Marina Gorbis's Blog, page 1498

Tackling the “Hotspotter” Patient Challenge

A fascinating business dynamic will unfold as health care providers in the United States shift from a reimbursement system that has historically paid for procedures performed to one that rewards population health — providing the total care of a community at a fixed cost and improving its members overall health. This means that to a significant degree historic areas of revenue generation will become generators of losses. While it’s common in most for-profit and nonprofit businesses for centers of revenue generation to fluctuate in their productivity, a shift of this scale represents a sea change for the health care sector that it must face head-on. The concept is especially applicable to high-cost patients, sometimes referred to as “hotspotters.” In the United States, the top 1% of high-cost patients consumes a disproportionate 28% of total health care costs, and the top 5% of high-cost patients consumes more than 50%.

One reason for this phenomenon is that these patients, while costly, are also the source of a substantial amount of revenue and contribution margin. In today’s health care market, providers — hospitals, physicians, surgery centers, clinics — are paid for volume. And this comparatively small subset of patients is the source of extraordinary amounts of volume. We know, for instance, that hotspotters visit our system 41 times over a five-year period, on average, compared to six times for the average patient. As health care reform rolls forward and provider incentives move towards fixed payments, these high-cost and high-utilizing patients will become the five-alarm fire for all care providers for one simple reason: There will be no commensurate revenue offset. In the foreseeable future, what was once a profitable or breakeven proposition will become a significant financial liability.

At Intermountain Healthcare, we are proactively changing the way we provide care for high-cost patients. A nonprofit serving Utah and southern Idaho, Intermountain has a network of 22 hospitals and 185 clinics and employs 1,000 physicians and more than 34,000 employees in total.

Although we have much ground still to cover, we have vastly improved our understanding of high-cost patient characteristics, accumulated extensive knowledge of hotspotter perceptions from a comprehensive survey that we recently conducted, and learned about optimal organizational structures required to realize change.

As the largest health care provider in Utah, Intermountain has always had an enhanced commitment to population health. The answers to these core questions serve as our compass: What is best for our patients and the community we serve? And, how can we provide the highest quality care at the lowest appropriate cost?

These questions are at the heart of why Intermountain is so interested in addressing the current challenges of high-cost patients, and we have invested substantive efforts and resources in learning more about them. Our findings include the following:

One percent of Intermountain’s patients used 24% of the total amount we spent on patient care between 2008 and 2012.
Five percent of Intermountain’s patients consumed almost 51% of our total costs over the same time period.
High-cost patients experience high rates of turnover. Less than 10% of the top 1% of high-cost patients remain in that category the following year, and less than 0.5% of these same patients remain in that category for five consecutive years.
The top 1% of high-cost patients has a 75:25 split of adult:pediatric patients. (Intermountain has an entirely different team looking at high-cost pediatric patients.)
The top 1% of high-cost patients experiences a mortality rate of 26% over a five-year period.

The unfortunate reality is that despite all the frequent and costly care these patients receive, they’re not necessarily always getting well. While clearly a work in progress, here are some lessons learned about our top 1% of high-cost patients:

Understanding the patient perspective is an essential part of identifying potential solutions.  Over the past six months, we completed a comprehensive survey of our high-cost patients to learn and understand more about their experiences and perceptions. Some of the findings were expected, but others were surprising.

Among the expected findings were the following: Patients said their care is not well coordinated and that they need more help to understand and follow up on their complex care plans. Although grateful for the care they received, they most often described their quality of life as fair to poor.

We were surprised to learn that by almost a 2-to-1 margin patients attributed themselves, not the care they received, as the more significant impediment to their improvement. Fifty-seven percent indicated lack of self-care as a contributing factor, and an even higher percentage (63%) identified depression or other mental health concerns. The findings reveal the critical need for self-care educational and motivational assistance in addition to improvement of system structure and processes.

The good news is we can analyze our care for these patients and develop ways to improve their care while potentially reducing its costs — which is precisely what we are attempting now. Almost all of our high utilizers have a chronic disease and many have several:

Seventy-seven percent have at least one of these chronic conditions: cardiovascular, mental illness, lung disease, renal disease, diabetes, liver disease, cancer, stroke, or some kind of paralysis;
Forty-six percent have two or more of those conditions;
Twenty-three percent have three or more of those conditions.

For almost all of them, a major problem is following the ever-growing list of  recommendations from all the specialists they see; it is more than most can do.

Numerous and varied targeted interventions will be required to address the different subgroups of the top 1% of high-cost patients. The organizational challenge we face is that the top 1% of our patients represents about 20,000 patients — a large population to tackle at once.

We know, for instance, there were 89 patients who remained in our top one percent of high-cost patients for five consecutive years. Those 89 patients consumed approximately $40 million in care. Almost $11 million, or over a quarter of the total, was related to renal care. We learned that three clinic sites in the system providing dialysis care were responsible for the majority of cost.

This kind of analysis provides actionable information, which can result in changes to the provision of care. In addition to bringing transparency to the care and disproportionate costs associated with a small number of patients, the analysis triggered in-depth case management review, which revealed some waste as well as confirmation of appropriate care. Some patients had numerous attending physicians whose care was poorly coordinated between providers. In some cases, there was no point person or coordinator and specialists were not communicating sufficiently. In other cases, data revealed that costs were driven by extraordinarily high medication costs that were medically necessary and represented life-sustaining treatment.

