There is evidence that these feelings of the work martyr may be justified. The same report showed that 28% of senior leaders found it difficult to approve paid time off requests, and 32% of leaders worried that vacation time puts an extra burden on other employees. While senior leaders may understand intellectually that paid time off improves their employees’ performance, that can get overshadowed by a stronger (and often subconscious) belief that more work equals more success.

If you think you are coming off as neutral by not encouraging or discouraging taking vacation, your silence could be interpreted negatively. Likewise, if you email an employee who’s on vacation, you’re communicating an expectation that she should work during her time off — even if you believe she “should know” that you don’t expect a reply until she’s back in the office.

So in order for companies to reap the benefits of their investment in vacation time for their employees, the solution has to be more comprehensive than just upending the old-fashioned policy of allotted days. It has to fix a corporate culture that undermines vacationing, and encourages workers to take time off — and feel comfortable doing it. No one should be a work martyr.

Here are three ways that leaders can show support for time off, help employees feel good about taking time to recharge, and reap the benefits of increased productivity:

Take a hard look at what managers and executives truly believe about time off and whether they discourage, even inadvertently, using vacation days or fully unplugging while on vacation. Have an open discussion with your leadership team about these messages and the behaviors they’re promoting.


Use your own paid time off, and don’t check email while you’re on vacation. You’ll get all the restorative benefits of vacation yourself, of course, and you’ll be modeling healthy behavior for employees. Encourage all the leaders and influencers at your organization to do the same.


Have managers going on vacation choose a trusted staffer to take on their responsibilities. This provides incentive to the manager not to check in because that would be perceived as a lack of confidence in the staffer. Additionally, the employee has an opportunity to grow. (One of my clients told me that this “Boss for a Day/Week” was a common practice at IBM in the 80’s.)

In addition to showing support and modeling the benefits of disconnecting, technology can also help untether employees from their email. For example, the IT team can teach employees how to “hide” their email on their phone and how to schedule outgoing mail so messages only get sent during business hours or when a colleague has returned from vacation. Or you could model Daimler’s policy, and offer an auto responder like: “I am on vacation and your message has been deleted. Please direct your message to XX in my absence, or resend it after X date when I will be back in the office.”

Another policy worthy of consideration is the one employed by Full Contact, a Colorado technology company, that it calls “Paid Paid Vacation.” In addition to paid time off, every employee gets $7,500 per year that must be used for vacation. Working while on this vacation is prohibited. Full Contact’s founder Bart Lorang also wrote that disconnecting while away can help build the company, because it would encourage programmers to document their code better and share their knowledge — and it might empower direct reports to make more decisions.

Productivity ultimately suffers when employees skimp on time off or work during vacation. Give your staff the support, policies, and tools they need to truly get away and recharge.

Shutting Down Stores Doesn’t Have to Be Bad for Business

When The Gap recently announced its plans to close 175 of its 675 stores in North America, it joined a number of other retail chains — including Staples, Office Depot, Target, and Radio Shack — that have been or soon will be shuttering a slew of outlets for one reason or another. A major challenge for all retailers is managing the closures in a way that maximizes revenues and profits. In our research, we have found that retailers often could handle closures much better than they do.

In retailing, most products, stores, business units, and even firms go through a life cycle of birth, midlife, and death. Our studies of a wide range of retailers have found that companies often have the most difficulty managing death. Managing death more effectively can provide numerous benefits: It can boost profits significantly, lower the cost of capital, and reduce complexity in operations, which can improve the performance of concepts that are in the early and midlife stages.

When retailers liquidate stores, managers must quickly make a series of decisions, since the duration of a liquidation sale is limited by law to 60 or 90 days in many jurisdictions. They include:

Forecasting demand and setting a markdown level or price for each store for every day of the liquidation. This is no easy task when the closures involve hundreds or thousands of stores.

