Marina Gorbis's Blog, page 1528

What Gets Measured in Education

The world over, the performance of colleges is under fire.  It’s about time that happened, but there should also be serious concerns about the new report cards that are being fashioned for tertiary educational institutions.

The Obama Administration in the U.S., for instance, plans to create a new performance-based rating system with teeth.  In future, it says, resources will flow only where tangible student-focused outcomes justify their deployment.  Those outcomes will be, most likely, improved retention and graduation rates; fewer wasted credits; lower student debt-burdens; easier access to financial support; greater efficiency estimated by linking progress to degrees and demonstrations of competency, not to credit hours or seat times; more students hired within a reasonable period after graduation; higher salary levels for them; and so on.

Are these useful measures?  Of course.  Will tracking them prove helpful to college managements?  Of course.  Will knowing them be relevant to students and families?  Of course.

But these are not measures of educational performance; these measure only the efficiency of the educational process.  Think, for a moment, of a college as if it were a factory, a pipeline that takes in raw materials and puts them through a structured series of steps that leads to the creation of  “finished products,” namely well-educated students.  The measurements under discussion are yardsticks of the pipeline’s asset utilization and process efficiency levels.  If we improve them, the “factory” will run better.

However, if colleges use only these metrics to evaluate their performance, they will continue to repeat past errors.  For, they will be measuring virtually everything except the one thing that matters most: Student learning.

Nonsense, will be the predictable rebuttal; colleges already measure learning.  What do you think grades indicate?  What do you think degrees stand for?  What do you think the Latin on a diploma signals?

Even if you believe that colleges grade, certify, and award degrees accurately, there are grave limitations to the way they do it.  Their measurements primarily reward discipline-based knowledge — not the capabilities in critical thinking, analytic reasoning, communication skills, and interpersonal effectiveness that employers most care about and that are essential for students to succeed as adults in the real world.

Research shows that there are links between traditional academic performance and economic status.  For instance, students with the advantages that prepare them to test well at one level tend to test well at other levels too.  So the fact that students are performing well according to standard measures may have little, if anything, to do with a college’s learning-related performance.  It may just have a great admissions office and a powerful brand, taking in talented kids through the front door and not messing them up.

Meanwhile, two great ironies are unfolding.  One, while the accuracy of traditional grading stagnates, the ability to carry out true learning-related assessments has advanced with lightning speed.  Improvements in the U.S. Collegiate Learning Assessment; the skills-and-employability assessment instruments pioneered by organizations such as Aspiring Minds in India; the algorithms used to track learning in online video games; the analytics that underlie the learning experiences offered by massive open online courses; and US Education Testing Services’ new proficiency profiles and skills instruments are all changing what assessments can lead to.  (That’s a topic I will revisit in my next post.)

Two, this is also a time when corporations and executives can help create the outcomes they desire as long as they don’t focus only on helping colleges to boost process efficiency or re-shape curriculums.  The corporate world knows a lot about how to evaluate the kinds of learning that matter to it.  It’s time business shared that expertise with colleges, and joined them in efforts to build novel tools that will help measure students’ real learning performances.

As a Leader, Create a Culture of Sponsorship

Sexual tension will always exist in the workplace. Affairs happen, and where there’s even the possibility of sex, there’s gossip.

Sex — or the specter of it — haunts sponsorship, prompting men and women to avoid the professional partnerships necessary to achieve their career goals for fear of being censured, fired, or sued. My research shows that 64% of senior men (vice president and above) and 50% of up-and-coming women admit they’re hesitant to initiate any sort of one-on-one with each other lest their motives be misconstrued by their colleagues and rumors start poisoning the workplace. When affairs  — or even the perception of one — are present, 70% of women surveyed say the junior female disproportionately bears the brunt, and 53% of male respondents agree. Her career trajectory changes, either because she requests a new position or one is forced upon her. And her reputation takes a dive from which it may never recover.

But while women need to consider the challenges posed by sex, scandal, or innuendo, the responsibility for keeping the relationship safe shouldn’t rest solely on their shoulders. If sponsorship is a two-way street, then keeping that street clear of career-wrecking garbage demands participation from both parties. As a sponsor, you must telegraph relentless professionalism, meet openly, and keep spouses and children literally in the picture.

But as a senior executive with the power to influence or set policy, you do have the wherewithal to make sponsorship safe — by changing the organizational culture in which it’s exercised.

