Marina Gorbis's Blog, page 1555

Coddled Relatives Can Kill a Family Business

Denis was a bright, handsome, 45-year-old French executive who had failed his way up the ladder—almost to the top of his family's fourth generation perfume business.

As the eldest son of the family patriarch, Denis went directly from university into the family business. During his entire career, he worked in his father's span of control, reporting directly to his dad within six years of joining the business.

Denis has always been the presumptive heir apparent for the CEO position. The apple of his father's eye, Denis could do no wrong, including doubling a sales force while halving sales and running a new cosmetic division into the ground. Each of these career steps led to more and more responsibility befitting a rising—not a failing—executive.

Non-family employees, knowing that someday Denis would be their boss, kept their mouths shut—or exited the organization, leading to a drain on talent.

Ultimately, however, the other family owners of the business had to end this dangerous game of "chicken." Denis's had risen high enough in the organization that underperformance was becoming a threat to the health of the overall business.

Worse, Denis's cavalier attitude to the firm's values—launches of new fragrances hawked by aspiring actresses who were given million dollar contracts; business budgets that were set and missed with no consequences—threatened the very fabric of the of the organization. Another upward failure could be financially calamitous.

The owner group slowly, cautiously, raised the issue of Denis's performance and behavior with the patriarch. The patriarch kicked up a storm, but with his eyes pried open, he reluctantly let his son go.

Denis broke down and admitted to one of us privately that he had been totally in over his head in his job: "I've never worked anywhere but in our family's business. I don't have the skills to be an executive. What the hell am I going to do now with my life?" We empathized with Denis. Throughout his career, everyone had acted with the best of intentions towards him. But because he was a family member, likable and protected, everybody treated him with kid gloves.

We have run into Denis-like characters in family businesses around the world. And we have come to realize that the situation nearly always end badly — both for the business and for the individual. When exposed, the coddled family member often feels such shame that he or she chooses to give up all interactions with the family for three or more years.

How can you avoid this tragedy from happening?

Here's a quick test to indicate whether you are enabling a family member. If you answer "yes" to at least four of the following questions, then you are probably cocooning, indulging, overprotecting—in short, coddling—a family member:

1. Has a family member worked exclusively in the family's business?

2. Has he reported within his parent's span of control for most/all of his career?

3. Has she never received 360 feedback on her performance?

4. Is the family member paid above the market-based compensation for his position?

5. Has the family member been promoted beyond his capabilities?

6. Is the family member's behavior often outside the boundaries of acceptable value-based behavior of the company?

If you detect a problem, you should take immediate measures. Here are some remedial steps to be considered by the various players:

Overindulgent parent: It is the responsibility of the family owners to set things right. This almost always involves adopting a merit-based system—carefully, fairly. This isn't easy. Altering what are often generational-old family employment policies can be upsetting to the family, but it is necessary if you want to stop strangling your business. In family businesses, merit-based systems mean both that family employees are in explicit competition for positions with non-family members in the business, and that family members receive supplemental feedback to ensure that they learn and grow. If your family business has a board with outside directors, consider enlisting them in the sensitive task of gathering honest feedback and delivering it to family employees

Coddled individual: You need to get outside of your parent's span of control. Given your special treatment, it is likely that you are now in a job that requires more competence than you currently have. Working in a job that is beyond your capabilities is not good for the business—or for you. Continued coddling is toxic to your sense of achievement and self worth. Find a place in the business where you can display your talents. Take a leave of absence and work at another firm. Wherever you go, actively seek more honest feedback.

Non-family employee: You are in a difficult position. Providing candid feedback to or about the coddled individual can get you fired, as happened to one of our friends who worked in a family business. However, all is not lost. Most family businesses have long-term employees who have earned the deep trust of the leadership over several decades. If you are one of those people, you may be in a unique position to carefully raise the need for action. If you are not in that position, seek out those who are and share your concerns. When you do have the dialogue, make sure to frame it as concern for the long-term health of the business and for the individual in question.

What's happening in your family business? Do you have a Denis who is being coddled and cocooned from the realities of everyday business? Have you tried intervene? What happened?

Or are you Denis?

Fortune Favors the Prepared, and Hiring Managers Favor the Fortunate

Do You Feel Lucky, Punk?


When they’re hiring, companies are looking to find out what candidates have really done — not what they’ve participated in or watched, but what they’ve done. At least, that’s what Neil Roseman was looking for when he was Technology VP for Amazon and Zynga. “Even at the greatest companies,” he says in this illuminating piece from First Round Capital, “there’s a gap between those who get the most stuff done and those who don’t get much done. You need to try and figure that out during an interview.” Roseman explains how he designs interview processes to build effective organizations, but he also has a lot to say about what the interviewer should be thinking about. For example: “Once you form an initial impression of someone — which usually happens within the first 60 seconds — you should spend the rest of the interview trying to invalidate that impression.” And dig for the who, what, where, when, why, and how of the candidate’s accomplishments. He also asks everyone he interviews whether they consider themselves lucky — but without the threatening edge that Clint Eastwood’s Dirty Harry character puts into the question. Why? “I’m looking for the people who embody the phrase, ‘Fortune favors the prepared,’” Roseman says. “It’s the willingness to be ready and take advantage of every opportunity that presents itself.”