Figuring out at which of the targeted stores they should sell the collective inventory that’s going to be liquidated. There are often substantial differences in “multipliers” of stores being liquidated, with some generating much higher revenues during liquidation relative to the revenues that they generated during the same period the prior year. Since inventory transferred to a high multiplier store may sell at a higher price, retailers should forecast the multiplier during the liquidation in order to transfer inventory from stores with low multipliers to those with high multipliers if there’s enough time to move the inventory.

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Deciding when to close a store. While legal restrictions set an upper limit on the length of a liquidation, managers may close stores early to save operating expenses.

Over time, retailers have identified and adopted many innovative ideas to manage these complex tasks. (There are individuals — and even firms — that specialize in liquidations.) During liquidation, retailers can reach new demographics and markets by using bold signage and unconventional advertising methods such as “sign-walkers.” On a year-over-year basis, stores undergoing liquidation often earn more revenue during liquidation than during Black Friday weekend or other high demand periods.

In spite of the industry’s sophistication, we have identified numerous ways in which net recovery rate (the store’s revenue minus its operating expenses) can be improved by around 5%. Given that billions of dollars of retail inventory are liquidated annually in the United States, this is a big number.

In our research, we found that retailers often discount too deeply toward the end of the liquidation in order to sell off the entire inventories of the stores in question. They would be better off retaining the product to sell in another market or just donating it to a charity. Managers also frequently did not discount deeply enough early in a liquidation. Further, managers often transferred much less inventory from low-multiplier stores to high-multiplier stores than they should have, and managers should have shut stores sooner than they did. By systematically making pricing, inventory, and store closing decisions, our mathematical model reveals these biases in managers’ decisions.

Bank of America, JPMorgan Chase, PNC Bank, Wells Fargo, and others that offer loans collateralized by a retailer’s inventory base the amount they are willing to lend and the terms on the retailer’s proven ability to liquidate inventories effectively. So as the liquidation value of the assets in question increases, so does the amount a lender will provide in return for a given amount of collateral, thus lowering the effective cost of capital for retailers.

For retailers such as Dillard’s, Neiman Marcus, Rite Aid, and Whole Foods, inventory-based loans are an important source of capital. Because of the security provided by inventory, these loans do not carry the financial covenants and investment limitations of cash-flow loans. This provides retailers more flexibility in managing the number of their outlets — since an inventory-based loan scales with a retailer’s inventory and is less sensitive to a retailer’s cash flow. Inventory-based lending also makes it easier to carry out transactions such as leveraged buyouts.

Since products, stores, and retail concepts have life cycles, companies should be as adept at managing the death of each of these as they are at managing birth and mid-life. Excelling at managing death will allow retail firms to constantly renew themselves and, ultimately, thrive.

Do Regulators Go Easier on Socially Responsible Firms?

What does a for-profit company gain by investing in social or environmental responsibility? One answer is reputation. Customers may react more positively to a socially responsible firm; so might potential hires.

But a new working paper suggests that customers and employees aren’t the only ones who can be influenced by social responsibility. The authors argue that regulators notice it, too.

Princeton economists Harrison Hong and Inessa Liskovich studied how steeply U.S. companies are fined by the Department of Justice and the SEC for bribing foreign governments. Their research showed the more socially responsible the company at fault, the lower the fine.

Hong and Liskovich looked at violations of the Foreign Corrupt Practices Act (FPCA) from 1990 to 2013, as well as the fines that were levied. Then they compared that data to violators’ social responsibility scores, from a widely used index that assesses things like community relations, environmental impact, and how a firm treats its employees.

A relatively small difference in social responsibility — the equivalent of a strong employee retirement program vs. an average one — was associated with $2 million less in fines.

The researchers ruled out a number of possible explanations: it wasn’t that the bribes by socially responsible firms were smaller, or that those firms were more cooperative with investigators. And it wasn’t that they donated more to political campaigns, another possible avenue for subtly influencing regulators. Finally, the authors were able to rule out reverse causality, the idea that lighter fines made companies appear more deserving of a higher social responsibility score. (Firms with better CSR scores prior to their investigations still received lesser fines.) The authors even used text mining to demonstrate that regulators’ press releases used more positive language when describing the fines for socially responsible firms.

