Marina Gorbis's Blog, page 1359

Sales Data Only Matters If It Helps You Take Action

In sales, as everywhere else in business, there is a buzz about big data and analytics. Vendors hype tools and mobile applications to help sales forces make sense of it all, while touting case studies that generated impressive improvements in sales force effectiveness.

Companies are anxious to capitalize on the opportunity. While some jump in, many are reluctant to move forward. Some will remember or hear stories of failed projects – big investments to give salespeople tablet computers, to develop data warehouses, and implement CRM systems that ended up racking up huge costs, while generating little value for customers and salespeople. We also hear concerns such as “the technology is too new — let’s wait until it matures,” or “we don’t want to invest in something that becomes outdated in a year.”

These are valid concerns, but here is the crux of it all. It’s not the data and technology that matter. What really matters is how technology, data, and analytics can help salespeople, sales managers, and leaders improve fundamental sales force decisions and processes.

Consider a few examples.

Helping salespeople. Consider account targeting. Traditionally, salespeople decide which customers/prospects to spend time with by examining a list of accounts in their territory and figuring out which ones to focus on to achieve a territory sales goal. But far too frequently, salespeople end up spending too much time with easy and familiar accounts, demanding customers with urgent needs, and friendly prospects. Ease and urgency trump importance.

Approaches that use data and analytics, structured around frameworks that capture the dynamics of customer/prospect needs and potential, help salespeople target the right accounts and spend time more effectively. Such an approach involves:

Identifying profile characteristics (e.g. type of business, number of employees) that predict account potential and developing an estimate of potential for each customer/prospect.
Using techniques such as collaborative filtering to identify customers/prospects with similar needs and potential (the “data doubles”) and suggest the best value proposition and sales approach for each account.
Closing the loop by providing an assessment of how effective account targeting was so as to inform better future decisions.

Helping sales managers. Analytics can help sales managers have higher impact as coaches and make more-informed decisions about issues such as sales territory design, goal setting, and performance management. Traditionally, managers rank salespeople on criteria such as territory sales or sales growth, and tie rewards or corrective consequences to these rankings. But if territories don’t have equal potential, the rankings don’t reflect true performance. Salespeople with rich territories have an unfair advantage while those with poor territories are demotivated.

Data and analytics enable performance metrics that account for territory potential, so that sales managers can reward the best salespeople, not the best territories. Such an approach involves:

Developing measures of customer/prospect potential, using company and third-party data sources (e.g. business demographics) and sales force input.
Identifying the true best performers using techniques that separate the impact of territory potential from the impact of a salesperson’s ability/effort on performance.
Rewarding the true best performers, learning what they do that’s different from average performers, and sharing the learning across the sales team.

Helping sales leaders. Analytics can help sales leaders improve decisions about issues such as sales strategy, sales force size and structure, and the recruiting of sales talent. Consider how analytics can help sales leaders design a sales incentive compensation plan. Traditionally, incentive plans are designed by surveying salespeople about their satisfaction with the current plan, benchmarking against industry and company historical norms, and checking past incentive costs versus budget. This retrospective approach can blindside sales forces with undesired consequences in terms of sales force effort allocation and financial risk.

A better plan results when companies use data and analytics, structured around frameworks that link plan design to projected costs, sales force activity levels, and fairness under varied market conditions. Such forward-looking approaches improve the odds that despite an uncertain future, an incentive plan will motivate the sales force to focus effort on the right products and customers, and be fiscally responsible. Such an approach involves:

Using analytics to test the consequences of proposed plan designs, compare alternatives, and reveal unwanted side effects and financial risks.
Monitoring payout distributions and metrics showing a plan’s strategic alignment, motivational power, and costs.
Proactively making adjustments to keep the plan on track.

It’s not about the technology or the data. Investments in sales data, technology, and analytics can only live up to their promise when sales forces focus first on understanding the dynamics of the fundamental decisions and processes that salespeople, sales managers, and leaders are responsible for.

What an Economist Brings to a Business Strategy

Although many business executives sat through one, or perhaps several, courses in economics while in school, most probably took away little more than the supply and demand graphs to which they were introduced early in their first course. Ask them if they apply much else from else from economics in their actual business careers, and you’re likely to hear “not much.”

They might be surprised at how certain economic notions have been directly applied in business, with largely positive results. Here a few notable examples.

Auctions. Consider first the increasing use of auctions, which have a distinguished history in the development of economics. In the 1900s, French mathematician-economist Leon Walras envisioned prices in a market economy being set by an auctioneer (since known as the “Walrasian auctioneer”) conducting continuous auctions for all kinds of commodities.

It may be tempting to think that the Walrasian auction is just a theoretical construct, useful primarily in a classroom setting for thinking about markets, and in the real world, only for scarce commodities or unique items, of the kind put up for sale by Sotheby’s or Christies. But that would be a mistake.