Mandate. In a corporate culture where sponsorship is the norm, close working relationships between senior men and women take on a normality that defies gossip. At Credit Suisse, for example, sponsorship is a company-wide mission supported by senior management. Established by CEO Brady Dougan, Mentoring Advisory Groups (MAG) task a select group of high-potential women with solving business challenges articulated by members of the executive committee, who act as sponsors. Over 18 months, teams of six protégées, two executive board members, and an executive “champion” tackle a critical-to-mission business challenge the firm has identified. Meeting regularly — by phone, email, teleconference, and in person — not only drives the core value proposition but regularizes the one-on-one relationships.
Educate. Become a sponsor evangelist. Spread the gospel to your peers. Enlist the help of HR. Embed sponsorship education into leadership development. “Our goal is to make sure everyone knows what sponsorship is, how it works, who does what, and why it’s important to the success of this firm,” says Keisha Smith, who spearheaded a company-wide program to educate VPs, executives, directors, and managing directors at Morgan Stanley.
Make it matter. Ensure that performance reviews assess sponsorship as a measure of leadership readiness. Again, by making sponsorship a must-have, you’ll swivel a spotlight on every attempt to grow it — nurturing healthy growth while eliminating the dark corners where illicit liaisons are perceived to take root.
Publicize policies. It’s not enough to have corporate policies in place governing sexual harassment or office liaisons. Well-crafted policies deter detrimental behaviors only to the degree that people know about them — and, as I discovered, people don’t know about them: 43% of men and 46% of women don’t know whether their company has a policy on office romance, and 37% of men and 38% percent of women don’t know whether their company prohibits relationships between manager and subordinate.
Push for punishment. There’s often a troubling disconnect between what companies think they are doing to address the problem of sex in the workplace and what they’ve actually accomplished. Policies that are less than airtight or are enforced differentially send a message that some employees are valued more than others and can be excused from punishment should they overstep. At the end of the day, how serious a company is about punishing its offenders says a lot about its culture. “It’s very important [that] a firm’s policies are in line with its overarching mission,” says Annalisa Jenkins, executive vice president of Merck Serono. “If you want to drive equality of opportunity and drive the notion of justice in your organization, you cannot be vague in terms of how you handle these transgressions. The tighter the policy, the more women benefit.”

Sponsors need protégés as much as protégés need sponsors. For the relationship to succeed, it’s incumbent on those in power to use their influence to create a safe environment for sponsorship for all parties involved.

When You’re Innovating, Think Inside the Box

A company noticed a strange anomaly: One of its manufacturing plants had a significantly lower scrap rate. That little finding and its consequences illustrate a point that managers often overlook in their search for innovation: Sometimes it’s better to think inside the box.

Companies spend a lot of time and effort trying to adapt ideas from other industries and other disciplines, but I would guess there’s at least one idea lurking within your own company that you could use to great advantage. That’s why I say think inside the box – the box being your organization. Of course, if there’s a great idea, it’s probably hidden away inside the corporate maze.

That was the case with the company that noticed the lower scrap rate. A lower scrap rate implies a more-efficient manufacturing process. But what was the plant doing differently? Corporate managers went out to take a look.

They found that an engineer at the division, which did injection molding, had developed a way of preprocessing the plastic pellets so that when they were fed into the system, they flowed more smoothly. The machines didn’t have to be cleaned as frequently, and there was less scrap.

The innovation had been applied to most of the machines at the plant, but not beyond. Why? Because the division’s managers hadn’t seen the idea as all that special. It was such a simple improvement – it required just a small amount of inexpensive equipment – that it wasn’t even big enough to be called a “project.” Companywide dissemination of the idea turned out to be easy, and the entire corporation benefited.

Very few companies have cultures that promote dissemination of good ideas. Instead, there are barriers everywhere. Plant managers are too busy to think about other plants’ needs. Divisions that are competing for scarce resources hoard their advantageous ideas. Engineers in one country don’t communicate well with their colleagues in another.

So the reality is you have to go prospecting for ideas within your own company. Here are a few best practices:

Look for anomalies. If your company keeps business-unit dashboards, look for data showing 2X differences. If your unit has a 4% customer-complaint rate, for example, look for a unit with a 2% rate. Why is your group’s rate 2X the other group’s? They’re probably using a different process. Find out what they’re doing right.

Build relationships. Managers typically despise organizationwide meetings, seeing them as time sinks. But don’t be so quick to try to get out of meetings with people from other divisions. Once you get to know them, you can ask: “By the way, how do you handle this or that?” Or “Can I swap engineers with you?” Pretty soon, the ideas will start flowing.

Study acquired companies. After making an acquisition, companies have a tendency to tell their new subsidiaries: “Do it our way.” But before that change happens, look at what the acquired company does well, and find out their M.O. – it might be better than your company’s way.