Still, there’s one explanation the paper can’t rule out. What if socially responsible firms are more proactive about detecting bribery and self-reporting it, and, as a result, regulators go easy on them? That’s related to cooperation, but slightly different. It’s been demonstrated that when bribery is first detected by a firm itself it tends to be punished less harshly. And socially responsible firms are more likely to have internal anticorruption practices, Perhaps socially responsible firms face smaller fines because they’re more likely to come clean. When I asked the authors about that possibility they noted that they looked at the link between fines and each subset of corporate responsibility. Community relations, responsible products, and good employee relations were most associated with lower fines. “These are not related to anti-corruption programs,” said Liskovich. (Still, without data on self-reporting or the presence of anti-corruption programs it’s hard to know for sure if there’s a link.)

“One implication of our analysis is that firms might very well have a strategic motive to be socially responsible as a form of insurance in case of unfavorable regulation,” the researchers conclude in the paper.

That’s the cynical take: firms invest in CSR to appear more virtuous than they actually are. Suddenly, the fact that socially responsible companies outperform their peers even looks a bit nefarious.

The more optimistic take is that the researchers set out to see whether people — in this case regulators — are more positively inclined toward responsible firms. And they’re not the first to find that, yes, people really are.

That’s an argument for the effectiveness of CSR, not against it. If the link between regulatory scrutiny and social responsibility is real, that’s problematic, and something policymakers will have to address. But it doesn’t change the fact that a company’s reputation really is improved by investing in social and environmental responsibility. If even regulators in the middle of bribery investigations perceive companies differently because of CSR, think of what it could do for customers and employees.

3 Emerging Alternatives to Traditional Hiring Methods

When evaluating talent for recruitment or development, you have just two key questions to answer: What should you assess? And how?

The what question is in part context-dependent. (For example, the skills and knowledge required to be a good neurosurgeon are quite different from those needed to be a good lawyer, banker, or software engineer.) Yet you’ll also be looking for certain universal characteristics associated with effective employees, regardless of their job or role. First, you’ll keep an eye out for the best learners and problem solvers — those who have good judgment and are most able to get the job done. Second, you’ll want to know which people are most willing to work hard. And third, you’ll try to identify the ones who are the most rewarding to deal with, the most likable and pleasant in their interactions with others.

These three dimensions of employability and career success have strong links with broad psychological traits. The first relates to IQ, curiosity, and decision-making styles; the second to motivation and ambition; the third to emotional intelligence and social skills. Employees who are smarter, nicer, and more hardworking than their peers will always be in demand.

As for the how question, there has been much innovation in talent identification over the past five years, mostly as a result of the digital revolution and the ubiquity of smartphones. Although many developments are still works in progress, three approaches in particular deserve consideration because of their potential to quantify individuals’ talent and predict their future job performance:

Behavioral analytics. Some organizations assess talent by monitoring and measuring day-to-day activity. Large call centers are pioneers in this area — for years, they’ve tracked the number of calls and breaks employees take and the customer ratings for each call. Today, such methods are applied in a variety of environments. For instance, some companies use e-mail traffic to predict revenues that sales reps will bring in. Tracking daily behavior generates enormous quantities of data — more than a human being could possibly interpret — so organizations use algorithms to create individual, team, or organizational diagnostics. This approach has the greatest potential for identifying talent internally, since companies are legally entitled to collect employee data for performance assessment. But certain organizations, such as PepsiCo and Starwood Hotels and Resorts, are also analyzing employee data to create profiles of their most successful people — this gives them valuable benchmarks for outsiders.

