Marina Gorbis's Blog, page 1581

Leaders, Choose Your Words Wisely

Even a brief interaction can change the way people think about themselves, their leaders, and the future. Each of those many connections you make has the potential to become a high point or a low point in someone's day. Each is a chance to transform an ordinary moment into a touchpoint.

What is a touchpoint? A touchpoint is an interaction with one other person, a couple of people, or a group that can last a couple of minutes, a couple of hours, or a couple of days. Those Touchpoints can be planned or spontaneous, casual or carefully choreographed.

Every touchpoint is spring-loaded with possibilities. Each one can build — or break — a relationship.

For instance, when I was a first year graduate student at the J. L. Kellogg School of Management at Northwestern University taking a Management Policy class. My professor, Ram Charan, noticed that my schoolwork was starting to slip. I was not only taking a full load of classes but I was also working two jobs. I was stretched pretty thin. One day, Ram called me aside and said, "You can do better." Those four words inspired me to hold myself to a higher standard. I remember those words as if they were spoken yesterday and that was over 35 years ago.

Shortly after I graduated, I accepted a job with General Mills. Like many people starting a new job in a new place, I was completely lost in the building. This older man saw me stumbling around and said, "Young man... you look lost. How can I help?" I asked him if he could help me find my way back to the marketing department. He pointed the way and said, "So you work in the marketing department. If there is one thing that I want to leave you with is that you've got to give it all you've got." We then went our separate ways. Ultimately, I saw this man's picture a couple of weeks later and discovered that he was Jim McFarland, the CEO and Chairman of General Mills. Those five words inspired me to lean into my work with greater intensity. I carry them with me today.

I had been with General Mills for six months and I was up for my first performance review. I was struggling to hit the ground running. I had never worked in an office environment before in my life. Here I was, unmistakably a rookie. During the performance review, my manager offered this observation, "Doug, you are clearly very determined to contribute here but, quite frankly, your work is very mediocre." That comment, in and of itself, was something I was able work through. Next, I was to receive feedback from my boss's boss. In this case, he had written six words down on a piece of paper to be read to me. Those words were, "You should look for another job." This was the first performance review I had received in my life and my boss's boss, whom I thought was a god, just told me to go look for another job. He wasn't inclined to give me the time of the day or the benefit of the doubt. I was devastated and very anxious but ultimately I played through it. Those six words reminded me that the corporate journey is not for the faint of heart. You must bring great resolve to your work. It's not all a bed of roses.

I persevered through some difficult times as I was starting up my career and I was promoted to Product Manager at General Mills in a very timely way. Within 48 hours of that promotion, I received a call from my wife's grandfather, Mr. R. T. Johnstone. R.T., a man I admired greatly, said, "I'm so proud of you." Those five words of encouragement reminded me that I was not alone on this journey, as difficult as it was. My family was, is and will always be with me. Those words ring in my ears to this day.

After six years of working in the General Mills food group, I transferred over to the General Mills toy group. Three years in, I lost my job. I've shared this experience in great detail here before. After I was let go from General Mills, I went to an outplacement counselor; a man by the name of Neil MacKenna. Every time Neil would answer the phone he would say, "Hello, this is Neil MacKenna, how can I help?" With those four words, "How can I help?" Neil changed my entire work life. He helped me see beyond my own agenda to discover the fulfillment of starting every interaction with a desire to be helpful. This was a very powerful lesson, delivered in four words. It took all of two seconds.

On July 2, 2009, I was involved in a very serious automobile accident. I was traveling to my home in Northern New Jersey for the Fourth of July weekend. I was in the back of a Lincoln Navigator asleep with my seat belt on when, while going at least 70 miles an hour, we ran into the back of a stopped dump truck on the New Jersey Turnpike. It was a very serious accident. I was taken to a nearby trauma center and went through an extensive array of surgical procedures. Understandably, I was pretty much out of it for 24 hours. When I woke up in the intensive care unit my wife, Leigh, who had been helping my daughter move into her apartment in Washington D.C., was right by my side. And all she said were three words. She said, "I'm right here." Those three words, said in one second, connected me in a powerfully indescribable way with my wife and my recovery. I'll never forget the moment.

Over the following 40 days, as I was recovering from the automobile accident, I had been moved from the ICU to the trauma center then to a hospital and finally to a rehabilitation program. I dealt with nurses in all four of these facilities that, time and again, reaffirmed for me the power of touchpoints — that they're not just about the words you say, they're about how you say them.

