Marina Gorbis's Blog, page 1581

Fewer U.S. Males Are Working, and It's Not Just Because of the Economy

Disability is contributing to a steady decline in the number of men in the American workforce: In 2012, 3.1% of working-age males were receiving federal disability benefits, up from 1.9% in 1982, according to National Academy of Social Insurance data cited by CNN. Other factors in the decline, aside from recession and downsizing, include increasing rates of incarceration. Just 88% of men ages 25 to 54 are participating in the workforce today, down from 97% in 1956.

Why Executive Teams Shouldn't Write "Culture Decks"

Boston is teeming with entrepreneurship. The "startup renaissance" that followed the financial crisis of 2009 has led to as many acquisitions as it has public companies.

For the founders and CEOs of many startups, the recent influx of additional tech giants to Boston like Amazon, eBay, and Twitter means that hiring—especially when it comes to engineers—will become even more challenging. With far deeper pockets than early- and mid-stage startups, these tech giants will be vying for the same talent our startup ecosystem has been fostering.

How can young startups continue to attract and retain great talent? One of the keys may lie in culture.

Companies are creating "culture decks" to answer the question, "why should I work here?" In Boston and beyond, companies large and small are publishing more and more of these. Some are impressive, clearly well thought out, and critical to recruiting strategies. However, many end up sounding strangely similar—mentioning something about vacation policies, a beer fridge, and how the company is structured. More often than not, these culture decks come across as pre-canned.

Culture decks are becoming as mundane as missions statements. Upon reflection in recently creating our culture deck here at Nanigans, the reason for this seems rooted in two core points:

How companies define culture
Who is behind the creation of these culture decks

Culture is a rich term, used historically to describe civilizations and people, but in the business context it's often reduced to "org structure," "mission statements," and "employee incentives." Defining culture in this way in the workplace—mapping it to corporate goals—is much behind the reason why many culture decks feel forced.

Perhaps they also come across this way because most are created by founders, CEOs or select members of executive teams. By definition they are much less in tune with what happens on a daily basis on the ground than employees themselves. A company's founders and executives know what they're on a mission to accomplish. They're in tune with corporate goals and how the company should ideally be projected to evoke success to investors and customers alike. However, this also contributes to the elements of culture being focused on mission statements, organizational structure, and top-line incentives.

Yet authentic culture is not dictated from the top down. Authentic culture emanates from people—a natural expression of who they are, and arises out of shared experiences together inside and outside the office.

Do founders and executive teams affect culture? Absolutely. Top-down created culture decks aren't necessarily wrong or bad; however, more often than not, they're simply not in tune with reality.

In witnessing and being a part of an incredibly vibrant startup culture, from a 15-person early stage startup 2 years ago with no venture funding to our now 100+ person company, I know the real elements of company culture aren't reflected in the traditional definition nor the top-down approach to culture decks.

When we decided to create a culture deck at Nanigans, we took a different approach. In fact, we didn't even set out to create such a deck. Instead, it was the product of a branding exercise.

We held one-on-one, hour-long conversations with almost all of our employees about company pillars like industry, product, customers, and culture. We asked each thirty-five different questions, such as the following:

What defines a successful company?
What transitions us from provider to strategic partner?
What words best describe our product?
Why do our customers need us?
What about Nanigans scares competing firms?
What's most critical for us to do now to continue to grow, fast?
What trends and commonalities unite our employees?

As our project was coming to an end and pitch decks and new positioning were created, we kept finding ourselves back to the consistency and passion with which people spoke when discussing our culture—it came through when we talked about our product, industry and customers as much as it came through when we talked specifically about culture.

Despite this, I struggled while putting together our "culture deck." It felt wrong to package up our authentic culture into a set of slides. In my mind, imposing words and images devalued how special and organic our culture truly was.

Then an executive who'd come to Nanigans from a place replete with a top-down culture deck reacted to my hesitancy by saying, "This is exactly why an executive should never create a culture deck." Instead of interpreting other employees' answers to our questions, I began using the real words and imagery they'd used in those conversations. The culture deck came together seamlessly thereafter. The result is a presentation created by every single employee at Nanigans. And upon showing it to executives, their only feedback was, "Keep it exactly as it is."

