Marina Gorbis's Blog, page 1322

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.

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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.

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GE’s Culture Challenge After Welch and Immelt

It’s an established fact that the life cycles of companies and many products have been shrinking. But what’s often not appreciated is that culture also has a life cycle and that it, too, is getting shorter.

Culture is often associated with the individual at the helm — so much so that the return of a former chief (Steve Jobs returning to Apple, A.G. Lafley going back to P&G) is often intended and viewed as a kind of restoration. However, true culture turnaround requires a complete psychological shift across the entire organization. It is relatively easy for new organizations to start with a clean sheet of paper in creating a culture. But for organizations that have been around for a while, the shift involves quite a bit of shedding and rewiring.

How do long-established companies make this transformation? How do they understand the need to change and create the energy and urgency around it? How do they match a shift in strategy (which is called for in times of change) with a shift in culture? I suspect that many organizations get into trouble not because of a failed strategy but because of a frozen culture. If this hypothesis is true, how do we make culture change a lever for growth as opposed to taking it as a given?

At GE, we have stayed competitive for more than 130 years because of our relentless quest for progress on all fronts, including culture. We believe that there is no such thing as a 130-year culture. In our opinion, culture is contextual, and what would have been appropriate in the 19th century, when the company was a one-product, one-country organization, is very inappropriate in today’s far more globalized environment. (GE now operates in 175 countries across the globe.) So a constant reengineering of our business portfolio, operating model, and culture has been a key to our evolution.

For an organization to endeavor to change its culture, it needs to take its cue from what changes in its strategy. Sometimes strategic shifts are driven by external events, such as the post 9/11 environment or the onset of the Great Recession in 2008. Other times, shifts may be driven by disruptions and disrupters like the one happening in the transportation and hotel markets right now thanks to the likes of Uber and Airbnb. Of course, leaders, too, can set a different tone: Jack Welch, Lee Iacocca, Lou Gerstner, and Steve Jobs all did that.

Whatever the prompt, a strategic shift often cannot happen without a culture shift as well.

The cultural shifts that GE has made over the last couple of decades were clearly set within the context of their respective eras in the business world. Let’s take the 1990s. The context demanded operational excellence. Companies in industrial businesses had to drive costs down and execution up and create foolproof processes to ensure quality. Accordingly, Jack Welch’s drive to Six Sigma involved an intense focus on controlling costs, quality, and execution on both the infrastructure and behavioral sides (e.g., the forced ranking of employees, and the “4Es” of energy, energize, edge, and execution that leaders were expected to demonstrate). The result was a tight, control- and process-oriented, operationally focused, cost-conscious organization.

In the first part of this century, innovation became the priority. Operational excellence had made us vulnerable to disrupters that were figuring out new ways to move mainstream. New industries were spawned, some existing ones became obsolete, and others (e.g., telecom, music, and aviation) experienced upheavals. The decade also saw the rise of formidable emerging-market competitors and opportunities.

Accordingly, Welch’s successor, Jeff Immelt, drove GE to achieve growth through innovation. In fact, we defined growth as a process. This was aided by encouraging innovation (through “imagination breakthroughs,” a way of protecting growth ideas) and launching a massive commercial training operation that built commercial and marketing capabilities. The behavioral dimensions of this effort were focused on values like external focus, clear thinking, imagination, courage, inclusiveness, and expertise. The result was growth and scale. We grew our presence around the world and expanded our definition of emerging markets from China, India, and Brazil to include Algeria, Angola, Chile, and Vietnam.

Now that the Great Recession is behind us, the business world is undergoing yet another shift. There are three drivers behind it.

An increasingly inter-connected world in which any one issue can trigger a “tsunami.” The plunge in oil prices is an example. Not even the best pundits predicted that the fall would be so rapid and so dramatic. This is good news for some industries and bad for others. Or take Ebola. What’s happening in West Africa is not confined to that part of the world alone.

The rise of the millennial generation in the workplace.  At GE, we specifically commissioned a group of millennials, called the Global New Directions group, to help us understand what kind of an organizational culture they would like to see. They told us they were ready for a more horizontal, agile, “connect and inspire” model as compared to the “command and control” model the boomers are used to.

