Marina Gorbis's Blog, page 1487

To Make Virtual Teams Succeed, Pick the Right Players

Setting up small, high-performing virtual teams has enormous potential for companies to increase sales, penetrate new markets, improve business processes and come up with the next generation of disruptive innovations. But putting together a great team is tricky.

Part of the problem is that teams—both the virtual and co-located types—are often thrown together without much thought or planning.

At a large, multinational manufacturing company Ferrazzi Greenlight recently worked with, a virtual team was formed to deal with the company’s complex interdependent businesses. The goal was to optimize decision-making all along the value chain and boost earnings by tens of millions of dollars.

But when we looked under the covers it was clear not enough thought had gone into selecting members. The team was huge—more than 30 people—with a mixture of business, manufacturing, and commercial leaders, some of whom reported to each other. Many who were selected (seemingly because of seniority) lacked the deep technical knowledge vital for optimization decisions. By the time we were asked to help, members openly acknowledged that the team was in disarray and its decisions had failed to boost earnings as expected.

As the manufacturer discovered, getting team composition right is critical. That’s especially true for virtual teams, which are more autonomous than co-located teams. Leaders of virtual teams must work harder to develop trust and rapport among team members who lack the frequent informal exchanges and visual and body language cues of co-located teams—vital feedback mechanisms that help keep team members’ efforts aligned.

The manufacturing company is not alone. In many companies, teams seem to come together out of nowhere, grabbing any available resource, operating without adequate planning, and then fail to gel. Months or even years later, senior executives have to face the unpalatable truth: the virtual team that was put together to slash costs is not only dysfunctional, it was a drain on your bottom line.

These problems generally originate at the beginning of the process, when the team is put together. That’s why it’s important to focus on team composition—the size and structure of the team, as well as the skills members bring to the team, including interpersonal skills. These attributes are among the most important predictors of team success.

Small is Beautiful: In my experience working with everything from iconic multinational companies to tiny start-ups, the best virtual team is a small one—under 10 people. Four or five is ideal.

Small is better in part because relatively minor coordination and communication challenges grow exponentially as a virtual team grows. Do the interpersonal math! Inevitably, someone (or a subgroup) feels left out of the loop. Few things erode trust faster than being left out of important communication.

Where input from a wide range of people with expertise in different areas is needed, there’s a strong temptation to put together a virtual team that’s too large. Keeping the core team small while advisory groups gave input on an as-needed basis was more likely to be successful.

Don’t make the mistake of including honorary team members. And team membership shouldn’t be voluntary or outside the normal job. It is the job. Teams with a lot of members who have no real stake in the team’s success almost invariably fail.

Get the Structure Right: When virtual teams come together from a range of functions —say, finance, operations, HR and IT to work on a cost-management initiative—problems tend to arise from a lack of accountability. Leaders may lack formal authority over all members of such a matrixed team, making it difficult to hold them accountable.

I see this a lot, especially in large firms. Virtual teams members are frequently not evaluated on their contributions to the team or on successful collaboration, but rather on their performance within the line of business they represent. This sets up an automatic disincentive to collaborate and has the potential to derail important and innovative virtual team initiatives.

The important takeaway is that leaders of a cross-functional virtual team need to establish clear lines of accountability and uniform performance measures at the outset.

Virtual Work Isn’t for Everyone: Red Giant, a company that develops video special effects software, has gone from being two guys with an idea 10 years ago to a leader in its field by adopting a “no backup plan” mentality. They define the goals for each project, put together small virtual teams and—here’s the big one—give them the responsibility for the success of the project. Each team member shares a piece of that responsibility. “There is no Plan B,” says Micah Sharp, GM of Red Giant, “It’s us.”

Despite the company’s rapid growth, they don’t make team staffing decisions quickly. “We like to date a lot first,” says Sharp, of the 50-person company, 36 of whom work virtually. Micah recognizes that not everybody is suited to virtual work. He says it takes entrepreneurial spirit and initiative as well as technical skills to thrive as a remote worker.

What does it take to succeed as a virtual worker?

Research by OnPoint Consulting confirms that successful virtual employees need to be more self-sufficient than co-located counterparts who can more easily turn to others. Successful virtual team members also tolerate ambiguity better than other employees—everything from that terse email from the boss that might be taken negatively to not knowing project details as quickly as co-located workers.

Virtual workers need to have is excellent communication skills. They have to express themselves well and update project documents quickly and consistently. Distance and time lags are an inevitable downside of working remotely. Virtual employees need to be hyper-vigilant about communicating with everyone else on the team. There’s no room for personality conflicts or information hoarding.

Virtual team workers also need to be more resilient than the average employee. But leaders can’t forget that they have the same need as other employees to feel a sense of purpose in the work they do, and to feel connected to others within the organization. Interestingly, Gallup’s work says a strong predictor of an employee’s productivity is whether they have a best friend at work. Carefully chosen, small teams of self-directed people who engage with each other deeply are the keys to creating high-performing virtual teams.

The Eight Archetypes of Leadership

Although the ghost of the Great Man still haunts leadership studies, most of us have recognized by now that successful organizations are the product of distributive, collective, and complementary leadership. The first step in putting together such a team is to identify each member of the team’s personality makeup and leadership style, so that strengths and competences can be matched to particular roles and challenges. Getting this match wrong can bring misery to all concerned and cause considerable damage.

I was once asked to facilitate in a group coaching intervention for the leadership team at the subsidiary of a large chemical company. A year before Kate (not her real name, the head of the subsidiary) had been moved from head office to take charge. At head office she had always been viewed as a person extremely insightful about personnel decisions. Given her talents in HR, she was seen a good candidate to sort out the mess in that particular subsidiary. It was a big leap in terms of promotion but Kate was given a chance.

Unfortunately, I quickly realized that her tenure had been a disaster. She may have been a good coach but didn’t have what it takes to create greater strategic focus and execute a turnaround. A great amount of money had been spent on consultants and on training a workforce that had no clearer idea at the end of 12 months what they were doing or why. What had dazzled the people at head office had been Kate’s coaching and communication skills. She was at sea, however, in a more operational role.

