Marina Gorbis's Blog, page 1550

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.

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.

Group Think Is the Kryptonite of Leadership

Let’s be honest: for the most part, we gravitate toward people who hold a lot of the same beliefs that we do. It’s human nature. But for anyone in a leadership position, this basic human urge can also be your kryptonite. If you surround yourself with too many like-minded colleagues, that is, you can create a culture of group think. That’s not good. Just take a look back at U.S. history. Lyndon Johnson’s escalation of military action in Vietnam, John F. Kennedy’s invasion of Cuba — many historians have argued that these mistakes were fueled by too many team members refusing to voice their opposition. So every leader should take this advice to heart: never shy away from opposition; welcome it — better yet, encourage it, then encourage it some more.

SOURCE: Every Leader Needs a Challenger in Chief by Noreena Hertz

Leading Across Sectors

William D. Eggers and Paul Macmillan, authors of The Solution Revolution, discuss why “triple-strength” leaders are the best problem solvers.

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Five Mistakes to Avoid When Managing Digital Teams

As digital becomes part of every line of business, effective marshaling of digital capabilities is a critical competency. Management is often maligned (sometimes for good reason!), but strong management is an important differentiator in both digital delivery and in aligning that delivery to strategic goals.

So what’s the best way to tackle management of digital teams to keep engagement and output high? I’ve been through two Internet booms and busts in corporations, nonprofits, and startups — so I’ve made plenty of management mistakes by commission and by proxy. Here are five common ones I’ve seen or made myself:

Mistake #1: Enabling team member silos, divorced from execution. Encourage everyone on the team — including designers, developers, and content producers — to consider deliverables through to execution. There’s a risk of managing each person on the team to his or her discrete deliverable, rather than in a way that everyone sees their reflection in the final outcome. If your team today has practices like designers throwing PhotoShop files over the wall for developers to execute, you may need to build in more collaboration. Incorporate some aspects of design thinking into your digital projects — starting from a solution is a good way for everyone to envision themselves in the final outcome, rather than focus on their piece through to handoff.

Mistake #2: Not baking data-informed thinking into the culture. Digital, social, and mobile technologies are still new enough that there’s a lot that’s measured as a binary (a checkbox for responsive design, for example) or subjectively (that new app looks great). Managers need to create a culture of continuous measurement on a team. Without this focus, development energy can be expended on the wrong feature rather than optimization of a micro-interaction to drive conversion. Communicate what the quantitative success metrics look like. Share data points with the team regularly, or better yet, display dashboards that show progress against established goals.

Mistake #3: Letting fear of failure override thoughtful experimentation.

Experimentation is essential — a digital team operating within the bounds of tried and true will not advance your goals. And by nature, some experiments fail — but how can they fail forward? Beta environments and assiduous segmenting, testing, and iteration can reduce fear of failure. As a manager, you can also highlight your own misses, along with ways you’ve avoided repeating them. Tried a new software framework without development resources nailed down for maintenance? I’ve done that. Created a private online community with too much friction to attain growth? Yep. In enterprise the culture too often is to speak of failure in hushed tones, rather than “so, this failed, and here’s what we learned.” Managers need to avoid instilling fear of the F word, so teams won’t eschew experimentation in favor of the safest course.

Mistake #4: Prizing communications control over collaboration. When many managers entered the workforce, the company dictated the terms of communication. Paper memoranda were the top-down coin of the realm, and feedback upward was limited to select channels like town hall meetings. Woe to those managers who think that world still exists. While hierarchies of all kinds are alive and well — and will be with us always — work-related communications flows have changed dramatically. Ask your digital team the best way to communicate. Successful teams will likely use a flavor of collaboration software, whether that’s an explicit project tool like Apollo or a Google doc structure. Periodically, re-evaluate this decision. Has information sharing moved to instant messaging? To Twitter? Let your team vote with their feet, apart from security essentials. You have a better shot of retaining team knowledge if you’re optimized for the real ways information travels, and aren’t waiting for updates to the company intranet.

