Marina Gorbis's Blog, page 1366

The Fall of the Talent Economy?

Roger Martin, former dean of the Rotman School of Management, on why talent’s powerful economic position is unsustainable.​

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Breaking Down the Freelance Economy

The American workforce is now 34% freelancer, according to a commissioned by the Freelancers Union and the recently-merged Elance-oDesk. Well, sort of: 14.3 million of the 53 million freelancers counted in the survey are “moonlighters” (people with full-time jobs doing independent work in their spare time). Another 5.5 million are temp workers. Here’s the full breakdown:

In any case, it’s a lot of people. But what’s hard to say is whether it’s more or less than there used to be. For the past few years, the main data source for those trying to quantify the freelance economy has been a 2006 Government Accountability Office report that put the number of “contingent workers” at 42.6 million, or 31% of the workforce. And yes, 53 million is more than 42.6 million and 34% is more than 31%, but the two surveys weren’t exactly counting the same people (moonlighters, for example, aren’t contingent workers). And back in 2006, the GAO estimated that “contingent workers constituted a relatively constant proportion of the total workforce from 1995 through 2005.”

This doesn’t really support the claims we’ve been hearing for almost two decades now that the U.S. is becoming a nation of free agents, freelancers, or supertemps. It doesn’t entirely contradict them either, though. Back in February, in an exhaustive (and maybe exhausting) look at the numbers on self-employment, I tried to square the grand claims with the pretty inconclusive data by arguing that long declines in old-style independent work in agriculture and small-scale retail and services were probably masking a rise in white-collar independent work. But while there’s some evidence to back this up, such as the Census Bureau’s annual tally of “nonemployer businesses,” which shows a 29% rise from 2002 to 2012, government data on the phenomenon is pretty spotty.

This new survey of 5,052 U.S. adults, conducted by the research firm Edelman Berland in July for the Freelancers Union and Elance-oDesk, is a welcome attempt to fill in the picture. To really get a sense of where we’re going, though, they will need to keep paying for identical surveys for years to come (the back-office firm MBO Partners has been doing this for a narrower population of “independent workers” for three years now). When I asked Freelancers Union founder and executive director Sara Horowitz if that’s the plan, she said yes. “Having real longitudinal data would be very helpful for everyone.”

It would be even more helpful, and the data would be even more credible, if this stuff just became part of the Bureau of Labor Statistics’ regular employment surveys. But government statistics-gatherers are on the defensive these days in Washington, so they’re not going to be expanding their surveys any time soon. Which is too bad, because white-collar freelancers almost certainly are becoming a more important economic force, and it would be nice if more of the country’s economic policy-makers were aware of that.

Should You Get an MBA?

At least once a month an ambitious and hard-working person in their 20s asks me, “Should I get an MBA?” I earned my MBA from Stanford’s Graduate School of Business in 2000, and since 2007 I’ve been an Instructor and an internal coach back at the GSB, helping hundreds of students develop their leadership and interpersonal skills. Here’s how I respond to those inquiries. First, it’s critical to determine whether your expectations for an MBA are aligned with what the degree will likely do for you. MBA programs offer three different types of benefits, all of which vary tremendously from one school to another.

1. Practical leadership and management skills. Management education has changed significantly over the last few decades. Previously it focused on quantitative analysis in areas such as finance and operations, with little emphasis on other aspects of organizational life. As a result MBAs were often seen as bean-counters myopically focused on data and out of touch with the challenges managers face in the real world.

MBA programs responded by expanding their offerings in areas such as strategy, organizational behavior and leadership. B-school curricula are still intensely quantitative, but as Stanford Dean Garth Saloner told McKinsey, “The [quantitative] skills of finance and supply chain management and accounting and so on, I think those have become more standardized in management education, have become kind of what you think of as a hygiene factor: Everybody ought to know this.”

Business schools have realized that it’s not sufficient to provide quantitative and analytical training, because within a few years of leaving school (or even immediately upon graduation) their alumni will add value more through their ability to lead and manage others than through their talents as individual contributors. And effectiveness in these more senior roles requires an entirely different interpersonal skill set. Saloner goes on to note that, “the softer skill sets, the real leadership, the ability to work with others and through others, to execute, that is still in very scarce supply.”

But the ability to provide quality training in these areas is unevenly distributed across MBA programs. The best schools have made leadership and interpersonal skills a high priority—Stanford now offers twelve sections of Interpersonal Dynamics to more than 400 students each year, making this labor-intensive course our most popular elective. Second-tier schools are making an effort to catch up, but high-caliber programs in these fields are difficult to establish . Harvard’s Bill George has said, “I don’t think you can teach leadership, I think you can learn about it” through experiential activities that bring students together to help them understand their strengths and limitations, provide feedback and promote self-awareness, and these activities require a very different approach from traditional lecture methods.

