Marina Gorbis's Blog, page 1408

What’s Different About All These Mergers

Corporate marriage brokers are again fully employed. Every day a new deal is announced, often in reaction to yesterday’s deal. As a consequence, the business landscape is changing.

Take pharmaceuticals. In the last couple of months, Novartis and GlaxoSmithKline joined in a series of deals (valued at about $25 billion) and Bayer followed soon after with the purchase of a division of Merck (for about $14 billion). Pfizer’s pursuit of Astra-Zeneca has been called off for now, but don’t be surprised if it comes back, or if the companies find other ways to recombine their assets. Valeant’s bid to acquire Allergan is the most controversial. Companies in other industries, too, are following such combination strategies. And they too are watching their backs—as Andy Grove said, “only the paranoid survive.” Chief rivals in an industry often seek to match each other’s capabilities, lest they fall behind. For example, AT&T and DirecTV were prompted to conclude their merger deal after Comcast and Time Warner announced theirs; the long-discussed merger between Sprint and T-Mobile may not be far behind.

Many of the deals we’re seeing today are not “merger-as-usual”—they are more nuanced ways to remix business assets than what we have seen before. All these types of deals combine the assets of different players to create new value. For example, as blockbuster drug patents expire, the pharmaceutical companies are looking for more nuanced ways to build competitive advantage by focusing on specialties or building scale in over-the-counter medicines

Take the Novartis-GSK deals. This is not a slap-them-together merger of pharma giants. Novartis will slice off its vaccines business and sell it to GSK. GSK in turn will slice off its cancer business, and sell it to Novartis. The two companies will transfer their consumer healthcare businesses into a new joint venture that will be owned two-thirds by GSK and one-third by Novartis. It is enough to make your head spin.

To succeed, Novartis and GSK will need to manage carefully the separation of each business from its home-base, the grafting of the business onto its new base, and heal the wounds left from the procedure. Good thing that they are already adept at genetic engineering—this looks like a careful re-engineering of the DNA of each company.

Furthermore, Novartis and GSK will now be tied at the hip in more ways than one. The consumer-healthcare joint venture is an obvious linkage. Beyond that, the asset sales include ongoing royalties and payments that are contingent on milestones or on the results of future trials. In other words, these deals will be far from done when they are signed—their payoff will depend critically on how well the post-deal processes are managed. If you have successful experience managing a partnership, polish your resume. It has become invaluable.

Deal-making was always a hot profession, attracting top consultants and lawyers; all the while, deal-managing usually took a back seat. This is changing. In the last decade or so, many firms have built up capabilities in alliance management—this has become a profession, with its own methods, training needs, and career paths. Pharmaceutical companies have been in the forefront of this trend; they compete openly on being a “partner of choice.”

Mastering partnership skills often demands taking on a new perspective. For too long, you have been told to take care of your own—stick to your knitting, stay true to your “company DNA,” and so on. Today, a firm holding on to its DNA when the world around it is changing will end up like the extinct Dodo bird.

Take a cue from the deals you see daily now: Look outside your business for new sources of competitive advantage. The Not-Invented-Here syndrome is so 20th century. The future strength of your business is as likely to come from resources you don’t own outright—or own yet—as it is from assets you already own.

Your Company Is Not a Family

When CEOs describe their company as being “like family,” we think they mean well. They’re searching for a model that represents the kind of relationships they want to have with their employees—a lifetime relationship with a sense of belonging. But using the term family makes it easy for misunderstandings to arise.

In a real family, parents can’t fire their children. Try to imagine disowning your child for poor performance: “We’re sorry Susie, but your mom and I have decided you’re just not a good fit. Your table-setting effort has been deteriorating for the past 6 months, and your obsession with ponies just isn’t adding any value. We’re going to have to let you go. But don’t take it the wrong way; it’s just family.”

Unthinkable, right? But that’s essentially what happens when a CEO describes the company as a family, then institutes layoffs. Regardless of what the law says about at-will employment, those employees will feel hurt and betrayed—with real justification.

Consider another metaphor—one that Reed Hastings, the CEO of Netflix, introduced in a famous presentation on his company’s culture. Hastings stated, “We’re a team, not a family.” He went on to advise managers to ask themselves, “Which of my people, if they told me they were leaving for a similar job at a peer company, would I fight hard to keep at Netflix? The other people should get a generous severance now so we can open a slot to try to find a star for that role.”

In contrast to a family, a professional sports team has a specific mission (to win games and championships), and its members come together to accomplish that mission. The composition of the team changes over time, either because a team member chooses to go to another team, or because the team’s management decides to cut or trade a team member. In this sense, a business is far more like a sports team than a family.

Consider what we can learn from the example of America’s winningest professional sports teams. In the National Football League, the New England Patriots have won three Superbowls since the turn of the century. Over the same time period, the San Antonio Spurs of the National Basketball Association have won three NBA championships (and a fourth in 1999), and the Boston Red Sox have won the World Series three times as well.

Each of these winning franchises has been able to build a consistent identity and a long-term relationship with its players—even though many of those players change from year to year.

An NFL team has 53 players on its roster. The only member of the current New England Patriots team that played on their first championship team is quarterback Tom Brady.

A Major League Baseball team has 25 players on its roster. The only member of the current Boston Red Sox team that played on the 2004 World Series champions is designated hitter David Ortiz.

The Spurs stand out for the stability and longevity of their player relationships, yet even their current 13-man roster only includes one player from their first championship in 1999: power forward Tim Duncan.