Study suppliers. Companies that supply to your company can be sources of ideas, either because they do certain things well or they have capabilities you aren’t tapping into. For example, a company that was buying standard printed-circuit boards discovered by chance that they came with wifi capability, a feature that the purchaser hadn’t requested. A circuit board with wifi can send information about the product, such as that a particular component is wearing out. The purchasing company made use of this previously unsuspected capability to offer its customers a component-monitoring service at a higher price point.

Push for a more open culture. I’m always surprised at how many companies don’t publish their measures internally. Try to persuade your company to institutionalize the exchange of information. One company I’m familiar with has developed a culture of best-practice sharing. During the annual budgeting process, each operating division is required to cite two best practices it implemented in the past year. The company also regularly moves managers among divisions to spread knowledge.

Of course, some ways of disseminating knowledge are more effective than others. A lot of companies today use online knowledge-sharing systems. Those can work well, but only if the person who “owns” and manages the system is a subject-matter expert, rather than an IT person whose main role is to keep the server running. A subject-matter expert who is assigned to ensuring that the site is full of ideas can make the difference between a useless and useful system.

It’s often said that one factor hampering people’s ability to learn is that they don’t know what they don’t know. Companies have a different problem: They typically don’t know what they do know. In the quest for ideas, make sure you take time to investigate the innovation that’s happening in remote corners of your own organization.

Executing on Innovation

An HBR Insight Center




How Good Management Stifles Breakthrough Innovation
Capturing the Innovation Mind-Set at Bally Technologies
Good News, Bad News: An HBR Management Puzzle on Innovation Execution
Why Conformists Are a Key to Successful Innovation

Consultants Should All Get Real Jobs

I challenge all consultants to spend some time — at least a year — back in a “real” job, working shoulder to shoulder with the same kinds of people who pay for their advice. So few authors and experts are willing to do this, because they’re afraid. They know it’s much harder to be accountable for a real team, in a real company, for a real project, than it is to critique and advise from the safety of the sidelines.

In 2010, I decided I was guilty of this shortcoming myself. Though I had written three books, a decade had gone by since I’d managed a team or built a product. I had reached the point where no matter how many companies I visited or books I wrote, I couldn’t be sure how much of my advice was good anymore.

How could I advise others on things I hadn’t done in years? Where was my integrity? The only solution was to take off my expert hat for a time and return to a real job. I dropped my commitments for writing and speaking engagements and went back to work with three goals in mind: (1) Learn firsthand how the working world had changed, (2) take a true test of my abilities, in the present day, and (3) discover how much I actually followed the advice I had preached.

From 2010 to 2012 I worked as a team leader for WordPress.com, the 8th most popular website in the U.S. As I describe in my recent book The Year Without Pants: WordPress.com & The Future of Work, it was one of the most amazing and challenging experiences in my entire career. My deepest assumptions were tested and I was forced to reconsider my thoughts on management, leadership, innovation, and more. WordPress.com itself introduced me to ideas about work I’d never experienced firsthand – from how they’ve escaped email overload, to the unusual and often brilliant methods at the heart of the highly productive and passionate culture they’ve cultivated.

As for my three specific goals, they can also serve as a road map for other consultants who are interested to stop teaching and start doing:

Learn for yourself how the working world has changed. It’s well-known that most business people work primarily online today, with laptops and mobile devices, diminishing the need to be in the same physical office with coworkers. My team at WordPress.com was distributed around the world and was on the cutting edge of the latest tools and applications I’d never seen before. And when I began to work in such an environment, I discovered that my ability to lead hinged on earning trust and providing clarity to my direct reports – rather than deploying a fancy management method or strategy. With the smart, self-directed employees on my team (the kind who are now in high demand), I realized less command-and-control leadership was needed and favored guidance and coaching instead.

Test your abilities in the present day. Giving advice is a kind of storytelling. To teach someone a lesson as a speaker or consultant, it’s easy to pull on events from the past and sound very smart. But when you’re managing something in the present, stories are irrelevant: What matters are decisions and outcomes. In a real job, those decisions have deep, emotional, and long term effects – you can’t leave them after a few days or weeks. I hadn’t experienced those pressures in years.

Discover how well you practice what you preach.  I’d written books about creativity and decision making, but how would I apply that knowledge to a real product, with millions of customers, and hundred of challenges? For example, my team had never worked on a rigorous schedule or with planned goals and milestones before and I had to figure out how to make these practices fit in their culture (or vice versa). I definitely made some big mistakes, but so far I haven’t heard anyone point out my inconsistencies. If they do, I’ll still be proud. Taking this challenge hopefully taught me new things that will make be a better teacher and advisor.