Selling the Hacker Mind-Set

That Cookie-Killing Student? An Ad Agency Just Hired Her AdAge

If you’re young and entrepreneurial and have a radical streak, you can always start your own company. Or join the big boys. Twenty-five-year-old Rachel Law, whose master’s thesis at Parsons New School recently caused shock waves of distress in the world of digital-ad targeting, has taken a job with, of all things, a creative ad agency, CHI & Partners. Her browser extension, Vortex, is designed to misinform and confuse ad-targeting technologies by collecting cookies that have no ties to actual user behavior, says AdAge. Jeff Anderson, co-executive creative director of the agency’s New York office, says Law’s hacker mind-set was partly why she was hired. "We think that ideas can come from anywhere in the agency; it's not just up to the creatives anymore…and in order to do that we need all different types of brains," Anderson says, adding, "She has a brain that I don't think I've ever met before."

The Great Beyond

When the Next Ernest Hemingway Dies, Who Will Own His Facebook Account? Quartz

Suppose the amazing idea you’ve never told anyone about actually panned out and you became famous…but then you died. While your soul ascended to join the pantheon of the great, your writing would remain stuck in limbo. On Facebook. Once Facebook is notified of your death, it turns your account into a memorial and locks it. Friends can leave messages and see posts, but no one can log in and use the account, including people who had access prior to your death. The executor of your will (you had a will, right?) can request a copy of your content, but, Facebook says, he or she isn’t guaranteed to receive it, even with a court order. Simone Foxman of Quartz tells the story of a couple whose son committed suicide at age 21; Facebook gave them limited rights to their son’s content, but only after a months-long legal nightmare. The best thing, for now, is for your heirs not to inform Facebook about your demise. And to make sure the executor of your will has your passwords readily available.

No More Mister Nice Board

A 4-Point Guide to Fighting Bill Ackman Fortune

Almost as soon as Ron Johnson was fired by JC Penney, blame for the retailer’s annus horribilis shifted to board member and billionaire hedge-fund manager Bill Ackman, who had lured Johnson to Penney from Apple in 2011. Now Ackman is out too, and Fraser P. Seitel of Fortune offers the board members (and someday board members) among us some useful advice on how not to do what Penney’s board did. Under threat from a renegade member, the rest of the board should quickly get its act together, be tough with the miscreant, and go to the media with a unified message. And not just any media. The New York media. “The only way a company or a board can expect a fair fight with a street hustler like Ackman or Einhorn or Icahn is to meet them, mano-a-mano, on their hometown New York City turf.”

BONUS BITS:

Creative Minds

Marimba! How Apple's Default Text-Message Alert Was Born (The Atlantic)
Why I Started a Business: 5 Unusual Founder Stories (Inc.)

Your Thoughts Can Release Abilities Beyond Normal Limits (Scientific American)

Make Your Work More Meaningful

Have you noticed the rising chorus in the management literature proclaiming that work must have meaning? On this very site, for example, several authors have published research-based blog posts on how managers can create the conditions that support meaningful work. This is a very positive development, because work is a huge part of life, and meaning in life is not just a "nice-to-have". We need it in the way we need oxygen. There are few things more life-enriching and life-prolonging in human experience than a sense of meaning.

Critically important to performance and well-being, meaning is what makes people thrive. And conversely, a lack of it undermines people's ability to function on many levels, from job performance to mental and physical health. For example, people who self-report that they are missing a sense of meaning in their lives are far more likely to exhibit the chronic pro-inflammatory stress response that is associated with life-threatening diseases like heart disease and some cancers.

But how many people truly experience their work as meaningful? From my experience conducting research, teaching, and speaking in a number of countries over the last 15 years, I can attest that large numbers of people do not. Across all manner of occupations, from gas station attendants to investment bankers, surveys reveal the numbers of people failing to find meaning in what they do.



So what do you do if you're not in a setting where meaning is obvious — because your organization, for example, exists to provide life-saving technology or to raise people out of poverty? What if you work in place where management is unaware or unconcerned that it could do more to infuse the daily grind with a higher sense of purpose?

You learn to make your work more meaningful yourself. While it helps enormously to have conditions in place that facilitate work meaning (like autonomy in deciding how you do your work), it's important to realize that meaning is ultimately something you create on your own. Indeed, even in jobs that may look dismal from the outside, there are always steps you can take to build the kind of meaning that will make you feel better and work better.

I saw this firsthand when I was a PhD student, in the call center of a large telecommunications company. As part of the research for my dissertation, I was there interviewing and observing customer service representatives while they worked. The pace of work was relentless: as soon as a worker completed a call and hung up the phone, another call would automatically be directed to his or her extension. Every detail of representatives' work was measured and recorded: the number of rings it took them to answer each call; the number of seconds they placed each call on hold; the amount of time they spent resolving each call, etc., as well as daily totals of calls handled and sales made. Supervisors monitored the resulting data in a room that resembled the deck of a starship from science fiction films, with an array of lights that identified representatives who were "out of adherence" with the standards set for the aforementioned metrics. What's more, supervisors could listen in on representatives' calls without their knowledge at any time in order to monitor their performance. If you failed to make a sales pitch on a call that your supervisor was monitoring, you'd be reprimanded. All in all, the work conditions were prime for high stress and low meaning.

