Marina Gorbis's Blog, page 1449

The Breakfast of Champions: No Longer a Champion Itself?

It’s still a thrill and an honor for Olympics athletes to appear on the Wheaties box, but their images apparently aren’t doing much to sell the cereal: The 91-year-old brand is lagging behind competitors, with a falling market share that’s now barely 1%, according to the Wall Street Journal. Compare that with another General Mills brand, Cheerios, which has a 12% share. Some 474 athletes have appeared on the Wheaties box, starting with Lou Gehrig in 1934; the most recent are winter Olympians Mikaela Shiffrin and Sage Kotsenburg.

Be Kind to Your Employees, but Don’t Always Be Nice

At 39, I was the CEO of a company with a few hundred employees. Depending on the day and the employee you asked, I’d rate anywhere from a zero to a seven on the unkindness scale (10 being a tyrant). I’d guess that I normally hovered around 4.5. I doubt anyone would have rated me a 10—that takes a particular kind of malevolence. I wasn’t taken to raging, other than on one occasion when the lives of the participants in our Montana AIDS Vaccine Ride (a 1,500-person, seven-day bike ride across the Rockies to fight the disease) were in jeopardy during a horrific mountain wind storm that literally blew our temporary city apart. But day to day, I was fairly consistently stern and serious.

Stories of the raging, maniacal CEO are the stuff of legend, from American Apparel’s CEO, Dov Charney, who was accused of choking an employee with both hands, to Walt Disney, whose underlings warned each other he was approaching by repeating the line from Bambi, “Man is in the forest!” Bill Clinton was infamous for his temper tantrums. Even Tim Cook, Apple’s seemingly mild-mannered CEO, terrifies people. In an upcoming book on the CEO, author Yukari Iwatani Kane writes, “When someone was unable to answer a question, Cook would sit without a word while people stared at the table and shifted in their seats. The silence would be so intense and uncomfortable that everyone in the room wanted to back away…Sometimes he would take an energy bar from his pocket while he waited for an answer, and the hush would be broken only by the crackling of the wrapper.”

Is fear and intimidation the only way to build a truly great (not just really good, but great) company? Is kindness a recipe for mediocrity? It’s a tough question. And let’s not kid ourselves that we are always the champions of kindness. When we, as customers, are on the receiving end of a consumer brand screw-up, whether it’s an airline gate attendant ignoring delayed passengers or a software update that disables our cell phone, we sure wish that the company had a dictator at the top prohibiting a culture where these things could happen.

But the choice between kindness and greatness is a false choice. First, there’s a difference between malevolent intent and anxiety-driven unpleasantness. Although some of my employees may have perceived me as unkind, with rare exception I never intended it. Mostly I was consumed with the enormity of the responsibility on my shoulders. There was crushing pressure to keep expenses on our charity events low, and equally intense pressure to make sure the events were safe and the experience was second to none. My company’s future hung in the balance on this tight rope. I felt pressure to keep costs down but pay our talented people more. There were difficult clients holding large receivables over our heads, threatening cash flow. There was the constant demand to continue innovating and to grow. Some leaders may be able to handle that pressure more gracefully than I did, but it doesn’t change the fact that when I acted badly, it was without malicious intent. A friend of mine is a famous entertainment industry executive. He says, “I get paid to worry.” The tendency—and the willingness—to be on guard about everything is part of why some people are able to lead when others are not. And anxiety on the inside rarely produces a nice exterior.

But there’s a more important distinction to consider: There’s a difference between being kind and being nice. Vince Lombardi wasn’t a nice guy. But he drove his players to be the best they could be, and in hindsight, they loved him for it. I’d much rather play for a coach committed to my true potential and willing to sacrifice my perception of him or her in the short term than a coach who’s more concerned about being liked. I’d rather work for someone who loves me than someone who’s nice to me.

The key is permission. It’s not kind to drive me to be the best I can possibly be when I haven’t agreed to it; when I haven’t asked for it.

Ultimately, it’s not a choice between kindness and greatness. It’s a choice between creating or forgoing context. You have to create and maintain a context in which people are expected to rise and want to rise to be their absolute best—where you have people’s express permission to push them beyond their comfort zones. The keys to making that happen are:

Tell all potential employees that they are going to be pushed at your company and that it is going to be the best experience of their lives.
Confirm that they are agreeing to a culture and context of greatness before they come on board.
Hire professionals whose only responsibility is to keep that context alive at all levels.
Help people distinguish between malevolent intimidation and tough love. It will look messy, but when the intent is positive people will feel it.
Establish a zero-tolerance policy for malevolent behavior.
People are human. There will be bursts of anger or pettiness or condescension. When that happens, make sure that you have systems and professionals in place to help people talk it through and talk it out.