Web scraping. Algorithms are also used to translate people’s web and social media activity into a quantitative estimate of job potential or fit. Recent research indicates that this method of assessment, “web scraping,” can help employers estimate IQ and personality with around 50% of the accuracy of scientifically valid tests. Candidates’ digital footprints include information that they have deliberately collected and curated — such as LinkedIn endorsements and recommendations — but also comments, photos, and videos posted by colleagues, clients, friends, and family. (Unsurprisingly, there are now several businesses, such as reputation.com, that help people monitor and clean up their online reputations.) Clearly, web scraping has ethical and legal implications, particularly when firms request applicants’ social media passwords as part of the vetting process. (Enough companies have done this that at least 23 U.S. states have introduced or considered legislation to ban the practice.) But it may feasible to gather electronic intelligence on people without trampling on privacy rights, by creating apps or algorithms that enable users to own their data and voluntarily share it with employers and recruiters. Alternatively, organizations should limit themselves to collecting information that’s freely available online.

Gamification. In the context of recruitment, gamification means creating IQ and personality tests that are fun to take — or at least more enjoyable than traditional assessment tools, which can be long and boring. Participants solve puzzles or complete challenges to earn points and badges. The goal of enhancing user experience like this is to increase response rates. By offering free, entertaining tests online — and providing instant developmental feedback — companies can attract many thousands of engaged test takers. Reckitt Benckiser, IKEA, and Deloitte are a few of the global firms that have relied on gamified assessments to evaluate potential candidates, particularly Millennials. Developers still have some work to do in order to bridge the gap between “fun” and “accuracy” — and gamified tests are usually more expensive to create and administer than the typical questionnaire. Even so, employers are keenly interested in them because they can help identify more people with high potential by reaching beyond the applicant pool, effectively marketing the organization as a workplace that’s fun.

How do these newer approaches to assessing talent compare with the more traditional ways, such as interviews, resumes, psychometric tests, work samples, and reference checks? It’s still hard to say, especially in the absence of independent scientific studies confirming accuracy. (In contrast, traditional assessment tests have been scrutinized by thousands of scientists over the past century — see my recent HBR article on how employers are using them to vet talent, and what candidates can do to set themselves up for success.)

The needed evidence will come from studies that put the same candidates through all assessment methods and measure how well each method predicts future performance at the individual, team, and organizational levels. Talent recruiters and managers will also want to consider factors such as costs, ethics, and user experience. For instance, behavioral analytics may be more accurate than intuitive managerial decisions, but the daily monitoring is also expensive to implement (though it should save businesses money over time). If your goal is not just to predict future behaviors but also to evaluate candidates’ competence, likeability, and work ethic, traditional methods are still more informative than the innovative alternatives — at least for now.

How to Tell Someone They’re Being Laid Off

Dismissing an employee is one of the most unpleasant tasks of management. It’s likely to evoke a lot of mixed feelings: sympathy, sadness, and anxiety. Even if letting go of the employee (or employees) is in the best interest of the company, you still may feel guilty. What’s the best way to deliver the news? How do you strike the balance of being direct and compassionate? How much should you let your emotions show?

What the Experts Say

Presiding over layoffs is a “distasteful part of management that many people fear,” says Laurence J. Stybel, a career management and board adviser and an executive in residence at Suffolk University’s Sawyer Business School. It’s also a thankless task. “Nobody ever got promoted because they fire well. But your career can get sidetracked if you don’t treat people in a dignified way.” All of your employees and customers are going to be watching how you handle the process. “The way you fire people needs to reflect the words you have in your mission statement.” Dismissing an employee or group of employees is particularly hard when you disagree with the decision, says Andy Molinsky, professor of organizational behavior at Brandeis University International Business School. “You’ll feel conflicted, discouraged, and frustrated.” Still, as a manager you may have to do what’s best for the company. Here’s how to manage the process in a way that is clear and respectful, whether you’re terminating a single person or letting go of an entire team.