What can be done to prevent a situation like the one with Kate? There are a number of serious leadership questionnaires that are worlds away from the enneagrams and compatibility tests that litter the coaching circuit. Some of these try to identify certain recurring behavior patterns considered more or less effective in a leadership context. We have also tests to discover whether executives are people or task oriented, autocratic or democratic, transactional or transformational, and variations on all of these. These sorts of questionnaire may be a bit simplistic, but they can help point someone in the right direction on a career or organizational path.

My own approach to leadership assessment is based on observational studies of real leaders, mostly at the strategic apex of their organizations. My aim is to help them see and understand that their attitudes and interactions with people are the result of a complex confluence of their inner theater (including relationships with authority figures early in life), significant life experiences, examples set by other executives, and formal leadership training.

As these influences play out over time, one typically sees a number of recurring patterns of behavior that influence an individual’s effectiveness within an organization.  I think of these patterns as leadership “archetypes,” reflecting the various roles executives can play in organizations and it is a lack of fit between a leader’s archetype and the context in which he or she operates is a main cause of team and organizational dysfunctionality and executive failure.   The eight archetypes I have found to be most prominent are:

The strategist: leadership as a game of chess. These people are good at dealing with developments in the organization’s environment. They provide vision, strategic direction and outside-the-box thinking to create new organizational forms and generate future growth.
The change-catalyst: leadership as a turnaround activity. These executives love messy situations. They are masters at re-engineering and creating new organizational ‘‘blueprints.’’
The transactor: leadership as deal making. These executives are great dealmakers. Skilled at identifying and tackling new opportunities, they thrive on negotiations.
The builder: leadership as an entrepreneurial activity. These executives dream of creating something and have the talent and determination to make their dream come true.
The innovator: leadership as creative idea generation. These people are focused on the new. They possess a great capacity to solve extremely difficult problems.
The processor: leadership as an exercise in efficiency. These executives like organizations to be smoothly running, well-oiled machines. They are very effective at setting up the structures and systems needed to support an organization’s objectives.
The coach: leadership as a form of people development. These executives know how to get the best out of people, thus creating high performance cultures.
The communicator: leadership as stage management. These executives are great influencers, and have a considerable impact on their surroundings.

Working out which types of leaders you have on your team can work wonders for your effectiveness as a group.  It helps you to recognize how you and your colleagues can individually make their best contributions. This will in turn create a culture of mutual support and trust, reduce team stress and conflict, and make for more creative problem solving. It also informs your search for new additions to the team: what kinds of personality and skills are you missing?

Kate’s story had a happy ending. The group coaching session made it clear that the problem was not so much Kate’s lack of ability but rather that team lacked specific leadership qualities.  If the team incorporated an executive with a strategic outlook and who had turnaround skills and experience then Kate’s skills as a communicator and coach would be more effectively leveraged to resolve the subsidiary’s crisis. After talking to the head of talent management at head office we were able to identify exactly such a person, creating a more rounded team and helping Kate to fulfill her mandate.

Raise a Glass to Economic Growth. No, Wait…

Beer drinking appears to have a negative impact on economic growth: A 1 gallon increase in per-capita beer consumption is associated with a 0.48 percentage point decrease in per-capita personal-income growth, according to a study of more than 30 years of data by Resul Cesur of the University of Connecticut and Inas Rashad Kelly of the City University of New York. Taxes on alcohol help pay for the costs that drinking imposes on society, such as lost productivity and increased disability; approximately doubling taxes on beer would potentially increase personal-income growth by 0.43 percentage points, the researchers say.

There’s No Such Thing as a Culture Turnaround

Company culture changes very slowly, so efforts to do an about-face are inevitably a waste of time and energy: Organizations either declare victory prematurely or, in frustration, abandon the attempt.

You’re better off thinking of your cultural situation as an underpinning you’ll have to work with over time. It will evolve, but more slowly than other elements of your enterprise, such as a new operating model. You can shape your culture, however—and you can make better use of it by altering or adopting a few key behaviors.

That’s what one client of ours, a large industrial manufacturer, did to accelerate its recovery from severe financial distress during the recession. This example from the past is particularly instructive because we now have the distance to see how a few behavioral changes not only improved performance right away but also are having a longer-term impact on the company’s culture.

At the height of its troubles, this manufacturer was hamstrung by a risk-averse, slow-moving culture. At the time, the interim CEO assumed he wouldn’t be there long enough to “turn around” the culture—and in a sense, he was right. But we worked with his senior team to better understand the existing culture and to foster three key behaviors that would improve performance.

First, the management team started making significant, visible decisions—for instance, canceling a major product line expansion—in a matter of weeks instead of years. Next, several senior executives conducted small-group discussions with informal leaders in the organization about which cultural traits needed attention—something they’d rarely done in the past for fear of either wasting time or meddling outside their formal jurisdictions. They also put more in-house people in direct contact with customers more of the time.

Those adjustments have helped the company cultivate three traits—speed, risk-taking, and accountability to customers—deemed essential to its success.

All leaders can learn from this example: Target a few behaviors that will immediately energize the elements of your culture that are critical to moving your business forward. It is surprising how rapidly you can revitalize existing cultural traits if you concentrate on the right behaviors. Though it takes a bit of time and patience, viral spreading among informal leaders is a lot faster than programmatic spreading through redesign. Here’s what you do: 

1. Find a theme. Summarize, at a very high level, what you’re trying to accomplish. This is important because the critical behaviors manifest themselves differently, and you need coherence across groups and levels in the organization. In our example, the unifying theme for behavioral change was customer-centricity and responsiveness.