There was the same protocol over all four facilities. In this case, every nurse would come into my room and ask me the same question: "How is your pain?" When the nurses were fully prepared and exceptionally gifted at managing patients they could come into the room and dial-in in a very thoughtful and genuine way. But with nurses who were new to the profession, new to the facility, or who just felt a little bit uncomfortable getting into a conversation, I would quickly realize that those four words weren't about me; it was about how they were going to handle me. It was about them. Those conversations were always awkward.

So, those four words, "How is your pain?" opened up a world that was magical when it was well managed. But when not well managed, the resulting awkwardness could completely undermine the effectiveness of the nurse. Those four words reaffirmed the power of touchpoints.

There you have it:



Seven memorable touchpoints

32 words total

Less than five words per Touchpoint

Strung together, it's generously 20 seconds of conversation

That's approximately four seconds per touchpoint

Despite their brevity, those seven touchpoints have had a profound impact on my life. I encourage each of you to look for opportunities to have a profound impact on the next touchpoint you encounter. You have the opportunity to make a tremendous impact on the lives of the people with whom you work and live. Make the most of it. The next touchpoint is right around the corner — use it wisely.

Think Carefully About Where You Put the Office Bathroom

Working From My Bean Bag Chair Treadmill Desk


That's what everyone's favorite late CEO did when he designed Pixar's offices in 1986. Instead of putting the bathrooms (and café and mailboxes and gift shop) off to the side, Steve Jobs placed them in an atrium at the center of the workspace. And "although some were more than a little annoyed to have to traipse to the lobby every time they needed the loo — something remarkable started to happen," writes The Independent's Archie Bland. "Pixar’s employees started to bump into each other. They shot the breeze. Sometimes, the chatter would yield something useful, and one of the participants would head back to her desk with a new idea." And now everyone wants to be like Apple. Bland ventures into the West London headquarters of juice and smoothie maker Innocent to witness "a benevolent, juice-obsessed cult, teetering on the border between charming and insufferable; that is, like an Innocent smoothie bottle with desks in it." While perhaps an extreme example, this type of setup is prized by the likes of Yahoo’s Marissa Mayer, who says that people are "more collaborative and innovative when they’re together. Some of the best ideas come from putting two different ideas together." And recent research found that people are happier when they have different options for where and how to work. But does that actually lead to productivity — and, perhaps most important, to profit? Maybe not. Dish Network is often cited as one of the most hostile workplaces in America and still boasts outstanding numbers. So goes this winding article, with no real answers but with lots of important questions that will shape how we work in the future.

Game Changer

Finally: SEC Lifts Ban on Advertising Fundraising Rounds Inc.

Until now, start-ups in the U.S. couldn't advertise themselves as investment opportunities through traditional media to nonaccredited investors. If they wanted to sell stock, they had to do it through official financial channels such as angel investor groups. That made it hard for start-ups to raise money from ordinary investors, and hard for ordinary investors, especially those outside VC hotbeds such as Silicon Valley, to put money into promising new businesses. But the Securities and Exchange Commission, prodded by recent legislation, voted this week to lift its ban on what's known as "general solicitation" of fundraising rounds. Now entrepreneurs will be allowed to solicit investments through new channels, provided they vet investors. The big complaint about the ruling is that it creates new bureaucratic obstacles to selling stock. But the upside is big: Entrepreneurs living outside tech hubs may find it easier to connect with investors and grow their startups without having to relocate, says Inc. Cue the Twitter jokes. — Andy O'Connell

Agree to Disagree

Strategic Controversy: Welcome the Dissent University of Michigan Ross School of Business

Why is it that when you attend a strategy meeting, everyone who isn’t nodding off to sleep seems be nodding in agreement, at least on the basics? It's not because everyone really does agree; it's because companies don't know how to handle reasoned disagreement, says Aneel Karnani of the University of Michigan. It's rare for companies to value internal debate. One positive example he cites is a company that typically identifies five pressing issues and assigns two managers to each, telling them to explore different avenues. In the end, one approach is chosen for each problem. The key to opening the floor to dissent is to depersonalize the discussion. Argue about ideas, not people. That way you get robust, constructive debate that can help your company choose the right strategy. "The 'Let's all be team players' and 'Let's pull together' thinking can be a trap," Karnani says. "Strategy comes from internal debate, even dissent." I don't disagree. — Andy O'Connell

What Happens When You Run Your Company Like "The Hunger Games"

At Sears, Eddie Lampert's Warring Divisions Model Amplifies Troubles Businessweek