The reason these teams have been able to remain consistent winners despite high personnel turnover is that they have been able to combine a realistic view of the often-temporary nature of the employment relationship with a focus on shared goals and long-term personal relationships.

While a professional sports team doesn’t guarantee lifetime employment for its players—far from it–the employer-employee relationship still benefits when it follows the principles of trust, mutual investment, and mutual benefit. Teams win when their individual members trust each other enough to prioritize team success over individual glory. It is no coincidence that these teams are known for “The Patriot Way” or “The Spurs Way,” and that television broadcasters often praise them for “unselfish” play.

And paradoxically, winning as a team is the best way for individual team members to achieve success. The members of a winning team are highly sought after by other teams, both for the skills they demonstrate and for their ability to help a new team develop a winning culture. Both the Patriots and Spurs have supplied numerous other teams with veteran leaders and coaches. For example, five of the other 29 NBA teams have a former Spurs assistant as their head coach. Meanwhile, the New York Yankees’ habit of signing former Red Sox as free agents is so well known that it is now a common punchline among baseball writers.

Great sports teams also find ways to maintain their relationships with former players, even long after their departure or retirement. For example, Spurs alumni who are now working as television broadcasters still regularly have dinner with the team and its coaches, even though they might not have played with the team for over a decade. Do you think that current players, seeing that kind of loyalty, might want to play for the Spurs?

Of course, a professional sports team isn’t a perfect analog to your business. It’s doubtful, for example, that you obtain the bulk of your employees by taking turns with your competitors as part of an organized talent draft. But a great sports franchise consistently brings together a disparate team to achieve a common goal despite the reality of staff turnover. That’s something all businesses should strive for.

4 Design Mistakes Corporations Should Avoid

Organizations worldwide are increasingly using design to drive growth and innovation. For the most part, this is good news: the influence of design has made products, services, software, and environments better, both for the customer and the bottom line. But there are still plenty of  companies that are getting design completely wrong, or at best, only partially right when it comes to making it an integrated business function. Here are four of the biggest, most common mistakes I’ve seen that sabotage efforts to integrate design into the corporation.

Tug of war management. When companies decide to add to their design headcount, particularly in management positions, there’s often an unintended consequence: A battle between the new hires and the non-designers who have gotten used to making de facto design decisions. This is particularly common in brand, supply chain, and R&D departments in large consumer packaged goods companies. This tug-of-war within the ranks is because the former decision-makers are reluctant to cede control — intentionally or because of deep-rooted norms and processes — undermining the point of hiring and involving designers in the first place. Corporate culture and design integrity, as well as brand equity, are often compromised in the process.

A notable example I witnessed was when a VP of R&D was bent on using a new machine technology that made ingredients inside a package look twisted like a chocolate and vanilla soft serve ice cream. Even though a design executive said the look was “wrong, wrong, wrong” for the beauty care brand equity she was trying to drive, her opinion was overridden and the product went to market anyway — no doubt at enormous expense.  The product subsequently underperformed and was taken off the shelf.

Leaving an empty seat at the table.  Some companies, like Microsoft, have hundreds of talented designers who have little influence over the company’s strategic direction for two major reasons: They are either incorrectly positioned in the organizational structure, or they are performing functions that don’t add the most value. In Microsoft’s case, design has never been at parity with other important business functions such as engineering and marketing. Consequently, the voice and influence of its designers has been muffled, leaving its business stakeholders as well as its customers scratching their heads why such a well-resourced and “smart” company can make such frustrating and unintuitive software, missing market windows time after time.

For design to be most effective in complex corporate environments, having a seat at the executive decision making table is critical. Strategic direction and its implications must be able to be discussed directly, and in real time, with the design leader who is responsible for bringing that direction to life. Sure, there is always a great deal of tactical design execution work in any large business, but keeping designers solely in the trenches as a service function erodes much of the value they can bring to a company.

The “toe in the water” phenomenon.  Some companies stop at second base when it comes to design. GE, for example, is making progress through greater investments in design. But its efforts have primarily focused on consumer-facing divisions such as health care and appliances, rather than fully embracing design as key business function across the entire firm. Most of the time equipment, control panels, and software in their industrial B2B divisions are still designed by engineers.

As user expectations for simple, intuitive interfaces are increasingly set by savvy consumer companies like Google and Apple, the view that design matters in some places but not in others isn’t going to cut it. By now, all types of customers have come to expect thoughtful design wherever they turn, and companies that don’t recognize this new reality are going to lose big time. Dr. Ralf Speth, CEO of Jaguar, captures the implication perfectly in his recent quote, “If you think good design is expensive, you should look at the cost of bad design.”

Yo-yo commitment. Becoming a design-centric company requires constant attention to driving a culture and environment that will support design, team building, and processes to accommodate design content. Due to design’s creative nature and special functional requirements, this takes time. A design executive I know who is reengineering his company’s design capability told his board recently he was embarking on “a marathon, not a sprint,” setting expectations that excellence in design does not happen overnight.

One of the worst things I’ve seen happen is that, for whatever reason, senior management gets excited about design and then suddenly reneges on its commitment, eliminating resources, killing momentum, scattering difficult-to-assemble talent and know-how in the process. HP, for example, drove a concerted effort at design capabilities development under ex-CEO Carly Fiorino, hiring design leadership, reengineering development processes, driving new brand standards, and developing tailored performance metrics. These efforts were decimated after several subsequent CEOs pulled the plug.