2. Don’t claim victory too soon. Because culture is always slowly evolving to fit strategic and operating priorities, it’s not an endpoint. Rather, what you’re ultimately aiming for is better business performance. And existing cultural forces can fuel the behaviors you’re trying to adopt in your organization. For example, legacy pride, engineering excellence, and design elegance helped energize and sustain newly identified key behaviors in the case of the industrial manufacturer. In other words, your organization’s culture is a fundamental source of energy that will help secure an emotional commitment from your employees, which is essential to making behavioral changes take root.

3. Enlist the help of informal leaders. Seek out the “influencers” in your organization, and ask them how they persuade, inspire, and mobilize their colleagues. They can tell you what works—and what doesn’t. They’ve learned through experience how to work with, not against, the underlying culture to garner support and make things happen. Business unit heads and HR can help you identify these informal leaders, but they aren’t very hard to spot. You’re looking for people who get things done in the organization. Learn from them; they know a lot more about the existing culture than you do, and more than any survey could uncover. Note that they aren’t necessarily your high potentials. They are authentic informal leaders who connect with people emotionally as well as rationally. In our example, what began as a smaller band of informal leaders became several groups of pride builders at the company. By treating these influencers as cultural advisers and tapping them for guidance, senior managers found ways to get more people across the company in direct contact with customers. As a result, customer satisfaction and sales numbers have improved.

4. Remember that cultural forces don’t go away. You can rekindle elements of a previous culture that produce feelings of pride, commitment, and collaboration, but you can’t kill an existing culture. And you shouldn’t try to. Just about every culture contains some elements you don’t want to lose.  Instead, work with your influencers to think about which behaviors you need, to articulate them, and to persuade people to embrace them.

5. Start now. Leaders often say they have other things to do first—then they’ll get to culture. Or they want to wait for new leadership, or a new governance structure. Do not wait. The time to understand your cultural situation is now. It will influence everything else you’re doing.

Culture That Drives Performance

An HBR Insight Center




The Three Pillars of a Teaming Culture
Three Steps to a High-Performance Culture
If You’re Going to Change Your Culture, Do It Quickly
As a Leader, Create a Culture of Sponsorship

Four Keys to Thinking About the Future

A publishing company has discovered that one of its well-known authors has plagiarized. The publisher has pulled the title. But does the publisher’s responsibility end there? Does one disclose the transgression to the public? Or to the author’s university employer? Or insist that the author do so him/herself?

Dilemmas are situations that require us to make a choice between equally unfavorable options.

I recall an instance as President and CEO of Radio Free Europe/Radio Liberty (RFE/RL) when I was informed by my security chief — he and I both held top secret security clearances — that one of our journalists had once worked undercover for a hostile intelligence service. Mind you, while the discovery was recent, this transgression had occurred years ago. The intelligence service (and regime) had since ceased to exist. In the meantime, the journalist in question had become a respected colleague. What to do with the fellow? Dismiss him? On what grounds? And to what effect inside the company?

Confronting ambiguity is one of the issues that came up time and again in a symposium I had the pleasure of convening recently with the Harvard Business Review and the Sidney Harman Academy for Polymathic Study at the University of Southern California. The day-long symposium, called “The Next Big Thing: a Historical Approach to Thinking about the Future,” included a small, formidable mix of business leaders, technologists, historians, economists, defense experts, pollsters, and philosophers.

We all think about the future, but my first conclusion from this London gathering was that some people are better equipped than others to see it. Reflecting on the discussion, my own conclusion is that, if you want to become more prescient, you should do four things:

1. Enhance Your Power of Observation. For starters, be empirical and always be sure you’re working with the fullest data set possible when making judgments and discerning trends. Careful listening, a lost art in today’s culture of certitude and compulsive pontificating, can help us distinguish the signal from the noise.

In fact, read Nate Silver’s 2012 book, The Signal and the Noise : Why Most Predictions Fail – but Some Don’t. Also see psychologist Maria Konnikova’s 2013 Mastermind: How to Think Like Sherlock Holmes. Drawing on recent research from psychology and neuroscience, Konnikova presents ways to sharpen one’s methods of observation and deductive reasoning. I also recommend the essay “The Power of Patience” in the current issue of Harvard Magazine. Art historian Jennifer L. Roberts has her students spend what appears at first to be an excruciatingly long period — three hours! — with a painting in a gallery. “It is commonly assumed,” observes Roberts, “that vision is immediate. … But what students learn in a visceral way in this assignment is that in any work of art there are details and orders and relationships that take time to perceive.” Ditto in any shifting business environment.

2. Appreciate the Value of Being (a Little) Asocial. I had a colleague once, a distinguished China scholar, who eschewed conferences and professional gatherings. His logic was simple. He was convinced that this otherwise entirely pleasant socializing and socialization led invariably to a kind of groupthink among the community of experts. “Thinking outside the box,” is one of the most well-worn clichés in any business or creative endeavor. We all prize it. Yet how do you actually do it, when life and livelihood generally depend on operating inside a box?

I’m convinced that a company culture that encourages curiosity is vitally important. Read the essay by Rutgers historian James Delbourgo in The Chronicle of Higher Education on “Triumph of the Strange” and Brian Dillon’s volume of essays titled Curiosity: Art and the Pleasures of Knowing. Curiosity keeps us learning and helps us, like the virtue of patience, to see the hidden, or understand the unexplained.

3. Study History. Do this not because history repeats itself, but because history often rhymes, as Mark Twain put it. The rhymes may be about social patterns, the impact of technology, or how nations tend to adapt. Charles Emmerson of Chatham House was a member of our roundtable. He’s the author of 1913: In Search of the World Before the Great War, a recent book that depicts a civilization a century ago that was interconnected and fragmented, cosmopolitan and chauvinistic, prosperous, decadent, and in danger of decline. It sounds similar to the situation of the West today.

I think you study history to study human nature, the human condition, and human behavior. This is the realm of patterns, but also — frustratingly and fascinatingly — of infinite complexity and unpredictability. Apart from the intrinsic beauty, power, and simple enjoyment, it’s why reading great fiction is to be commended. HBR writers have more than once made the business case for reading literature. Training in emotional intelligence is life-long work, and most of us need as many tutors as possible.