Surprisingly, end-of-life care was not a significant factor, accounting for approximately 8% (last six months of life), and 12% (last year of life), respectively, of all costs incurred by the top 5% of high-cost patients.

Appropriate organizational structure is imperative to realizing change. We learned more about the organizational structures required to implement change across a large, integrated, health care operation. Each hotspotting committee has a charter, which is a frequently updated document that describes its purpose, participants, scope, decision-making authority, and objectives.

Initially, we created a steering committee comprised of key stakeholders, including representatives from our central headquarters, senior doctors from our medical group, officials from SelectHealth (our integrated health insurance provider), and leaders of various operating areas. This committee provides valuable input into our efforts as well as vital channels for information sharing across the system. The sheer number of concurrent system initiatives addressing the redesign of care requires extensive coordination and collaboration. Without it, we duplicate resources, waste time and confuse patients with overlapping programs. This group has provided us greater uniformity in how we approach the complex challenges of improving care for high-cost patients.

Soon thereafter, we established a “hotspotting” executive committee, which provides executive sponsorship, direction, and orchestration of analysis and implementation efforts system-wide. This committee is comprised of a half-dozen senior leaders, including Intermountain’s vice president for health care transformation and vice president of clinical operations, who is also our chief nursing officer. One of the revelations of the first year of our efforts was that executive ownership and sponsorship are essential to making substantive change. In this era of reform, there are so many competing programs and initiatives for limited resources that programs lacking executive sponsors often can’t warrant the attention necessary to succeed.

Finally, we created a “hotspotting” analytics committee — comprised entirely of analysts — to broaden our understanding of how the high-utilizing patient population is being served: the characteristics of their health conditions; the nature and extent of their care (including where it was provided and by whom); and the effectiveness of its coordination. The contributions of these analysts to our efforts to redesign care processes cannot be overstated. They provide the bulk of support for complementary committees across the system dedicated to redesigning care processes. Their expertise is helping to generate uniquely valuable insights. (For example, the coding we use to identify high-cost patients and subsets of that segment is pages long.) Our analysts maintain data integrity across the organization and prevent the respective committees from duplicating efforts.

We now have two pilot projects in the works that will help us better serve the 5% of our patients who use so many services.

An integrated-care-management pilot will aid us in refining our overall strategy for managing adult care. It will help us use best practices more effectively, improve the way we manage transitions and handoffs between providers, prevent unnecessary emergency department admissions, and increase our coordination with community resources.
A special-care-clinic pilot located centrally in Salt Lake City is designed to assist the whole person and not just specific medical conditions. The clinic will provide personalized adult primary care to help high-utilizing patients increase their access to services like primary care, home health, mental health, and medication management.

We anticipate launching additional pilot projects designed for future hotspotter subgroups.

We’ve demonstrated historically that when we implement evidence-based practices, we not only improve clinical outcomes but also do so at a lower overall cost to the community. That’s the key to making reimbursement for population health work. It’s not restricting care to reduce costs, because restricting care leads to worse outcomes. It’s focusing on the outcomes.

In a very real way, those who were initially seen as the problem, point the way to making population health work. The key is outcomes, which is what health care should have been about all along.

China’s Economy, in Six Charts

China’s economy has entered a critical phase. Since the country opened its doors in 1978, the economy has witnessed tremendous growth. Its gross domestic product has surged from less than $150 billion in 1978 to $8,227 billion in 2012 (see “China’s GDP” chart below). In the process, more than 600 million people have escaped poverty. This is a marvelous achievement for any country, let alone one as geographically large and populous as China.

China’s business landscape has also undergone a transformation. It boasts 85 companies in the Global Fortune 500 list of the world’s largest corporations. Foreign investors have flocked to the country’s shores as many of the world’s largest manufacturers have established operations there. Many iconic brands dot the shopping districts of the major cities. Despite these impressive achievements, there is still plenty of room for catch up, with China’s per capita GDP only a fifth of the U.S. level (see “GDP Per Capita” chart below).

China’s growth has come largely from a rising labor supply and rapid capital accumulation. While these factors will remain important, in the next decade China must put greater reliance on productivity growth — the ability to get greater output from existing labor and capital stocks. The government has emphasized the need to rebalance growth, focusing on raising domestic consumption and living standards. However, transitioning to a more economy, while maintaining current growth rates, will not be easy.

Decomposing China’s GDP growth over the last three decades, we assessed the drivers behind it such as labor, capital, and total factor productivity (TFP), which is a more precise measure of efficiency in the use of inputs other than labor and capital. As shown in the chart “China’s Sources of Growth” below, capital has been the key driver of China’s growth over the last three decades. Capital accumulation accounted for 6.9 percentage points of the 10.5 percent average annual increase in GDP in the last decade, 5.7 percentage points of the 10.1 percent average annual increase in GDP in 1990 to 2002, and 7.2 percentage points of the 9.7 percent average annual increase in GDP in 1979 to 1989.