You can’t be a good design leader if you have to start from scratch every few years. Further, once a company has established a reputation for yo-yo commitment to design, it becomes increasingly difficult to hire talent who don’t want to chance having their efforts squandered, no matter how much they’re paid.

My prediction is that it will soon become clear to everyone, including Wall Street, that companies must have a grip on design to compete successfully. Imagine if, during a call, an analyst surprised your CEO by asking, “And what are you doing about design?” Your company can’t afford to have that question met with silence.

Why Would Amazon Want to Sell a Mobile Phone?

If you believe the rumors, Amazon.com is going to enter the mobile phone business this week, with most pundits guessing that a mysterious video suggest that it will release a phone with novel 3-D viewing capabilities.

There are obvious reasons for Amazon to be eying the category. The mobile phone industry is massive, with close to 2 billion devices shipped annually and total spending on wireless-related services of more than $1.6 trillion across the world. As mobile devices increasingly serve as the center of the consumer’s world, their importance to a range of companies is increasing.

What should you watch for on Wednesday’s launch to see if Amazon is moving in the right direction? It is natural to start with the set of features that Amazon includes on its phone.

One of the basic principles behind Clayton Christensen’s famous conception of disruptive innovation is that the fundamental things people try to do in their lives actually change relatively slowly. The world advances not because our needs, hopes, and desires change, but because innovators come up with different and better ways to help us do what we were always trying to get done.

Take the big shifts in the music business. People have enjoyed listening to music for all of recorded history. But the biggest industry transformations came when innovators made it simpler and easier for people to listen to the music they want, where they want, and when they want. Thomas Edison’s phonograph was the first big democratization of music, allowing individuals to listen to music without having to hire a live performer, train to be a musician, or go to a concert. Sending sound through the airwaves, received in a radio, furthered this trend, enabling people to hear live sound remotely, or hear a wider variety of pre-recorded music.

Floor-standing radios were relatively expensive and consumed a lot of power. So it was hard for individuals to listen to what they wanted where they wanted until Sony popularized the highly portable transistor radio in the 1960s. The fidelity was low, but teenagers eager to listen to rock music out of earshot of disapproving parents or to baseball games late at night flocked to the device.

It’s difficult to enjoy music if everyone is blaring transistor radios on the subway, so Sony again made it simpler and easier for people to listen to what they wanted, when they wanted, when it introduced the Walkman in 1979. The device, and its offspring the Discman, had one obvious limitation — when people were away from home they couldn’t easily access their music collection. People compensated for this by making mix tapes or lugging around cases with dozens of CDs.

MP3 players, most notably Apple’s iPod, made it simpler and easier to listen to the precise music you wanted when and where you wanted. The first commercials for the iPod highlighted the value of having “1,000 songs in your pocket.” Finally, streaming music services like Spotify removed even the need to build a music collection.

Mobile phones follow a similar pattern. The first wave of growth came as devices from Motorola and Nokia made it easy and steadily more affordable for people to make phone calls and send short messages when they were on the go. Blackberry’s rise came from releasing office workers from their desks by making remote e-mail easy. The next wave of growth came as Apple and Android-based smart phones put productivity and entertainment applications from computers in the palm of your hand.

Leaving aside the hype of 3-D technologies, the big question about Amazon as it enters into this seemingly crowded arena will be whether its offering makes it easier or more affordable for people to do something they’ve historically cared about. Pundits are skeptical, with some calling the potential idea “silly.” But one job a 3-D phone might do better than existing alternatives is enable shoppers to see something before they buy it. People like finding and obtaining new goods, and replicating the in-store experience anywhere in the world could allow more people to shop more conveniently.

Of perhaps even more interest is Amazon’s business model. Market disruptions typically combine a simplifying technology with a business model that runs counter to the industry norm. The prevailing mobile phone model involves service carriers subsidizing the devices in return for locking consumers into two-year phone service contracts and charging them based on usage.

If Amazon were primarily interested in driving more retail purchasing it might come up with completely different pricing and usage models, subsidizing both the hardware and the phone service, perhaps in conjunction with a more disruptively oriented mobile carrier such as T-Mobile, and reaping its profits by taking a cut of transactions enabled by its 3-D platform.

Finally, remember that the true impact of an innovation isn’t always fully apparent when it launches. When Apple launched the iPod in 2001 it was interesting, but when it added the iTunes music store in 2003 an industry changed. Similarly, Google’s super-fast search technology caught people’s attention in the late 1990s, but the development of its AdWords business model a few years later is what made the company what it is.

So on Wednesday look to see if Amazon has found a way to make the complicated simple or the expensive affordable, pay particular attention to the business model it plans to follow, and, most critically, once the dust settles from the pundit reactions, watch what the company next has up its sleeves.

Deregulation Won’t Boost Entrepreneurship

When politicians around the world talk about supporting entrepreneurs, one idea is repeated more than almost any other: improving business regulations.

According to this line of thinking, entrepreneurs would be much more successful if governments would just get out the way. The most commonly cited ways to do this include making it easier to file the paperwork to start a business, and reducing the amount of administrative bureaucracy and restrictions that entrepreneurs encounter.

Until recently, evaluations of these regulations have been conducted at the national level. Unfortunately, this makes them incomplete. In many countries, business policies vary a great deal among individual cities, which is where companies actually operate.