Now you can create a culture that is kind AND great. Loving AND powerful. It just won’t always be nice.

How to Have a Eureka Moment

In the ancient world, the Greeks believed that all great insights came from one of nine muses, divine sisters who brought inspiration to mere mortals. In the modern world, few people still believe in the muses, but we all still love to hear stories of sudden inspiration. Like Newton and the apple, or Archimedes and the bathtub (both another type of myth), we’re eager to hear and to share stories about flashes of insight.

But for those who have to be creative on demand, these stories don’t offer much practical advice on how to have a eureka moment of their own. Long walks or hot showers may be where we think out best ideas come from, but those are hardly available options in the middle of a crowded workday. While research hasn’t exactly validated the existence of divine muses, it has given us some insight into how eureka moments happen…and how to make them happen more often.

Eureka moments feel like flashes of insight because the often come out a period when the mind isn’t focused on the problem, what psychologists call a period of incubation. Incubation is the stage where people briefly step back from their work. Many of the most productive creative people intentionally set a project aside and take a physical break from their work believing that this incubation stage is where ideas begin to come together below the threshold of the conscious mind. Some people juggle various projects at the same time under the belief that while their conscious mind is focusing on one project, the others are incubating in their unconscious. The insights that come after incubation are what feel like we’re tapping into the same idea-generating force that powered Newton and Archimedes.

A team of researchers led by Sophie Ellwood recently found empirical evidence for power of incubation to boost creative insight. The researchers divided 90 undergraduate psychology students into three groups. Each group was tasked with completing an Alternate Uses Test, which asks participants to list as many possible uses for common objects as they can imagine. In this case, the participants were told to list possible uses for a piece of paper. The number of original ideas that were generated would serve as a measurement of divergent thinking, an important element of creativity and a significant step toward finding a eureka-worthy insight.

The first group worked on the problem for 4 continuous minutes. The second group was interrupted after two minutes and asked to generate synonyms for each word from a given list (considered to be another task that exercised creativity), then given two more minutes to complete the original test. The final group was interrupted after two minutes, given the Myers-Briggs Type Indicator (considered an unrelated task), and then asked to continue working on the original alternate uses test for two more minutes. Regardless of the group, each participant was given the same amount of time (4 minutes) to work on their list of possible uses for a sheet of paper. The research team was then able to compare the creativity that resulted from continuous work, work with an incubation period where a related task was completed, and work with an incubation period where an unrelated task was completed.

The researchers found that the group given a break to work on an unrelated task (the Myers-Briggs test) generated the most ideas, averaging 9.8 ideas. The group given a break to work on a related task placed second, averaging 7.6 ideas generated. The group given no break but four continuous minutes of work time generated the least possible uses, averaging 6.9 ideas. The research team had validated the idea that incubation periods, even those as brief as a few minutes, can significantly boost a person’s creative output.

One possible explanation for these findings is that when presented with complicated problems, the mind can often get stuck, finding itself tracing back through certain pathways of thinking again and again. When you work on a problem continuously, you can become fixated on previous solutions. You will just keep thinking of the same uses for that piece of paper instead of finding new possibilities. Taking a break from the problem and focusing on something else entirely gives the mind some time to release its fixation on the same solutions and let the old pathways fade from memory. Then, when you return to the original problem, your mind is more open to new possibilities – eureka moments.

More interestingly, their research offers hope for those with packed calendars. Recall that Ellwood’s team found that group of participants who switched to unrelated work generated the most ideas. This suggests that an effective way to incubate a problem in need of a eureka moment is to switch to an unrelated, but still work-related, task. This could be a totally different work project or even better something a bit more mundane, like responding to emails or cleaning out your contacts. Anything that takes your mind off the problem at hand and gives your mind a break will boost your odds of having a eureka moment when you return to that problem. If you need a creative insight on demand, consider structuring your workday to leave some mundane tasks undone, saving them for when you need to incubate. When you switch back, you might just find yourself shouting “eureka.”

Loose Ties Are Abundant, but Risky, at the Top

The decor varies greatly in the offices of the 550 CEOs, government officials, and heads of NGOs interviewed as part of our research on leadership — but hands down, photos are the most popular accessory. There are some shots of families and vacations, but most of the pictures show these senior leaders with prominent people. Playing golf with Jack Nicklaus. Smiling with President Obama at a state dinner. Laughing with another CEO at Davos.

Global leaders pride themselves on having many connections across industries and sectors. As experts on networking will tell you, these sorts of “loose ties” are essential to the machinery that gets things done. But when they come apart, they can do a lot of harm.