Meanwhile, the contribution of labor to GDP growth is decreasing. It contributed 1.4 percentage points of GDP growth in 1979-1989, 0.5 percentage points in 1990-2002, and 0.3 percentage points in 2003-2012. Because of the one-child policy, China’s population growth is slowing. Moreover, the population is aging and the size of the labor force is set to plateau in 2016 (See “China’s Labor Market” chart below). A shrinking labor force will be a drag on growth. In fact, China is already experiencing a labor shortage: Wages are rising and it is losing its labor-cost advantage to other developing countries.

During the last decade, China relied increasingly on investment to boost its economy. This was obvious during the financial crisis in 2008, when the government invested about 4 trillion RMB to enhance growth. Such investments might not be sustainable in the long term. Policy makers and scholars generally agree that China must rebalance its economy toward a consumption-driven development model. This is the overarching goal of China’s 2010-2015 plan.

China will find it hard to sustain rapid rates of economic growth in the future. Our research suggests that if China wants to lower the investment ratio to below 40% of GDP by the end of next decade, while keeping the rate of economic growth above 8 percent (essential for maintaining full employment), it must improve the growth rate of productivity. In the most optimistic scenario, where GDP growth during the next decade is sustained at the same rate as during the last decade (10.5%), annual productivity growth would need to jump from 3.3% to 5.6% (See the “How Much Productivity Is Needed to Drive Future Growth?” chart below).

Since China opened up, the nation has travelled through different stages of development. As the impact of the labor bonanza and capital-led phases begins to fade, productivity growth in China must increasingly come from the quality of innovation and management expertise at the organizational level. Witness the rapid growth in US productivity levels in the 1990s and 2000s in sectors such as retailing. That growth was driven largely by the increased use of information technology in customer analysis and supply chain optimization.

China, too, needs more technological innovation. China has almost tripled the share of its GDP devoted to R&D over the past 20 years, from 0.65% in 1993 to 1.97% in 2012 (See the “R&D Expenditure in China” chart below.) although it still remains below that of the US. This is attributable to China’s national technology strategy of “market access in exchange for technology.” The strategy stems from China’s desire to acquire new technology through technology transfer or foreign direct investment, and assimilate it through learning, imitation and other means. The ultimate goal is the ability to innovate independently. Chinese firms have realized that they cannot just purchase core technologies; they must create them on their own.

Franz Kafka once said that productivity is about being able to do things that you were never able to do before. By addressing the productivity imperative now, China, too, can continue doing things it has never done before.

China’s Next Great Transition An HBR Insight Center




If You Want to Change the World, Partner with China
Ten Predictions for China’s Economy in 2014
How Chinese Companies Can Develop Global Brands
The Chinese Steamroller Is Already Sputtering

Making #GivingTuesday a Movement

Most of the traditions we associate with the holiday season – stuffing turkeys, decorating trees, burning candles – are rituals that have taken hold over decades if not centuries. Some, like Black Friday and Cyber Monday, are habits gained more recently thanks to the power of consumer goods advertising. But what if people decided they’d like to have a new tradition, and one not centered on shopping but in the deeper, soul-satisfying spirit of the holidays? Could we start a movement to create one?

Some of us decided to try, and last year for the first time we put out the idea of “Giving Tuesday” – or, more properly styled for the age of social media, #GivingTuesday. The point is to follow the binge-buying of the Friday and Monday after Thanksgiving with a day of gift-giving to charities.

Within just 70 days, a coalition of nonprofit and corporate entities came together to agree on the mission and create a communications infrastructure, and more than 2,700 organizations, representing all 50 US states, registered as partners on the #GivingTuesday website. By signing on, partners were committing to launch some kind of initiative under the #GivingTuesday banner, and gaining resources from the site to help them do that.

The leaders of these organizations immediately got the concept that the philanthropic community stood to benefit by converging on a day like this, in the same way that retailers (even though they compete aggressively) all take part in and benefit from Black Friday. With every project, they are spreading the word through their networks, and the connection to #GivingTuesday becomes more valuable. At the same time, they appreciated that their participation did not require them to spend on messaging over and above what they had been planning. Because the timing and tagline of #GivingTuesday can easily be incorporated into existing campaigns, even thinly-stretched charities can use it to refresh their message and increase awareness.

It wasn’t only the charitable institutions whose attention was captured. In the latter half of November 2012, there were more than 800 media hits for #GivingTuesday. On Twitter, the hashtag trended to number one on Tuesday, November 27. (Not bad for a movement that had first said hello to the Twitterverse in August.) Across all kinds of platforms, individuals from nonprofit development staff to celebrities to CEOs helped spread this compelling idea.

And most importantly, more giving took place. Many partners reported higher donations – several said their online giving was up by 50 percent on #GivingTuesday. There is not a development team or nonprofit board in the world that wouldn’t perk up at that number.

My organization, the National Philanthropic Trust, has held a series of events in Philadelphia for fundraising organizations who want to learn more about how to benefit from #GivingTuesday. We were pleasantly surprised when approximately 50 percent of the people we thought to invite to the first session showed up – a rare turnout.  Six months later, the number of attendees was almost triple, as regional nonprofit and community leaders caught wind of the movement.