A new report from the U.S. Chamber of Commerce Foundation has taken steps to address this issue. Its authors used a well-known international framework to evaluate the regulatory environment for entrepreneurs across a number of U.S. cities.

This new analysis illustrates how large the differences among cities can be. For example, in Chicago, it takes 32 days for an entrepreneur to start a business, while in Detroit it takes just 4. In New York, it usually takes founders 511 days to enforce a contract, but in Atlanta it requires only 167.

The authors consider metrics like these to be important barometers of the local business climate. According to the report, the data can even act as “a proxy for a city’s competitiveness.”

Yet, one U.S. city stands out like a sore thumb. San Francisco requires entrepreneurs to submit to more bureaucracy than almost any other city. Construction permits in San Francisco typically cost over $100,000 for businesses. Like other cities in the state of California, local founders must also make dozens of individual payments to tax authorities. Overall, San Francisco received a total score of 41.3 out of 100 on the report’s “Regulatory Climate Index.” That’s less than half as good as top-ranked Dallas.

Of course, entrepreneurship is booming in San Francisco. During the last decade, founders in the city have built a number of highly successful companies like Twitter and Dropbox. Data on the Silicon Valley region, which includes San Francisco and neighboring cities with very similar regulatory policies, shows that nearly half of all venture capital investments in the U.S. are placed into local companies. Much of this capital is providing a good return. Last year, more than 280 tech companies in the area were acquired.

The story is quite similar in New York City. It costs over $1,300 to start a business in one of the five buroughs. New York also adds administrative costs to commercial real estate transactions that include a mortgage recording tax of 1.925% and property transfer tax of 2.625%, something that does not exist in cities like Dallas and St. Louis. The total regulatory climate score for New York City is 34.7, which is even worse than San Francisco.

However, New York is now the number two city for venture capital investing and had the second largest number of tech acquisitions in the country last year. It also hosts more Fortune 500 companies than any other city in the world.

This disconnect between regulatory scores and the success of local entrepreneurial companies shouldn’t come as a surprise. In fact, the best entrepreneurs don’t really care about the local regulatory environment.

Last summer, our team at Endeavor Insight surveyed and interviewed 150 entrepreneurs from some of the fastest-growing companies in the U.S. We asked them why they decided to start their companies in the specific cities where they did, and evaluated the factors they mentioned. Only 2% of the entrepreneurs in our study reported that the quality of the business regulations in their cities influenced their decisions.

This doesn’t mean that regulation has no bearing on entrepreneurship. It simply demonstrates that other factors are far more important. The entrepreneurs at the fast-growing companies we surveyed highlighted three things in particular. First, they wanted access to a talented workforce, especially technically trained employees like engineers and software developers. The next resource they valued was proximity to potential customers. This was especially important for B2B companies and was a big reason people moved to cities known to be hubs of specific industries. Finally, entrepreneurs also prefer to live in places that enable them to have great quality of life by providing natural or cultural attractions and connections to others. (Several also noted that these attributes also attract great employees.)

It is very tempting for policymakers to focus on regulatory policies when they set out to support entrepreneurs. However, as the examples of Silicon Valley and New York City demonstrate and research with the best entrepreneurs confirms, the effects of changes in these areas are not likely to have large impacts.

Policymakers who want to support local entrepreneurs should look instead to other solutions. The best place to start is to focus on the three areas outlined above: access to talent, access to customers, and a high standard of living. Leaders who want specific ideas for improving these things should speak directly with local entrepreneurs who lead high-growth companies. After all, the challenges that cities face are often unique, and these founders have the firsthand experience that matters.

How to Give Your Team Feedback

Business books, magazines, and blogs are chock full of advice about how to give feedback to individuals, but how do you do the same for your entire team? What type of constructive criticism is appropriate in a group setting? How much is too much? And how should your colleagues help?

What the Experts Say

Providing feedback isn’t solely the team leader’s responsibility, according to Mary Shapiro who teaches organizational behavior at Simmons College and is the author of the HBR Guide to Leading Teams. For starters, that would be impractical. “You can’t be the only one holding everyone accountable because you can’t possibly observe everything that’s going on,” she says. Second, if you’re the only one praising or critiquing, group dynamics suffer. “You want to give everyone the opportunity to say his piece,” she says. Your job as manager is to ensure that team members are “providing regular constructive feedback,” says Roger Schwarz, an organizational psychologist and the author of Smart Leaders, Smarter Teams. “There needs to be an expectation within the team this is a shared leadership responsibility,” he says. Here are some principles to help you lay the groundwork for ensuring and enhancing this effective team practice.

Set expectations early

“When a team works well together, it’s because its members are operating from the same mindset and are clear about their goals and their norms,” says Schwarz. At the start of a new project, help your direct reports “decide how they’re going to work together” — and importantly, how they will “hold each other accountable,” says Shapiro. She recommends coming up with an “explicit agreement” about how the team will handle issues like the division of labor and deadlines. Stipulate, for example, that if a colleague knows he is going to miss an important deadline for his portion of a project, he must email the team at least 24 hours in advance. “If someone doesn’t follow through on the expectations the team created, he’ll get feedback from the group about what happened because he fell short.”

Create opportunities for regular check-ins

There’s no hard-and-fast rule about how often your team should meet to review how things are going, but in general, “it’s better to start out with more structure and relax it over time, than to start out with too little structure and have to impose it later,” Shapiro says. When you’re in the early stages of creating a project plan, schedule regular check-ins as part of the timeline. “If the team is running smoothly you can always cancel the meeting.”

