Marina Gorbis's Blog, page 1391
July 10, 2014
Marc Andreessen and Jim Barksdale on How to Make Money
How to Avoid Collaboration Fatigue
It’s nearly impossible to escape a meeting or conference call without someone touting the virtues of collaboration. After all, researchers have linked collaboration to increased innovation, and many have compellingly argued for collaboration’s role in better leadership performance. Collaboration just feels right — like a big hug or a warm puppy.
But collaboration also has an overlooked dark side.
Picture this: A complex issue is identified. A diverse, cross-functional team is assembled to solve it. Key stakeholders are gathered. Information is collected. Options are debated. Approval is sought. And then… nothing happens. So more information is gathered. More stakeholders are invited. More conference calls are logged. More debate ensues. More approval is sought. Round and round the project goes — when, where, and how somebody will decide, nobody knows.
This is a recipe for collaboration fatigue, and if consumed in large doses for prolonged periods, this potent blend of abdication, confusion, and indecision will poison your team. So the question is: How can you leverage the advantages of collaboration while limiting your exposure to the morale-sucking effects of collaboration fatigue?
You can start by answering the two questions below. If you have clear answers to these questions, there’s a good chance that a lot of your collaborative woes will subside.
What is the project’s purpose? It’s easy to assume that everyone on your team already knows the project’s purpose. “We’re here to solve the supply chain problem” or “we’re here to build a new product.” And it’s easy to assume that your team will know that its objective is to produce the highest quality solution at the lowest possible cost in the shortest amount of time. These are flawed assumptions, and they usually turn good collaboration into bad collaboration. For example, when your team inevitably has to choose between the lowest cost solution and the speed-enhancing solution for the supply chain, which objective wins? Should the new product address the needs of a premium customer segment, or be a market disruption aimed at attracting non-consumers? These decisions require a shared strategic direction, not an on-demand cost/benefit analysis.
So before you begin, make sure everyone is crystal clear about the primary strategic objective. It will help your team make hard choices going forward.
Who will make the decision? At some point, your team will have to make a decision based on the insights and research it has gathered. And although defining the project’s purpose will be a huge help in guiding the way, there’s sure to be conflicting opinions and unavoidable tradeoffs. When the time comes, who will make the call? Is it a single person, or a vote? If it’s a vote, who is the tie-breaker?
The best time to answer this question is at the beginning of the project before the pressure has mounted and the temptation to schedule just one more meeting, one more round of data collection, or one more conference call grows too strong to overcome.
To be sure, some collaboration fatigue just comes with the territory. The reason you pursue collaborative ventures in the first place is because you need to address an ambiguous, highly visible, boundary-crossing issue for which responsibility and control is spread evenly across many people. Decades of research show that these high demand/low control situations are a veritable petri dish for job stress and burnout.
But you can mitigate the fatigue even in a situation like this. The fact is collaboration also has a bright side over and above its (occasional) connection to performance. Human beings are wired to connect. It just feels good. You can leverage that positive inclination in order to produce more positive results — objectively and emotionally. All it takes is a little direction and a lot of decision making.
A Case for Group Risk-Taking
I work in the investment business, where risk-taking is an occupational necessity. There isn’t anyone successful at managing a mutual or hedge fund who avoids risk; we just need to face it carefully. Traditionally the industry encourages a solo approach to evaluating risk; at Fidelity Investments, where I worked for over two decades, each fund is assigned to one person who makes all the buying and selling decisions. When results are strong, the manager basks in the glow, prestige, and compensation attached to outperformance. When performance suffers, a situation experienced by anyone who has managed a fund for over ten years, you feel like an impostor and reach for the Pepto Bismal.
Nine years ago, when I co-founded an investment firm, we chose a different approach to decision-making, characterized by group risk taking. Two to four of us, working on each type of investment involved – stocks, alternative asset classes, venture or private holdings — must all agree on the merits of the transaction.
Why did we decide on this, rather than the traditional “czar” structure?
As a fund manager, I was very aware that the pain of losing money was markedly worse than the satisfaction of gaining an equal amount. I didn’t realize that noted academics Amos Tversky and Daniel Kahneman were studying this exact phenomenon, which they officially named “loss aversion.”
I felt that I would be perfectly happy, in our new enterprise, to forego the personal credit for good decisions if I could also share blame for the mistakes. I anticipated, but without any evidence, that shared pain would be less severe than solitary suffering. My partners agreed that the group approach made sense.