Everyone connected with #GivingTuesday is happy to see excitement growing as our next big day –December 3, 2013 – grows near. Signs are promising that this is a happening more people want to participate in, and that might just take hold as a lasting tradition. At the same time, we know a new movement requires constant infusions of fresh energy to build its momentum. As our partners leverage the power of #GivingTuesday to capture the public’s imagination and lend excitement to acts of generosity, here are a few things we’re working to do:

Make it easier. With the benefit of time, hindsight, and sustained enthusiasm, #GivingTuesday has expanded its resources for partners. This year, there are training and workshop opportunities, online tools and kits, compelling videos, and sample Tweets. #GivingTuesday has made the “lift” as light as possible for organizations that want to tap into the movement to amplify their normal year-end activity.

Take it global.  International giving by US-based donors is the fastest-growing piece of the giving pie, according to Giving USA. As international charitable organizations learn about #GivingTuesday and try to leverage the idea with their stakeholders, they’re not just attracting US donors who are aware of the movement, but raising the profile of #GivingTuesday regionally and around the world. Already, communities in Canada, Australia, and Mexico have launched efforts to spread #GivingTuesday particularly in those countries.

Encourage innovations on the theme.  The point of #GivingTuesday shouldn’t be to hand partners a playbook and insist they follow it to the letter. We know creativity inspires creativity—and saw that when individuals, families, charities, and businesses grabbed this idea and ran with it. One of my favorite variations came from Dress for Success, a charitable organization that gives lower-income women professional clothing so they can walk into job interviews and office settings more confidently. Playing on the name #GivingTuesday, they staged a #GivingShoesDay. As for this year, rumor has it we’ll see some famous couples spending #GivingTuesdates together, taking money they could have spent going out and instead staying in, and giving it to a favorite charity.

Learn from experience. #GivingTuesday developed case studies and metrics to capture what happened in 2012. As that effort continues, the objective will be to share what works throughout the network and collectively build on the gains being made. They say “a rising tide lifts all boats” and that is what #GivingTuesday aims to be.

The beauty of #GivingTuesday is this: you can make it whatever you want it to be. It is decentralized and therefore adaptable to existing or new efforts. It is a charitable organization’s online fundraising campaign and an opportunity to talk to your children about philanthropy; it is a grant from a Fortune 500 company and a bake sale to benefit a community theater; it is a simple act of kindness to a neighbor or stranger. #GivingTuesday only has to be about giving — people sharing what they have to help others and build stronger communities.

It’s part of American life that, as soon as Thanksgiving is over, it dawns on us all that there are gifts to be given. Probably it is inevitable that we will feel compelled to swing into action, and be drawn by the promise of bargains. Perhaps we just have to accept that Black Friday and Cyber Monday will be frenzied. But wouldn’t it be nice if, before getting any deeper into the holiday season, we could re-set the tone? Why not spend a day reflecting on the bounty we have, and enjoying the kind of giving that does our souls good?

The second #GivingTuesday will happen on December 3, 2013. For updates and related news, follow @GivingTues on Twitter.

 

Reasons to Gloat If Your Credit Score Is High

People with higher credit scores tend to be less impulsive, better at delaying rewards, and more trustworthy than those with lower scores, according to a study of 63 university students and employees by Shweta Arya, Catherine Eckel, and Colin Wichman of the University of Texas at Dallas; the study included a survey and a set of tasks and games. Thus “it is not too much of a stretch” to say that credit scores might be a useful tool for screening job candidates or potential partners on a dating web site, the authors say. Fair Isaac credit scores are calculated on a scale from 300 to 850, with the U.S. average being 680. In general, a good credit score is anything above 700.

As Emerging Markets Slow, Firms Search for “New” BRICs

By all measures, emerging markets are having a tough year. The Economist bemoans their “great deceleration” and HBR featured a well-researched study on how multinationals are becoming less global. However, multinationals still expect their emerging market portfolios to deliver robust growth and increasing profits based on the memory of their performance in recent, more bullish years.

In this new operating environment, I find more and more multinationals looking to new frontier markets for growth while demanding profitability from their emerging-market operations. Using our 200+ clients as a proxy for global sentiment, I find the pivot towards profitability to be significant: 37% of MNCs are focused more on profitability than growth in emerging markets, up 16% from just last year.

To accommodate these new market dynamics, executives are adopting a dual strategy of “going deep” in the BRICs while simultaneously and aggressively pursuing the next frontiers.  Let’s see how this story is playing out in the different emerging market regions.

Asia Pacific

Asia offers a good example of this push to frontier markets. I remember a conversation I had with an executive in 2000. I asked which markets he was focused on outside of China and India. He responded, “for us, China and India are Asia.” It’s been awhile since I heard a similar response, as companies are now expanding aggressively into ASEAN (Malaysia, the Philippines, Singapore, Thailand, and especially Indonesia). This is the result of a growing and affluent middle class that supports private consumption and is bolstered by favorable demographics; over 50% of the population is under 29 years old and approximately 52% live in urban areas.

However, there are some risks. For example, on the Indonesian archipelago, supply chain and distribution logistics present serious challenges — with logistics costs at 24% of GDP, compared with the regional average range of 9-11%. Difficulty in distribution is not unique to Asia and reflects a global trend. According to our recent benchmarking survey of more than 100 senior executives, 94% of executives sell at least partially through distributors, accounting for about 50% of their revenue in emerging markets. Additionally, managing corrupt business practices often makes it difficult for MNCs to realize growth potential in the short term.