There is no cookie-cutter framework or five-step process to creating a meaningful culture deck, just like there is no simple formula for creating great company culture.

Genuine culture is organic, not imposed. It's why our executive team didn't write our culture deck, and it's why we fear not the looming hiring challenges that Boston tech companies face. Culture is what keeps people at Nanigans—not our mission statement or how our teams are structured.

Our culture deck is a guide for company hiring and fit, as much as it is a signature of what's made us so successful to date:

Culture at Nanigans from Nanigans

Obama Gave a Monumental Climate Change Speech, But It's Still Not Enough

Yesterday, President Barack Obama gave what Al Gore called the "best presidential address on climate change ever." It's true: the actions President Obama outlined will likely reduce our contribution to climate change, possibly by quite a lot. And while the plan will have large impacts on business, it's not a big enough vision to meet the scale of our climate challenge.

The majority of the speech focused on the mitigation of emissions — spewing less stuff into the air — and fell into four key areas:

Enforcing the Clean Air Act rules, which mainly means more strict emission rules on new and existing power plants which are responsible for one-third of our emissions (this is something the Supreme Court gave the EPA power to do six years ago). President Obama made it crystal clear that greenhouse gas emissions are a pollutant subject to regulations — he used the phrase "carbon pollution" about 30 times.
What the White House called "doubling down on" clean energy. The president wants to double the share of electricity coming from renewables (wind and sun mainly), after already doubling this percentage in his first four years.
Improving energy efficiency standards for things like appliances and federal buildings, a worthy follow up to the aggressive auto fuel efficiency standards passed last year.
Attacking "other" greenhouse gases, those that can be much more powerful warming agents than CO2, such as methane (which comes from animals/farms, natural gas leaks, and landfills) and HFCs (the class of chemicals used in refrigerants). Oddly, none of this was in the final text of the speech, but a White House briefing call I sat in on (while at the Corporate EcoForum) mentioned this category of action, and the full plan online features this category.

So what does this all actually mean for business?

Carbon-based energy will be more expensive and clean energy will be cheaper. The largest, glaring gap in the speech was any mention of a price on carbon, by far the most effective action we can take to tackle climate change. But when all the elements of the president's plans are combined, carbon energy will less appealing relative to cleaner options. More restrictions on coal could raise dirty energy costs if utilities can't reduce emissions profitably (which they're already doing).

In other words, costs for energy will potentially rise if your power is heavily coal-dependent. Nationally, the percentage of coal feeding our grid has been dropping fast (to 37% in 2012), but there are major regional differences. But costs per kilowatt-hour don't mean spending more if you're getting efficient quickly enough and buying your own renewables (which many companies, for their part, are also already doing).

Still, if you're dependent on coal-powered energy — or your value chain is — it's time to rethink your energy strategy and reconsider the payback periods on clean energy investments.

Business will feel government action on many fronts. During the briefing call I sat in on, the White House called it a "whole of government approach," with many agencies applying pressure or affecting markets in numerous ways. Regulations are just one path. Raising standards on appliances and cars another. But perhaps more importantly, many government entities are affecting markets, in a very good way, as customers — they're buying cleaner economy products in large quantities.

The Department of Defense is one of the largest purchasers of biofuels (for Navy planes) and invests heavily in solar for forward Marine bases in Afghanistan and Air Force bases at home. The General Services Administration (GSA), with $500 billion of purchasing of its own, will continue prioritizing greener products in many areas. The President didn't talk yesterday about this kind of purchasing power specifically, but he (and his predecessors) have issued executive orders before.

Business (outside of coal plants) will be leveraged as a partner. The President name checked Walmart, GM, and Nike, and for very good reasons. Walmart is the largest private user of solar power in the country, and has set goals to increase that amount 6-fold by 2020. GM and Nike (and 500 other companies including Starbucks, Swiss Re, and Unilever) have signed onto Ceres' Climate Declaration, calling for much more action. These companies are doing important work, if nothing else because they provide the president cover from those claiming falsely that business hates climate action.