While I acknowledged that, perhaps selfishly, I wanted to avoid the disproportionate emotional response to loss, this was not the only reason we preferred a group risk-taking approach. We had decided to create a concentrated portfolio of 30-35 names, wide-ranging enough to capture at least 90% of the diversification of the S&P 500 but of a manageable size so that three of us could carefully analyze and follow all of our holdings, an impossibility with a large number of stock positions. Each of us would need to convince others of the merits of her or his selections, backing up conviction with strong research. We would only buy or sell a position if everyone agreed. Our combined effort offers “less opportunity to be sloppy” (as one of my partners puts it) and forces an extremely thorough analysis and close monitoring of our holdings. The bar to convince your colleagues is higher than for just yourself.
Studies have now shown that loss aversion leads individuals to make irrational decisions, but that groups often make better ones. One study found that, in various lottery scenarios, groups of three or more were significantly more risk averse than individuals, particularly when the probability of winning was 40% or less. Once people joined a group and discussed their options, they consistently moved toward a risk-neutral position. Groups did accept slightly more risk in the highest probability bets.
How is group risk taking working for us? Because our performance has been good (knock on wood) since our inception, I have to like the process. Through the financial meltdown in 2008, I still felt sick staring at my screens, but I appreciated that we bonded over how to manage through the market implosion rather than point fingers at each other (although I confess, that still happened occasionally – we’re only human).
What are the potential downsides?
Groups may play it safe, with each individual choosing to pitch ideas most likely to win broad approval. While we all insist otherwise, there may be a subconscious bias against spending the time building a case for a concept that could be rejected as too risky.
Group efforts could also result in horse trading, where I might support one partner’s idea in the hope that he’ll back me the next time I pitch a name. In over 9 years, I have not been part of any side dealing with any of my colleagues, and I suspect that this has not happened at all.
Another concern is that group decision-making may simply take longer. I don’t sense any lengthening of the days taken between first hearing the idea and pulling the trigger, but I know we devote more time collectively to the analysis. (Research has also found that groups don’t necessarily take longer to make decisions.)
Of course, no system of group risk taking could succeed without positive group dynamics, mutual respect for each other’s abilities, and a collaborative spirit – but that’s true of all teamwork, not just investing.
Toxic Talent Management Habits
All organizations have problems, and they always involve people. Indeed, talent management issues are a major cause of organizational underperformance. For example, a recent report by Deloitte, based on data from over 2,500 business and HR leaders from 90+ countries, shows that employers around the world are poorly prepared to tackle key human capital challenges, such as “leadership, retention and engagement, the reskilling of HR, and talent acquisition.” I see five specific bad talent habits over and over again. They all threaten the effectiveness of the modern organization.
1) Being unaware of one’s actual company culture: Senior managers, executives and founders often agree in their evaluations of the organizational culture. Unfortunately, these views bear little resemblance to how most employees see the culture. Viewed from the top, culture looks a lot like the PR blurbs found in company websites: “We are passionate believers in diversity, innovation, and corporate social responsibility.” Viewed from the bottom – when the values of an organization are crowdsourced by surveying most employees – organizations look rather different; that is, not so great. Open-source websites, such as Glassdoor, which record employees’ experience of their working environment, provide a much needed reality check for self-deceived leaders.
2) Confusing employee engagement with happiness: Although employee engagement deserves all the attention in the world, the concept has been hijacked by the self-help industry, who equate it with happiness. However, the main purpose of work is not to make people happy, but productive. And engagement matters precisely because of its connections with productivity, which are twofold: first, engaged employees feel more energized and see work in a more meaningful manner, which makes them more productive; second, when employees are given the opportunity to be productive, they are proud of their achievements, which, in turn, boosts their engagement levels. Notice that happiness can be left out of the equation here. In fact, many employees are engaged and productive without being happy; and it is equally feasible for employees to be happy without being engaged or productive. In short, managers should try to create meaningful challenges for their employees, instead of worrying about their happiness levels.
3) Ignoring the toxic effect of office politics: All organizations are political, but most underestimate (a) just how political they are, and (b) the degree to which politics eclipses smart and rational decisions. For decades, psychologists have been studying office politics – defined as those informal, illegitimate, and largely invisible forces of influence intended to maximize the self-interest of certain individuals at the expense of the organization’s interest. These studies provide compelling evidence for the adverse effects of politics on employees’ productivity and wellbeing. Most notably, perceptions of office politics have been linked to higher levels of stress, turnover intentions, and burnout, as well as lower levels of job satisfaction and employee engagement. Most of these associations are found across different job sectors, age groups and cultures, which makes organizational politics a global epidemic.