I’m not suggesting that the quantitative and technical skills that an MBA provides aren’t useful—they absolutely are. But they’re also increasingly available through other venues that individuals can access on their own at a much lower cost. The special advantage of an MBA program is the opportunity to develop leadership and interpersonal skills with a group of peers in a sequence of experiential courses informed by current research. So ask yourself:

Do the MBA programs I’m considering provide practical leadership and management training?
How well-established are these courses? How much support do they have from the school? How much support do they have from the surrounding community?
What do alumni say about their experiences in these courses? How have they benefited from this training?
And what alternative means are available to me to develop these practical skills?

2. A credential that sends a signal to the marketplace. No career paths absolutely require an MBA—it’s an optional degree and is nothing like a JD, an MD or the other credentials that professions such as law and medicine make mandatory. There are many senior people in general management roles, in consulting and even in financial services who don’t have an MBA—so don’t assume that the credential will necessarily serve a meaningful purpose in your chosen field.

As a coach I have two different “markets”—my students at Stanford and my private clients, who are primarily senior leaders, and in both settings my degree sends a useful signal. New students feel more comfortable knowing that I’ve been in their shoes (albeit 15 years ago), and prospective clients trust that I understand the complexities of their world and the challenges they face.

But it’s not a given that an MBA will have this effect. In my first job after business school I interacted with a very diverse range of communities, and while I never misled anyone about the fact that I had an MBA, I didn’t advertise it either. I knew that some people in my field had negative impressions of MBAs, and I needed a chance to prove myself as an individual before being stereotyped. My particular version of this experience may have been unusual, but by no means is it unique—there are many fields and organizations in which MBAs are viewed with skepticism and even disdain.

In addition, the nature of the signal being sent depends on the specific MBA program’s reputation, and this is not simply a matter of prestige. Harvard, Stanford, and Wharton routinely top lists of U.S. business schools, but they also have a reputation for entitlement and arrogance. While some firms seek out graduates from elite schools, others avoid them out of a concern that they will be difficult to work with and disruptive to the established culture. So ask yourself:

What market am I in now? What markets might I seek to enter in the future?
Who’s interested in my services? How might this change if I had an MBA?
How are MBAs perceived in these markets? What signals does an MBA send in these markets? What stereotypes (both positive and negative) might I face as an MBA?
What is the specific reputation of the MBA programs I’m considering? How are these schools and their alumni viewed within my desired markets?
And what alternative means are available to me to send the signals I desire to communicate?

3. Membership in a learning community and access to an alumni network. Business school emphasizes working in groups, and MBA students often learn as much from their peers as they do from faculty, so it’s important to consider who you’ll be working alongside for two years. Those same people will become your fellow alumni, and access to that network is one of the most valuable benefits an MBA program can offer.

Of course, alumni networks aren’t created equal. Larger MBA programs yield larger networks. Certain networks are concentrated in specific geographic areas or in specific industries. And some B-school experiences create networks that are particularly active sources of mutual support.

I’ve benefited tremendously from the support of my fellow GSB alumni during two major professional transitions. In my job search after graduation and later when I began exploring executive coaching as a career path, other Stanford alumni were extraordinarily generous with their time and insights, and there’s no way I could have succeeded without their help.

All this said, there’s a misperception about the importance of socializing in business school as a means of cultivating these ties. To be sure, my students devote a substantial amount of time and energy to elaborate social activities, and I often find myself amused at the lengths to which they go to entertain themselves. However, while it’s true that I’m middle-aged and boring, and a quiet night at home is my idea of a good time, I was pretty boring even as a student, and I didn’t spend much time at parties or other social events.

But I didn’t need to in order to benefit from the GSB network—the school’s relatively small size and communal culture help ensure that graduates feel a sense of obligation to help fellow alumni. And the fact that I can’t pay back the many people who helped me is motivation to “pay it forward” by doing as much as I can to support recent alumni seeking help from me. So ask yourself:

What do I know about the students at the MBA programs I’m considering? Are they like-minded peers? Do I see myself learning alongside them?
What do I know about the alumni networks of these programs? How active are they? Are they concentrated in geographic areas and professional fields of interest to me?
What support does a school provide to its alumni network and to individual alumni? Do alumni return frequently to participate in events and activities at the school?

One final point on diversity: I have no doubt that my experience in business school was made substantially easier by the fact that I’m a straight, white, American man with an Ivy League undergraduate degree. Even as MBA programs have sought to attract more diverse student populations in recent years, B-schools are still disproportionately filled with people like me. And even at Stanford, which prides itself on its inclusiveness, I know that women, gays and lesbians, people of color, students from outside the U.S., and non-native English speakers can feel isolated in business school and find the MBA experience more difficult and stressful. I hope to encourage people from a wide range of backgrounds to consider business school as an option, and it feels important to acknowledge this current state of affairs if anything is to change.