Of course consulting, teaching and writing are hard to do in their own right. They demand not only expertise but also the ability to translate that knowledge in ways people can use. Starting a consulting practice or writing a book is difficult, and has its own risks and challenges. But they can never be real in the same sense as the jobs the people hiring consultants and buying books have. The stakes for an executive in making a decision are magnitudes larger than for the consultant, however wise and well-paid they might be. No matter how popular he or she may become, a consultant is merely a commentator on the sidelines and not brave enough to get on the field, even just once a decade. We know the world changes fast today, which demands anyone giving advice to step back now and then to match their egos with experience.

Are you brave enough to take the challenge? And if not, how can you explain that decision to your clients?

Pioneer Accountable Care Organizations: Lessons from Year 1

In the three months since their release, the initial results of Medicare’s Pioneer Accountable Care Organization (ACO) program have generated divergent interpretations by analysts and policymakers. Some have pointed to savings and quality improvements in the first year as evidence that the program is off to a promising start to improving the value of care. Others cite the nine organizations leaving the program and the humbling results of a prior ACO experiment in Medicare — the Physician Group Practice Demonstration (PGPD) that ran from 2005 to 2010 — as reasons to be pessimistic.

While both camps have merit, we must keep in mind that after one year, there is still more unknown than known about how the Pioneer ACOs might perform over the long run. It is also important to remember how the Pioneer ACO contracts differ from both the PGPD and current ACO contracts outside of Medicare. By putting the first-year achievements of the Pioneer ACOs in the appropriate context, they look more impressive than they might otherwise seem, although the challenges they face going forward remain daunting.

ACOs are one of the main ways that the Affordable Care Act (ACA) tackles costs. About 250 ACOs contract with Medicare for the care of 4 million beneficiaries. Most chose a one-sided model in the Shared Savings program, under which they are rewarded for savings below a spending target but are not penalized for any spending above the target in the initial three-year contract period. In contrast, the Pioneer program, which began in early 2012 and involved 32 organizations, is a two-sided model that carries penalties for excess spending but also provides greater rewards for savings. Both programs reward ACOs for reporting and performance on quality measures.

The First Year’s Results

In Year 1, spending grew 0.3% for the 669,000 beneficiaries in Pioneer ACOs, which was 0.5 percentage points lower than the 0.8% spending increase for similar beneficiaries in the traditional fee-for-service program. The Pioneer organizations collectively beat their spending targets by $87.6 million in the first year, $33 million of which went to the Medicare Trust Fund. These savings came largely from 13 organizations, in part through reductions in hospital admissions and readmissions. Of the 19 other Pioneers, 17 had spending that did not significantly differ from their targets, whereas two had losses totaling about $4 million.

All ACOs were rewarded for reporting quality measures. Although rewards were not tied to performance in 2012 (they will be in later years), Pioneer ACOs did better on blood pressure and cholesterol control for beneficiaries with diabetes than did managed-care plans, and better on readmissions relative to the Medicare fee-for-service benchmark. Beneficiaries in Pioneer ACOs rated their experience higher on all four patient-satisfaction measures in 2012 than did fee-for-service beneficiaries in 2011.

At the end of the year, seven organizations that did not generate savings decided to transition to the Shared Savings program, and two decided to leave the ACO arrangement altogether. The absence of financial risk in the one-sided model and in the fee-for-service program is presumed to have contributed to their decisions.

A Context for the Performance

There are two bases for comparison: the Physician Group Practice Demonstration program and, outside of Medicare, the hundreds of ACO-type contracts between physician groups and private insurers that cover 15 million to 20 million people under the age of 65.

The PGPD program is seen by many as a bellwether of today’s ACOs. While all PGPD participants improved quality, only two sites achieved the minimum 2% savings in the first year needed to qualify for a bonus. Only four sites had statistically significant savings by the end of the demonstration. Although a greater proportion (40%) of Pioneer ACOs achieved savings in the first year, the PGP experience serves as a reminder of the difficulty of generating savings.

Yet one distinction bears emphasizing. While the one-sided ACO model is a cousin of the Pioneer model, they are distant cousins. Bearing risk for excess spending is a strong incentive to find savings and more likely to promote serious delivery-system changes. The PGPDs, unlike the ACOs created by the Affordable Care Act, were not required to move to such a two-sided model. Thus, the initial Pioneer results may lead a different path than that of the PGPD predecessors.