4) Misunderstanding leadership: Few topics are more widely discussed (and researched!) than leadership. However, popular views on leadership are out-of-sync with the science of leadership, and HR professionals are much more influenced by the former than the latter. As a result, there is a big difference between what organizations actually do about leadership, and what they should do. For instance, most managers – and this is also true for senior leaders – are selected for either technical expertise or personal charisma, when the quality that really matters most is their ability to build and engage teams. To make matters worse, charismatic leaders are often too narcissistic to put the interests of their teams and the organization above their own interests.
As a result, good leadership is rare; and managerial incompetence is the norm. Consider the following facts: (a) the average CEO is on the job for only 18 months; (b) disengagement is a global epidemic (with as many as 70% of employees reportedly not engaged); (c) the top causes of disengagement and most widely-cited reasons underlying turnover intentions all have to do with people’s direct manager; (d) self-employment rates have been rising steadily, mostly because people are fed up with poor management. As a Harvard University poll recently demonstrated, 70% of Americans believe there is a national crisis in leadership, and yet spending on leadership development programs has doubled in the past two decades (to $14 billion). It is time for organizations to select and develop people with actual leadership potential, as opposed to picking individuals who are good at navigating the corporate landscape, advancing their own career and self-interests, or fitting the popular stereotype of charismatic and Machiavellian leaders.
5) Relying on intuition instead of data: This is arguably the deadliest of all talent management sins, because it underlies the previous four points. How can you properly manage talent if you don’t know how talented your employees are? Despite the wealth of data and evidence available on leadership, management, and organizational effectiveness, most organizations play it by ear, and make promotion and hiring decisions based solely on the intuition of their leaders, board members, and managers. Although reasoning biases are universal to all human beings, they are particularly pronounced in managers, not least because they tend to be more overconfident than the average person. Allowing intuition to proliferate unchecked by metrics allows prejudices of all types to flourish while undermining true talent.
To be sure, intuition does sometimes work, but only when it is grounded in expertise. The issue, then, is not to completely eliminate intuition, but to align it with facts and reason in order to make intuitive decisions more effective than they are for the average novice.
In short, to the extent that organizations are able to accurately evaluate their culture, energize their staff, minimize the influence of office politics, and properly assess leadership potential, they will be more likely to outperform their competitors. And the best way to achieve that is not by trusting their leaders’ gut feeling, but by following a rational, data-driven, and scientifically informed approach.
The good news? All of these bad habits are self-inflicted wounds.
Restore Trust at Work with These 3 Words
We are allies. Three simple words. Yet when spoken by a manager to an employee, these may be three of the most powerful words possible.
Most of us spend the majority of our waking hours at work, on our way to and from work, or thinking about work. When we meet someone new, the first question Americans ask and are asked is typically, “So, what do you do?” When we describe someone else, we usually lead with their profession: “She’s a doctor.”
Given how important work seems in our lives, it is tragic that most employment relationships are built on a lie.
Managers pretend that employees have a job for life. Employees pretend that they intend to work for their company for the rest of their careers. But deep down, both parties don’t believe their own words.
You can’t build a trusting relationship on a foundation of dishonesty and self-deception.
Yet the “honest” approach of considering every job temporary, and every employee a “free agent” leads to a bleak, cynical world without trust or loyalty.
The answer is for managers and employees to treat each other as allies: Independent and autonomous players who voluntarily come together to work towards mutually agreed upon goals.
Treating employees like allies allows managers and companies to build loyalty without lying. Successful alliances can be renewed and updated, allowing employees to construct a successful career filled with professional growth without ever changing employers. And employees who choose to leave can do so on amicable terms and with fond memories of what the members of the alliance achieved together.
This open, accepting approach allows managers and employees to be honest with each other, providing a solid foundation for mutual trust, mutual investment, and mutual benefit. It creates a bigger pie for everyone rather than treating our work relationships as a zero-sum game.
We’ve thought a great deal about this approach and how to put it into effect, including concepts like Tours of Duty, Network Intelligence, and Corporate Alumni Networks. We’ve tried to build a rich framework that lets managers change their employee relationships, whether you’re a Fortune 500 CEO or a newly minted team leader.
But, really, your journey as a manager will begin the next time you meet one-on-one with an employee and speak the three simple words that show that you’re committed to an open, honest approach: We are allies.