Employee engagement. Here, we use our employee surveys as a tool for culture change. Our employees clearly told us that our organization had to shift its culture — that we had to become more decentralized and simpler to do business with, and had to delegate power to where the action is.

GE has responded to this new context and feedback by making simplification our operating rhythm. The tenets of simplification include customer intensity, lean management, and a complete reimagination of IT — not as a cost to be outsourced but as a strategic lever that must be maximized. Digital intensity is an imperative.

Using tools learned from Silicon Valley, GE launched FastWorks, which relies on lean start-up principles. This new way of working results in better outcomes for our customers, faster. FastWorks is about constantly experimenting, learning, and iterating, and the customer being at the center of everything we do.

To facilitate this new operating model, we have had to create a new cultural template that demands new ways of behaving. We even called our new cultural orientation “the GE Beliefs” to ensure that people changed their frame of thinking to the new way. The GE Beliefs are: Customers determine our success, stay lean to go fast, learn and adapt to win, empower and inspire each other, and deliver results in an uncertain world. They reflect a renewed emphasis on acceleration, agility, and customer focus. Interestingly, the GE Beliefs were crowdsourced from our employees for the first time — an attempt to drive a culture that the employees wanted to see.

In a fast-moving world, we have also realized that annual events are passé. Every operating rhythm has to become more agile, responsive, nimble, and focused. Consequently, we have moved away from an annualized strategic-planning process to a more continuous process of checking on the environment and context and pivoting where necessary every quarter. Reviewing the people and organizational-capability equations is also more continuous. And we are changing the way we do performance appraisals from an annual event to a more real-time approach. All these “interventions” reinforce the new culture — one of speed, simplicity and customer focus.

When culture is not given enough attention, it becomes an obstacle to change. Just as they do with strategy, companies should make constantly examining their cultures a part of their operating rhythm.

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A Consultant’s Guide to Firing a Client

We all have limited time, and despite our best efforts at triage, email and meetings will probably always remain low-grade annoyances. But if you want to dramatically enhance your productivity, it pays to zero in on the biggest source of stress and wasted time: problematic clients.

Some entrepreneurs and executives fight to hold onto business at all costs, recognizing that it’s easier to retain a customer than to win a new one. That’s true, but many business leaders are loathe to fire clients, even when it’s the right move. I’ve been a consultant for the past nine years, and my client list today looks dramatically different than it did when I launched, in large part because of strategic decisions I made to let some clients go and take on others. Here’s how to recognize when it’s time for your business relationship to end.

When you’re doing work you no longer want to do. In the early days of your business, almost any contract feels like a win. You may be willing to accept assignments outside your sweet spot. PR? Board development? Strategic planning? Sure, why not? But over time, you learn where you excel, and where you’d like to focus. In the early days of my consulting business, I worked with a prominent education nonprofit, helping them with communication projects, from messaging to media outreach. But over time, I became less interested in the tactical – calling up reporters to come to press conferences – and more interested in media and marketing strategy. They still needed the former, but I just couldn’t bring myself to do it anymore. If you have “legacy assignments” that no longer appeal or that don’t make strategic sense for your business, you’re better off referring them to someone else who’s eager for the work instead of doing a half-hearted job out of a misguided sense of loyalty or because you want the money.

When your client wastes your time. It’d be nice if everyone focused on results, not face time – but sadly, that’s not the case. (Even Best Buy, the originator of the innovative “Results Only Work Environment” program, later rescinded it.) There’s something to be said for small talk and “getting to know you” conversations (famed psychologist Robert Cialdini says neglecting these forms of relationship-building is one of the top mistakes that American professionals make). But if your clients push this too far, they’re taking money out of your pocket. I once had a consulting client who insisted that I attend her weekly staff meetings. It was a relatively lucrative contract, so I agreed; I assumed we’d be discussing strategic issues that were relevant to my work. Instead, I quickly discovered that everyone went around the table discussing everything they’d done the previous week, and everything they were going to do for the coming week. I knew more about their comings-and-goings than I did about my friends, family, or neighbors. When I spoke to the managing director and suggested my time could be better deployed elsewhere, she put her foot down: “You’re our consultant, and we want you at that meeting.” I continued to attend, but only until my initial contract ran out. If the client doesn’t respect your time, or your judgment about how best to help them, they’re treating you like a lackey.