Seek training

All organizations need an “effective, efficient, and standardized process” for handling layoffs “and everyone — managers and potential managers — should be trained in how to do it,” according to Stybel. “Training makes it a less frightening task,” he adds. Trouble is, says Molinsky, most organizations don’t “necessarily see the need to offer extensive training because it costs time and money and layoffs are a relatively infrequent occurrence.” This, he says, is an oversight. Companies that do layoffs poorly “suffer tremendous consequences,” including wrongful termination lawsuits and dents to their reputation. “It’s a no-brainer to invest resources in doing this well,” he says. If your company doesn’t offer training, Molinsky suggests seeking advice and guidance from mentors who have first-hand experience with laying off employees.

Practice

Don’t go into this task cold — and certainly don’t go in alone, says Stybel. It’s more comfortable and legally practical to deliver this news with at least one other person in the room. “Ideally you’re working closely with a consultant at an outplacement firm to help you manage the process,” he says. If not, enlist someone from HR. As you practice what you plan to say, role-play how the employee may react. “During the trial run, anticipate worst-case scenarios,” he says. “The person might cry. The person might invoke their family with something like: ‘My daughter is going to college in the fall, how will I be able to pay for it now?’ You need to consider how you will manage your emotions” in these situations. You should have a script, but try not to rely too heavily on it, warns Molinsky. “The danger of a script is that you become too mechanical and detach yourself so much that you fail to show interpersonal sensitivity,” he says. “At the same time, you don’t want to be so moved by efforts to show sympathy that you don’t deliver the message.” Practicing beforehand helps ensure you “strike the right balance.”

Consider logistics

The physical environment in which you deliver the news should be a private, quiet room or office, Molinsky says. Have a box of tissues at the ready. The goal is to “maximize your comfort in delivering the message” while also granting “dignity to the person who’s being laid off.” Your safety is another consideration. “Oftentimes the reaction of the person is shock or sadness, but the person could get angry.” In light of this, Stybel recommends you “make sure that the person has direct access to the door in case he gets emotional” and needs to leave. “Make it easy for the person to storm out,” he says. While there is “no right time of day” to tell someone he no longer has a job — frankly, they’re all terrible, “try to do it on Friday because it gives the person the weekend to deal with it,” he says. “If you do it on Monday, everyone will be talking about it for the rest of the week.” And if you’re shutting down an entire division, it might be better to announce the layoff to everyone at once, according to Molinsky, “since they’re all suffering the same fate.”

Be direct

The script for letting an employee go is relatively straightforward, says Molinsky. “Get to the point quickly: Be direct, be honest, and no small talk.” Stybel recommends beginning the conversation by saying: “‘I have some bad news to deliver today’ because it emotionally prepares the individual. It’s equivalent to saying: ‘I’m about to punch you in the stomach’ versus just punching you in the stomach,” he says. Then say something like: “The purpose of this meeting to tell you that your career with this company has come to an end.” Next, give the person a folder containing the severance arrangements. If your company is providing outplacement services, then say: “As part of the respect we have for you, we have hired a firm to help you successfully land on your feet.” Then hand over the meeting to the consultant or HR rep who will explain next steps. “It doesn’t need to be long and drawn out,” Stybel says. “Say what you need to say, then leave the room. The outplacement firm should take over.”

Further Reading



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How to Handle Difficult Conversations at Work

Communication Article

Rebecca Knight

Start by changing your mindset.




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Don’t get sidetracked

As the person who’s losing her job absorbs what’s happening, she might react emotionally. She might get teary; she might lash out; she might have questions. But you, the manager, must not respond. “You don’t want the conversation to devolve into a debate, discussion, or argument,” says Molinsky. Don’t bring up the employee’s poor performance or the fact that she had been warned. Instead, Stybel suggests saying: “If you wish to discuss the justice of this decision, I will be glad to set up an appointment with you next week — this is not the time,” adding that he’s never “had a situation where a fired employee asked for a follow-up appointment.”

Be compassionate

When you’ve been tasked with laying off an employee with whom you have a good working relationship, “it’s likely you’ll feel genuine, deep sympathy” for that person, says Molinsky. In cases like these, “offer support” by, say, assuring him you’ll give a great reference or offering to introduce your contacts. This is certainly not something you’d do for everyone, but if your relationship warrants it and it “feels natural,” it’s the kind thing to do. Most important, never talk about how difficult this decision has been for you. “That is irrelevant,” Stybel says. “The employee doesn’t care about your feelings right now.”