July 9, 2014
Regulation Is Hurting Cabs and Helping Uber
Upfront confession: I’m a big fan of Uber and regularly use this private car service both personally and professionally. After years of experiencing taxi monopoly-like “we’ll get to you when, and treat you how, we please” service, riding with Uber is pure joy. And it’s not just me who shares this love. The company was recently valued at $18.2 billion (only Facebook has raised capital from private investors at a higher valuation). As much as I want Uber to succeed, it should do so fairly.
Much of its spectacular growth has been fueled by outdated regulation. This is because the rates of Uber’s primary competitors, taxi cabs, are set by local regulators. In Boston, for instance, the rates applicable 24/7 are standardized at $2.60 for the first 1/7 of a mile and then 40 cents for each additional 1/7 mile. These fixed rates effectively render taxi cabs to be sitting ducks. Uber and fellow ride sharing services (such as Lyft and Sidecar) can easily advertise big discounts and regulation-laden taxis are unable to respond. Conversely, during peak times, Uber can dynamically raise its prices while taxis are tied to the same static one-size-fits-all rates.
Uber is further capitalizing on this uneven pricing field by running sales this summer. In Boston. Los Angeles, San Francisco, and Seattle, for instance, the company cut UberX prices by an additional 25%. On Monday, UberX prices in New York were discounted by 20%, making the service cheaper than regular taxis. As a result, with the gulf between Uber’s prices and regulated fares widening, taxi drivers are at a further disadvantage.
Illustrating its aggressive intent on stealing market share, Uber has announced that in some markets (e.g., California), its drivers will be paid their standard 80% split on what the fare would have been before the summer discount is applied. So on a normal $20 fare (which discounted at 25% is $15), the driver would receive $16 and as a result, Uber loses $1 (plus credit card fees) on the fare. Thus, Uber is pricing below its variable costs. Interestingly, if Uber had a large market share (which to be clear, it doesn’t), pricing below its variable costs would have put the company at risk of being charged with predatory pricing by the Antitrust Division of the Department of Justice.
Local governments are the lynchpins to Uber’s growth in the car transportation services. The key issue so far has been whether Uber is providing taxi services and if so, this would require owning medallion licenses (which are expensive and in limited supply) and strict regulation. Uber has successfully argued that since its vehicles aren’t hailed from the street (a key privilege of a medallion), it’s not offering taxi services. While this distinction is subtle (using their app is so convenient that it’s arguably easier than hailing on the street), so far Uber’s argument is holding up in government decisions. Local governments need to understand that consumers view ride sharing services like Uber as close substitutes to taxis. Regulators are doing its residents an injustice by regulating taxi prices (consumers would benefit from a taxi vs. Uber price war) — and in the process unwittingly fueling Uber’s growth and enriching its stockholders.
While price regulation was relevant in the days when taxis had a virtual monopoly over private car transportation, technology has changed this market. As has occurred in a variety of markets including airlines and telecommunications, it’s time for governments to deregulate the prices of taxis to generate fair competition and truly allow the best service win. The longer local governments delay taxi price regulation, the bigger advantage Uber gains in dominating the private car transportation market.
7 Reasons Your Company Can’t Hire
Since the beginning of the recession, hiring managers are taking much longer to fill open positions. BLS data shows that in May the number of open jobs reached its highest point since the summer of 2007, but the rate of hiring is still well below its pre-recession peak. While many human resources managers cite structural issues like the skills gap as a key explanation, recruitment strategy plays a crucially important role.
We recently surveyed more than 2,000 hiring managers about their recruiting behaviors and tactics. What a surprising number of them are (and in some cases aren’t) doing is effectively making it much more difficult to find the right person for the job. Here are seven examples that, if corrected, will spur U.S. hiring while ensuring both the employer and employee win.
1. Excluding salary ranges on job descriptions. According to the survey, 46 percent of employers exclude salary and wages from their job listings, and the idea that companies should disclose a projected salary range before the interview phase will be a nonstarter for many employers. Some companies keep pay secret to enter salary negotiations with a strong playing hand. Other times, employers don’t want salaries to foment internal politics.
But transparency can be a huge advantage from a recruiting perspective – especially if the company is offering compensation packages at the market rate or better. Job seekers are not only more likely to apply when they see a salary range listed, the transparency is a sign that the company is forthright and willing to engage in dialogue. Moreover, the tactic can provide a huge advantage over competitors who choose to offer less or hide that information in the job listing.
