Marina Gorbis's Blog, page 1541

What Wall Street Wants to See From Twitter’s Executives (and Why It’s Wrong)

All eyes are on Twitter, with last night’s announcement that it has filed an S-1 in order to go public. Between now and the IPO, every bit of information about the company’s finances and other metrics will be closely scrutinized. You can expect to see endless discussions in the press about revenue, valuation, user growth, and product. But one key variable is missing from that list: people.

It’s not just the company’s metrics that investors are interested in. Research shows that firms’ management teams influence the success of their IPOs. Just as investors will be judging the appeal of Twitter’s business, so too will they be analyzing the competency of its leadership.

A research brief by academics at Arizona State and Florida State summarizes the many studies that have assessed the impact of people on IPO performance and pinpoints several attributes that have an impact.

What Wall Street Wants to Know About a CEO

Unsurprisingly, much of the research that the brief cites concerns the CEO of the company going public. And there is reason to believe that CEO Dick Costolo’s background, ownership stake, and compensation package may each impact investors’ confidence.

Ownership: ”CEOs retaining higher levels of equity serve as valuable signals to potential investors,” the authors write. Expect investors to look closely at the S-1 for Costolo’s stake in the company.
Incentive: Similarly, investors will want to see that Costolo is incentivized to see Twitter succeed. One study found that “stock option compensation was positively related to IPO performance, as measured by investor valuations.”
Professional background: Here the research is a bit more mixed. One paper, for instance, found that firms whose CEOs had backgrounds in finance or as professors performed better; another study found no relationship based on those characteristics. One thing that is unlikely to hurt Costolo is the fact that he’s not a Twitter founder. (He joined in 2009, three years after the company was founded.) Here again the data is mixed, with some evidence that the market prefers founders and some that it prefers “professional” CEOs.

Senior Management & the Board of Directors

The CEO isn’t the only one likely to be scrutinized by the market. Research likewise suggests that senior management and the board of directors are tied to a firm’s IPO performance.

Management’s background: Multiple papers have demonstrated a link between the management team’s credentials (measured by prestigious degrees) and reputation (measured by charitable board seats).
Incentives: Just as with the CEO, investors will be looking at the S-1 to see what kind of compensation packages senior executives have; the data suggest that incentives like stock options “positively influence IPO performance.”
Who’s on the board: The research also suggests that the presence of more prestigious board members is correlated with less chance of underpricing during an IPO, and having an underwriter on the board is associated with a higher price at IPO.

Is Wall Street a Good Judge of Leadership?

Of course, the fact that the market likes to see certain backgrounds and incentive structures doesn’t mean those things are actually connected to a company’s success further down the line. And there is less research into how executives’ attributes and compensation impact long-term performance. (Stock options do incentivize CEOs to take risks, for instance, but that doesn’t always translate into gains for the business.)

“Sadly, Wall Street is only good at one thing: mechanistically projecting existing trends on a straight line into infinity,” says Roger Martin, dean of the University of Toronto’s Rotman School of Management. As for Wall Street’s ability to gauge people, Martin is even less optimistic. “The notion that Wall Street has a single useful thing to say about the effectiveness of leaders — other than if the financials are trending up, leadership must be effective and the reverse if financials are trending down — is farfetched,” he says.

Of course, that won’t stop Wall Street from scrutinizing.

Why We Didn’t Learn Enough From the Financial Crisis

“Liquidate labor, liquidate stocks, liquidate real estate,” Treasury Secretary Andrew Mellon may or may not have told Herbert Hoover in the early years of the Great Depression. “It will purge the rottenness out of of the system.” This is what has since become known as the “Austrian” view (although most of its modern proselytizers are American): economic actors need to learn from their mistakes, “malinvestment” must be punished, busts are needed to wring out the excesses created during boom times.

Within the economic mainstream, there is some sympathy for the idea that crisis interventions can create “moral hazard” by bailing out the irresponsible. But the argument that financial crises should be allowed to wreak their havoc unchecked has few if any adherents. As Milton Friedman put it in 1998:

I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, … you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. You have Rothbard saying it was a great mistake not to let the whole banking system collapse. I think by encouraging that kind of do-nothing policy both in Britain and in the United States, they did harm.

When a financial crisis hit in 2008 that was probably worse than anything the world had seen since the early 1930s, it was this mainstream view that won out. The bailout of the big banks in late 2008, while hugely unpopular with the general populace, has garnered near-unanimous support from the economics profession. In a paper eventually published in the Journal of Financial Economics in 2010, the University of Chicago’s Pietro Veronesi and Luigi Zingales — two economists who aren’t generally big fans of government economic intervention — concluded that even without including the impossible-to-measure systemic benefits, the cash infusions and guarantees orchestrated by Treasury Secretary Hank Paulson created between $73 billion and $91 billion in economic value after costs.

The Federal Reserve’s subsequent (and continuing) support of asset markets has been somewhat more controversial, but still meets widespread approval among economists. More controversial yet have been fiscal stimulus efforts like the American Recovery and Reinvestment Act of 2009, but the tide of economic opinion and evidence seems to have turned in their favor too, with the bulk of post-stimulus empirical studies showing a positive effect and the former austerity advocates at the International Monetary Fund dramatically changing their tune starting late last year.

