Marina Gorbis's Blog, page 1326

Advice and Credibility Go Hand-in-Hand for Managers

Managers who seek and give advice effectively are also likely to wield soft power, our research shows. But you risk damaging your reputation if your behavior has even a hint of inauthenticity — if you use counsel to curry favor, for instance, or to advance an agenda. So tread carefully. It takes a long time to build trust and political capital, but you can lose credibility very fast.

Consider this example. The head of a business unit — we’ll call him Cal — was weighing three finalists for the open position of marketing VP, who would also report through a dotted line to the corporate CMO. Cal had a clear favorite; to ensure that she got hired and came in with high-level support, he sought “advice” from his head of sales and the CMO. Cal began these conversations with open-ended questions: What skills and capabilities do you think the position requires? Which of the candidates strikes you as best meeting those qualifications? After listening, he asked more pointedly, “If you were in my shoes, which candidate would you choose?”

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But each time the head of sales or the CMO spoke in favor of one of the other candidates, Cal responded critically, diminishing them relative to his favorite. As a result, his “advisers” felt they’d just been lobbied, not heard. Worse yet, they felt manipulated and misled. They had thought their counsel was genuinely being sought, but they walked away with considerable distrust of Cal.

Though seeking advice when you make decisions can enhance your credibility and others’ trust in you — both crucial for increasing influence, effectiveness, and political support — you have to really want it when you ask for it. Otherwise, you’ll inadvertently train people to question your motives, which will damage your efforts to exercise influence in the future. That’s what happened with Cal. Both the sales head and the CMO were guarded around him after it became clear that he was looking for buy-in, not guidance.

Now consider another example — this one about giving advice. An executive we’ll call Astrid was asked by a peer how to handle a direct report who always delivered results, but alienated many of his colleagues in the process. After Astrid asked a few key questions (What was at stake for the company? What was at stake for the peer? Were there any other folks who could step up and take on the work?), she had a sense that her peer needed to do a better job managing his team (and his own insecurity) rather than move or fire the problematic direct report.

But instead of leaping to that conclusion, Astrid took a more nuanced approach. First she shared her understanding of the situation and the mistakes she might be tempted to make in her peer’s shoes. Then she offered a suggestion: “How about bringing the team together to say that the company is counting on everyone to work better together? That would help set the stage for a separate one-on-one conversation with your difficult employee. You could frame his development goal as a way of helping the team deliver on that larger mandate.” After sharing the rationale behind her advice, Astrid laid out two other options to think about: arranging for the direct report to transfer to another area or bringing in a seasoned supervisor to work closely with him.

Astrid’s peer responded with admiration and thanks. He felt heard, and he fully grasped the advice, appreciating both its wisdom and Astrid’s — all because she had shown empathy and offered alternatives alongside her proposed solution. Since Astrid had crafted her advice in such an open-ended fashion, her peer and others began to see her as “the person to go to with the tough stuff.”

Whether advice makes or breaks you politically has a lot to do with how pure your motives are for seeking it and how empathically you give it. Ironically, as a seeker or as an adviser, you stand to gain subtle, quiet influence by focusing less on securing power and more on opening yourself to others.

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Start-Ups Are Helping Consumers Make Better Health Care Purchases

For years, one prescription to health care woes in the United States has been to shift costs to consumers. The logic is simple: Because patients currently do not bear the expense of most of their decisions, shifting expenses to them will cause them to make more rational, cost-effective decisions and will ultimately help bring about a more functional health care market.

As this experiment plays out in real life, however, a different reality is unfolding. While patients are paying more and more out of pocket for care, key challenges stand in the way of them operating as effective consumers. Fortunately, a number of innovative start-up companies are arising to address this problem.

Three obstacles. The first reason shifting costs to patients alone won’t work is many care decisions have short-term financial implications and long-term health implications. In most other purchases, consumers receive some form of immediate feedback or signal about their decisions, good or bad. In health care, the decision to forgo a colonoscopy or use one medicine over another has implications that play out over several years, if not decades.

Second, most health care purchases are complex, and there still is a severe lack of good information on the quality of services and products. When information on outcomes is available, it often is hard to digest, focuses on volume rather than quality, or lacks specificity. A surgeon might perform more operations than his counterparts, but how do those operations relate to the one that I am having? Consumers may have more power, but they lack the information they require to appropriately exercise that power and have few ways to contribute their own insights to others.

Third, cost is still not transparent to patients. The complexity associated with deductibles and arcane benefit structures for different types of services means that consumers might be more empowered and cost sensitive, but no less confused about the impact of a decision on their personal bottom line.

Reconceive the market. To truly unleash the power of consumers in health care, we must reimagine the health care market — much in the way that Uber reconceived the transportation market. By this, I mean we must create platforms that allow patients to be more quickly rewarded for healthy behaviors and to provide feedback that leads to rapid improvements in services and products.

Rather than simply rewarding patients for seeking lower costs, we must reward them for making good decisions or taking actions that lead to such choices — for example, demonstrated understanding of their health care decisions and their personal implications, adherence to medications and care plans, and participation in high-value preventive services such as vaccines or colonoscopies. Patients must be engaged in rating and evaluating the quality of services they receive and sharing these insights with other patients.

Absent that linkage of reward and behavior, we might face a type of race to the bottom in which cost-sensitive patients forgo necessary care at the appropriate time (e.g., in the early stages of a disease that would reduce the costs of treating them over the long run). We would also fail to take advantage of one of the most powerful tools we have at our disposal to improve care: patient insights.

To be successful, this market also must be liquid in terms of both suppliers entering and exiting it and the incentives applied to different types of behaviors. (Health care currently suffers from stultified benefit designs and closed networks that prevent new entrants from offering services.) As insights are generated about what improves health, the market should adapt to reward those types of behaviors and make it easy for new entrants to freely enter and offer services. As data clarifies which suppliers and services lead to better health, the market should more clearly signal these data to consumers. Absent this type of mechanism, patients are left making blind decisions.