Take Jim Owens, one of our interview subjects, who spent his entire career with Illinois-based Caterpillar. He might not strike you as a cosmopolitan leader, but the former chairman and CEO has strategic ties throughout the world. During his acclaimed six years at the helm, Owens brought Caterpillar profitably through the 2008 recession. He also is a major player in national circles, having served on the boards of IBM, Alcoa, and Morgan Stanley, and as a member of the Council on Foreign Relations, the Business Council, the Business Roundtable, the Institute for International Economics, and the President’s Economic Recovery Advisory Board (PERAB). To borrow a term from Wharton management professor Michael Useem, Owens is most definitely a member of the global elite’s “inner circle.”

Back in February 2009, Owens’s ties were severely tested. The first meeting of PERAB was convened, President Obama was trying to get his economic stimulus plan through Congress, Owens was chairing the Business Council, and Caterpillar was losing a lot of money. Owens had befriended Obama when he was a senator and genuinely liked him, though politically they were poles apart. At the PERAB gathering, Owens persuaded the President to talk off-the-record with the Business Council the following week; in return, Obama asked to visit Caterpillar’s factory in Peoria to promote his stimulus plan. That plant was being hard hit with layoffs, so Owens suggested Obama speak at a different factory, but the president insisted on Peoria because it’s the home of Caterpillar’s corporate headquarters.

At the factory, things took a bad turn. Obama declared, “Yesterday Jim . . . said that if Congress passes our plan, this company will be able to rehire some of the folks who were just laid off.” In fact, Owens had said nothing of the kind. As they’d flown to Peoria together on Air Force One, Owens had explicitly stated that the layoffs were an outcome of an international market crash, and the stimulus plan was irrelevant to this particular factory. During a press conference that afternoon, Owens tried to endorse the idea of a fiscal stimulus in general while making it clear that layoffs would persist. When pressed, Owens tried to hedge his answer, but the media portrayed him as calling the President a liar. Within hours Obama’s chief of staff, Rahm Emanuel, excoriated Owens and said that he had torpedoed the President’s entire day and should have just stayed home.

Ripples spread. In an effort to undo the damage, President Obama invited the press to his meeting with the Business Council. Instead of talking off-the-record with Council members, the President delivered a speech to the Council and the press. It was a disaster for everyone involved. A misunderstanding between one executive and the President drove a wedge between the President and leaders of the nation’s business community.

Conflicts like this are common in the upper reaches of powerful institutions. Usually they’re outside the media spotlight; to outsiders, the networks of the powerful seem relatively cohesive and harmonious. We found quite the opposite in our research on leaders. An unintended consequence of increased diversity at the top is that there are far fewer “strong ties” between powerful leaders. Contrary to popular opinion, they did not go to elite schools together (only 14% of those interviewed went to an Ivy League college), nor do they consider one another good friends, as the rancor in Washington makes all too evident.

While increased diversity among the elite brings cross-pollination of ideas and institutions, it also comes with real risks. The President’s conflict with Owens was a surprise to everyone because the two assumed that their casual friendship and shared goal of promoting financial stimulus was enough to guarantee shared talking points on this key issue. But in reality, loose ties are most dangerous when senior leaders have common goals but different frameworks for decision making. As Max Weber might have put it, the President was motivated by an ethic of conviction, doing everything possible to achieve his end goal, which was getting the bill passed. Owens, however, operated out of an ethic of responsibility – the ends were not enough to justify misleading his workers or the press. Both ethical frameworks can be used appropriately, but the lack of a common framework produced a conflict, which in turn generated a series of problems that took much more time and energy to manage than either leader had to spare.

When utilizing loose ties, leaders need to be mindful of divergent commitments, even when they have a common cause. Ultimately, both the President and Owens achieved their ends, but they also damaged the prospect of collaborating in the future. After the incident in Peoria, Owens and his wife were invited to a state dinner (he recalls that President Obama welcomed them “like we were old fellow Illinoisans”). Though the conflict was, on the surface, forgiven, Owens was not reappointed to PERAB. Some fractures go too deep for splints.

Thriving at the Top

An HBR Insight Center




Developing Mindful Leaders for the C-Suite
Meet the Fastest Rising Executive in the Fortune 100
If President Obama Can Get Home for Dinner, Why Can’t You?
To Get Honest Feedback, Leaders Need to Ask

More CEOs Should Tell Anti-Environment Shareholders to Buzz Off

Apple CEO Tim Cook recently said something to a shareholder that you very rarely hear: take a hike. I’m paraphrasing, but only slightly.

At the company’s latest shareholder meeting, a think tank, NCPPR, pushed Apple to stop pursuing environmental initiatives like investing in renewable energy. Cook went on a tirade — or at least what passes for one from the very cool and collected CEO. He made it clear that he makes choices for reasons beyond just the profit motive. As he put it, “If you only want me to make decisions that have a clear ROI, then you should get out of the stock.”