4. Learn to Deal with Ambiguity. A banker in our group emphasized the importance of this. Whether it’s nature or nurture, most of us seem hard-wired to sort the world into simple binary choices. Alas, there’s often lots of grey out there. I’m not sure what the publisher ended up doing in the case I cited at the outset. Nor am I at liberty to reveal my own decision regarding that former intelligence officer. But those are matters of the past anyway. Thinking about the future, here’s a final reading tip. It’s the 1992 novel Einstein’s Dreams by MIT physicist Alan Lightman. I’m fond of this passage:

In this world, time has three dimensions, like space. Just as an object may move in three perpendicular directions, corresponding to horizontal, vertical, and longitudinal, so an object may participate in three perpendicular futures. Each future moves in a different direction of time. Each future is real. At every point of decision, the world splits into three worlds, each with the same people, but different fates for those people. In time, there are an infinity of worlds.

Consciously attempt to act on these four pieces of advice and I think you can only get better at anticipating the big things (and small things) that will come next.

Of course, the wisest among us will always hedge our forecasts with qualifiers such as “will likely” or “is apt to.” Life is seldom linear and best estimates frequently become undermined by those eternal “unknown unknowns.”  But don’t let them stop you from preparing for an uncertain future by learning more from the past and present. Think long, think deep, think laterally — and brace yourself. 2014 is nearly upon us.

What Boards Can Do About Brain Drain

Not only are individual companies and industries battling for talent, but countries are, too. In the global competition for top talent, emigration of highly skilled workers —brain drain — can result in an especially pernicious drag on the source nations’ talent pools. Many countries are susceptible to flights of talent and experience its deleterious effects.

We wanted to take a deeper look at this phenomenon, so we chose a country that has been experiencing substantial losses of highly skilled talent for many decades: New Zealand. In fact, the Organization for Economic Cooperation and Development (OECD) estimates that almost a quarter (24.2%) of all New Zealanders with university-level educations have emigrated. Among OECD nations, only Ireland has suffered as much brain drain.

Consider how the talent exodus is playing out New Zealand: between 2012 and 2013, the country’s researcher headcount (per million of the population) dropped by almost 11% and its ranking in the Global Innovation Index dropped four slots. Given that innovation can be a highly influential driver of competitive advantage, how can New Zealand build or maintain any advantage while losing so many of its best and brightest?

As labor markets continue to open up and nations and the corporations they house chase ways to stem the talent drain and retain their skilled workers, we wanted to know how those at the highest level of industry — corporate directors — viewed the problem and what, if anything, they were doing about it.

Global Disconnect

In 2012, we surveyed (in partnership with WomenCorporateDirectors and Heidrick and Struggles) more than 1,000 board members in 59 countries including New Zealand. To facilitate a deeper dive into corporate governance in New Zealand, we administered the survey to a second wave of New Zealand directors between December 2012 and March 2013 to increase the sample size. We analyzed the data along several dimensions and for this analysis compared a breakout of New Zealand directors with their global counterparts.

Our analysis found that “attracting and retaining top talent” was their number one strategic concern as it was for directors across the globe.  “Innovation” and the “regulatory environment” were top concerns for both groups, but in what seems to be a strategic non sequitur New Zealand directors were substantially less concerned about global competitive threats than directors globally. We found this surprising given that brain drain leaves the flight country vulnerable to competitive threats.

One other difference of note: although risk management was somewhat more of a concern for New Zealand than global directors, a substantially smaller percentage of New Zealand board members (13% versus 29% globally) indicated that their companies had a Chief Risk Officer in place.

We also asked the directors to assess their companies’ performance on talent management by evaluating the following nine practices:

attracting top talent
hiring top talent
assessing talent
developing talent
rewarding talent
retaining talent
firing
aligning talent strategy with business strategy
leveraging diversity in company’s workforce

To gain advantage in the war for talent, companies should execute superbly on each of these dimensions, but when talent is fleeing outstanding execution is essential. Therefore, we were not interested in uncovering the percentage of directors who thought their companies were doing an adequate job but rather the number who could say their companies were doing a great job — those who “strongly agreed” their companies were performing each practice effectively.

Our analysis revealed very low scores for both New Zealand and global companies. In fact, not more than 20% in either group could say their companies were doing a great job on any one practice, and, further, the percentage of New Zealand directors who described their companies’ talent management as “great” was mired in the single digits for six out of the nine practices.

Although the New Zealand and global scores were similar for most practices, there were two with a noteworthy difference: retaining and rewarding talent. When we consider these differences within the context of the ongoing brain drain from New Zealand, they make sense. And although many factors influence the rate of talent flight, the lure of higher paying jobs and greater earning potential outside of the home country is a very important factor and has played a role in the emigration from New Zealand of its highly skilled workers.

  Talent Trouble at the Board Level

In addition to uncovering a considerable deficit of outstanding talent management practice in New Zealand companies, our analysis also revealed that New Zealand boards are not doing a great job managing their own talent. Fifty-eight percent said they did not have an effective board succession planning process for directors, fully 60% said there were skills missing on their boards, 42% said their board did not have an effective means to address poorly performing directors, 25% could not say that all board members were well prepared for meetings, and only 35% agreed that their boards provided effective training for new directors

We also discovered that, on average, New Zealand directors served on more boards during their careers, sat on more boards concurrently and served for longer periods than their global counterparts. Although more research is needed to better understand the factors influencing board service, these differences might suggest that, in addition to closed networks, New Zealand boards are drawing from a smaller talent pool because of brain drain, that is, many New Zealanders who would be qualified to be directors have left the country.

In order to keep their companies viable and competitive, our research revealed that corporate directors in New Zealand, like their global counterparts, were most concerned about attracting and retaining top talent. Yet, as our data made plain, directors said their companies were not doing a great job on retention. Although the global scores for executing well on retention were very low (17%), they did not even reach double digits in New Zealand (8%), a country blighted by talent flight.