Finally, the market must make transparent the real cost of services to the patient in the context of his or her health plan benefits. Without this type of information, patients will continue to struggle to make cost-effective choices that result in the best health outcomes.

Innovative start-ups are leading the way. Fortunately a number of start-ups are beginning to work to chip away at the complex problems I’ve described. Here are three examples.

Castlight Health is beginning to make costs more transparent to patients, and there is evidence that this transparency is driving better decision making. A recent JAMA study showed that households that used the Castlight tool to select a site of care for imaging studies saved over $100 per study. In aggregate, such savings and true price competition could yield billions of dollars in real savings.

Better, the personal health assistant, aims to help patients navigate the true costs of care in the context of their insurance. Through a combination of automation and live access to nurses, patients receive a thorough review of insurance and their benefits and help in resolving problems with medical bills or insurance.

Vital, a company I have been advising, aims to “provide the right medicines to patients at the right time for the lowest cost.” Vital aggregates patients’ purchases of medications and negotiates with manufacturers and service providers to secure lower out-of-pocket costs for patients. It hopes to expand into other health care services. Vital also helps patients receive the monetary benefits of healthier behaviors now — as opposed to later when they accrue.

Remaking the health care market with the aim of optimizing the long-term health of the patient rather than just costs will be a difficult and will require flexible thinking — something that won’t come easy to an industry that is comfortable doing business as usual. But with the massive reform of the health care system that’s underway and the new emphasis on improving the amount and quality of health care data that’s available and the ease with which it can be shared, the time has never been better for entrepreneurs to tackle the challenge.

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Any Value Proposition Hinges on the Answer to One Question

Any strategy lives or dies on the basis of its customer value proposition. There are many typologies relevant to crafting a value proposition, because there are many ways to win customers. But the key issue is always: what is the center-of-gravity in our approach? Do we ultimately compete on the basis of our cost structure (e.g., Ryanair and Wal-Mart) or another basis that increases our target customer’s willingness-to-pay (e.g., Singapore Airlines and Nordstrom)? In other words, will we sell it for more or make it for less — and allocate sales resources accordingly?

Nearly all competitive markets confront firms with this choice. In retailing, there is Wal-Mart, Dollar General, and category killers. But there is also Nordstrom, Louis Vuitton, and many high-end boutiques. In pharmaceuticals, there are blockbuster drugs targeted at mass-markets segments. But there is also Soliris, a drug sold by Alexion to treat certain blood and kidney diseases that afflict relatively few people. Soliris costs $400,000 per patient annually. But insurers pay this price because Soliris is the only safe and effective treatment for these diseases and that price is less than the total cost of alternative treatments. Alexion has grown from $25 million in sales in 2007 to $1.5 billion in 2014.

Sell it for more. Here, your product or service provides better performance on attributes that are important to target customers and for which they are willing to pay a premium. This approach must continually avoid the following pitfalls:

Meaningless or false differentiation: the points of superiority are unimportant to customers or based on a false presumption of superiority.
Uneconomic or invisible differentiation: customers are unwilling to pay for additional performance or are unaware of the difference.
Unsustainable differentiation: the product or service features are imitated over time.

Make it for less. Here, your cost structure allows you to sell and make money at prices that competitors cannot. Realities in many industries typically allow only a few firms to compete successfully in this manner. Once they do, moreover, their scale advantages make it difficult for others to duplicate. To be a viable value proposition, therefore, this approach must avoid these pitfalls:

Price wars: any cost advantage is lost in price competition and no one extracts value.
Substitutes: you may have a cost advantage over competitors, but not over substitutes that are available to target customers.
Cost reductions versus lowest costs: lowering cost doesn’t necessarily mean your cost is lower than competitors and, in any market, there is only one lowest cost competitor. Never confuse these different cost positions.

You must be clear with your people about where your business falls along this spectrum.

If you’re not clear about this, your sales efforts will run into problems. Externally, there will always be someone out there who can beat you on cost and price, or someone else who tailors its operations and sales efforts to the performance and buying criteria of a segment better than you can. Depending upon your value proposition, sales will face different buyers and selling tasks and require different support processes to deliver value.

Internally, important organizational issues flow from the value proposition. Different assets will be needed for the cross-functional activities required for effective selling of a given value proposition. Different metrics are relevant for setting and evaluating sales performance. And basic HR issues are at stake whenever a firm is unclear about its value proposition: salespeople cannot be premium service sellers in the morning and cost hawks in the afternoon. It doesn’t work that way.

Strategy requires choice, clear communication, and coherent performance management practices, not just stirring metaphors, with the people who deal with customers. A moment of truth is the customer value proposition. Clarity about that will help your salespeople (and everyone else) focus more efficiently, qualify customers more effectively, and allow your firm to allocate resources more profitably.

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Why Social Networks Still Haven’t Cracked the Job Search Puzzle

Facebook is preparing a version of its site for the workplace designed, it’s suggested, to compete directly with LinkedIn. This is puzzling at first glance, since Facebook at Work seems geared toward letting people connect and collaborate with colleagues and peers at their current jobs, while LinkedIn is focused more on building professional connections with people outside the firm.

On the face of it, that seems to be two entirely different markets, with Facebook at Work playing in the workplace productivity market (competing with the likes of Microsoft Office, Webex, and project management software) while LinkedIn is part of the headhunting industry.

But look at the move in terms of the jobs customers are trying to get done (rather than the markets that these companies address) and the possible connections become much easier to see.

Every working professional knows that at least 50% of all available job openings are never advertised. Hence, all of them have a job to do – something along the lines of,  “Do I have the right network so, in case something happens, I would know about these hidden offers?”  LinkedIn addresses this job directly, by allowing you to create and build an exclusively professional network among its 300 million+ members.