Ask general questions

Giving and receiving feedback is a skill and most people are not naturally good at it, says Shapiro. “One of your goals is to develop your team’s capacity to give feedback and help people get used to articulating how they feel the team is doing.” Take baby steps. At the second or third check-in, ask the group general questions such as, “On a scale of one to five, how well is the team sharing the workload? What needs to change?” As the leader, you’re the moderator of this conversation. Once team members have spoken, offer your two cents about “where the team excels and where it faces challenges,” Schwarz adds.

Work your way up to structured reviews

As your team gets accustomed to working together and sharing feedback, “you need to do a deeper dive into how team members are doing at the individual level,” says Shapiro. Ask each person to prepare specific reviews of colleagues to be read aloud at the next meeting. “Every team member should say one thing they appreciate about the other members and one thing that would be helpful if they did differently.” The aim is to help “people understand how their behavior is impacting others,” she says. “If they hear the same kind of feedback from multiple people, that is powerful.” When it’s your turn, Schwarz recommends validating your observations with others. “Ask: ‘Are you seeing things the same way?’ Get other people’s reactions.”

Keep performance issues out in the open

The management mantra for giving individuals feedback is: “Praise in public, criticize in private.” But in team settings, this goes out the window, according to Schwarz. “In the traditional view, it’s inappropriate to raise issues in a meeting that would make people uncomfortable or put people on the spot.” But your job as a leader is not always to make people feel comfortable. When teams have problems, “it should all be out in the open,” he says. “You alone can’t help people improve; there needs to be a group plan.” After you’ve “harnessed the power of the group” to prompt change, one-on-one conversations with struggling colleagues are then in order, says Shapiro. “Say to them: ‘What did you hear from the team? How are you going to do things differently? And how can I help?’”

Foster team relationships

Conflicts between coworkers are inevitable. But “you can’t just say, ‘I’ll handle it,’ because [as the manager] you can’t solve a problem to which you’re not a primary stakeholder,” Schwarz says. “You can coach people on how to have difficult conversations, and you can help facilitate those conversations, but team members need to address issues where the interdependencies lie.” Help colleagues build trust before problems arise by encouraging open conversation. And, when there is conflict, make sure they understand, they need to “give feedback directly to each other.” says Schwarz. Adds Shapiro: “The only way good work gets done is through good relationships — the better the relationship, the better the work.”

Debrief every project

At the end of a project or when your team is disbanding, schedule a final check-in to discuss “what worked and what didn’t, what should we bring forward and what should we do differently next time,” says Schwarz. Take careful notes: the information gleaned in this session should not only be part of the organization’s final project review, but also part of each team member’s annual performance appraisal, says Shapiro. The objective is to “provide closure on the team and also determine what each member needs to do to further develop,” she says.

Principles to Remember

 Do:

Make sure your team understands that feedback is a shared leadership responsibility
Schedule routine check-in meetings
Keep the tone positive by encouraging team members to say what they appreciate about others’ contributions

Don’t:

Start meetings with your own feedback for the team — allow everyone else to first express how they think they’re doing
Shy away from  performance issues — address them openly with the group
Get in the middle of personality conflicts — help facilitate difficult conversations

Case study #1: Create opportunities for team and individual reflection

Once every quarter, Laree Daniel — chief administrative officer of Aflac, the insurance company — assembles an ad hoc team around a particular customer incident for an in-depth feedback session. “I take a customer case study in which we either did very well or very poorly, and I gather everyone that touched the customer in some form,” she says.

First, Laree makes sure everyone is up to speed. Team members are given a packet of information that includes a write-up of the incident, transcripts of phone calls, copies of customer letters, and copies of the company’s responses. Next, she poses a series of questions to the team: What worked well? Where were the gaps? What can we do better?

The goal, she says, is to get the team to reflect on the company’s behavior from both the customer’s perspective and shareholder’s. “This isn’t about blame and I’m not scolding anyone,” she says. “I am the facilitator and I make it a neutral environment.”

During these feedback meetings, colleagues often have epiphanies. “They realize: ‘I didn’t know [my behavior] would have that impact,” she says. “It becomes a dynamic learning experience.”

The feedback and information she picks up from those meetings are used to make process improvements. “Often the best ideas come from those people who were closest to the work.”

Case study #2: Focus on empowering your team

David S. Rose, the angel investor and CEO of Gust — a platform for the sourcing and management of early-stage investments — has a simple approach when it comes to giving group feedback. “The goal is not to depress the team,” he says. “I try to keep everything upbeat and lay out our strengths and our challenges.

A few years ago, for instance, he was involved in leading a 15-person technical team at a software company. The group’s biggest issue was its disappointing B2B product suite. “Customers were unhappy and the front-end salespeople were being yelled at,” he says. “As a team, we had some good individual contributors but we needed to get better at working together. I couldn’t just walk in and give feedback along the lines of: ‘These products are terrible; you’re all fired.’ We needed to identify the organizational problems and come up with a prescription for a path forward.”

He broke the team into subgroups of two or three people, and he tasked each with brainstorming how to manage a particular inter-team challenge. The subgroups then provided feedback to everyone else; based on that, the team developed a strategy to improve workflow and communication. “We came up with a plan and the whole team felt empowered,” he says. “We knew what the problems were and we figured out how to solve them.”