Decompress and debrief

Letting go of an employee is a demanding task that “takes a toll” on even the most experienced managers, says Stybel. Don’t neglect your own wellbeing. “Once you’ve delivered the news, find a way to physically and psychologically restore yourself,” he says. Take a walk. Take a nap. Lift weights. “Whatever you do, don’t schedule another meeting right after — give yourself time to calm down.” It’s also “important to debrief,” with the HR manager that helped you do the layoff, says Molinsky. Together you can “reflect on how it went and what you might have done differently,” he says. There is usually room for improvement. “It’s an emotional moment, but at the same time, it’s a task and it’s a skill. You can get better at this.”

Principles to Remember

Do:

Create a private, quiet physical environment in which to deliver the news


Enlist the help of an outplacement firm or HR to manage the process


Restore yourself physically and psychologically after the conversation

Don’t:

Go in cold — role-play the conversation and anticipate how the person will react


Talk about how difficult this decision is for you — the employee doesn’t care about your feelings right now


Be callous — if you have a strong relationship, provide support by offering to introduce your contacts and by providing a great reference

Case Study #1: Show kindness and help to make the transition as smooth as possible

After the Department of Defense notified Aero Jet Medical that due to funding issues, it would not renew its contract, Danielle Wilson, president and CEO of the air ambulance transport company, “was in a tailspin.”

“We had only been a company for less than two years and we hadn’t diversified our portfolio — we were 100% dependent on that contract,” she says.

The loss of the contract meant Danielle had to layoff 26 workers. She felt absolutely terrible. “I was very close to every single one of my employees,” she says. “They were people who had left secure jobs as critical care nurses and paramedics because they believed in the cause and because they believed in me.”

Before she delivered the news, she created information packets, which included each employee’s individual severance package, accrued paid time off, as well as information on how to apply for unemployment insurance and COBRA coverage. She also included a customized reference letter for each person. “I wanted to provide them with empowering information to help them through the process,” says Danielle. “I was trying to make the transition as smooth as possible.”

She decided to tell everyone at the same time. She gathered the team together in the company’s conference room and spoke in a “direct and matter-of-fact” way. “I tried to think about what I would want to hear if that news had to be delivered to me,” says Danielle.

She read excerpts from the government’s letter, which both explained the funding issue and also complimented Aero Jet Medical’s professionalism and service. “I thanked them,” she says. “It was emotional. But emotion, when it’s honest, is important to show. I believe employees are the ambassadors for your company— even the ones who leave.”

Danielle remains the CEO of Aero Jet Medical. Today the company has 150 employees and a diversified portfolio.

Case Study #2: Act decisively and deliver the news in a straightforward manner

In 2009, Ted Karkus became the CEO of ProPhase Labs, the makers of Cold-EEZE. It was a challenging time: sales were falling; morale was low; and retailers threatened to cut shelf space.

Ted could see that overhead was too high and that he had to layoff a large number of workers. He looked at each of his 26 employees’ strengths and weaknesses and whether each was suited to his or her role. The excercise helped him realize that he needed to let a significant number of them go, including the CFO — we’ll call him Michael.

Ted knew he needed to act decisively. “When you make the decision to [let people go], you cannot procrastinate,” he says. He called a meeting with Michael and his COO. “The discussion was short and polite. I was straightforward in delivering the news and then I handed him the severance package.” Michael, for his part, “was totally shocked.”

Ted personally liked Michael so he offered to help him find a new job, and he kept the conversation on track by reminding himself of what was “in the best interest” of the company. “First and foremost, I have to protect the shareholders’ interest. I have a responsibility to them and to the Board of Directors. That puts me in motion,” he says.

Within one year, only five employees remained from the original group; Ted streamlined his team by hiring only 10 people to replace those he let go. As a result, he decreased overhead by almost $2 million.