There are also significant differences between ACO contracts outside of Medicare and those of the Pioneer program. ACOs in Medicare have fewer options for cost control. Unlike private insurer contracts that have the flexibility to lower cost sharing for high-value services or high-quality providers, Medicare ACOs must rely on a standardized cost-sharing structure. They cannot restrict access to physicians outside the organization, putting them at the mercy of clinical decisions that are beyond their control. They cannot achieve savings by referring patients to lower-priced providers, since Medicare prices are more or less uniform. Thus, the only way for ACOs in Medicare to lower spending is to lower utilization. They can forgo wasteful services, find less expensive substitutes, or provide care to patients at home to prevent unnecessary hospitalizations. However, none of these is easy, which makes their 0.5 percentage-point lower spending increase relative to the fee-for-service program look even more impressive.

How the World Is Different and the Same

That decision of nine Pioneer ACOs to leave the program after the first year may well be the most ominous result. This evokes memories of the managed-care backlash, when capitation contracts of the 1990s that placed physician groups at financial risk proved to be unsustainable. In some ways, however, today’s environment is different. Physicians have more experience practicing in integrated delivery systems, contracts now include caps on potential losses, quality bonuses play a bigger role, risk adjustment has improved, awareness of wasteful spending has grown, and the urgency to slow spending has reached fever pitch.

Nevertheless, many institutional realities from the 1990s remain. The basic market failures in health care are still with us. Restraining utilization remains a difficult sell to patients and providers. Moreover, the delivery system is still best when people fall ill; it is less adept at managing population health for an aging nation. As Pioneer ACOs face continued pressure to lower spending without major parallel efforts to protect them from financial risk (like improving the nation’s public health system, medical-malpractice reform, and public education about high and low value care), there is no certainty that the remaining Pioneer ACOs will not someday walk away. Nor is there certainty that one-sided ACOs, mandated to transition to two-sided contracts after three years, will not walk away.

The Bigger Question

At its core, the ACO concept has two objectives: payment reform and delivery-system reform — with the hope that the first will kick start the second. Regardless of whether the Pioneer program or similar contracts in the private sector generate savings or improved quality in the short run, the bigger question is whether they will succeed in changing the nature of the delivery system. Will physicians and hospitals begin to join forces to keep populations healthy? Will providers across specialties climb out of silos in an age of joint accountability? Will patients fare better?

Unlike designing a payment contract, delivery-system reform has no blueprint. It inherently requires changing the culture of medicine — the way providers work with each other, relate to each other, and the way the system perceives patients. It calls on physicians across the specialties to find common ground in a world with shared risks and rewards, to work in teams and coordinate care towards common goals within their organizations. It calls on insurers to help providers identify waste and inefficiency, and patients to be part of the care team. And it calls on our health care economy to see patients less as commodity and financial opportunity and more as populations whose health and dignity the medical profession was envisioned to protect.

The ACO concept is vital because it enables delivery-system reform to make economic sense, and it provides physicians the opportunity to lead in this reform. With 10,000 Americans turning 65 every day over the next two decades, for Medicare, at least, this opportunity will look increasingly like an imperative.

Follow the Leading Health Care Innovation insight center on Twitter @HBRhealth. E-mail us at healtheditors@hbr.org, and sign up to receive updates here.

Leading Health Care Innovation

From the Editors of Harvard Business Review and the New England Journal of Medicine




Leading Health Care Innovation: Editor’s Welcome
A Global Online Network Lets Health Professionals Share Expertise
How to Design a Bundled Payment Around Value
Providing High-Quality Health Care to Americans Should Trump Politics

Humility Compensates for Low Mental Ability

Among students with low mental ability, those who were rated by others as highly humble scored about 9% higher on performance measures over a 10-week team task than those who were seen as not humble. Humility’s performance-boosting effect was much less pronounced for highly intelligent people, says a team led by Bradley P. Owens of the State University of New York at Buffalo. The compensatory power of humility for those with low mental ability is probably due to humble people’s teachability, which is a result of their willingness to honestly understand their weaknesses, the researchers say.

The Bonus Employees Really Want, Even If They Don’t Know It Yet

Ask your employees this: “How would you like to be rewarded for your efforts and performance, in addition to your fixed salary?” They will likely respond by asking for a cash reward in the form of a raise or bonus, which they can then spend on themselves. They might even convince you that spending this extra cash on the newest tablet on the market, or Daft Punk’s next album, will motivate them to work “harder, better, faster, stronger.”

Take what they say with a grain of salt.

Giving your employees money, and the freedom for them to spend it on whatever reward they choose, might sound like the recipe for a happy and more productive workplace. But evidence from an array of scientific studies says otherwise. Individual rewards—ranging from pay-per-performance to bonuses—have been shown to be detrimental to employee morale and productivity.

