Marina Gorbis's Blog, page 1412

New Research: How Four Talent Practices Add Up to Big Revenue Gains​

Too many companies miss out on enormous opportunities for growth and profitability because they don’t appreciate the impact of excellent talent management. Now, research by Gallup clarifies the relationship between firms’ use of four specific human capital practices and their revenue growth. And most importantly, it reveals the power of implementing all four practices together; employers who combine them see substantial additive effects.

If you have studied biology or chemistry, you might be familiar with the term. An additive effect is the precisely measurable boost that occurs when a new intervention pushes things in the same direction as an earlier one.  An anesthesiologist, for example, might administer a barbiturate to a pre-surgery patient and then choose to add a tranquilizer, knowing the additive effect it will have on the patient’s relaxation. Interventions aren’t additive when they work against the first effect, or when they are simply redundant and the time and resources spent on them yield no greater effect.

We designed our research to look at four human capital practices previously revealed to be valuable, and discover whether a firm choosing to implement more than one of them would experience additive effects. The answer was a resounding yes. In isolation, these practices are each associated with increasing revenue per employee, but none by more than 27 percent.  Combined, however, they drive higher gains – as high as 59 percent when all four practices are in place.

If you do nothing else: select managers with natural talent. Let’s start with the strategy linked to the greatest impact on revenues per employee: the practice of selecting and deploying managers based on their true talent for managing people. As discussed in another post, people can get promoted into management positions for all kinds of reasons (for example, based on years of seniority or to reward standout performance as an individual achiever). But in the most progressive companies, they get the job for only one reason: they are among those few people (about  1 in 10, we find) who have what it takes to motivate and enable teams to do great work.

Whom a company names manager has a ripple effect on everything else. Bad managers drive talented employees away, damaging customer relationships, while talented managers attract and engage the most capable talent. The key to hiring the right managers is to select candidates based on what the job requires – that is, on their ability to inspire employees, drive outcomes, overcome adversity, hold people accountable, build strong relationships, and make tough decisions based on performance rather than politics. The business units we find to be systematically filling their managerial ranks with people who have natural managerial strengths are winning big in the marketplace:  they experience 27% higher revenue per employee than the average business unit.

Add to the gains: select the right individual contributors. A 27 percent revenue advantage might sound like plenty, but the big finding of our research is that it is not even half of what companies achieve when they add three other elements to their human capital strategy. An additional 6 percent revenue gain comes when the companies who hire the right managers extend that philosophy to employee hiring. While it might seem obvious that companies would select and develop employees based on their having the natural talents to succeed in particular roles, the reality is that candidates are more often chosen based on generic achievements such as education level, technical skills, and past work experience.

Ideally, with each hire, a company manages to reduce its performance variance and make performance more predictable. The key is to develop a systematic process using assessments that predict future performance. This streamlines the decision-making process, increases productivity, removes bias, improves diversity, and enhances customer and employee engagement.

Push revenue further: engage employees. So far, we’ve seen two practices combine to account for a revenue-per-employee advantage of 33 percent.  We can take that up to 51 percent by adding good practices in engaging employees. Here we should note again that we are looking for additive effects. We know that when organizations put naturally talented managers in place, they already achieve higher engagement levels. However, focusing on engagement in itself can produce additional benefits.

Employee engagement initiatives typically begin with a survey to establish baseline metrics and focus attention on what needs to improve. For example,  Gallup’s 12-item employee-engagement assessment, the Q12, measures employees’ involvement in and enthusiasm for their jobs and workplace, which links directly to their willingness to go the extra mile for the company and customers. Based on what is discovered, firms devise strategies, establish accountability, communicate progress, and build the data bases that will allow them to do predictive analytics. And as employee engagement rises, companies see gains in productivity, profitability, retention, safety, quality, and customer engagement. Thus a specific focus on increasing employee engagement levels is associated with an additive effect of 18 percent higher revenue per employee.

For maximum payoff: add a focus on strengths. One last major practice in human capital management can be layered on for even greater gains. We know from extensive past research that employees thrive best when they are aware of their greatest strengths and focused on capitalizing on those (as opposed to spending their energy trying to turn their relative weaknesses into strengths). Gallup found that when managers focus on employees’ strengths, 61% of workers are engaged and only 1% are actively disengaged — a dramatically better result than what surveys find of employees generally.

When employees use their strengths, they’re more engaged, perform better, and are less likely to leave their company. And, of course, their company benefits from their relative excellence at the work they do. All this contributes to the additive effect shown by our data: teams who add a focus on strengths to the three human capital practices discussed above see an additional 8 percent higher revenue per employee, for a total advantage over the average business unit of 59 percent.

How many firms are seeing this ultimate additive effect?  Unfortunately, very few: from Gallup’s analysis of U.S. organizations, we estimate that less than 1% of teams are given the benefit of all four of these human capital strategies. This highlights an area of tremendous opportunity for any company to accelerate their growth. Businesses can implement the four strategies in whatever order best meets their needs. While the incremental gains might be calculated somewhat differently, the effects will reliably be additive.