In this regard, Facebook looks a lot like LinkedIn, but bigger – with 864 million active users, almost three  times bigger. So one way to view this is as a battle between two powerful networking companies with similar digital business models that are both able to keep getting bigger and bigger by linking people to more people in relentless geometric progression.

Looked at that way, Facebook’s size doesn’t look like much of an advantage, since job seekers can already list their professional credentials on its site. And when Facebook at Work is launched, job hunters can simply tap into both Facebook’s and LinkedIn’s networks, for free.

But here’s the important point – neither Facebook nor LinkedIn are doing the “let me know about hidden employment opportunities” job well enough yet.  Facebook introduces too much variability, with all the information in your profile that’s not related to your professional experience and aspirations. And LinkedIn is more oriented toward the job of  “advertise the candidate” than “advertise the opportunity.” That is, it works best for companies checking out people’s credentials than for people trying to check out potential employers.

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While an internal work productivity site doesn’t seem to address that job any better (and even does it arguably worse), it is a job that many people need done, and one that isn’t yet being done very well. That’s the definition of a potent business opportunity, and a powerful incentive for both parties to direct resources to fulfill that need before some clever third party, say an aggregator or data crawler, steps in.

That essentially makes it a resource arms race, and in a resource arms race, Facebook has the clear advantage. After all, Facebook’s $7.87 billion in 2013 revenues is more than five times larger than LinkedIn’s $1.52 billion. That not only gives it more resources but more urgency to apply them, since Facebook needs to find much bigger markets to sustain its growth. What’s more, professional networking is a natural extension of Facebook’s original operating model, sussing out and serving the needs of the relatively homogeneous community of college students. Working professionals are another such market of fairly homogeneous users, and the market is remarkably big – by some accounts more than three times as big as the student population.

So maybe the right question to ask here isn’t which titan will win but, rather, with these two companies converging on fulfilling the same job-to-be-done in a market of enormous size, and given Facebook’s greater need to sustain its growth in 2015, will it compete – or simply acquire?

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Workers Are Bad at Filling Out Timesheets, and It Costs Billions a Day

You probably spend a huge amount of your time at work on email — most of us do. And we’re pretty aware of the costs: distraction, intrusion into our personal lives, and so on. But for consultants, lawyers, and others who work in professional services, there’s often another, more direct cost: the loss of billable hours.

That’s the conclusion of a recent study from AffinityLive, a company that specializes in professional services automation. Surveying 500 workers last summer, the firm calculated that each person lost $50,000 per year in revenue due to insufficient tracking of emails with clients and others. In total, “almost 40% of respondents reported never tracking time spent reading and answering email,” with only 33% of respondents saying they “always” or “often” do. Consider these numbers when you realize that “more than half of survey respondents indicated that their employer directly uses timesheets to bill clients hourly or determine retainer amounts.”

Taking into account the size of the professional services sector, the company estimates that the U.S. economy is losing 50 million hours, or $7.4 billion a day, in productivity.

The research, and AffinityLive’s plan to deliver automated tracking solutions, derived from conversations CEO Geoff McQueen was having with others in the professional services industry (he ran such a business at the time). “Their problems were the same,” he says. “They would be working harder and longer and wouldn’t know whether or not it had been financially worthwhile until a couple of weeks after the end of the month.” And while it was sometimes easy to identify early on the projects that were big winners or major disasters, everything in the middle was muddy. “We really had no visibility as to what the heck was going on,” according to McQueen.

Part of this difficulty derives from the fact that the way we work now makes it trickier to track exactly how much time we’re spending on projects. McQueen points out that, prior to email, correspondence would generally come in via mail or fax. “You’d spend 15 or 20 minutes reading this letter and thinking about what you’re going to do,” he says. “Then you might draft your reply, which might take 45 minutes to an hour. You’re basically dealing with a round-trip time of an hour. If it took you, let’s say, two minutes to keep track of that, you’re basically dealing with 3% overhead time to keep track of the work you did.”

This model changed entirely with email, McQueen argues. People often deal with a couple hundred emails a day, with most interaction taking 20 to 30 seconds, and occasional longer responses of around five minutes. “If it then takes you three minutes to go into your timesheet program to record the time, you’ve gone from spending 3% of the work unit in administrative overhead to spending 60% in overhead.” Not to mention the fact that it’s entirely impractical to log activity bit by bit every time you answer an email. It is, as the AffintyLive report states, “a disconnected afterthought and not part of any other systems people use to get their work done.”

McQueen says many people deal with this by spending Friday afternoons trying to remember what they did over the course of a week in order to fill out their timesheets. This is obviously not a very accurate method. Data collected by AffinityLive shows that people who fill out timesheets once a day reported being more accurate in their record-keeping than those who fill them out once a week or less. (And the people who said they don’t track their time? They’re required to submit timesheets by their company but are essentially guessing at whatever they did that day or week.)

According to Sanford DeVoe, an associate professor of organizational behavior and HR management at the Rotman School of Management, it’s especially difficult to recall time spent on email for a couple of reasons. “Email occupies that liminal space between tasks, and it hurts a lot that we often write and receive personal emails while we’re reading or composing a response to a client. That integration between the personal and professional makes it seem like it’s not a task you’re supposed to keep track of,” he says. “If we spend time writing an internal memo, it’s much clearer in our mind that we’re spending a specific amount of time on a work task.”

When it comes to why we’re stuck between a new way of working and an old way of recording it, McQueen places a lot of blame on the technology sector and, particularly, the user-unfriendliness of enterprise software. Not surprisingly, he points to his company’s software as a potential solution. It basically automates a lot of the inputting for you based on what’s in your calendar and who you’re emailing, using these signals to construct a record of a person’s work during the day. In the future, he imagines being able to detect whether a cell number is a client or if you’re meeting with a client based on your geographic location. The software would then automatically log the number of minutes you’re on the phone or in a client’s office.