If one of the keys to successful hiring is successful retention, the key to implementing great hiring and retention practices is great corporate governance. But it is unlikely boards will be able to improve their companies’ talent management practices until they fix their own. As our analysis uncovered, boards need to improve many of their key talent practices, e.g., succession planning, identifying and appointing directors with the skills their boards need, effectively onboarding and training new directors, and managing board dynamics.

Change starts at the top and boards need to be the exemplars for their organizations by providing leadership, stability and effectively executing their own talent management practices. It seems that some boards may, unfortunately, not be offering solutions within the realm of their gigantic talent management problems, but rather, contributing to them.

Methodology

We surveyed more than 1,000 board members in 59 countries. Groysberg and Bell administered the survey to a second wave of New Zealand directors between December 2012 and March 2013. We analyzed the data along several dimensions including geography and specifically for this analysis we did a New Zealand and Global breakout.

Talent and the New World of Hiring

An HBR Insight Center




The American Way of Hiring Is Making Long-Term Unemployment Worse
We Can Now Automate Hiring. Is that Good?
Learn How to Spot Portable Talent
Why Japan’s Talent Wars Now Hinge on Women

The Danger of Turning Cynical About Silicon Valley

Silicon Valley is losing its luster, at least among elite opinion-makers. An increasing number of critiques have been mounted in publications as diverse as The New Republic, The Weekly Standard, and Wired (to name only a few) based on charges of sexism, conspicuous consumption, inequality, and an attitude toward government and social problems ranging from naivete to disdain. Reports of an entrepreneur trying to teach a homeless man to code and, most recently, of one ranting publicly against the homeless haven’t helped. Perhaps most damning to entrepreneurs, inclined to pride themselves on what they produce, is the charge that many of the products Silicon Valley has been churning out are trivial.

Most of these critiques have merit, particularly those based on gender. But the economic case against startups is prone to overreach and represents a dangerous kind of cynicism. Tech entrepreneurs are not merely akin to Wall Street bankers, a younger, less formal set of oligarchs in waiting. Startups are an engine of prosperity, albeit a highly imperfect one. And if America’s media and cultural elite choose scorn over engagement, the whole economy will suffer.

Perhaps the most complete case for the wave of media disillusionment with startups is a September article in The New Republic by Noreen Malone who asks whether “tech entrepreneurs [are] replacing Wall Streeters as the rich bad guys in the popular imagination.” While noting that this doesn’t seem to be the case with respect to the public — both the computer and internet industries poll favorably — she documents at length the rise of “tech hate” among journalists and other commentators, including HBR contributor Umair Haque:

“Tech is something like the new Wall St. Mostly white mostly dudes getting rich by making stuff of limited social purpose and impact,” economist Umair Haque argued on Twitter. Tech-world denizen Jesper Andersen tweeted a similar sentiment: “Change ‘startup’ to ‘hedge fund,’ ‘ecstasy’ to ‘cocaine’, and ‘douche-bag’ to ‘douche bag’ and you too can see SF is just another Wall St.” Or this, from Mother Jones’ Clara Jeffrey: “I saw the best minds of my generation building apps to send sexts and brag about fitness and avoid the poors.”

By this logic, there’s no reason to applaud the growing number of graduates from top universities opting for jobs in startups and tech rather than finance. This equivalence is too cynical by half.

Though venture capital funds account for only about 0.2% of U.S. GDP, according to Harvard Business School professor Josh Lerner, venture-backed companies made up more than 11% of public firms as of 2011, with a total market value of $25.9 trillion. Moreover, those public firms employed 6% of the public-company workforce. Compared to the small amount we invest in them, startups have an outsized impact on the U.S. economy and on employment.

Of course, Wall Street also looks pretty good when dollars are considered a proxy for value created; a growing line of research argues that the increasing financialization of the economy is holding back overall economic growth. Could the same be true of the entrepreneurial sector? Quite the contrary. Though economic growth remains a highly uncertain area of study, virtually all economists agree that technological innovation plays a central role.

Tech startups play a critical role both in driving technological innovation forward and in bringing it to market. As Lerner writes, “Venture funding does have a strong positive impact on innovation. On average, a dollar of venture capital appears to be three to four times more potent in stimulating patenting than a dollar of traditional corporate R&D.” And the level of entrepreneurship predicts economic growth at a city level, even after accounting for numerous confounding variables.

How does all this square with the intuition that products and services like Snapchat aren’t the most valuable use of the tech sector’s time?

Actually, one line of thinking suggests that typical economic indicators drastically underestimate the social value of cheap internet-enabled entertainment. But the simplest answer is that while consumer-facing apps get most of the press, they’re only one piece of the startup ecosystem. Last quarter, within the dominant “Internet” category, the most venture capital deals were done in the areas of business intelligence and analytics, followed by advertising, HR and workforce management, and customer relationship management — all ways of using the Internet to make other businesses more efficient. By contrast, only 2% of deals went to social companies. Even in the mobile category, the number of deals in photo startups trailed behind CRM, analytics, and payments. And while Internet and mobile have together accounted for the bulk of VC deals in recent quarters, healthcare still represents a substantial chunk — 13% of deals and 16% of dollars in Q3.

The positive economic impact of the startup sector in no way diminishes the merit of other critiques against it, but recommends an approach that seeks to improve the industry rather than discredit it. Addressing Silicon Valley’s gender and class problems becomes even more urgent when one realizes the outsized role that the ecosystem plays in defining our economic lives.

Building useful products may not be the same thing as saving the world, but neither is it the same as doing nothing. Let’s not lose sight of the difference.

The Three Pillars of a Teaming Culture

Building the right culture in an era of fast-paced teaming, when people work on a shifting mix of projects with a shifting mix of partners, might sound challenging – if not impossible. But, in my experience, in the most innovative companies, teaming is the culture.