The late Julian Simon (better known, perhaps, for his optimistic views about population growth and resource abundance) thought up the idea for having airlines auction off overbooked seats and persuaded the Civil Aeronautics Board, which used to regulate airlines fares and entry, to permit the idea in the 1970s. Economist Ronald Coase proposed auctioning off segments of the electromagnetic spectrum in late 1950s, a policy idea that was later adopted in the 1990s. Many economists since have been hired by the U.S. and other governments to help them design these often complicated auctions and by telecommunications companies trying to figure out the best strategies for bidding.

Two well-known companies have also made auctions famous, and economists have played central roles in the success of each. Google generates most of its revenue through an auction-based system of selling ads that was developed by two engineers but validated by its chief economist, Hal Varian, a former consultant to the company who was also the first Dean of the School of Information Sciences at the University of California at Berkeley. Varian has since overseen the hiring of a large corps of statisticians and economists who developed other innovations for the company, notably Google Trends, which can be used to track the number of search terms that can be helpful in predicting various real world events (such as the progress of the flu or forthcoming official unemployment statistics).

Priceline introduced the “conditional price offer,” an economic notion developed by the company’s founder, Jay Walker, who put his undergraduate economics training to good use to form a company that has revolutionized travel. Walker’s innovation was to bind travelers to pay the prices they bid if the airlines and hoteliers on Priceline accepted the offers. That way, travelers took their offers much more seriously than if they simply could “name their price” without any purchase obligation.

Economics and logistics. All businesses seek to control costs; they don’t need an economist to tell them why it’s important or how to do it. But there are some very important exceptions. Companies in the transportation and communications business face complex optimization problems that mathematicians and economists have figured out how best to solve through “linear” (and later “non-linear”) programming methods. Firms in these industries and their customers who thereby benefit from lower prices (admittedly through processes they never see) benefit greatly.

Economists and big data. For several decades after World War II, economists used statistical techniques to build increasingly complex models to forecast key macroeconomic variables, notably, GDP growth, inflation and unemployment. Economists who had statistical skills worked at leading forecasting firms such as Data Resources, Inc and Wharton Econometric Forecasting Associates (the two have since merged and been absorbed into Standard & Poors). Many large banks, other financial institutions and some large manufacturing companies also had their own economic staffs.

This has all changed. Macro models are now largely out of vogue, though still used along with human judgment at institutions like the Federal Reserve Board and the International Monetary Fund. Forecasters never were very good at predicting turning points in the economy — recessions and recoveries — and it is not clear they will get better over time, though some will try.

Instead, the “Big Data” revolution ushered in by the ease of capturing, storing and analyzing large bodies of data has generated new demands for economists and statisticians. High tech companies like Amazon, Yahoo and Google, among others, now employ economists to sift through all kinds of data — retail transaction data, browsing patterns, mobile phone usage — to fine tune their product offerings, pricing and other business strategies.

Economists and market design. Most markets “clear” by having prices signal producers to make just enough that purchasers are willing to purchase. But a relatively new strand of economics, known as “market design” or “matching theory,” has focused on markets where “fit” is much more important than price in directing resources or decisions is gender neutral: matching of medical residents to hospitals, organ donor banks and on-line dating. For example, drawing on his Nobel prize-winning work shared with Lloyd Shapley, Harvard Business School emeritus professor Alvin Roth has used matching theory to design the national medical resident assignment program and kidney donor exchanges.

In the online dating world, one well-known problem is that women can get flooded with more offers for dates than they can reasonably screen or may want to spend time screening. One online service, cupid.com, hired one economist and drew on the work of another to limit the number of “roses” (requests for dates) men could send per month to women. This greatly incentivized the men to be much more selective, and knowing that, women were much more likely to reply after the limits were put in place.

Economists increasingly are also using insights from matching theory to help companies better design systems for matching potential employees with employers, where finding the right “cultural fit” is as or may be more important than an employee’s initial specific skills.

Economists and finance. Finally, not surprisingly, economists have been active for decades in formulating and testing theories in the financial world, some of which have found their into actual products (not all of them bad, like the complicated sub-prime mortgage securities at the heart of the financial crisis, which economists did not design). Examples include index funds, and their more recent variation, index-based exchange traded funds (EFTs). Index funds initially were brought to market by Vanguard founder Jack Bogle, whose idea for the S&P 500 Index fund was heavily influenced by two economists: late great MIT economist Paul Samuelson and Princeton’s Burton Malkiel, author of the classic, A Random Walk Down Wall Street.

Even more directly, the growth in financial options can be traced largely to the ease of valuing them, which is due to the Nobel-prize winning work of Fischer Black (the MIT economist and later Goldman Sachs partner who died before he certainly would have shared in the award), Myron Scholes (formerly of Stanford) and MIT’s Robert Merton.

Admittedly, better pricing of options has been a mixed blessing. While it is has greatly improved liquidity in the market of options, and facilitated the formation and growth of many tech startups (where option grants are routinely used to compensate employees, directors and advisers), better options pricing may also have contributed to excessive option grants used by companies like Enron, Tyco, and Worldcom to manipulate accounting statements to show illusory profits.