The president's plan is extensive — with many elements I didn't get to in the full outline — and it will accomplish a great deal. But the plan we have on the table isn't fully up to the task we face. Our national goals (17% reduction from 2005 by 2020) fall short of what the science facts — and reports from number crunchers at McKinsey, PwC, and WWF/CDP — are telling us we have to do (and, importantly, can do profitably). As Al Gore put it, "The hard truth is that the maximum that now seems politically feasible still falls short of the minimum necessary to actually solve the climate crisis."

We're operating in a "what can we get done" mentality, which is what passes for vision in Washington these days. There's also still a disturbing reliance on the "all of the above" energy theme — the president mentioned how great it is that we're producing our own oil, which, regardless of the geopolitical benefits, is the opposite of fighting climate change.

I had hoped that a second term president could raise the stakes and firmly grab all those third rails. Talk about the need to price carbon so our markets can function correctly. Talk about our deep need to change how we operate fundamentally, but for the better.

The president is right to identify business has a partner in this, but he could go much, much further. We should be honest about the hard truth that there will be losers — like fossil fuel companies that can't (or won't) make the transition to a clean economy. But I'd like to see our political leaders really grasp the opportunity here. It's not just innovation to avoid regulations — that's old school. Instead, there are multitrillion-dollar markets in play — efficiency in general, but also entire sectors in buildings, transportation, and energy — and vast wealth creation opportunities available to the countries and companies that go for it aggressively (like China).

President Obama's speech outlines the best plan we've ever had, though it's more like playing defense. Still, with this very real push and help from Washington, business can go on the attack, building a massive clean economy much faster. And it should.

How to Compete When IT Is Abundant

"You only gain an edge over rivals by having or doing something that they can't have or do," wrote Nicholas Carr ten years ago in his controversial HBR article, "IT Doesn't Matter."



Carr predicted that an organization's ability to compete through investing in information technology was about to change dramatically. When "the core functions of IT — data storage, data processing, and data transport — have become available and affordable to all," he wrote, IT would cease to be a source of competitive advantage.



This was not yet reality at the time of Carr's article. The IT boom of the 1980s and early '90s had brought information technology to the corporate masses, unleashing the first full-scale technology revolution in the enterprise. To stay competitive, businesses rapidly embraced PCs, and the subsequent transition to the client/server era.



The original IT department was formed to centralize a unique expertise that could purchase, implement, and manage technology in the enterprise. And given the complexities involved in building up competitive IT weaponry, businesses won by out-spending and out-resourcing their opponents. Only the largest of enterprises could afford the best technologies, and even for those with the largest bank accounts, IT strategies were limited to basics like CRM, ERP, or email.



Today, though, Carr's prediction is coming true. We're in the early days of yet another seismic shift in IT, this time driven by mobile devices, the cloud, and a demand for technology experiences that match the simplicity of the consumer world. We are moving abruptly from an era of IT scarcity to one of abundance.



This end of IT scarcity begs an interesting and important question. How do companies differentiate in a world where access to technology is no longer a competitive advantage?

Information Eats the Enterprise

With the swipe of a credit card, the customer support team can move to Zendesk or Desk.com; the HR team lives on Workday; the business intelligence group moves to GoodData or Domo; the finance team logs into Netsuite; the marketing department orbits around Marketo and Salesforce's marketing cloud. Whereas in the client/server world managing these disparate systems would have taken up the vast majority of a company's IT budget and time, today an organization can be on dozens of job-specific, tailored solutions in days. The cloud enables enterprises to efficiently implement best-of-breed services while serving the varied needs of a business.

But here's the surprise twist: Whereas many feared — and Carr more or less predicted — that the cloud would drive the extinction of the IT organization, the sudden avalanche of technology is actually making the IT function more important than ever before. Rather than serving as an adjunct to the core business, or merely a cost center, IT is becoming intrinsic to the very products and services that every company offers.



Why is this? Mainly because, as Marc Andreessen puts it, "software is eating the world." A recent Accenture report concurs, claiming that every business is now a digital business:

Every industry is now software driven; as such, every company must adopt IT as one of its core competencies ... Here is Nike using wireless sensors and Web technology to create a performance-tracking system that allows it to create new services to monitor, and to improve and create new training routines for athletes. There is Ford, using sensor data to monitor both how a car operates and the driver's behavior, and seeking to apply analytics to improve the experience for the next generation.

