Marina Gorbis's Blog, page 1583

When Congress Takes Interest in Accounting, Watch Out

Few things are simple in corporate regulation. Reforms often backfire. Changes meant to help shareholders end up enriching executives, or lawyers, or accountants. Less regulation is often better than more.

But here's a simple rule that I imagine holds up pretty well. If an overwhelming bipartisan majority in the U.S. Congress decides to delve deep into the details of a corporate regulatory process and tell the rule-makers they can't do something, that overwhelming bipartisan majority is up to no good.

This happened in the early 1990s, when the Financial Accounting Standards Board first tried to assign a value other than zero to the stock options handed out to executives and other corporate employees as compensation. With Joe Lieberman leading the way, the Senate voted 88-9 to tell the FASB to give it up. And the FASB did give it up, until the corporate scandals of the early 2000s changed the mood in Congress, giving the accounting standards-setters cover to get stock-options expensing through in 2004.

On Monday, it was the House of Representatives that got into the act, with a 321-62 vote in favor of a bill, sponsored by Republican Robert Hurt of Virginia and Democrat Gregory Meeks of New York, that would ban the Public Company Accounting Oversight Board from considering any proposal to force corporations to regularly rotate auditing firms. A couple weeks ago, this "Audit Integrity and Job Protection Act" (a wonderfully Orwellian title, no?) was approved by the House Financial Services Committee by an even more lopsided 52-0 vote.

The PCAOB is a relatively recent creation of Congress, one of the seemingly most successful products of the sprawling Sarbanes-Oxley Act of 2002. And so far its proposal to force companies to rotate auditors can best be described as a trial balloon. PCAOB chairman James Doty, a veteran securities lawyer, first floated it in a speech in 2011 a few months after he took the job:

Considering the disturbing lack of skepticism we continue to see, and because of the fundamental importance of independence to the performance of quality audit work, the Board is prepared to consider all possible methods of addressing the problem of audit quality — including whether mandatory audit firm rotation would help address the inherent conflict created because the auditor is paid by the client.

Doty went to acknowledge that this wasn't a new idea — it was considered as part of Sarbanes-Oxley, and deemed to require more study. That study, by the what was then still called the General Accounting Office, concluded that the evidence was mixed on auditor rotation and the best course of action was to wait and see how the other Sarbanes-Oxley reforms worked out. After almost a decade of waiting and seeing, Doty said, it was time "to explore whether there are other approaches we could take that could more systematically insulate auditors from the forces that pull them away from the necessary mindset."

What followed was a "concept release" from the PCAOB, and a bunch of public hearings at which accounting firms and corporate executives have been given ample opportunity to express their (mostly negative) opinions about the idea — but a few accounting scholars and others have raised points in favor of it. In a speech in April, Doty pointed to "emerging research" that "finds term limits are associated with less earnings management, less managing to earnings targets, and more timely loss recognition post-adoption," but acknowledged that it was far from conclusive and that there would be costs to rotating auditors that needed to be considered.

What this seems to be, in short, is a regulatory agency doing its job — trying to look out for the public, being extremely transparent about it, and relying on the best evidence available. Much of this evidence is coming from outside the U.S., where the auditor-rotation movement is further advanced. Italy, South Korea, and Brazil already require auditor rotation; the Dutch parliament voted last year to do so starting in 2016; UK regulators are considering it; and so is the European Parliament.

But now in the U.S., Congress appears headed toward foreclosing any discussion of the topic whatsoever. The dynamics of a vote like this are pretty simple: Legislators for the most part can't be bothered to delve into or understand such an arcane topic, and it's a safe bet that voters are even less likely to. So it's purely a matter of who will make lawmakers' lives difficult if they vote one way, and who will give them campaign contributions if they vote the other way. In this case, accounting firms and publicly traded corporations are strongly opposed to auditor rotation. A few institutional investors support it, but it's not a key issue for them. And accounting professors, you may be shocked to learn, do not comprise a major lobbying force in Washington. The unanimous vote in the Financial Services Committee, possibly the most lobbyist-ridden of House committees, is a telling sign here.