Within nine months, he says, the products were in far better shape.

Working with Your In-Laws Isn’t Always a Terrible Idea

When Walmart’s Rob Walton, board chairman of the family-controlled company, appointed Greg Penner to vice chairman last week, he was going to bat for his son-in-law, underscoring the important role that in-laws can play in the game of family business.

It isn’t always that way. In-laws in many business families often find themselves at a disadvantage. As nearly every married (or formerly married) person recognizes, tensions with in-laws are common, whether you work together or not. When working in the family’s business, in-laws (who sometimes call themselves “out-laws”) have two strikes against them. They have to live up to the standards and expectations set down for non-family employees; at the same time, they are viewed by non-family employees as having all the perks that come along with being part of the family. Essentially they have the worst of both worlds.

And yet some in-laws can and do avoid a third strike; some even manage to hit a home run.

What does it take for an in-law to survive and thrive, as Walmart’s Greg Penner has?  We decided to find out. We called up a number of in-laws (and their spouses) to ask: “What are the keys to success for being an in-law who makes it in a family business?”

We quickly learned that there is no single in-law experience. Successful involvement in the business depends on a number of factors, including each in-law’s competence, personality, expectations, and opportunities in the business, as well as a family’s philosophy about whether or not to allow in-laws in the company. We found that different in-laws can even have positive or negative experiences within the same family business. And yet after talking with our client families, we found that the successful in-laws often play by the following rules:

Play for another team first. Work experience outside the family is often a prerequisite for being – and feeling — successful in a family business, and for maintaining a sense of personal identity. This experience is critical not only for developing competence and skill, but also for building a reputation, self-confidence, and credibility both with the family and with non-family employees. As one CEO put it: “I came in as an accountant, and I felt pretty good about that because I didn’t feel like they were having to train me to try to find a place for me.” The importance of this work experience was emphasized time and again — even by in-laws who had made it to the top of the heap but who had not worked outside the family business.

Negotiate like an agent. Given the infamously porous boundaries between the family and the business in a family-controlled enterprise, successful in-laws draw an invisible but firm line between their personal and work lives. As one top executive put it: “When you negotiate for compensation, clarify compensation, clarify benefits, clarify your role, clarify your career plan, clarify your goals, and be honest and candid about it. Don’t treat it as a family decision to buy a summer home. Act just as if you were negotiating with Oracle.” The more transparency, professionalism, and clarity that you achieve, the better placed you will be to shape your career in the family business.

Be clear about structure and policies. Several in-law executives attributed their success to the fact that they did not report to a family member. If you must do so, then be sure that the family has a strong employment policy and that it is supported by the board. The policy needs to address to whom you are responsible, what your responsibilities are, and what recourse you have if there is a family member in charge of the company who is undermining your efforts in the business. Remember: Structure is your friend!

Be smart about geography. It’s a truism that familiarity breeds contempt, but it also happens to be the source of good advice. A number of in-laws we spoke to, and their spouses, attributed their success to the fact that the in-law worked physically far away from the family center. Distance not only makes the heart grow fonder, but it allows for personal and professional growth and maturity in a way that is not always possible when one is at HQ, under the magnifying glass of the patriarch or matriarch.

Be patient. Take a hard look the make-up of the family whose business you are thinking of entering. If there is already a favorite son or daughter, there may be no room for a male or female in-law executive. “If there are other ‘real’ family members working in the business, you may get sidelined,” warned one in-law. “At least you won’t be deeply involved in the succession process.” And yet it doesn’t always turn out that the heir apparent is either good enough or smart enough or interested enough to wait around to take over the business. “I tell every employee, including in-laws, to be patient and to do the job better than anyone else could do it,” said one CEO. “You will be paid handsomely, and if this doesn’t work out, you’ll be in a position and will have the confidence to go work somewhere else.”

Find a confidante outside the family. When you work for a family business, you just can’t bring the job home with you – it’s often too sensitive for a spouse to be forced to take sides between you and his or her family of origin. “Maybe it’s because your partner has grown up thinking that her father knows everything and is the smartest guy in the world, but when you run up against that, you’re in trouble,” said one in-law CEO. “You really need a good friend that you can talk to if you hope to make it in a family business.”

If all else fails, you can always follow the practice of an in-law of one client family: Keep a signed copy of your resignation letter sitting in your desk. “Whenever it’s clear to anyone that I’m not the right guy for the job, I’ll just walk into the patriarch’s office and hand over my letter,” this executive said. Having an exit option is important, whether it is your own money, an outside business, or employable skills. The additional security gives in-laws – and their spouses — the distance they need to be able to walk away from an unhealthy situation.

The in-laws we talked to were successful and have made it to the top. They took pride in working for a family business. Once you realize that you have a lot of room as an in-law to influence the future of your career in the business, you’ll feel much better, and likely be much more effective. From that point on, it’s a whole new ballgame – both for you, and for the business.

Choose the Right Words in an Argument

When addressing a conflict with a colleague, the words matter. Sometimes, regardless of how good your intentions are, what you say can further upset your coworker and just make the issue worse. Other times you might say the exact thing that helps the person go from boiling mad to cool as a cucumber.

So, when things start to heat up with a colleague — you don’t see eye-to-eye on a project or you aren’t happy with the way you were treated in a meeting, for example ­— how can you choose your words carefully? To help answer this question, I talked with Linda Hill, the Wallace Brett Donham Professor of Business Administration at Harvard Business School and faculty chair of the Leadership Initiative. She is also the co-author of Collective Genius: The Art and Practice of Leading Innovation and Being the Boss: The 3 Imperatives for Becoming a Great Leader.