Cook’s gut reaction to defend actions that don’t have a clear ROI is admirable — and he has the legal right to make strategic decisions and investments, as does every CEO. But he missed an important opportunity because much of what he was talking about — particularly investing in renewable energy — does in fact have strong ROI benefits, just not ones we can always measure.

For the sake of argument, let’s put aside the easy environmental wins that pencil out in any ROI calculation: energy efficiency and the increasingly common no-money-down renewables options (using “power purchasing agreements” to lease your roof and pay the solar provider the same, or less, than you currently pay per kilowatt-hour).

That leaves at least three other deep benefits to investing in green power on your own facilities in ways that may take longer to pay back in traditional terms. First, making significant amounts of your own power at zero variable cost is more than nice; it’s a hedge against volatility and smooths out expenses, which makes business planning easier.

Second, generating power, and possibly building ‘microgrids’ to create energy independence for your facilities, offers some serious resilience benefits. Consider Walmart’s significant commitments to energy efficiency and renewables. At one of the company’s sustainability  ”milestone meetings” in 2013, one senior exec said the initiatives would “help us keep our stores up and running no matter how bad the weather is or who else might be down.”

Third, the brand value of walking the talk is significant. Employees, especially the younger ones, increasingly want to see the companies taking these measures — I have one large CPG client making a significant, visible move to renewables at its facilities for precisely this reason. In addition, the story you tell customers can affect sales. One of the largest hotel chains in the world showed me the questions it got from big corporate customers — the ones deciding where to buy hundreds of rooms for big events. The list included multiple questions about whether the hotel chain purchased or used renewable energy.

By creating an energy-price hedge, building resilience, and driving brand value, deep green investments create significant value and thus do have a strong ROI. The problem then is not with the value creation, but with the tool of ROI and how we define it. None of the benefits I mention show up in a traditional ROI calculation, but operating while your grid-based competitors can’t, for example, is a very nice “R” on your “I.” Most importantly, none of these benefits are directly about tackling what NCPPR calls “so-called” climate change. They create direct (and indirect) value for the company aside from the shared benefit of a stable climate.

So ill-informed (or biased) shareholder activists, by demanding that companies like Apple avoid green investments, are actually working against shareholders’ interests (if you believe shareholders are those who want a more valuable company, not those traders flipping stocks in fractions of a second).

Don’t get me wrong about Cook’s statements. I’m thrilled. This was an important moment in business and for CEOs. Pushing back on relentless pressure to do only what seems right in the quarter is critical for success in a volatile world. And he was right in the larger sense that ROI should not drive all decisions. Companies need to invest in innovation and resilience, which may require projects that pay back over longer periods of time or in ways that are not easily measured.

In this way, Tim Cook is onto something important. He is perhaps taking his company down a road to a big pivot, moving away from focusing on short-term earnings only and building longer-term, sustainable value. And he’s building a more resilient company — an idea I explore in more depth in my upcoming cover story for the Harvard Business Review magazine.

The argument I wish brave execs like Cook would make, however, is not just that they can do things that have a public good element. He should say in no uncertain terms that these renewable and green investments are flat out good for business. Full stop.

When It’s Time for the CEO to Go

At a directors’ meeting of a specialty appliance firm I was advising a few years ago, the agenda featured the selection committee’s report presented by Stefan, chairman and CEO. The board members had expected to get a list of the candidates to succeed Stefan, who was past retirement age. However, Stefan informed the board that, despite an extensive search, the selection committee had determined that no candidate was yet qualified: the three insiders needed at least four to six years’ seasoning, while the outsiders (in spite of their outstanding track records) lacked the kind of expertise that would fit the future needs of the company.

After a short discussion, the board agreed that Stefan should postpone his retirement for another four years. Yet several directors remained troubled. Something wasn’t quite right. Were there really no competent external candidates out there? And why did no one in the company qualify? What had happened to the leadership development pipeline all these years? As the company seemed to be on a holding pattern for the past two years, wasn’t it time to bring in somebody new? But was it also possible that the members of the selection committee, knowing Stefan’s attachment to his job, were in reluctant to confront him about succession?

How long should a CEO stay in his job?   The most common response I usually have from CEOs is seven years, plus or minus two. It’s a reasonable number: seven years is probably the period of maximum effectiveness for most people in what can be a very stressful job.   I think also that the nature and challenges of the job evolve over time, going through three distinct phases:

Entry: This is the “honeymoon period”, the one time that a CEO has an open playing field. Most likely, it’s the period when he or she is most willing to learn, experiment, and innovate. It is also the point at which a CEO is prepared to take risks and make major changes, particularly if brought in as an outsider.  During this time the CEO is unlikely to perform at full potential. This is to be expected: many new things have to be assimilated: she has to gain control over a new environment, get to know her various constituencies, and select key lieutenants, the people who will help make it happen. She may also have to “kill” wounded princes, executives who had hoped to get her job.
Consolidation: After a new CEO has established what his or her leadership is all about, in terms of direction, strategy and style, the second phase, the period of consolidation sets in.  If everything has gone well, he will start to see the fruits of all his work in the honeymoon phase. He has alliances with key stakeholders and top executives are committed to the course he has chosen. He has a good working relationship with the board. He delivers good results and is secure in his role.   The traps here, of course, are complacency and rigidity; as they approach the end of this phase, some CEOs start to resist even minor changes.
Decline:  You know that a CEO has reached this stage in the cycle when the company has few or no new products planned for the near future and there are no initiatives to find new markets. Furthermore, there is no new blood coming into the top ranks of organization. Everyone sings to the CEO’s same old tune. The company is probably accumulating a lot of cash because top executives are running out of ideas about how to use it.  It’s during this phase that a CEO starts having problems. He may have stopped listening to other people’s ideas.   The job has become routine.  Performance is slipping.  In a fast paced industry, the problems tend to become apparent quickly; declining CEOs in a relatively stable environment can get away with it for longer.

So what is to be done when a CEO starts to decline?  The best scenario, of course, is if that the CEO himself realizes what is happening, acknowledges his increasing ineffectiveness, and looks for new horizons when the going is still good.  Ideally, that is at the point when they are at that sweet spot of being at the peak of their performance, just before the decline.

But many CEOs find it very hard to admit that the time has come to pass on the baton.  Paradoxically, this reluctance doesn’t mean they stay closely involved; many actually distance themselves from day-to-day operations.   The reason is that because the day-to-day job has become routine, they look elsewhere for mental stimulation.

As long as they stick to safe pursuits (social, environmental or artistic causes, say), this is OK, maybe even reinvigorating.  The danger is that they may instead look for stimulation by involving the company in risky new ventures — typically a big acquisition. This offers a quick and emotionally gratifying solution to the company’s operational inertia (that they’re often aware of) as well as their own sense of inner unrest, anxiety, and boredom.  Deals are exciting, they impress the CEO’s peers, and they allow the CEO to pretend that he’s addressing the company’s growing problems.

It’s precisely at this stage that the board needs to step up.   If the CEO was an exceptional performer during the honeymoon and consolidation stage, this is unlikely to happen; human instinct is to trust the track record.  Over time, the CEO may even have filled the board with people indebted to him or her, who do not really take their review function very seriously. The result is that the board takes action only when things become really catastrophic — by which time it is often too late.

Leadership programs can also provide a form of stock taking. Through reflection — studying  “the leader within” — the CEO can increase his self-awareness and by working in a group he can exchange ideas with peers in similar situations.   Quite often, leaders who engage in this discover that they do in fact want to step down and find another job in a new environment.   Other CEOs take on a role as mentor or leadership coach to younger executives, which is a highly effective way of maintaining continuity in the organization and also helps to reduce the CEO’s anxiety about leaving.

In Stefan’s case, his reluctance and the board’s to contemplate change meant that it was eventually forced on them.  A well-known activist shareholder bought a sizable stake in the company and laid out the case for major change in the financial press. It didn’t take long before he was given a seat on the board.  With the help of fellow shareholders, he pressured the directors to push Stefan aside and appoint a new CEO.

Entrepreneurship Always Leads to Inequality

“Inequality is bad.” “Inequality is dangerous.” “Our system is at risk due to increasing inequality.”

Wealth inequality is on everyone’s minds these days: citizens, political leaders, economists, policymakers and yes, business leaders. Unfortunately, simpleminded thinking and insensitivity are often clouding the conversation. Deservedly vaunted venture capitalist Tom Perkins’ callous, arrogant and elitist recent comments should not serve as an expedient excuse to overlook an important “dirty little secret” about entrepreneurship, the acknowledged engine of economic growth: successful entrepreneurship always exacerbates local inequality, at least in the short run.

The $19 billion sale of WhatsApp’s to Facebook made Koum and Acton, overnight, vastly wealthier than their next door neighbors. The Boston Innovation District’s meteoric real estate prices are pushing the very entrepreneurs who made the district sexy towards neighboring districts where rents have not tripled since 2010. Tel Aviv’s “Cottage Cheese Protests” in 2011 stemmed in part from the entrance of newly-exited wealthy entrepreneurs into the city making it too expensive for “normal folk” to live in, with its nouvelle cuisine restaurants and ten million dollar Mediterranean penthouses blocking the views of the grandmothers whose parents settled the city a century before.  The brand new Google Buses protest movement is fueled by similar fears. Seniors and the disabled worry they’ll be evicted to make room for well-paid and well-paying urbanizing tech workers cum stock-optionees with Tesla parking spaces worth more than a room in a public retirement home. In Seattle, home of Amazon and Microsoft, a protestor waved a sign, “Gentrification Stops Here.”