If it seems far-reaching when it comes to employees’ privacy, he says the software only takes into account things you do using your work email account and with work contacts. And it has the side effect of exposing people who have “become really good at convincing their organization that they’re doing work when, in fact, they’re not.”

But are there any pitfalls to this type of tracking minutiae? Maybe, if you don’t approach the task thoughtfully and with the right technology. “The biggest danger with having managers or employees focus too much on how they are spending their time is that activities that aren’t ‘billable’ are given short shrift,” says DeVoe. “There is a large academic literature attesting to the importance of organizational citizenship behavior — all the things that technically aren’t part of your job but are nevertheless key to organizational success.”

In addition, being too attuned to how employees are spending their time can be psychologically problematic, explains DeVoe. “When people are billing their time at high rates, laboratory experiments I’ve conducted show that we become much more impatient with our time. This obviously has negatives in terms of greater time stress, but inducing impatience can have downstream effects across a wide set of domains, such as making people more financially short-sighted.”

Lastly, it can have an impact on your personal life and worldview. “Having this monetary value on time can make you more stingy with your free time, less likely to stop and smell the roses, and more likely to focus on economic factors when you’re evaluating your overall life satisfaction,” he says.

Technology can help, says DeVoe, because it can precisely and unobtrusively measure your activity without many of the psychological pitfalls. As a best practice, companies should “explicitly consider monetary value when they are making habitual or permanent decisions about how people will spend their time in the organization, but avoid practices that repeatedly remind them of the monetary value of their time.”

In other words, you want the right information to help you allocate the organization’s time, without the daily psychological burden of gathering it.

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Free Community College Would Help Fix the Skills Gap

On Friday, President Obama proposed a program that would make community college tuition free to most students. Such a program might go a long way to providing employers with a better-skilled workforce; it would also restore growing economic opportunity for many workers.

Modeled after a program that is starting up in Tennessee, Obama’s proposed program would pay tuition for community college students who are enrolled in a degree program at least half time and who maintain a 2.5 grade point average. The Federal government would kick in $60 billion over 10 years to cover 75% of the cost; states would pay the remainder.

Workforce experts see community colleges as essential for providing workers with “middle skills,” especially for jobs that require some post-secondary technical education and/or on-the-job learning (see “Who Can Fix the ‘Middle-Skills’ Gap?”). Currently, 26% of jobs require less than four years of post-secondary training; 16% of jobs require on-the-job training of more than six months. Community colleges provide a wide range of technical training and many of these vocational programs include work-study components at local employers, providing critical job experience.

But the evidence suggests that while demand is growing for middle-skill workers, the U.S. educational system is turning out relatively fewer graduates at this level. This mismatch contributes to employers’ perceptions of a “skills gap”. The chart below shows the educational requirements of the jobs that will be created between 2012 and 2022, compared to the share of diplomas generated over the past decade. While 24% of job openings will require less than four years of post-secondary training, this category only accounts for 21% of the diplomas granted (including both associate degrees and non-degree certificates). By comparison, a larger portion of four-year and graduate degrees are awarded relative to job openings requiring these higher degrees.

New technology at least partly explains the rising relative demand for mid-skill workers. Historically, new technologies initially demand relatively educated workers, but as they mature and technical knowledge becomes more standardized, demand shifts to mid-skill technical occupations. While many of the first computer programmers were PhD mathematicians, few are today. In healthcare there has been a major shift of jobs from the most highly educated doctors and dentists to mid-skill workers including nurses, dental hygienists, medical assistants and a wide range of health technologists. Over the last two decades, two million mid-skill jobs have been created in health occupations beyond what can be explained by the overall growth of the healthcare sector.

But our educational institutions are not keeping up with this shift. The chart shows that middle skill workers are being undersupplied relative to workers with four-year or graduate degrees. Obama’s program might help fix that imbalance, benefiting both employers and employees. Indeed, mid-wage, mid-skill jobs in mature industries have been particularly hard hit by automation, leading to a “polarization” of job opportunities. But new jobs are being created that demand new skills, skills that community colleges can often provide. Free tuition may help bolster economic opportunity for the less privileged.

As the Wall Street Journal notes, presidents since Ronald Reagan have touted two-year colleges as a cure for problems with both job training and educational opportunity. Yet the funds haven’t followed the rhetoric. Instead, policy has favored four-year institutions. Over the last decade, one study found that spending per pupil at private research universities increased by $14,000 after adjusting for inflation; meanwhile spending per student at community colleges remained unchanged. In total, public research universities receive about twice as much government funding per pupil as do community colleges, not counting tax subsidies on donations and endowment funds.

Yet, arguably, community college students are more in need of assistance, including remedial education. As one study put it, “two-year colleges are asked to educate those students with the greatest needs, using the least funds, and in increasingly separate and unequal institutions. Our higher education system, like the larger society, is growing more and more unequal.”

Perhaps President Obama’s proposal will fare no differently than past ones. That would be a shame. Though some critics argue that this proposal is not the best way to promote mid-skill education it is nevertheless a step in the right direction. Moreover, the president’s proposal helps put a spotlight on the middle-skills gap. As Senator Angus King of Maine argues: “It’s not necessarily all about bills and funding. Sometimes it’s about the bully pulpit and raising the profile of an issue.” If America hopes to rebuild its middle class, technical education needs all the profile it can get.

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Ethical Consumerism Isn’t Dead, It Just Needs Better Marketing

Ethical consumerism is the broad label for companies providing products that appeal to people’s best selves (for example, fair trade coffee or a purchase that includes a donation to a charitable cause). Now that the general idea of combining ethics and shopping has become a mainstream concept, there is a developing a backlash against the idea that consumers might effect change through their purchasing habits. This pessimistic stance stems primarily from the lower sales of ethical brands. “If consumers cared about moral issues,” the argument goes, “then companies and brands that did the right thing would have a larger market share. It is clear people must not care about these issues and so ethical consumerism is going to fail. We cannot shop our way to a better world.”