Hill explained that the words we use in confrontations can get us into trouble for three reasons:

First, the stakes are usually high when emotions are. “With conflict, there are typically negative emotions involved, and most of us aren’t comfortable with those kinds of feelings,” she says. Our discomfort can make us fumble over our words or say things we don’t mean.

The second reason that we often say the wrong thing is because our first instincts are usually off. In fact, it’s often the words we lead with that get us into so much trouble. “That’s because too often we end up framing the issue as who’s right or who’s wrong,” she says. Instead of trying to understand what’s really happening in a disagreement, we advocate for our position. Hill admits that it’s normal to be defensive and even to blame the other person, but saying “You’re wrong” or “Let me tell you how I’m right” will make matters worse. “We’re often building a case for why we’re right. Let that go and focus on trying to resolve the conflict,” she says.

Third, there’s often misalignment between what we mean when we say something and what the other person hears. “It doesn’t matter if your intent is honorable if your impact is not,” Hill says. Most people are very aware of what they meant to say but are less tuned into what the other person heard or how they interpreted it.

So how do you avoid these traps? Hill says it’s not always easy but by following a few rules of thumb, you’ll have a better chance of resolving the conflict instead of inciting it:

Say nothing. “If the emotional level is high, your first task is to take some of the emotion out,” she says. “Often that means sitting back and letting someone vent.”

The trouble is, Hill says, that we often stop people before they’ve gotten enough of the emotion out. “Hold back and let them say their piece. You don’t have to agree with it, but listen,” she says. While you’re doing this, you might be completely quiet or you might indicate you’re listening by using phrases like, “I get that” or “I understand.” Avoid saying anything that assigns feeling or blame, like “Calm down” or “What you need to understand is.” If you can do this effectively, without judging, you’ll soon be able to have a productive conversation.

Ask questions. Hill says that it’s better to ask questions than make statements. Instead of thinking about what you want to say, consider what you want to learn. This will help you get to the root cause of the conflict and set you up to resolve it. You can ask questions like, “Why did that upset you?” or “How are you seeing this situation?” Use phrases that make you appear more receptive to a genuine dialogue. Once you’ve heard the other person’s perspective, Hill suggests you paraphrase and ask, “I think you said X, did I get that right?”

Own your part. Don’t act like there is only one view of the problem at hand. “You need to own your perception. Start sentences with ‘I’ not ‘you,’” Hill says. This will help the other person see your perspective and understand that you’re not trying to blame them for the problem. Instead of saying “You must be uncomfortable”, try “I’m feeling pretty uncomfortable.” Don’t attribute emotions to other people. That just makes them mad.

So, how do you choose the right words to use in a conflict? Of course, every situation is different and what you say will depend on the content of what you’re discussing, your relationship with the other person, and the culture of your organization, but these suggestions may help you get started:

Scenario #1: You have a criticism or dissent to offer. Perhaps you disagree with the popular perspective or perhaps you’re talking to someone more powerful than you.

Hill suggests you get to the underlying reason for the initiative, policy, or approach that you’re disagreeing with. Figure out why the person thinks this is a reasonable proposal. You can say something like, “Sam, I want to understand what we’re trying to accomplish with this initiative. Can you go back and explain the reasoning behind it?” or “What are we trying to get done here?” Get Sam to talk more about what he’s up to and why. Then you can present a few options for how to accomplish the same goal using a different approach: “If I understand you correctly, you’re trying to accomplish x, y, and z. I’m wondering if there’s a different way to approach this. Perhaps we can…”

In a situation like this, you also want to consider the venue. “You may be able to have a more candid discussion with someone if it’s one-on-one meeting rather than in front of a group,” she says.

Scenario #2: You have bad news to deliver to your boss or another coworker. You missed a deadline, made a mistake, or otherwise screwed up.

Hills says the best approach here is to get to the point: “I have some news to share that I’m not proud of. I should’ve told you sooner, but here’s where we are.” Then describe the situation. If you have a few solutions, offer them up: “These are my ideas about how we might address this. What are your thoughts?” It’s important to own up that you made a mistake and not try to point out all the reasons you did what you did.

Scenario #3: You approach a coworker about something he or she messed up.

Here you don’t want to launch in right away, Hill says, but ask permission to speak to the person about what happened: “Mary, can I have a moment to talk to you about something?” Then describe what happened. You can say: “I’m a little confused about what occurred and why it occurred. I want to discuss it with you to see how we can move this forward.” Use phrases like “I understand that X happened…” so that if Mary sees the situation differently, she can disagree with your perspective. But don’t harp too long on what happened. Focus on figuring out a solution by engaging her with something like: “What can we do about this?”

Scenario #4: You approach a colleague about feeling mistreated or you’re upset about something he or she said.

Hill points out that this is a good place to talk about the difference in intent versus impact. After all, you don’t know what your coworker’s intent was; you only know that you’re upset. You can start off with something like: “Carl, It’s a little bit awkward for me to approach you about this, but I heard that you said X. I don’t know whether it’s true or not. Regardless, I thought I should come to you because I’m pretty upset and I thought we should talk about it.” The focus shouldn’t be on blaming the person but airing your feelings and trying to get to a resolution: “I want to understand what happened so that we can have a conversation about it.”

