Marina Gorbis's Blog, page 1341

The Fortune Global 500 Isn’t All That Global

The 2014 DHL Global Connectedness Index that one of us (Ghemawat) prepares with Steven Altman, and that was released on November 3, indicates that global connectedness started to deepen again in 2013 after its recovery stalled in 2012. In other words, there’s now a higher volume of information, capital, people, and trade flows between countries.

But even more striking are the report’s findings concerning the breadth of connectedness –how widely distributed those flows are between different nations. Emerging economies are reshaping global connectedness and are now involved in the majority of international interactions. But advanced economies, in particular, have not kept up with the big shift of economic activity to emerging economies, leading to declines in the breadth of globalization.

Do we see similar patterns when we look at company level—and particularly at multinationals that operate in multiple countries? Specifically, are companies from advanced economies failing to keep up with the big shift? There are indeed some indications that point in this direction. Thus, analysis of a sample of companies by McKinsey indicates that over 1999 to 2008, companies from emerging economies not only grew 10 percentage points faster annually at home than companies from developed economies (18 percent vs. 8 percent), but also enjoyed a similar edge (22 percent vs. 12 percent) in advanced economies, and an even bigger one in other (foreign) emerging economies (31 percent vs. 13 percent). And Bain & Company’s analysis of the performance of nearly 100 Western firms with listed subsidiaries in emerging markets found that these companies increased their profits there by an average of 15 percent a year between 2005 and 2010—compared to 23 percent a year for comparable local companies.

Unfortunately, these data start before or even end with the financial crisis, and the sample selection criteria are not entirely clear. To address the extent of globalization at the company level and provide a firm-level counterpart to the country-level analysis presented in the Global Connectedness Index, we looked at the world’s 500 largest companies, as in companies included in the Fortune Global 500 in 2012 and 2013, and collected data on all their majority-owned affiliates—both national and international (over 75,000 in 2012 and 71,000 in 2013). While this metric has its own limitations—among other things, it reflects choices about internal organization and is likely to change very slowly–it does allow us to be systematic as well as relatively up-to-date.

The data indicate that even the Fortune Global 500 continue to locate nearly one-half of their affiliates at home: Europe was actually the only region in which, overall, more than one-half—about 70%–of companies’ affiliates were international. And while there was, given the numbers reported above, a general tendency toward reducing the total number of affiliates in the 429 companies that were on the list in both 2012 and 2013, the number of international affiliates dropped a bit faster than domestic ones.

The most pronounced differences, however, are at the level of the three major world regions to which most of the Fortune Global 500 can be assigned: the triad of US/Canada, Europe, and Asia. Asian multinationals are the only ones that increased the number of international affiliates between 2012 and 2013, and they chose to reinforce their regional presence rather than their presence elsewhere. This pattern dovetails with the declining distance (and increasing regionalization) observed at the country-level in East Asia & Pacific in the DHL Global Connectedness Index. (South and Central Asian, broken out separately in that report, ranks much lower on both internationalization and regionalization levels.)

European multinationals have the highest proportion of both regional and global (outside-the-region) affiliates within the triad—in keeping with the characterization in the DHL Global Connectedness Index of Europe as both the world’s most internally integrated and globally connected region. Between 2012 and 2013, these companies reduced their international affiliates within Europe particularly rapidly, as one might expect given anemic European growth and forecasts for growth. The cut-backs in their global affiliates, in contrast, were significantly more modest than in the other two regions.

US/Canada consists of just two countries, so as one might expect, companies headquartered in this region have relatively few regional affiliates: global affiliates are more than 15 times as numerous. These companies cut back their numbers of global affiliates to a significantly greater extent than their Asian and European counterparts—which jibes with casual impressions that there is significantly more skepticism about global expansion in the C-Suite in the U.S. (which dominates this region) than elsewhere.

Of course, as is often the case, these averages, mask significant variation: thus 18% of the firms that figured on the Fortune Global 500 lists in both 2012 and 2013 actually increased the percentage of their total affiliates that are international by more than 5 percentage points, versus 13% that registered decreases of 5 percentage points or more. And in the aggregate, the changes reported are relatively small, as one might expect: affiliates aren’t started or stopped on a dime. But they do fit with the pattern of changes observed for the Fortune Global 500 companies between 2011 and 2012 and with the pattern of declining breadth observed at the country level by the 2014 DHL Global Connectedness Index. Perhaps these cutbacks are a response to overshooting earlier on because of “globaloney.” But whatever the explanation, at least some companies—even among the world’s largest—seem to think that globalization has run its course, at least as far as they are concerned.

When Stock Buybacks Are Not a Waste of Money

Buying back stock, pretty much corporate America’s favorite thing to do with its money over the past decade, has come in for a lot of criticism this fall. In an epic September 2014 HBR article, “Profits Without Prosperity,” economist William Lazonick blamed buybacks for much of what ails the U.S. economy. His arguments have begun to catch on, in the media at least.

Two years ago, though, HBR Press published a book that cast buybacks in a much different light. In The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success, Will Thorndike described how share buybacks had helped drive several of the most remarkable corporate successes of the past half century. The Outsiders has been described by The Wall Street Journal as the “playbook” for many of the activist investors currently pushing companies to buy back more shares.

So I asked Thorndike, a managing director at the private equity firm Housatonic Partners, what gives: Are buybacks a travesty, or smart capital allocation? What follows is an edited and condensed version of our conversation. But first, I should probably define a few things that come up: A tender offer is when a company publicly offers to buy a large number of shares, at a set price, over a limited time period. P/E means price-to-earnings ratio. And John Malone is a cable-TV billionaire who figures prominently in Thorndike’s book.

I guess I’ll start where your book starts, with Henry Singleton, who is really the father of the modern stock buyback. What did he do?

The way to think about Henry Singleton is that he demonstrated kind of unique range as a capital allocator. He built Teledyne [in the 1960s] largely by using his very high P/E  to acquire a wide range of businesses. He bought 130 companies, all but two of them in stock deals. Throughout that decade his stock traded at an average P/E north of 20, and he was buying businesses at a typical P/E of 12. So it was a highly accretive activity for his shareholders.