Yet there were some employees who experienced their work as meaningful. Joan, a 24-year-veteran of the call center, told me, "I really enjoy my work." She explained, "I am a customer service professional. [Joan's emphasis.] When customers call, it's often because they have a problem that is frustrating to them. I know how to solve every request or problem customers might call with, and I know how to do it in a way that makes them feel good about their call. I resolve the problem so it's no longer stressful for them." The skill mastery she described and demonstrated provided her with meaning, as did the way in which she incorporated this mastery into her identity as a helping professional. Knowing that she was capable of reliably producing a result that she cared about amplified Joan's experience of her work as meaningful. In other words, Joan's recipe for work meaning was self-efficacy mixed with concordance with her personal values, seasoned with connection to and feedback from the beneficiaries of her work.

Sitting by her side with a headset that enabled me to listen in on her calls, I witnessed how Joan systematically built an authentic connection from the first few seconds of her interaction with each caller. "I hear what you're saying, and I know how frustrating this is," she assured her customers. "I understand the issue. I promise that I will help you solve this. I'm so glad I could help you today." Customers responded positively to her competence, compassion, and reassurance, thereby affirming her sense of mastery and boosting her self-confidence and pleasure in her work. Joan's way of working—and of thinking about her work—created a self-reinforcing cycle of performance, meaning, and positive emotion.

Joan's example provides a lesson that everyone can use to make their work more meaningful, regardless of company, industry, or occupation. The key is to link your personal values and motivations to the work you perform. To do this, pay close attention to the elements of your work that you find energizing and fulfilling, and then find ways to incorporate them systematically into how you perform your work. Look for opportunities to make an authentic connection with the people who benefit from your work. Invest some energy in developing positive relationships with others who contribute to the same work results you care about and find energizing.

Since you have the ability to determine how you think about and respond to the conditions you experience, you do have control over the meaning you derive from work. So yes, as you interact with hiring managers and supervisors, keep making it clear that you want meaningful work. But at the same time, do what you can to make the work meaningful.

Who Dares Bake Cookies for the Office?

Recently, I asked one of my partners, a big, strong father of three, what he had done over the weekend. He explained that while his wife was out one rainy afternoon, he and the kids baked blueberry crumble, then assembled a confection known as an "ice box cake" and also tried a new multi-step red quinoa salad recipe. When I asked Thad why we've never sampled his creations, he sheepishly mumbled that they weren't really that good and that he didn't want to ride the subway carrying a pink Tupperware container. Why not, I wondered?

In this era of celebrity chefs, foodies and foodists, reality TV cook-offs and locavore restaurants, why is it that virtually no men, and almost no professional women, would dare bake or cook anything for their colleagues? Are we still subject to the stigma, well illustrated by Hillary Clinton's much-publicized comment during her husband's 1992 campaign, "I suppose I could have stayed home and baked cookies" instead of pursuing a legal career, that domestic-based endeavors and a profession were mutually exclusive? Twenty years later, this view was supported by the majority of experts in an essay on Forbes.com, who agreed that baking "can do serious damage to your reputation and gravitas."

While my career has evolved through the era of women being intensely aware of, and concerned with, projecting an overly feminine office image, I do cook brisket twice a year, and can sense my colleagues salivating in anticipation days in advance. Or maybe that's just my imagination. So, I decided to survey men and women of different ages at businesses, law firms, and other enterprises to find out whether they or others ever baked or cooked for their workmates, and if they felt there was a stigma in doing so.

The results surprised me. I started with women and men who had at least 20 years of professional experience, some very accomplished cooks. They universally reported, with one exception, that they had never brought any self-cooked item to the office and the only people who did were support staff women who were seen as "motherly" or nurturing" and occasionally a man who brought something in that his wife baked. Angelique, a senior women at a financial services firm, who regularly comes in first in her age group in triathlons, said that "over a long career, I have never been comfortable making something for the office. I believe it would diminish me in the eyes of my colleagues." Most other women executives echoed this view.

Most men over 40 had a slightly different take on the topic. Jason, a mutual fund manager, described the payoff as asymmetric: a lot to lose with bad cooking and not much to gain with good. Only Joff, the owner of a furniture manufacturing company, had treated his office to his "killer pear tart," obviously confident in its charm and his executive standing. No man said they would think less of either women or men as professionals if they shared their cooking or baking. Repeatedly, the only concern they expressed was about quality. As Nat, a partner at a major Boston law firm, succinctly put it, "If the food isn't good, you bet there's a stigma."

A case began to emerge that some women, conditioned by past decades of gender bias, might be overly worried about a display of culinary skills, which younger generations saw as a positive example of competence. As Nina, a top executive at an international services company said, "I would think it's really cool, if someone had the skill and guts to bake something to share." Hobbies, whether mountain climbing, fly fishing, or marathon running, tend to generate respect; why not cooking?