Imagine, for a moment, the CEO of a major company sitting alone in his South Florida mansion. You run a division of his company and can only see him via video conference. Your job is to convince him to give you money to fund your retail operation, and not others in the company. He barely pays attention, until he disagrees with what you’re saying. Then he berates you for an hour. Now imagine that this is reality at Sears. In this fascinating and slightly hard-to-believe story, Mina Kimes explains why Eddie Lampert runs Sears like a hedge fund, splitting the operation into 30 independent divisions with their own CEOs, CMOs, and boards. Former execs say it's created chaos and infighting. Lampert counters: "Decentralized systems and structures work better than centralized ones because they produce better information over time." Meanwhile, Sears continues to record losses while attempting to reinvent shopping on digital devices. There are also these tidbits: Lampert makes his first CEO entrance at a shareholder meeting to the tune of Maroon 5's "Moves Like Jagger." He created a social network for Sears employees on which he used the pseudonym "Eli Wexler." And he's really into Ayn Rand.

Praise Be

How to Escape from Bad Decisions Huffington Post

Praising people makes them — and you — feel good, so why not be liberal about doling out the ego-buffing compliments? Because if you praise people the wrong way, you can prompt them to unconsciously increase what's known as "escalation of commitment" — the tendency to stick with a course of action even after it's been discredited, writes Wharton professor Adam Grant. In an experiment, when people who had been praised for their decision-making skills made a choice about whether to keep investing in a bad choice (in this case, a bad hire), they were 40% more likely to escalate their commitment to the new employee than people who hadn't been praised. Makes sense: If you've been told you're a great decision maker, you must have made a good decision, so you'd better stick with it. But people who had been praised instead for their creativity were 40% less likely to escalate their commitment than those who hadn't been praised. Since they had been induced to feel good about something other than their decision making, these people were willing to admit to having made poor choices. Any time you give positive feedback for a particular skill or trait, the praisee is at risk for becoming overconfident in that domain. — Andy O'Connell

BONUS BITS:

Can I Interest You in a Snack? Perhaps a Beverage?

9 Vintage Vending Machines From a Time When They'd Sell Anything (Gizmodo)
7 Ways the Utensils You Use Change the Taste of Food (Fast Company)
Coca-Cola’s New Bottle Is Made of Ice (Time)

When You've Done Enough, Do More

How do you become truly influential? We've found that the most highly respected leaders avoid techniques to gain short-term compliance; they also steer clear of a self-centered "How can I get people to do what I want?" mindset. Instead, they take a different approach altogether.

We interviewed over 100 high-impact influencers from a wide range of industries and organizations for our recent book. To achieve real influence, they tend to follow four steps that turn typical persuasion strategies upside down. These steps are action guidelines all of us can use to get things done with people in ways that not only yield great results, but also strengthen relationships and enhance credibility.

In previous articles we covered Step 1: Go for great outcomes, Step 2: Listen past your blind spots, and Step 3: Engage others in "their there."

In this post we cover Step 4: When you've done enough... do more.

Think back to the last time you helped someone very important in your life achieve a goal. Maybe you helped a friend with a business venture, participated in planning a wedding, or pitched in when a son or daughter moved to a new city.

When you offered your help, we bet you didn't say, "I'll take a few minutes to offer some advice, but for more than that you'll have to do something for me."

Instead, you spent hours running errands, hanging decorations, or moving furniture. You volunteered for messy, difficult, or time-consuming chores like cleaning the fridge or carefully writing 300 names on 300 place cards.

Why? Because you automatically do more for the people you care about deeply. In fact, you usually don't even stop to think about it. It comes naturally to you because your relationships with these people matter and you want to strengthen them.

Of course, these relationships are special; they mean more to you than a business connection or a relationship with a casual friend. But in any relationship, you can go beyond what's expected. When you do this, you make a statement about who you are as a person and a professional.

Our friend Kouji Nakata describes it this way: "It's about not being the main attraction. You look for the angle of help; look for the angle of assistance. It's like being a caring relative, like an uncle who really is taking an interest in his nephew. Look for the way that they can shine and help them do it. Don't be the important piece. Step aside, get alongside them, and help them do great things and help them be happy."

When you do this, you set the stage for positive influence both now and in the future. "Overdelivering" makes you stand out in the moment and makes people remember you later. You become locked in as someone who deserves to be listened to, and people don't wonder whether you have ulterior motives or hidden agendas.

Doing more isn't just a onetime thing but an ongoing practice. For maximum effect, you'll want to focus on three distinct times when you can do more: before, during, and after an interaction.