That was Phase One. Then he abruptly stops acquiring when the P/E on his stock falls at the very end of the decade, 1969, and focuses on optimizing operations. He pokes his head up in the early ‘70s and all of a sudden his stock is trading in the mid single digits on a P/E basis, and he begins a series of significant stock repurchases. Starting in ‘72, going to ’84, across eight significant tender offers, he buys in 90% of his shares. So he’s sort of the unparalleled repurchase champion.

When he started doing that in ‘72, and across that entire period, buybacks were very unconventional. They were viewed by Wall Street as a sign of weakness. Singleton sort of resolutely ignored the conventional wisdom and the related noise from the media and the sell side. He was an aggressive issuer when his stock was highly priced, and an aggressive purchaser when it was priced at a discount to the market.

The other seven companies in the book, buybacks were a big part of their success too, right?

Yes, that’s correct. Of the eight companies in the book, all but Berkshire Hathaway — kind of a special case, Warren Buffett’s company — bought in 30% or more of shares outstanding over the course of the CEO’s tenure.

Is part of it the era? Most of these stories you tell, the bear market of the ‘70s and early ‘80s is right in the middle of them.

There’s definitely some meaningful overlap across that group in terms of their tenures. But John Malone’s buyback activity is just extraordinary over the last five to eight years. And Buffett has signaled for the first time ever that he’s a buyer. He’s gone from a non-active buyback CEO to one who has changed his approach and gotten very specific about it for the first time, which is interesting.

So in the 1970s, when Henry Singleton and some of these others were getting into buybacks, it was seen as weird, a sign of weakness. Now I think we’re going through the greatest buyback wave ever. Is that good news for investors?

Corporate America’s track record buying in stock is just horrendous. It’s terrible. We are now again approaching a peak of buyback activity, no matter how you measure it. The prior peak occurred in the second half of 2007, the last market peak. The trough in corporate buyback activity? Early ’09. So, kind of a perfect contra-indicator for the stock market.

Not surprisingly, many studies have shown that buybacks don’t produce great returns. But there are very different approaches to buybacks, and they produce very different outcomes. The typical way that corporate America implements a buyback is the board announces an authorization, which is usually equal to a relatively small percentage of market cap — low to mid single digits — and they then proceed to implement that authorization by buying in a specific amount of stock every quarter. Sort of a metronome-like pattern. And generally the amount of stock they repurchase is designed to offset options grants.

The approach of the CEOs in the book was entirely different. It was pioneered by Singleton, and it involved very sporadic, sizable repurchases. I mentioned that Singleton bought in those 90% of shares over eight tender offers. The largest was the last one, which he did in 1984. He bought in 40% of shares outstanding. He tendered for 20-25% and there was excess demand, so he bought in all the shares [that were offered to him].

It’s very different mindset. You’re looking at a stock repurchase as an investment decision with a return and you’re comparing that return to other alternatives, and when it’s attractive you’re aggressive in implementing it.

With Carl Icahn and Apple, Icahn’s argument is, “Do a tender offer, because the stock is relatively cheap compared to where I think it’s headed.”

That’s exactly right. It’s very interesting to see, [because] tenders are rare these days. Even Malone, he’s used tenders occasionally, but he’s generally doing open-market purchases. But you can still implement that sporadic, large-purchase approach in the open market. It’s just you don’t see it that often.

I think the world divides into people who are serious about repurchases and those who are doing it for more cosmetic reasons. You could look at a list of companies who’ve bought in some minimum threshold of shares over the last 24 months, and that’s a group who’s going to have a very different philosophy in this area than the broader market.

So the way to tell  buybacks done as capital allocation from buybacks that are done because everybody’s doing buybacks is the size and also the sporadic nature?

It’s the size, it’s the sporadic nature, and also it’s just, how does management talk about buybacks? Are they describing them as attractive investments in their own right? That’s the key, I think. Not as simply another channel for “returning capital to shareholders,” which seems to be the phrasing du jour.

How to Motivate Someone You Don’t Like

The odds are pretty low that you’ll like everyone you have to manage. And while you may think that disliking an employee or two isn’t something to be concerned about (after all, making friends isn’t the point of being a manager), it can actually interfere with your job. A caring manager is key to employee engagement. When you have negative feelings toward an employee, chances are that person will feel less motivated. That disengagement can, in turn, affect your entire team and the outcome of important projects – which ultimately reflects badly upon you.

In my experience, it’s almost impossible for managers to motivate people they don’t like (except perhaps with fear, which is not ideal). So, for the sake of employee engagement — and your own mental health – it’s important to invest some energy in learning to like at least something about each of your direct reports.

Before you even try to motivate a person you don’t like, take ownership of your feelings and assumptions. If the phrase “He makes me so angry” or “She drives me nuts” ever plays in your head, you need to change your thinking. Recognize that anger, frustration, or mistrust is your reaction and that no one has the ability to make you feel something without your consent. Be curious about why you react the way you do and see if you can get to the root of the issue. You need to own your dislike; your team member does not.

Once you have a sense of what behaviors or characteristics you’re reacting to, employ one or more of the strategies below:

1. If you feel uncomfortable around an employee, increase your time together. It may sound like counterintuitive advice, but if you feel awkward, frustrated, or angry around one of your employees, you probably try to avoid her and may even struggle to make eye contact when you’re together. Imagine how demoralizing it can be for the employee whose boss won’t even look her in the eye!

To change the dynamic, you need to actually create more opportunities to be together, so you can get to know the person’s back-story. This will have two benefits: First, you’ll get used to her quirks, which will make you more comfortable with them. Second, you’ll learn about what makes her tick and how you can tap into those values as a source of motivation. Try opening up a conversation by saying, “You and I haven’t had much of an opportunity to get to know one another. What are the most important things to know about you?”