How Unethical Behavior Becomes Habit

When a former client’s secretary was arrested for embezzlement years before his own crimes were uncovered, Bernie Madoff commented to his own secretary, “Well, you know what happens is, it starts out with you taking a little bit, maybe a few hundred, a few thousand. You get comfortable with that, and before you know it, it snowballs into something big.”

We now know that Madoff’s Ponzi scheme started when he engaged in misreporting to cover relatively small financial losses. Over a 15-year period, the scam grew steadily, eventually ballooning to $65 billion, even as regulators and investors failed to notice the warning signs.

Many of the biggest business scandals of recent years — including the News of the World phone hacking scandal, billions in rogue trading losses at UBS, and the collapse of Enron — have followed a similar pattern: The ethical behavior of those involved eroded over time.

Few of us will ever descend as deeply into crime as Bernard Madoff, yet we all are vulnerable to the same slippery slope. We are likely to begin with small indiscretions such as taking home office supplies, exaggerating mileage statements, or miscategorizing a personal meal in a restaurant as business-related. Nearly three-quarter of the employees who responded to one survey reported that they had observed unethical or illegal behavior by coworkers in the past year.

“The safest road to Hell is the gradual one — the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts,” wrote C. S. Lewis. Our research backs up both Lewis’s intuition and the anecdotal evidence: People often start their misconduct with small transgressions and then slide down a slippery slope.

Two of us (Dave, Lisa, and our team) found that people who are faced with growing opportunities to behave unethically are much more likely to rationalize this conduct than those who are presented with an abrupt change. We predicted that if we could get people to cheat a little in one round, they might be willing to cheat a bit more in another round, and finally cheat “big” in a third round.

This is precisely what we found: When given a series of problem-solving tasks, 50% of our subjects cheated to earn $.25 per problem in the first round, and 60% cheated to earn $2.50 per problem in the final round. However, the people in the abrupt change group who could not cheat during the first two rounds were much less willing to cheat big for $2.50 per problem during the final round (only about 30% did).

This suggests that employees might look at their slightly exaggerated mileage statements as “rounding up.” But rationalizing minor indiscretions inevitably influences how they view progressively worse behaviors and may lead them to commit bigger offenses (e.g., billing their employers for personal travel expenses) that they initially would not have considered.

To make matters worse, people are more likely to overlook the unethical behavior of others when it deteriorates gradually over time. For example, one of us (Francesca) found, with colleague Max Bazerman, that people who played the role of auditors in a simulated auditing task were much less likely to report those who gradually inflated their numbers over time than those who made more abrupt changes all at once, even though the level of inflation was eventually the same.

Unfortunately, the assumption that unethical workplace behavior is the product of a few bad apples has blinded many organizations to the fact that we all can be negatively influenced by situational forces, even when we care a great deal about honesty. Yet approaches to warding off the slippery-slope problem need not to be drastic. In their book Nudge: Improving Decisions about Health, Wealth, and Happiness, Richard Thaler and Cass Sunstein illustrate how a small and unobtrusive nudge in the right direction can lead people to eat better, save more for retirement, and conserve energy.

Our research similarly indicates that ethical nudges can help people avoid the types of indiscretions that might start them down the slippery slope. For example, in a study conducted with a major U.S. insurance company, Francesca and colleagues found that customers who signed the statement “I promise that the information I am providing is true” prior to reporting their annual mileage — that is, at the top of the page — were significantly more honest in their reporting compared to those who reported first and signed at the bottom of the page.

In a different study, Dave and Lisa found that even subconsciously exposing people to ethical content increased their moral awareness and prompted more ethical decisions. Perhaps with this in mind, some organizations have incorporated ethical nudges into images, symbols, stories, and slogans. For example, the University of Arizona’s Eller College of Management recently created posters featuring the image of a fire alarm to call attention to cheating. And at International Paper, employees are given a wallet card with a set of ethics-related questions to consider when making business decisions.

When moral standards are unclear or unenforced, it’s easy for employees to feel emboldened to engage in questionable behaviors that are readily rationalized. Environments that nudge employees in the right direction, and managers who immediately identify and address problems, can stop ethical breaches before they spiral out of control.

Plan a Satisfying Retirement

You’ve worked hard all your life, and now you’re on the brink of retirement. Trouble is, the things you looked forward to all those years — mornings on the golf course, afternoons puttering in the garden, trips to exotic places — don’t feel like they’ll be enough to sustain you. Encore careers — jobs that blend income, personal meaning, and often some element of giving back — are becoming an increasingly popular alternative to full-time retirement. But where do you start?

What the Experts Say

According to Encore.org, a think tank focused on Baby Boomers, work, and social purpose, nearly 9 million people ages 44 to 70 today are engaged in second-act careers. “People are leading longer and healthier lives and so leaving full-time work in your mid-60s means that you’re looking at a horizon of 20 to 30 years. That’s a long time,” says Marc Freedman, CEO of Encore.org and the author of The Big Shift. There is, he says, the financial question of how you’ll support yourself, “and then there is the existential question: Who you are going to be?”

