Marina Gorbis's Blog, page 1380

August 4, 2014

Warren Bennis, Leadership Pioneer

The sad news came over the weekend that Warren Bennis has died. For us at HBR it is the loss of a long-time author and friend. Many, many more will miss him, too, as a teacher and adviser.


Let’s define “long-time”: Warren’s first piece in HBR appeared in 1961. It was called a “Revisionist Theory of Leadership,” and that is what it delivered. A half-century later, its message does not sound so revisionist: that in a business environment marked by increasingly complexity and constant change, organizations require not autocrats at the top, but leaders with more humanistic, democratic styles. (For shorthand, Bennis liked the phrase from “macho to maestro.”) At the time, however, corporate titans were very unlikely to see things that way.


The revision Warren helped to bring about happened on a different level, too. Before 1961, the very topic of leadership wasn’t standard HBR fare. Management was about effective structuring of enterprises and administration of their workings. On the fact that some executives had the ability to inspire, motivate, and discern the challenges of the future better than others, management theory was largely silent. This was ineffable territory, not suited to a discipline aspiring to be scientific.


Warren liked to call himself lucky. In the last piece he wrote for HBR, a personal reflection, he even claimed that the keys to his successful career were “inglorious” ones: ambition, insecurity, labor, and luck. But as the old saying goes, people can make their own luck. The fact is that he seized on leadership as a topic when it wasn’t taken seriously, and stayed with it as it rose in legitimacy – indeed, helped to make it important as his own insights evolved based on constant, thoughtful interactions with real leaders.


Why did he gravitate to leadership in the first place? Warren credited various influences, including Douglas McGregor, whose exposition of Theory X versus Theory Y famously opened managers’ eyes to better ways of managing people. McGregor was president of Antioch College when Warren arrived there fresh from World War II, highly attuned to the dynamics between leaders and those who depend upon them. But it’s hard not to believe that the very fact of his name also swayed him. Warren Gemaliel Bennis, born 1925, was named after a U.S. president whose popularity was just then at its peak after his unexpected death in office – but whose legacy would very soon be tarnished forever as scandals came to light. Carrying the name of a leader in disrepute must surely have set young Warren’s mind to thinking about what makes some legacies great.


As the decades of his career passed, Warren continued to sail unafraid into topics that were hard to study but harder to ignore. He looked at “The Leader as a Storyteller” (1996) and at the formative moments that made leaders capable, in “Crucibles of Leadership” with Bob Thomas (2002) and in “The Seven Ages of the Leader” (2004). He wrote about leaders’ capacity for wisdom in “Making Judgment Calls” with Noel Tichy (2007) and about how leaders affect the cultures of their organizations in “What’s Needed Next: A Culture of Candor,” with James O’Toole (2009). In his earliest writings, he often looked far ahead – as in his declaration in 1964 that “Democracy is Inevitable” – and in his later writings, inevitably, he did some looking back.


Warren might have been, as he claimed, ambitious, insecure, hard-working, and lucky. But he was also charming, gracious, self-reflective, generous, full of good humor – and ever optimistic. In an interview with HBR, occasioned by his memoir Still Surprised, Warren suggested he might yet have another book in him:


I’m thinking, I’m not yet serious about this, but it may come that my next book will be called one word – and I’m not a particularly religious person, but the word is a powerful word: it’s Grace. I think that may be just the name for a book which is going to deal with issues of generosity, respect, redemption, and sacrifices. All of which sound vaguely spiritual, but all of which I think are going to be required for leadership.


Grace never made it to bookstore shelves. But the people who had the privilege of knowing and working with Warren got the content of that book in his presence.


 




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Published on August 04, 2014 08:50

Marketers, Don’t “Join the Conversation” — Lead It

Why are some brands able to be at once both global and local — to successfully seize the energy of grassroots movements and at the same time leverage corporate assets on a massive scale — while others only come off as artificial and pandering?


The web did not invent community-driven brands – just think of Harley Davidson — but technology has surely made the strategy more popular. These days, it’s pretty easy to interact with consumers directly.


Yet that’s exactly the problem. All too often, when marketers talk about their “social strategy,” they really mean a digital marketing strategy implemented on social platforms, rather than using social dynamics to benefit their business.


That’s why many social initiatives fail miserably. Consider Pepsi’s Refresh project, which sought to replace $20 million in Super Bowl spending with a social platform that funded good works. While its social media KPI’s soared, its business suffered. Pepsi actually lost market share and fell to number three in the cola wars for the first time in modern history.


Clearly, social initiatives are not a panacea. They can be wildly successful, but they can also crash and burn. For marketers to build effective community platforms it’s not enough to simply join the conversation—we must lead it.


For marketers to succeed in the social arena, strategies need to be grounded in network science, not conjecture. More specifically, four elements need to be in place.


First, we need to win credibility, not by paying lip service to the concept of authenticity, but by truly earning our mission. Pepsi Refresh failed because it had no relevance to the brand’s operations or heritage. Giving large sums of money to unspecified social causes might have reflected genuine corporate sentiment, but had no real relevance to Pepsi’s longstanding brand identity. Pepsi never earned that particular mission and therefore consumers saw little need to reward the company for its efforts.