2. If you find an employee’s habits annoying, focus on the positive. Constantly focusing on what you want the person to change can really be a downer (for both of you). Instead, redirect your attention to what you do like and respect about the person. Think about one trait or habit that impresses you—even if it’s a strength that is sometimes over-applied. Does the person plan diligently? Is he a fan favorite among customers? Does he bring attention to the risks inherent in your strategies? Pay more attention to the positive contributions that you want to encourage. The employee will be motivated by hearing how the team is counting on his strengths to be successful.

Imagine a sales associate who is being pushy with clients. If you reframe the pushiness as persistence, you can encourage that behavior while opening up a conversation about when it’s appropriate to back off. You could say something like “I’ve been watching you on the floor today and you are really giving it your all. I admire your persistence. At the same time, I’ve noticed that it doesn’t seem to work with everyone; when do you think it might be best not to approach someone a second time?”

3. If you think your employee acts disrespectfully, get to the root of the behavior. If the source of your dislike for an employee is bad behavior, (e.g., bullying, self-promotion, disrespect) you won’t be able to motivate the person unless you have some empathy. Most bad behavior is not intentionally destructive; it’s self-protective.  Figure out what the person is trying to protect.  Does he have fragile self-esteem? Is she worried about something? Dig deep. Ask open-ended questions such as “What’s going on for you?” or “What did this discussion trigger?” or “What are you concerned about?”

When you figure out what’s beneath the behavior, you’ll have a better sense of how to motivate good behavior. For example, if you uncover a self-esteem issue, you might determine that an employee needs more opportunities in the spotlight, or that another might be more motivated by small, manageable assignments that allow room for growth without taking undue risk.

Regardless of the source of your dislike for an employee, motivating him or her will be very difficult until you can improve the connection. If you want to be direct about it, you can express your desire to improve the relationship with a statement such as, “I feel like we got off to a bad start and I’d like to change that.” If you want to be more subtle about it, you can signal that you are open to changing your relationship by slowly including the person in more activities, using her as a positive example when talking to the whole team, or just by using your eye contact and body language to be more inclusive.

It’s not your job as a manager to be everyone’s friend. But if a sour relationship is affecting your ability to motivate an employee, the risk is that he will fail, and so will you. Take ownership of your relationships with your direct reports and make the small changes that will help you reframe how you think about them. Even if you don’t end up becoming friendly, your relationship will at least be strong enough to keep the other person motivated.

7 Marketing Technologies Every Company Must Use

With over 1,000 companies trying to sell some type of marketing technology in over 40 categories, it’s not surprising that the most common word that marketers use to describe themselves is “overwhelmed.” Indeed, according to my research into 351 mid-market B2B companies, except for companies in software, the adoption rate of marketing technology is very low: companies in other industries are using a median of just 2 out of 9 major marketing technology programs that I identified.

This is a wasted opportunity. Many marketers have reported rapid and significant ROI from adopting these tools; but first, they had to convince higher-ups to make the up-front investment. So, in the interest of helping clear that path, I am suggesting a Marketing Technology Starter Kit: the seven programs that every company’s marketing team should have access to, at a minimum, to grow leads, opportunities, and revenue.

These programs are essentially an online form of direct marketing. Traditionally the two most important factors in the success of direct marketing campaigns have been the list — getting the materials in front of the right audience — and the offer – offering them something that they will value and act on. And direct marketers have been measuring and optimizing to improve results for decades, in a way that even David Ogilvy admired. In my Starter Kit you’ll see repeatedly how marketing technologies help you get in front of the right audience at the right time with the right offer.

Here’s my list of seven technologies that are table stakes for today’s marketer:

Analytics: Marketing is at an inflection point where the performance of channels, technologies, ads, offers – everything — are trackable like never before. Over a century ago retail and advertising pioneer John Wanamaker said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Today smart marketers do know which half isn’t working. But to do that you need to have web analytics programs set up, and have people on the marketing team who know how to use data.

Leading tools:

Far and away the most popular website analytics tool is the free Google Analytics, which is used on over 80% of small and mid-market websites. It’s definitely the place to start; at some point you may find a need for the paid version or other enterprise analytics tools such as Adobe Analytics. Note that the tools below also have their own analytics platforms.

Conversion Optimization: Conversion optimization is the practice of getting people who come to your website (or wherever you are engaging with them) to do what you want them to do as much as possible, and usually that involves filling out a form so that at the very least you have their email address. Typically only about 3% of people coming from an online ad will fill out a website form; with conversion optimization that can be doubled to roughly 6%. With outstanding offers or marketing apps some companies have created conversion rates several times higher than that; I have a form on my website with a 33% conversion rate. If you’re going to go to the effort and expense of getting people to your website, you need to get as many of them as possible to convert.

Leading tools:

Wordstream’s free Landing Page Grader
Optimzely lets you run A/B tests on landing pages and other website elements
With Unbounce you can create and A/B test landing pages
ion interactive provides tools for non-programmers to create marketing apps, which may provide higher levels of engagement and conversion than a form or content download

Email: Email marketing is the 800-pound gorilla of digital marketing. And I’m not talking about spamming people by buying lists that are being sold to your competitors, too. I’m talking about getting people to give you permission to email them additional information, and then sending only valuable content tailored to the person’s interests. It takes more than one touch to close a sale; email marketing is so powerful because you’re staying in front of customers and prospects who have said that they want to hear from you.

Leading Tools:

MailChimp
Constant Contact
Marketing automation programs (see below) usually have robust email marketing capabilities built in

Search Engine Marketing: Search Engine Marketing includes both paid search ads, like Google AdWords, and search engine optimization (SEO) to try to get high organic search listings for your website content. Since most people, even B2B buyers of big ticket items, use search as part of their work, you need to be there when these people are searching for what you’re selling. With search ads you can test and optimize on keywords, ad copy, offers, the website forms you take them to, and more, and track the people downstream if you integrate your Google AdWords data with your Google Analytics data and CRM so that you know not just which ads are clicked on the most but which ads lead to the most opportunities and revenue. These insights can be applied to all of your online and traditional marketing. SEO involves not just technical enhancements to the site but, most importantly, regularly creating high quality content, which is what Google really values and ranks highly.