On one hand, it’s daunting to contemplate embarking on a new career at this stage in life. On the other hand, it’s liberating to “let go of the past” and forge a new identity based on “things that you find exciting, stimulating, or interesting,” says Ron Ashkenas, a senior partner at Schaffer Consulting and an executive-in-residence at UC Berkeley’s Haas School of Business. “It’s an opportunity to think about how you want to contribute to society, your community, and your family.” Karen Dillon, coauthor of How Will You Measure Your Life?, agrees: “Life doesn’t necessarily get simpler after you leave a full time job,” she says. “But it can become more rewarding — if you’re willing to hold yourself accountable and work for the new goals you’ve set yourself.” Here are some things to think about as you prepare to for this new phase.

Lay the groundwork early

If you’re confident that your job won’t be in jeopardy, tell colleagues about your plans to officially retire while you’re still gainfully employed. “Then it’s not out of the blue, and it also gives them a chance to figure out if they have contacts or a network you could leverage,” says Ashkenas. It’s also important that you leave on good terms with your company and indicate if you are open to occasional projects and assignments — which is a good way to keep your hand in your profession. Adds Dillon: “You can’t just stop working and expect the phone to ring. Plant seeds early so that once you’re in circulation, experiences and opportunities will come to you.”

Don’t rush

Once you leave your job, give yourself a period of time — ideally months in duration — to reflect on what you want to do next. “Give yourself time to rest, renew, and restore,” says Freedman. Navigating this transition will take some time. “You’ve been working and juggling family stuff for decades and likely haven’t had the time to think about this next chapter of your life. Recognize that finding work that is significant and fulfilling could take two to three years.”

Ask yourself: what’s really important?

Make a list of all the things “that feed you emotionally” and then drill down to figure out exactly what it is about those things that inspires you and makes you happy, suggests Dillon. For instance, you might list spending time with your kids or doing work that’s challenging, but “what you most enjoy is having new experiences with your children, like travel. And what you really like about work is collaborating with others and creating something,” says Dillon. “Push yourself to do the things that matter to you and be conscious of the choices you’re making and how you’re spending your time.” Your goal, says Freedman, is to “figure out what your priorities are at this juncture in your life.”

Be willing to experiment

Freedman advises taking a “try-before-you-buy” approach. “Find ways to dabble in things that interest you,” he says. Seek out internships, fellowships, or part-time jobs; give back by volunteering to serve on a board of a nonprofit; take on different kinds of professional assignments; or sign up for a class at a community college. “If it sounds fun and interesting and it seems as though you will learn new things, do it,” says Dillon. Also look for ways to transfer your hard-earned expertise to new domains, says Ashkenas. “It’s not as if you stop being who you are. You are still you, and you still have the same skills; you’re just applying them to new situations and environments.”

Keep productive

After you’ve given yourself some time off, it’s important to return to some of the things that office life gave you: structure and community. “Just as you would look ahead to milestones in your work, you need things to look forward to and anticipate,” Ashkenas says. Consider joining a group or community like an alumni association, a volunteer or religious organization, a freelancer’s group, a book club, or even a virtual community. After all, “you need the stuff you get from the informal office environment: banter, chatter, laughter, and information,” Dillon adds. It’s also helpful to spend time with others who are “wrestling with the same challenges you are,” says Freedman.

Hold yourself accountable

As you’re navigating this transition, “you have to think about goals,” says Dillon. “Get feedback from those you care about — like your spouse or partner, children, and friends — about how you’re doing. And be honest with yourself about how you’re spending your time. Do a reality check by asking yourself, “Do I feel good and healthy? Do I feel stimulated? Don’t let outside voices dictate your answers,” says Dillon. And once you figure out where you want to focus, Ashkenas says, “you need to keep asking yourself: Am I adding value? Am I making a contribution? Am I learning something?”

Principles to Remember 

Do:

Find meaning in your new life by pinpointing how you most enjoy spending your time
Experiment with different jobs and assignments to stretch yourself and learn new things
Expose yourself to new perspectives and ideas by joining a community

Don’t:

Be secretive about your intentions to leave your job — share your plans with colleagues and let them know you’re open to new opportunities
Rush into a new job right away; give yourself time to relax and restore
Squander hours away just because you can; hold yourself accountable about how you’re spending your time

Case study #1: Embrace your personal passions as the source of new opportunities

The day that Gail Federici sold John Frieda — the professional hair care company she co-founded with the British stylist — her mind reeled. “We hadn’t been planning to sell the company,” she says. “Over the years we had meetings [with prospective buyers], but we wanted to keep doing what we were doing.”