What’s the larger point to be made here? Only the one I assert in my book Trillion Dollar Economists, that business managers may want to pay a bit more attention to the scribbling of academic economists. There can be strategic advantage in consulting the sources where those thoughts are published, especially as translated for a bit broader audience than the economics priesthood (such as here in the Harvard Business Review and even in some relatively accessible professional journals like the Journal on Economic Perspectives). The first step to succeeding wildly as a first mover may be to connect with a first thinker.

Repeated Texting Can Thicken the Tendons in Your Thumbs

The tendon that extends to the tip of the thumb showed significant thickening in research subjects who were frequent texters and who repeatedly flexed the interphalangeal joint, which is closest to the thumbnail, while texting, according to a medical study reported by the Wall Street Journal. The greater the number of texts, the thicker the tendon. Frequent texters (an average of 1,209 messages per month) reported greater thumb pain in the dominant texting hand than infrequent texters (50 per month).

The Unexpected Consequences of Success

Everybody loves a winner, right? No, unfortunately, not always. In my coaching practice, many executives and entrepreneurs vent their frustrations with the unexpected negative consequences of their success — such as their anxiety over being able to maintain their winning streak, the fear that they will be set up to fail, and the envy others feel toward them for their good fortune. Turns out that, according to recent research, these kinds of worries aren’t just in their heads — they’re very real. Here’s a summary of that research, along with suggestions for overcoming these traps.

Don’t do victory laps:  A recent study shows that people judge expressive winners as arrogant compared to inexpressive winners and are less likely to want to befriend them. Being judged negatively for your success is justifiably an implicit fear. As a result, success can heighten ambivalence, even unconsciously, about winning. What can you do about this? Learn to moderate when and where you express happiness about your success. Share the good news with other successful people. And focus your conversation on other things you are developing when you are succeeding so as not to annoy people. Striking a balance between authentically admitting your happiness and pretending to “not care” is important. We should enjoy the motivation that comes from being successful, rather than sabotaging ourselves when we are inauthentic. For example, Ray, a current client, often smiles in a pleased way when he announces good news to his company or the public, but always focuses on the unconquered path ahead. He avoids fist pumps and overt signs of victory even when he is overjoyed, and reserves this for conversations with select people in his life.

Focus on the value you bring, not on winning per se: Another study found that when people are similar but superior to us in their achievements, our brain’s conflict center is activated leading to envy. In addition, when these people fail, our brain’s reward center is activated leading to feelings of schadenfreude (pleasure when someone else falls from grace). When we win, we assume that others will feel similarly, as we project our own feelings onto them. This fear may be unconscious or conscious and may disrupt our confidence, causing anxiety about the effect of our success on other people. To counteract this fear of someone else wishing we would fall, focus instead on the value that you bring to the world rather than winning per se. This will help boost your confidence despite this fear. For example, Cathy, a CEO whose meteoric rise to the top left other people gasping, “distracted” people from their shock by focusing on the value that the company brought to the world.

Stay in the “here and now”: When we anticipate future reactions from others, this may actually prevent us from achieving or maintaining success, and if we think too much about these reactions, they may prevent us from subsequently adequately controlling our emotions.  To manage this consequence of success, stop overthinking the success. Focus on the “here and now.” Let go of worrying about the future and rationalizing the past.  Obsession with the past can be distracting and is not always helpful. Also, it will prevent you from clearing your mind. The study above shows that when we integrate what we are anticipating into the here-and-now, we are more likely to manage our emotions more effectively. This means enjoying, accepting, and motivating ourselves with our successes. Joe, an entrepreneur, always “recalibrates” after each round of funding by setting new goals and focuses on what he has to execute on now, rather than obsessively trying to “psychologize” his prior victories. He chooses a time to let go and moves on.

Reach higher:  Finally, when we are at the summit of our careers, we may become bored to the point that we slow down too much and become disoriented.  This is called “the summit syndrome.” To prevent boredom, you have to always be looking for stimulating ways to apply your mastery. When you have mastered something, ask yourself: How you can innovate around this? Watch out for your own boredom as it can lead you to sabotage yourself, and also watch out for reactive lateral shifts in job hierarchy simply to escape your boredom of mastery. Huang, a fund manager, sticks to his investment process within his company and after a streak of major wins, he raises the bar even more for himself and engages in this “reaching.”

People often prepare for failure, but rarely prepare for what they will do when they succeed. Even when we consciously want to be successful, enjoying that success can be a challenge. By following the suggestions above, you can create a framework for managing success so that you can more reliably sustain your success when it occurs. If you are conscious about these factors, you will create far more opportunities to sustain your success over time. More importantly though, as a society, we are likely to have more sustained wins if we manage our feelings of envy and schadenfreude. If we do this, we, and those whom we care about, will fully enjoy and savor those winning streaks.