When you begin interactions in this way — by doing more, and sometimes even taking a risk in the process — you form instant bonds with people who are tired of being ripped off, manipulated, or given the bare minimum of service. You prove immediately to these people that you have integrity. And they tell other people, who tell still more people.

In fact, you can "do more" for people who have no connection with you at all. Think of this as committing "random acts of doing more."

David Bradford, former CEO of Fusion-IO, fell into a great outcome by doing exactly that. Here's the story behind his break-through addition of Apple co-founder Steve Wozniak to Fusion-IO, which helped drive the organization's phenomenal success.

David didn't target "Woz." Instead, one of David's random acts of doing more led to a cascade of positive results.

David, who at the time was living in Utah, had a friend whose son was moving into the state and could use some help setting up his law practice. David obliged, helping get the young man connected and raising his visibility in the state.

A few months later, because of this connection, David received a request to speak at the Utah Bar Association. It was in Sun Valley, a five-hour drive for him, and he'd be speaking to a relatively small group. Many people would have considered it a complete waste of time. But David cheerfully agreed.

After the speech, he stayed for lunch. As it turned out, the keynote speaker was Steve Wozniak. Chance led Wozniak's executive assistant to sit right next to David. She observed that Wozniak would probably enjoy the opportunity to speak with him, joking that he'd welcome "a kindred spirit from the information technology world in a room full of lawyers," and she was right — they struck up a conversation.

It turned out that Woz had his eye on solid-state trends that Fusion-IO was exploring. Later David sent him materials and asked if he'd like to be a part of the advisory board. Wozniak said yes, and then went on to take the role of chief scientist.

Just random chance? Maybe. But in the bigger picture, the David Bradfords of the world don't think of it as blind chance. They think, "That's how it works." It's about a mindset that starts not with results, but with relationships. You may not have any clue where those relationships will lead . . . but that's part of the excitement of real influence.

When you do more, always remember that you're not "giving to get." Never see your actions as a prelude to springing an uncomfortable request on another person. Instead, understand that your goals are to build long-term relationships and to make things better.

If you've noticed in yourself a "zero sum" mentality, work to move beyond it. It's holding you back. Instead, think of the times in your own life when people have done more for you. How can you pay forward to others the positive influence these people gave you? How can you do more for people before, during, and after the projects you're currently planning?

When you find ways to help other people learn, grow, gain, avoid problems, make progress, and achieve their goals, you achieve something far more important than near-term gain. You form the basis for ongoing results, enriched relationships, and an integrity-based reputation.

And that will lead — in wonderful ways you can't even begin to predict right now — to real, lifelong influence.

Rethinking the Work of Leadership

In 1973, Peter Drucker stated in his book Management: Tasks, Responsibilities, Practices, "Management is not culture-free, that is, part of the world of nature. It is a social function. It is, therefore, both socially accountable and culturally embedded."

Some thirteen years later, Tom Peters remarked in the article Managing As Symbolic Action: "It requires us, as managers, to get people to share our sense of urgency in new priorities; to develop personal, soul-deep animus toward things as they are; to get up the nerve and energy to take on the forces of inertia that bog down any significant change program."

Yet, here we are in 2013 with organizational leadership models that continue to deny the social nature of organizations and wallow in inertia.

Our leadership practices remain authoritative. People are disengaged, distrusting and perhaps even disenfranchised.

According to the 2013 Edelman Trust Barometer, fewer than 20% of respondents believe leaders are actually telling the truth when confronted with a difficult issue in their organizations. Furthermore, a study conducted by the Human Capital Institute and Interaction Associates in 2013 found only 34% of organizations had high levels of trust in the places they work. And, a paltry 38% reported that their organizations had effective leadership running the show.

To cap off a small sliver of dismal data points, research firm Gallup found that over a twelve-year period between 2000 and 2012, the percentage of engaged employees in the workforce has shifted between 26% and 30%. That is, roughly 70% of employees in today's organizations have spent more than a decade essentially collecting a pay check, an almost Shakespearean spectacle of tragic ambivalence.

What if our approach to leadership was to evolve into Drucker's vision of "socially accountable and culturally embedded" management?

Cam Crosbie is the CIO of Equitable Life Insurance Company of Canada, represented by more than 10,000 independent producers across Canada and Bermuda. Cam completely understands the need to "lead without authority." He does so, quite simply, by asking questions rather than barking orders. Before moving forward with a big decision or a large project, Cam makes a practice of asking lots of questions, including, as he says, "even the so called 'dumb ones'".