The important point is that, in combination, these practices drive increases in everything companies want — more sales, increased productivity and profitability, lower turnover and absenteeism, fewer accidents and defects, and a culture of high customer engagement.    Of course, 59% higher revenue won’t happen overnight. But each step pays off in higher human capital capacity, and moves a company along on the path to growth.

Is the Possibility Bias Keeping Us from Having Crazy Fun?

Amateur auto racers aren’t reckless; in fact, they’re more rational about choices than the average population, according to a study by Mary Riddel of the University of Nevada, Las Vegas, and Sonja Kolstoe of the University of Oregon. Survey results show that racers’ behavior arises not from a devil-may-care attitude but from a relative insensitivity to what’s known as the “possibility” bias, an exaggerated fear of possible but low-probability negative events and an exaggerated expectation of low-probability positive events. The possibility bias, which afflicts the majority of people, leads to poor financial decisions, such as overinsuring against highly unlikely losses and overinvesting in highly unlikely payoffs.

One Reason Cross-Cultural Small Talk Is So Tricky

It was my first dinner party in France and I was chatting with a Parisian couple. All was well until I asked what I thought was a perfectly innocent question: “How did the two of you meet?” My husband Eric (who is French) shot me a look of horror. When we got home he explained: “We don’t ask that type of question to strangers in France. It’s like asking them the color of their underpants.”

It’s a classic mistake. One of the first things you notice when arriving in a new culture is that the rules about what information is and is not appropriate to ask and share with strangers are different. Understanding those rules, however, is a prerequisite for succeeding in that new culture; simply applying your own rules gets you into hot water pretty quickly.

A good way to prepare is to ask yourself whether the new culture is a “peach” or a “coconut”. This is a distinction drawn by culture experts Fons Trompenaars and Charles Hampden-Turner. In peach cultures like the USA or Brazil people tend to be friendly (“soft”) with new acquaintances. They smile frequently at strangers, move quickly to first-name usage, share information about themselves, and ask personal questions of those they hardly know. But after a little friendly interaction with a peach, you may suddenly get to the hard shell of the pit where the peach protects his real self and the relationship suddenly stops.

In coconut cultures such Russia and Germany, people are initially more closed off from those they don’t have friendships with. They rarely smile at strangers, ask casual acquaintances personal questions, or offer personal information to those they don’t know intimately. But over time, as coconuts get to know you, they become gradually warmer and friendlier. And while relationships are built up slowly, they also tend to last longer.

Coconuts may react to peaches in a couple of ways. Some interpret the friendliness as an offer of friendship and when people don’t follow through on the unintended offer, they conclude that the peaches are disingenuous or hypocritical.  Such as the German in Brazil who puzzled: “In Brazil people are so friendly – they are constantly inviting me over for coffee. I happily agree, but time and again they forget to tell me where they live.”  Igor Agapov, a Russian colleague, was equally surprised to experience the pit of the peach on his first trip to the United States: “I sat next to a stranger on the airplane for a nine-hour flight to New York. This American began asking me very personal questions: was it my first trip to the U.S., what was I leaving behind in Russia, had I been away from my children for this long before? He also shared very personal information about himself. He told me he was a bass player and talked about how difficult his frequent travelling was for his wife, who was with his newborn child right now in Florida.”

In response, Agapov started to do something unusual in Russian culture. He shared his personal story thinking they had built an unusually deep friendship in a short period of time. The sequel was quite disappointing: “I thought that after this type of connection, we would be friends for a very long time. When the airplane landed, imagine my surprise when, as I reached for a piece of paper in order to write down my phone number, my new friend stood up and with a wave of his hand said, ‘Nice to meet you! Have a great trip!’ And that was it. I never saw him again. I felt he had purposely tricked me into opening up when he had no intention of following through on the relationship he had instigated.”

Others are immediately suspicious. A French woman who visited with my family in Minnesota was taken aback by the Midwest’s peachiness: “The waiters here are constantly smiling and asking me how my day is going! They don’t even know me. It makes me feel uncomfortable and suspicious. What do they want from me? I respond by holding tightly onto my purse.”

On the other hand, coming from a peach culture as I do, I was equally taken aback when I came to live in Europe 14 years ago. My friendly smiles and personal comments were greeted with cold formality by the Polish, French, German, or Russian colleagues I was getting to know. I took their stony expressions as signs of arrogance, snobbishness, and even hostility.

So what do you do if, like me, you’re a peach fallen amongst coconuts? Authenticity matters; if you try to be someone you’re not, it never works. So go ahead and smile all you want and share as much information about your family as you like. Just don’t ask personal questions of your counterparts until they bring up the subject themselves.  And for my coconut readers, if your peach counterpart asks how you are doing, shows you photos of their family or even invites you over for a barbecue, don’t take it as an overture to deep friendship or a cloak for some hidden agenda, but as an expression of different cultural norms that you need to adjust to.