Why the Fed Is So Wimpy

Regulatory capture — when regulators come to act mainly in the interest of the industries they regulate — is a phenomenon that economists, political scientists, and legal scholars have been writing about for decades.  Bank regulators in particular have been depicted as captives for years, and have even taken to describing themselves as such.

Actually witnessing capture in the wild is different, though, and the new This American Life episode with secret recordings of bank examiners at the Federal Reserve Bank of New York going about their jobs is going to focus a lot more attention on the phenomenon. It’s really well done, and you should listen to it, read the transcript, and/or read the story by ProPublica reporter Jake Bernstein.

Still, there is some context that’s inevitably missing, and as a former banking-regulation reporter for the American Banker, I feel called to fill some of it in. Much of it has to do with the structure of bank regulation in the U.S., which actually seems designed to encourage capture. But to start, there are a couple of revelations about Goldman Sachs in the story that are treated as smoking guns. One seems to have fired a blank, while the other may be even more explosive than it’s made out to be.

In the first, Carmen Segarra, the former Fed bank examiner who made the tapes, tells of a Goldman Sachs executive saying in a meeting that “once clients were wealthy enough, certain consumer laws didn’t apply to them.”  Far from being a shocking admission, this is actually a pretty fair summary of American securities law. According to the Securities and Exchange Commission’s “accredited investor” guidelines, an individual with a net worth of more than $1 million or an income of more than $200,000 is exempt from many of the investor-protection rules that apply to people with less money. That’s why rich people can invest in hedge funds while, for the most part, regular folks can’t. Maybe there were some incriminating details behind the Goldman executive’s statement that alarmed Segarra and were left out of the story, but on the face of it there’s nothing to see here.

The other smoking gun is that Segarra pushed for a tough Fed line on Goldman’s lack of a substantive conflict of interest policy, and was rebuffed by her boss. This is a big deal, and for much more than the legal/compliance reasons discussed in the piece. That’s because, for the past two decades or so, not having a substantive conflict of interest policy has been Goldman’s business model. Representing both sides in mergers, betting alongside and against clients, and exploiting its informational edge wherever possible is simply how the firm makes its money. Forcing it to sharply reduce these conflicts would be potentially devastating.

Maybe, as a matter of policy, the United States government should ban such behavior. But asking bank examiners at the New York Fed to take an action on their own that might torpedo a leading bank’s profits is an awfully tall order. The regulators at the Fed and their counterparts at the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation correctly see their main job as ensuring the safety and soundness of the banking system. Over the decades, consumer protections and other rules have been added to their purview, but safety and soundness have remained paramount. Profitable banks are generally safer and sounder than unprofitable ones. So bank regulators are understandably wary of doing anything that might cut into profits.

The point here is that if bank regulators are captives who identify with the interests of the banks they regulate, it is partly by design. This is especially true of the Federal Reserve System, which was created by Congress in 1913 more as a friend to and creature of the banks than as a watchdog. Two-thirds of the board that governs the New York Fed is chosen by local bankers. And while amendments to the Federal Reserve Act in 1933 shifted the balance of power in the Federal Reserve System from the regional Federal Reserve Banks (and the New York Fed in particular) to the political appointees on the Board of Governors in Washington, bank regulation continues to reside at the regional banks. Which means that the bank regulators’ bosses report to a board chosen by … the banks.

Then there’s the fact that Goldman Sachs is a relative newcomer to Federal Reserve supervision — it and rival Morgan Stanley only agreed to become bank holding companies, giving them access to New York Fed loans, at the height of the financial crisis in 2008. While it’s a little hard to imagine Goldman choosing now to rejoin the ranks of mere securities firms, and even harder to see how it could leap to a different banking regulator, it is possible that some Fed examiners are afraid of scaring it away.

All this is meant not to excuse the extreme timidity apparent in the Fed tapes, but to explain why it’s been so hard for the New York Fed to adopt the more aggressive, questioning approach urged by Columbia Business School Professor David Beim in a formerly confidential internal Fed report that This American Life and ProPublica give a lot of play to. Bank regulation springs from much different roots than, say, environmental regulation.

So what is to be done? A lot of the classic regulatory capture literature tends toward the conclusion that we should just give up — shut down the regulators and allow competitive forces to work their magic. That means letting businesses fail. But with banks more than other businesses, failures tend to be contagious. It was to counteract this risk of systemic failure that Congress created the Fed and other bank regulators in the first place, and even if you think that was a big mistake, they’re really not going away.

More recently, there’s been a concerted effort to take a more nuanced view of regulatory capture and how to counteract it. The recent Tobin Project book, Preventing Regulatory Capture: Special Interest Influence and How to Limit It, sums up much of this thinking. While I’ve read parts of it before, I only downloaded the full book an hour ago, so I’m not going to pretend to be able to sum it up here. But here’s a thought — maybe if banking laws and regulations were simpler and more straightforward, the bank examiners at the Fed and elsewhere wouldn’t so often be in the position of making judgment calls that favor the banks they oversee. Then again, the people who write banking laws and regulations are not exactly immune from capture themselves. This won’t be an easy thing to fix.

update: The initial version of this piece listed the Office of Thrift Supervision as one of the nation’s bank regulators. As David Dayen pointed out (and I swear I knew at some point, but had totally forgotten), it was subsumed by the OCC in 2011.