As a CIO, Cam believes it's important to reach out to others and inquire before pushing ahead. Cam said, "I hope that in some small way if people see the CIO unashamedly asking the simple questions, it clears the way for clearer and more meaningful discussion." Perhaps the first step toward a better future for your organization is to acknowledge that you don't necessarily know the way there — and, just as important, to understand that by asking questions, you not only awaken and engage people, you stand to collect more valuable perspective and ideas than you would by starting from a position of authority.

Leadership isn't a 9-5 job — it's communal, it's holistic and it's accretive. It's time to abandon the long-held notion that the "leader" knows all and should decide everything. A fancy title doesn't put you above others — it puts you in their service.

TELUS, a national telecommunications company in Canada, with $11 billion of annual revenue and more than 40,000 employees worldwide (and where I am head of learning and collaboration), has worked incredibly hard over the past five years to raise employee engagement from 53% to 80%. It did so through myriad actions including the launch of the TELUS Leadership Philosophy. The TLP is an enterprise-wide leadership framework that cultivates a collaborative, social, open and engaging mindset among all employees regardless of rank or title. It encourages all employees to "engage and explore" with one another before "executing." It defines key behavioral attributes such as communicating, collaborating, learning, deciding and adapting such that everyone can speak the same leadership language.

In mid-2010, an internal program was born at TELUS entitled Customers First. The overarching goal of the program was to improve the likelihood that TELUS customers would recommend the company. As the program began to gain traction, another idea surfaced: Customer Commitments. Think of the commitments as customer promises — specific actions that any TELUS team member would carry out to help a customer regardless of role.

Instead of locking its most senior executives in a room to decide what the Customer Commitments were going to be for the organization, we designed a collaborative process that involved the entire organization. Over 1,000 different examples surfaced over a two-month period. Through focus groups, interactive online polling and voting, the 1,000 were whittled down to a final four.

If the culture at TELUS was one that relied on authoritative leadership, the Customer Commitments would have been created in a couple of hours by a few authoritative leaders. Because the culture was healthy, open and participative as opposed to dogmatic and ruthlessly hierarchical, the organization collaborated without authority. This is the work of leadership today: asking questions, involving people, connecting them to each other, creating a platform for their insights and ideas to make a real impact — in other words, unleashing leadership behavior everywhere.

In this moment of reflection, as we seek to redefine the work of leadership, let us remember the words of Nelson Mandela:

"[Ubuntu is] the profound sense that we are human only through the humanity of others; that if we are to accomplish anything in this world it will in equal measure be due to the work and achievements of others."

If you're lonely at the top, it's time to start recognizing and amplifying the contribution of those around you.

Tell us how you're rethinking the work of leadership. What are you or your organization doing to escape the limits of top-down power structures? What are you doing to equip and energize individuals to exercise their leadership gifts, wherever they are in the organization? Learn more about the Leaders Everywhere Challenge and share your ideas and stories here.

What to Ask Your "Numbers People"

If you're a manager working with the analysts in your organization to make more data-driven business decisions, asking good questions should be one of your top priorities. Many managers fear that asking questions will make them appear unintelligent about quantitative matters. However, if you ask the right kinds of questions, you can both appear knowledgeable and advance the likelihood of a good decision outcome.

In my new book (co-authored with Jinho Kim) Keeping Up with the Quants, and in a related article in this month's HBR, we list a lot of possible questions for various stages of analysis. But in this short article, I thought it might be useful not only to mention a couple of the most important questions you can ask about data, but what some of the ensuing dialogue might involve.

1.Questions about Assumptions

You ask: What are the assumptions behind the model you built?

You think in response to their answer: If they say there are no particular assumptions, you should worry — because every model has assumptions behind it. It may be only that you're assuming that the sample represents a population, or that the data gathered at a previous time are still representative of the current time.

Follow-up: Is there any reason to believe that those assumptions are no longer valid?

You think in response: You are really looking only for a thoughtful response here. The only way to know for sure about whether assumptions still hold is to do a different analysis on newly-gathered data — which could be very expensive. Perhaps a particular relationship only holds when the values of a variable are moving in a particular direction (e.g., "this mortgage risk model only holds true when housing prices are going up — nah, that could never change!").

2. Questions about Data Distribution

You ask: How are the data you gathered distributed?

You think in response: If the person can't describe the distribution, he or she is a shoddy analyst. Good analysts should have already looked at — and be able to show you — a visual display of the distribution of your data on any particular variable.



If you are interested in one variable as a likely predictor of another, ask for a "scatterplot" and look to see if the data line up in any linear pattern; that would indicate a strong correlation between the two variables.