You and Your Team



Getting More Work Done


How to be more productive at work.

When you’re locked into low fees. You may be working with a great client doing interesting projects, but if you’ve been collaborating for a while and have gained experience in the interim, you may have outgrown your existing fee structure. When I started as a consultant, I knew precious little about pricing; I’d guess wildly with scarce information to base things on besides my previous experience as a salaried employee. As I gained experience, I realized I’d been underpricing – but clients grow accustomed to having you at a certain rate and may be unwilling to accept new fees. As you learn more and grow your brand, you may need to move upmarket and work with a different set of clients who don’t blink at what you’re worth.

When your client is never satisfied. If you find your clients growing increasingly demanding, it’s worth a conversation. They might have unspoken expectations that you’re not meeting (because you don’t know they exist). It might be something easy to address, in which case you’ve spared yourself a potential rift. But equally important, you may discover that their desires are downright unrealistic. The same client who insisted I attend their staff meetings had enjoyed a years-long media bonanza prior to my work with them; a prominent newspaper editorialist was a huge fan of their work, and wrote about them regularly. She retired a month before I started my consulting contract, leaving a barren landscape of newspaper coverage…for which I was blamed. Until I succeeded in replicating the frequent media panegyrics that they’d previous enjoyed, they wouldn’t be satisfied. And that was never going to happen.

Firing a client is a difficult decision. But it doesn’t have to be awkward or contentious the way that firing an employee often is. For one thing, an employee generally expects ongoing employment, while you most likely have a fixed contract with your client (to deliver 50 airplanes, or create a marketing strategy, or provide six months of executive coaching). Unless your relationship has become toxic, it’s best to hang tough until your contract is up for renewal, and then gently explain to the client – who might be thinking the same thing – that this is the perfect point to wind down your engagement. If they require future assistance, you can recommend some good options – that aren’t you. After all, to make room for better, more strategic, and more lucrative clients, you have to be willing to let go of the ones that are holding you back.

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What Everyone Should Know About Managing Up

Photo by Andrew Nguyen

Having a healthy, positive relationship with your boss makes your work life much easier — it’s also good for your job satisfaction and your career. But some managers don’t make it easy. Bad bosses are the stuff of legend. And too many managers are overextended, overwhelmed, or downright incompetent — a topic that HBR has covered extensively over the years. Even if your boss has some serious shortcomings, it’s in your best interest, and it’s your responsibility, to make the relationship work.

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:

A brand new boss, someone you’ve never met before.
A manager you don’t see face-to-face because she works in another location
An insecure boss (hint: it’s important to know how to tame his ego)
An all-knowing or indecisive boss
A manager who gives you conflicting messages
A long-winded boss
A hands-off boss
A manager who isn’t as smart as you
A boss that’s actually a board of directors

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.

You and Your Team





Managing Up




Best practices for interacting with your boss.

There will, of course, be times when you disagree with your boss, and that’s OK — as long as you’ve learned to disagree in a respectful, productive way. Still, despite your best efforts to build a good relationship, there may come a time when you’ve lost your boss’s trust. It happens. And while it may take some diligent effort on your part, it is possible put the relationship back on track, even if you feel like your boss doesn’t like you.

And if you scoff at all the talk of bad bosses and think, “I have a great boss,” be careful. It’s possible to like your boss too much. And being friends with your manager can be equally tricky. You don’t want your boss to be your only advocate at work. You need to find ways to demonstrate your worth to those above her as well.

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.

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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.

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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.

Reduce stress

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.

Assess potential

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.

Further Reading




How to Separate the Winners from the Spinners

Hiring Article

Chris Smith and Chris Stephenson

Push job candidates out of their comfort zone to find out who they really are.




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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

Do:

Lower your candidates’ stress levels by telling them in advance the kinds of questions you plan to ask
Ask behavioral and situational questions
Sell the role and the organization once you’re confident in your candidate

Don’t:

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.

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What Is a Business Model?

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.

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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:

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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.

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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.

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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.

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