Inequality, in the broadest sense, is precisely, and perhaps paradoxically, what entrepreneurship is all about: entrepreneurs use their wit and grit to burst into new markets and generate extraordinary wealth, sometimes very quickly, more often over decades. Along the way, entrepreneurship rewards smart and risk-tolerant investors (who helped build the success) with wildly above-market (read: unequal) financial returns. The most successful entrepreneurship is disruptive — a term entrepreneurs these days have donned as a magic mantle: “We have a disruptive business model, a disruptive technology, and will disrupt the market” goes the startup pitch. Amazon has disrupted book stores and other retail chains, Zipcar disrupted car rentals, Netflix is disrupting cinemas and cable companies, Airbnb disrupts hotels, and Bitcoin may disrupt the payment industry. But the meaning of “disruptive” was never meant to be pure and all-positive: its synonyms include “troublemaking,” “disorderly,” “disturbing,” “unsettling,” and ”upsetting.” With all the buzz around disruptive innovation as a driver of business success in recent years, it’s important not to forget this original meaning.

Entrepreneurial success is intrinsically lopsided, a natural outcome of creating extraordinary value for customers. Entrepreneurship — if it succeeds — will always be, by definition, about the top one or two percent. It is about being the best of the best, about jumping over hurdle after hurdle on the way to the gold medal in the Olympics of enterprise, and leaving competitors in the dust.

Entrepreneurship, per se, can create many social goods. It can push innovation, can create dignified employment, can improve quality of life, can contribute to fiscal health through taxes, and does (at least in a few countries, including the US) dramatically boost philanthropy.

As I have argued in my book, successful entrepreneurship can also make housing unaffordable, increase taxes, and elevate the cost of personal services; it can deplete public goods such as education and health by giving the newly wealthy a simple and immediate work around public systems that don’t function well. Entrepreneurship can displace loyal legacy suppliers or products, along the way putting good people out of work, disorganizing and reorganizing supply chains and on the way down, depleting the wealth of the shareholders of deposed market leaders.

So is inequality, when it is directly created by entrepreneurs, good or bad?

For sure, without a system that ensures merit-based mobility, inequality can become a canker that infects and spreads. When the top 1% keep getting richer and the bottom 20% or so lose hope, inequality can become hardwired into a social structure and can keep people stuck, creating a vicious cycle of loss of ambition, loss of success, and loss of worth, both psychological and tangible.

But inequality can also be a great motivator, can fuel ambition, can bolster achievement, and can foster innovation. When my neighbor or friend or fellow citizen embarks on the entrepreneurial venture and is one of the fortunate few who succeed, this also may inspire, ignite my dreams, and shine a light on a new path to accomplishment and upward mobility that was previously obscured.

What should we do? I do not have all the answers, and I do not think there are panaceas. But I am sure that honest, clear-headed dialog will help. I am sure that whitewashing reality and sweeping entrepreneurship’s dirty little secrets under the rug will not help. Blindly ignoring the fact that entrepreneurship creates acute inequality will keep our society from benefiting from entrepreneurship’s positive spillovers and keep us from realistically mitigating its negative spillovers. I am also certain that measures which serve to dampen entrepreneurial ambition are not helpful. And I am equally certain that igniting aspiration — with appropriate education, support, role models, and encouragement — across the spectrum of society will improve our society and economy. If we want growth entrepreneurship, we will have to deal with its inequality as well.

Winning as a Self-Fulfilling Prophecy

The maid-of-honor was consoling the bride, desperately trying to keep her makeup from liquefying. The yacht was perfect, of course, and most of the bridesmaids were there as planned. So what was the problem? No pictures. The photographer was a no-show. Well, the bride would make sure that he never got another high-profile job. And to think, all the best families had raved about his genius.

Two hours later, as they lay desolate on the yacht’s sun deck in the warm tropical air, they heard the roar of twin diesels. Looking up, there in the bowsprit chair of a racing boat was the photographer, Paul Barnett, snapping photos from a long telescopic lens. James Bond with a camera.

But of course! You don’t photograph the wedding party on the yacht itself; too close quarters. You shoot from a separate boat! What a genius. Everything turned out OK – spectacularly, really — in the end.

But let me tell you the story from the point-of-view of my brother Paul, the tardy but brilliant photographer: A desperate realization that he had been told the wrong time; a frantic cab ride to the marina, only to see the yacht heading out to sea; a search for a fast boat; a payoff to a nefarious bad guy; the last-second idea to shoot from the bow-sprit chair strapped in like a marlin fisherman. And then, of course, the usual self-assured act later on, as if to say, “All part of the plan.”

Some people have a way of making things go right, no matter how badly they seem to be going wrong. Why do winners seem to just keep winning?