I understand the attraction to markets and their efficiency; I am a marketing professor. I am also a psychologist, though, and a “behavioral economist,” which in my case means someone who studies the psychology of market decisions with an eye to economic theory and when it does (and does not) explain what people do.

I worry that the pessimism about ethical consumerism gives companies the idea that they should not actively pursue the moral high ground because consumers will not reward them for it. I also worry that consumers will give up on trying to effect change through purchasing, because they believe that the aim is hopeless. On the flip side, it is pleasing to imagine the market fixing societies’ ills, to provide a nice antidote to the common idea that the marketplace and consumers are amoral and solely profit-driven.

And yet the hopelessness of ethical consumerism is echoed everywhere, in the business press, in (some of) my students’ resistance to studying moral issues in a business framework, and in conversations I have on airplanes, at parties, and with colleagues. An often-quoted 2010 Wall Street Journal article, “The Case Against Corporate Social Responsibility,” laid out the argument clearly: “the fact is that while companies sometimes can do well by doing good, more often they can’t. Because in most cases, doing what’s best for society means sacrificing profits.” Indeed, regulation would be a more immediate and effective solution to unethical consumerism than hoping for market change. But let’s be honest– widespread sustainability regulation is not coming any time soon and would likely have some negative consequences even if it did.

So, for now we are stuck with hoping that consumers will drive change. I’m still optimistic about this, for one primary reason: Even though market share for sustainable brands is not always as high as for other brands, I do not think current sales are the best barometer of ethical sentiment. Until marketing practices do the best that they can to guide ethical consumerism, we can’t really draw any conclusions about what current market share means.

My first piece of evidence may seem obvious, but it seems to get lost whenever people discuss market behavior. The truth is, most people will (at least sometimes) behave ethically even when they have to sacrifice something, usually cash, for their morals. Billions are given to charity every year ($335.15 billion in the US alone in 2013 according to Charity Navigator). This past year, thousands of people dumped ice water on their heads and then gave a total of $115 million (as of this writing) to help support research for ALS. So clearly there is some human willingness to part with one’s money for an ethical cause.

And yet sometimes it is tempting to believe that shopping behavior is more indicative of people’s “real” selves than behaviors such as giving to charity, because market tradeoffs are expected to be more accurate revelations of deep, actual sentiment that strip away any nonsense and get to the real, perhaps ugly, truth. As economist Paul Samuelson explains, market preferences are “revealed preferences” that make people put their money where their mouth is.

But people regularly buy hybrid cars, organic foods, environmentally-friendly detergents and Warby Parker glasses. Why? I would chalk a lot of it up to really effective marketing. Yes, there are other benefits to those products – saving money on gas, health benefits, style, and comfort – but isn’t it a marketer’s job to tout those and other benefits, too?

Pessimism about ethical consumerism rests firmly on the assumption that consumers have one, stable utility structure and they express that utility in their purchasing. The problem is, human psychology does not work like that—people do not have only one value for things and they do not have a stable and consistent utility structure. Modern treatments of economic behavior have rejected the simplistic one-preference idea of human values and decisions for quite some time.   As Daniel Kahneman’s explains in his wonderful book, Thinking Fast and Slow, a survey of all of his (Nobel-prize winning) research over the last forty years or so: “it is self-evident that people are neither fully rational nor completely selfish, and that their tastes are anything but stable.”

My primary research area has been how ethical decisions are especially squirrelly and inconsistent, flip-flopping all over the place, depending on the situation. To provide a personal example, I was just on vacation at Disney World and was offered the “green package,” which would mean not washing the towels while I was there, and also not tidying up the room. Consider: I not only value being environmentally sensitive, but also was in the middle of writing this very article. Nevertheless, I rejected the green choice, because I wanted them to tidy the room and they had mentioned the room tidying last, so I weighted that information more highly in my decision.

One of my favorite quotes, by Mark Sagoff, expresses this type of inconsistency: “I love my car; I hate the bus. Yet I vote for candidates who promise to tax gasoline to pay for public transportation. I send my dues to the Sierra club to protect areas in Alaska I shall never visit…I have an “Ecology Now” sticker on a car that drips oil everywhere it is parked.” Sagoff is focusing on inconsistencies between political and consumer behavior within a person, but the inconsistencies exist even across purchasing contexts.

For example, in a paper published in the Journal of Marketing Research with my colleague Rebecca Naylor, we showed that how much people cared about whether a shampoo company conducts animal testing depended on a simple shift in context. We asked participants to consider a set of actual shampoos that differed on many attributes including animal testing. There was a large set that, we told them, would need to be narrowed down before they picked one shampoo to keep (and we did actually give them the shampoo they chose). We instructed half of them to indicate which shampoos they wanted to consider further, and half to indicate which ones they did not want to consider further. Consistently, and surprisingly, the shampoos picked for further consideration (i.e., those that were included versus those that were not excluded) differed. In the including case, ethics played very little role in choice but in the excluding case it loomed significantly larger. In the end, being told to think in terms of excluding led to more ethical decisions.

In another paper, published with Kristine Ehrich in the same journal, we showed that people who care about ethical issues such as child labor will, strangely enough, avoid finding out whether their products are made using child labor. But then if you give them the information they will incorporate it into their purchasing. Ethical information is difficult to process and it is common for consumers to want to remain willfully ignorant of it. I myself behave in this manner at least once a week.