In sum, the economic mainstream got its way, the Austrians didn’t, and we all appear to be better off for it. It has been a tough five years, but not nearly as tough as the early 1930s. And the biggest economic policy mistake made was probably not the bailouts or the deficit spending or the printing of money, but the failure to stop Lehman Brothers from failing on Sept. 15, 2008.

Yet despite this record of relative success, most the commentaries being published in the lead-up to the fifth anniversary of that fateful day seem to focus instead on the opportunities missed. Princeton economist Alan Blinder’s op-ed piece in the Wall Street Journal is a prime example of this. Blinder laments that the dangerous financial-sector practices that precipitated the crisis have mostly been left in place. Contrasting the tepid regulatory measures taken since 2008 with the remaking of the financial system that took place during and after the Great Depression, he writes:

Far from being tamed, the financial beast has gotten its mojo back — and is winning. The people have forgotten — and are losing.

What Blinder and his kindred spirits (and I should add that I am one of them) generally fail to discuss, though, is that one of the main reasons the people have forgotten is because economic policy-makers succeeded in averting anything quite as memorable as the wave after wave of bank failures and widespread economic misery that swept the U.S. in the early 1930s. By giving us a Great Recession in place of a Great Depression, they made it much harder to assemble a political consensus for truly dramatic change.

This is where the Austrians surely have it right. If you are spared the full consequences of your actions, you’re far less likely to learn what you did wrong. That still doesn’t seem like enough reason to justify a do-nothing economic policy in the face of a financial crisis. But it ought to be clear by now that there are also real costs to doing something.

How I Got My Team To Fail More

Business-school literature has long stressed the importance of taking risks and encouraging rapid failure. In the real world of quarterly numbers, though, embracing failure mostly remains a throwaway line in CEO speeches.

At PBS Digital, we went beyond corporate lip service and demanded failure from each and every employee.

The results? The transformation of a venerated but legacy brand into a digital leader.

The story of our decision to create and embrace a failure metric begins, as do many business advances, with desperation. By 2007, PBS.org audience growth had stalled and the product pipeline was dry. Worse, the digital team was paralyzed by a deeply engrained culture of caution. Its top two priorities — a redesign of PBS.org and a new video player — had churned on for two years with little to show except a thick binder of product requirements from key constituents.

It’s easy to understand why. Television production works on a different cycle from digital, with programs often greenlit two to three years in advance. Also, PBS is the opposite of a top-down company. It’s a membership organization created to serve more than 350 independently owned and operated stations, each with its own board of directors, objectives, agendas and strategies.

With hundreds of masters, any potential digital product was bound to fall short of meeting somebody’s needs. Layer on the fact that PBS stations receive a small but vital revenue stream from federal and state governments, and you had an almost ideal scenario for paralysis.

That culture had worked fine in the analog world, through nearly four decades of groundbreaking children’s television started by Sesame Street, and primetime television gems such as NOVA, Nature, Masterpiece, and FRONTLINE — each of which has been on the air for more than a quarter-century.

But that was analog. On the digital side, an organization that deliberates too long about products instead of launching them will find itself quickly gasping for survival.

So when I joined the company in December 2006, I decided to deliver a shock to the system. Soon after arriving at PBS, I called the digital team into a conference room and announced we were ripping up everyone’s annual performance goals and adding a new metric.

Failure.

With a twist: “If you don’t fail enough times during the coming year,” I told every staffer, “you’ll be downgraded.”

Because if you’re not failing enough, you’re playing it safe.

The idea was to deliver a clear message: Move fast. Iterate fast. Be entrepreneurial. Don’t be afraid that if you stretch and sprint you might break things. Executive leadership has your back.

When I talked about the failure metric and freeing the team to become more entrepreneurial, some in the larger PBS organization translated this as the digital group wanting a license to be undisciplined. So we worked to build a digital team that was left-brain, right-brain — embracing the nonlinear right-brain mojo of a startup (entrepreneurial, fast-moving, unafraid of risk) while filtering every initiative through the left-brain empirical rigor of goals, metrics, and KPIs. The KPIs also helped ensure our failures were disciplined failures, not the result of sloppiness.

In a beautifully ironic twist, the failure metric itself initially failed. We originally envisioned the metric as a formal KPI in each staffer’s annual performance review. But we soon realized we had created a contradiction: You can’t build a culture that values rapid iteration by simply changing an annual performance cycle. We needed daily reinforcement of the desirability of risk-taking and failing fast.

So instead of spending cycles working with HR to create a KPI measuring lack of failure, we focused on endlessly repeating the “must fail” message.

The change was rapid and profound. Some staff were uncomfortable with the new culture and left. Others began taking risks. The product manager working on our first augmented reality site for PBSKids.org ditched her plans for months of customer research and testing in favor of a 10-week sprint to launch. The site failed. The product manager? She received a spot bonus and her “smart failure” was listed as a top accomplishment in her glowing annual review.

Critically, the lessons learned from the augmented reality failure led to creating a suite of gesture-based games, which are now among the most popular areas of pbskids.org.

With the team taking risks and being rewarded for doing so, we set to work institutionalizing the new culture, adding the day-to-day processes of a lean startup.