Once the paperwork was signed, she took a one-week trip to Venice with her college roommate then returned home to London. At first it was a tough transition. “We had been building this company for 12 years: I had a definitive routine; I had a plan for the future; I had goals. All of a sudden it was gone,” she says. Gail decided to dedicate her time and energy to a personal passion: music. It was a natural second act: Her husband is a musician and Gail used to sing in his band in New York. At the time, the couple’s twin daughters were interested in becoming performers. “It was a huge learning curve for me: I had to read the back of CDs to find out the names of producers and songwriters,” she says.

Over the next five years, she worked on albums and promotions with several musicians and boy bands, including Taio Cruz, the British singer-songwriter and record producer. “It was exciting and challenging to learn a new industry but I was still doing what comes easy to me: marketing, problem solving, and strategizing.” After signing the main act she and her team developed to Interscope, she decided to “go back to what [she] does best.”

Now in her 60s, Gail is the President and CEO of Federici Brands, another hair styling company. While she is happy to be back in the hair care business, she looks back on her years in the music industry fondly. “I was out of my comfort zone but I liked it.”

Case study #2: Leverage your expertise and connections to give back

Bill Haggett spent the first part of his career in the shipbuilding business — first as President and CEO of Bath Iron Works in Maine and later as the head of Irving Shipbuilding of New Brunswick, Canada. After leaving Irving in the late 1990s and returning to Maine, Bill wanted to give back to his community.

His first priority: building a new YMCA in his hometown. Bill helped raise funds for the Y and also helped design the new complex. “I grew up in Bath, Maine in the 1940s and I am from a family of modest means,” he says. “The YMCA was a terrific outlet for me and my friends.”

By 2000, the Y project was complete, but Bill wasn’t interested in “moving into retirement mode.” The Libra Foundation, a large charitable organization in Maine, approached him about a job. “They wanted to make a strategic investment in a potato company in northern Maine on the brink of bankruptcy. And they asked: ‘Would I be willing to serve as chairman and CEO?’”

Bill knew nothing about the potato business, and he had little interest in moving to northern Maine. But after reflecting on what he wanted out of the next chapter of his life, he realized the opportunity was appealing. “It was a way to help the economy by adding value and jobs in that part of the state,” he says. The job would be fulfilling on a personal level too. “I wanted the challenge of turning this business around. It was a way to learn something new, but I also thought I had some expertise I could bring to the party.”

The early years were a struggle, but after a while, business at Naturally Potatoes improved: Sales increased by 40%, and the company returned to profitability. By 2005, it was sold to California-based Basic America Foods (BAF). Bill, meanwhile, went on to run a meat company. But Naturally Potatoes fell short of BAF’s expectations, and when, in 2010, a team led by Libra bought the company back, Bill resumed the role of CEO.

At the age of 80, Bill — who is chairman and CEO of Pineland Farms Natural Meats and Pineland Farms Potatoes — has no plans to stop working. “I feel energized,” he says. “One of the great pleasures of being my age is that everyone I work with is younger than I am. They have bright ideas, skills, and technology savvy that I don’t have.” Learning a new business every few years has been “stimulating,” he says. “I like to be useful and to make a contribution.”

To Make Better Decisions, Combine Datasets

A complicated system is somewhat like a complicated recipe.

You know what the outcome will be because you understand what will cause what — combine a given number of ingredients together in a certain way, put them in the oven, and the results will be consistent as long as you repeat the same procedure each time.

In a complex system, however, elements can potentially interact in different ways each time because they are interdependent. Take the airline control system—the outcomes it delivers vary tremendously by weather, equipment availability, time of day, and so on.

So being able to predict how increasingly complex systems (as opposed to merely complicated systems) interact with each other is an alluring premise. Predictive analytics increasingly allow us to expand the range of interrelationships we can understand.  This in turn gives us a better vantage point into the behavior of the whole system, in turn enabling better strategic decision-making.

This idea is not new, of course.  Firms have been developing models that predict how their customers will behave for years. Companies have developed models that indicate which customers are likely to defect, what advertising pitches they will respond to, how likely a debtor is to default (and what can be done to avoid making loans to that person), what will prompt donors to up the ante on their giving, and even who is likely to pay more for services like car insurance.  Organizations such as Blue Cross Blue Shield have used their considerable databases about chronically ill people to target and influence their care, reducing to some extent the total cost of care, much of which is concentrated in helping a small portion of their total consumer base.

What is new is that the advent of predictive analytics, in which disparate information that was never before considered as or looked at as related parts of a system, is giving us new ways to see interrelationships across, and think comprehensively about, entire systems.  Rather than arguing about what various kinds of activities will drive which outcomes, the questions can now be answered quantitatively.  Indeed, as I argued in Harvard Business Review, complex systems with their continually changing interrelationships often defy understanding by using conventional means.  This in turn creates the opportunity for strategic action.