Leading Tools:

Google AdWords
Bing and Yahoo
WordStream
Wordtracker
BrightEdge

Remarketing: You’ve experienced remarketing: it’s when you go to a website and then, when you leave that site, their ads appear on other sites that you visit. It’s really easy to set up and incredibly cost effective because you’re only advertising to people who have already expressed enough interest in you to come to your site. It can even be customized to show ads for the particular products or services they looked at. And since you usually pay on a CPM basis, you get tons of free impressions. Over 50% of software companies use remarketing, but less than 10% of other companies do; follow the lead of those software companies.

Leading Tools:

Google AdWords remarketing
AdRoll
Perfect Audience (from Marin Software)

Mobile: Half of emails are now opened on smartphones, and soon half of search will be done on smartphones, so all websites need to be mobile friendly. But today, less than a third of them are. Simply put, you need to have a site that is easy to read and use on a phone. If you don’t, Google penalizes you with lower mobile search rankings. So that mobile-friendly site is step one; after setting up a mobile-friendly website you can go on to mobile search advertising and other forms of mobile marketing. But this is, after all, just a starter kit.

Leading Tools:

The most common technique for making a mobile-ready website is to use responsive design, which automatically resizes the website to fit the device on which it’s being viewed. You can usually tell that a site is responsive by resizing your desktop browser from a horizontal to a smaller, vertical (smartphone-like) size and seeing if the site automatically reconfigures itself, as the mayoclinic.org site does. The other major approach is to create and maintain a separate mobile site such as the New York Times does at mobile.nytimes.com; smartphones are automatically directed to that site.

Marketing Automation: Marketing automation brings it all together. It is a terrific technology that includes analytics, online forms, tracking what people do when they come to your website, personalizing website content, managing email campaigns, facilitating the alignment of sales and marketing through lead scoring and automated alerts to sales people, informing these activities with data from your CRM and third party sources, and more. There isn’t enough room to go into more detail here; just get it.

Leading marketing automation programs for small businesses and mid-market companies:

HubSpot
Act-On
InfusionSoft

Leading programs for mid-market and enterprise:

Marketo
Adobe Campaign
Oracle Eloqua
Pardot and ExactTarget (Salesforce)
Silverpop (IBM)

You may have noticed that I mentioned “content” several times while describing the implementation of these programs. Content is the currency of modern marketers, including in B2B when it is ideally tailored to the different members of the buying team and stages of the buying cycle. Content can take many forms including blog posts, webinars, infographics, marketing apps, and videos as well as traditional forms such as events. And the quality of content is key; as MarketingProfs Chief Content Officer Ann Handley asks, “Would your customer thank you for that content?” So high quality, creative content is critical, but it’s not a technology.

And, no, I didn’t forget social media. Social media is important for engagement, for promoting content, and for other purposes, but I don’t put it in my top seven when it comes to lead generation.

While I have described these seven separately, they are in fact synergistic. Search ads by themselves don’t do nearly as much as search ads with great website conversion forms, remarketing, automated email follow up, and all tracked in a marketing automation system and integrated with your CRM. So it can be complicated. Like sales and product development and supply chain management and finance and any other important part of the company, it ultimately comes down to not just what you do but how well you do it. There are no silver bullets, and it’s a poor marketer who blames their tools. If you’re new to digital marketing, you’ll need to work with people who have a holistic view of marketing technology and don’t just want to steer you toward the one or two that they support.

How to Participate in Your Employee’s Coaching

Once upon a time, executive coaching was viewed as a remedial intervention for executives and managers who needed to be “fixed” in some way. Managers were not expected to be particularly involved in the coachee’s exploration or journey. Coaching was even sometimes viewed as “outsourcing” the management of a difficult employee.

But today, executive coaching is often viewed as a strategic investment in human capital – a perk reserved for employees with high potential — and managers have realized that they need to participate in the process. If you are a manager with a direct report who is working with an external coach, there are several things you can do at the beginning of a coaching engagement to help make it successful:

Set broad objectives and frame them positively. At the outset, the more specific you can be about how you define success for the participant, the better. But when you do so, be sure to emphasize professional development goals. So, for example, your objective might be that the individual should “advocate more persuasively for resources, information, and support” by “navigating organizational politics and priorities more effectively” instead of telling your staffer that he or she “needs to fix contentious relationships” with others. Or you might suggest that he or she “manage workload, expectations, and deadlines more effectively” instead of telling them they need to stop over-promising and under-delivering.

Provide data. Coaching is most effective when the participant and the coach have multiple sources of information, which might include past reviews, personality assessment reports, or online or interview-based 360 degree feedback. While the employee may already have this information, it’s often helpful for you to share what you have in your files directly with the coach. If the coach will be conducting 360 degree feedback interviews, you can make sure that he or she speaks with a representative sample of colleagues for the participant, who can provide a broad, not biased, perspective.

Be specific about concrete action steps the employee can take. A good coaching engagement can go to waste if the manager, the coach, and the employee haven’t clearly articulated specific things the employee can do differently or better.

For instance, the head of a division in a pharmaceutical company had a staff member with a reputation for being brilliant but over-committed. When the coach sat down with the manager to define goals for the coaching, the manager was able to articulate two clear prescriptions for the direct report who was working with the coach: 1) Respond to everyone within 24 hours, even if the response was just a simple reply to set expectations about when a full answer to the voicemail or email would be forthcoming and 2) Create a “not to do” list of tasks that the participant would either not take on or would delegate to others. These two prescriptions, which the coaching participant put into practice, helped him satisfy his stakeholders while simultaneously prioritizing more effectively and focusing on his highest value-adding activities.

Define clear parameters on confidentiality. A coach is not acting as a psychologist, and different confidentiality rules apply. On the one hand, there should be confidential aspects of the process, such as the feedback the coach collects on behalf of the participant (otherwise, feedback providers might hold back in their comments due to concerns that their input may have implications for how higher-ups, or Human Resources, evaluate the employee). You can also understand that your direct report might not want to share all of his or her personality assessment reports, or the 360-degree interview feedback that is collected, with you.