The youngest among the twenty five responders were generally surprised by the stigma concept. Darrin, one of my colleagues, is highly respected for her incredible French macaroons. According to her, if a male co-worker cooked something tasty for us, it would "show he's talented as well as brave." One young male trader suggested any quality baked item deserves some kind of award. He ties fishing flies for friends and colleagues, which he sees as similar in that "once you make something by hand, it's an expression of yourself, and you're in a vulnerable position if it fails to impress."

Maybe it's because I'm a CEO, and have the luxury of not worrying as much about my professional status, but I believe that if you only share the food you're proud of, don't beg for compliments, and pay attention to whether people seem to enjoy your offerings, bringing home-made food to work is unlikely to make you seem unprofessional — whether you're a man or a woman.

Sharing food as a group is often a great way to reduce barriers and bond as a team. In fact, research has shown that sharing a meal while you negotiate actually increases the value of the final deal. So let's replace the stigma about homemade food being too "domestic" with respect for a wider skillset, a show of self-confidence, and the courage to be judged.

Now, who wants brisket?

The Debt Collection Company that Helps You Get a Job

Bill Bartmann, CEO of debt collection company CFS2, does things a little differently. Instead of just calling, hounding, and suing debtors to pay what they owe, he calls them "customers" and provides them with free job-search services, such as resume help and interview prep.

Perhaps the reason Bartmann runs his company differently is because he himself has never shied away from living life differently. A high school dropout who later put himself through college working at a hog slaughterhouse, he found himself $1 million in debt himself after his first business collapsed. He clawed his way back up by building CFS, the subject of this HBS case study — but then, that too, imploded. Now he's back (again), and doing things differently (again). What follows are edited excerpts of our conversation.

What's it like running a debt collection company that's so different from the rest of the industry?



It's a little bit like telling everyone that the world is round, when they're still in that flat-earth society. The debt collection industry believes that you have to beat people up to get money out of them — that's in their DNA. We all know pleasure and pain are what motivate people, but the debt collection industry has only ever focused on pain. In our company, we've reversed that, and quite frankly it works wonderfully.

Maybe some of the people we work with made bad decisions, and maybe some you wouldn't want to hang out with, but most of them are people like you and me, and they just got swept up in an economic tsunami that literally knocked the blocks out from under them.

You've said the idea came from your employees. How did that happen?

Well, there was this emphasis on litigation by the debt collection industry. We saw that as a train wreck. The banks that sell these loans have so much reputational skin in the game, when the banks become aware of how exposed they are by the tactics of these agencies, we believe the banks will want to change course. So we had decided that we really needed to focus on the pleasure principle.

We knew we needed to be more than just nice, but we didn't know exactly what to do. I went to my employees. I said, "How do we create pleasure for the customer?" This was my plea to 120 employees at a company-wide meeting. What can we do to have them respect us, like us, to "friend them," for lack of a better term, to want to work with us? So ideas started coming from the audience. Some people suggested raise their FICO score, or help them get their credit back, get a credit card. So then we went to test these ideas with our customers: did they want these things? The customers did not. The customers said, excuse the French, "We want the damn phone to quit ringing." It was an epiphany. They didn't want the things we thought they wanted. Maslow's hierarchy? These people were not even on the bottom rung.

So we huddled everybody together again. They said, "The number one problem we hear from customers is that they don't have enough money to pay their bills." We realized if we help them get a better job, they'll have more money. It's one of those really simple things where you wonder, "Why didn't I think of that earlier?"

So how did you take that idea and actually put it into practice?



We tried a number of different approaches which didn't work early on. It was mostly advice and suggestions, things of that nature. So we huddled again. And then an employee said, "We're going to have to do it for them. They can't do the heavy lifting themselves — they're so beat down they have no get-up-and-go left." So now we get the customer on the phone, get their info, write a resume for them. We realized we were on to something, and we said, "OK, let's do more of that." We start with a petri dish and if something doesn't work, we don't do it anymore. If something does work, we replicate it.

So tell me about that. How did you take what you'd learned about the resumes and replicate it?

We started doing job interview prep. We put customers on Skype before their interviews, show them what to wear, do mock interviews.

Then we said, "We've got to do more than hope they hear about a job, let's help them find one." So we created a job network. We take their resume and look for openings that fit their skill set. We'd find one, call up the customer, and ask them if it's of interest. Then we'd fill out the application. We'd schedule an interview. And then we would do the mock interview. And then at 8:00 am on the morning of the interview, we call our customer to get them out of bed.

Our success rate has been phenomenal.

How do other companies that are hiring your customers see this? Do they know they're being helped by a debt collection company?

It never comes up. The companies do not know that's how that person ended up there, and nobody really cares where the application comes from.

Were there any surprises you ran into, in implementing some of these ideas?

Not all our customers have the same buttons to hit. We're all different. So one of my employees said, "Why are we trying to figure out what they want; why don't we just ask them what they need?"

Early on, requests came in for food stamps, child care, a new hot water heater, fixing a leaky roof, a new wheelchair. Someone wanted a tree in his backyard cut down. Someone needed a casket for their father's funeral. And we said, "OK, we'll do that."