An example of exactly this kind of action caught my eye in an unlikely setting—city government.  New York City Comptroller Scott Stringer, in an effort to help the city reduce its considerable cost of defending against and paying out legal claims made against the city, has turned to predictive analytics to help.  The program is called ClaimStat and is modelled after Richard Bratton’s famous CompStat program of collecting crime data.  The system tracks the incidences that led to the city’s paying out $674 million in payments for claims.  Stringer’s website observes that “These costs are projected to rise over the next four years to $782 million by FY 2018, a figure that is greater than the FY 2015 budget for the Parks Department, Department of Aging, and New York Public Library combined.”

Using analytics, the city found a non-obvious systemic relationship—one where the dots may never have been connected otherwise—with costly unintended consequences:  In fiscal year 2010, the budget allocated to the Parks and Recreation department for tree pruning was sharply reduced.  Following the budget reductions, tree-related injury claims soared, as the Comptroller reports, leading to several multi-million dollar settlements with the public.  One settlement actually cost more than the Department’s entire budget for tree pruning contracts over a three-year period!  Once funding was restored for tree-pruning, claims dropped significantly.  Such a relationship might never have been spotted absent the connected database, as the budget for Parks and the budget for lawsuits are managed as separate and unrelated resources.  By bringing them together, the system-wide consequences of individual decisions becomes obvious and something that can be tackled in a strategic way.

In the coming years, we can expect to see smart organizations increasingly leveraging the power of multiple databases to get a real vantage point on their strategic challenges.

Predictive Analytics in Practice

An HBR Insight Center




Nate Silver on Finding a Mentor, Teaching Yourself Statistics, and Not Settling in Your Career
Beware Big Data’s Easy Answers
Who’s Afraid of Data-Driven Management?
When to Act on a Correlation, and When Not To

A Simple Fix Makes a Big Difference in Phone Thefts

Kill switches in cell phones appear to be having an effect on thieves. Thefts of iPhones declined 38% in San Francisco and 24% in London in the six months after Apple’s offer in September 2013 of software that allows users to lock down phones after thefts, and in New York City, robberies of Apple products fell 19% in the first five months of 2014, according to The New York Times. Cell-phone companies were slow to incorporate kill switches, which make it harder for thieves to resell stolen phones, but Samsung has added the technology to the newest version of its top-selling Galaxy S phones and is expected to add it to others soon.

The Ice Bucket Challenge Won’t Solve Charity’s Biggest Problem

I love the Ice Bucket Challenge. Period. It’s a collective expression of love in a world with far too little of it. It has generated public tears in an age with far too few of them. It restores faith. It connects. And, as of last week, it raised more than $100 million for the Amyotrophic Lateral Sclerosis Association, up from donations of $2.8 million for the same period last year.

So, are we looking at the future of charity? We are glimpsing the potential of momentary collective engagement, but at the same time, we are seeing the confining rules by which nonprofits must play, collectively imprisoned in an ancient way of thinking. The ALS Association is already being scrutinized to make sure it doesn’t spend a penny of the Ice Bucket money on anything but research. So when the enthusiasm fades, there will be nothing there to replace it, because investment in the replacement was forbidden.

I love the Ice Bucket Challenge as a thing unto itself. But for the sake of the ALS Association and everyone afflicted with ALS, we must dedicate ourselves to something far greater – yes, far greater than $100 million. We must aspire to a statistically significant increase in charitable giving as a percentage of GDP. And for that to happen we need to give charities far more freedom to invest in that result.

Charitable giving in the U.S. was $335 billion in 2013, but only about 15% of that, or $50 billion, went to health and human services causes – 85% went to religion, higher education and hospitals. $50 billion isn’t near enough to cure cancer, ALS, AIDS, Alzheimer’s, and other threatening diseases. It’s not enough to end poverty, homelessness, bullying, and all of the other problems charities address.

Charitable giving has remained stuck at 2% of GDP in the U.S. ever since we started measuring it in the 1970s. In forty years, the nonprofit sector has not taken any market share away from the for-profit sector.

What keeps us from increasing charitable giving? We are inherently averse to seeing humanitarian organizations spend money on anything other than “the cause,” as we define it, and we define it very narrowly. We condemn them for using donated resources on building market awareness or on fundraising, even though without those things, they can never reach the scale we need to fully address these massive social problems.

Without a systemic way to raise money and also build market awareness of its causes, charities have to pray that a fluke like the Ice Bucket Challenge – a zero-cost, once-in-a-lifetime, spontaneously combusting viral idea – will come their way. This is no way to change the world. Imagine if Tim Cook had to get people to dump ice on their heads in order to bring revenue into Apple – and had to figure out a new idea like that every six months – with an R&D budget for hatching it of precisely zero, to boot. Apple’s revenues are close to $50 billion every quarter – equal to the entire annual budget of the entire U.S. health and human services charitable sector.