On the other hand, coaching is an investment by you and the organization in the development of your subordinate, so there needs to be accountability built in to the process. Therefore, while assessment data should remain confidential, the development plan based on the data should be shared with you, and possibly also with your Human Resource Business Partner or Leadership Development counterpart.

Be blunt with the coach – blunter than you would be with the coachee. While a coach should not become a messenger between you and your staff member, there is an opportunity in the context of executive coaching for you to provide more specific and candid feedback to the coach than you might feel comfortable delivering face-to-face with your employee.

For example, the manager of a talented investor relations executive at a financial services organization told the employee’s coach that he hadn’t been promoted in the last cycle because the executive was viewed as too self-promotional and political. The manager had been reluctant to share her perspective directly with the executive because she was concerned that he wouldn’t find the feedback credible, coming only from her. However, since other feedback providers in the 360 process shared that same observation, and the coach was viewed by the participant as a neutral and supportive outsider, the coaching participant was able to hear the feedback in a way he wouldn’t have had it been provided directly by his manager. The participant got the message when positively communicated by the coach, became more collaborative and supportive of his colleagues, put the firm’s interests above his own, and was promoted the following year. This happy ending was only possible because the manager had been an active sponsor of, and participant in, the coaching – and had been honest with his coach.

By carefully considering your role in the executive coaching of your direct reports, you can help retain talented members of your team while helping them learn and grow as managers, leaders and teammates, and supporting them as they take their performance up to the next level. Your direct reports will progress further and better on their coaching path if you help show them where it is and where it leads, and then provide direction and support along the way.

The Boundaries Around Your Industry Are About to Change

Most obviously, the Internet of Things has the power to profoundly change operations — that’s where much of the coverage of this burgeoning network has focused. But companies should also be preparing for profound shifts in their competitive strategies as the IoT takes off. It will change the category you compete in, the products and services you sell, and  how you market them, and even the talent you acquire. These three mini case studies will show you just how profound those shifts will be.

Lowes: Right now, most retail IoT home products — thermostats, security systems, lighting — are singular. The market won’t scale if companies can’t help consumers tie these things together and manage them as a unit easily. Lowe’s, the $53-billion U.S.-based home improvement retailer, has hence developed and is marketing a full home management system, called IRIS. According to Kevin Meagher, vice president and general manager for Smart Home at Lowe’s, “Connected home is the first truly new category that Lowe’s has added in nearly 20 years, because we realize that we can add value by bringing these devices together.”

A new category means new skills: Suddenly, many of Lowe’s 240,000 retail employees must be able to talk software and apps, and know how to connect IRIS to all these other products, so the company is training them. At the same time, with 15 million consumers walking through Lowe’s stores every week, Meagher and his team believe that they can — must — play an important role in educating consumers on smart home technology, ease anxiety around standards and reduce customer confusion while providing that unifying product. If they don’t, Lowe’s can envision a scenario in which customers would buy an IoT device from the retailer, then work directly with manufacturers on future services and products — go right to Google for Nest-related products, say.

Longer-term, Lowe’s needs to reinvent the way it markets and sells to consumers. Lowe’s sees a future in which the company is delivering air filters to customers’ doorsteps because IRIS is providing accurate HVAC usage and customers have enrolled in a filter subscription program. Meagher takes it a step further and imagines that Lowe’s could use energy usage data to inform consumers of programs that would save them money with local energy companies. This will require careful stewardship and permissions around consumer data, and expertise around mining the information for new useful services.

Thermo Fisher Scientific: Medical devices companies suddenly find themselves in the software and subscription services businesses because of the Internet of Things. Thermo Fisher Scientific has developed cloud-based genome-mapping devices that allow scientists to subscribe to the computing power they need at affordable rates. The value for Thermo Fisher Scientific is twofold. First, the company can now identify who the end customers are and how those doctors and researchers are using these devices. Second, this new explosion of analytics on healthcare research has opened a new line of business around aggregating the results and selling access to curated views of large datasets.

Of course, that means that a medical device company that’s used to focusing on procurement groups who bought their devices en masse is now focused on the actual end users of their devices. A company with a strong legacy of device product managers and engineers, Thermo Fisher Scientific had only one software product manager when its new cloud-enabled genome-mapping tools launched. The company is now making considerable investments to bring on additional people in fields and with skill they’d never focused on to expand into the new lines of business. This includes digital product managers and data scientists.

All Traffic Solutions: A traffic sign manufacturer is a natural for Internet of Things adoption. Ten-year old All Traffic Solutions made the strategic shift to put sensors into its products to track traffic flow data. More than 25% of All Traffic Solutions revenue comes from TraffiCloud, a web-based application that uses connected sensors to collect traffic data and transmits that data to a centralized database letting users (often municipalities) generate relevant reports.

Ted Graef, President of All Traffic Solutions, says one of the biggest challenges his company faced was aligning its sales team around the shift from selling hardware to selling hardware bundled with software services. The company conducted a number of experiments with pricing and marketing until they found what made sense to their customers and their sales channels. Ted says, “We learned very quickly that bundling promotional pricing and providing onboarding training sped up adoption of our services.” All Traffic Solutions hired a team to provide introductory training for customers on setting up and using TraffiCloud. The investment in onboarding, a totally new skill for the company, has resulted in 70-80% renewal rates for the service.

Lest you think these companies are just organically building these new skills and entering these new kinds of businesses, that’s not necessarily the case. Huge shifts in strategy and culture like these can be slow, costly, or frankly, too difficult to pull off organically. CEOs and senior executives are looking outside their organizations for help in making the transition. In fact, new businesses are developing to help companies make the leap. They’re turning to startups like Sprosty, which helps companies with market research on consumers’ feelings, business strategy, and product development in IoT technology. Another company, Zuora, has helped companies build and scale subscription businesses, and understand its dynamics like billing, renewal rates, and customer churn.