Social scientists tell us that winners keep winning for several reasons. First off, they may just be better. Quality aside, we know that those with a reputation for past success tend to get disproportionate credit for future wins – the “Matthew effect” described by the sociologist Robert K. Merton. And of course the winners from the past tend to be in the right place to make things happen in the future, and have the connections and resources to make good on those opportunities.

But there may be another reason that winners keep winning, a reason that is particularly useful to understand business leadership: Some people tend to be unrealistically optimistic, a view that sometimes makes itself come true.

The downside of such unrealistic optimism is that it can lead you to be out of touch. But the upside is that an unrealistically optimistic outlook might trigger what’s known as a self-fulfilling prophecy (another idea pioneered by Robert K. Merton).

Social psychologists have been talking about these “positive illusions” for years in terms of mental health outcomes (see the work by Shelley Taylor and her colleagues). But when such views trigger the self-fulfilling prophecy, these illusions have the potential to increase chances of success. As my colleague Andy Rachleff argues, winning helps a leader feel confident in future contests, thereby increasing their chances of winning. Many, many people have commented on Steve Jobs’s “reality distortion field”; Jobs believed in possibilities even when others saw them as unthinkable. Of course, once he believed, then others would too, making his vision more likely to come true.

Paul Barnett could not accept that he would fail. So in a situation where others would throw up their hands and admit defeat, he kept scrambling. Not letting the facts get in the way, the unrealistic optimist expends effort as if victory was within reach, which of course makes that victory more likely. And with every victory, the optimist’s unrealistic view gets confirmed yet again.

The lesson for leadership is clear. We know that a well-informed decision is one that sees reality for what it is. But leadership is so much more than correct calculation. Especially in uncertain times, what the leader believes to be true may end up so through the self-fulfilling prophecy.

A version of this post originally appeared at www.barnetttalks.com.

Do You Need to Lighten Up or Toughen Up?

Which has helped your career more?

A. Positive Feedback

B. Negative Feedback

If you’re like most of the people we’ve recently surveyed, you answered “B.” Praise is always good to hear, but 57% preferred to hear constructive criticism. There’s no mystery why. Practically three quarters of them thought their performance would improve and their careers advance if their managers gave them corrective feedback.

But is that so? Well, sometimes, it would appear. But sometimes not.  As we continue the survey, we’ve sought additional detail, asking which kind of feedback actually has been most helpful in career advancement. (You can participate in the survey and compare your scores to the findings we’re reporting here.)  Over 2,500 people have replied to this question, and it turns out that the pack is fairly evenly split on this question, with 52.5% saying negative feedback was more helpful, and 47.5% saying positive feedback helped them more.

This is something to consider if you’re managing people who fall into both camps, because they’re almost nothing alike.

We can sum up the philosophy of those who favored negative feedback as “What doesn’t kill you makes you stronger.” A whopping 96% of them agreed with the statement “Negative feedback, if delivered appropriately, is effective at improving performance.”  And most believed that negative feedback not only improves the performance of those who receive it but increases the influence of those who give it. Fully 72% of this group agreed that leaders can be most influential in their careers by “giving corrective feedback and advice when mistakes are made.”  What’s more, they tended to view positive feedback as “mostly fluff,” not very helpful — and as something the weak would prefer.

All in all, many people in this group seemed to have an internal fear they may be doing something stupid that is ruining their careers — something everyone else is aware of and no one, including the boss, is willing to speak about plainly.

Those who had found positive feedback more useful as they advanced were adamant about the harmful effects of constant criticism, which they felt created a demoralized work environment in which the leaders’ role was to “catch people doing things wrong.”

Yet even those who preferred positive feedback are not suggesting that leaders should entirely abandon giving negative or corrective feedback. When ask what employees need, 75% said, “Mostly positive feedback, with some corrective suggestions.”  Still, 67% said the best managers “deliver much more feedback, praise, and recognition than negative feedback.”

What prompts a person to fall into one camp or the other? Certainly, individual preference, background, temperament, and experience must play a role. But we did see some broad correlations in our data that give us food for thought.

First, we found a pretty direct, and significant, correlation between which kind of feedback a person favored and how old they were: 64% of those under 30 reported finding negative feedback most helpful, but 60% of those 50 or older preferred positive feedback. So it’s probably not surprising that 57% of relatively lower level (and presumably younger) supervisors preferred negative feedback while 53% of (older) top management favored positive feedback.

We also found that males were substantially more likely to prefer negative feedback (57%), but females were only slightly more likely to prefer positive reviews (at 51%).