2. Writing all job listings the same, regardless of audience. Fifty-three percent of employers use the same messaging to promote their employment brand and job opportunities to workers in all age groups. This approach wouldn’t fly in advertising or marketing, where segmenting target audiences by demographic underlies every message we read, hear or see in media. If a hospital, for instance, is searching for experienced nursing professionals, it’s safe to assume they’ll be attracted to different aspects of the job than nurses fresh out of college.
Research in The Talent Equation, a new book co-authored by CareerBuilder CEO Matt Ferguson, confirms this. The authors studied data from more than 2 million job seekers who were asked what compelled them to apply for certain jobs. Millennials were much more likely to cite work-life balance and development opportunities, while older generations placed greater value on security and organizational prestige.
3. Hiring candidates only if they had the same job title as the open position. Forty-seven percent of employers primarily hire candidates who already hold the same job title as the open position. This is a shortcut that can significantly cut down on the quality of the candidate pool. Screening resumes by job title ignores the reality that skills and competencies are much more important factors in determining a person’s ability to do the job. A former sociologist with advanced statistics training may not have been a market research analyst in the past, but she certainly has skills befitting market research work.
Too many quality candidates are being eliminated before the interview stage. This statement, it’s important to note, also applies to screening out the long-term unemployed.
4. Recruiting without labor market data. Eighty-three percent of employers don’t routinely use data intelligence – such as studying the supply and demand of labor in a city or region – during job recruitment. This is like a salesperson wandering a subdivision of unoccupied homes waiting for someone to answer the door.
Outside of a few metropolitan areas, employers cannot assume there are enough job seekers with the requisite skills and education to fill openings for certain high-skill occupations. To find an experienced web developer in a smaller market, employers may have to go to another city or state to recruit. Alternatively, knowing there’s a shortage of workers in an occupation should lead companies to either raise wages to attract new labor or encourage them to work more closely with local universities and community colleges to ensure degrees are lining up closely with available jobs.
5. Failing to build a talent pipeline. Sixty-two percent of employers do not have a talent pipeline (a list of prospective, interested candidates) they can tap into when jobs open up.
This is a problem for a simple reason: The threat of extended vacancies in high-turnover positions can have deleterious effects on productivity and morale, and since most large organizations already know what their high-turnover jobs are it makes sense to prepare ahead of time. Companies that continuously recruit frequently cite lower cost-per-hire and time-to-hire.
6. Setting up technological barriers for job seekers. Sixty-nine percent of employers say job seekers cannot apply to jobs on their career site if they’re on a mobile device. On the surface, mobile optimized job applications might seem like less of an imperative than other items on this list. However, smart phones and tablets are quickly becoming the primary vehicle for web access in the U.S. and around the world. Job search behaviors are quickly following suit. For instance, mobile traffic accounted for just a few percentage points of CareerBuilder’s web traffic in 2010. Today it’s headed north of 50 percent.
Passive job seekers – people who are already happily employed, often recruiters’ ideal targets — are not likely to return to a desktop later to apply for jobs they found on mobile. Moreover, past research has found that job seekers of all skill and education levels are on board with mobile job search. This trend isn’t reversing. Companies need to update their career sites now. Busy, ambitious people won’t be impressed with your company if they have to take an hour to re-type their resume using a clunky web interface.
7. Ignoring retention efforts. More than a third (37 percent) of hiring managers say their organization does not make any efforts to avoid turnover.
Employee retention is obviously important, but what does it have to do with talent recruitment? First, lowering turnover reduces the burden on recruiters, allowing them to focus on what they do best: engage meaningfully with candidates without being overwhelmed by a carousel of new openings. Secondly, retention efforts lead to a happier, more engaged workforce, who will become recruiters’ strongest asset over time. People simply want to work for companies that are known to treat its workers well, and oftentimes, they’ll place that priority above salary and job title.
Regardless of industry or company size, there’s likely a tactic within every organization inadvertently slowing down the hiring process. As demand for labor continues to increase, it’s important for companies to identify trouble spots now – not only to ensure they can hire the best talent, but to avoid stifling the economy’s newfound momentum.
Ethics for Technologists (and Facebook)
I recently finished writing a book about business experimentation and its future. In retrospect, if I had to write it again, I’d include a section or chapter on ethics.
The ongoing explosion of technologically-enabled business opportunities inherently expand the ethical dilemmas, quandaries and trade-offs managements will confront. Consider the global controversies surrounding Facebook’s “social mood contagion” experiments. (Full disclosure: My brother is a senior Facebook executive; this post does not reflect our conversations.) As Big Data resources and analytic opportunism become more prevalent, larger themes materialize around the nature of relationships between organizations and their communities of interest. Ongoing organizational learning is essential — but does that justify treating selected customers and clients as virtual lab rats or guinea pigs? What level of explicit consent or awareness permits customers to become resources to be exploited, explored, or cultivated for knowledge and insight? Indeed, what does “informed consent” even mean when neither the customer nor the researcher can know in advance what the potential risks and impacts of —say—a social media experiment may be?