We've now delivered 203 services that are just as eclectic as you could imagine. In the case of the leaky roof, we called up Habitat for Humanity. The guy who needed a water heater, we called up Salvation Army. Cutting a tree down in the backyard, that was even more simple. We now keep a database of 6,000 agencies around the United States so that whenever we have a customer that wants or needs anything we can find someone who cares about that customer. There are organizations that care about every race, religion, gender, military service, and so on. We care about one person, the customer. So find out everything about who our customer really is so that we can target the organizations that care about some aspect of who they are.

I know you said the point wasn't to have it make money, but I read that you actually do make good money with this model.

This company is only 3 years old, so we're still growing, but our results today are two times that of any peer in the industry. That is shocking. Note to industry: There is a better model.

So what if other debt collection agencies start copying your model? Would that be a good thing? How will you adapt?

First, I hope they do copy my way. I'm not afraid of competition. We really think the world is a better place if we could get every debt collector to follow this model.

Secondly, we think there's enough debt out there that we don't' have to worry about competition.

If somebody catches up to us, that's not their fault — that's our fault. We're first movers, and it's our job to stay ahead.

You know a few things about losing money, as well as making money. Advice for those out there who may be facing down failures, business or otherwise?

Somebody once told me that failure is not final. I thought that was just another cute little cliché thing. I didn't give it much shrift. But then I had the good fortune of failing a couple of times. And here's what I found out: he was right. Failure is not final. It is an awkward, uncomfortable, anxiety-filled portion of your life; it is not your whole life. It isn't who you are, it's what happened to you, and once you get that distinction, then you realize, "I can change that. I can come back. I can do again." Isn't that was capitalism is all about? We have the freedom in America to try anything we want to, and most of them do not work. But entrepreneurs say, "I just want some of them to work."

I really hope I end up being a role model for businesses and businesspeople who failed. Then I would look back at all of my failures and scuffed knees and bruised elbows and know it was worth it.

A Board Director's Perspective on What IT Has to Get Right

Over the last 30 years I have served a large range of organizations as either a director or a trustee with the specific role of helping them exploit IT for competitive advantage. From my experience, I believe that there are four highly interdependent categories of contributions the CIO and IT function should make.

1. Generating Top-Line Growth

I'm often struck by how many articles exclusively focus on new or emerging technology and their productivity or efficiency effects. Every discussion on the role of IT and CIOs should start with the question: "What are the potential uses of this technology that will guarantee we stay in business?" This question attempts to tease out an unconscious assumption that "we will always be in business." (Note that the high-profile C-suite executives at firms like Borders, Jessops, and Bank of New England had large IT budgets, but no longer have a company to make more efficient today.)

The best answers to this question generally protect or generate top line growth. Recent, well-documented examples include Progressive Insurance's use of predictive modeling in the property and casualty insurance space and the many industrial manufacturing companies that are generating almost all their margin and profit from after-sale, value-added services based on information generated by embedded sensors.

As many companies move from exclusively internal focused R&D to distributed-innovation systems (e.g., P&G's Connect and Develop) to increase velocity and quality of their new product introductions, the IT infrastructure support for this business process change is critical.

A new component of the IT function must be developed to support this category of work: the Distributed Innovation Group (DIG). DIG is responsible for emerging technology, collaboration methods and technology (e.g., online idea markets), the center of expertise for innovation support, and analysis across the enterprise.

2. Improving Operational Efficiency

IT has been primarily used to significantly increase productivity and reduce communication and coordination costs as measured in money and time. For mature, large-scale, multinational companies, there is a virtuous cycle of efficiency improvements that frees up resources, which can then be deployed for growth and innovation projects. The biggest opportunities for these companies are simplification and horizontal integration projects. These projects reduce time, cost, and variability while improving quality and transparency. They frequently are anchored by the establishment or enhancement of shared-services organizations that cross traditional organizational boundaries.

The biggest challenge is identifying the associated cost savings and headcount reductions and ensuring these funds or resources are allocated to growth and innovation projects. Frequently, movement of storage costs from in-house to a public cloud, or replacing an in-house sales support system with an external software-as-a-service (SAS) vendor are not measured and captured for purposes of reinvestment in Category 1 projects.



A second new component of the IT function should be dedicated to this category of work: the Enterprise Integration Group (EIG). EIG is responsible for enterprise architecture, the center of expertise for simplification and integration methods, process and program management.

3. Ensuring Effective Corporate Governance and Controllership

The spread of capitalism and the associated growth in emerging markets provide organizations of all sizes with an opportunity to participate in globalization. The geographic dispersion that accompanies these opportunities frequently challenges traditional management-control systems and controllership.

Additional challenges come from "localization" requirements in many countries. IT-based management-control systems, starting with finance and human resources and including distributed-innovation systems, are critical to ensure the policies and governance guidelines are effectively implemented in geographically dispersed locations. The EIG through its enterprise architecture work will require the embedding of controllership functions in applications and process design.