Moreover, people’s assumptions about which feedback is most helpful was influenced by their functions, and not always in the way we might have expected. Sixty-six percent of people in quality assurance found negative feedback more helpful, something that might be connected with their professional focus on eliminating defects. Those in legal, operations, finance, and accounting showed a similarly strong preference for negative feedback, perhaps reflecting the importance that anticipating and addressing risk plays in their work. But if so, how to explain why those in sales also show a strong preference for negative feedback? Or that fully 60% of safety officers – arguably those most concerned with risk – favored positive feedback? Perhaps less puzzling is the fact that administrative, clerical, and HR professionals also preferred encouragement to criticism.

National culture seems to have an influence here as well. In the U.K. and the U.S., 53% prefer negative feedback. But an equal percentage in Australia and even more (56%) in Canada, prefer positive input. The countries with the strongest preference for negative feedback were Mexico, New Zealand, France, Switzerland, and Brazil, who report a 60%-plus preference for negative feedback.

Clearly, both positive and negative feedback are essential. Perhaps each works best at different times; certainly each works differently with different people. So, if you are one of those who believe the world would be a better place if people only knew what they were doing wrong, our advice to you is this: “Lighten up.” Only 12% of the people in our research reported being surprised when they received negative or corrective feedback. On the whole, apparently, people in our survey knew what they were doing wrong before anyone told them anything.

But conversely, if you are a person who strives to focus only on the positive and assumes that people don’t need corrective feedback, our advice to you is “Toughen up.” People need to understand boundaries, and they need confirmation from their leaders when they’re doing something wrong. The best leaders provide both varieties of feedback well and have learned to be insightful and selective about when to deliver which sort to which sorts of people.

Draw Your Elevator Pitch

When it comes to a good elevator pitch, brevity and memorability are everything. Most elevator pitches are neither.

One of us (Liza) is a staff cartoonist for the New Yorker, while the other (Deb) is a mentor to many start-up founders.  We got to talking about the problem of crafting a brief, memorable pitch, and the impact of powerful visuals — and began discussing how any new venture or project could benefit from a pithy cartoon that sums up its value proposition. After all, most people are visual learners. And many people — Deb included — turn first to the cartoons when they get their copy of the New Yorker. So why shouldn’t entrepreneurs and intrapreneurs use that human impulse to their advantage?

We see five reasons that cartoons can convey ideas and start conversations better than traditional elevator pitches:

Cartoons force us to distill and prioritize our value proposition down to its simple essence – the real reason customers need what we’re offering.  The exercise of fitting our values into a single, simple drawing forces us to question assumptions, listen to our targeted customers, and get to the fundamental benefit we’re offering.  A cartoon can dramatize the benefit of our product or service from the customers’ perspective — instead of ours, as so many traditional elevator pitches do. Consider this example: 
Humor is disarming.  When people laugh, it’s a form of agreement and consensus, even if it’s just for a moment.  Laughter brings people together and diffuses tension, allowing more open dialog.  This lets us talk about the value proposition with our potential customers, and even investors.  Our potential customers will probably open up more about their wants, needs, jobs-to-be-done because they can see themselves in the cartoon, which is easier to personalize than reading words.  Consider another example: Pictures evoke emotions almost instantaneously and can influence our behavior and decisions while words take a bit longer, literally.  Our brains actually interpret images concurrently while text is processed linearly. This means we understand, remember and retains images (and their meaning) better than words.  Some argue that this is due to the multiple areas of the brain involved in image processing versus language processing.
Cartoons can make A/B testing easier — and more fun.  Since we quickly process the image, we can grasp the value proposition faster and perhaps assess how we’d react.  Draw several different cartoons and captions to test out which ones get to the heart of the customer need and convey value in the most meaningful way.  By testing, listening, and learning, we can iteratively refine our value proposition and show it in ways customers relate to.
Cartoons are memorable.  Research has shown that the best remembered part of any message is the cartoon.  Studies have shown that humans process images 60,000 times faster than text! No wonder we remember cartoons and they impact us. We all have cartoons we remember for various reasons — and you probably remember more cartoons than you do typical bullet-point PowerPoint presentations and now we know why:  we are wired to favor images over text.
Cartoons are a powerful message to rally the troops, to get our people to buy in, support and become passionate about what our customers need.  For decades, images have been used to engage people’s hearts and minds, from  advertising to World War II propaganda posters  to the power of images in social media.  A cartoon provides a common symbol and language for people to share and reference in discussing their jobs, their tasks, their goals and their company’s purpose.

Of course cartoons won’t work for everything. We still need more elaborate reports and presentations for investor pitches, product launch roadmaps, and detailed strategic planning.  Using a cartoon doesn’t replace for these, but can supplement these other formats (and prevent them from being quite so forgettable).

But in many cases, a good cartoon and a pithy caption are all we need to get potential customers to talk, investors to listen, and employees to remember. And stick figures can do; we don’t need to be artists. We just need to be able to think with clarity, concision, and discipline. That’s not easy — but that’s business.