China’s Tough Approach and a Changing Economic World Order

The international spotlight is on China again, as its behavior in the South China Sea has led to violent protests in Vietnam, rising regional tensions, a flurry of media coverage, and questions about where this is all heading.

We put a few of those questions to Ian Bremmer, president of Eurasia Group and author of Every Nation for Itself: Winners and Losers in a G-Zero World. An edited version of our conversation is below.

Do you see the recent actions by China as typical and consistent with their past behavior, or do you think it’s a change, something new and different?

It’s escalatory. The Chinese are dramatically increasing their naval and air capacity in the South and East China Seas. They’re not expanding as a land power, but they see naval power as critical for facilitating their economic ambitions in the region. Their long-term concern is the potential for a Southeast Asian multilateral security framework, potentially aligned with the United States. They see that as dangerous, especially if US/China relations start getting worse.

So they feel there’s a window over the next couple of years to probe and change the status quo ante in the region, and that’s what is happening with this military escalation – and they’ll see what kind of response they get.  Recent incidents with Japan and the air defense identification zone resulted in a very significant US response: trips by Secretary Hagel, President Obama, announcements on the US Defense Treaty pertaining to the Senkaku/Diaoyu Islands issue – ultimately leading to the US and Japan developing a much closer relationship. But the US has made no statement on the South China Sea, where we do not have any defense obligations.  And so what I see here is China, vastly bigger than the Philippines and Vietnam, with not only more military capacity, but much more economic capacity and influence over those markets, seeing if they can improve their situation on the ground, and not minding so much if the cost is that a couple of noses get bloodied.

What do you think China’s more aggressive approach means for Western economies and for the world economy?

Look at China 30 years ago and the role it had in global GDP. It was around 2%. Look at it now, and it’s something like 13%. China is close to becoming the world’s largest economy. But when it becomes the largest economy, it will still be poor. It will still be state capitalist. It will still be authoritarian. In other words, it will not share the values and priorities of the United States or our allies in advanced industrial economies. That is an enormous challenge to the economic order.

There’s no question that China is reforming, and that Xi Jinping is engaged in politics of economic transformation that, if successful, will make us cooperate much more closely with the Chinese over the medium to long term. But China is getting bigger faster than it’s reforming, and there is also uncertainty around whether reform will be successful.

All of this means that the challenges that China poses to America and its like-minded allies, from an economic and political perspective, will absolutely grow larger. That can be mitigated – by smart policy, and by the United States having a lot of economic success. But there are also issues between the US and China that are already getting much, much worse. Security for one, because of the rise in the Chinese military and the economy, and their willingness to push. But the second, of course, is cyber, where the Chinese and the Americans are actively at war against each other, and the Americans have had no ability whatsoever to get the Chinese to engage in meaningful dialog in trying to reduce those tensions. So as a consequence, the US has taken the unilateral step of going to the Department of Justice and actually filing charges against five members of the People’s Liberation Army. That will only lead to further escalation, it’s very clear.

You have noted elsewhere all the media hoopla around China becoming the largest economy. But you have also said that this benchmark is not so important to the Chinese, that they have no desire to engage in economic triumphalism. Instead, they prefer a quieter kind of economic expansion. Isn’t that in tension with what they’re doing in the South China Sea, which seems very much like 20th century hardball expansion? 

I don’t think those things are inconsistent. The Chinese want to become the largest economy in the world as quickly as possible. They want the rewards and benefits of that to accrue to them as quickly as possible. What they don’t want is to have everyone out there saying, “Oh my God, China’s the largest economy! We’d better do something about it!” Right? So they absolutely want to change the rules of the road through their real power and influence. But they don’t want a bunch of reports publicly saying, “Hey everyone, look. China’s number one.” They understand that they’ve got to be more responsible. They have to play more of a leadership role. They’ve got to put money into dealing with climate. They have to put money into dealing with collective security issues.

Now if it were Russia, that would be different. If someone did a report and it claimed that Russia was the largest economy, you’d have Putin touting that all over the world out of insecurity. The Chinese aren’t insecure. The Chinese want to get as big and powerful as possible before the folks that could stop them might start taking measures that could be damaging to them.

You recently tweeted that the clear winner from the US/Russia fight over Ukraine is China. How so? 

The Russians and the Chinese have been negotiating the recent huge energy deal for over ten years. It went on and on and didn’t get done. Now it’s done. The reason it wasn’t getting done for all that time is they weren’t coming together on price, and the Russians were not willing to compromise. What’s changed? The Russians are now under a lot more pressure – from the Americans in particular, but also from the Europeans – and they want to show very strongly that the American policy of isolating the Russians is going to fail. So it was extremely important, politically, for Putin to get this deal done with the Chinese. And it is a massive deal: $400 billion, providing natural gas over 30 years. It definitely shows that the American policy has failed on Ukraine. It also shows that the Chinese are clearly in the driver’s seat here.