What makes today—and tomorrow —so very, very different from even a decade or five years ago is how the cost and complexity of running serious “large scale” human experiments have radically declined. Marketing experiments that might have cost hundreds of thousands of dollars in 1995 might cost a couple of hundred dollars in 2015; maybe less. Literally every individual and organization with a web presence has both the ability and opportunity to cost-effectively perform real-time experiments on people that would have been impossible in the 20th Century. Everyone online can—if they want to make the effort—become an amateur Asch, Skinner, Zimbardo, Pavlov, Ariely, Kahneman and/or Vernon Smith. Every business can —and will—treat their digital media platforms as laboratories and R&D facilities. Indeed, as I’ve mentioned elsewhere, the Internet is the greatest research, development and experimentation medium in the history of mankind. (And “the internet of things” has barely begun…)
More people—smart and dumb, honorable and sleazy, careful and sloppy—will be running more and more experiments for you, with you and on you; sometimes with your explicit knowledge and consent, more likely not. Most of the times people won’t mind or won’t care….but sometimes, they will. A lot.
So the ethical question and challenge organizations should openly—not secretly or quietly—confront is: How can we honestly, openly and authentically demonstrate that our experiments are reasonable, fair and safe?
I am pleased to report that this turns out not to be a difficult question to answer or challenge to meet. In fact, it’s fairly easy and straightforward: The organization must be ready, willing and able to make employees, their friends and their families a full and equal part of the experimental protocols. In other words, an organization should not run any experiments on customers or clients that it would not run on the families, friends and colleagues of its managers, leaders and employees.
For example, if your organization wants to run an experiment seeing if certain words, images and memes can influence the social media communications of your best customers, you better make sure that relevant family members, friends and colleagues are similarly exposed and monitored. If you’re reluctant —or they’re reluctant—to participate in such a protocol, you had better fundamentally rethink what you are doing. If your organization’s experiments treat your family, your colleagues’ families and their friends with the same care and respect that they treat your customers and clients, you are unlikely to be successfully accused of hypocrisy and exploitation. To the contrary, you will be setting a standard that is clearly understood by all—whether they agree with it or not.
Let me emphatically stress that this experimental heuristic is not a variant of The Golden Rule. This has nothing to do with what experiments you or the researchers would be willing to perform on yourselves. Indeed, the rich and controversial history of medical self-experimentation confirms an important bias every organization should know: Innovators are happy to use themselves as guinea pigs and lab rats for their ideas. They’re passionate and committed to the pursuit of knowledge. They’re exactly the wrong people to be determining the perceived risks and appropriateness of experimental designs and impacts. In purely human terms, serious researchers are the worst possible judges of their own proposed experiments.
Consequently, experiments and experimental designs should become part of the everyday conversation of the firm—just like its brand value proposition and corporate mission. Human experimentation shouldn’t be the province of the researchers, innovators and lawyers—it should be a part of the larger discussion and debate of how the organization wants to collaborate and work with customers and clients. Indeed, the fact that one’s family and friends can and will be a part of those experimental protocols means that employees will take extra care in viewing how they want to experiment with, for and on their customers and clients.
Will some of those experimentation discussions and debates become heated? Will honest and honorable people disagree about what kinds of experiments are appropriate for friends and families and customers? Of course. But those are good arguments. Those are arguments that force real leaders to understand and persuade rather than command and impose. The ethics of innovative experiments are better and healthier when they’re open and shared rather than concealed and departmentalized. Just as the war is too important to be left to the generals, human experimentation is too important to be left to the researchers and lawyers. If an experiment is good enough for your best customer, it’s good enough for your best friend.
A Great Negotiator’s Essential Advice
The Program on Negotiation (PON), an active Harvard-MIT-Tufts consortium, draws lessons from the world’s best negotiators. This year, PON honored PON has annually granted this award to a range of remarkable men and women such as former Secretary of State James Baker, Lazard CEO Bruce Wasserstein, and U.S. Special Trade Representative Charlene Barshefsky.