As software eats the world, information is eating the enterprise. Access to the right information at the right time from anywhere will transform every business and every industry. Competitiveness in IT will come from connecting employees and partners in meaningful ways to bring products to market faster (how does a supply chain process shrink from days to minutes?), supporting customers with new experiences (can my thermostat talk to my energy provider?), and surfacing the right people and knowledge to generate better ideas (how do I find experts across my organization that I'm not connected to?).

IT abundance will affect every job, product, and customer interaction. We're seeing retail outlets supply store employees with iPads chock full of product catalogs to improve in-store consultation, enabling them to be instant experts on the latest goods and services. Flextronics uses Workday to provide visibility into its global workforce of 200,000 employees, allowing it to move around talent and projects at a moment's notice. Kimberly Clark utilizes Salesforce's Chatter to connect to its customers for development of products. Education publishing businesses are digitizing their entire supply chain, creating an end-to-end experience that connects everything from the creative and production process to the delivery and interaction with students.

In this transition from a world of IT scarcity to abundance, competitive advantage has little to do with unique access to technology, and everything to do with unique access to — and use of — information. When technology is near-ubiquitous, it's the connection between people and information that drives business forward. Organizations that capitalize on this trend will ensure that as information eats the enterprise, they'll be the ones satiated.

Airbnb: A Spare Room for Debate

In the early days of the Internet, services such as eBay and Craigslist revolutionized secondary markets, making it easy for individuals to buy and sell used goods. Among other devastating results, the classified ad went the way of the dodo (and with it much of the revenue that subsidized printed newspapers). Now we're in the midst of the next generation of such services, which make it possible for individuals not just to dispose of used assets but to rent, lease, or loan their belongings to other consumers, without the need for much if any corporate infrastructure.

This idea of peer-to-peer commerce, or the "sharing economy" as it is sometimes known, has spawned a new breed of innovations. Start-ups are now facilitating short-term borrowing of such expensive but often under-utilized possessions as apartments and homes, cars (or just a ride), power tools, and even, on sites such as TaskRabbit, personal expertise.

An existential issue looms over them: Is the sharing economy even legal? And if not, should laws and regulations be reformed to allow it to exist?

These are not rhetorical questions. Regulators — often spurred into action by incumbents threatened by the new competition — have cast jaundiced looks in the direction of every one of the new sharing economy services, in some cases ruling them in violation of long-standing laws. In some cities, for example, sharing economy services have been banned under laws that prohibit unlicensed hotels, taxicabs, and other professional services.

Airbnb, an accommodation matching service first launched in 2008, has recently come under heavy fire just as — not coincidentally — its revenue is taking off.

The site's early ambitions were modest — provide a website for cash-strapped out-of-towners to find cheap places to crash, a form of budget travel known as couch-surfing. But casual rental of part or all of a "host" house or apartment is now big business. Airbnb growth has been doubling in shorter intervals for some time; last year, it booked 12 to 15 million "spaces."

A recent study found that Airbnb and similar services have gone from gimmick to disruptor in record time, offering real competition for traditional hotels with rates that average 20-50% below market price in most cities. The company now operates in 190 countries and 28,000 cities, and its founders expect the service to grow to 100 million annual bookings and revenue of $1 billion. (The site charges both host and guest service fees for each stay, based on a percentage of the total price.)

Those numbers have been a wake-up call for the hospitality industry, and for the local regulators who are responsible for ensuring lodgings are licensed and taxed, and meet minimal standards for health, safety, and hygiene. Airbnb's hosts aren't subjected to any of these rules, the industry complains, and should be.

Like other sharing economy innovators, Airbnb is now at the center of a legal maelstrom in cities around the world. In Airbnb's home town of San Francisco, tax collectors say hosts haven't paid any of an estimated $1.4 million in hotel taxes or registered as businesses. And New Orleans considers Airbnb listings in the French Quarter to violate laws against "rentals" of less than 60 days.