Latin America

As executives become more sophisticated in their understanding of these countries, they balance their focus between looking to expand in new markets as the old standbys–namely Brazil and Mexico–have recently slowed to disappointing growth rates. For example, Peru’s rising middle class offers an increasingly attractive choice for consumer goods and retail MNCs looking to diversify their investments beyond established markets.

Quantifying the impressive rise of the middle class, FSG calculates private consumption in Peru is set to grow 54% between 2010 and 2015. Real increases in personal income and access to credit will support growth across all retail categories, but the automotive, consumer electronics, and food and drink sectors will outperform, as consumer taste becomes more sophisticated.  The consumer sector has already begun its high-growth phase as over 36 new shopping centers have been built in Peru over the last 10 years. The three main grocery retail chains in Peru grew from 57 stores in 2001 to 155 stores in 2010.

Eastern Europe, Middle East & Africa

Eastern Europe, the Middle East, and Africa follow the same pattern of slowing growth in traditional strongholds, with opportunities in previously untapped frontier markets. In Russia, having made significant investments in the two largest cities, we are seeing companies expanding into regional markets by relying on third-party distributors, similar to the storyline in Indonesia. Growing beyond Moscow and St. Petersburg allows companies to build market share, strengthen their competitive position, drive profitability, and contribute to long-term sustainability in Russia – and it’s worth remembering that 64% of Russia’s GDP sits outside of the these two cities.

Sub-Saharan Africa is in many ways the last great frontier. Here multinationals are reacting to South Africa’s stagnant growth by looking to the hottest frontier markets globally: Nigeria and, to a lesser extent, Angola. The region has piqued executives’ interest, as it benefits from improving business conditions, demand for infrastructure projects, and a strong demographic profile.  Nigeria is especially attractive, as it is poised to overtake South Africa as the largest African economy after its GDP grows 40-50% as a result of the government changing the way it measures GDP at the end of the year. Nigeria’s automotive industry is booming, as international car makers are expanding their dealerships and setting up local assembly plants.  Case in point: Ford is planning to introduce at least five new models after seeing a 33% increase in sales in the first half of 2013 in Nigeria. Mercedes-Benz and Skoda have recently expanded in the country with new showrooms and models.

In emerging markets, what began primarily as a growth strategy has evolved to a dual mandate of growth and profitability. Executives must act fast to capitalize on the final frontiers, while market share is still there for the taking. Although each region exhibits similar potential, success for multinationals will depend on identifying the most attractive opportunities for their unique businesses and adopting management best practices that account for the local nuances of each market.

To Strengthen Your Attention Span, Stop Overtaxing It

The Iditarod dog sled race covers 1,100 miles of Arctic ice and takes more than a week. The standard strategy for mushers had been to run twelve hours at a stretch, then rest for twelve. Either you ran all day and rested at night, or you rested all day and ran all night.

That all changed because of Susan Butcher, a veterinarian’s assistant keenly aware of the biological limits of her dogs. She trained them to run in four-to-six hour spurts, and then rest for the same length of time, racing at that rhythm both night and day. She and her dogs won the race four times.

Susan Butcher trained her dogs the same way top athletes train in most any sport: an intense workout for about four hours – and then rest. That’s the best routine for the body to attain maximal performance.

Anders Ericcson, a psychologist at the University of Florida who studies top performers, has found that world-class competitors from weight lifters to pianists limit the arduous part of their practice routine to a maximum of about four hours each day. Rest is part of their training regimen, to restore their physical and mental energy. They push themselves to their max, but not past it.

This work-rest-work-rest cycle also applies to helping our brain maintain maximal focus at work. In the workplace, concentrated focus allows us to use our skills at their peak.  Researchers at the University of Chicago found, for instance, that at moments when people perform at the top of their game they are completely absorbed in the task at hand, whether brain surgery or making a three-pointer in basketball.

Top performance requires full focus, and sustaining focused attention consumes energy – more technically, your brain exhausts its fuel, glucose. Without rest, our brains grow more depleted. The signs of a brain running on empty include, for instance, distractedness, irritability, fatigue, and finding yourself checking Facebook when you should be doing your work.

A reasonable response is one executives today rarely make: give yourself a break. All too often we try to “push through it.” But there is no magical energy reserve waiting for us – our performance will more likely slowly deteriorate as we push on through the day.

The decay in cognitive efficiency as we push past our reserves — well-documented in research labs – shows up in an executive’s day as a mounting level of mistakes, forgetting, and momentary blankouts. As one executive put it, “When I notice that my mind has been somewhere else during a meeting, I wonder what opportunities I’ve been missing right here.”

Given the high expectations on executives, perhaps it’s understandable some have turned to performance-enhancing drugs. One lawyer who daily takes a medication for attention deficit disorder (which he does not have) confided to his physician, “If I didn’t take this, I couldn’t read contracts.”

But there are other ways – legal and healthy — to help beef up our attention to meet the relentless demands of an executive’s busy day: meditation. From the perspective of cognitive science all meditation methods are methods to train attention. An increasingly popular method to grow the power of the brain’s circuitry for attention is “mindfulness,” a meditation method stripped of a religious belief system.

The neuroscience behind mindfulness hinges on the concept of “neuroplasticity.” The brain changes with repeated experience as some circuits strengthen and others wither.