There is no single path to success with selling and marketing smart, connected devices. This third wave of IT-driven innovation is reshaping industries and redrawing the lines of competitive rivalry. Companies need to identify which skillsets they want to hire, acquire or outsource to partners. The goal is aligning closer to consumers and building ongoing relationships. The distinctions between industries will become less pronounced than the differences between market leaders and laggards within the same categories.

The World Is Still Not Flat

Globalization marches on. But the pace isn’t all that fast, and the overall level of global connectedness still hasn’t gotten back to its all-time peak of 2007. The overwhelming majority of commerce, investment, and other interactions still occur within — not between — nations.

That’s the message from the just-released DHL Global Connectedness Index 2014, which combines measures of trade, capital, people, and information flows to give a picture of how entwined we citizens of the world are with each other. Here’s the headline chart, with the subindexes for “depth” (the volume of flows) and breadth (how widely distributed the flows are among different countries):

The index is compiled by Pankaj Ghemawat, a professor at NYU’s Stern School of Business and the IESE Business School in Barcelona, and Steven Altman, a lecturer at IESE. Ghemawat, a frequent HBR contributor, began arguing in 2007, with the book Redefining Global Strategy, that the world isn’t nearly as flat as Tom Friedman said it was. As he put it that year in Foreign Policy magazine:

Despite talk of a new, wired world where information, ideas, money, and people can move around the planet faster than ever before, just a fraction of what we consider globalization actually exists. The portrait that emerges from a hard look at the way companies, people, and states interact is a world that’s only beginning to realize the potential of true global integration. And what these trend’s backers won’t tell you is that globalization’s future is more fragile than you know.

The financial crisis of 2008 and subsequent global recession demonstrated that fragility, as trade flows shrank dramatically. And in 2011, after Ghemawat published another globalization book, World 3.0, global logistics giant DHL asked him to put together an annual index of globalization’s progress (or regress). When I asked Ghemawat if it wasn’t a little bit weird for a champion of globalization like DHL to commission such research from a globalization skeptic, he laughed and said, “If the world were already connected, they couldn’t trumpet what a role they play in connecting it.”

The big news in the chart above, other than global connectedness getting back close to its 2007 peak, is that the breadth of connectedness is still declining. Breadth is a measure that reflects how many different countries a particular country is interacting with and the distances over which interactions occur, among other things. So the tourist trade in the Bahamas, while it scores high for depth because there are lots of tourists, doesn’t have much breadth because more than 80% of them come from one country, the U.S., that is less than 200 miles away and accounts for less than 10% of the world’s outbound tourists.

This global decline in the breadth of connectness, Ghemawat says, suggests that “with the big shift in economic activity to emerging markets, the world is in some sense getting pulled apart.” For the past couple of decades, globalization been largely driven by trade, investment, and other interactions between developed countries and developing ones. Now the action is among the developing countries (and formerly developing countries), which is having the effect of re-regionalizing many economic flows. South-to-South trade is now growing faster than South-to-North or North-to-South, Ghemawat says, while North-to-North trade “has basically stagnated.”

The index’s different “pillars” of connectedness have also followed different trajectories over the past decade:

Trade, as already noted, took a big hit and has now rebounded. The number of people studying or working outside their home country hasn’t changed much, while the information index has been rising fast. (The capital measure is a moving three-year average, because otherwise it would be too volatile to make sense of.) But the information flows have been rising from a pretty low base: Less than 20% of internet traffic crosses borders, and fewer than 5% of telephone calls do. The international calls that are made tend to follow immigration routes:

Of the international calls measured here, 41% are made from advanced economies to emerging ones. The route with the most calling minutes, by far, is from the U.S. to Mexico, and second is the U.S. to India.

So the world is still far from flat. And it’s not even getting that much flatter.

The Rise of the Rude Hiring Manager

When his three-hour board interview ended with an offer to join the executives for a beer, 35-year-old Martin* figured he’d nailed the job. He had spent the last two months interviewing for a position as director of operations at a sporting goods company. His resume was spot-on — he’d spent five years as a sporting goods sales rep and several years as an operations manager doing “everything from ordering for shops, to speaking with dealers, to sales.” Senior management at the new company knew him, his successful track record, and the companies he’d worked for. Slam dunk, right? Wrong.

Martin had participated in five interviews, between which he managed myriad back-and-forth e-mails and deliverables. At the company’s request, he created and submitted a five-year business plan and a master list of vendors and buyers. He was asked to explain his strategies for expanding distribution and introducing new products to market. At the time, Martin had felt uncomfortable about offering so much proprietary information to a company for whom he did not yet work, but colleagues who’d more recently been in the job market told him, “This is how the interviewing process works these days — you jump through hoops.” Martin decided he wanted the job, and if he had to give up the keys to the car to get it, he was going to hope for the best.

But after months of interviews and assignments, Martin said, “Instead of making me an offer, they told me they had to make a ‘really tough decision’ and ‘decided to move in a different direction’” — that direction was giving the position to the most junior board member, who lacked any hands-on experience. “We hope this won’t affect our relationship,” they told him. And with months of his “life down the drain,” but knowing that he worked in a small community, Martin felt obliged not come off as a sore loser. “But the fact of the matter is, I got taken.” His goal today? “To ruin this company.”

Maybe you’re thinking that Martin just didn’t know how to play his cards right. Or that maybe, in the end, he simply wasn’t the best candidate for the position. But Martin is not alone. His utter frustration over the hiring process is pretty much par for the course these days. This type of behavior is happening more and more often. Ask five acquaintances about recent hiring experiences and I bet you’ll encounter one friend who personally has suffered something similar. Data compiled for The New York Times by Glassdoor found that an average interview process in 2013 lasted 23 days versus an average of 12 days in 2009. And time-consuming assignments and auditions for candidates as chronicled in the stories here, and here, and here, are the new normal.