Tommy Koh became the youngest ambassador ever appointed to the United Nations and later served as Singapore’s Ambassador to the United States. During his remarkable career, described in detail here, Koh played central roles in some of the most complex international negotiations ever held. For example, he:
Led negotiations over China’s recognition of Singapore while preserving Singapore’s important relationship with Taiwan;
Served as President of the Third United Nations Conference on the Law of the Sea in which thousands of delegate-negotiators hammered out a “constitution for the oceans” that was ultimately ratified and/or signed by 197 countries;
Chaired negotiations at the Rio “Earth Summit”—likely the high point of international environmental cooperation, with the final session attended by no fewer than 130 heads of state/government—that produced global agreements on forests, biodiversity, desertification, and climate change, etc.; and
Acted as Chief Negotiator for Singapore in talks leading to the U.S.-Singapore Free Trade Agreement.
While most of us will not undertake negotiations of this complexity, Koh’s approach offers powerful lessons for all negotiations. Koh himself emphasizes often-neglected “fundamentals,” such as:
1. Master your brief. There is simply no substitute for doing your homework on the issues, the people, and the context in which you’ll be negotiating.
2. Build a talented, happy, and cohesive team. Negotiation is not usually an individual sport.
3. Build a common fact base. In many disputes, disagreement arises less from a clash of interests and more from disparate understandings of the situation. Develop the facts of the case jointly with your counterparts.
4. Think outside your own box. Along with analytical intelligence, which is absolutely essential for negotiating, exercise both emotional and cultural intelligence. Koh observes, “The beginning of wisdom is to understand that we all live in our own cultural box. We should therefore make an attempt to understand the content of the cultural box of our negotiating counterparts. This will help us to avoid violating cultural taboos such as serving pork to American Jews or food that is not halal to our Malaysian or Arab friends. At a deeper level, it will help us to understand how our American, Chinese, and Malaysian friends think and how they negotiate. Armed with this understanding, we will able we will be able to customize our negotiating strategy and tactics to suit each negotiating partner.” Koh stresses the importance of negotiating both with your head and your heart; connect emotionally with your counterparts and make airtight arguments. This is often done best over informal meals; in Malay, this is called “makan diplomacy.”
5. “Think win-win.” Koh emphasizes that sustainability calls for the deal to be fair and balanced.
These five points have value in almost any negotiation. But, for those carrying out more complex negotiations — let alone those with thousands of negotiators like the Law of the Sea or the Earth Summit — Koh offers this additional advice:
1. Educate. In high-stakes, multiparty dealmaking, technical sophistication and understanding of the issues can vary widely, leading to serious conflicts. For example, a critical and contentious issue in the Law of the Sea talks involved the economic and technical aspects of an emerging industry that would mine deep seabed “nodules” made of copper, cobalt, nickel, and manganese. To help shape a shared understanding, Koh recruited an MIT team that had independently built an analytical and financial model of a seabed mining operation to give a series of influential seminars and analyze proposals for feasibility.
2. Minimize, then expand your circle. To make progress in large-scale negotiations, look for an opportune moment to “miniaturize” the process by finding a small subgroup of negotiators — not necessarily from the largest or most important countries — who are widely respected for their technical knowledge and are seen to hold the values of the group that they will informally represent. As this miniaturized negotiation begins to make real progress, carefully expand it to bring others along. For example, on a key issue under negotiation by 172 countries, Koh finally miniaturized the larger stalled process to include only Fiji, Pakistan, Argentina, and the United States, with their small-scale agreement ultimately expanding into a full consensus.
3. Wage your campaign on several fronts. Think in terms of multi-front “negotiation campaigns” rather than specific deals. While you need to have an ultimate deal in mind, in reality you must orchestrate a series of smaller deals that set it up. For example, when negotiating the U.S.-Singapore Free Trade Agreement, Koh had a U.S. counterpart — Ralph Ives from the Special Trade Representative’s office — with whom he interacted extensively. Yet, in parallel, Koh also coordinated multiple deals on each at least five fronts: 1) other Executive Branch agencies, 2) the U.S. Congress, 3) key companies and trade organizations from the U.S. business community, 4) the Singaporean government, as well as, 5) potential opponents of a free trade deal representing organized labor, human rights, and the environment. As a result, the U.S.-Singapore Free Trade agreement was successfully signed in 2004.
From studying great negotiators like Tommy Koh, we can learn (or re-learn) the fundamentals as well as inventive approaches to truly challenging negotiations.
To learn much more from Koh, watch the 2014 Great Negotiator sessions held at Harvard Law School here and here.