If Carl gets defensive, you can point out that you aren’t questioning his intent. “I’m not talking about what you intended. I thought it was better to clear the air, rather than stewing about it. Would you agree?”

Scenario #5: A colleague yells at you because of something you said or did .

This is where you might stay quiet at first and let them vent. People usually run out of steam pretty quickly if you don’t reciprocate. Keep in mind though, Hill says, that you never deserve to be yelled at. You might say: “I realize that I’ve done something to upset you. I don’t respond well to being yelled at. Can we sit down when I can be better prepared to have a conversation about this?”

Scenario #6: You’re managing someone who engages in conflict regularly and is annoying or upsetting the other people on your team.

Sometimes you have a hothead on your team — someone who seems to even enjoy conflict. Of course disagreements aren’t always a bad thing, but you need to help the person explore how he might be damaging his reputation and relationships. You can try something like: “I like having you around because from where I sit, you raise important issues and feel strongly about them. I also know you’re well-intentioned. I’d like to talk you about whether you’re having the impact you want to have.” Get him to think through the consequences of his regular battles.

 

Of course, even if you follow this advice, sometimes there just aren’t the right words and it’s not possible to have a constructive discussion. “Occasionally, you need to let it go and come back to it another time when you can both have the conversation,” says Hill. It’s OK to walk away and return to the discussion later, when you’re ready to make a smart and thoughtful choice about the words you want to use.

A Key Ingredient for Creating Start-Ups: Young People

The presence of young workers appears to be necessary for the creation and growth of new firms, particularly in industries where young people have key technical skills, say Paige Ouimet of the University of North Carolina and Rebecca Zarutskie of the Federal Reserve Board. For example, in the electronics industry, a 5% increase in the share of youth in the population leads to a 1-to-2-percentage-point increase in the rate of new-firm creation, according to the researchers’ analysis of U.S. Census data.

Three Ways to Actually Engage Employees

Nobody washes a rental car.

People will go the extra mile only if they feel they have ownership. It’s much the same in the workplace. Employees who take ownership of their work — and who feel that what they are doing matters — are far more likely than others to feel engaged on the job.

You can have great talent that is appropriately teamed. You can eliminate structural barriers to effective collaboration, and you can design meetings and other interactions so that people can actually get things done. But if your company’s employees don’t have a sense of ownership and engagement, all the other steps won’t make much difference. By the same token, if you can increase the average level of engagement in your organization, you will likely see the productivity of your entire workforce increase.

How powerful is engagement? Look at DaVita, a market leader in providing dialysis treatments for kidney patients. Fifteen years ago, Total Renal Care (as it was then known) was unprofitable and short on cash, and half of its executives had recently quit or been fired. So new CEO Kent Thiry set about building a different kind of company.

He began to speak of DaVita as a village and himself as mayor. He involved employees in changing the culture (a group of 800 representatives chose the new name.) He made a point of recognizing hundreds of employees every year who went the extra mile for patients. DaVita’s “wildly spirited nationwide meeting, in which thousands of employees celebrate awards, mourn the death of patients, and connect with the emotional side of their work, is truly something to behold,” reports one journalist. At these meetings, Thiry often hollers out three questions for attendees to answer; one is “Whose company is it?” The huge audience yells back in one voice: “Ours!”

Fueled by this kind of engagement, DaVita’s performance over the past 15 years has been truly remarkable. Revenues have risen from $1.4 billion to $11.8 billion, earnings from $-30 million to $663 million. Patient outcomes have improved, employee turnover has declined, and DaVita has consistently been listed on Fortune’s annual compilation of Most Admired Companies.

Not every company is going to take DaVita’s route, but nearly every organization can foster greater engagement. Here are a few tips that often escape the conventional wisdom on the subject:

Talk about your company’s impact, not its financial results. Shareholders may care about financial performance, but employees are more often motivated by the impact their organization has on the world around them. That’s particularly true of younger employees, the Gen Xers and Millennials who make up more and more of today’s workforce. At a recent conference, Dell founder Michael Dell spoke of the billions of patients who received better health care and the billions of students worldwide who had access to better education as a result of Dell’s information technologies. He said nothing about the benefits to Dell’s bottom line.
Reward inspirational leadership as much as effective task management. Research shows that people who work for inspiring leaders are more committed, satisfied and productive. They are also less likely to leave their jobs. In short, employee engagement is directly related to leaders’ ability to inspire people — and it is pretty much unrelated to leaders’ effectiveness at assigning and managing tasks. So foster inspiration. Reward executives for raising people’s eyes to the horizon as much as you reward them for holding their noses to the grindstone.
Cultivate employee advocacy, not employee satisfaction. Employees who say they are “satisfied” may or may not feel engaged. Satisfied employees come to work every day, put in their time, and may even enjoy themselves, but they aren’t always willing to go the extra mile. A much better measure of engagement is how likely employees are to recommend their workplace to a family member or friend, a metric known as eNPS because it’s a sibling of the well-known Net Promoter System. Just as Net Promoter gathers regular, direct feedback from customers, eNPS gathers regular, direct feedback from employees, enabling managers to take action to boost engagement and advocacy. Bain research shows a direct relationship between employee advocacy and customer advocacy, so there is likely to be a payoff in customer loyalty as well.

Executives often think of engagement as “soft,” but it’s both measurable and powerful. And it’s the often-missing link in companies’ attempts to increase the productivity of their human capital.