[Making money is] not the reason the Russians are doing this. They’re doing it because they feel like they need to show strength, and tying this knot with the Chinese is a wonderful way to do that.

How does China view international economic development differently than we do in Western economies?

The Chinese have absolutely learned that providing lots of money for development-related activities in poor countries is a great way for them to build goodwill and for them to get outcomes that they want. But unlike American development, this is not conditionally linked to democracy or economic advancement or modernization. Chinese development money – and there’s a lot of it, the Chinese development bank, UCDB, gives more money internationally than the IMF and the World Bank combined –constitutes a quid pro quo for decision making that supports Chinese economic objectives directly. So they’re going to help you build a stadium. They’re going to build hospitals. They’re going to build roads. They’re going to give you a power grid. But this is what they want in return. And it’s a very clear list.

So there is no pretense towards development for poor countries and their economies to become strong and self-standing?

No, the Chinese are not, in my view, trying to make these countries strong and self-standing. Now, of course, the Americans don’t always do that [either]. The argument I’m trying to make here is, the fact that the Chinese don’t do as we do doesn’t mean that the Chinese are bad. It means that the Chinese are at a very different level of development with a different economic and political system, and it should surprise us very much for the Chinese to act any differently than they do. So, for instance, when we tell the Chinese we want them to be responsible stakeholders in the global community, the logical Chinese response is: Wait a second. So you want us to act like a rich country, even though we’re a poor country, and you want us to support rules and norms that you created to benefit like-minded countries, of which we are not one. It makes no sense for China to do that.

So in light of what’s been happening in Southeast Asia specifically, and some of these broader dynamics more generally, how should people who are running companies be thinking differently in terms of the risk profile in the region?  Is the threshold rising for a destabilized environment there?

I don’t see war between China and Vietnam, or China and the Philippines.  As I said, I think the Chinese are pushing and probing in this new phase, and if they get whacked, then they’ll recalibrate. I don’t think this will have a huge impact on investors or multinational corporations on the ground in the near term. Longer term, as China continues to grow, if reforms fail or if they become more antagonistic towards the West, then I expect the ability of Western multinationals to do effective business on the ground in these countries will deteriorate greatly.

The biggest problem I see is a growing paradox: not only is China going to be the world’s largest economy, but out of the top 20 economies in the world, China likely has the largest variance in terms of how attractive it will become for Western investors over the next, say, ten years. At the same time, the Chinese are engaging in fundamental economic transformation, unleashing forces that might lead to a China that can work well with us, or could possibly lead to the collapse of the system, or enormous xenophobia and nationalism. The vast majority of American and Western multinational CEOs are unwilling to think about this, and are just not investing. They don’t think they’ll be in their corporations that long, and they don’t want to deal with that core uncertainty and its implications.

Cross-Culture Work in a Global Economy

Erin Meyer, affiliate professor at INSEAD and author of The Culture Map, on why memorizing a list of etiquette rules doesn’t work. For more, read the article, Navigating the Cultural Minefield.

Download this podcast

Win at Workplace Conflict

No matter how sound or well-intentioned your ideas, there will always be people inside — and outside — your organization who are going to oppose you. Getting things done often means that you’re going to go head to head with people who have competing agendas. In my career studying organizational behavior, I’ve had the privilege of witnessing some incredibly effective conflict management techniques. I’ve distilled a few of them into some rules for dealing with organizational conflict:

1. Stay focused on the most essential objectives.

It’s easy to become aggravated by other people’s actions and forget what you were trying to achieve in the first place. Here we can learn a lesson from Rudy Crew, a former leader in the New York City and Miami-Dade County schools.

When Crew was verbally attacked by Representative Rafael Arza, a Florida legislator, who used one of the nastiest racial slurs to describe Crew, an African-American, Crew filed a complaint with the legislature but then essentially went on with his work. As he told me at the time, a significant fraction of the Miami schoolchildren were not reading at grade level. Responding to every nasty comment could become a full time job but, more importantly, would do nothing to improve the school district’s performance. Arza was eventually expelled from the legislature. Crew’s takeway? Figure out: “what does winning look like?” If the conflict were over and you found that you had won, what would that look like? Which leads to the second rule…

2. Don’t fight over things that don’t matter.

For a while, Dr. Laura Esserman, a breast cancer surgeon at the University of California, San Francisco (UCSF), and a leader of fundamental change in breast cancer treatment and research, was sponsoring a digital mammography van to serve poor women in San Francisco. The sponsorship was taking a lot of time and effort — she’d had trouble raising money for the service after the Komen Foundation had reneged on a pledge of support. Her department chair was worried about the department’s budget and why a department of surgery was running a radiology service. The hospital CFO was not interested in funding a mammography service that would generate unreimbursed care while the university was raising debt to build a new campus. And Esserman herself did not (and does not) believe that mammography was the way forward for improving breast cancer outcomes. After figuring out that sponsoring the mamo-van was absorbing disproportionate effort and creating unnecessary conflict with important people inside UCSF, Esserman offloaded the van. It smoothed the relationship with her boss and allowed her to focus on higher-leverage activities.