Focus On: Negotiating
Win Over an Opponent by Asking for Advice
The Best Negotiators Plan to Think on Their Feet
Two Kinds of People You Should Never Negotiate With
Why Women Don’t Negotiate Their Job Offers
It’s Time for Boards to Cross the Digital Divide
Is there any aspect of your daily life and business that is not significantly affected by digital technology? Not likely. Just think about all the ways that digital is integrated into your own daily routine. The ever-growing digital wave is washing over just about every facet of our personal and organizational lives, our consumer experiences, and across every industry and sector in its impact on business models and processes.
So one would think that, in light of this, boards of directors would be actively steering their organizations through the digital revolution, right? According to recent research, it appears not. This is disturbing. Despite prominent calls to action, and despite digital’s ubiquity in the press and in many discussions of strategy and tactics across organizational functions, it appears that boards are still not seeing the value of digital. Why?
One possible reason is that the financial crisis and the recessionary period that followed have driven corporations to skew their board appointments towards including more risk management and conventional corporate experience, at the expense of more tech-savvy and digital knowledge. In this view, with renewed economic activity, boards will soon catch up with the C-suite’s enthusiasm for all things digital.
Don’t bet on it. A more likely explanation for the continuing disconnect is that this is a different and particularly pernicious variety of digital divide. Data supports the fact that this digital divide is more pronounced at board level than in other organizational echelon, and that it is generational in nature. A 2012 survey of board practices reported that almost none of the large-cap companies had a director under the age of 40. Though several digitally-savvy board appointments have been well publicized recently — for example, Walmart inducted Marissa Mayer; Disney nominated Sheryl Sandberg; and Starbucks recruited Clara Shih — if the data is right, such examples would appear to be exceptions rather than the rule.
What’s more, this digital divide seems to be evolving in the wrong direction. Research indicates that the average age of independent directors in the S&P 500 companies inched up to 62.9 years in 2013 from 60.3 in 2003, an all-time high. (Of course, age isn’t everything; nor is having a digitally-savvy non-executive director a guarantee of success for your digital transformation.)
The continuing gap between the magnitude of the digital challenge and the digital awareness of many corporate boards matters for at least two big reasons. First, with the rise of the digital economy, we are entering a new era of managerial innovation with both opportunities and major risks. Boards cannot remain isolated from this fundamental change. Second, our research at Capgemini Consulting with MIT has shown that successful digital transformation is a top-down leadership exercise. Boards must play a strong leadership role, fully integrating digital into their strategy-formulation and ongoing monitoring activities.
Digital transformation is about a careful transition between the old and the new, balancing risk management, value creation and long-term sustainability, which are precisely the key roles of boards. As with any significant shift in the larger business and economic context, it is the duty of the board to exert the required pressure on the CEO and the management of the company to understand and address the impact of digitization on the operations and the long term position of the organization. Senior executives have, for the most part, been making the necessary progress in their understanding of the need for digital transformation in their own companies. If, as the data indicate, boards have not, then it is time for boards to perform their own digital transformation.
So what should boards focus on to overcome this harmful digital divide? Here is a litmus test:
First, boards should ensure that they recognize the scale and the pace of the digital impact on the corporation. Finding the right tempo is an art form. The digital transition needs to both protect profitable operations and assets, while making the transition to a new digital business or digitally enhancing part of the existing business.
Second, boards should step up their understanding of the digital risk profile of the organization. This means they will need to more fully understand how digitization impacts the company’s business model and the part of the value chain that it operates in. Board members need to ask themselves: Where are the vulnerabilities with regard to digital? Are there opportunities for new entrants and competitors to disrupt the existing business model?
Third, boards also need to understand how digital can help the organization create more value. Again, board members need to ask themselves: Do we understand how customer experience can be enhanced through digitization? Can we use the possibilities of these new digital technologies to drive innovation? What step changes in productivity are possible through digitizing our operations and connecting our workforce more efficiently?
Finally, boards also need to ensure that the digital transition is being adequately funded for successful implementation.
If you, as a board chairman or member, have a hard time raising these issues or getting your board colleagues to discuss them in any depth, the company could be at risk. What to do? Start a process of digital education for the board. Go outside of your company and industry to see how other companies (and not just tech-related companies) have used digital technology to transform their performance. Get closer to the executive team leading the change to understand the strategy, the priorities and the expected benefits. Ensure that the interactions between the board and the management are more frequent around the topic of digital transformation. And, finally look closely at your board composition. The addition of the right digitally-savvy board members could make a crucial difference.
With digital technology and its impact on business growing exponentially, corporations cannot afford a massive digital divide between the board and executive management.
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