First, monetary rewards tend to decrease the individual’s intrinsic motivation and interest for the job. Second, unless the job is extremely simple (requiring no creativity, problem-solving, or complex reasoning abilities), monetary rewards can paradoxically impair performance by leading employees to focus too much on the up-coming extra cash. Finally, when employees compare their end-of-year bonuses, we see more jealousy, anxiety, and competition, and less trust, sharing, and teamwork in the workplace. If your employees are working in groups, the effect is compounded: deterioration of these relationships damages both their individual happiness as well as how they work together as a team.

So, should you throw away the carrot once and for all? Not quite. We suggest that you try something new and potentially far more effective: prosocial bonuses.

Instead of giving your employees more money to spend on themselves, what if you provide them the same bonuses with one caveat: they must be spent on prosocial actions towards charities and co-workers? We tested this very idea, with our collaborators Lara B. Aknin, Michael I. Norton, and Elizabeth W. Dunn: in three countries, we examined the power of prosocial bonuses across different professions and cultures.

First, National Australia Bank gave some of their employees money to spend on charities. This differs from the classic corporate social responsibility model, where the company donates a lump-sum amount of money to a charity usually selected by the CEO. In this method, the company cannot measure the impact of this act of kindness on the dynamics within the firm or on public image. As an alternative to lump-sum donation, the bank gave each employee their own charity voucher and encouraged them to spend it on a cause that they cared about, whether it was to fund cancer research or save Australian ducks. After redeeming these prosocial bonuses, employees reported being more satisfied with their jobs and happier overall.

Next, we wanted to see what would happen if people were nice to others they personally know, rather than being charitable towards strangers. We also wondered whether prosocial bonuses are motivating for everyone, or just for bankers (!), who might often spend money on themselves. In our next set of examinations, we encouraged spending on co-workers and teammates. We gave cash to some members of dodgeball teams in Canada and pharmaceutical sales teams in Belgium and asked them to spend on each other. When asked to give gifts to one another, team members reported indulging in a box of chocolate or bottle of wine, and one team even reported buying a piñata, which they gladly bashed together. Prosocial bonuses appeared to change the way team members thought of their interactions with one another, resulting in gifts that increased shared experiences. Most importantly, we found that teams that received prosocial bonuses performed better after receiving the bonuses than teams that received money to spend on themselves.

Earlier, we mentioned that it is nearly impossible to measure the return on investment in corporate social responsibility. With prosocial bonuses, however, we were able to measure the dollar impact on the bottom line. On sports teams, every $10 spent prosocially led to an 11% increase in winning percentage compared to a two percent decrease in winning for teams where members spent on themselves. On sales teams, for every $10 spent prosocially, the firm gained $52.

Nowadays, people spend more and more time at work, yet less than half of working Americans report being happy with their jobs. Maybe it is time to be creative with the rewards and switch from a self-centered to an altruistic paradigm. Rather than spending a significant amount of time wondering about the big holiday bonus, what if your employees spent some time figuring out how their donations can impact the world, or what kind of gift will make their co-workers happy?

Maybe then money can be a path to spreading happiness and productivity in the workplace.

Entrepreneur, Fire Thyself

When entrepreneurs first start their businesses, they are usually involved in everything: running operations, keeping the books, and making sales calls. But as a company grows, one of the smartest things an owner can do is to fire herself from role after role. Letting go of anything critical to business outcomes is a challenge, but successful entrepreneurs have all learned to replace themselves – and serial entrepreneurs even develop it as a skill.

Why be in a hurry to hand off important work? By building a team to handle operational responsibilities, entrepreneurs can find more time to focus on strategic priorities and even bigger goals.

In the EY Entrepreneurial Winning Women program I sponsor, which is designed to recognize high-potential businesses and help their women founders scale them, teaching this process is a priority. “You can’t micromanage your way to growth,” says Dr. Mary Jo Gorman, founder and CEO of Advanced ICU Care, which provides high-quality critical care to patients in intensive care units. A member of the 2011 North American class of Entrepreneurial Winning Women, Gorman says, “This is more than delegating. This is about building a team that allows you to not think so much about the day-to-day, and a team that comes to you with new ideas.”

Gorman’s comment connects well with three warning signs we tell entrepreneurs to heed. You are probably spending too much time working in your business, and not enough on it, if you:

Begin to get overwhelmed with small details of office management, which takes your attention away from the big picture.
Find yourself with no one to challenge your thinking, because you’re the only one with all the answers.
Are not challenging yourself on a regular basis.

“The whole transition from working in the business to working on the business means letting go of what you’re comfortable doing,” says Gorman. “You always need to be thinking big and challenging yourself.”