Now consider the Business Innovation Factory (BIF), an organization that seeks to bring cutting edge innovation techniques to social initiatives, many of which are similar to those Pepsi Refresh sought to promote.


Its founder, Saul Kaplan, is a self-professed innovation junkie. After a successful career as a corporate consultant, he became the Director of Economic Development for Rhode Island, a cabinet level position, where he saw the opportunity to put his ideas into action and create innovation at scale.


Saul eventually left government to focus on BIF full-time.  It is now a cult favorite in the innovation world.  Today, their annual conference brings together well-known corporate innovators, such as Harvard’s Clayton Christensen, Zappos CEO Tony Hsieh and author Daniel Pink, to mix with an eclectic assortment of social entrepreneurs and devise solutions to society’s thorniest problems.


The contrast is stark. Where Pepsi merely borrowed its mission for Refresh, Saul spent decades earning his. Where Pepsi sought only to join the conversation, Saul led it and continues to do so today, a decade after BIF’s founding.


OK, you might say, it’s not fair to compare a large, for-profit enterprise with a mission-driven organization. But consider the example of American Express and its long-running Open Forum initiative. While BIF has empowered social initiatives, Open Forum empowers small businesses. Given AmEx’s operations, consumer base, and resources, it’s well positioned to do so.


And that brings us to the second principle—social efforts need to be guided by genome of shared values. Let me explain. DNA, despite popular misconceptions, is not a blueprint –in fact, our genome contains only about 1.5 gigabytes of data, barely enough for a full-length movie.  Its genius is that rather than try to specify every single feature of our biology, it provides us with rules for adaptation—first, for chemical gradients in the womb and later for the outside environment.


Effective corporate genomes perform the same function, establishing core principles that can adapt to local environments. McDonald’s has a great business in India, where beef is taboo and the company must cater to strict vegetarian diets.  Cosmopolitan magazine thrives even in Islamic countries, where attitudes toward sex differ markedly from the US.  Yet in both cases, the brands remain faithful to their core values, whether it’s fast and affordable food, or fun and femininity.


It is, of course, important that core values are codified and documented (BIF has published its genome), but even more crucial is that core principles become mantras, continuously repeated and applied throughout the organization even as they are adapted to local environments. This can only be done by applying a third principle: we must balance cohesiveness with diversity.


When we find a model that works, there is a strong compulsion to try to replicate it at scale. We establish rules and regulations, along with penalties for violating them. While such orthodoxy can instill discipline and obedience, it squelches innovation and the ability to adapt to changing contexts.


Research has shown that top performers find a way to combine both cohesive local units and global networks. In a study of currency traders, researchers at MIT found that the most successful performers worked within a core group, but also diversified their sources of information.  Other studies of star researches at Bell Labs and of informal company networks found much the same thing.


Every community must find a healthy balance between cohesion and diversity.  Without cohesion, there is no common purpose, but without diversity groupthink will set in and eventually that purpose will lose relevance.


Finally, every successful community creates passionate platforms.  BIF’s annual conference serves as its focal point. American Express has developed “Small Business Saturday.” Harley Davidson has its group rides. These are all essential for allowing members to connect, share experiences and build ties.


Yet passionate platforms cannot be conjured up out of thin air, but must evolve over time. Network science tells us that the strength of a community is not determined by its size, but by its density of internal connections; you must build in before you can build out.


And that, probably more than anything else, is what caused Pepsi Refresh—along with many other social marketing efforts—to fail. While digital technology can empower social initiatives, they are essentially human endeavors. Clearly, merely setting up a web page and a Facebook account will not suffice.


The humbling reality of social movements is that, while we can lead them, we can never really control them. As Daniel Dennett put it, “A scholar is just a library’s way of making another library.”




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Published on August 04, 2014 08:00

Lafley’s P&G Brand Cull and the 80/20 Rule

Declaring he’d cull up to 100 brands — many of which he’d acquired and developed — P&G CEO A.G. Lafley launches a “game changer” profoundly different than what he championed in his eponymous 2008 bestseller.


P&G is cutting its global brand portfolio by more than half. Instead of focusing on innovation, as he did during his first tour as CEO of the world’s largest consumer packaged goods firm, Lafley is now innovating on focus.


Lafley’s bold pare is part of a strategy to dramatically improve P&G’s financial performance by doubling down on the roughly 80 brands that generate 95% of the company’s profits and 90% of its sales. “This new streamlined P&G should continue to grow faster and more sustainably, and reliably create more value,” he said in a telephone call with reporters and analysts to discuss P&G’s quarterly results. “Importantly, this will be a much simpler, much less complex company of leading brands that’s easier to manage and operate.”


Does the leaner, meaner, and refocused Lafley 2.0 represent an innovation repudiation of Lafley 1.0? Not yet. But the “new and improved” game changer offered a heuristic that may reveal a lot about P&G’s analytic and innovation future. In retail, Lafley observed, the 80/20 rule usually applied: “Twenty per cent of the brands and products account for 80 per cent sales.”