Mistake #5: Underestimating the speed of change. In 2003, blogging was still new in the mainstream, and mistrusted by corporations wedded to large CMS installs. In 2005, it was understood that video would never be a dominant form for readers. In 2007, mobile was mostly a development afterthought. In 2012, people insisted ephemeral content was a fringe use case, before Snapchat’s ascendancy among both preteens and Wall Street bankers. Managers must develop digital teams strong not only at rinse and repeat, but with adaptable skillsets and mindsets. Set the stage for expansive thinking about what’s possible through tactics as varied as shared bookmarking sites, lunch and learns, and guest speakers from different industries. Digital is full of examples of the unthinkable becoming the inevitable — and a default-open approach to new ideas helps your team adapt for these shifts.

Nigeria's Big Gamble on One Indigenous Entrepreneur

Aliko Dangote, Africa's wealthiest man, recently signed a multi-billion dollar contract to build Nigeria's largest oil refinery, and turn the oil-rich country into a petroleum exporter. The promise of job creation — the refinery project is expected to employ 8,000 engineers and create jobs for 85,000 Nigerians — has excited many commentators. But there are further reasons for optimism, and lessons for companies looking to understand the power of indigenous entrepreneurs in emerging markets.

First, Dangote's deal is likely to happen. This is not the first time a multi-billion dollar refinery project has been announced in Nigeria. Chinese investors have negotiated several infrastructure-for-resources deals in Nigeria over the past decade. But, despite their history of success in such deals in other African countries, nothing of substance has materialized in Nigeria. The latest set of contracts, penned in 2010, have run aground due to haggling over Chinese access to oil blocks and the threat of unfavorable regulation.

It is not surprising that China's success in countries like Angola and Sudan did not translate to Nigeria. In their research on "Winning in Emerging Markets", Harvard professors Tarun Khanna and Krishna Palepu theorize that emerging economies have unique combinations of institutional voids (e.g. the absence of market intermediaries or inefficient contract enforcement mechanisms). Tarun and Palepu suggest that what works in one country does not necessarily translate to another, and companies have to repeatedly assess their capabilities and decide whether to:

Replicate or adapt a business model from a different situation
Collaborate with domestic partners or go it alone
Navigate the market's voids or try to fill them/

For Chinese companies, the institutional voids in the Nigeria deal include the complex web of entrenched political interests, and their inability to navigate it. Lobbyist groups with opposing interests like the Nigerian fuel importers and the European exporters with which they are aligned have had more influence on political decisions than Chinese companies. While countries like Angola also have related issues, Nigeria's size and complexity probably would have led the institutional voids theory to prescribe a different strategy of adaptation and collaboration. China instead had to deal what economist Raymond Vernon calls the obsolescing bargain, in the form of post-agreement power grabs by government agencies.

On the contrary, Khanna's and Palepu's theory would suggest that Dangote, as an insider with political connections at the highest level, is better positioned to directly fill the market's voids and deal with the political risks.

Another reason for optimism is that Dangote's move might signal a shift to a conglomerate-led growth phase in Africa. Clay Christensen's research explores interdependent versus modular approaches to customer problems (pdf). Interdependent systems are well suited to situations where "the job-to-be-done" is not well understood, or the current solution is not "good enough". Modular systems tend to arise after the solution has become "good enough", and help the industry participants achieve greater efficiency. Underdeveloped emerging markets, with their weak institutions, can be seen as being in the "not good enough" stage. At this stage, the theory would predict the dominance of interdependent business groups with strong links to institutions and government. Thus, transforming the fate of the country's economy would necessitate pushing these groups to progressively more complex "jobs".