Follow-up: Do the data follow a normal distribution?

You think in response: If the analyst says that the data aren't distributed normally (i.e., in a bell-shaped curve), then he or she needs to employ different types of statistics (called "nonparametric" statistics), and some commonly-used ones like standard deviations and correlations don't apply.

You might ask how they adjusted their analysis based on the distribution. For example, nonparametric tests often require a larger number of cases for the same level of statistical confidence.

Second follow-up: Were there any significant outliers?

You think in response: If the data are normally distributed but there are some outliers (unexpected values that don't fit the pattern), you could ask what they might mean, and what the analyst plans to do with them. In some cases it may be reasonable to delete outliers — if, for example, they are the result of coding errors.

You get the picture. It's important to show with this dialogue that you are interested, somewhat knowledgeable, and dedicated to a good decision outcome. You're not trying to suggest with such questions that you know more than the analyst, or that the analyst is hiding anything from you. It's the same sort of conversation that a CEO might have with a division manager who is presenting financial results. Gentle probing is the desirable tone.

What Would You Do Differently If You Could See Yourself 20 Years Older?

Undergraduates who had gazed at their 40-year-old selves in virtual "mirrors" were 74% less likely to cheat for extra cash on a subsequent trivia test, says a team led by Jean-Louis van Gelder of the Netherlands Institute for the Study of Crime and Law Enforcement and Hal E. Hershfield of NYU. This and another experiment suggest that one reason people make self-defeating choices such as engaging in unethical behavior is that their ability to imagine their future selves is limited. They're less inclined to indulge in illegal acts if they can see vivid images of themselves such as the computer simulations presented by the researchers. See Hershfield's "Defend Your Research" interview in the June 2013 HBR.

The Brighter Side of Decades of Disappointing Investment Returns

The prospects for investors, be they corporate pensions, sovereign wealth funds, or individuals, appear bleak. John Authers, in Thursday's FT, musters up the evidence (or at least the opinions) that bonds and stocks are both likely to deliver paltry returns for years to come. Sheelah Kolhatkar, in a cover story (and what a classy cover it is) in the new Bloomberg Businessweek, argues that the great alternative to plain-vanilla equity and debt investing — the hedge fund — is more or less over, too. And London Business School's Elroy Dimson, Paul Marsh, and Mike Staunton, in a Credit Suisse report cited by Authers that's a few months old but it is well worth downloading and taking the time to read, make a pretty convincing case that the equity and bond returns that came to be perceived in the U.S. as "normal" in the decades following World War II — and particularly since 1980 — are anything but.

We're all pretty well aware of the negative consequences of low investment returns, although perhaps not of the specifics. Dimson, Marsh, and Staunton calculate that a 25-year-old entering a defined-contribution retirement savings plan — such as a 401(k) in the U.S. — needs to set aside 16% to 20% of her income (!) if she hopes to retire at age 65 at half salary.

Still, where there are losers, there are winners. "While a low-return world imposes stresses on investors and savers in an over-leveraged world recovering from a deep financial crisis," Dimson, Marsh, and Staunton write, "it provides essential relief for borrowers." The biggest borrowers these days are governments, and because governments possess powers that most borrowers don't, they are often able to cut their borrowing costs at the expense of creditors through a variety of techniques that Harvard economist Carmen Reinhart dubs "financial repression."

Financial repression doesn't sound like a good thing, and in some ways it isn't. But the great global recovery after World War II was accomplished in an environment of artificially low interest rates and capital controls — that is, financial repression. So it doesn't have to be bad economic news. Sometimes governments actually use the money they borrow wisely.

Then there are the other tradeoffs inherent in investment returns. Over time, Rob Arnott and Peter Bernstein demonstrated in a great 2002 article in the Financial Analysts Journal, stock market returns should and do trail economic growth. That's because:

Shareholders can expect to participate only in the growth of the enterprises they are investing in. An important engine for economic growth is the creation of new enterprises. The investor in today's enterprises does not own tomorrow's new enterprises — not without making a separate investment in those new enterprises with new investment capital.

So when U.S. stock market returns outpace economic growth, that money has to come from somewhere. It can be taken out of workers' paychecks, creditors' pockets, or government coffers. It can come from overseas, as U.S.-based companies take advantage of faster growth elsewhere. And it can come from the future, as investors bet on faster growth to come.