Last month, the service suffered a serious blow when New York's Environmental Control Board ruled that an Airbnb host had violated the city's transient hotel law, which prohibits the rental of rooms or apartments for less than 30 days. (The New York case is ironic in that the 2011 law was enacted to stop landlords from converting apartments into more lucrative hotel rooms — to protect tenants, in other words.)

If the ruling stands and the city takes a more aggressive approach to enforcing the law, it could spell the end of Airbnb in New York. Though the company wasn't a party to the proceeding, its lawyers appeared at the hearing to argue on behalf of the host. Airbnb and the host plan to appeal.

Whatever the outcome in New York and other cities where the service is under attack, the bigger legal questions about Airbnb can't be answered easily. Should individuals be allowed to occasionally rent out their apartments or spare rooms without any legal oversight? Or should they be subject to the full suite of laws that govern hotels and other full-time lodging services, including "real" B&B's?

On the one hand, laws that require licensing and regulation for temporary lodgings were designed to protect travelers from being ripped off, or being subjected to unsafe or unsanitary conditions (fire codes, public health codes, etc.). Enforcing these legal standards is an expensive task for city governments, on that depends on the collection of hospitality taxes.

On the other hand, as often happens, laws aimed at protecting hotel consumers have morphed into rules that protect the regulated hotel industry from some forms of competition, either with each other or, as here, with a new form of more casual lodging.

For its part, Airbnb says its hosts and guests are already well-protected. But in the absence of any licensing, standards, or inspections, how can the company be so confident that abuses aren't already taking place or won't in the future?

In part, the answer comes from applying more technology.

Airbnb, it turns out, isn't simply matching buyers and sellers. The service also requires hosts to provide verifiable identification, and offers guests 24/7 customer service in case anything goes wrong. Users also rate and review each other. Payments go directly to Airbnb, not the host. And the company provides a $1,000,000 insurance policy against damage caused by guests. These are precisely the kind of quality and safety controls that city regulators enforce for traditional lodgings, and for which they collect taxes. But using the same technology that makes the service possible, Airbnb has replicated much of the regulatory structure in what is arguably a more efficient format.

But is that enough? And shouldn't governments, in any case, have some say over whether new kinds of transactions are exempt from old rules, or whether Airbnb's technology-based regulation is sufficient? Or do individuals have the right to opt-in to alternate systems of private government, unless and until something goes very wrong?

Given the inefficiency and protectionist features of traditional rules, I'm inclined to grant the sharing economy broad latitude to test its innovative approach to improving asset efficiency. For one thing, the success of disruptive innovators often inspires incumbents to implement long-overdue innovations of their own. And regulated incumbents are especially prone to inertia — inertia shared by regulators, who are even less likely to look for opportunities to improve their efficiency.

Still, it's worth remembering that traditional laws, at least in principle, are designed not only to protect individual consumers but also to create public perceptions that someone is watching out for those at risk — to minimize what economists call "negative externalities."

There may be such a thing as too much efficiency, for example. Venice in the summer now resembles an amusement park more than a city, with visitors packed so tightly that no one actually gets to experience the charm they all came for. In the case of lodgings, residents who rely for income on the tourist industry have a strong interest in ensuring that visitors don't have a bad experience, no matter where they stay. There's some value to regulations that maintain that sense of well-being, in other words, even if they aren't implemented in the most cost-effective way.

Perhaps consenting guests should be free to accept any conditions at an appropriate price. But don't bet on local authorities or the services they have long regulated to disappear or transform overnight. For every transaction cost the sharing economy eliminates, expect two or three new ones to appear in the form of legal obstacles — even if they're only transient.

Consumers Don't Want to Cook, But Want to Feel as If They're Cooking

Prepared-food products that require a few preparatory steps appeal to customers who want to feel as though they're actually cooking dinner, rather than just opening a package, says the Wall Street Journal. One group of women studied by Kraft Foods Group made it clear they wanted to spend at least 15 to 30 minutes peeling or chopping, "to have it count," says Risa Schwartz, the food company's associate director of consumer insights and strategy. ConAgra says the most popular day for use of some of its frozen-meal brands is Wednesday, a day of the week that the Journal describes as the "cooking-from-scratch low point for most households."