This problem is the result of several factors:

Fear of decision-making. Back when I was hiring people as an executive at a large business, I’d solicit candidates, look at a batch of resumes, decide who had the requisite skills on paper, and then interview the top three or four. Each interview lasted about 30 minutes. I had my standard set of questions that probed their personalities, attitudes, ambitions, skill set, and prospective fit with the company ethos. If two potential hires seemed close, I’d have a breakfast with each and then make a decision. And I personally wrote everyone who didn’t get the job. This wasn’t rocket science.

I can’t pinpoint exactly when the hiring process went off the rails, but I believe it began in the late 90s, when cost cutting became a mania and headcount was slashed to the bone, requiring every employee to do the work of many. With so little margin for error, every hire became a fraught decision, and the fear of making a mistake loomed larger and larger. To protect themselves and validate their choices, managers began to seek more and more “evidence” of their thoroughness in vetting their hires. New hurdles were added until someone interested in a director-level position, such as Martin, is now routinely required to submit the kind of analysis and proposals that were once the province of in-house executives or paid consultants.

A culture of rudeness. Rachel, a 60-year-old former news producer turned freelance marketer, was introduced by a friend to the CEO of “a fast growing ‘deep content’ company with clients like GE and Xerox.” The company seemed like a good fit for Rachel’s portfolio of skills, and employed a large staff of experienced journalists, artists, and web designers. After a brief phone conversation, the CEO wanted to meet with Rachel “ASAP.” During their first in-person conversation, Rachel and he discovered shared viewpoints, and after talking for an hour, the CEO asked Rachel to meet with his editorial VP. But first, the CEO gave Rachel his card. “This is my direct line,” he said, “and I return every call on this line. Call me by the end of the week.” Rachel did as requested. Six weeks later, after several awkward interactions with the CEO’s assistant, he finally took Rachel’s call.

CEO: “Hi Rachel, I’m too busy to talk today.”

Rachel: “I understand —maybe Monday?”

CEO: “Well, I can’t commit to that right now, either. And I need to tell you, it doesn’t inspire me that you’ve been calling so much.”

Rachel: “On the day we met you asked me to call you two days later. That was six weeks ago. I’ve called less than once a week.”

CEO: “Well, every time you call your name doesn’t go to the to top of the list – it moves to the bottom! This doesn’t mean I’ve lost interest in you and your work, but it’s not cool to do what you’re doing.”

Rachel: “I understand. I won’t call again. Thank you.”

The colleague who set up the initial contact told Rachel: “There is no bad intent here — like me, he gets 300 emails a day and works 18-hour days across five continents. It’s not personal.”

I wrote a book about emotion in the workplace called It’s Always Personal. And no matter what others say, it nearly always is. People hiring today have precious little time to read, process information, and respond to even urgent issues like staffing. But this comes at great peril to their organizations and to the rude employer. Instead of fostering good will among the prospective hires they interview, enemies like I-live-to-see-this-company-destroyed Martin are made.

My time is more important than your time. An author I know was approached by a publisher to write a book for which the publisher had decided there was a market. The writer was asked to write a proposal, but wasn’t told that he was only one among many other people from whom they’d solicited proposals until midway through the process. That process took “months and months and months,” he says, and “it was always a hurry-up-and-wait situation, where they made me jump through hoop after hoop — every one of them a last-minute-need-it-immediately kind of thing. And then I’d hear nothing for weeks.” When his proposal was finally accepted, they wanted the finished book in six weeks. “It took them about eight months to make a decision to accept the proposal — which, by the way, was their idea in the first place, and which they had approached me about — and then they expected me to just whip the entire book out of thin air in six weeks? What’s wrong with these people?”

This is happening to almost everyone I know looking for any kind of work, even those who have been invited into the process — freelance, contract, full-time. The prospective employer/client needs everything now and then it’s radio silence for days, weeks, months — leaving the prospective supplier/employee in the unenviable position of feeling like they must beg for feedback. During the last decade, it became acceptable behavior to simply not answer e-mails. But that’s the worst kind of ego-sucking, demoralizing power play imaginable. We’re all busy. That’s no excuse for disrespect. And the awful truth? I don’t think the employers have a clue. Fearful of losing their own jobs by making a wrong choice, they’ve lost perspective on what matters.

So what’s lost amid all these changes?

At a time when the buzzwords in corporate America are innovation, disruption, and game-changers — all actions that require recruiting the best talent in the marketplace — organizations, instead, are artificially creating bureaucratic inefficiencies that are inexcusably cumbersome and that result in the creation of legions of antagonists. It’s a waste of human capital, it’s a huge waste of everyone’s productive time, and it damages the reputation of an organization and the individual doing the hiring. Jobs are scarce enough, and the general economic vibe is insecure enough that companies and managers believe that they can be cavalier about how they treat people outside the organization — but in this thinking lies madness. Now that 20th-century-style employer loyalty and benefits are a thing of the past, employees return the disfavor, churning through organizations at a rapid clip. If a typical new hire is only going to stay at a company for two to four years, why sweat the decision so much? Be responsive. Act fast. Trust your gut.

Employers need to streamline the hiring process, calling upon both common sense and basic good manners. Here are six easy actions:

Make the process transparent from the outset for prospective hires
State the timetable for making a decision
Offer updates if the process extends beyond that timeframe
Limit the “tryout” requirements — proposals, plans, original work — and make the deliverables clear at the start of the process
Make the timeframe for submitting any materials reasonable — 3 to 5 business days, never tomorrow
Make certain that everyone who’s being considered for a position is given the courtesy of a definitive response within the stated timeframe. Just as e-mail has compounded our daily load, so too does it liberate us from making those hard calls person to person. Use the tool to your advantage.

The wildly successful actress/producer/director Lena Dunham perhaps said it best in a recent interview: “I’m never going to be the person who lets e-mail and voicemail sit for weeks — I’m going to be the person who responds, even if the answer is no.” How refreshing.

*Names have been changed

Governing the Smart, Connected City

As politics at the federal level becomes increasingly corrosive and polarized, with trust in Congress and the President at historic lows, Americans still celebrate their cities. And cities are where the action is when it comes to using technology to thicken the mesh of civic goods — more and more cities are using data to animate and inform interactions between government and citizens to improve wellbeing.