Choosing to lead and manage in accord with that empirical insight has enormous organizational and operation repercussions. As devotees of Vilfredo Pareto and Richard Koch well know, 80/20 rules and ratios are relevant beyond retail. Lafley’s brand cull is likely but the first and highest profile of its application. A company that’s simpler and less complex more readily lends itself to 80/20 (re)organizing principles. Identifying the 80/20 products and brands is the easy part. But what other 80/20 portfolios will empower and enable the kind of high-impact/high-value focus Lafley now celebrates? To wit, cultures celebrating 80/20 innovation in product and process make different choices and investments than those celebrating “breakthrough” — dare I say “game changing”? — innovation. Indeed, companies focusing on those 20% customer segments that generate 80% of sales and/or profitability and/or sustainable growth markets and innovate differently from those who seek to serve everyone well. Just ask Walmart.


Big Data clearly becomes a big future winner in this strategic scenario. Almost certainly, P&G’s core 80/20 brands will be even more rigorously instrumented and analyzed. Data-rich and data-driven analytics will be where essential growth insights and hypotheses will originate. As I’ve noted in the past, “What happens to innovation and segmentation when serious organizations are challenged to assimilate and integrate 10X, 100X or 1000X more information about customers, clients, prospects and leads? Should management refine and dig deeper into existing 80/20 KPIs? Or do those orders-of-magnitude more data invite revising and reframing a new generation of 80/20s? In other words, how much should dramatic quantitative changes inspire qualitative rethinking of the vital few that generate disproportionate returns?”


A new generation of 80/20 analytics to support its 80/20 brands will invite a similar refocus on organizational and operational 80/20s for investment. For example, which 20% of technical P&G core competences generate 80% of the meaningful features and functionality of the company’s core brands? Which 20% of employees — and key suppliers — produce the 80% that core technical competence or capability? Which 80/20 technical capabilities (visualization, computational chemistry, materials science expertise) enable the 80/20 competences that uniquely differentiate and add value?


The demands of 80/20 criteria shifts the innovation emphasis away from more traditional financial metrics around DCF, IRR, and NPV and toward better understanding of how novelty preserves, protects, and extends the 80/20 franchise. Consequently, the most challenging strategic opportunities will emerge from identifying the right units of analysis for 80/20 enshrinement. Are 80/20 people, competences, or capabilities the best value mechanisms for measurement? No doubt there will be meta-criteria — the 80/20s underlying the 80/20s — that will command special top management time, attention, and research. You can be sure that Lafley knows which 20% of his time and effort defines 80% of his impact on the company.


Does this mean that the people and processes outside that Pareto core will be minimized and marginalized? That will prove a huge cultural challenge for Lafley 2.0. Just because a talented team or evolving process innovation doesn’t fall within the 80/20’s vital center doesn’t mean they should be ignored or starved of support. But simply treating them as “overhead” or “enablers” has challenging financial and organizational consequences, too. Will P&G innovation dynamism tomorrow come more from initiatives supporting the core? Or from innovative efforts to break into the core? To what extent do 80/20 criteria encourage brand adjacencies and extensions versus fundamental transformations?


P&G is not getting bigger by getting smaller; it’s redefining the measures and metrics it will use to invest in value creation. Lafley 2.0 is a multibillion dollar bet that the most important way to change the game is changing how you’re going to keep score.




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Published on August 04, 2014 07:54

So You Want to Join a Board

Many senior managers desire — and are qualified — to join a board. And many companies around the world would greatly benefit from infusions of fresh talent and insight into their boards. Yet all too often board positions go to people who are already serving on other boards. So how can you, a promising potential new director, realize your aspiration?


First, let’s look at the reality. Boards can be conservative and clubby institutions. They tend to select new members who are proven quantities — typically, members of other boards. This is understandable but not good: The syndrome can lead to board timidity, herd mentality, and an aversion to innovation, which can hurt or even kill an enterprise.


Despite these barriers, you can do a lot to unlock the boardroom door and become that force for change on a board that is so often needed. Here’s how.


Begin by understanding that boards select on two basics: capabilities and character.


Start with capabilities. Assess yourself not only as a sector expert but also as an executive with special competences and map those attributes against the market’s needs. What are your special skills — digital marketing know-how you learned in fast-moving consumer goods? Or perhaps expertise in managing clinical trials you learned in biopharma? Or is it your knowledge of how to work with regulators in highly regulated industries?


Next, candidly evaluate how you compare with other executives, based on your proven track record. Ask colleagues and mentors to help. Be ruthless in eliminating anything except where you truly excel. Matrix the inventory against the findings of the scan above.


You have just composed your new CV for seeking board positions. These are the capability and experience assets that boards are seeking in the areas where you have greatest strength. One of us (Fred) was invited to join one important board seat (Time Warner) in large part because his expertise in the highly regulated realm of health care could be applied to the increasingly regulated world of global telecommunications.


Now comes the harder part: character.  There are five character basics where you need to demonstrate special strength:


Judging others. This is different than simply the good judgment expected of senior managers. As a board member some of your most important tasks consist of judging the CEO’s mettle. Can she handle the job, and is she handling it well? Is she choosing the right Level 2 talent? Is she translating strategy into excellent execution? Is she earning trust on a 360-degree basis? So look for moments in your career where your judgment of others has made a winning difference.


Raising questions. Unlike most executive roles where leading involves a lot of telling, board members succeed by asking — because they rarely can just tell. Successful board leaders ask questions such as “Why is this the right strategy, if the environment has changed?” “If these are your challenges, why is this Level 2 person on your team?” This is how you guide the CEO (and other board members) toward making the right calls. So inventory those moments when your leadership success has been proven by your questions.