This is exactly what we have seen in fast-growing East Asian economies, where national business groups like the Korean chaebol or the Japanese keiretsu have been instrumental in the shift from commodities to higher-value manufacturing. Samsung started off as a trading company, evolved to textiles and food processing, and then on to high-value add manufacturing. Today their business spans electronics, shipbuilding, construction and aerospace, among many other industries. Samsung's story is a microcosm of the Korean growth miracle.

Similarly Dangote's business, which has already transformed from a trading company to a manufacturer of cement and flour, could now be moving into a new phase of higher value-added products. This step into more complex "jobs" may also draw other African conglomerates into the mix, and create a platform for rapid industrialization.

Of course, it can be argued that Dangote's move is risky for Nigeria because his success would concentrate too much power in one man's hand. This is a valid concern — the conglomerates of East Asia have had disproportionate power throughout its growth, and retained significant influence even as the economies move into modular phases. Samsung alone is still responsible for a mind-boggling proportion of Korea's economy.  African governments can mitigate this by diversifying contract awards to various national players, but ultimately it may be a worthy risk for the promise of growth led by indigenous companies.

Welcome to the 72-Hour Work Week

How many hours do you think the average American professional works each week? If you think 40, 50 or even 60, think again. For many, 72 hours is the new norm.

In a recent survey of 483 executives, managers, and professionals (EMPs), we found that 60% of those who carry smartphones for work are connected to their jobs 13.5 or more hours a day on weekdays and about five hours on weekends, for a total of about 72 hours. Assuming these people sleep about seven and a half hours a night, that leaves only three hours a day Monday-Friday for them to do everything else (e.g. chores, exercise, grocery shop, family time, shower, relax). It also means they spend 62% of their waking hours every week connected to work (82% on weekdays). That seems like a lot.

But it’s not the connectedness itself that bothers EMPs; in fact, in many cases they appreciate it. One EMP described getting an urgent work request via her personal smartphone while she was on vacation but said she was happy to handle it because it took her two minutes, compared to the hour it might have taken another person. She cares about her work and her colleagues and wants to save others time and trouble, wherever she is.

What does bother EMPs is when companies use 24-7 connectedness to compensate for organizational inefficiencies and when it significantly undermines their personal lives, productivity, creativity, and ability to think strategically. The complaints we heard most often (from at least three-quarters and as high as 96% of respondents) centered on useless meetings and emails, inadequate technology, disorganized or incompetent C-suites, and unclear decision-making authority.

One manager we interviewed talked about an incident where he was out on a date and received a message saying he had to get on a strategy call with an executive at 9pm on a Friday night. This wasn’t an emergency; the manager had simply changed his mind about a decision he’d made earlier that week and that was in the process of being implemented. Another study participant who moved from an executive job requiring him to be constantly connected (including on weekends and holidays) to a position at another company with a less demanding schedule told us it was a dramatic shift. Previously exhausted and stressed, he said he felt “a huge difference.” “It’s astonishing how much you can get done when you’re not in meetings for 10 hours a day and things aren’t cycling 24/7. Since people aren’t working round-the-clock, I don’t get stuck in responder mode. I can actually think a little bit about what I need to do, which is saving me time and lowering my stress level. This is certainly not a low-stress job, but I don’t feel like I’m in hyper-drive mode all the time anymore. I’m really energized.”

The message is clear: EMPs don’t necessarily mind being connected to work for more than eight hours a day. But they are upset when it happens because leaders don’t respect their time or their official work day is wasted, so they have to make up the time working from their laptops or smartphones at home.

There are many steps organizations can take to avoid this problem. Frequent equipment and software upgrades can ease technological delays, for example. Clear decision-making guidelines will prevent bottlenecks in the chain of command. Reducing and eliminating meetings will free up schedules so work can get done during work hours. And C-suite leadership that emphasizes both the importance of not wasting time and the benefits of down time can go a long way toward changing the always-on culture.

We’ll never be truly disconnected from work again. But smart organizations will make sure their employees appreciate that connectedness.