Ello Is a Wake-Up Call for Social Media Marketing

To understand upstart social network Ello, which burst into the spotlight this week — growing from just 90 members in August to a reported 30,000 new users per hour — let’s start with its manifesto:

Your social network is owned by advertisers.

Every post you share, every friend you make and every link you follow is tracked, recorded and converted into data. Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.

We believe there is a better way…We believe a social network can be a tool for empowerment. Not a tool to deceive, coerce and manipulate—but a place to connect, create and celebrate life.

Even if you’re cheering for this phenomenon as a social media user, the view from inside any business that relies on social media advertising may be less enthusiastic.

Businesses need to take Ello and its manifesto as a wake-up call to rethink the way they use social networks to reach customers. The intense interest and discussion engendered by this manifesto attests to the profound misgivings many of those customers now have about the networks that occupy a growing place our work, our relationships and our lives.

Those misgivings are evident in the sign-ups for networks like Ello and Diaspora; in the emergence of anonymous, private and non-persistent platforms like Secret and WhatsApp; and in the growing number of Internet users who report taking steps to obscure their digital footprint.

We have a long way to go before Ello and its ilk pose a significant threat to established players like Facebook and Twitter — if they ever get there. But companies still need to pay attention to the growing public discomfort with advertiser dominance and algorithm-driven user experiences. As Internet users are growing uncomfortable with the now-established model of “you get free social networking, we get your data and eyeballs,” businesses need to do more than tinker with their social media strategies: they need to rethink their core approach to social media itself.

That means stepping back from the relentless quest for followers, clicks, and mentions, and instead thinking about why brands got involved in social media in the first place. In its early days, the promise of the social web lay in the ability of companies to have direct and ongoing relationships with their customers — to become more responsive, more accountable and more attuned to the things their customers really cared about. Instead, companies have found a world in which their old intermediaries (broadcasters, publishers, journalists) have simply been replaced by a new set of intermediaries (social networks, bloggers).

This shift provides companies with a chance to rethink their own use of the social web; the smart ones will seize this opportunity to forge a new kind of relationship with their customers.

But because any successful relationship has to be built on trust, companies will have to begin by addressing the trust gap that has emerged out of the past five or ten years of social media marketing — a trust gap that is clearly conveyed in the Ello manifesto. That gap is about more than privacy or invasive ads: it reflects the frustration with the steady commercialization of our online interactions and spaces. Instead of elbowing their way into Ello with branded accounts and “content” that takes the place of ads, companies need to recognize that our online world needs non-commercial spaces as well as ad-friendly networks, just as the offline world has room for both libraries and bookstores. Instead of relying on algorithms and ad targeting to get dollars out of their customers’ wallets, companies need to think about the value they can offer to their customers’ online lives.

Just because advertisers are unwelcome on some parts of the social web, that doesn’t mean businesses are necessarily unwelcome, though: consumers simply want businesses to engage with them in some way that goes beyond a pitch. That could mean inviting customers into your product development process through co-creation. It could involve convening meaningful conversations on topics that resonate with your customers and your brand. It could look like partnering with your customers to make the products they want, or offer the services they need, or help them sell their stuff to other people like them. All of these are ways to engage with your customers that align with the spirit of the social web, instead of treating it as a billboard.

But you’re not going to get that kind of engagement by moseying up to the social media drive-thru and asking for a double order of customer engagement, please. You can’t leave it to the established social networks to create the platform that helps you connect with your customers; you need to find a way to convene the conversations you want, in a context that will actually work for both you and the customers you serve. And as the sudden rise of Ello suggests, that will probably need to be a context in which your customers feel like you are treating both their data and their attention with the greatest respect.

And you can begin with your own version of the Ello manifesto:

Your customer relationships are owned by other companies — companies like Facebook, Twitter and Google.

Every interaction you have, every customer you acquire and every ad you place is tracked, recorded and converted into data that can serve your competitors — or the social network itself. You dedicate your ad dollars, your customer relations team and your very best content creators to building a social network that somebody else controls. You are the customer, but your own customers are the product that is bought and sold. 

We believe there is a better way…We believe the social web can be a tool for customer engagement. Not a tool to deceive, coerce and manipulate — but a place to connect, create and celebrate what we can do together.

Tell Your Team What Customers Should Say About Them

How do you get employees to behave in ways that differentiate your brand to the people that matter most to your business: customer prospects, clients, partners, colleagues, and recruits?

Too many companies are still trying to create thick manuals that lay out every possible scenario and a corresponding brand-appropriate response — an “if they do this, you do that” kind of approach. Very reactive.