4. Participating in Strategy Formulation

Whether formal or informal, all large-scale companies have strategy-formulation and strategy-implementation processes. Many IT functions are only involved in the implementation phase. The pervasiveness of IT requires more organizations to describe the role and effects of IT during their industry and competitor analysis (ICA), which is more robust when the most technically literate professionals in the company are involved. In most, but not all, organizations, these people are the leaders of the function. However, they are required to also have significant ICA literacy and communication skills to help generate strategic options for the organization. Primary responsibility for this input lies in the DIG.

In summary, the challenge of closing the gap between emerging IT and the ability of companies to exploit it requires two new capabilities: the Distributed Innovation Group and the Enterprise Integration Group. They can help companies exploit rapidly evolving information technology and implement a virtuous cycle of revenue growth and operational-efficiency improvements.

Reinventing Corporate IT
An HBR Insight Center





IT Doesn't Matter (to CEOs)
The New CTO: Chief Transformation Officer
Google's CIO on How to Make Your IT Department Great
IT Has to Deliver Great Tools — and Teach People to Use Them

Why You Need to See Two Products Before You'll Buy One

When people in an experiment were shown two DVD players, 32% indicated they would buy one of the brands and 34% chose the other. But when the participants were shown a single DVD player, only 9% or 10% (depending on which brand they saw) said they would purchase the product, says Daniel Mochon of Tulane University. Retailers should bear in mind that consumers have an aversion to being offered just a single option, he says. Even if they can find an option they like, they may be unwilling to purchase it without considering similar options first.

Customer Service in the Age of the Internet of Things

Today, innovative customer service means being able to contact a company on multiple platforms — not just by phone, but via email, web, Twitter, Facebook, and mobile devices. However according to ABI Research, by 2020 more than 20 billion additional devices will be wirelessly connected to physical things — TVs, washing machines, thermostats, refrigerators, even cars.

Good customer service in this age of the Internet of Things will take one step further and take place right on the device itself — screens to tap to search knowledge bases for answers, chat live with a rep, or schedule a service appointment. Imagine a service rep talking you through changing your tire, or a virtual agent who advises you to adjust specific settings on your refrigerator so that it runs at greatest efficiency.

With this kind of customer service evolution happening over the next few years, big changes will be in store for support departments across major industries. But how can businesses best prepare?

Build more robust knowledge bases, and make them easy to access. Self-service knowledge bases — or your online customer resources for product information, FAQs, and how-to's — will not only reside on web portals. They will be present on all devices, from mobile phones to racing bikes. This means that your product materials (both internal and external) will need to be richer, more sophisticated, and organized by context. Eventually devices will already know the consumer's purchase history, their personal preferences, and will be able to both detect and predict problems. As more products are designed with touchscreen search capabilities, companies will need to place much greater emphasis on first touch resolution through self-service. In fact, based on the results of one of our customer case studies, service teams may see a rate of 70-90% for self-service resolution automated by the actual device which will dramatically relieve the contact center and change the types of inquiries they normally answer.

A good example of a company that's applying this strategy today is TurboTax. When filing taxes with TurboTax's software, the form itself provides contextual help based on what the user is filling out, including answers to frequently-asked questions and an option to live chat. This content changes as you go through the form, and none of your information is lost along the way. Looking ahead, more devices will have a similar built-in help function. For instance if you're two hours in on using your lawnmower and it's starting to overheat, the user screen on its handle or steering wheel would automatically indicate the problem with a searchable list of common resolutions for that model.

Invest in a strong data analytics platform. The fact that millions of devices will soon be Wi-Fi enabled will cause a flood of user data for companies to sift through. Businesses can use this data to understand where issues are happening on their products, how frequently, and best resolutions — but only if they have the means to analyze it. Analytics tools will not only help their customer service efforts, but inform improved design of products, upcoming product launches, as well as performance improvements.

Already IBM (full disclosure: they're one of our customers) has rolled out a new analytics solution that "harnesses big data from instrumented assets and identifies irregularities in the manufacturing process, spots product irregularities, and forecasts a range of asset performance risks before a problem ever arises." This type of predictive analytics solutions will be the norm, and companies will need to incorporate tools that will inform and improve customer service engagement on all of their devices.

Hire and train smarter customer support agents. The contact center is going to evolve from a volume support center to a more highly sophisticated center of talent agents. While many support reps today are tasked as "concierges," reading answers from a script or internal knowledge base, tomorrow's support reps will face more complicated inquiries from customers — because basic questions will be resolved right on the device. If a question is routed to a support rep it is likely to be a complicated one, and they will need to be prepared to do heavy troubleshooting on that product.

The reps should also have much more information at their fingertips because the data is pre-collected on the device and should provide reps with metrics reports with real-time information about the device, the issue and the user. While now, half of the time of a service call is collecting basic information about the user and the product, in the near future all of this information will be available to the support rep. And with self-service moving front and center, consumers will expect real-time response to all of their inquiries if their answer is not readily available. Today, the best customer service companies, such as Zappos, Warby Parker, and Nike, already know how to respond quickly to customers across a variety of platforms.

As you may have noticed in recent years, the Internet of Things has already begun. Major auto manufacturers like Volkswagen and GM are already delivering Wi-Fi enabled cars; and there are already smart refrigerators, light switches, garage door openers, and thermostats. For the consumer, this means more convenience and faster response to getting the answers they want. For customer service (if businesses are paying attention), it will mean the cost savings of a reduced number of contact center calls, insightful customer and product data, and happier, more informed customers.