Our development team went Agile. We began formally recognizing staffers who took risks, such as the design director who landed several impressive applicants by replacing a traditional job posting with an infographic about the position.

Crucially, we redefined success. When our first foray into web-original video production, a safe, TV-type series called “The Parent Show,” launched to fairly good reviews, we resisted the temptation to declare victory. Instead, the team challenged itself to risk breaking the PBS mold by creating a truly YouTube-native show.

This led to the Mr. Rogers remix, “Garden of Your Mind,” which auto-tuned old clips so Mr. Rogers bursts into song. Within 48 hours, it rose to the top of the most viewed and most shared videos charts on YouTube.

Before the failure metric, the team would have considered a Fred Rogers music video to be risky at best, sacrilege at worst. Instead, the culture change triggered by the failure metric gave the team comfort that even if this blew up in their face, they would be protected.

Every revolution eventually faces a counter-revolution. Ours was no exception. The failure metric was a get-out-of jail-free card for the digital team, but had done nothing for the larger PBS organization. Tensions began to surface between the digital group’s new lean start-up pace and the larger organization’s traditional culture.

Properly managed, it’s a healthy tension. Each culture challenges the other to grow. More often, though, the incumbent culture simply blots out any challengers. So far, PBS has avoided that fate, thanks largely to CEO Paula Kerger, who has pulled off the difficult task of nurturing and supporting the new digital culture while growing audience ratings for the legacy television business.

We learned that to make the culture change stick, we needed to be both radical and incremental.

Radical because we needed to establish audacious goals to inspire the team. Incremental because, well, we didn’t want to get fired. (And because it’s a rare organization able to swallow significant change in one gulp.)

We went radical by re-casting our team’s mission statement into two words: Reinvent PBS.

And we took baby steps by starting with one product, PBS.TV, which upended both internal and audience assumptions about what a PBS website should look like.

We suspected we had it right when AP led a story with “PBS may be cooler than you think”; the Twitter crowd started calling PBS.TV “sick nasty”; and a middle-aged woman in focus group testing announced, “I can’t believe this is PBS. It’s so … modern.”

Crucially, we delivered business results. In the five years since we delivered the failure metric jolt to our system, unique visitors to PBS.org have doubled. In each of the first seven months of 2013, PBS.org topped ABC, CBS, NBC, and Fox as the most-visited network TV site, according to comScore.

In that same timeframe, video views on PBS.org and our mobile platforms have risen 11,200 percent — from 2 million a month to almost a quarter-billion last month.

The 11,200 percent growth in video views has propelled PBSkids.org to become the most popular Web site for kids video for 17 straight months, according to comScore.

In the end, the failure metric was something of a verbal stunt. Here’s what staffers said a few years later: If I had simply announced that they had permission to fail, they would have considered it corporate blather. By making failure a requirement, I had shocked them into taking the message seriously. Sometimes it takes a stunt to push people — and organizations — out of their comfort zones and on to lasting change.

When You’re Innovating, Resist Looking for Solutions

If someone comes to you with a problem, you start thinking of a solution. That’s natural — everyone does it.

But as soon as you start thinking of a solution, you unconsciously begin shutting off possibilities for getting a deeper understanding of the problem and therefore of finding a truly breakthrough solution.

That’s why it can often be more productive to avoid “solutions” thinking when a problem arises. It’s better to stay in what we call the “problem space” for as long as possible. If that sounds strange, here’s an example of what we mean.

A military organization came to us for help because people who were being observed by pilotless drones were using techniques such as smoke screens to deceive the analyzers of the drones’ video and other data. The organization asked for assistance understanding the adversary’s deception techniques. But by framing the request that way, the client had already moved from the problem space toward the solution space — the client was specifying the type of solution that was expected.

We encouraged the client to stay in the problem space, sometimes known as the “front end,” in order to get a deeper understanding of the problem. The client soon came to see that analysts are deceived because there are limits on their ability to perceive. The real issue is understanding these limits.

To further explore that issue, we held an off-site at which we brought in people (outside the military) who are experts at confusing people, and others who are experts at making sense of ambiguous information. The first group included an illusionist and a theatrical set designer. The second included a forensics expert and a blind person who was practiced at perceiving whether her guide dog was leading her into safe or unsafe places.

The insights from this “divergent collaboration” of people from disparate walks of life gave the client ideas for new avenues of research. For example, could the analysts’ information feeds include other types of data, such as auditory signals, or even smells?

What does all this mean about your own efforts to solve problems and execute on innovation?

First, force yourself to stay in the problem space as long as possible. Obviously, companies sometimes face real restrictions on the types of solutions they can consider. But often those limits are purely psychological, the result of narrow thinking about the nature of the problem.

So go deep. Look for underlying issues. What’s the real obstacle you face? Once you’ve found it, go deeper still. What’s the essence of that obstacle?

Then search for different viewpoints on the obstacle. Go far afield. Look for people who have faced that same essential challenge, and tap their insights. This can be easier than you think. It can be as simple as reading a relevant book or magazine that you’ve never looked at before. Or call an unfamiliar organization that includes people who face your challenge on a regular basis. Don’t be afraid to bring outsiders into the discussion. We’ve found that people from wide-ranging backgrounds are often very willing to help — they find the experience fascinating.