With the world a messy place filled with unexpected situations, it’s just not possible to anticipate everything.  (I’d argue it’s not even desirable.) So if you can’t script every interaction, what are some ways to drive a consistent customer experience from a diverse range of employees across an even more varied range of interactions? In preparing for a brand experience workshop with a retail banking customer recently one key element became pretty clear: You have to work from the outcomes back. And the best way to do that is to work back and from a single question: What do you want them to say after they walk away?

This is simple but powerful stuff. Let me illustrate.

I can tell my kids I want them to be honest, hardworking and well-behaved. But they — like your employees — can always ask: “What the heck does that mean?”

Instead, I can tell them: “I want your teachers to say you’re honest, sports coaches to say you’re hardworking, and grandparents to say you’re well-behaved. Not just think or feel it but actually say it.”

By flipping things around and being specific about the outcomes I expect from the various people they’ll encounter during their day, I’ve done a few things:

Changed the accountability. It’s no longer about ticking a box. Your responsibility doesn’t end once you’ve said or done something from a list I gave you. It ends when you’ve driven the outcome we’re looking for.

Accounted for the unexpected. If the focus is on what someone is going to say when they walk away, then it really doesn’t matter what the situation is that they’re walking away from. The consistency is not in the behavior but in the goal.

Activated their cultural knowledge. This is a big one. Everyone is different. And how you interact with someone to make them think you’re honest or hardworking or well behaved, may be very different from how I would do it. It’s the whole freedom-within-a-framework idea and puts the onus on them to figure it out.

Made it specific. By identifying the audience and the outcome, I’ve moved brand behavior from the land of the vague to the world of the concrete.

What did this look like for that retail banking client I was talking about?

Its leaders wanted their brand to be known for three things: ingenuity, simplicity, and humanity. So, instead of doing the usual — exhorting their employees to be ingenious, be simple, and be human — we translated those three things into what they should strive to get others to say about them (and, by association, the brand). Some examples:

“I didn’t expect him to do that, but I’m glad they did.” (Ingenuity)
“That was easy and well worth the effort.” (Simplicity)
“Wow, she gets it. She knew just where I was and what I needed.” (Humanity)

Of course, you have to supplement all of this with training focused on positive examples and parameters around what’s acceptable or allowed and what’s not. But by starting with the end and thinking about what you want people to say about your brand after you walk away, you’ve gotten a pretty good start.

For a New Way to Manage Risk, Look to the Past

By Focusing on Resilient Risk ManagementEbola Battlers Can Learn from Venice's Response to Black DeathNPR

Every now and then, a story comes along that makes us editors say, "Why didn't we think of that?" This is one of those stories, which looks at the devastating Ebola crisis through the lens of both history and risk management, with lessons that go beyond what's happening in Africa. In a recent article in the journal Environmental Systems and Decisions, a group of risk management experts dissect how Venice responded to the Black Death in the 1400s. At first glance, that response may seem chaotic; but "the authors of the article argue that beyond the chaos lay some surprisingly sophisticated crisis management," with civic leaders simultaneously enforcing rules like quarantines while also remaining "flexible enough to try alternatives when things went wrong."



This all comes down to what the article’s authors call resilient risk management. It differs from what usually happens, which involves "predicting the likelihood of various specific crises and devising specific solutions." Resilience theory holds that "many threats are fundamentally unpredictable or have unpredictable twists or secondary effects." Or as Igor Linkov, a coauthor, posits: "Can we design our countermeasures in a way that no matter what the threat is we still manage to do our best to recover fast?" In order to do this, you have to take two tenets to heart: Preparing and communicating with people before a disaster happens is paramount; and you also have to recognize that you don't have all the answers up front.

If You're Dating or Buying a House When Fewer Choices Are Worth MoreKnowledge@Wharton

If a real estate company were to tell buyers that they could only look at 10 houses at a time, and that each seller was showing his or her house to just 10 potential buyers, would it be more or less successful than a company that allowed buyers to see hundreds of properties? Pinar Yildirim of Wharton thinks it would be more successful. She and colleagues Hanna Halaburda and Mikolaj Piskorski have found that under certain circumstances, when companies offer limited choices to consumers, they can still successfully compete with other firms – and they can charge more. For example, one of eHarmony’s competitive advantages in the matchmaking market is that it limits competition on both sides of the match. So when you contact someone, your chances of getting a response are higher. On other sites, so many messages go flying around that people get inundated. The beneficial effects of fewer choices seem to apply to companies that provide platforms where both sides have to consent to a match. —Andy O’Connell

(Don't) Google ItThe Solace of OblivionThe New Yorker

By now, we're all familiar with the basics of this past spring’s European Union privacy ruling against Google: The European Court of Justice ruled that people in the EU "had the right to prohibit Google from linking to items that were 'inadequate, irrelevant or no longer relevant, or excessive in relation to the purposes for which they were processed and in the light of the time that has elapsed.'" That is: you have a right for certain information to be “forgotten” on the internet. So, what exactly does this mean in practice? Jeffrey Toobin visited Google to learn more about how they're reluctantly — but seemingly diligently — handling this new and unexpected aspect of their business, tracing the history of personal information-gathering that helps explain why the U.S. and Europe weigh privacy and free speech very differently. It's a nice primer on a range of views about what search engines should and shouldn't reveal, and how the extraordinarily powerful company in the middle of the battle is responding.