What should you do if you want to transition from being a small one-person band to the leader of a high-growth business? Consider these six tips as you begin the process of building your team – and firing yourself:

Decide what will be for your hands only: Your time and attention should be reserved for those few things that only you can accomplish. For many entrepreneurs, this means focusing on the most valuable sales and marketing opportunities — meeting with key prospects and building markets for your product or service. If you, too, need to focus on being the face of the company, then tap into others for help with the rest.
Focus on growth: Once you’ve brought in others to handle the tasks you don’t need to perform directly, such as bookkeeping and managing the office, allow yourself to focus more intently on the keys to growing the business. And by the way, there may also be growth-oriented activities, such as consulting services, that you will discover can and should be managed by others.
Set the tone: As you delegate to others, set clear goals and responsibilities for each new position from the beginning, and make sure each person you hire understands them. Otherwise, you may find yourself spending too much time managing people instead of the next stage of growth.
Hire ahead: Hire people who can grow with the company. If you hire someone who can perform a task required today, but nothing more, you will won’t have the talent needed for the next phase of growth.. “You usually don’t have time to do on-the-job training,” Gorman advises. Make sure the people you hire understand the company’s goals and where you want to take the business over the next three to five years.
Manage expectations: Be careful not to give employees inflated titles. Entrepreneurs are often inclined to give a new hire an executive title, such as vice president, in lieu of a high salary or an equity stake in the company. But if the person is not equal to the demands of that role in a larger company, then your growth will force you to bring in someone above him or her. Why set yourself up for conflict that may distract you from the bigger picture?
Find advisors who will keep you thinking: Consider setting up an advisory board to help you secure talent and determine the overall structure and strategy of your business. You need others to infuse new thinking and to help you figure out how to delegate your responsibilities.

Tactics like these have helped many of the entrepreneurs in the Entrepreneurial Winning Women program build excellent organizations – teams of people who share their entrepreneurial frames of mind and their vision and energy for growing their businesses. At the same time, these entrepreneurs have learned to make strategic use of tools such as business reporting to get a better handle on the state of their companies and determine the best path forward. By stepping outside the day-to-day, they were not only able to grow their revenues and create jobs but also to build a valued team of colleagues who share in the responsibilities and rewards of their ventures.

Understanding Fairness is the Key to Keeping Customers

Remember Netflix — with the DVDs that came in the mail?

In July 2011, Netflix decided to unbundle its streaming and DVD products. This move was textbook strategy. In fact, it is taught at HBS as an example of how economically informed decisions can benefit both company and customer.

Textbook logic goes something like this: you’re charging $10 per month for a subscription to all your customers, who value streaming and DVD services differently. On average, 35% value streaming at $10 and DVDs at $2; 35% value streaming at $2 and DVDs at $10, and 30% value both streaming and DVDs at $8. If you unbundle prices, charging $8 for each service, 70% of your customers are better off! Cinephiles pay $8 for DVDs only, Youtubers pay $8 for streaming, and impatient cinephiles pay $16 for both. And Netflix also wins, increasing its total revenue 4% and attracting new customers to buy lower-priced individual services.

But, as we know, when Netflix tried such a change in 2011 the outcome was different: outrage,  opprobrium, subscription cancellations. Netflix lost a million customers in the month after unbundling. My dad still won’t use Netflix, because they “tried to screw him.”

Fairness, it turns out, is critical to understanding customers’ perceptions of your business.

What happened? 

Netflix triggered people’s fairness response. Customers interpreted unbundling not as a move that would create consumer surplus, but as one designed to profit at their expense. So they canceled subscriptions, not based on any rational calculation, but rather to punish Netflix.

Executives could have predicted this reaction, had they studied psychology and sociology, as well as economics.

Customers think businesses with higher prices must have higher profits. Consumers consistently underestimate firm costs and overestimate profits, attributing price differences to profit, and conclude that prices are unfair. Interventions such as providing historical prices, explaining price differences between businesses, and suggesting costs customers hadn’t considered are only modestly effective at decreasing perceived unfairness.

Customers think prices should only go up when costs do. They think it’s fair to maintain prices as costs decrease or to raise them if costs increase, but not to raise them if costs remain constant. Increasing prices because of increased demand is seen as unfair. Usually, firm profit is seen as “at the customer’s expense.”

Customers infer bad motives when businesses raise prices. These negative inferred motives make customers see price increases as less fair, and decrease satisfaction and desire to buy again. The importance of motive also suggests that price discrimination to help “the less fortunate” is OK – senior citizens’ discounts, for example — and that transparently explaining motives can reduce the harm from increasing prices.

Customers think higher prices for quality is fair. Customers are willing to accept price increases for better product quality, suggesting that firms should demonstrate better quality as justification for price increases.

Most people will punish unfairness, given the chance. In interpersonal experiments, around 85% of people tend to punish unfairness, given the chance, even when it is costly and has no immediate payoff to them. This helps explain the risks to firms of implementing strategies that customers deem unfair. 