I could list a half dozen or more other examples, but suffice it to say that there is ample research to match the anecdotal evidence that ethical consumer values exist, but the context has to draw them out. This is the marketer’s task. I think a useful analogy to ethical consumerism is the tradeoff between vices versus virtues. Decades of research in psychology and economics (nicely summarized in Richard Thaler and Cass Sunstein’s book, Nudge) establishes that people often want something different in the short term (e.g., chocolate cake) versus the long term (e.g., being skinny). Likewise, people both want to be ethical and they want to ignore ethics. As Thaler and Sunstein explain in the context of virtues such as eating healthy, exercising and saving money, sometimes all that is needed is a contextual push toward better behavior — a nudge.

Marketers are all about nudging, so why not use it to promote more ethical consumer behavior? Consumers are likely to be especially brand loyal if their deeply-held values are engaged in their purchasing. Consumer engagement and commitment is priceless: ethical brands are more likely to encourage this engagement. Consumers walk around with Whole Foods branded merchandise all the time; it is difficult to find similar examples for less ethical retailers focused solely on price. If low price is all a company offers, it is easy enough for the consumer to walk away when a lower price comes calling.

Imagine if your competitors have all fallen prey to pessimism about ethical consumerism, but you know better. You know consumers have ethical motivations, and you know you can help them express those motivations. You realize that past market share doesn’t have to mean consumers aren’t hungry for the chance to do good while they spend money. By remaining optimistic, you have both made a difference in a larger sense, and you have found a sweet spot in the competitive landscape where you can grow profits and your brand.

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Office Politics Isn’t Something You Can Sit Out

Ask most people about workplace politics and they’ll say they’d prefer to avoid it. Yet, most also know that developing political competence is not a choice; it’s a necessity. The ones who who manage to reach the inner circle are at a great advantage. They get more done, but they are also recognized for their competence and ability to manage interpersonal relationships.

When you don’t understand the political landscape of your company, it shows. Questions arise. Can you go the distance, handle the rough spots, inspire the troops, get the job done, and garner respect? Young workers, especially, often make the mistake of assuming that understanding office politics isn’t necessary. That assumption leads to the loss of valuable learning time. When you’re no longer so green, and start to become a threat to others, things change. Political know-how becomes important — and those who fail to develop such skills are often the ones who get left behind.

Handling public put-downs, knowing with whom to speak about what, understanding how to move projects along, realizing the right times to make yourself visible and how to make your work relevant are only a few important skills. Achieving a high level of political expertise is not easy — nor is maintaining it. Mastery will never be total or permanent. After all, the inner circles of business shift. Even the best senior-level engineer may stall out because she lacks the ability to manage or avoid the political traps that ensnare so many otherwise competent people.

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Karen Dillon


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So do we all need to play games every day? Not necessarily. The degree to which you engage in politics depends on where you work. Consider these four levels of politics in organizations: minimally, moderately, highly, and pathologically political:

In minimally political companies what you see is largely what you get. Standards for promotions and expectations for managing and leading are made clear. There is a sense of camaraderie. Rules are occasionally bent and favors granted, but underhanded forms of politics are avoided. This is the type of organization in which those with little understanding of or interest in politics — the purists among us — can thrive.

Moderately political organizations also operate largely on widely understood, formally sanctioned rules. Political behavior, where it does exist, is low-key or deniable. Conflicts are unusual, as there is a team player mentality. This environment works for people who’d rather not engage in politics, but are capable of managing or living with pockets of political activity.

The highly political arena is where not understanding politics and being unwilling to engage in some of its more surreptitious forms can exact a price. Formally sanctioned rules are only invoked when convenient to those with power. In-groups and out-groups are usually well defined. Who you know is likely to be more important than what you know. Working in organizations like this can be very stressful. Political street-fighters who “read the tea leaves” and “know the ropes,” as politically adept business people I’ve interviewed call it, do far better than those who don’t keep abreast of the games being played.

One organization where I consulted was highly political. Cliques had formed. People slipped into each other’s offices before meetings to share the latest offense of the out-group and to plan their revenge. In highly political organizations like this one, there usually isn’t one person responsible for the climate. Political activity is relational — even if only a couple of people are engaging in negative types, others get pulled in and playing-along-to-get-along becomes the norm.

The most virulent forms of business politics occur in pathologically political organizations. Daily interaction is fractious. Nearly every goal is achieved by going around people or formal procedures. People distrust each other — and for good reason. Out of necessity, people spend a good deal of time watching their backs and far less gets done than might otherwise be achieved.

Management expert Henry Mintzberg wrote of these types of organizations: “Much as the scavengers that swarm over a carcass are known to serve a political function in nature, so too can the political conflicts that engulf a dying organization serve a positive function in society. Both help to speed up the recycling of necessary resources.” The only problem: These types of organizations take a while to die, and so a lot of talented people are caught up for quite a while in politics run amuck.

Fortunately, most of us don’t work for pathological organizations and we don’t drive to work wondering who will be figuratively poisoning our wells today. But even more rare is the organization where politics of any type barely exists. Wherever there is competition, especially for scarce resources, you’ll find politics.

So, how do you know which type of organization you’re working in, and how do you develop the skills to survive there, especially if it’s not in your nature to play politics? You can wait around for the organization to address negative politics head-on. It happens. And when it does, all boats rise. That’s why more organizations should actively foster constructive politics. But it may take a long time for your own organization to see the light and take action, and in the meantime you have a career to manage, to say nothing of keeping your sanity. So, start by identifying the type of arena in which you work, as well as your own personal style. Is there a good match? If you’re a purist working in a highly political environment, for example, you need to become more street smart or move on. If it’s not in your nature to be political, then the latter may be the better choice. But it never hurts to learn about politics and to stretch your style to accommodate a variety of levels:

Read about workplace politics and observe those who are skilled. Treat it like any other important area of business expertise.
Try tweaking how and when you say things. For instance, if others expect you to be demure and let them steal your ideas at meetings, learn some ways of asserting yourself. For example, you could say: “I mentioned that option earlier. I’d like to expand upon it a bit more now.”
Consider to whom you’re giving power and alter that if it’s getting you nowhere. Find another way to get what you want or change the goal.
Break out of dysfunctional patterns, such as repeatedly taking on low visibility, low value projects to please someone; always having to be right rather than crediting others for their input; or failing to choose your battles instead of learning what matters most.
Be less predictable, because predictability is the kiss of death in political organizations. For example, if you’re constantly attempting to prove yourself, but you lack guidance and a support network, you can leave yourself open to political foul play. The more predictable you are, the easier it is for others to manage you to their own advantage.