The Dell Deal Explained: What a Successful Turnaround Looks Like

You're CEO of a once great company, now beleaguered on all sides by competitors and a rapidly changing industry. How do you get back on top?

That's the question Michael Dell has been asking himself since 2007, when he retook the top job at the computer company he founded in 1984. And last year, he decided that the answer was to take the company private, to escape the hectoring of the public market. (For more background on the potential deal, click here.) But even if he succeeds in convincing shareholders to let him buy back his company, the real challenges lie ahead.

Luckily for Dell — both the man and the company — the history of corporate turnarounds provides clues as to what the company must do to get back on track.

A Short History of Dell

How Dell went from dorm room startup in 1984, to the world's largest PC maker in 2005, and then saw its stock plummet precipitously the next year, is the subject of a lengthy Harvard Business School case study by HBS professor Jan Rivkin. The whole thing is a must read for anyone interested in the company's future, and a quick summary of the history it recounts is worth repeating here.

Dell's success can be attributed in large part to its "direct model." While competitors like Compaq and IBM sold PCs through retailers, distributors, and resellers, Dell sold directly to its customers, offering highly customized PCs at a time when the cost of computers was high enough to still require significant tradeoffs. The bulk of sales came from business and government, as big customers appreciated the ability to customize a large number of PCs; Dell also offered these companies customized portals where employees could buy one of several company-approved computers directly.

This simple strategy proved wildly successful. Competitors like IBM and Compaq struggled with the politics of managing their various channel partners and lagged Dell in inventory management. When competitors tried to copy the direct model, their channel partners — fearing for their own businesses — objected, preventing other PC makers from fully going direct.

By the mid 2000s, much of Dell's competition had faded. By 2007, most had merged (HP and Compaq) or sold some or all of their PC businesses to foreign competitors (IBM to Lenovo; Gateway to Acer).

In 2004, Michael Dell left the company, replaced by Kevin Rollins, a former Bain consultant who joined the company in 1996. Though Rollins held the job for just two and a half years, he presided over a brisk decline, attributable to everything from bad customer service to shoddy batteries to questionable accounting practices. Dell returned as CEO in 2007.

Do Tech Buyouts Actually Work?

Dell's fortunes have not reversed over the past six years, owing in part to the recession, but more fundamentally to the decline of the PC market. It was against this background that Michael Dell last year hatched a plan to take the company private, with the help of the private equity firm Silver Lake Partners.

So will it work? To answer that, it's important to first consider whether tech buyouts work at all. The data suggest that they do, and not just in the sense of creating returns for PE firms. In a 2011 paper, researchers from HBS, Columbia, and the University of Chicago looked at the success of 472 tech buyouts based on a novel measure: patents. Their aim was to determine if the companies in question became more or less innovative following the buyout. Their conclusion, as HBS's Josh Lerner writes, was that "companies that are owned or controlled by PE firms tend to pursue more promising innovations," and that those innovations tend to be in areas "that reflect the firm's historical core strengths."

Lerner has another paper relevant to the Dell case, which looks at the performance of buyout companies' stock prices after they IPO, including public firms taken private in the deal. He and his co-authors find that these stocks outperform the market, with one exception — when companies are "flipped," or taken public within one year of the buyout.

Taken together, this research suggests at least the possibility of a Dell turnaround. As Lerner summed it up for me in an interview, "There seemed to be a pretty positive track record in terms of technology companies after buyouts."

The Case of IBM

That tech buyouts have worked in the past is, of course, no guarantee that it will work in Dell's case. If Michael Dell and Silver Lake are to succeed, they should look to the case of IBM in the 1990s, what Rivkin calls "the gold standard for turnarounds in the computer industry." IBM's transformation under CEO Lou Gerstner is the subject of an HBS case study by Lynda Applegate, Robert Austin, and Elizabeth Collins. Two decades later, it offers hints at what Dell must do to succeed.

There are two basic patterns to a successful turnaround, Rivkin told me in a recent interview. The company must identify some assets from which it can squeeze more cash, in order to improve its short-term position. Then it must pick the right areas to reinvest in, to fuel the company's longer-term success. Both strategies are evident in the case of Gerstner and IBM.

In 1990, IBM was the second-most-profitable company in the world, and "the world's dominant player in the growing IT industry," according to the case study's authors. And yet by the next year, due to an overreliance on the mainframe computer market and a bloated cost structure, it began posting losses.

While it's difficult to summarize the changes Gerstner initiated after taking the reins in 1993, a few decisions stand out. Amid aggressive cost cutting, Gerstner's "One IBM" strategy included shifting resources to IBM's consulting and services business, which grew rapidly as a source of revenue.

Yet the improved financial position came at a cost. Long-term investments were being de-prioritized, thanks to "the focus on flawless execution and short-term results [that] had intensified under the ruthless cost cutting necessary to survive the 1990's." And so, beginning in 1999, Gerstner began reorganizing the company to identify "emerging business opportunities" that could one day become billion-dollar businesses. Of the 18 areas selected, life sciences, business transformation services, Linux, and pervasive computing would each soon grow to over $1 billion in revenue.