Collaborating. Boards are collectives. You must show that you can play on the collective team through persuasion, teamwork, and compromise. Develop telling examples of where you succeeded not by managing your team downwards but by leading sideways with your peers.


Earning trust. When boards are selecting new members, they want to believe that they will be able to trust that person when things get rough. How can you demonstrate it? Prepare stories — including ones from your personal life — where you earned others’ trust and it paid off. In addition, create a list of the supervisors whose trust you earned and another of those whose trust you may have failed to gain. Reconnect with those on the latter to see if you can rebuild a bridge. We know one highly capable top executive in technology who looked like a shoo-in for board positions. But she has been effectively blackballed because a former supervising CEO has declared her untrustworthy.


Emotional Intelligence, or “EQ.”  This quality, so essential to becoming a CEO, is also the single most important quality required to earn a board seat. Self-knowledge, empathy, and humility are the critical ingredients of EQ. One recently selected director of a large corporation essentially won the position by starting his interview with the board chairman, not by talking about business matters; rather he described how he resolved a personal issue affecting one of his reports.


To win a board role you must see yourself as a product, and market yourself — discreetly. Boil your proposition down into one or two sentences. Then seek out speaking and writing opportunities and use each one to prove your proposition, demonstrating each time the elegant fusion of your capabilities and your board-level character strengths. For example, in writing a piece about how you handled a strategic challenge, also build in the way you socialized your solution in the organization to get your way accepted.


Boards frequently go through headhunters. Each of the major search firms has specialists who focus on recruiting people for board positions. Find out who they are and get to know them. Ask their advice on how to improve your profile. Search consultants love unearthing capable new talent. Make it easy for them.


Finally, don’t forget about your most valuable marketing asset: your current CEO. She will regularly have opportunities to volunteer names for board positions or respond to a fellow CEO’s inquiry about you. So ask her advice on how you might join a board. With humility, lay out your combination of capability and character. If she appears ambivalent, you may want to rethink your plan. But if she lights up and asks how she can help, a board seat may soon be in your future.




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Published on August 04, 2014 07:00

Market Basket Shows the Best and Worst of Family Business

Family businesses rarely receive much public attention unless they are in crisis. The public loves a good Greek tragedy. And periodically, families in business give them one.


Right now we have an honest to goodness Greek tragedy in Market Basket, a large family-owned grocery store chain being run into the ground by the feuding Demoulas (yes, Greek-American) family. The story is front-page news in Boston and is getting attention nationally and even outside the U.S. This drama is enhanced with antagonist-cousins, Arthur T. Demoulas and Arthur S. Demoulas, each named after the family business founder, Arthur Demoulas. You can’t make this stuff up.


At this very well-regarded family company, employees are picketing to protest the board’s firing of CEO Arthur T. Demoulas. Shelves are largely bare, and suppliers are being hurt by the slowdown. Many shoppers are not crossing the picket lines. The company’s newly appointed co-CEOs are trying to replace striking employees; 2,200 jobs are at stake but employees are holding the line. Politicians and government officials are weighing in.


This high-stakes, riveting story obviously teaches us a lot about the vulnerabilities of family companies — but it’s also a good reminder of their strengths. It is important to keep in mind that family business, a largely silent sector of market capitalism, is also the biggest sector, accounting for two-thirds of all businesses in the world, and about half of the largest companies in the United States. Studies done in a number of countries indicate that both public and private family companies perform, on average, significantly better than non-family businesses. They are stronger financially, have higher stakeholder loyalty, live longer, and are more trusted by the public. These company strengths have a lot to do with their family ownership and family leadership. And this is also true at Market Basket.


The now-former family leader of Market Basket, Arthur T. Demoulas, built an impressive and extremely loyal employee group. What company wouldn’t love to have frontline employees striking to support their CEO? The same goes for the cult-like loyalty of Market Basket customers.


All this goodwill pays off. In a very competitive industry where margins are low and sales are hard fought every single day, Market Basket performs well against encroaching giants and big box discounters. The company has been able to keep its prices low and highly competitive, in part, because the company, not the family, owns its real estate. Arthur T. Demoulas has championed the strategy of company ownership of real estate, and employees cheer him for it. The faction led by Arthur S. Demoulas wishes to transfer ownership of the real estate to the family.  The employees are right when they predict that this transfer would result in higher store rents and higher prices in the stores; this could in turn lead to competitive problems and lower growth for the business.


Arthur T. Demoulas was able to maintain his business model as long as he had the support of the board. Board support was gained by having a majority of family owners (including one from the Arthur S. family branch) support his stewardship approach to the family business.  When family business owners are largely stewards of their business — who want to grow and pass their company into the next generation and take only affordable dividends from the business — management is able to focus on customers, quality, and long-term growth. Not all family owners need to be stewards. Some family owners can have more of an “investor” mind-set and emphasize strong dividends and stock appreciation. Investor-owners usefully keep management on its toes. But to support continuity of a family business, it is better to have mostly steward-owners. In the Market Basket situation, a mostly steward-ownership group switched to a mostly investor-ownership group when one board member switched to the Arthur S. side and tipped the balance; the board subsequently fired Arthur T.