Be thoughtful about the physical environment in which you explore the problem space. A lot of companies do offsites in hotel conference rooms, but those can be mind-numbing. Find something a little more conducive to exchanging ideas, a comfortable setting where you can get away from your day-to-day activities, form and re-form small groups, write on the walls. And plan the sessions carefully. When it comes to mixing and matching ideas, don’t trust to luck. Structure conversations so that they’re enriching rather than draining.

None of this is easy. Staying in the problem space, in particular, can be very difficult. Sometimes clients feel frustrated that we resist moving from the problem space to the solution space. Even some of the “divergent” collaborators we bring in for additional insights feel frustrated when they hear we’re less interested in their proposed solutions to a client’s problem than in how they look at the issues involved.

But staying in the problem space is worth the effort. If you rush to a solution, you run the risk of solving the wrong problem. The place to get the problem right is in the problem space, where you’re more open to new ideas.

Executing on Innovation

An HBR Insight Center




Research: Middle Managers Have an Outsized Impact on Innovation
What’s the Status of Your Relationship With Innovation?
Innovation Isn’t an Idea Problem
Five Ways to Innovate Faster

Don’t Sugarcoat Negative Feedback

The old rap against coaches and consultants: they borrow your watch to tell you the time.

And yet I’d bet anything that 90% of the coaches reading this hung out their shingles with an eye toward helping executives grow and overcome impediments to success. So why do they bear the stigma of being a cajoling cheerleader rather than a conscientious change agent?

The answer is that, in the same way that hungry rats learn to navigate the blind alleys of a maze in their search for food, coaches, consultants, and other change agents learn that punishment most often follows their constructive criticism. Conversely, when they stroke the egos of clients, rewards come raining down. Managers fall victim to the same temptation: it’s much more fun (and in the short term, rewarding) to praise your direct reports than to deliver negative feedback.

The bad news is that if you’re a consultant or coach, folks will tire of having smoke blown at them and, sooner or later, react negatively. They’re paying for reasoned critiques, and chronic evasiveness eventually gets on their nerves. And if you’re a manager, you can’t only rely on praise. (Although of course, praise is just as important as criticism, and needs to be delivered in larger doses.)

First, remember: Mary Poppins don’t know squat. A spoonful of sugar does not help the “medicine” go down. Who hasn’t been enraged by a putz who wanted to deliver criticism and started his spiel by saying, “With all due respect, Adam…” Don’t folks know that in the argot of the business world, “with all due respect” means “screw you”?

This isn’t an opinion of mine; it’s an empirical fact that Dr. Edward E. Jones, the psychologist who (literally) wrote the book on ingratiation, demonstrated: When evaluators gave critical reviews to experimental subjects role-playing employees, those who expressed what was wrong immediately were significantly more respected than those who began with praise and ended with, “the bad news is…”

If you want to help a person change restrict your sugarcoating to breakfast cereals. Deliver constructive feedback rapidly in its raw form. This doesn’t mean harshly; there’s a way to soften blows without delaying them if you strive to be empathic. Just never make it seem like you’re avoiding hard cold facts. All that does is make the facts seem worse than they are.

And yet, proceed cautiously with established stars. Somewhere in the collective unconscious of coaches and CEOs lives the notion that being young equates to being thin-skinned. Fact: There is often an inverse correlation between tenure on the fast track and tolerance of criticism. Professor Chris Argyris demonstrated that many “stars” who effortlessly ascend the career ladder are shockingly unable to handle negative news. What Argyris showed was that managers who “never failed” — who were hot shots in school and then on the job — were often devastated by constructive criticism and actually sought to ignore or deny it. Conversely, if you’ve learned, through failure, that you don’t die from being criticized, you take it as it is intended: Information to learn from.

So know your target: If a person has never performed poorly, handle with care. Someone who obtained a degree from the School of Hard Knocks before coming to your company can take feedback straight, no chaser.

Resist the urge to prophesy. The absolute worst thing a CEO, coach, or consultant can do when offering constructive criticism to someone is to provide a timetable for the process that a person who must change should be expected to conform to. Saying, “Most of my clients can get their anger management issues checked in less than 6 months…” adds insult to injury. You may think it’s encouraging to say, “Don’t worry; it’s a quick process,” but what you’re doing is adding fuel to a negative fire.

Similarly, don’t minimize the challenge. When you critique someone with a history of success you have to assume that the flaws you see in them are (a) entrenched, and, (b) something they have long grappled with to suppress or get past. Saying, “No big deal” to that sort of issue can scare the socks off someone who knows that what you’re targeting for change is an issue they have battled unsuccessfully for years.

To help someone with a problem that hasn’t derailed an otherwise productive career, ask them how they believe they can best cope with it. After they give you their (terrified) perspective say, “Well, I have some suggestions for reducing the time and energy you might expect to devote this matter.”

Any and all of my success as a coach is because I internalized an observation by Anais Nin: “We don’t see things as they are; we see them as we are.” Constructive criticism and your plan(s) for having someone address the flaws you see emanate from your worldview. To have these well-intended messages hit home, you must understand your audience and tailor your feedback to their needs.