Why do these lessons matter? 

Fairness — and the tendency to punish unfairness — is instinct, which we transfer from personal interactions to firm interactions.

Netflix could have anticipated the risk of a fairness response to unbundling, quantified the potential cost, and either opted not to unbundle or sought to mitigate the risks. They might have been more transparent about what they were doing and why, and communicated their decision in a way that speaks to concerns over fairness:

Licensing costs for streaming content are rising as content owners renegotiate licenses. These costs do not affect DVD users, and it would be unfair to charge them separately.
Most customer rely heavily on either streaming or DVDs, so separating the services will lower costs and make most people better off.
We are separating our services so each can focus exclusively on increasing quality for streaming or DVD movie consumption. For example, Netflix just acquired licenses for a number of new films.

Obviously, Netflix isn’t the only company to make this mistake. Customer retaliation can take place whenever companies follow a similar unbundling strategy, but also in bundling or even routine price increases and experimentation. But fairness also creates opportunities for innovation.

Industries known for poor customer service or abusive policies — unfair practices — can create situations where their customers are waiting for a chance to retaliate. Gyms and some software services that create artificial exit barriers and misleading renewal policies are examples of industries that may be at risk of this.

An HBS professor once advised me, “Never use the word ‘fair’ in business – always use ‘reasonable’ instead.” While good negotiating advice, it missed a deeper point: fairness is hardwired into humanity and ignoring its business implications is costly.

Leaders, Drop Your Masks

How can leaders spark and sustain change in themselves and their organizations?

I devoted my doctoral research to this question and came up with an unconventional answer:  metaphors. My co-author Richard Badham and I wrote about four of them in this HBR article:  fire (representing ambition), snowball (accountability), movie (reflection) and mask (authenticity). Others include:  master chef (use of tools and frameworks), coach (internal and external support) and Russian dolls (organizational context), which I covered in this blog post.

These seven concepts helped all the CEOs we studied make the transition from ineffective to effective, stymied to successful, frustrated to celebrated, and in my consulting practice over the past few years, I’ve helped many more executives do the same. Interestingly, the metaphor that has sparked the greatest interest and debate is mask.

There two main ways in which leaders wear masks. Some conceal their perceived inadequacies and flaws behind the polished facade we have come to expect of “great” leaders, a bit like the Phantom from Andrew Lloyd Webber’s epic musical The Phantom of the Opera. Others take on a new persona at work that they feel is necessary for success, much like Jim Carrey’s character Stanley Ipkiss in the movie The Mask, who transforms into a flamboyant green superhero. Both types of mask undermine trust and effectiveness. They also create inner conflict, as leaders struggle to align their work and home lives. This three-minute animation provides a neat summary of the metaphor.

In my work with executives, I’ve found the mask metaphor to be particularly relevant with women. Take Christine, the highly articulate and ambitious CEO of a credit reporting and debt collection company that had been acquired by a private-equity firm. In order to justify the firm’s investment, Christine had agreed to dramatically increase her business’s financial performance. Her credibility was on the line, but she wasn’t sure her young team was up for the challenge. In response, she put on a mask of persona:  toughness.

At the time, this felt logical.  After years of working in a macho, male-dominated industry, she thought she had to be highly competitive and hard-driving to succeed. Whenever her instincts for openness, warmth, and curiosity bubbled up, she pushed them back down for fear of not being taken seriously. As a result, she created a dysfunctional work environment focused exclusively on execution and results. If you hit your target, you were a superstar. If you didn’t, you’d better raise your game. After three strikes, you were out. There were no real conversations about the bigger picture, how to get better results through clever resourcing or innovation.

It took a few new and smart senior hires to get Christine to drop the mask. They were harder to fool and made her feel comfortable shifting to a more collaborative mindset.  “We lost a lot of the unnecessary formality in our interactions and began to have very rich conversations,” she explains. “I wish I had listened to my instincts sooner instead of going through the motions of being tough. I’ve learned that authenticity comes from confidence, and confidence comes from taking risks but you can’t take risks unless you’re prepared to be vulnerable.”

Christine’s team and organization thrived under her new leadership, boosting revenue tenfold and setting industry benchmarks for performance. She has since transitioned away from executive life and now serves as an independent director on several boards and president of a think tank and networking organization for top female CEOs. Recently, I asked her what advice she gives today to rising young female executives. Her response was all about dropping the mask: “I place no value on the literature talking about how to succeed as a woman in business. It’s too binary. One school says ‘be tough,’ and the other one says ‘be a nurturer.’ It’s bloody confusing and completely unhelpful. What about ‘just be yourself’?”