To be fair, the board may have fired Arthur T. for reasons other than this philosophical divide. Certainly, the steward-investor divide among the Demoulas owners is just the tip of the iceberg of disunity in the Demoulas family. The family ownership group has been fractured and fraught with distrust and disrespect at least since a court battle that began 24 years ago. After four years of fighting in court, in 1994 the court found that one branch had taken advantage of the other by siphoning significant company assets to itself. The court awarded the wronged branch (now headed by Arthur S.) 50.5% of the company shares and created a board with three independent directors to mediate between the branches on the board — a pretty wise solution. But it didn’t adequately address, let alone restore, family trust. With deep family wounds on both sides stemming from ugly personal attacks, and a shareholder agreement that didn’t have a clear buy-sell process or a mandated process for privately managing disputes, it was practically fated that the family would publicly battle again and again.


How is it that the conflict didn’t overwhelm the company sooner? The fact that the business held up as well as it did is a testament to the strength of the Market Basket business model, a tenuous majority of votes on the board of directors, and adequate sheltering of the management and employees by Arthur T. from the owners’ problems. But it didn’t last.


Once families turn to lawyers and courts, it is very difficult to restore trust in a family. But it is possible. My colleague Suzanne Stroh and I document in our HBS case “Clarks at a Crossroads”  how family board chairman Roger Pedder helped rebuild family unity and commitment to the U.K.’s Clarks shoe company in the wake of a big, public shareholder battle. The Demoulas family could have created a shareholder agreement that mandated that future disputes be mediated and arbitrated rather than going to court. A clearer, fair process for future buy-outs could also have been negotiated. They could have tried rebuilding trust in the broader family. The independent board members could have insisted on these actions and guided the process. A neutral non-family CEO could have assumed the helm until things in the family improved.


I can’t say that these suggestions would definitely have worked with this family, but families in business have an obligation to their many stakeholders to at least try to reconcile or to peacefully part ways. Now that they have reached this point, where the company is hemorrhaging, the independent directors need to find a new ownership solution. Arthur T. has made a buyout bid which is being “considered” by the Arthur S. branch. My guess is that the Arthur S. side would prefer an outside buyer to selling to their cousins. With every day that passes, more and more industry commentators claim that the company has reached its marketing and financial limits. And yet the stalemate goes on.


It’s possible that the Arthur T. branch may be able to partner with the employee group. Alternatively, Arthur T. might be able to secure family-friendly private equity backing to regain ownership control. He would, however, be well advised to steer clear of traditional short-term, high-return private equity funding sources.  Given the loyalty of employees to Arthur T., it will be interesting to see if suppliers and customers can rally around any other new owner, who will probably bring in new senior management.


No matter how this crisis gets resolved, this family business drama will play out on the public stage for a while, at least until the next family business Greek tragedy takes its place. In the meantime, I hope that the public will see beyond just the vulnerabilities of family ownership of a business in this case. Family capitalism has many natural strengths and it does a lot for the world economy. It’s just not as riveting to talk about them.




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Published on August 04, 2014 06:51

Don’t Trust Your Company’s Reputation to the Quants

Inversion is all the rage – and it’s sparking rage, too. Companies are employing or considering the complex and controversial tax maneuver to relocate their headquarters to countries more tax-friendly than the U.S. and save bundles. Pfizer is perhaps the largest corporation to attempt inversion. (The deal fell through.) Walgreen’s and as many as 30 other deals reportedly are in the pipeline.


From a cost-reduction standpoint, inversion is perfectly logical: Change your address and your tax bill goes down. And isn’t lowering costs exactly what managers focused on shareholder value are supposed to be doing? But railing against the practice are critics of all kinds, from President Obama on down. They say that anyone opting for inversion lacks patriotism – and is ripping off taxpayers.


We find the debate interesting because it offers a great example of reputation risk – and more specifically, of why such risk has to be assessed both quantitatively and qualitatively. Over the decades, risk management has become a deeply quantitative endeavor. But as damage to institutional reputations becomes a more potent threat, that overwhelmingly quantitative bias won’t serve organizations well.


Certainly, business leaders worry about reputation risk. In a recent series of studies by accounting firm EisnerAmper, it emerged as a top concern of board members. They know it is linked to risks of other kinds. Consider the reputation damage caused by product failure at GM, or unpopular workplace practices at Walmart, or the multibillion dollar fines for fraud levied against Bank of America – which, not incidentally, came in dead last in a recent Harris Interactive reputation ranking. But they also know that reputations can damaged by more than the operational risks that can be managed with functional redundancies, or the financial risks that can be countered by hedging, investing in futures markets, and global currency diversification.


Understanding how to manage reputation risk starts with understanding the elements of reputation. So let’s look at that research by the Harris Interactive team. For each of the past 15 years, they have calculated the RQ (reputation quotient) of 60 highly visible companies in the eyes of the American public by measuring perceptions of those companies in six major areas:



Social responsibility
Emotional appeal
Products and services
Vision and leadership
Financial performance
Workplace environment

The top 10 in the most recent Harris ranking are for the most part brands that consumers do business with directly, such as Amazon, Coca-Cola, and Whole Foods. (This finding mirrors the results of Edelman’s annual Global Trust Barometer.) By contrast, the bottom 10 includes several companies – Goldman Sachs, AIG, Halliburton, Monsanto, and BP — which most consumers know only by reputation. When everything in the news about a firm is bad, and the average person has no personal experience running counter to what they hear, reputation scores plunge.