Drink Your Way into the Middle Class

Straight Up How Johnnie Walker Conquered the WorldForeign PolicyForeign Policy

<p>At a gathering of Beijing techies, on a cruise up the Nile, at a four-day wedding in Jaipur, or among members of Iraq’s Baath Party. These are all places where Johnnie Walker whiskey has been poured — and, according to Afshin Molavi, the Scotch whisky's global reach is only expanding. This delightful tour through the history and marketing of the  “amber restorative” is a blueprint for how to use our aspirational desires to sell us lots and lots of stuff — all over the world. The story begins in the late 1800s, when Alexander Walker became the company's first brand ambassador, meandering around London "on a specially-built open carriage known as a phaeton, a mode of transport favored by royals and the superrich." Today, five of Johnnie Walker’s seven top global markets are emerging markets, and ads from Mexico to Africa exhort the emerging global middle class to “keep walking” or “step up.”</p><p>This transnationalism has a long heritage: the iconic “Striding Man” logo was originally designed "to look English, not Scottish," complete with a monocle indicating his literacy. Today, most of the Striding Man's features have been wiped out, and for good reason: "He has become a silhouette," writes Molavi, "a colorless everyman. He could be anyone — and you could be like him." </p>

Those Pesky Gray Areas The Upsides and Dark Sides of RivalryStrategy + BusinessStrategy + Business

<p>Most of us aren't psychopaths or saints. We're all bumbling about in a gray area, a zone that's of particular interest to Gavin Kilduff, an assistant professor at New York University's Stern School of Business. In particular, he studies how rivalry chews away at our morals. He's found that merely writing about a rival for five minutes makes people "agree more with all kinds of Machiavellian statements." People are "also more likely to inflate their performance on a task by saying that they fared better than they actually did" after such an exercise. Rivalry can hurt entire companies if they dwell on historical competitors, losing sight of what's actually happening around them – for instance, U.S. car companies in the 1980s who battled so hard against one another that they missed the rise of Japanese autos. But are there any times when rivalry can actually push us in positive ways? Possibly: Kilduff is investigating whether fierce competition with another company can improve group cohesion and loyalty. And competition on routine office tasks can improve worker performance. The key, of course, is managing when rivalry is appropriate — and when it's dangerous for both your employees and your company. </p>

"Am I gonna be psycho?" Survivors of Bangladesh Garment Factory Collapse Still Suffering, 5 Months LaterWashington PostWashington Post

<p>The Rana Plaza garment factory collapse killed more than 1,100 people. In the aftermath, companies like Walmart, Gap, and Disney <a href="http://www.nytimes.com/2013/05/02/bus... to identify</a> whether their supply chain partners conduct work in the country, promising to <a href="http://www.theguardian.com/sustainabl... an unwieldy system</a>. The Bangladeshi government has started making settlement payments and global corporations are <a href="http://www.bloomberg.com/news/2013-09... decisions</a> about how to compensate victims and their families. Ad hoc and grassroots organizations are trying to identify and help those who might be suffering psychological effects from the disaster.</p><p>In the meantime, survivors, families, and rescue workers are struggling. According to Jason Motlagh, "none of the 4,000 families affected by the Rana Plaza disaster have received the full payments," with some families relying on handouts because their single breadwinner is dead or injured. The psychological toll may be even more dire: one man, Rafiqul Islam, cut eight people out of the wreckage with a hacksaw blade. Now he says he hears voices "calling for me," and his propensity for violent outbursts and memory lapses following his heroics cost him his job. Faizul Muhid searched corpses for identifying documents and features; he now self-medicates with anti-depressants, asking, "Am I gonna be psycho?" Then there's Omar Faruque Babu, who became a bit of a media celebrity after rescuing more than 30 people. He has since hanged himself. </p>

Why Your Virtual Garden Doesn't Yield Any Crops How Zynga Went from Social Gaming Powerhouse to Has-BeenArs TechnicaArs Technica

<p>Between 2007 and 2011, Zynga seemed unstoppable. Its flagship game, FarmVille, was ubiquitous on Facebook, with both social companies reaping financial benefits from the virtual care of animals and crops. But around the time the company went public — with a share price of around $13 — its cracks were beginning to show. Among them: an explosive and often chaotic increase in staff (mostly in middle management), relying too heavily on Facebook as the core of its strategy, a focus on getting new players instead of retaining old ones, and squeezing as much money out of its users as possible in ways some felt were unethical. Cash was also being thrown around like crazy for lavish game-themed parties and, on one occasion, clowns. "I came in one day and there were clowns that were passing out balloons," said the current Zynga principal engineer. "Some people said they were deathly afraid of clowns! I don't know the thought process there. [I mean, why not] jugglers? Nobody is afraid of jugglers."</p><p>This past summer, founder and CEO Mark Pincus stepped down, and the company's shares now sell for under $3. Can Zynga turn itself around? Possibly, though the consensus is that it will take a drastic reduction in staff and a renewed focus on mobile, a platform the company has struggled with. And maybe fewer clowns are in order, too. </p>