3. Build an empathetic understanding of others’ points of view.

As the previous example illustrates, sometimes people fight over personalities, but often they have a reason for being in conflict. It helps to understand what others’ objectives and measures are, which requires looking at the world through their eyes. Don’t presume evil or malevolent intent. For example, an ongoing struggle in the software industry has centered around when to release a product. Engineers often want to delay a product release in the pursuit of perfection, because the final product speaks to the quality of their work. Sales executives, on the other hand, are rewarded for generating revenue. It’s therefore in their best interest to sell first and fix second. Each is pursuing reasonable interests consistent with their rewards and professional training — not intentionally trying to be difficult.

4. Adhere to the old adage: keep your friends close, and your enemies closer.

The late President Lyndon Johnson had a difficult relationship with the always-dangerous (because he had secret files on everybody) FBI director, J. Edgar Hoover. When asked why he spent time talking to Hoover and massaging his ego, Johnson was quoted as saying: “It’s probably better to have him inside the tent pissing out, than outside the tent pissing in.” This is tough advice to follow, because people naturally like pleasant interactions and seek to avoid discomfort. Consequently, we tend to shun those with whom we’re having disagreements. Bad idea. You cannot know what others are thinking or doing if you don’t engage with them.

5. Use humor to defuse difficult situations.

When Ronald Reagan ran for president of the United States, he was (at the time) the oldest person to have ever been a candidate for that office. During the October 21, 1984 Kansas City debate with the democratic candidate, Walter Mondale, one of the questioners asked Reagan if he thought age would be an issue in the upcoming election. His reply? “I am not going to exploit, for political purposes, my opponent’s youth and inexperience.”

Let’s face it: you’re going to have conflict in the workplace. It’s unavoidable. But if you keep these simple — albeit difficult to act on – rules in mind, you’ll learn to navigate conflict more productively.

Focus On: Conflict




Most Work Conflicts Aren’t Due to Personality
Conflict Strategies for Nice People
Senior Managers Won’t Always Get Along
When Your Boss Is Too Nice

How to Break Up with Your Mentor

Having a great mentor can do wonders for your professional development and career. But even the best mentoring relationships can run their course or become ineffective. How do you know when it’s time to move on? And what’s the best way to end the relationship without burning bridges?

What the Experts Say

“A good mentoring relationship is as long as it should be and no longer,” says Jodi Glickman, author of Great on the Job. If you are no longer learning from your mentor or the chemistry is simply not there, “there’s no point in prolonging it.” You do yourself and your mentor a disservice if you stay in a relationship that isn’t meeting your needs. “If in order to grow, it’s necessary to move on,” don’t hesitate to break it off, says Kathy Kram, the Shipley Professor in Management at the Boston University School of Management and coauthor of the forthcoming Strategic Relationships at Work. Here’s how to end things graciously.

Take stock of your needs and goals

Ask yourself what value you’ve gained from your mentor, what guidance and support you feel you aren’t getting, and what you want going forward. With introspection, you can figure out “what’s missing in the relationship and whether there is an opportunity to reshape it in some way,” says Kram. You may decide that your mentor’s skill set doesn’t align with where your career is heading. Or you may want a mentor with whom you have a better rapport, or who has more time to offer. The exercise may even surprise you. You could discover that you haven’t been taking full advantage of your mentor’s expertise, for example.

Consider giving your mentor a second chance

Don’t assume that your mentor has a crystal ball. If you aren’t getting the guidance you want, it may be because you haven’t articulated your expectations and needs. “People don’t realize they need to educate their mentors, too,” says Kram. You should spell out “what you are striving toward and how you think your mentor can help.” Consider approaching him to make your needs clear, saying, ‘These are the challenges I’m now facing and this is the kind of advice I’m hoping to get.’ That said, “if you feel like you’ve both received and given value but going forward it’s the law of diminishing returns, it’s time to end it,” says Glickman.

Don’t draw it out

If you decide the relationship isn’t working, act on it quickly. “You don’t want to waste your time, or frankly theirs,” says Glickman. If your mentor-mentee arrangement is more formal, it’s often advisable to arrange a time to discuss the issue face-to-face. But not everyone has to break up over lunch. Depending on the nature of your previous interactions, parting ways could involve a note or a telephone call, or be as simple as letting the relationship fade away. But however you do it, don’t drag out your interactions with him if you don’t plan on investing in the relationship and taking it seriously.