Rethinking Security for the Internet of Things

Cyber attacks, once primarily directed against networks to steal confidential information and wreak virtual havoc, have begun to expand and are now directly affecting the physical world. For example, the recent hacking of the Associated Press's Twitter account by the Syrian Electronic Army and subsequent tweet about an explosion at the White House caused the U.S. stock market to decline almost 1% before the news was revealed as a hoax. In 2010 the computer worm Stuxnet was discovered and implicated in the attack that caused physical damage to centrifuges at Iranian nuclear enrichment facilities. In 2012 a hacker built and revealed a simple device that can open Onity-brand electronic locks (which secure over 4 million hotel room doors) without a key.

The growing Internet of Things — the connection of physical devices to the internet — will rapidly expand the number of connected devices integrated into our everyday lives. From connected cars, iPhone-controlled locks (versions of which here, here, and here are in or close to production), to the hypothetical "smart fridge" that will one day order milk for me when I've run out, these technologies bring with them the promise of energy efficiency, convenience, and flexibility. They also have the potential to allow cyber attackers into the physical world in which we live as they seize on security holes in these new systems.

As consumer demand for connected devices increases (and projections from Cisco and others suggest that there will be 50 billion connected devices by 2020), traditional manufacturers will, en masse, become manufacturers of connected devices. As these devices become subject to the same cyber threats with which software developers have long been familiar, companies will need to take steps to integrate security considerations into their designs and design processes right from the start.



Train engineers to apply existing systems-engineering tools to security threats. Apart from those who work on specific niche applications, engineers who write software for embedded hardware systems don't usually focus on security issues. For example, although Onity locks used a "secret" cryptographic key to prevent unauthorized access, the key was stored insecurely in the lock's memory, allowing hackers to bypass the security and open the lock. And several models of networked security cameras, designed for remote streaming of real-time security footage over the internet, are vulnerable to remote hacking through a software flaw that exposes the video stream to unauthorized parties and compromises security and privacy. Educating engineers on common cyber threats and design paradigms that have evolved to mitigate attacks would allow them to integrate existing robust security protections into the systems-engineering practices that they already use to build reliable, stable systems.

Train engineers to incorporate security into products by using modular hardware and software designs, so that a breach in one area can't take control over other parts of the system. Technologies like microkernels and hypervisors (which allow individual components to fail and be restarted without affecting other parts of the system) are already commonly used to increase the reliability of embedded systems. These technologies also isolate different parts of the system from one another in the event of a security breach. So, for example, if attackers remotely take control of a car's infotainment system through an unsecure music-streaming station or e-mail app, they won't have access to the authentication or navigation application to change the car's destination or order a remote pickup.

Use existing, open security standards where possible. Open security standards, whose details and implementation have been investigated and vetted by many experts, are more secure than proprietary solutions. Robust security is hard to achieve, and mistakes in proprietary approaches often manifest themselves only when a third party has succeeded in uncovering a security weakness. The internet is built on open standards. Technologies like TLS (which provides secure identification, encryption, and prevents eavesdropping) and OAuth (an open standard for authentication) provide secure, tested protocols. While choosing an established platform does remove direct control over some security design decisions, it is preferable to rolling one's own custom solution, which will have been subject to less scrutiny and the input of fewer experts.

Encourage a skeptical culture. In addition to incorporating security considerations into formal design processes, companies should encourage a skeptical culture in which intellectually diverse groups from different product teams review one another's designs and give feedback about flaws, including those that affect security. One particularly useful approach is to designate internal specialists or external experts as devil's advocates and make it their job to independently review, test, and try to break existing systems. Products produced from a culture in which skepticism is not just encouraged but formally ensured are not only more secure but generally more reliable, as well.

The smart, connected fridge that will know when I've run out of milk and automatically place an order seems like a lovely, benign addition to my house. But when that fridge also has access to my credit card and can wirelessly unlock a door for a delivery person, it becomes less benign, especially if it depends on a security model designed for a fridge that only plugs into the power outlet. As cars, locks, cameras, and other traditionally unconnected products join the Internet of Things, cyber threats directed toward hardware will affect an increasing range of companies. For these companies, investing in a robust, open security solution will be less costly than deploying a proprietary system, if its hidden flaws cause customers harm, trigger costly product recalls, and damage their brand.