When the Bottom Drops OutHow Austerity KillsCNNCNN

<p>Fixing a struggling economy ain't easy. But austerity, Europe's budget-slashing policy, may be causing a preventable public health crisis that's also costing countries more in the long run. Political economist and epidemiologist David Stuckler and physician Sanjay Basu have been deeply analyzing how austerity is affecting citizens. Some of their findings: in Greece, the public health budget was cut by more than 40%, eliminating needle-exchange programs and funding for mosquito-spraying; the result has been a 200% rise in HIV infections and a malaria epidemic. In addition, forty percent of people say they can't access medically necessary health care. Stuckler and Basu argue that it doesn't have to be this way, pointing to numerous examples of depressed countries actually making health care <em>better</em> for its citizens: 1930s America, Malaysia after the East Asian financial crisis in the 1990s; and Iceland today. In fact, the authors say, investing in public health can actually save money: "Each euro invested in public health can yield up to a three euros return if invested wisely in data-supported government programs." </p>

BONUS BITS"You Just Weren't a Good Fit…"

<p><a href="http://online.wsj.com/article/SB10001... Should You Bring Mom and Dad to Your Job Interview?</strong> (Wall Street Journal)</a><br /><a href="http://gawker.com/company-sorry-for-t... Sorry for Turning Job Interview Into a Daft Punk Dance-Off</strong> (Gawker)</a><br /><a href="http://www.businessinsider.com/beauti... Women Get Callbacks for Job Interviews More Often</strong> (Business Insider)</a></p>

At a gathering of Beijing techies, on a cruise up the Nile, at a four-day wedding in Jaipur, or among members of Iraq’s Baath Party. These are all places where Johnnie Walker whiskey has been poured — and, according to Afshin Molavi, the Scotch whisky's global reach is only expanding. This delightful tour through the history and marketing of the  “amber restorative” is a blueprint for how to use our aspirational desires to sell us lots and lots of stuff — all over the world. The story begins in the late 1800s, when Alexander Walker became the company's first brand ambassador, meandering around London "on a specially-built open carriage known as a phaeton, a mode of transport favored by royals and the superrich." Today, five of Johnnie Walker’s seven top global markets are emerging markets, and ads from Mexico to Africa exhort the emerging global middle class to “keep walking” or “step up.”

This transnationalism has a long heritage: the iconic “Striding Man” logo was originally designed "to look English, not Scottish," complete with a monocle indicating his literacy. Today, most of the Striding Man's features have been wiped out, and for good reason: "He has become a silhouette," writes Molavi, "a colorless everyman. He could be anyone — and you could be like him." 

The Right Way to Rally Your Troops

Leaders face enormous public and employee scrutiny when their companies are failing. Many have to measure their success in terms of stock price and market share, and when those slip, everyone sees it happening, reads about it in the business pages, watches it on CNBC. How do the best CEOs confront that challenge? When the heat is on, and pressure intense, how do they rally their troops?

For 10 years, I worked as a consultant to John Emery, CEO of Emery Worldwide, now part of UPS. Every six months, we produced a video to update employees around the world on how the company was doing. At one point, the stock had taken a dive and when John and I shot his usual recording soon after, he stared into the camera, frankly explained what had happened and asked everyone for their help reversing the trend. I wanted to edit what he’d said and do another take, but his response was: “I’m one-take John and I know when telling the truth is vital to our success. We’re all in this together, and I need everyone on board now more than any other time.” When we released the video, I was blown away by the response. There was a buzz across the organization, with everyone talking about what they could do to fix the problem. I’d never seen a leader be so boldly truthful — nor had I ever seen such a positive impact. We weathered that storm, and John’s leadership set the bar for me on how to effectively engage employees to overcome a crisis.

Recently, I watched two CEOs handle similar situations. One followed John’s example; one didn’t. And I think there are lessons in both stories for us all.

This spring, after disappointing first-quarter earnings, IBM’s stock plunged 8.3% in one day, its biggest drop in eight years. This was certainly not what CEO Ginni Rometty wanted or expected to face only one year into her job running one of the largest and best-known technology companies in the world. So she gave a company-wide video address to 434,000 employees in 170 countries, telling her people to “wake up, work faster, work smarter, and work together.” The press described the talk as a “reprimand”, but I saw it differently. I think Rometty’s clear, direct, provocative language was intended to activate her employees, to make them acutely aware of the issues at stake, and to direct their full attention on working together, fast.

“Where we haven’t transformed rapidly enough, we struggled,” she said. “We have to step up … and deal with that, and that is on all levels. We were too slow to understand the value and then engage on the approval and the sign-off process. The result? It didn’t get done.”

Those words and others were designed to create clarity amid confusion and uncertainty, to push employees toward candid, honest conversation and to encouraging them to start looking for — and executing on — new and better ways of doing business. She was reframing, coaching and redirecting.

The second story comes from AOL CEO Tim Armstrong, who last month hosted a meeting and call to address the 1,100 employees of Patch, a unit that had been losing money and was about to face some layoffs. The beginning of the speech was no doubt designed to sound like “tough love” but it came across decidedly more threatening than energizing. Repeatedly Armstrong told his staff that anyone not fully invested in Patch should leave. Then, abruptly, he fired someone standing in the room with him: creative director Abel Lenz.

“Stop shooting”, he said, followed quickly by: “Abel you’re fired. Out of here.”