Attention is a mental muscle, and can be strengthened with the right practice. The basic move to enhance concentration in the mental gym: put your focus on a chosen target, like your breath. When it wanders away (and it will), notice that your mind has wandered. This requires mindfulness, the ability to observe our thoughts without getting caught up in them.

Then bring your attention back to your breath. That’s the mental equivalent of a weightlifting rep. Researchers at Emory University report that this simple exercise actually strengthens connectivity in the circuits for focus.

There’s also another option. Call it the Latin Solution.

I was in Barcelona recently, where at lunchtime most shops and companies shutter themselves so employees can go home, have a good meal – and, ideally, take a nap. Even a short rest at mid-day reboots the brain for the rest of the day.

The Truth About Online Rumors in China

The Chinese government has focused considerable energy on managing the Internet, most recently with a campaign against “spreading rumors.”  Potential rumormongers, defined as anyone with over 50,000 online followers, face the prospects of arrest, detention, and public self-criticism.

Ironically, the Chinese government itself is the source of many online rumors, some of which may be efforts to shape Chinese consumers’ perceptions of foreign brands and companies.  The issue, however, is how effective the government’s attempts have been.

The government’s approach follows a standard pattern: Chinese Central Television (CCTV) will attack a foreign company for the way it does business in China.  Later, some discrediting details about the salvo will emerge amidst heated online discussions, and the story will derail, making CCTV look worse than its target.

Social media acts as both sound-check and amplifier for traditional media, so CCTV News, though still mandatorily aired across the nation, can no longer assume that its audiences are believers.  Consumers are seeing through government disinformation, and our research shows that government critiques result in Chinese consumers embracing, not eschewing, foreign brands.

On March 15, 2013, World Consumer Rights Day, CCTV aired a special report criticizing Apple’s i-Phone customer service policy in China for providing only a one-year warranty when Chinese law mandates two.  CCTV also reported that i-Phone-owners had to pay about $90 to replace faulty back covers.  The story quickly gained widespread attention, and Apple’s lack of response induced coverage that was even more negative.

However, when we performed text-based sentiment analysis on a sample of posts from accounts on China’s leading micro-blog site, Weibo, we found that sentiments about Apple before and after the event continued to be divided.  While negative sentiment increased due to the controversy, so did positive sentiment about Apple.

Many Netizens doubted the CCTV report.  A telltale Weibo post ending with the words “send at 8:20 pm” later revealed that CCTV had paid several Weibo users with large followings (online celebrities known as Big V users) to criticize Apple after the broadcast.

A post from one user, Liu Jishou, that was proven to have been arranged by CCTV, read: “@Liujishou: # 315 in action # apple, you have pocketed enough money in China.  But your computer warranty period in U.S. is two years, in China, it is one year; the warranty period of your cell phone in the US is recalculated after repairs, but in China it isn’t.  US companies promote fair and equitable dealings, why are you playing this double standard in China?  You made a big mistake.” 

CCTV has been steadily losing credibility after the veracity of several of its exposes was questioned.  A CCTV reporter was charged with extorting money from Da Vinci, a furniture company allegedly selling fake products, in exchange for silencing reports.  When CCTV reported in July that KFC and McDonald’s ice cubes were “twelve times dirtier than toilet water,” some experts claimed that CCTV’s investigation was unscientific.  Weibo users joked they would eat KFC ice cubes if CCTV reporters drank toilet water.  CCTV’s Apple broadcast also backfired as its share price increased by 2.1% the next day, signaling that the company had won the public opinion war.

Even when there is no proof of foul play, CCTV’s attacks on foreign companies don’t have their intended effect.  In October 2013, an incident involving Starbucks unfolded, when CCTV aired a segment “exposing” its relatively higher prices in China.  Netizens collectively shrugged at the prices and decried the broadcast as biased and unfair.  As Rachel Lu of Tea Leaf Nation noted: “What really riled observers is that CCTV grossly underestimated Chinese people’s ability to distinguish real injustice from the manufactured variety.”

Numerous mistakes, lack of transparency, and tone deafness have primed Netizens to be on the lookout for rumors originating from their government rather than from each other.  Given CCTV’s lack of credibility, what exactly are state-run broadcasters trying to accomplish?  Are they clumsy attempts to sway public opinion, or are they directed at the companies themselves?

The case with Fonterra sheds light on the effectiveness of these attacks as a form of protectionism.  When Fonterra’s dairy products were rumored to contain bacteria that could cause botulism, China immediately suspended imports of all whey protein and milk-based powder from the New Zealand-based company.  Food safety is highly sensitive, and after the 2008 melamine scandal, Chinese customers overwhelmingly prefer imported milk products.  This time, the scandal involved imported products, causing a greater uproar in the country.  On August 14, 2013, Fonterra’s milk products business head, Gary Romano, resigned over the scandal.

However, the event proved to be a false alarm (an “own goal,” according to Chinese media).  By August 2013, laboratory results revealed that the bacteria found in the whey protein concentrate manufactured by Fonterra was clostridium sporogenes rather than botulism-causing clostridium botulinum.  The Chinese could breathe a sigh of relief; those who knew about the test results, that is.