Looking at the Harris study at a more granular level, it’s possible to see which of the particular elements it measures are the strongest drivers of RQ. Companies with strong reputation scores tend to post high marks for vision and leadership, employee satisfaction, social responsibility, and customer service; the bottom feeders score low on these. Similarly, the Edelman Trust Barometer is able to determine which components of its index carry most weight in people’s overall impressions of companies’ trustworthiness. Over the years, those trust drivers have shifted:



From “micro” impressions of firms in isolation to more “macro” impressions of firms and their networks of suppliers and contractors
From satisfaction with positive transactions to perceptions of shared values with the firm
From respect for firms that play by the rules (strictly comply with legal and regulatory requirements) to respect for firms with principles (who show leadership in responding to heightened societal expectations).

Think about these key drivers of reputation and trust and it starts to become clear why the quantitative methods that you probably rely on to address risk in other areas will never be sufficient. Reputation will always be too impressionistic, and too long-term in its impact, to be left to your Quants. Indeed, if you do leave it to the Quants, it will most likely be neglected, along with other risks that involve intangibles. In a recent survey of risk executives by the American Institute of CPAs, more than a third of respondents admitted they conduct no formal assessment of strategic, market, and industry risks.


We’d like to propose a solution. In your boardroom and senior management strategy sessions, make an explicit effort to listen to your “Qualts.”


What – or who – is a Qualt? He or she does not lack for rigor, but insists that managing reputational risk requires qualitative as well as quantitative experience and instincts. Your Qualts have internalized the values and larger purpose of the organization, and grasp how powerful these are in maintaining healthy connections between the company, its customers, employees, and other stakeholders. In a world with expanding transparency, heightened customer expectations, fragmented authority structures, social media that “negotiate” truth, and potent NGOs, they are the leaders who appreciate the interdependencies of these elements and the potential consequences of running afoul of society’s expectations.


Qualts tend to come to the fore in moments of crisis because, if the rankings of BP, AIG, and Goldman are any indicator, failing to lead well through a crisis carries a price that endures. At such moments, risk, and particularly reputational risk, gets elevated to a senior-leadership concern – and those executives ensure that its importance percolates throughout the organization. It should be no surprise that most “best practice” crisis-recovery examples (e.g., P&G, Exxon, J&J) show organizations shifting to fully integrated risk-management platforms, which build reputational considerations into the full “supply chain” of risk-based decision making.


But a crisis is a tough time to start managing in an unaccustomed way. Qualts understand that reputations and long-term value accrue through consistent commitments over time. They see rigorous quantitative approaches to risk as necessary but not sufficient, since any purely numbers-driven risk analysis of deeply subjective components such as “emotional appeal” or ”vision and leadership” is only suggestive of the truth, at best. In fact, the equations can overlook or mask fragility.


Of course, risk-taking is central to business success. But Qualts appreciate more than anyone else how succumbing to immediate financial temptations can mortgage a reputation, creating reputational debt. They maintain and evolve decision-making models that guide those decisions with clear reputational standards that remain inviolate up, down, and across the extended enterprise.


Our intention here is not to denigrate the Quants who are doing so much to illuminate risks across the enterprise, and finding ever more sophisticated ways to track reputational changes over time. Our warning is that reputation risk management is a special case. Its foundational elements – values and emotions – are frankly qualitative and managing wisely will always require a Qualt.




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Published on August 04, 2014 06:00

Morality and Competence Are Universal Concepts Among Humans

A team of researchers looking for ubiquitous human concepts in a dozen languages as diverse as the Afro-Asiatic tongue Afar and the Australian language Wik-mungkan discovered that ideas of morality — reflected in words that translate as “good,” “bad,” “disobedient,” and “ashamed” — occur in all 12. Also common are concepts of competence, or lack thereof: “strong,” “weak,” “useless,” and “stupid,” says the team, led by Gerard Saucier of the University of Oregon. The ubiquity of the concept of shame may indicate that a central part of the human experience is the response to behavioral constraints imposed by social groups, the researchers suggest.




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Published on August 04, 2014 05:30

Schedule a 15-Minute Break Before You Burn Out

When you’re racing 90 miles an hour, the last thing you want to do is slow down.


That’s how it feels on those exhilarating days when you’re completely focused, tearing through your to-do list, racking up accomplishments. You just want to keep going.


You might also worry that if you take a break, you’ll lose momentum and find it impossible to regain your stride.


But the research tells us otherwise. Studies show we have a limited capacity for concentrating over extended time periods, and though we may not be practiced at recognizing the symptoms of fatigue, they unavoidably derail our work. No matter how engaged we are in an activity, our brains inevitably tire. And when they do, the symptoms are not necessarily obvious. We don’t always yawn or feel ourselves nodding off. Instead, we become more vulnerable to distractions.


Consider what happens over the course of a typical day at the office. The early morning hours are when most of us are at our sharpest, but as the day wears on, we inevitably lose steam. And it’s at this point that we become more easily seduced by the lure of viral videos, celebrity gossip, and social media. A recent study examined the time of day Facebook users are more likely to post updates. The finding? Facebook usage builds from 9:00 AM through noon, dips slightly during lunch, and then peaks at 3:00 PM, the precise hour when many of us are at our most fatigued.