Teaming is about identifying essential collaborators and quickly getting up to speed on what they know so you can work together to get things done.  This more flexible teamwork (in contrast to stable teams) is on the rise in many industries because the work – be it patient care, product development, customized software, or strategic decision-making – increasingly presents complicated interdependencies that have to be managed on the fly.  The time between an issue arising and when it must be resolved is shrinking fast.  Stepping back to select, build, and prepare the ideal team to handle fast-moving issues is not always practical. So teaming is here to stay.

Today’s leaders must therefore build a culture where teaming is expected and begins to feel natural, and this starts with helping everyone to become curious, passionate, and empathic.

Curiosity drives people to find out what others know, what they bring to the table, what they can add.  Passion fuels enthusiasm and effort.  It makes people care enough to stretch, to go all out.  Empathy is the ability to see another’s perspective, which is absolutely critical to effective collaboration under pressure.

The leader’s task is to model these behaviors.  When leaders ask genuine questions and listen intently to the responses, display deep enthusiasm for achieving team goals, and show they’re attuned to everyone’s diverse perspectives no matter their position in the hierarchy, curiosity, passion and empathy start to take root in a culture.  When you join an unfamiliar team or start a challenging new project, self-protection is a natural instinct. It’s not possible to look good or be right all the time when collaborating on an endeavor with uncertain outcomes.But when you’re concerned about yourself, you tend to be less interested in others, less passionate about your shared cause, and unable to understand different points of view.  So it takes conscious work to shift the culture.

Consider the case of Julie Morath, a pioneer in launching an ambitious patient safety initiative at Children’s Hospital and Clinics in Minnesota, long before such efforts became widespread in the industry. To get employee attention, she gave speeches about patient safety and met one-on-one with opinion leaders throughout the organization. But still, staff resisted the change effort, confident that the hospital didn’t really have a problem. Instead of using her position to argue her position more forcefully, Morath responded to the pushback with questions. “What was your own experience this week, in the units, with your patients?” she asked thoughtfully. “Was everything as safe as you would like it to have been?”

This simple inquiry transformed engagement, and started to shift the organization’s culture to one in which people started teaming up to improve safety. Morath’s simple questions made the staff realize that most of them had been at the center of a health care situation where something did not go well and the hospital could indeed be doing better. She went on to lead as many as 18 focus groups to allow people to air concerns and ideas. As everyone began to discuss the incidents they’d experienced, it became clear that their experiences weren’t unique or idiosyncratic; many of them had similar stories.

In short, Morath’s display of curiosity helped others deepen their own understanding of the organization’s processes and results.  She was passionate about patient safety, and her passion was infectious.  Finally, her empathy was unmistakable, extending not just to the patients whose lives would be saved by higher quality care but also to the employees who needed to team up under pressure day in and day out.

Culture That Drives Performance

An HBR Insight Center




Three Steps to a High-Performance Culture
If You’re Going to Change Your Culture, Do It Quickly
As a Leader, Create a Culture of Sponsorship
Ferguson’s Formula

10 Sustainable Business Stories Too Important to Miss

Somehow it’s already year-end, a time to look back and try to make sense of what’s happened. Creating any “top” list of stories from 12 months is nearly impossible. But as I’ve done for the last 4 years, I’ll attempt to summarize some of the latest stories about the big environmental and social pressures on business, and how some innovative companies are dealing with them.

This year, like recent years, saw some continuation of big trends: with a few exceptions, the international policy community keeps failing to come to a meaningful agreement on climate change; carbon emissions just keep rising; transparency is increasingly unavoidable and keeps gaining technology-enabled traction; pressure from big companies on their suppliers keeps going up.

So what’s really new this year? Let’s dive in.

The Big Picture

1.  The science of climate change gets clearer: the IPCC lowers our carbon “budget.”

The Intergovernmental Panel on Climate Change (IPCC) issued its wonky, but readable, Summary for Policymakers (a precursor to the full 2014 report). The report expresses “near certainty” that humans are causing climate change and calculates how much more carbon we can “safely” put in the atmosphere and hold to the 2-degree warming threshold that the world’s leaders have agreed to (and some scientists are suggesting that even the 2-degree threshold is too high).

The short story is that we have less room than before. PwC’s annual Low Carbon Economy Index report concluded that we must lower global carbon intensity (the amount of carbon produced for every dollar of GDP) by 6% per year until 2100, a percentage point lower than last year’s report recommended.  On the upside, similar calculations from WWF and McKinsey suggests that this pace of change –they endorse a 3% reduction in absolute emissions per year through 2020 – will actually be very profitable.

2.  The reality of climate change and pollution get scarier: Australian heat, Philippine devastation, and Chinese air pollution all break records.

The models and carbon budgets aside, the weather this year got even more extreme, helping make the case for action in a more visceral way. In January, Australia’s meteorologists had to add new colors to weather maps to deal with temperatures ranging up to 54 degrees Celsius (129 degrees Fahrenheit). And in November, after the Philippines faced the most powerful storm ever recorded to hit land, some climatologists suggested we add a “Category 6” to the top end of the storm scale.

While it’s impossible to tie any single weather event to climate change, the complicated correlation got clearer this year. The National Oceanic and Atmospheric Administration concluded that “high temperatures, such as those experienced in the U.S. in 2012, are now likely to occur four times as frequently due to ­human-induced climate change.”

In parallel, China’s air became, at times, dangerous and unbreathable. Several cities experienced days with small-particle air pollution running 25 to 40 times higher than the World Health Organization’s recommended limit.  This may seem like a regional story, but it has global ramifications for manufacturing, consumer goods, the energy industry, and much more.  The world’s most populous country is taking increasingly drastic action, such as slashing Beijing’s new sales quota for cars by 40%.

3. The clean tech markets keep growing fast: three of the world’s biggest economies — the U.S., Germany, and Walmart — add lots more renewable energy.