Open Questions

Though the history of tech turnarounds suggests some optimism about the future of Dell, the specifics are far from certain. With the PC market in decline, Dell will need to look elsewhere both to improve its short-term financials and to invest in the future. "The markets that they have talked about publicly are all ones with established players that are pretty darned good," Rivkin told me. "It's not as if Dell is going to sneak up on IBM in services, for instance." The tablet space is similarly competitive.

"The marvelous thing about Dell, historically, is that they found a different way to compete. A core lesson of the direct model was, 'To be better, you first have to be different,'" said Rivkin. "That said, I find it hard to bet against Michael Dell, the guy. If you were to make a list of people who could make it work despite all the challenges, Michael Dell would have to be on your short list."

Good Leaders Get Emotional

Much of what comes out of people's mouths in business these days is sugar-coated, couched, and polished. The messages are manufactured, trying to strike just the right tone. Genuine emotion stands in stark contrast. It's a real person sharing a real feeling. When we hear it, we're riveted — for one because it's rare, but also because it's real. Sometimes it's uncomfortable and a little messy. But that's what makes it powerful. No one is trying to hide anything.

We hide emotions in an attempt to stay in control, look strong, and keep things at arm's length. But in reality, doing so diminishes our control and weakens our capacity to lead — because it hamstrings us. We end up not saying what we mean or meaning what we say. We beat around the bush. And that never connects, compels, or communicates powerfully.

Yes, being too emotional in business can create problems. It clouds objective analysis, screws up negotiations, and leads to rash decisions. But in nearly two decades of working with leaders, I've found that showing too much emotion is far less of a problem than the opposite — showing too little.

Emotions are critical to everything a leader must do: build trust, strengthen relationships, set a vision, focus energy, get people moving, make tradeoffs, make tough decisions, and learn from failure. Without genuine emotion these things always fall flat and stall. You need emotion on the front end to inform prioritization. You need it on the back end to motivate and inspire.

Over the last 17 years working with senior teams I've collected a lot of examples of leaders getting emotional — to good end. Here are a few:

"I'm angry that I had to spend 3 hours dealing with a problem that you created — a problem that you should have handled. Don't put me in that position again." Joan, a partner in a consulting firm hated conflict and rarely said things like this. She normally just rolled up her sleeves and took care of problems herself, even if she hadn't created them. Then she got promoted to the head of the Southeast Region. There were too many problems to take care of by herself. Her outburst above and the ensuing conversation was a survival tactic, but it sent a clear message to the partner in charge of the Atlanta office. Don't let this employee staffing issue happen again, and if it does, fix it yourself — before it lands on my plate. It was uncharacteristically aggressive for Joan, but exactly what the situation needed. That was two years ago and the problem hasn't happened since.

"I think most of the ideas on this list are sh**ty...but that one's great. Let's do it." Jamie, the CEO at a biotech company had a reputation for walking the fine line between galvanizing a team and offending them. He shot straight and went with his gut. While he had to clean up messes from time to time, it was never anything egregious. And his approach had a profoundly positive impact on the organization. Everyone knew where they stood with him. And everyone knew that he meant what he said. When he got excited about something, no matter what, he was going to make it happen. His energy and emotion accelerated innovation and execution across the company.

"I'm upset. I'm responsible. I apologize." It was the type of mea culpa no one expected from Jeremy. The COO of a software firm, he had had a horrible relationship for years with Ron, a key product development VP. Finally, frustrated and tired, Ron quit. Within months it became clear that Jeremy had underestimated Ron's impact on his team. It started to fall apart. With Ron gone, Jeremy was able to step back and see that he'd let a small issue create a huge problem. And that his stubbornness was at the root of it. He apologized to the executive team with a tear in his eye. I was there. It was shocking. That's not the kind of guy Jeremy was. In an instant I understood how much he cared about the company and how ashamed he felt. Everyone saw it. Amazingly, he ended up apologizing to Ron and hiring him back.

Often, one of the reasons we don't show emotion is because we're not even aware we're feeling it. We're angry, frustrated, or upset and we suppress it. We're excited, motivated, or inspired and we temper it. We do it without even realizing it. Emotional data seems less relevant in the business world where logical data reigns supreme. But it's not only relevant, It's usually the lynchpin to change and growth.

One further point. It's important to note there's a gender bias around showing emotion at work. I've seen that in the same places where men get labeled tough, passionate, or open, women get labeled bitchy, hysterical, or weak. I find this double standard particularly destructive and insidious because it leads to women's emotions getting dismissed more readily than men's, often at exactly the times where that emotion is most needed — times when no one else in the room is raising the most important points. We all need to stay aware of this double standard and not enable it.



My advice to all leaders is to pay attention to your emotions. At least a couple times a week, stop for 10 minutes and ask yourself, "What am I feeling right now?" Write it down if you can. Keeping a regular journal is a helpful way to understand how you're feeling.

Then pick your spots to let loose a little. Let your emotions out. Let people in. Both are critical to effective leadership.