Political proficiency is not a choice at work, but it’s a necessity that can be improved at any point in your career. For each and every one of us, the sooner that happens, the better.

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What Business Can Learn from Government

In 1989, Peter Drucker wrote an article for Harvard Business Review titled “What Business Can Learn from Nonprofits.” As the story goes, the concept was so counterintuitive that readers thought the magazine had made a huge typo; surely, it had gotten things backwards.

We wouldn’t be surprised if readers had the same reaction upon seeing the headline that sits atop this piece. What, after all, could government possibly teach business?

As it turns out, plenty. Despite the public sector’s blanket reputation as a bureaucratic backwater, there are countless examples of civil servants doing highly effective work. A number of cities, in particular, have become hotbeds of innovation, in no small part because of the fiscal strains they face.

With Washington mired in gridlock, local governments are being left “to grapple with super-sized economic, social, and environmental challenges,” Bruce Katz of the Brookings Institution has asserted. The good news: They’re responding “with pragmatism, energy, and ambition.” In fact, from our perch at the Drucker Institute — as we guide municipal leaders through the “Drucker Playbook for the Public Sector,” a training program distributed in partnership with the National League of Cities — we see local agencies performing particularly well in three areas.

The first is exemplified by South Bend, Ind., which is spurring rank-and-file workers to view themselves as innovators — a tough thing for many corporations to get right. As we’ve observed, it’s a mindset that starts at the top.

In the case of South Bend, that means Mayor Pete Buttigieg, a former Rhodes scholar and McKinsey consultant, who has been known to challenge city workers to tackle problems so thorny that they can only be solved with new kinds of thinking. In 2013, for instance, Buttigieg called for staffers in just 1,000 days to address, through rehabilitation or demolition, 1,000 vacant and abandoned properties blighting the city. They are now on pace to beat his ambitious timetable.

“Mayor Pete frequently says, ‘If we’ve never done it that way before, we’re on the right track,’” notes Scott Ford, the executive director of the city’s Department of Community Investment, which is responsible for economic development in South Bend. In turn, Ford has issued a mandate to his direct reports: He expects them to carve out real time to work on policy innovation, and not just concentrate on programmatic execution.

The results are tangible: Largely through the efforts of a single front-line employee and two middle managers working in Ford’s shop, South Bend last year streamlined and automated its tax-abatement petition process. Specifically, these staffers figured out how to slash the application from 22 pages to 4. What’s more, they made it so that those seeking tax relief now fill out a common online application, which allows the city to track their progress, monitor delays, coach them through any hiccups, and help them hit all deadlines.

It’s hardly an isolated example. In the past year, Ford’s people have also come up with fresh ideas to simplify accounting approvals, better track low-income housing tax credits, and speed up the transfer of funds.

That a place like South Bend has been able to cultivate this kind of bottom-up innovation makes sense. Although government workers are widely considered apathetic, research shows that many of them “enter public service because they are already committed to the mission of government” and are eager to make “a positive difference in the lives of the citizens they serve,” as Robert Lavigna, the author of Engaging Government Employees, commented recently. For companies trying to convey a strong sense of purpose to their workers, there is much to be learned here.

A second area in which cities are operating at a world-class level is in gathering and analyzing data to enhance performance. Take Louisville, Ky., which is pushing hard to constantly answer some key questions: What is city government doing? How well are we doing it? And how can we do it better?

Backed by the city’s LouieStat database, officials in 2014 were able to, among other things, reduce hospital turnaround times by an average of nearly 10 minutes for Emergency Medical Services personnel, making them available for more runs; slash the portion of restaurants, public pools, and other facilities in Louisville not receiving health inspections on a timely basis from 10.5% to less than 0.1%; and cut repair time for the city’s vehicle fleet to just 19 days from 77.

It’s not merely theory that government has much to teach business about using information effectively. Humana, the health insurer, helped Louisville get its performance-improvement team rolling a couple of years ago by offering pro bono support and teaching city staff about Lean and other management techniques. Humana executives still provide mentoring and coaching. But now, Louisville is also sharing with the company its own knowledge on a topic in which it has developed considerable expertise: linking performance management with innovation.

In addition, the city has become active in the Association of Internal Management Consultants, exchanging best practices with managers from Coca-Cola, Bell South, Turner Broadcasting, and other corporations. “It’s really a dialogue back and forth,” says Theresa Reno-Weber, Louisville’s chief of performance and technology. “We’re learning from one another.”

The third area in which cities are excelling is in arming residents with technology to improve government services. Among those leading the way is Boston, whose Citizens Connect mobile app allows people to report on potholes, graffiti, and other neighborhood nuisances. Now, the city is trying to take the technology even further by having it foster real civic engagement.

We are certainly not saying that all cities are well managed. Mindless bureaucrats abound in too many locations. Episodes of waste, fraud, and abuse are easy to cite, as well. When it comes to government, “it’s very easy for us—people associated with corporate entities or people doing research on the corporate world—to be somewhat condescending, dismissive,” Yvez Doz, an INSEAD professor, remarked last year.

But to see only the warts is to miss a huge opportunity. The best-run government operations have much to teach business, just as the best-run businesses have much to teach government. As Peter Drucker knew, the same holds true for nonprofits. Clearly, no sector has a monopoly on wisdom.