Auditor rotation may not solve anything. It may even make the situation worse. But when Washington's elected officials rush in bipartisan union to take a know-nothing stand like this, it seems fair to conclude that those on the losing end actually do know something.

Why Fights Erupt in Family Businesses

Two brothers sharing ownership in a fourth-generation concrete business had a bitter falling out over an unlikely issue: a sailboat. The older sibling accused the younger of dipping into the till to support his racing habit. The younger brother struck back by issuing an ultimatum: buy out my share of the company, or sell me yours. An ugly fight ensued, affecting the business, the family, the employees, and the customers.

The rift between these two men — the father and uncle of a colleague of ours — never healed. Both men went to their graves without speaking another word to one another; their children grew up as strangers instead of cousins.

It's one of life's sad ironies that folks who love one another can end up having far more acrimonious business relations than people who are unrelated.

And yet in our experience, conflict actually occurs less frequently in family businesses than non-family businesses. It's just that when it does break out, the fighting tends to be more intense.

Why is that? The answer is devilishly simple. Fights in family businesses break out because they can. In non-family businesses, there are barriers to keep things from escalating. Owning the business removes many of these barriers. Once a conflict starts, it can easily spiral out of control.

It isn't that the causes of conflict are any different in family and non-family businesses. In all types of companies, people disagree about issues related to strategy, money, status, and authority. No organization is immune to narcissistic leaders or difficult relationships between employees. But there is a fundamental difference in the two types of companies in what stops conflicts. The difference, in a word, is boundaries.



Most non-family businesses have rules and processes — structure — that govern behavior for everyone from the bottom of the corporate ladder to the top. If my boss tells me in front of colleagues that I have a personality disorder, he is likely to be called up by HR for disciplinary action. Of course, we can all go overboard. A colleague's former boss once asked her if it was okay to shake her hand. They both laughed, but the comment underscored how controlled behavior can be in non-family environments.



The positive side of such rules and processes is that employees can safely quarrel with one another, confident that most people are going to stay within the bounds of civility most of the time. If they don't — and this is the stick that non-families businesses can always wield — employees can be fired, even from the executive suite.

Conflict is different in family businesses. Rules and processes may exist, but most don't apply to the owners. What's more, key relationships are grounded in the dynamics of the family itself. And families are governed by power far more than structure. Most families operate on a single rule: parents decide and children obey. No matter how imperious they may be, leaders of non-family businesses are rarely as dominant as matriarchs or patriarchs.

This hierarchical arrangement works under normal circumstances, especially since young people leave home to start their own families — where they switch roles and become the dominant figure rather than the dominated one. But in family businesses, in a very real sense, "children" never leave home. Parents dispense love, respect, and other things that people value — and they control wealth and career opportunities as well.

The overlap of family and business is the source of many of the wonderful and unique strengths of family-owned businesses — deeply held values, resilience in tough economic times, long-term orientation towards investment, and the greater loyalty of employees and customers.

Yet those same strengths can be undermined by the way families tend to handle disagreements. Family members often deal with difficult circumstances by withdrawing, avoiding, shaming, or undermining each other. All too often, matriarchs and/or patriarchs try to resolve disputes by forcing everyone to toe the line. If a conflict finally breaks through, it can do so with a pressure that blows the lid off the family's presumed harmony.

Now imagine what happens when a family brings those powerful dynamics over to the business. The result is that there is nothing to stop a fight once it gets going. The owners of the business can rewrite the rules, or ignore the processes — threatening the very success of the business.

Does this mean that members of a family business are fated to bide their time until their relationships erupt into a bitter fight? Not at all, and this is the good news. Once we understand that intense conflicts result from the relative absence of formal boundaries on behavior, we see that they can be avoided through an infusion of greater structure into the situation.