The backstory, according to press reports, is that Armstrong had been disappointed in Lenz’s performance. When he saw Lenz filming, instead of really listening to, this critical meeting, it was the last straw. But no leader should ever give individual feedback or fire an employee in public. In an already tense and anxiety-filled situation, Armstrong created more fear and distrust by acting impulsively on his emotions. I imagine the other 1,099 employees on that call thinking, “This is what might happen to me!” That sort of response pushes the brain into fight or flight mode, reducing its ability to reason, problem-solve and think creatively. It’s hardly an invitation to work together towards positive change.

As a leader, what you say and how you say it matters — especially when your company is facing challenge or crisis. Your job is to model what is right and good and energize the talent around you. If you don’t, you will shut your employees down.

I tell my clients to consider the following strategies:

Anchor the organization. Focus people on what they need to do differently and why this is critical. Explain the changes you want to see, and lead people into thinking about how they can play a role.
Model the right kind of truth-telling. Encourage employees to speak frankly without finger-pointing. Use clear and direct language and monitor your emotions. Never let fear or frustration creep in.
Focus on the future. Explain that you want to hear ideas from everyone in the organization on how to better collaborate and innovate. Be clear that you’re open to two-way conversations.

Great leaders understand that rallying the troops is not about scaring employees into working harder with threats and blame but inspiring them to want to “do battle” together, unified in purpose and determined to succeed.

Why Organizations Should Embrace Randomness Like Ant Colonies

Consider the common ant. Each one is by genetic design capable of only a few simple behaviors and binary choices, making it a pretty dumb, rigid, inflexible being. Yet the collective behavior of an ant colony is adaptive, flexible and even creative; it’s a highly structured social organization.

Now consider your average human. Most of us are individually adaptive, flexible and very creative. Yet the large organizations in which we work are often inflexible and incapable of adaptation and true innovation.

Why are ant colonies so much better than the sum of their parts, while governments and companies are so often much worse?

I think it’s because of the different ways in which ant and human organizations deal with uncertainty. In my new book, I talk a lot about how ant societies exploit randomness and “leaderlessness” to learn and flourish. As a colony is exploring a new environment (such as your house), forager ants walk around aimlessly until they find something surprising, say a piece of fruit on the floor. Through random interactions, the location of this new information spreads quickly Very soon, thousands of ants converge on this food source and begin transporting bits of it back to the colony. When ants don’t find food, they increase the randomness of their searching. As Deborah Gordon, an ant biologist at Stanford, points out, “Elegant top-down designs are appealing, but the robustness of ant algorithms shows that tolerating imperfection sometimes leads to better solutions.” Without any central control, “food acquisition strategy” or risk management, ants are one of the most successful species on the planet, 10 million billion strong, giving them roughly the same global biomass as humans.

Human organizations tend to take a completely different approach to exploration and have the opposite response to setbacks. Most try to decrease randomness, with executives conducting feasibility studies and risk analyses or tightening budgets, introducing more processes, standardizing operations. When projects come in late or over budget, as so many inevitably do, the result is “deep-dives” and lengthy PowerPoint presentations about “lessons learned” so everyone can plan better next time (even though the situation will undoubtedly have changed by then). Even successful companies have trouble resisting the temptation to reduce uncertainty and fight noise.

What would happen if we stopped resisting, and instead took the terrifying step of embracing randomness? Organizations would start to learn, just as individuals do when they are surprised. Scientists have explained it to me like this: When something unexpected happens, the human brain reacts by focusing attention and increasing stress. A driver swerves in front of you, and for a few seconds when you’re consumed by avoiding that car, all other thoughts disappear from your consciousness. The more unexpected the event, the better you will remember, and the more you will learn from, it.

Surprise is information. So an organization that puts all its effort into planning, tracking, monitoring and documenting to minimize surprise and the chance of failure prevents itself from acquiring and spreading information, and consequently from learning. Innovation slows, and the company either atrophies or gets superseded by more agile organizations.

Some entrepreneurial companies, such as Valve, the entertainment software and technology maker, and Netflix, the video-streaming service, have obviously learned to relax controls to increase randomness and make the most of their flexible, creative individual contributors. The rest should aspire to act more like those ant colonies.

The One Thing VCs Could Do Immediately to Increase Returns

If the person who can cure diabetes came to you for money, if you were a VC you’d likely turn that person away. And, an inventor who could reduce global dependency on oil by designing better batteries? That VC might not even take the meeting. By venture capitalists’ individual actions, they are limiting growth and innovation. By their collective choices, they are risking our very lives.

Now that might sound a little extreme. But bear with me.

Ted Schlein, general partner at Kleiner Perkins, was recently invited to discuss race and investment in technology. The conversation took place at an inaugural conference called Platform, created by Hank Williams after a provocative series that Soledad O’Brien did on CNN on black entrepreneurship. At Platform, luminaries like Quincy Jones and Governor Deval Patrick, as well as entrepreneurs like urban revitalizer Majora Carter, and Juliana Rotich of Ushahidi came together to discuss what specific changes could be made to have all aboard the innovation economy.

And so all ears were tuned in when well-known VC Ted Schlein of Kleiner Perkins started talking… but Ted denied there was a problem. Despite the story the numbers tell — women receive less than three percent of all venture capital funding, and blacks even less than that — Ted said that the venture capital community was “color-blind” and “operates fully on a meritocracy.” This continued argument disregards the astounding facts that essentially 100 percent of funded founders are white or Asian, and 89 percent of founding teams are all-male.