Disengage with gratitude

“Gratitude is the key to leaving gracefully,” says Kram. Start the separation conversation by thanking your mentor for all of her time and effort. Detail what you’ve learned in the course of the relationship and how those skills will help your career in the future. “Speak in terms of how your needs have changed rather than in how your mentor is not doing x,y, and z for you,” says Kram. “Maintain the focus on yourself and your reasons for wanting to move on.” By keeping it positive, you’ll leave open the possibility of future collaborations.

Be transparent and direct

Be as honest and transparent as possible about why your future plans necessitate a shift, says Glickman. You might say, “Given my change in focus, I wonder if getting together regularly is the best use of your time.” Don’t worry too much that they will be upset or offended. “Prolonging a relationship out of respect for them doesn’t help them,” says Glickman. “They likely have plenty of other things they can do.” If your mentor does react negatively, “listen well, give him the opportunity to share his perspective, and if you don’t agree, just thank him for having shared it” and move on, says Kram.

Keep the door open

In today’s workplace, connections are more important than ever, and you’re likely to come across your former mentor at some point in the future. Since you want to part ways with your professional reputation intact, make every effort not to burn bridges. Be sure to offer her any assistance she might need in the future so you can return the kindness and help she has given you. “You never know when you are going to encounter this person again, whether as a boss, a subordinate, or a peer,” says Kram. “And you never know if you might need them again.”

Principles to Remember

Do:

Consider whether the relationship can be recharged — give your mentor an opportunity to adapt with you


Emphasize your appreciation and thanks above all else


Describe what you’ve learned from them and how those skills will help your career going forward

Don’t:

Stay in the relationship out of obligation — you’ll only waste your time and theirs


Focus on the relationship’s shortcomings  — emphasize the positive


Burn bridges — you never know when you might encounter them again

Case Study #1: Establish expectations early on

When Debby Carreau was promoted from the operations side of a multibillion-dollar hospitality company to a high-level HR position, her boss assigned her a mentor to help with the transition. For the first several months, Debby and her mentor (we’ll call him Jeff) had a productive and positive rapport. He was very helpful with developing Debby’s strategy skills. “He taught me to step back and look at the bigger picture,” she says.

One day, as Debby was conducting a sound check for a presentation at a major conference, Jeff walked in and requested a run-through. He proceeded to dissect her talk and suggested a number of changes. “I suspect his intentions were good, but I felt blindsided,” Debby says. She considered his input, but did not incorporate many of his suggestions. Following her well-received speech, she heard from a colleague that Jeff was upset, telling several people that he “didn’t know why he bothered giving her advice if she isn’t going to listen to it.” At that point, “I knew this relationship was not going to work.  While I valued his input and feedback, I was not always going to act on it,” Debby says.

Debby approached Jeff the next morning. “I focused on what I appreciated specifically, thanking him for his insight into strategy and his best-practice sharing,” she says. But after confirming that he had been disappointed with her failure to take his advice, Debby politely pushed back, saying that while she valued his opinion, she wasn’t under the impression she was obligated to follow his directions.

They left the conference on good terms, but their formal mentoring relationship petered out not long after. Her lesson? It’s critical for mentors and mentees to establish “on the front end what the expectations are and how you are going to engage.”

Case Study #2: Exit gracefully

Chris Hoffman, a marketing and brand strategy consultant in Colorado Springs, knew he owed much of his professional development to his boss, a marketing executive we’ll call Frank. Chris had sought him out as a mentor, taking him to coffee, buying him lunch, and picking his brain about marketing and problem-solving strategies. “I really learned so much from him,” Chris says.

But after working at Frank’s agency for four years, Chris began to feel that he’d outgrown his position — and his mentee relationship with Frank. He had learned a great deal, but other frustrations — Frank’s unnecessary distance from the day-to-day operations, his disinterest in feedback, and their value differences — made Chris feel increasingly disillusioned. “It was time for me to pursue my own endeavors and break out on my own,” Chris says.

His departure from the agency provided a natural transition point. During their final conversations, Chris emphasized how grateful he was for Frank having “invested in me with his time and his knowledge.” Chris recapped the great things they’d been able to accomplish, and “made a conscious effort to come across as humble instead of focusing on my frustrations.”

Frank offered to continue mentoring Chris after he left the agency, but Chris politely deflected the requests. “I told him truthfully that I had some new projects that I needed to spend 100 percent of my time on,” he says. He also stopped reaching out to Frank, and over time the relationship settled into an amicable friendship. “I see him from time to time and it’s not awkward at all,” Chris says. “I’ve actually done some contract work for his company since moving on, so that’s a win for me.”

The Origins of Discovery-Driven Planning

When HBR asked us to write about the origins of discovery-driven planning, we had to laugh. It all started back in the mid-1990s, with Rita’s “flops” file – her collection of projects that had lost their parent company at least US$50 million. (Perfume from the people who make cheap plastic pens, anyone? How about vegetable-flavored Jello?)