We're All WonderingLarry Ellison Bought an Island in Hawaii. Now What?The New York Times Magazine

The Hawaiian island of Lanai reminds me of Black Beauty, the 19th-century English novel told from the point of view of a horse that bounces from owner to owner, enduring kindness and cruelty and more kindness and more cruelty. Lanai was home to just Hawaiians for a few centuries, then fell under the ownership of mainlanders who ranched sheep and grew sugar cane and pineapples. Then it was owned by a California billionaire who built resorts and eventually tried to construct a wind farm, which provoked protests. Now, Green Beauty is mostly owned by Oracle founder Larry Ellison, who intends to transform it into a luxury tourist spot and “the first economically viable, 100 percent green community.”



One woman tells writer Jon Mooallem that Ellison is rejuvenating everything, and she feels blessed beyond her wildest dreams. In the past, Ellison has been quoted as saying that the island feels to him like “this really cool 21st-century engineering project.” But not everyone likes being part of someone else’s cool engineering project. Some residents seem to view Ellison’s actions with suspicion and uncertainty. “Like a lot of omnipotent forces, Ellison has remained mostly invisible,” Mooallem writes. “He has visited Lanai many times — locals told me they can tell he’s on the island when they see his yacht hitched in the harbor — but he seems determined to keep a formal distance from the community.” —Andy O’Connell

"Watch Yourself" Occupational Hazards of Working on Wall StreetBloomberg View

Michael Lewis knows a little something about Wall Street. And getting past the usual employee complaints about the financial sector (long hours, for one), he offers several often-hidden occupational hazards for the stellar university graduates who think they can make it in the industry while also holding on to ethics and personal responsibility. One: "Anyone who works in finance will sense, at least at first, the pressure to know more than he does." And many of the things you have to pretend to know can't even be known in the first place, he argues. "You will be paid a lot more to forget your uneasy feelings." Two: Working in finance does not involve joining "a team of professionals committed to the success of your bank." Instead, most who work on Wall Street and are successful "have no serious stake in the long-term fates of their firms." And three: "Anyone who works in big finance will feel enormous pressure to not challenge or question existing arrangements."



So for those embarking on a career in finance, Lewis has one last piece of advice: "Watch yourself, because no one else will."



Editor's Note: I've had the best time sharing with you the articles our editors have found to be important, controversial, useful, and sometimes downright entertaining. That's why I'm sad to announce that this is the last edition of the Shortlist. This doesn't mean we won't still be alerting you to the best reads from other places; rather, you'll be increasingly able to find them via our social media channels (Facebook, Twitter, LinkedIn and Google+). We will be reinvesting the editorial time that went into the Shortlist in exciting new formats we hope will help you work smarter, faster, and better.



So thank you for subscribing to the Shortlist. It's been such pleasure to write, and I hope it's been a pleasure to read, too. —Gretchen Gavett, Associate Editor

BONUS BITSResumes and Cover Letters

The Biggest Mistakes I See On Resumes, and How to Correct Them (LinkedIn)
Soon, You'll Have to Tell the Truth on Your Resume (The Wall Street Journal)
How to Write a Cover Letter (HBR)

What to Do When You Can’t Predict Your Talent Needs

Predictive analytics are often used in strategic workforce planning (SWP), to forecast and close the gap between the future talent you’ll have versus the future talent you’ll need. Now, powerful analytical tools are driving that organizational calculus. Those tools predict who will leave and when, where talent will be plentiful and scarce, and how talent will move between roles. But there’s a catch: Very precisely matching talent to “the future” is of little value if that future doesn’t happen. For example, it can take five years or more to develop today’s high potentials into leadership roles. Can you know today the five-year future for which you should prepare them?  Increasingly, you cannot. Yet, because HR strategy typically reacts to organization strategy, SWP often assumes a single future as its goal.

Does this mean predictive analytics don’t work for talent? No. Powerful analytics have value in preparing for a VUCA (volatile, uncertain, complex, and ambiguous) world, but optimizing your talent decisions will often mean balancing less predictive power applied to many futures, against more predictive power applied to one future. Options will often trump predictions.

Where’s the right balance? “Work diligently, but don’t fixate on one outcome.” In the yoga Sutras, this is Abhyasa (diligence) with Vairagya (non-attachment). It may be key to effective predictive analytics, especially for your talent.