Since then, we’ve had the case of Paul Graham, who recently got into a brouhaha because he claimed a correlation “between founders having very strong foreign accents and their companies doing badly.” He continued to dig into his argument, believing people were simply misunderstanding him, but he doesn’t acknowledge the facts: immigrants with accents do found successful startups, but often without VC support. Kauffman Foundation research shows that more than half of Silicon Valley start-ups are founded by foreign-born entrepreneurs. Imagine if those with accents could get your support — what tougher problems could they solve?

And who can forget that only two years ago, Vinod Khosla said that only the young can innovate. “People under 35 are the people who make change happen,” said Khosla, who explained his belief that old entrepreneurs can’t innovate because they keep “falling back on old habits,” because “people over 45 basically die in terms of new ideas.”

So, basically, if you followed this limited logic… you’d hear that if you’re a woman, black, foreign, or old, you need not apply; you will not be seen. No matter how good your idea could be. No matter how many lives it could save, or new solutions you create, or how much revenue it could generate.

Listening to Ted Schlein, Paul Graham, Vinod Khosla, and countless other conversations among VCs reminds me of playing peek-a-boo with a baby. Amazed that the person is there, even though they can’t be seen, this mystery creates joy. In the vast majority of VCs case, they believe that the person isn’t there, because they can’t see them. And there’s no joy in that.

Venture capitalists are often “pattern matching”, thus actively looking for someone who looks like the successful founders of Google, FaceBook, Amazon, or Apple. In other words, you are actively looking for people who look like Larry Page, Mark Zuckerberg, Jeff Bezos, or Steve Jobs — white men. Forget differentiation. Forget newness. VCs primarily invest in sameness.

By not seeing (and funding) new-ness you are actually blind, not color-blind.

Now what each of you says when this topic of “blindness” comes up is this: “I am not a racist / sexist / whatever it is you are accusing me of.” And, let me assure you that you’re (likely) not. What you probably are is biased, which is to say your lens is altered by cultural norms and so see what you expect to see. If you’ve largely been surrounded by, say, women who don’t work outside the home, your lens when it comes to women may be warped. But, as I’ve already written in a prior HBR post, bias is fixable — though it takes work.

Others of you say that it’s okay to pass up any particular group since you’re not interested in what you believe is a limited category. The most common one I hear is “I’m not interested in investing in fashion which is why it’s fine with me that I don’t see a lot of women’s pitches.” What doesn’t seem to occur to you is that women are also interested in bio-tech (like Nina Tandon), policy (like Marci Harris), and electronics (like Ayah Bdeir). Even the consumer goods industry is affected. Kara Goldin of Hint is taking on goliaths in the consumer beverages space by redefining what “is” and “is not” water. Each is an innovator, and many more like them exist. If you want to create higher returns, see these “new” types of innovators and watch them deliver home runs. But, first, you have to first actively filter them in, not out.

Finally, I hear you say is that this is about market capitalism and the only measure of success is whether you have made money. You, of all people, know that if you only focus on the profits of your existing enterprise, even though the rules of the game are changing, you leave yourself open to disruption. You now face the innovator’s dilemma — and if you fail to adopt new approaches, you will eventually fall behind, fail, and die. You know this, but mostly you dismiss the opportunity to reinvent.

But my bigger concern is that you will take us collectively down with you. You have — by far — the most access to funds to invest in new ideas. You are the structural gateway of innovation.

You recognize capitalism as an economic system, while dismissing these issues of inclusion as “social”. But I would argue that, in practice, your collective acts in venture capital are fundamentally a new type of structural power, the effect of which is economic in nature. When your collective actions limit human capital, when they deny opportunity based on race, gender and age, then that must be viewed and evaluated as an economic system. Today, practically speaking, it is not the laws that are structurally limiting our economy; rather, it’s money — specifically the flow of money to new ideas.

Ignoring inclusion is something you do at your own peril — and at ours. For we are all at risk when your system excludes. We — society, that is — need you to reinvent how you do what you do.

Now I’m not an innocent. While I’d like to believe in a just world where all creative and hardworking people will be seen, I know better. I know enough of Jeffrey Pfeffer’s work to know that the world has pervasive power differentials and that groups in power, like yourselves, will often respond to outside pressure by digging in your heels because you’d rather feel good about yourselves than risk change.

But what I also know is that it takes some relatively small set of influencers (data says only 10-20% are needed) with an unshakable belief to convince the rest to adopt the same belief. And, of course, some of you are already there, trying to get the rest to join you. Challenging the venture community may seem like an attack, but actually this is a call from the future. Step into the leadership we so need from you.

Do You Buy Stocks Just in Time for the Dividends? You’re Not Alone

Companies have significantly higher stock returns in months when they’re expected to issue dividends, because dividend-seeking investors buy stock in the days leading up to the expected payment, say Samuel M. Hartzmark and David H. Solomon of the University of Southern California. A portfolio that bought all stocks of companies that were expected to issue dividends in a given month would earn abnormal returns of 41 basis points, the researchers say. But beware: Significant negative returns are seen in the 40 days after the dividend day.