In October, 99% of the new energy added to the grid in the U.S. came from renewables (solar alone was 72%). Germany keeps breaking its own records, with wind and solar providing 59% of the country’s energy one sunny day in October. And America’s wind power has quadrupled over the last 5 years; wind is now generating enough electricity to power the state of Georgia.

In addition, electric and hybrid cars are about 4% of US auto sales now, a doubling of market share in the last couple of years. Companies are increasing investments as well. Walmart, already the largest private sector buyer of solar power in the US (with more solar capacity than 38 U.S. states), committed to a 600% increase in renewable energy by 2020.

4.  Deep concerns about labor conditions, wages, and equity take root: From tragedies in Bangladeshi apparel factories to minimum wages in the U.S.

Travesties like the death of more than 1100 workers at the Rana Plaza apparel factory in Bangladesh are increasingly unacceptable to the buying public. And it’s getting harder to hide how connected we all are to these workers. When the news hit about the loss of life, front pages around the world included the names of major brands that depended on the factory to make their goods. A startup called Labor Voices is now collecting information on working conditions in Bangladesh and elsewhere in a shockingly simple way: by giving workers a number to call from their cell phones, which everybody now has.

European companies are doing more than U.S. peers, at least publicly, to commit to higher safety standards. Swedish retailer H&M recently said it would pay a “living wage” to 850,000 workers in its supply chain by 2018 – a somewhat vague, but important announcement.  And to be fair, while U.S. companies haven’t been as clear, Walmart has contracted with Labor Voices to gather data on its 300+ Bangladeshi suppliers and subcontractors.

On the other side of the ocean, though, Walmart, McDonald’s, and many others are facing increasing challenges about minimum wages. Watch this space, as it seems unlikely that this debate will go away.

5.  Food and food waste gets more attention, debate, and innovation: Can cows save the world, or should we make meat in labs?

The level of concern about how we’re going to feed 9 billion people by 2050 is rising. Food waste also got more attention: a UN report estimated that the world throws out $750 billion worth of food annually.  Food is too big a topic to summarize, but a few stories grabbed my eye this year. Fenugreen, a smart startup that won the Sustainable Brands Innovation Open in June, sells sheets of paper made with natural ingredients that fight food decay – they can keep fruit and veggies from going bad 2 to 4 times longer than they would last normally.

On a different front, Biologist Allen Savory made a splash with a much viewed TED talk about how grazing cattle in a way that fertilizes land and sequesters carbon can fight desertification and climate change. His theory is under attack, at least to the extent that his method could make a significant dent in our climate problem. Wherever the science on this ends up, it’s an important discussion that brings more focus to systems thinking and to the nexus of food, energy, and water.  Finally, a quirky, totally different meat story was fascinating. Billionaires Bill Gates and Sergey Brin are funding experiments to grow meat in labs, a process that – once people get past any “ick” factor – could greatly reduce the footprint of producing meat-based protein.

What Companies Are Doing

6.  (Some) businesses get off the sidelines in the climate policy fight: Hundreds of companies sign onto the Climate Declaration.

Started by the NGO Ceres, as part of its Business for Innovative Climate & Energy Policy (BICEP) initiative, the Climate Declaration is a broad statement of intent that acting on climate will be good for our economy and society.  A large range of leading companies have signed on including Diageo, ebay, EMC, Gap, GM, IKEA, Intel, Microsoft, Nestle, Nike, Portland Trailblazers, Starbucks, Swiss Re, Unilever, and many more.  The Declaration itself is directional and not as specific as what Ceres and a subset of these signatories advocate for as part of BICEP’s work (like pricing carbon and aggressive energy efficiency programs). But it’s a very good start and demonstrates that the business community is not against tackling climate change.

In related news, Accenture produced a fascinating survey of 1000 CEOs around the world, in which a surprising 83% agreed that government should play a critical role in enabling the private sector to advance sustainability. And 31% even supported “intervention through taxation.” In a world where business generally fights all regulations and government interventions, it’s astonishing that one third of global CEOs basically said, “tax us.”

7.  Companies are aiming higher, for themselves and their partners: Dell, Coca-Cola, Lego, and many more set very aggressive environmental and social goals.

Goals are not the same as outcomes but they matter a lot – they set the bar within sectors, driving competition and performance.  As part of its 2020 Legacy of Good Plan, Dell said that it’s aiming to get a 10-fold multiple of good (reduced footprint, for example) from its technologies versus the impacts of making them (mimicking BT’s earlier 3:1 “Net Good” goal).  More specifically, the company pledged to reduce its greenhouse gases by 50% and product energy intensity by 80%.

Coca-Cola launched its own 2020 goals including reducing value chain carbon emissions by 25% (per drink), recovering 75% of bottles and cans, and replenishing 100% of the water the company uses. And Lego just announced its intention to use 100% renewable energy by 2016.  A few companies have already made incredible progress, including Diageo, which, I reported earlier this year, cut its North American GHG emissions by nearly 80%.

In fact, 75% of the world’s largest companies now have multiple environmental and social goals in place (see my new website, www.pivotgoals.com, a searchable database of 2500 environmental and social goals set by the world’s largest companies). In addition, my research shows that more than 50 of the top 200 companies have even set carbon goals in line with PwC’s 6% per year reduction recommendation.

A few companies have begun to extend their goals to their suppliers, a form of what I’m calling “de facto regulation.” Walmart is phasing out 10 toxic chemicals in the products on its shelves, and HP set a carbon reduction goal of 20% for its supply chain.

8.  Sustainable companies are winning the talent wars: Unilever ranks 3rd in LinkedIn’s list of in-demand employers.

Just consider LinkedIn’s top 20 most in demand companies (in order): Google, Apple, Unilever, P&G, Microsoft, Facebook, Amazon, PepsiCo, Shell, McKinsey, Nestlé, Johnson & Johnson, BP, GE, Nike, Pfizer, Disney, Coca-Cola, Chevron, and L’Oréal. The tech companies make sense given the platform (and they’re cool brands). But the rest are perennially in-demand employers, such as big consumer brands and top destinations for MBAs (McKinsey) and engineers (Shell).