During the great bull market of 1981 to 2001, all of these factors played a role. I'll focus on workers' paychecks. Labor's share of income actually didn't drop all that much over those two decades — in part because of big increases in worker pay (including a lot of stock-option jackpots) in the final years of the 1990s boom. But the longer-term trend since the 1960s has been of a significant decline in the percentage of total income going to workers, one that has accelerated over the past decade — during which stocks have sputtered but bond investors have done quite well.

So here's the big if. If those low investment returns that everybody's projecting are low just because the global economy keeps sputtering, that's not good news for anybody. If, however, they signal a regime change in which the financial sector's great rise over the past few decades begins to reverse and other sectors — governments and workers mainly, although there are certainly business sectors that have lagged as well — grab a greater share of economic growth, that doesn't have to be a bad thing at all.

To a certain extent, I'll admit, this amounts to saying that if times are bad they'll be bad, and if they're good they'll be good. But it's important to draw the link between two important and seldom-connected discussions: one about the prospects for investment returns, the other about the proper role of finance and capital in the economy. Because if the financial sector shrinks in relative size, and working stiffs gain a greater share of national income — both of which would be healthy developments, I think — the share of economic growth going to investors will have to decline.

The Booming Business of Craft Cocktails

An interview with Thomas Mooney, co-owner and CEO of House Spirits Distillery.

Download this podcast

A written transcript will be available by July 18.

For U.S. Employers, Health Care Reform Is a Watching and Waiting Game

Understanding the implementation plans for the health care law passed in 2010 is a complicated job for even the most seasoned policy wonks. A cascading series of deadlines, operating systems, and reporting rules have to be arranged, tested, and communicated. Add to this the resounding refrain that many Americans — and perhaps even many employers — don't fully understand what compliance with the landmark law will mean.

These logistics took a sharp new turn last week when the Obama administration decided to delay enforcing mandatory employer and insurer employment requirements until 2015. This provision would have required most companies with the equivalent of 50 or more full-time workers to offer health benefits on January 1, 2014, or pay a fine of at least $2,000 per employee. (Click here for a chart that breaks out the employer responsibilities around the Affordable Care Act). The delay has spurred fresh debates about the law and its oversight. It has also led GOP leaders to start advocating anew for rollbacks or delays on other key provisions, like the individual mandate. The House could call as many as three votes on the ACA in July.

The Treasury Department blog post announcing the change cast the move as careful implementation of the law that recognized "concerns about the complexity of the requirements and the need for more time to implement them effectively."

There's a key word: time.

Most large U.S. companies already provide workers with health benefits. But some of the businesses that would have been impacted by the employer mandate — in sectors like and food service — didn't appear to be ready to comply with the law. The administration also needs time to work on the reporting requirements that will be part and parcel of making the system work.

So the law has hit a delay, political heat is rising, businesses are in the middle, and many people are still just plain confused about what they have to do.

The tumult puts the broader role of the employer as conduit to health care benefits into new context — and by most accounts in the midst of a sea change. Companies are reexamining their place in the health care chain and what that means both for their workers and their tax strategies. One trend worth noting is toward consumer-directed health plans, which put workers in control of spending and coverage decisions.

"If fifteen years ago we were to have a discussion of health care in one of our membership meetings, 100% of the people attending the meeting would say it's our duty and responsibility to provide health care to our employees," says Jeffrey McGuiness, CEO of the Washington-based HR Policy Association, which represents chief human resource officers from large companies. "Now, my sense is that a very large percentage of those same companies are saying, is that case any longer? Can we really do that in this environment?"

What happens next? Here are a few things to watch:

HR departments. Companies of all sizes are evaluating their health care strategies and objectives now. HR executives are finding health care planning to be as high on their list of priorities as talent management. But while businesses need to start strategizing, policy experts like McGuiness caution against making any long-term commitments until the road ahead for the law is clearer.

The definitions of full-time and part-time workers. The health care law defines a full-time employee as one who works an average of 30 hours a week. There are bipartisan bills afoot in Congress that seek to redefine a full-time worker as someone who works 40 hours, not 30. It's tough to say if these will go anywhere. But expect the issue of who is and isn't a full-time worker to keep coming up in the conversation.

What happens on October 1. That's when federal and state-run healthcare exchanges, where individuals and small businesses can shop for coverage, are due to be open for enrollment. It's a critical day for the government on the path to making the law a reality. If this deadline isn't met, the January, 2014, deadline for the individual mandate could get thrown into question. Uninsured young people are expected to be among the first to get the pitch to sign up (although they apparently won't be spiking any footballs to celebrate).