In one client situation, for example, we helped the siblings to solve their extremely disruptive disagreements by developing a family employment policy that identified rules for the entry of their children into the business. We also worked with them to establish a board that would be a forum for making tough decisions, with trusted outside directors incorporated as a way of mitigating sibling disputes.

This infusion of structure into the sibling relationship allowed them to stay in business together. It wasn't smooth sailing. They still had their conflicts, but conflict is necessary for any business to survive. When it is well managed, conflict doesn't make for good headlines. But it can build up a family business rather than tear it apart.

The Innovation Mindset in Action: Jerry Buss

Innovators think and do things differently in order to achieve extraordinary success. They are found not just in the world of business, although they do have strong leadership qualities and excellent business sense as a common core. Our research indicates that whether they are CEOs, senior executives, sports team owners, or film directors, game changers who stand head and shoulders above the rest share a common set of qualities that we call the innovation mindset.

In a series of blog posts, we'll introduce a few game changers and explore the common qualities that make them such effective innovators: they see and act on opportunities, use "and" thinking and resourcefulness, focus on outcomes, and act to "expand the pie." Regardless of where they start, innovators persist till they successfully change the game.

Take, for example, Jerry Buss (1933-2013), the longtime LA Lakers owner who rose from an impoverished Depression-era childhood to the Basketball Hall of Fame and ultimately transformed the sport of basketball.

Innovators connect the dots differently and see opportunities that others don't. They seize opportunities that others don't dare to.

Buss launched his career in real estate with $1,000 in 1959—a venture that proved lucrative. Twenty years later, he purchased the Lakers, the Los Angeles Kings, and the Forum sports arena. In 1979, the Lakers, like the NBA, were struggling—even NBA playoff games aired after the event, outside primetime. There were plenty of sports enthusiasts for baseball and football, but basketball was a distant third.

Even under these challenging circumstances, instead of focusing on simply improving profitability, Buss saw a unique opportunity to build a team that would win the championships many times over. Even more importantly, Jerry Buss saw an opportunity to transform basketball from a sport into entertainment. He dubbed his team "Showtime," inspired by the signature opening line each evening at the famous nightclub The Horn: "It's showtime!" He had the backdrop of the perfect city to make his dream come true—LA and its entertainment industry. To quote Buss, "My dream really was to have the Lakers and Los Angeles identified as one and the same. When you think New York, you think Yankees. I wanted that to be the case here as well. That when you think L.A., you think Lakers."

Pat Riley, who coached four of Buss' 10 title teams, said it best: "Jerry Buss was more than just an owner. He was one of the great innovators that any sport has ever encountered. He was a true visionary, and it was obvious with the Lakers in the '80s that 'Showtime' was more than just Magic Johnson and Kareem Abdul-Jabbar. It was really the vision of a man who saw something that connected with a community." It is no exaggeration to say that Buss helped rescue the league from its late-1970 malaise. When Jerry Buss passed away on February 18, 2013, NBA commissioner David Stern said, "The NBA has lost a visionary owner whose influence on our league is incalculable and will be felt for decades to come."

Innovators break through to new levels with "and" thinking.

Buss aimed for great players and great entertainment—a new combination.

Buss recruited the best talent, starting with the charismatic point guard Magic Johnson, and provided his players with the best trainers and the best equipment. Buss aggressively invested in his players, creating a legendary line up of star players such as Kareem Abdul-Jabbar, Shaquille O'Neal, and Kobe Bryant, and coaches such as Pat Riley and Phil Jackson. After Magic Johnson's second season with the Lakers, Buss gave him an unprecedented contract for $25 million, then the largest contract for any athlete. "Anybody who makes an outlandish salary obviously attracts attention," Buss explained. "That was what was behind my contract with Magic. I think it created a lot of attention for the Lakers."