Today ProPhase Labs has very low turnover and Ted is philosophical about layoffs. “I really do care about every employee, even the ones I have to dismiss,” he says. “I want to help them find the right job for them. No one should be working in a position where their strengths don’t match the requirements of the job.”

Get Rid of Unhealthy Competition on Your Team

“Look to your left, look to your right: One of you won’t be here next year.” This intimidating line was immortalized as a greeting for incoming students at Harvard Law School in the classic movie, The Paper Chase. The explicit (and intended) message is that hard work is needed to be successful here. The implicit (and perhaps unintended) message is that your success occurs when others fail. In a competition, others must lose if you are to win, and so it’s natural to withhold information that might help others, or to fail to provide help when help may be needed. Clearly, this message inhibits teamwork. It’s hard to collaborate if you view (consciously or not) your colleague as the competition. Self-preservation is a powerful force.

But it’s hard to deny that competition motivates. Athletes at the Olympics train incessantly to be among the very best in the world. Aspiring young professionals recognize the competitive landscape they’re in and it makes them work incredibly hard to earn top grades and ace standardized exams. They know all too well that they’re competing for limited slots in top universities and, later, limited jobs at top employers.

And so, even when leaders don’t explicitly paint a win-lose game for new recruits or new team members, the competitive mindset is essentially the default for most high-achieving professionals. It’s overlearned in school. In every industry, those hired by elite organizations have competed in endless small contests along the way to achieve these positions. This isn’t bad in and of itself, of course. But, the unintended consequence is a mindset that views success as a zero-sum game, where my success depends in part on your failure. This fosters an inward focus, a focus on self – on how I’m doing compared to others. With this focus, impression management can take precedence over learning and teaming. And it certainly doesn’t breed team spirit.

This is why a teaming mindset must be adopted on purpose. Team leaders must paint success in the team as something shared and expansive. Because seeing success this way is rarely spontaneous, leaders have to go out of their way to convey – to sell, really – the upside of collaborative work. The message must be that success can be greater and more exciting when people work together. When this is done well, team members tend to focus more on the work than on themselves. They also focus on what the work means for the company’s value proposition – for their customers. They feel a sense of shared fate that fosters the development of trusting, cooperative relationships. The competitive instinct we all have is then channeled into the desire to perform better than other teams, not to shine relative to our fellow team members. Or more importantly, team members may channel that competitive drive into a desire to outperform other organizations in their industry.

You and Your Team



Leading Teams

Boost your group’s performance.

The team leader’s challenge is thus how to help smart, talented people who’ve gotten into coveted positions by performing well as individuals learn how to work well together – for the sake of a larger prize. The challenge is how to help them shed the hard-driving competitive mindset that may have become second nature — and replace it with an equally hard-driving collaborative mindset.

It starts with helping them reframe their colleagues as resources for achieving sought-after goals. Team leaders can emphasize the opportunity for all team members to value and learn from their colleagues, so that the team can do spectacular work.  They must replace the old classic line, “one of you won’t be here next year,” with the following:

“Look to your left, look to your right: How quickly can you discover the unique talents, knowledge, and expertise that each one of you brings to the table? How quickly can you convey to others what you bring?”  How quickly, in short, can we break down the barriers between us – barriers created by fear, competition, jargon, or status – and figure out how to accomplish things together that none of us could accomplish alone? These are the questions that leaders must use to help each member of a team to answer, faster, better, and more generously than ever before.  Here are three tactics leaders can use to help each member of a team answer these questions:

Model the behavior you’re hoping to inspire — for example, demonstrate curiosity and interest in the people you work with, ask them genuine questions, and respond thoughtfully to what you hear.
Place a high value on and reward successful teaming more than individual performance.
Frame the challenge ahead (the work, the initiative, the project) as something in need of diverse perspectives and skills.

With persistence and patience, team leaders can help team members abandon unhealthy competition among individuals and instead to cooperate to compete together to reach the most important goal – serving the customer.