Every day, I learn about some new civic improvement that will become possible when we can assume the presence of ubiquitous, cheap, and unlimited data connectivity in cities. Some of these are made possible by the proliferation of smartphones; others rely on the increasing number of internet-connected sensors embedded in the built environment. In both cases, the constant is data. (My new book, The Responsive City, written with co-author Stephen Goldsmith, tells stories from Chicago, Boston, New York City and elsewhere about recent developments along these lines.)

For example, with open fiber networks in place, sending video messages will become as accessible and routine as sending email is now. Take a look at rhinobird.tv, a free lightweight, open-source video service that works in browsers (no special download needed) and allows anyone to create a hashtag-driven “channel” for particular events and places. A debate or protest could be viewed from a thousand perspectives. Elected officials and public employees could easily hold streaming, virtual town hall meetings.

Given all that video and all those livestreams, we’ll need curation and aggregation to make sense of the flow. That’s why visualization norms, still in their infancy, will become a greater part of literacy. When the Internet Archive attempted late last year to “map” 400,000 hours of television news, against worldwide locations, it came up with pulsing blobs of attention. Although visionary Kevin Kelly has been talking about data visualization as a new form of literacy for years, city governments still struggle with presenting complex and changing information in standard, easy-to-consume ways.

Plenar.io is one attempt to resolve this. It’s a platform developed by former Chicago Chief Data Officer Brett Goldstein that allows public datasets to be combined and mapped with easy-to-see relationships among weather and crime, for example, on a single city block. (A sample question anyone can ask of Plenar.io: “Tell me the story of 700 Howard Street in San Francisco.”) Right now, Plenar.io’s visual norm is a map, but it’s easy to imagine other forms of presentation that could become standard. All the city has to do is open up its widely varying datasets.

A third key development will be some form of unique identifier for citizens. When cities know who they’re talking to, and what the context of the citizen’s relationship to the city includes, more deeply relevant communications become possible. This month’s launch of MIT Media Lab’s Laboratory for Social Machines, aimed at studying large-scale civic issues using Twitter data (and backed by a major investment from Twitter itself), may provide a starting point for the study of voluntary civic engagement along these lines. Deb Roy, who leads the effort, points out that citizens in the tiny town of Jun, Spain, are able to schedule health appointments and reserve city hall conference rooms using their Twitter monikers.

We still have a long way to go until we can realize any of these possibilities. For starters, the privacy implications of ubiquitous, identified streaming have yet to be fully explored. But one thing we know: humans want to share, humans love their cities, and government has to change to serve human needs better. We’ll need both better policies and better technology to make the invisible electronic layer of cities visible to us all. Because only when we can see something can we make progress.

Coworkers Should Be Like Neighbors, Not Like Family

All companies want engaged employees. After all, people who are engaged put in effort that goes above and beyond the minimum that’s required to complete a task. They are less likely to look for another job. And they project positive energy, which improves the mood of other employees and customers.

One way to increase engagement is to foster a “neighbor” relationship.

Research on types of relationships suggests that we can break the world up into several kinds of relationships. I refer to the three that are particularly important in the context of business as strangers, family, and neighbors.

Strangers are people with whom we do not have a close connection; if we need their help, we pay them to provide it. Families are people with whom we have a close bond and for whom we do whatever is needed, often expecting nothing in return. In between strangers and family are neighbors — people with whom we have a reasonably close relationship, who offer us help, and expect help in return.

It’s not good to have a workplace that consists primarily of strangers, because every interaction becomes a fee-for-service transaction and strangers are not motivated to go above and beyond the specific tasks presented to help the organization fulfill its goals. Moreover, the social environment in a workplace full of strangers does not energize employees to want to come to work.

Likewise, it’s dangerous for most organizations to function as a family, because not all employees will pull their own weight. It’s an inefficient and demoralizing way to work.

But with our neighbors, we try to balance what we do for them and what we get from them over time. We construct covenants in which everyone shares a common vision and agrees to do what they can to work toward these common interests.

In a healthy workplace, neighbor-employees work hard, secure in the knowledge that the organization is looking out for them. The organization succeeds because its employees put in a reasonable amount of extra time and effort for each other.

There are several ways to promote a neighborhood in the workplace. At the core of each of these techniques is a demonstration that the organization has a broader vested interest in its employees. This reassurance is particularly important for publicly traded companies that are normally focused on improving earnings each quarter.

One way to support neighborhoods is training. Many companies provide extensive training opportunities for their employees, which give them a chance to develop both work-related and personal skills. This demonstrates that the organization is interested in the employees’ long-term best interests. Any investment in those training opportunities pales in comparison to the cost of replacing people who leave the company.

A second way to promote a neighborhood is to provide regular opportunities for employees to engage directly with higher-ups. Being a part of the neighborhood requires a feeling that the organization knows who you are and cares not just about people in general, about you in particular. Without some points of contact to the upper management of the company, a business unit might become a neighborhood, but that neighborhood may feel disconnected from the rest of the organization.

A third component of the neighborhood is that it needs to have a shared purpose. Residential neighbors are bound together by the desire to create a community that benefits the people who live there. Similarly, companies need a shared vision that transcends the individuals. For example, at the University of Texas (where I work), I have worked with our operational staff to help the various units (like construction, emergency services, and power) to reconnect with the mission of the university in order to make those units feel like a more central part of the neighborhood.

Finally, it’s important for all managers to look for signs that an organization is slipping from a neighborhood to a group of strangers. The biggest signal that a neighborhood is eroding is when employees start finding reasons not to support broader initiatives within the organization because of the narrower job that they have been assigned. They may give excuses for focusing on their particular job instead of what the larger organization needs. When this happens managers need to return to the above approaches, demonstrating that the organization cares about them and remind them of their connection to the broader mission.

Although it does require effort and resources to maintain a neighborhood, the investment is quickly repaid.