The humanitarian sector has been taught to settle for scraps. The $100 million-in-two-months Ice Bucket Challenge is our highest-profile success in years. Compare this to what some companies can make in a day: Apple sells $465 million worth of iStuff every single day. And Anheuser Bush sells $40 million worth of beer daily.

Predictably, the sector is all abuzz now with Ice Bucket fever, and organization after organization is scrambling to figure out how to create its own version of it. That’s not the future. It’s how we’ve always done things. We look for the get-rich-quick-and-easy-scheme because we think that’s what donors want. Meanwhile, we are largely blind to the deep strategic and systemic issues that keep us scrambling for the next Ice Bucket Challenge.

For an audience hell-bent on promoting sustainability, we have a strange addiction to things that are not. The Ice Bucket Challenge is not sustainable, not for ALS and not for the sector as a whole. Zero-cost fundraising ideas that spring up from out of nowhere and require virtually no investment are not sustainable because they rarely happen, and relying on them won’t result in the world we truly seek.

Ice melts. The big play here is a wholesale re-education of how the American public thinks about charity. We did it with pork (“the other white meat”), we did it with gay marriage, and we can do it with charity. We need an Apollo-like goal that challenges America to increase charitable giving from 2% of GDP to 3% of GDP within the next ten years – and this, in large part, means allowing charities to make the investments in growth that they need (and not withholding donations because we disagree about what those mean). That would amount to an extra $160 billion a year. That’s the future of charity.

The Ice Bucket Challenge shows us that the human heart wants to be engaged. Now it’s time to invest in sustaining and increasing that engagement. If you really want to challenge yourself for ALS and for charity at large, challenge the long-held belief that charities should not be able to invest a healthy part of your donation in growth, the same way that beer and cosmetics companies do every day.

Uber-Style Talent Poaching Happens in All Industries

How much does it cost you when your employees are chatting with recruiters from other organizations, polishing up their LinkedIn pages, or just networking with employees at rival organizations?  The dust-up between two popular app-based car services, Uber and Lyft, has produced some very heated competing calculations of the economic damage of aggressive recruitment.

The Verge reported that Uber sent out brand ambassadors with burner phones and credit cards.  Ambassadors “request rides from Lyft and other competitors, recruit their drivers, and take multiple precautions to avoid detection.”  The story was picked up by CNN Money, which reported that Lyft’s internal data suggesting 5,560 canceled rides between October 2013 and August 2014.  Uber admitted enlisting average passengers: “We even recently ran a program where thousands of riders recruited drivers from many platforms, earning hundreds of dollars in Uber credits for each driver who tries Uber.”

The interesting thing here is not so much the question of whether Uber should curb its aggressive recruitment, but the phenomenon that, for all companies, strategic success increasingly depends on competitive advantage in talent markets as much as in product, service, and brand markets.

Strategic talent constraints are typically described in vast interconnected global supply chains and high-tech knowledge jobs like software engineers and research scientists.  Yet, the Uber-Lyft story plays out in the sharing economy for local services. With millions of drivers in every major city, should Lyft and Uber really be concerned about losing a few to their competitors?  Yes, because the pool of suitable and motivated drivers for ride-sharing is limited, and drivers are the only face to customers of Uber and Lyft.  Lock up the good drivers and you lock up the market.  In our book Beyond HR, Peter Ramstad and I described how Corning in the 1990’s could lock up float glass manufacturing in Central Europe by locking in a small population of qualified pivotal engineers.  So, this phenomenon isn’t new — but it is increasingly more pervasive, faster, and more varied.

And trying to stop aggressive recruitment is increasingly futile.  Jack-in-the-Box employees can chat up McDonalds’ associates during work hours, and engineers from one company strike up relationships with engineers in competitor companies. Zappos got rid of formal job postings in favor of an “Insider” website, for those who “might like to work for Zappos someday” to “sign up, stay in touch, talk to real people with real names and real faces, get to know us and allow us to get to know them.”  Microsoft recruited engineers for its Kinect for Windows team using a food truck called The Swinery, serving pepper bacon and toppings such as spray cheese, Sriracha, peanut butter, maple syrup, and chocolate sauce. The truck was parked at lunchtime near the Adobe and Google buildings, and staffed with Microsoft recruiters.

So Uber and Lyft should stop fixating on whether this recruitment activity is unseemly or not, and ask the more pivotal strategic question:  Will Lyft or Uber (or someone else) create the best “value proposition” for drivers?  That may be happening already. As this spat has played out, Uber and Lyft have both tried to depict themselves as being more devoted to their drivers’ welfare.

All leaders need to ask themselves the same question about their key employees. Just as with the ride-sharing drivers, technology is making alternative jobs easily available to your pivotal talent.  Everyone is familiar with Glass Door, Monster.com, and LinkedIn. More recent examples include Mediabistro.com’s  AgencySpy channel featuring “Cubes,” a video series that tours actual workers in cubicles at different creative agencies.  Plus, your talent will increasingly have alternatives that are more varied and accessible, and go well beyond traditional full-time employment.