Data Under Siege
An HBR Insight Center





Cyber Security in the Internet of Things
Is Anyone Really Responsible for Your Company's Data Security?
The Public/Private Cooperation We Need on Cyber Security
Embrace the Complexity of Cyber Defense

The Urban Sustainability Opportunity

John Macomber, senior lecturer at Harvard Business School, explains why the private sector needs to focus on city-level improvements.

Should I Accept that LinkedIn Invitation?

That's a question I am almost guaranteed to hear during any social media workshop, or indeed, in one-on-one conversations about social networking. Even committed LinkedIn users are often uncertain of which connection requests to accept, or which invitations to extend: Someone who regularly shares your blog posts on Twitter? That guy on your condo board? Your cousin's girlfriend with the commemorative-gold-coin business?

The problem of who to connect with on LinkedIn puzzles people precisely because the network itself is neither fish nor fowl. Is it a social network like Facebook, where your connections are (at least notionally) "friends"? A public platform like Twitter, where people can see and judge you on the number of your followers? Or just a really awesome address book?

It's actually all of these things.

To use LinkedIn to its fullest potential, you need to tap its power as an introduction machine: an address book in which all the entries can see and connect with another, to create a mini-network with you and the things you share at the hub.

But that introduction machine only works if you are selective about which connections you initiate and accept.

I learned the value of selectivity the hard way. In the early days of LinkedIn, I connected with anyone who asked, just as I had on other social networks. But once I started trying to use it to get introduced to people I wanted to meet, I discovered that my promiscuity in making connections meant that most of my search results consisted of people I couldn't actually get introduced to. Yes, each search turned up tons of potential connections — people who were connected to people I was connected with. But most of the time, that point of connection was someone I didn't know well enough to ask for an introduction. I wasted hours digging through pages of search results just to find the two or three connections I could really leverage. You need a filter to help you connect to not just anyone you know, but only those people who will be able to help — or whom you can help yourself.

Thus was born the "favor test," the answer to the who-should-I-connect-to-on-LinkedIn question.

The favor test is simple: Would you do a favor for this person, or ask a favor of them? If so, make the connection. If not, take a pass.

A favor isn't constrained to an introduction; other kinds of requests come into play on LinkedIn: Would you support my charity? Will you attend my conference? Can you review my book?

When you're thinking about whether to accept someone's invitation to connect, imagine being faced with a request like this. (Note that there's a difference between saying yes to a conference because it's an interesting event, and saying yes because you want to help out the person who asked.) It's the people you'd go out of your way to help or whom you trust to go out of their way to help you, however modestly, who pass the favor test.

If you're consistent in applying the favor test, you can build a LinkedIn network that is useful and efficient in supporting any professional goal.

But you don't want to be one of those people: the kind of person who evaluates people based on a number. The whole point of the favor test is to think about the two-way quality of your relationships. LinkedIn has its most dramatic impact when a favor goes from a hypothetical test to a tangible action — when you make those introductions, or when you meet that key individual at a company you've always dreamt of working for. Once you see your LinkedIn network not only as a way to realize your own goals but also as an asset you can share with the people you believe in, you'll find it gives you much more than a few more sales leads, or a higher rank in the stack of resumes on a recruiter's desk.

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For more on the favor test, and other ways to make the most of LinkedIn, check out Alexandra Samuel's new e-book Work Smarter with LinkedIn , just out from Harvard Business Review Press.

Why Consumers May Feel Awkward When You Give Them Gifts

A majority of retail managers said in a survey that they thought customers would be more satisfied getting perks and bonuses in public than in private, but a team led by Lan Jiang of the University of Oregon shows that's not so: Consumers have mixed emotions when others see them get unearned rewards, such as a cartload full of groceries for being the millionth shopper. It takes the presence of just one other person for the rewardee to start feeling negatively judged, the researchers say. Those mixed feelings dissolve, however, if the observers have higher status than the recipient.