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How to Break into Your CEO’s Inner Circle

There is a widely held belief that strategic decisions are made collectively by an organization’s executive team, the senior executives who report directly to the CEO. In many organizations, though, nothing could be further from the truth. Decision-making power resides with a much smaller group, who form what you might call the CEO’s inner cabinet. Members of this elite club wield a disproportionate amount of influence, which is why most executives want to join.

But how does one become a member of the CEO’s inner cabinet? What traits must one possess? Ask CEOs and many hesitate to even admit they have an inner cabinet lest it demotivate those who aren’t members or, worse, have them clamoring to be admitted. Other CEOs simply respond that their closest confidants need to be “team players,” which is vague and even misleading.

To help executives get a better understanding of what they need to do in order to become a member of the CEO’s top team, I asked the CEOs I have worked with to name the “best” executives they’ve led — by definition, therefore, members of their inner cabinet — and to describe what set them apart. Five traits came up time and again.

Insiders make their numbers

This is often the first thing CEOs mentioned. It is shorthand for “they achieve the objectives I set for them” and the dogged determination they demonstrate in doing so.

But do the very best always make their numbers? No, the CEOs admitted, but they don’t waste time making excuses when they don’t. In a word, they feel accountable. This trait was wonderfully illustrated by a senior vice president in a telecoms company who recounted how a regulatory ruling had just wiped several millions dollars from his bottom line. From the conversation that ensued it was clear that pleading with his CEO to readjust his year-end earnings target wasn’t an option. His only thought was how to make up the shortfall.

The dogged determination that the best executives exhibit when trying to make their numbers sometimes leads them to jostle with peers, something the CEOs I spoke to found quite acceptable, despite their often professed preference for “team players”.  In fact, the last thing a CEO wants is for an executive to surrender resources and capital to a colleague in the interest of the team. That decision is not for executives to take — it is the CEO’s. In such circumstances, the CEO feels best served by executives who fight hard to make the case that their units deserve the available capital and resources.

Insiders don’t spring surprises

If bad news is about to hit, CEOs want to hear it directly from the executive responsible, and certainly not from a board member or the media. This places executives between a rock and a hard place. Tell the CEO about the bad news before it materializes and you run the risk of appearing incompetent or unsure of yourself — not traits CEO admire. Just as bad, you invite the CEO to poke his or her nose in your business.

Seasoned executives learn when to reach out to their CEOs and when to hold back, which inevitably means they aren’t always totally transparent. CEOs tolerate this because they were once in the same shoes and in any event they know that they have little choice, given that they can’t know everything that’s going on in the company.

That said, not being totally transparent is one thing, but being evasive is quite another. Though CEOs may tolerate that executives keep information from them at times, they expect straightforward answers when they ask straightforward questions. One CEO told me about a direct report who had an impeccable track record but whose monthly reporting was never clear. This led the CEO to ask questions and demand more clarity. The situation never improved and, despite good results, the executive was dismissed for fear that, one day, his lack of clarity might hide a nasty surprise.

Insiders are loyal to the boss

If CEOs are the most powerful people in their organization, they still feel vulnerable — with good reason since they know that, at any given time, one or more of their direct reports wants their job. It’s easy to understand why loyalty is another important trait for CEOs.

It’s a particularly sensitive point for CEOs in an era in which their effectiveness is being scrutinized more than ever by corporate boards. For this reason, executives who wish to appear loyal should be wary of cozying up to board members. As one CEO put it: “Too much exposure to the board leads to radiation!” CEOs are also wary of executives who form coalitions with peers. One CEO told me she was considering firing her CFO because he consistently ran his monthly financial report by the Operations VP before showing it to her and, as she realized, was letting the Operations VP unduly influence when revenues and expenses were recognized.

Insiders tolerate ambiguity and uncertainty

This matters for two reasons. First, a CEO’s job involves striking a balance between a wide set of seemingly contradictory interests. They must plan for the long-term while minding the short-term, grow the top line yet ensure the bottom line stays healthy, and minimize risks while making risky bets. CEOs want executives who tolerate the ambiguity involved in this juggling act. As one put it: “When I hear an executive complain that I’m sending contradictory messages when I say we need to cut costs and spend to innovate, that tells me something about their capacity to move to the next level.”

Second, CEOs operating in uncertain environments need to have a lot of “what if” discussions with their executives. Those with a low tolerance for ambiguity and uncertainty invariably react by emphasizing the negative consequences of a given scenario, especially on their unit. It is at times like these that executives who want to enter the CEO’s inner cabinet must be able to put their organizational leadership hat on and leave their unit leadership hat at the door. In my experience, a low intolerance for ambiguity and uncertainty derails more executive careers than a lack of technical competence.

Insiders are good-humored

Many CEOs mentioned “a good mood” as a trait they saw in their very best executives.  I sought clarification and discovered that by “a good mood” they did not mean they wanted “Yes” men or women. CEOs want to be challenged but smart executives pick their battles and don’t constantly raise objections. And they are often, although not always, charming enough to present the unpleasant in a pleasant manner.

A good mood also seemed to be code for not bringing disputes with peers to the CEO for resolution. Top executives resolve them on their own. Some are even adept at helping to resolve disputes between their colleagues so they don’t find their way to the CEO’s office. Thus, a good mood appears in some cases to be synonymous with strong mediation skills.

The five traits that emerged from my CEO interviews were found in both men and women, and in executives with P&L responsibilities and those with functional responsibilities. They are not the traits typically found in leadership textbooks, but then again, the majority of leadership textbooks aren’t written by CEOs.  They might not even be the five traits the CEO in your own organization most covets. But unless and until your CEO signals what she actually wants from you, getting better at these behaviors won’t be a bad start to winning a place at the top table.

 

 

 

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