As we studied those failures, a pattern became clear to us. The projects were all being planned as if they were incremental innovations in a predictable setting: The assumption was that the organizations launching them had a rich platform of experience and knowledge upon which to draw. The venture leaders made critical assumptions which were never tested. The funding was often significant, and approved and handed out all at once. Leaders were personally committed to the particular strategy the ventures were pursuing. And it took a long time and a lot of money before they realized that the project had been barreling along, burning tons of cash, but heading for disaster.

Clearly, a new approach to planning was needed – one better suited to high potential projects whose prospects are uncertain at the start. In Mac’s entrepreneurship classes at Wharton, many of the elements of discovery-driven planning were already emerging from work he had done on milestone planning with Zenas Block at NYU. He stressed the importance of having a revenue model (as well as a cost model), of documenting and testing assumptions, and of moving ventures through a series of milestones, rather than trying to plan them all at once. It was on a business trip to Zurich, of all places, that all these ideas came together in a concept for a planning toolkit that would be suitable for new venture leaders.

So, what was different about DDP than conventional planning methods? First, we forced venture leaders to articulate right up front what success for their businesses would have to look like to make it worth the risk and justify the resources and the effort. Then, we’d ask them to do what Mac asks his entrepreneurship students to do, which was to benchmark the key revenue and cost metrics in their business against the market and against firms offering the most comparable products. Next, we’d force them to articulate the specific operational activities their business needed to carry out in very concrete terms. Mac always liked to ask his students to specify how they were going to get their “first five sales,” rather than put grandiose projected revenue numbers in their spreadsheets. As the venture teams were specifying these operations they thought would underpin their businesses, they’d have to be making assumptions, and in our planning model, we’d insist that they write them down. And finally, we’d drive the whole plan through a series of milestones (which we’ve subsequently renamed checkpoints) which represented the points in time at which the most sensitive assumptions could be tested. We’d ask our venture teams to re-evaluate their assumptions at these checkpoints, ahead of major investments. At that point, they could stop and disengage, redirect to a reconfigured plan or continue. We challenged venture teams to spend their imagination to avoid spending money – to use their creativity to learn as much as possible as cheaply as possible, reflecting the parsimony Mac demands in his entrepreneurship classes.

The worlds of strategy and innovation have gotten much closer to one another since the publication of Discovery Driven Planning, and increasingly entrepreneurial tools are used inside established corporations. As Rita argues in her book The End of Competitive Advantage, any such competitive advantage is eroding ever-more quickly, which means that firms need to create a pipeline of advantages to replace those that have been competed away. That in turn implies that innovation – and innovative strategy — needs to be a systematic, ongoing process with a set of tools and processes that let firms achieve innovative results reliably or abandon them inexpensively. The following enhancements to DDP methodology may be valuable for firms that need to continuously innovate:

Firms will need to generate assumptions about who likely future competitors will be and design checkpoints to test whether and when brand new competitors are emerging, thus better anticipating disruption.
They’ll need to make assumptions about when competitive attacks and erosion of profits will begin, and design checkpoints as indicators that this is happening so that the next advantage stage can be launched at the optimal time.
Given the increasing rate of change, it doesn’t make sense to think past the next four checkpoints. This should move the conversation from “are we deploying enough (i.e., a lot of) money to try to build a sustainable advantage?” to “Do we have just enough money to get through the next three checkpoints?”
To speed up the “demolition” of ventures that start off seeming to be good ideas but turn out to be flawed, we need to creatively design inexpensive, roughly right checkpoints that cheaply and quickly probe whether key assumptions are wrong.

 

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Gratitude Can Make You More Patient for Future Rewards

The conventional advice for overcoming our tendency to seek immediate gratification and discount future rewards is to increase our patience by suppressing emotions, but one emotion—gratitude—appears to enhance patience, says a team led by David DeSteno of Northeastern University. In an experiment, people who were induced to feel grateful were subsequently better able to resist instant gratification: In order to forgo $85 three months in the future, they required, on average, $63 immediately, whereas those in neutral or generally happy emotional states required just $55. Because gratitude can prompt kindness from others, the patience-enhancing effect of gratitude may have evolved as a way to allow people to wait for those kindly acts, the researchers suggest.

Unemployment Is About to Fall a Lot Faster than Predicted

The recovery from the Great Recession has been slow and painful, especially when it comes to jobs. The unemployment rate, which peaked at 10% in October 2009, is still an unpleasantly high 6.3% (compared with 4.4% before the recession), and many economists are saying it won’t go much lower anytime soon. The Federal Reserve’s forecast (made in December 2013) is for a rate of 6.3% at the end of this year, with not much chance of dropping below 5.5% before the end of 2016. Others are even gloomier: Trading Economics projects unemployment rates above 6% for the next couple of decades.