While news of the contamination had swept the Chinese social media, news of the false alarm hardly made a blip.  Interestingly, right after the New Zealand government announced that Fonterra products may have been contaminated, negative posts about Fonterra began growing on Weibo.  But so did positive ones.  People were scared, but negative sentiments began decreasing on August 4, when Fonterra started a recall.  Positive comments, on the other hand, kept growing.  Part of the reason may have been the Netizens’ mistrust of the government and state-run media.

Chinese media seized the opportunity to cast doubt on foreign brands, running headlines like “Could the worship of foreign milk powder be coming to an end?” and “The myth of foreign milk powder is collapsing.”  Jamil Anderlini, the Beijing bureau chief of Financial Times, who is New Zealand-raised, called the event a “gift” for the Chinese government.

Chinese Netizens reacted to the coverage somewhat differently.  Many who reposted a popular post from Xinhua News criticizing foreign milk expressed doubt about Xinhua’s motives and praised foreign companies’ responsibility in dealing with the incident.  When testing revealed the bacteria harmless, though, many never got the memo.

In contrast to the reporting bonanza surrounding the recall, China’s traditional media barely covered the false alarm: There are some 395,000 hits on Baidu News for 恒天然, Fonterra’s Chinese name, between August 1 and August 8, and just 93,600 from August 28, the day of the recall’s reversal, through November 4.  Kevin Wickham, managing director of Fonterra’s China unit, confirmed: “There are still consumers who are confused and uncertain, and we still have to do more to explain to consumers that it is a false alarm.”

Starbucks and Fonterra still enjoy favorable sentiments, but the two companies have suffered from CCTV’s reporting.  Even Apple, whose financial losses were minor, had to offer a public apology, with CEO Tim Cook promising to revamp customer-service policies in China.  The same script played out later with Samsung, which issued a prompt apology though.

The CPC may believe think that getting foreign brands to change their policies, even if they are minor, could boost overall competition and cut into foreigners’ profits.  But at what cost?  These efforts degrade the ease of doing business in China and may have a negative effect on foreign investment in the long run.  So far, none of the targeted companies has indicated they will scale back China operations.

Rather, the common narrative, the one consumer sentiment that survives Weibo’s short attention span, is that the Chinese government’s deployment of state-run media against foreign companies is unfair and untrustworthy.  If such tactics are part of a protectionist mindset that is designed to affect Chinese citizens, the CPC may well want to reevaluate its online strategy.

China’s Next Great Transition An HBR Insight Center




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How Europe Is Betraying Its Children

A few days ago, I participated in a debate organized by the Economist on whether the new generation has the skills it needs to succeed in tomorrow’s world. I thought I had the easy job of arguing that, especially in countries like Greece (where the event took place), there is a serious skill gap, with the educational and vocational training being dangerously out of date and misdirected.

The argument in favour of the motion, I reckoned, was straightforward. First, schools in many of the Old World countries, and certainly in the European South, still prioritize memorizing over critical thought; we obsess with teaching technical skills as opposed to fostering the ability to adapt, add and capture value in a shifting economic landscape. Universities, in many a European country, are neglecting the realities that graduates will face, producing degrees better suited to a generation ago.

Of course, all this is perfectly understandable. These school systems were built at a time when information was scarce and valuable, and obtaining vast amounts of it through memorization, was a useful skill. And Universities had evolved to serve the needs of a different polity and economy: skilled professionals destined to work in highly structured societies.

A degree was often the license to practice a privileged profession such as law or medicine, and humanities training was the tool to propel young graduates into the white collar workforce. Vocational training was, by and large, linked to the system of professions, themselves a descendant of the guild system. In other words, education was based on offering the brightest (or most fortunate) in society access to the land of privilege, bestowed by excluding most while anointing some.

This world no longer exists. Professions have lost their monopoly, guilds’ privileges are on their way out, sectors have unbundled, competition has become global, and value creation is the name of the game. With China making a massive push in its academic system, and as the Asian scores in aptitude tests reveal the shifting geography of the talent pool, the Old World cannot afford its old habits.

On the corporate level, as careers shorten and the nature of work evolves, the skills to succeed become ever more complex. Sadly, today’s youth is still kept behind by an antiquated educational system, and a reluctance of corporates to invest in developing their workforce. And on top of that, in Europe, most school and Universities’ lack of financial independence has hit hard in a time of fiscal austerity, depriving them of the resources and agility to react and adapt.

They also face tough governance problems, shown most acutely in places like Greece, where the Rector and the association of administrative employees can literally shut the biggest and oldest university down, as a protest on the mere prospect of having their own jobs redesigned. Dinosaurs die hard, and can wreak havoc on their way out.

It isn’t just the educational system that’s at fault. A recent BusinessRoundtable study of employers found that most complain that they can’t find the right people. Not because they can’t read, or lack computer or job-specific skills but because they lack critical thinking, critical problem solving and teamwork.  Perhaps worse, they also lack professionalism, adaptability, and personal accountability for work. These are skills that the educational system isn’t geared to deliver but they precisely what the new generation must necessarily develop.

Given this context, I was mesmerized by the fact that 51% of the audience in the Economist debate voted for the view that the young generation does have the skills needed. Now, this could be the result of debating prowess of my opponent, Steve Bainbridge, who played up the need to believe in the younger generation, and of the value of hope, in an auditorium of a crisis-striken country.