It’s easy to think expertise can solve this problem through more accurate predictions, but Philip Tetlock’s book, “Expert Political Judgment”  reports results from over 20 years of evidence spanning over 80,000 expert predictions.  He found that “people who make prediction their business … are no better than the rest of us.”  In fact, the deeper the expertise, the more chance of missing something important. Tetlock found that “hedgehogs,” who know a lot about one big thing, predict less accurately than “foxes” who know less about any one thing, but a moderate amount about each of many things. Forbes said, “Experts who had one big idea they were certain would reveal what was to come were handily beaten by those who used diverse information and analytical models, were comfortable with complexity and uncertainty and kept their confidence in check.”

Do you approach strategy and talent like a hedgehog or a fox? With the power that predictive analytics bring, it’s even more important for you to answer that question — are you driving toward one deeply-analyzed future or keeping your confidence in check by preparing for many futures? A hedgehog would start with a confident position such as, “the middle class in emerging regions will be the main source of consumer growth over the next 20 years,” and deeply focus predictive analytics on how to meet that future. A fox would start with many positions (such as different likely regional growth predictions) and use predictive analytics to optimize a collection of tactics for different futures.

In finance, the “fox” strategy is similar to using real options, and it can help you make talent decisions just as it helps in your decisions about R&D, manufacturing and finance. Consider your talent resource like an investment portfolio. As with financial investments, you could “bet on the most likely future” (build talent to fit the one highest-probability scenario and win big if you’re right but lose big if you’re wrong), the typical approach noted above. Sometimes, organizations admit they can’t predict the future and “go generic” by building talent attributes like intelligence, engagement and learning agility that are generally useful in most future situations, but not a complete match for any one.

Or, you might “diversify” talent, building several different talent arrays, each one well-suited to a different future scenario, similar to holding diversified financial assets, each well-suited to a particular future.  Only a small portion of the portfolio will actually “fit” the eventual future, but skillful mixing in advance can optimize risk and return. Of course, people aren’t financial instruments. You can adjust a financial portfolio by selling assets, but removing or retraining talent requires careful consideration. Yet, in those arenas where VUCA-like uncertainty is pivotal to your strategic success, using predictive analytics to diversify your talent options may be wiser than using predictive analytics to bet big on one future.

A “hedgehog” approach to organization and talent strategy can be a trap, even when supported by powerful predictive analytics. Perhaps your strategists should be more like foxes, optimizing prediction and options, by knowing when analytics should predict many futures moderately, rather than one future perfectly.

Prevent Conflicting Messages from Confusing Your Team

We’re all a little bit crazy — and at some point, most managers have certainly felt that way about their subordinates. But maybe you’re the one driving them nuts. Are you presenting them with a “double bind”—that is, asking them to behave simultaneously in contradictory ways?

Organizations today routinely tell people to “Be empowered and innovative. Take risks;” while demanding at the same time “Make plan, and deliver on all your commitments.”  If you think this drives people crazy, you’re right. So what can you do to help keep your people sane?

First, don’t pretend that this conflict doesn’t exist.  Chris Argyris has described the sequence of events that happens when you fail to do so: Organizations craft messages that contain ambiguities or inconsistencies. They then instill craziness by acting as if the messages were not inconsistent. Finally, they seal the whole thing up by making the ambiguity or inconsistency in the message undiscussable, and top it off with making this undiscussability undiscussable, too. Argyris pointed out that the problem is not that people cannot deal with conflicting messages; they do it all the time. Mom says one thing and Dad contradicts. But it’s bad news when the “powers-that-be” pretend that their messages are not in conflict and effectively preempt any discussion of the matter.

Second, acknowledge that when people on your team act frustrated, confused, or hesitant there is a good chance that this double bind is at the root.

The remedy is simple. Discuss the undiscussable. Bring it right out into the open without any expectation that the original mixed message will change, because it probably won’t, at least in the near future. The good news is that it doesn’t have to. If people talk and laugh about it, even if only with friendly colleagues and especially their boss, it will go far in creating psychological freedom. Even if your subordinates and entrepreneurs inside don’t talk about it a lot, just the awareness of these mental structures will leave people less frustrated.

You can even let people know you feel the same way. You can laugh about it, too. It means a lot to your subordinate to know you understand the situation the same way he does. Once you’re talking about it, you may even find other creative ways of helping them navigate the bind. Even if you fail, the discussions will naturally lead to increased confidence and sure-footedness.

So, change the mixed messages at the “local” level whenever you can, and help the higher-ups see the effects of these messages “on the ground.”  While you can render the double-bind impotent, changing the originating mixed message is another thing altogether. But have heart. Surfacing and discussing structures like these is probably the single most important first step to effecting systemic change.

Any double bind inevitably means people live in a world of some discomfort. If you or your coworkers are frustrated, confused or reticent you might point out to them the inherent difficulty of being told both to do something and not do it at the same time! It’s pretty hard to find behavior that meets both instructions. Ask them what they might do with this situation. You can never tell what you might learn and you will certainly deepen your rapport with them.