While tiring over the course of the workday can’t be prevented, it can be mitigated. Studies show that sporadic breaks replenish our energy, improve self-control and decision-making, and fuel productivity. Depending on how we spend them, breaks can also heighten our attention and make us more creative.


A 2011 study published in Cognition highlights another upside to sporadic breaks that we rarely consider: goal reactivation. When you work on a task continuously, it’s easy to lose focus and get lost in the weeds. In contrast, following a brief intermission, picking up where you left off forces you to take a few seconds to think globally about what you’re ultimately trying to achieve. It’s a practice that encourages us to stay mindful of our objectives, and, as the authors of the study report, reliably contributes to better performance.


The challenge, of course, is finding the time to step away for 15 minutes, or—even when we have the time—getting good at dragging ourselves away from our computers preemptively, before we’re depleted. One approach that can help involves blocking out a couple of planned 15-minute intermissions on your calendar, one in the mid-morning and the other in the mid-afternoon.


Next, find something active you can do with this time and put it on your calendar. Take a walk, stretch while listening to a song, or go out with a coworker for a snack. If these activities strike you as too passive, use the time to run an errand. The critical thing is to step away from your computer so that your focus is relaxed and your mind drifts. (So no, checking Facebook does not count.)


Finally, note your energy level when you return. You are bound to feel invigorated, both because you’ve allowed your brain some rest and because the physical movement has elevated your heart rate.


If this feels like a dereliction of duty, remind yourself that the human brain was not built for extended focus. Through much of our evolutionary history, heightened concentration was needed in short bursts, not daylong marathons. Our minds evolved to snap to attention when we encountered a predator, keeping us vigilant just long enough to ensure our survival. Yet today, we expect far more from ourselves than centuries of evolution have designed us to do.


Ultimately, the question we should be asking is not whether breaks are worth taking – we know they are. It’s how we can better ensure that they actually take place.




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Published on August 04, 2014 05:00

August 1, 2014

If You’re Always Working, You’re Never Working Well

In early April a series of reports appeared online in the United States and the United Kingdom lamenting the “lazy French.”  A new labor law in France had apparently banned organizations from e-mailing their employees after 6 p.m. In fact, it turned out to be more a case of “lazy journalists” than “lazy French”: as The Economist explained, the “law” was not a law at all but a labor agreement aimed at improving health among a specific group of professionals, and there wasn’t even a hard curfew for digital communication.


Like all myths, however, this one revealed a set of abiding values subscribed to by the folk who perpetuated it. Brits and Americans have long suspected that the French (and others) are goofing off while they — the good corporate soldiers — continue to toil away.  They’re proud about it too. A Gallup poll, released in May, found that most U.S. workers see their constant connection with officemates as a positive.  In the age of the smartphone, there’s no such thing as “downtime,” and we profess to be happier — and more productive — for it.


Are we, though?  After reviewing thousands of books, articles and papers on the topic and interviewing dozens of experts in fields from neurobiology and psychology to education and literature, I don’t think so. When we accept this new and permanent ambient workload — checking business news in bed or responding to coworkers’ emails during breakfast — we may believe that we are dedicated, tireless workers. But, actually, we’re mostly just getting the small, easy things done. Being busy does not equate to being effective.


And let’s not forget about ambient play, which often distracts us from accomplishing our most important tasks. Facebook and Twitter report that their sites are most active during office hours. After all, the employee who’s required to respond to her boss on Sunday morning will think nothing of responding to friends on Wednesday afternoon. And research shows that these digital derailments are costly: it’s not only the minutes lost responding to a tweet but also the time and energy required to “reenter” the original task. As Douglas Gentile, a professor at Iowa State University who studies the effects of media on attention spans, explains, “Everyone who thinks they’re good at multitasking is wrong. We’re actually multiswitching [and] giving ourselves extra work.”


Each shift of focus sets our brain back and creates a cumulative attention debt, resulting in a harried workforce incapable of producing sustained burst of creative energy. Constant connection means that we’re “always at work”, yes, but also that we’re “never at work” — fully.


People and organizations looking for brave new ideas or significant critical thinking need to recognize that disconnection is therefore sometimes preferable to connection. You don’t ask a jogger who just ran six miles to compete in a sprint, so why would you ask an executive who’s been answering a pinging phone all morning to deliver top-drawer content at his next meeting?


Some parts of the workforce do rely on constant real-time communication. But others should demand and be given proper breaks from the digital maelstrom. Batch-processing email is one easy solution.  Do it a few times a day and reserve the rest of your time for real work.  Most colleagues and clients will survive without a response for three hours, and if it’s truly urgent, they can pick up the phone.


The great tech historian Melvin Kranzberg said, “technology is neither good nor bad, nor is it neutral.” That statement should become a real tenant of the information age. I don’t advocate abstinence or blanket rules like that fictional post-6 p.m. email ban.  (Though, if you want to try unplugging for a weekend, check out my “analog August” challenge.)


However, I do think our cult of connectivity has gone too far. We can’t keep falling prey to ambient work or play. Instead, we must actively decide on our level of tech engagement at different times to maximize productivity, success, and happiness.