In ride-sharing, the drivers can find alternatives and change employers with the tap of a phone.  Your pivotal talent today may seem safely insulated in a cocoon of traditional employment and HR practices like rewards, careers, and culture.  That’s what taxi and limousine services thought too, just a short time ago. If you’re still focusing on how to stop your employees from using work time to look for other jobs, you’re missing the bigger question:  Will your strategy make you the best place for the pivotal talent that embodies your strategic capability?

The Corporate Folklorist’s Credo

Storytelling is key to a strong brand and culture — if it’s done right. Having a corporate folklorist on staff helps to convey an organization’s purpose and values through stories and artifacts. But since it’s a relatively new function, it could use a credo to inform and inspire good work.

Physicians have the Hippocratic Oath, reporters have the Journalist’s Creed, and military recruits have the Oath of Enlistment. Even as a little kid, I had to abide by the Girl Scouts Law (and sell a wagonload of Thin Mints to someone other than my dad) if I wanted to add badges to my Brownie sash.

What would the folklorist’s credo include? Here are some principles that guide my own work, gleaned from market research, social science, and storytelling best practices.

Ask lots of questions. There’s a story in every situation, and it’s the corporate folklorist’s job to find that juicy little nugget of narrative. Ask your interview subjects (executives or worker bees, customers or partners, whomever they may be) open-ended, I’ve-got-no-agenda kinds of questions. Simple prompts like “How did you get started in this work?” or “Tell me about the first time you attempted to do this” can unearth a deep narrative vein that branches off in multiple directions. Then probe for truths that expose underlying values: What did they try and fail before discovering the right path? Where did they find the courage to persist? How did that shape their values later on? Let the phrase “say more about that” weave its magic and then follow that thread as far as it goes.

Trust but verify. Storytellers often have a reputation for stretching the truth (at least in my family), and dramatic license certainly can make a story more lively. But as folklorists, we aren’t writing novels; we’re documenting history. So, facts matter as much as entertainment value. We need to capture the “who, what, where, when, why, and how” of a story and corroborate those claims with multiple sources (eyewitness perspectives, third-party coverage, public records, and so on) for a more complete account. For instance, when my colleagues and I crafted a corporate narrative for a life science firm, we gathered anecdotes from R&D and sales leaders about how their company’s technology had been used by health care firms across the country. But we supplemented their accounts with first-person perspectives obtained directly from customers, along with news coverage about the disease outbreaks that their technology had helped to stem.

Tell the whole truth. Every story has many sides, and the folklorist should represent them all truthfully. Including multiple points of view makes a story well-rounded and believable. What if stories are unflattering to a particular person or product, or to the company as a whole? Tell them anyway, because they may contain lessons that somebody needs to hear. For instance, the history of a major product launch should include the flawed prototypes, missed deadlines, customer complaints, or competitive countermoves that taught the launch team hard lessons and made the product stronger in the end. Learning from that past helps prevent bad decisions on other products and builds confidence that leaders in the company have the skills to handle tough situations in the future.

Make it interesting. Folklore may be an important source of learning, but it won’t get its point across if it’s dull. This is where the art of storytelling comes into play. It’s not a natural language for analytical thinkers, but you can guide them into a dramatic frame of mind and set the stage for a high-impact story by probing for details about a specific moment. A few years ago, I worked with a college educator who explained to me — in a logical (and dull) narrative devoid of conflict — how he had radically restructured his school’s curriculum. He happened to mention that he tested his initial ideas with new students (who loved the changes) and tenured staff (who hated the changes) over a series of meals that led to increasingly heated debate. I saw those events as the turning points in an emotionally charged story that pitted idealistic students against jaded teachers in a battle over the future of education. I then shaped his anecdotes into a classic three-act structure — likeable hero encounters obstacles and emerges transformed — to convert a factual account into an engaging tale.

Share the lore. Folklore is more than content; it’s the corporate conscience. The stories you tell about your company’s mission and values, including successes and failures, reveal the soul of the organization and the character of its people. Don’t allow them to be reduced to meaningless, jargon-filled platitudes. Instead, teach your leaders and employees how to share stories about your values in a personal, emotionally rich way. Companies like Mars, Boeing, and Esri embed storytelling into their culture by training employees to document and present their stories. Nike goes a step further by cataloguing stories about their maxims in video form. At Duarte, we ask functional teams to stand up at all-staff meetings and tell stories about situations when they embodied one of our core values.

Regardless of what form your lore takes, the corporate folklorist role demands rigor. As Voltaire and Spiderman’s Uncle Ben said, “With great power comes great responsibility.” It’s time we took a pledge to use our power well.