But what’s surprising is Unilever’s rank — for a company not nearly as well known as the others, it came in just behind two of the hottest, most valuable companies in the world, and ahead of much better known brands like Disney, Nike, and Coca-Cola. Executives at Unilever credit their ranking to the company’s known leadership on sustainability. It’s hard to argue the point.

9.  Systems innovation starts to take root: NIKE, NASA, USAID, and the Department of State create LAUNCH.

LAUNCH is an initiative to identify and accelerate innovations that help solve global problems with water, health, energy, waste, and systems. This program is new so it’s unclear what the impact will be, but it’s an interesting and indicative story for two reasons. First, look at the partners — what a weird, wonderful mix of business, government, and scientific organizations. Second, the goal is really systems change, and if we’re going to solve the mega challenges in our midst, we need to work across value chains and traditional lines.

10. Better tools for companies to assess “materiality” get closer: SASB releases its first sustainability accounting standards.

The Sustainability Accounting Standards Board has been plugging away, drawing together executives from the world’s largest companies to develop the right sets of questions – specific to each sector – that will help leaders identify which environmental and social issues are really material to their business. We’re very early in this journey, but SASB produced the first set of guidelines for one sector (health care). Watch this space.

2014 and Beyond

Will the divestment movement continue to gather steam and put significant pressure, either financial (unlikely) or moral (much more intriguing), on fossil fuel companies?
Will all the talk about building a circular economy gain mainstream acceptance?
Will we get better at valuing natural capital (and will companies and markets care)? It certainly garnered lots of attention this year, with new estimates of the damage the global economy does to natural assets (trillions), new tools to measure natural capital, and an important new book from former Goldman partner and CEO of The Nature Conservancy, Mark Tercek.
Can challenges to our consumption-driven model go gain currency? Patagonia continues to launch programs like its Responsible Economy initiative and a backlash to Black Friday, “Worn Wear,” which suggests that we should enjoy what we already own.
Will the resilience push take hold? New York City released a $20 billion plan to get the city ready for more extreme weather — will companies embrace the risk-reduction benefits of different thinking and planning?
Finally, why haven’t more companies followed some of the recent sustainability leaders? Paul Polman at Unilever stopped providing quarterly guidance a few years ago so the company could focus on real value creation. And Microsfot and Disney remain really the only two big companies charging their own divisions a carbon fee (yes, as CDP recently reported, and the New York Times put on the front page, 29 large companies now use some kind of internal pricing for carbon. But most of these are “shadow prices,” in use for years, not actual fees. Why has the pace of change lagged the urgency of our mega challenges? Will more than a small number of companies embrace a much deeper change to business as usual?

So it’s been a mixed year, as I suppose all years are, but I remain optimistic that greater stories of change are coming. Have a very happy, healthy, and sustainable 2014!

Doing Less, Leading More

Our first accomplishments as professionals are usually rooted in our skill as individual contributors. In most fields we add value in the early stages of our careers by getting things done. We’re fast, we’re efficient, and we do high-quality work. In a word, we’re doers. But when we carry this mindset into our first leadership roles, we confuse doing with leading. We believe that by working longer, harder, and smarter than our team, we’ll inspire by example.  Sometimes this has the desired effect–as Daniel Goleman wrote in his HBR article “Leadership that Gets Results,” this “pacesetting” leadership style “works well when all employees are self-motivated, highly competent, and need little direction or coordination.” But the pacesetting style can also carry a high cost – Goleman notes that it “destroys climate [and] many employees feel overwhelmed by the pacesetter’s demands.”

Instead simply doing more, sustaining our success as leaders requires us to redefine how we add value. Continuing to rely on our abilities as individual contributors greatly limits what we actually contribute and puts us at a disadvantage to peers who are better able to mobilize and motivate others. In other words we need to do less and lead more. Sometimes this transition is obvious and dramatic, such as when we’re promoted and obtain our first direct reports or hire our first employees. Suddenly we need to expand our behavioral repertoire to incorporate new leadership styles as a means of influencing others effectively. (“Leadership That Gets Results” provides a useful roadmap here, highlighting the styles that have the greatest positive impact or are used less frequently by managers.)

Subsequent transitions may be more subtle and nuanced, such as when we go from leading front-line staff to leading managers, who themselves must navigate this same transition. A coaching client realized that he was running his company as though he were the “Doer-in-Chief,” and this model of leadership had permeated throughout the organization and was holding everyone back. He revamped his role, delegating almost all of the tasks on his to-do list to his senior managers and had them do the same to their direct reports. Rather than simply creating more work for junior employees, this emphasis on leading rather than doing resulted in greater efficiencies throughout the company. In my client’s words, “We went from being firefighters to being fire marshals,” taking a more strategic approach to the business, redesigning inefficient systems, and solving problems before they became crises.

This emphasis on leading and not merely doing has had a profound impact on management education. In 2010 Dean Garth Saloner of the Stanford Graduate School of Business (where I’m an Instructor) told McKinsey that, “The harder skills of finance and supply chain management and accounting…have become what you think of as a hygiene factor: everybody ought to know this… But the softer skill sets, the real leadership, the ability to work with others and through others, to execute, that is still in very scarce supply.” We expect our students to have solid technical and analytical skills—to be effective doers. But we also expect that within a few years of graduation our students will be managing people who are even more technically and analytically capable than they are—and this requires them to be effective leaders.

Many of my executive coaching clients and MBA students at Stanford are going through a transition that involves a step up to the next level in some way. They’re on the cusp of a big promotion, or they’ve launched a startup, or their company just hit some major milestone. Very few, if any, of these people would say that they’ve “made it”; they’re still overcoming challenges in pursuit of ambitious goals. And yet their current success has created a meaningful inflection point in their careers; things are going to be different from now on. The nature of this difference varies greatly from one person to another, but I see a set of common themes that I think of as “the problems of success.” You can read my first and second posts on “the problems of success.”