But what if all this gloominess is unwarranted? Using an alternative model for projecting job growth, we see an entirely different scenario, one in which the U.S. unemployment rate will fall below 5% by no later than the middle of next year. This would of course have a profound effect on business and the overall economy.

Unemployment forecasts are generally based on past trends  — a reasonable if not infallible approach. But the assumptions being used may be wrong this time around. In past recessions, small businesses fueled early job growth and drove a predictable pattern that is currently used to estimate unemployment. During the current economic recovery, however, the largest of businesses added to their payrolls first, while small businesses have significantly underperformed in job growth. This has essentially created an inverse trend.

The typical trend in economic recoveries is driven by a process known as “cyclical upgrading,” where employment transfers to high-paying industries during booms and low wage jobs during recessions. Small businesses have a disproportionate number of low-wage jobs and that often leads job seekers toward those companies during recessions, which is what then fuels a rebound in employment. In previous recessions, small businesses were responsible for the bulk of new hires during a recovery. (This makes sense because small businesses, with their lower wages, employ more than half the workforce and create a full two-thirds of the new jobs in the United States.) Then, toward the end of most recoveries, as larger businesses add higher-wage jobs, unemployment continues to drop, but at a slower pace given that large businesses have fewer jobs available. This pattern is apparent after a quick glance at unemployment trends over the past century: the unemployment rate drops quickly after its peak, and then the drop becomes less steep.

The current economic cycle, however, is different. During this recession, the recovery started with big businesses, spurred initially by government bailouts and stimulus packages given to banks and large corporations. These subsidies were intended to trickle down to smaller businesses but that effect has been slow to occur. This recession was marked by an overall decline in small businesses (typically we see small business starts accelerate), decrease in mean employment size of small businesses, and a lack of turnover for the most tenured employees. All of this led to high unemployment rates. Optimism indexes show a similar trend: bigger businesses have gained in optimism at a faster pace than their smaller counterparts, contrary to past recoveries.

Contrast these trends with what has happened historically and it is clear that these anomalies are critical; any projection that relies too heavily on historical patterns is likely to be imprecise when the historical account materially differs from present events.

Moreover, the trends we’ve seen since the beginning of the recession are beginning to shift. Our data is finally showing that the smallest of businesses are growing  more optimistic about their prospects, which will eventually lead to the increased hiring that typically comes at the start of a recovery. If the trend holds, it means that the typical post-recession jobs growth will be inverted during the current economic recovery. Thus, we should begin to see an acceleration in new jobs and rapidly decreasing unemployment.

Our firm has worked to tease out historical biases using proprietary data that was compiled in conjunction with Pepperdine University. Re-running the unemployment numbers using the same criteria as the Federal Reserve, our analysts project that hiring will accelerate at a rate sufficient to lower the U.S. unemployment rate to 5.0% by July 2015 in our most conservative scenario (data and methodology are available at www.DandB.com/unemployment_methodology).

We have been tracking the unemployment figures for a number of years, and have noticed a recent change in sentiment that has not been taken into account by other projections. For several years, Dun & Bradstreet Credibility Corp. and Pepperdine University have asked business owners of all sizes how many employees they plan to hire in the next six months in our quarterly nationwide survey of 3,000 businesses. Then, we compared that number to how many employees were actually hired. By calculating the difference between expectations and actions, we have been able to consistently use our survey to estimate future hiring based on business owner expectations. The results, when adjusted for business optimism, have been predictive within a small margin every quarter and consistently directionally correct.

The survey results were, unsurprisingly, negative during the recession and started to turn positive at the end of 2012, but only for the nation’s largest businesses. Medium-sized businesses followed suit and became more positive a few quarters thereafter. Again, this is in contrast to prior recoveries, where both optimism and hiring came first from our nation’s entrepreneurs.

Since the last quarter of 2013, our results have finally shifted positive for small businesses, both in optimism and in willingness to hire. This is the missing link in the standard unemployment predictions. Adjusting our survey numbers to normalize business optimism, we predict that more than 20 million jobs will be created by small and micro businesses in the United States in the next 18 months.

In addition to the hiring expectations of existing businesses, our methodology includes a forecast of job losses as well as jobs created by new businesses.  The methodology does not account for significant changes in the civilian labor force, nor does it contemplate a continued decrease in the participation rate. While a decrease in the participation rate has the impact of reducing the unemployment rate, it has a long term detrimental effect on the overall economic infrastructure for the country.  It is always better to drive unemployment lower by adding jobs than by removing workers.

The Federal Reserve projections are based on similar assumptions as our alternative model, and thus show a continued trend downwards, but the rate is likely understated as a result of not taking into account small business growth. If small businesses add jobs at the volume suggested by historical averages, the slope will accelerate more quickly. This can give us all confidence that we will see a steady drop to 5.0% unemployment next year.