But it just might be something deeper: a reflection of just how hard it is to recognize some uncomfortable truths, especially when we have no ready solution to offer. Yet, what could happen if we keep confusing wishful thinking with optimism? Most probably, a wasted generation and, for sure, further loss of competitiveness. And, on the personal level, the biggest drama for parents in plighted countries, who sacrifice all they have for the education of their children, is the realization that they may be making a bad investment. Unwavering faith in their offspring and their future may be detrimental for their ability to succeed.

Perhaps worst of all is the likelihood that this trend will make an uneven society even worse.   Those who can attend the best universities, or go to the best business schools, will be able to cope effectively. But this will exacerbate societal imbalances, helping the 1% “in the know”, while leaving the majority behind. Our lack of courage in dealing with the skill gaps risks hurting the Old World and making it more uneven.

This isn’t an easy fight. It takes courage to accept the problem, and even more courage to address it, with entrenched interests as well as skill gaps in the educational system. But it’s an important fight, if we want to regain both prosperity and balance.

We Could Be Better at Giving Thanks

Although people say they want to be thanked more often at work, fewer than 50% of Americans polled for the John Templeton Foundation, a philanthropic organization, reported that they would be very likely to thank salespeople, their mail carriers, or cleaning crews, and just 15% express daily gratitude to friends or colleagues. 74% never or rarely express gratitude to their bosses—but 70% said they’d feel better about themselves if their bosses were more grateful.

Will Your Bad Boss Make You a Bad Boss, Too?

One of the best predictors of whether a person will become an abusive parent is if he or she was abused as a child. On the face of it, this is puzzling. Certainly, as children, these people did not say to themselves, “This is how I want to treat my kids.” To the contrary, our guess is that they said to themselves, “I am definitely not going to treat my children the way I have been treated.”   And yet they did; they did not escape the influence of that terrible role model.

This got us to wondering whether there might be a leadership analogy to this sad phenomenon. That is, we wondered, “Do people who work for terrible leaders turn out to be terrible leaders themselves?”

In our research we’ve demonstrated that a great leader can have powerfully positive effects on an organization: decreasing turnover of team members and greatly increasing customer satisfaction, profitability, employee engagement, sales revenue, and even workplace safety—virtually every business outcome that’s measureable.  In those studies, we’ve looked primarily at the relationship between individual leaders and their groups of direct reports. Recently, we’ve become fascinated by the question, “How much impact does a great or poor leader have at the next level down—on those who work for those direct reports?”

When we ask individuals about how their bosses influence their own leadership styles, they often respond that they are their own persons. Whether working for a great boss or a nightmare one, they feel that they are in control of themselves and the situation. If there’s a bad boss above, they serve as a buffer.

When we look at three levels of our 360 evaluations of the leadership effectiveness, correlating the scores of executives and their direct reports with those of the teams of those direct reports, we find some truth in this: we do see some leaders performing substantially better than their bosses. But we also see influences, good and bad, cascading down the line.

For this study we matched up data from 6,094 leaders (whom we will arbitrarily label “alpha leaders”) with their direct reports who were also leaders (whom we’ll call “beta leaders”) and the beta leaders’ direct reports. We assessed the overall effectiveness of each leader and the engagement level of that person’s direct reports.

First off, examining the best (top 10%) and worst (bottom 10%) of the alpha leaders (as assessed by the beta leaders who work for them), we were able see a substantial difference in the engagement levels of the beta leaders (as assessed by their direct reports).  Not surprisingly, beta leaders who worked for the worst alpha leaders suffered; their engagement was abysmal, averaging in the 24th percentile.  Meanwhile, the average engagement level of the betas who worked for the best alphas was at the robust 82nd percentile. This mirrors our global study of these same variables with over 30,000 leaders.

One level down, the effect is similar, but not as strong in either direction: Engagement levels of teams headed by beta bosses laboring under horrible alphas average in the 39th percentile while those of teams headed by betas working for the best alphas are only at 61th percentile, considerably lower than their bosses.

If alpha leaders had no effect on beta leaders, we’d have expected the average beta leader engagement scores to be at the 50th percentile, since with this large a sample, the good and bad leaders would balance each other out. So clearly, it’s not easy to be a buffer: a bad boss is a drag on a leader’s effectiveness. In fact, teams rated the leadership effectiveness of the beta leaders who worked for the worst alphas 11 percentile points below average, while teams rated the betas working for the best alphas 11 percentile points above average.  The symmetry here is striking.

Still, our data show that it is possible to work for one of the worst leaders and yet be rated as one of the best yourself. While 14% of beta leaders working for the worst alphas fell themselves in the bottom 10% in leadership effectiveness, 7% of those harried betas were rated by their direct reports as among the top 10% of leaders. At the same time, fully 24% of beta leaders working for the best alphas were themselves also in that top group, while only 7% of them fell in the bottom 10%.

What are we to make of this?  First, we’d argue that our data show, happily, that great leaders do more good than poor leaders do harm. And to those who say their destiny is in their own hands, we’d say they could be right — the cycle of poor leadership can be broken.

On the other hand, we’d argue that good leaders are expending a lot of energy they could be using more productively when they have to manage and buffer a bad boss. This should be blindingly obvious. And yet, so often in our practice senior leaders ask us to “fix” the leaders below them. The reality is our job would be much easier if the leaders at the top were as highly committed to fixing themselves first.