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Published on August 01, 2014 09:00

The Business Story Behind a Disaster

A Surreal TaleIn Ferry Deaths, a South Korean Tycoon’s DownfallThe New York Times

For me the most fascinating business story of the week was the Times’s takeout on religious-group founder, artistic photographer, and disgraced tycoon Yoo Byung-eun, whose hyperinflated life came to a strange and sad end in a South Korean apricot orchard last month (Suicide? Murder? Who knows?) during the aftermath of the ferry sinking that killed 304 passengers. The ship, which was part of his family’s sprawling businesses, had been top-heavy because scores of cabins and an art gallery laden with marble were added to the upper decks.



Yoo’s tale winds through his founding of a Christian-inspired church movement, the suicides of 32 adherents, exhibitions of his nature photographs at famous locations, a four-year prison term for fraud, a raid by 10,000 police officers on his church compound, the freezing of more than $100 million of his family’s assets, and on and on. There’s enough material here for several surrealistic novels. And what does it all mean? To paraphrase Dylan Thomas’s lament about his childhood science books, the Times story tells you everything you need to know about Yoo except why. —Andy O’Connell



Pants on FireOne Reason Women Fare Worse in Negotiations? People Lie to ThemSlate

Oh lovely. As Jane C. Hu tells us, researchers from the University of California–Berkeley and the University of Pennsylvania tested out gender bias in the context of honesty during negotiations. In a real-estate role-play, the setup was that the buyer was seeking to turn a piece of property into a tourist hotel against the wishes of the seller, who hoped it would be used for residences. Asked about future plans, buyers were more likely to tell outright lies ("They will be luxury condos," for example) if the sellers were female. If the sellers were male, buyers tended to use language such as “I can’t tell you.” Privileged information couched in terms such as "I'm not supposed to tell you this, but…" was used in male-to-male dealings only.

In the end, 24% of men and 17% of women said they lied to a female partner, while 3% of men and 11% of women said they lied to a male partner. The participants rated the women buyers as less competent than the males — and that makes it easier to lie.



With Tiny Drinks Coke Confronts Its Big Fat ProblemBusinessweek

Coca-Cola North America is trying to start over. Soda makes up 68% of its business, a business that's been drawing criticism over the past two decades for contributing to Americans’ poor health. It's the job of North American VP Sandy Douglas to fix the problem, to "persuade people to drink Coca-Cola again, even if they don't guzzle it like water the way they did before."



Moving away from the '90s, when the company went mammoth with beverage sizes (something most restaurants still prefer because it helps their bottom lines), Douglas is trying to make more money selling tinier sodas, with the help of renegotiated bottler contracts that pay on the basis of revenue as opposed to sales volume. There's a new effort to acquire independent brands like Zico coconut water and a partnership with Keurig to make a cold-brew machine. Coke has also seen some recent success with its controversial "America the Beautiful" campaign and its idea of printing the 250 most common names of teenagers on cans. Coke, it seems, still has the gift of advertising. But with relaunch nearing, Businessweek's Claire Suddath notes that victory isn't guaranteed. And as she points out: "No one wants to be responsible for another New Coke."



Feels Good When You StopThe Only Job With an Industry Devoted to Helping People QuitThe Atlantic

Attorney burnout at big law firms has given rise to a new helping profession: People who are devoted to assisting lawyers as they leave the practice of law and head for something more meaningful. Law school is often a default choice for undergraduates who don’t know what else to do, and life in big firms often turns out to be a lot grimmer than law students had imagined. But even after young associates get fed up, they still don’t know what to do with their lives. Many “need hand-holding from outside sources in redirecting their careers,” Leigh McMullan Abramson writes in The Atlantic. One big positive about the stress of Big Law: It feels so good when you stop. “I have not met a single former lawyer who regrets changing professions,” says the author of a lawyer-help book. “Most wish they had done it sooner.” —Andy O’Connell



Adults Can Be Terrible, Too Dealing With Bullies in the WorkplaceThe Boston Globe

Bullying is a reality at many companies, but few people talk about it openly. According to the Workplace Bullying Institute, 27% of Americans have experienced it at work, 21% have witnessed abusive conduct, and two-thirds of respondents say they know it exists. And while Bella English's article is full of stories of people who have decided to recount their experiences, many wouldn't allow her to use their names for fear of retribution, a chilling reminder of how powerful a toxic work environment can be. Their cases involve both new bosses who marginalize employees and stories where workers who bully their colleagues have much longer tenures than their targets. In fact, according to one recent survey, "more than half [of respondents] say that the bullying persists for more than five years," something that seems inexcusable.



So what are bullied employees to do? Without legislation — a bill in Massachusetts on workplace bullying, for example, faces fierce opposition from business leaders — or a more stable economy in which leaving a job isn't such a terrifying prospect, many feel completely stuck. Maybe that's part of the reason why the above-mentioned survey found that "two in three people say they deal with bullies by avoiding them."



BONUS BITSThe Language of...

Money Talks (The New Yorker)
Is Coding the New Literacy? (Mother Jones)
How a CEO's Fiery Battle Speeches Can Shape Ethical Behavior (Pacific Standard)






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Published on August 01, 2014 08:58

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