Growth in the U.S. health care sector. You can slice the news about growth in the health care sector many different ways. First, there is the eye-popping growth in jobs in the health care field, which defies most other charts you've seen lately on labor. Second, there are the long-running concerns about the high costs of health care in the U.S., something reform advocates have long hoped to see better calibrated. If we are on the verge of changes in the health care sector, these indicators may help track them.

There are many resources available to help keep up with or understand the law, some with particular value to HR leaders, or reporters, or consumers. If you have a useful one to recommend for managers, please leave it in the comments.

And if you'd just prefer a short refresher on what the law might look like for you in video form, try this one from the Wall Street Journal:

This post was updated at 5:30pm ET on July 11.

Are You Data Driven? Take a Hard Look in the Mirror.

The term "data driven" is penetrating the lexicon ever more deeply these days. Data Driven was the title of my latest book, and recent academic work shows that companies that regard themselves as "data driven," are measurably more profitable than those that aren't. So becoming data-driven is clearly a worthwhile endeavor. Yet for all the attention, I've yet to see any clear criteria by which leaders can benchmark themselves and their organizations to figure out what they need to do better.

In my view, the essence of "data-driven" is making better decisions up and down the organization chart. Over the years I've had the good fortune to work with plenty of individual decision-makers and groups, some terrific and some simply awful. From that work, I've distilled twelve "traits of the data-driven." (It bears mention that the data-driven also avoid some self-destructive traits; I'll take these up in another post.)

Traits of the Data-Driven

The data-driven:

Make decisions at the lowest possible level
Bring as much diverse data to any situation as they possibly can.
Use data to develop a deeper understanding of their worlds.
Develop an appreciation for variation
Deal reasonably well with uncertainty
Integrate their ability to understand data and its implications and their intuitions.
Recognize the importance of high-quality data and invest to improve.
Are good experimenters and researchers.
Recognize that decision criteria can vary with circumstances.
Recognize that making a decision is only step one.
Work hard to learn new skills and bring new data and new data technologies (big data, predictive analytics, metadata management, etc) into their organizations.
Learn from their mistakes.

All of these traits are important. And most are self-evident. Only a few require further explanation. First, data-driven companies work to drive decision-making to the lowest possible level. One executive I spoke to described how he thought about it this way: "My goal is to make six decisions a year. Of course that means I have to pick the six most important things to decide on and that I make sure those who report to me have the data, and the confidence, they need to make the others." Pushing decision-making down frees up senior time for the most important decisions. And, just as importantly, lower-level people spend more time and take greater care when a decision falls to them. It builds the right kinds of organizational capability and, quite frankly, appears to create a work environment that is more fun.

Second, the data-driven have an innate sense that variation dominates. Even the simplest process, human response, or most-controlled situation varies. While they may not use control charts, they know that they have to understand that variation if they are going to understand what is going on. One middle manager expressed it to me this way, "When I took my first management job, I agonized over results every week. Some weeks we were up slightly, others down. I tried to take credit for small upturns and agonized over downturns. My boss kept telling me to stop — I was almost certainly making matters worse. It took a long time for me to learn that things bounce around. But finally I did."

Third, the data-driven place high demands on their data and data sources. They know that their decisions are no better than the data on which they are based, so they invest in quality data and cultivate data sources they can trust. As a result, when a time-sensitive issue comes up they are prepared. High-quality data makes it easier to understand variation and reduces uncertainty. Success is measured in execution, and high-quality data makes it easier for others to follow the decision-makers logic and align to the decision.



Further, as one executes, one acquires more data. So the data-driven are constantly re-evaluating, refining their decisions along the way. They are quicker than others to pull to plug as when the evidence suggests that a decision is wrong. To be clear, it doesn't appear that the data-driven "turn on a dime"; they know that is not sustainable. Rather, they learn as they go.

Now take that hard look in the mirror. Look at the list above and give yourself a point for every trait you follow regularly and half a point for those you follow most — but not all — of the time. Be hard on yourself. If you can only cite an instance or two, don't give yourself any credit.

Unless you're one of the rare few that truly score seven or more, you need to improve. While each person and organization is different, I'd first recommend starting by pushing decision-making down the organization. I've already noted the benefits. It may be tough and counterintuitive, especially for managers that want to feel in control, but it's worth the effort.

Second, invest in quality data. Frankly, you simply cannot be data-driven (or do anything consistently well for that matter) without high-level of trust in your data and data sources. You're reduced to your intuition alone, the antithesis of the goal here. Quality data is a necessity.

Now, take one more step. You've taken a hard look at yourself. Engage your management team in doing exactly the same thing for your organization.