And Buss's investment went beyond the parquet; when former Laker Walt Hazzard suffered a stroke in 1996, Buss kept Hazzard on the payroll, vowing that Hazzard would remain a Lakers employee for as long as Buss owned the team. "He stood by his word," Hazzard's son said. "When my dad passed away [in 2011], he was still an employee of the Lakers and our family is eternally grateful."

Innovators use a mighty dose of resourcefulness to go through, over, under, and past obstacles. They leverage resources in groundbreaking ways to fulfill their big dreams.

To achieve his vision of great entertainment, Buss was resourceful, leveraging local Hollywood talent: live music and the Laker Girls—a group of cheerleading dancers, initially including Paula Abdul. Courtside seats that were priced at $15 when he bought the Lakers became the hottest tickets in Hollywood.

To recruit top basketball talent, Buss needed to raise more money. He was one of the first to sell naming rights; the Great Western Forum was the result of a major advertising agreement with Great Western Bank.

Innovators focus on outcomes. They don't get caught in the activity trap. They don't perform activities for their own sake but see them as instruments to achieve outcomes. Given their obsession with outcomes, the results of their work are significant.

Buss focused on outcomes—which, during his 30-year ownership, included 16 appearances in the finals and 10 NBA titles. In fact, the LA Lakers won the NBA Championship in Buss's very first year of ownership. In addition, Lakers grew from $16 million in value at the time he bought them, to $1 billion by the end of his era.

Innovators combine their resourcefulness and outcomes-focus to expand the pie, by effectively converting non-consumers into consumers. In the process they transform their industry, community, country, and sometimes even the world.

In order to attract a crowd that would not normally attend a basketball game, he encouraged famous Hollywood stars to attend. Jack Nicholson has since become the face of the LA Lakers. Attendance and TV coverage skyrocketed; viewers wanted to see the stars on the front row just as much as they came to see Magic Johnson's gravity-defying "no look passes" or Kareem Abdul-Jabbar's "skyhooks."

At a time when the major sporting events were shown on TV on pay-per-view basis, Buss co-founded Prime Ticket TV network and started showing the LA Lakers games free on basic cable, which further expanded viewership. Advertisers took notice and another revenue stream opened up. Buss used the additional revenues from the expanded pie to get even better talent and even better coaches, and even better equipment to train them, which in turn meant more championships and more crowds—quite a virtuous cycle.

"I've worked hard and been lucky," Buss said. "With the combination of the two, I've accomplished everything I ever set out to do." We all owe a big thanks to Dr. Jerry Buss for the innovations that we now take for granted—he truly "changed the game."

Why Are So Many Celebrities Now "Creative Directors"?

From Tommy Lee Jones waxing poetic for Ameriprise Financial to Beyonce boosting Pepsi's sex appeal, celebrities are commonly used by companies to get attention and generate buzz. In recent years, though, celebrities have taken on a more significant role. Some companies now actively involve stars in their product development process and other aspects of their businesses.

These modern-day arrangements are often formalized with a "Creative Director" title bestowed upon the celebrity. Undoubtedly, some of these relationships are simply glorified brand endorsements and can be classified as CDINO (Creative Director In Name Only), but some celebrities are having a bona fide impact on companies.

In years past, the basis of celebrity/brand relationships had been expediency and image. Today, it's about authenticity and impact.

For example, Black-Eyed Peas' front man Will-i-am pitched Coca-Cola on making new products of out its byproducts. The company took on the challenge of producing headphones, clothing, and other gear branded EKOCYCLE to give recycled products a hipper image that resonates with young consumers. And, Lady Gaga partnered with Polaroid to develop a throwback camera and LED photo glasses that act as a camera and are designed for real-time sharing.

Perhaps one of the most significant celebrity/brand marriages is between Justin Timberlake and MySpace, the once-fledgling online music sharing service. A few years ago, Timberlake joined forces with a couple of advertising executives to purchase the site, and he has been an integral part of the company's transformation into a service that helps artists manage their brands and connect with fans. He contributes with industry-insider knowledge, personal connections with artists and music executives, and a celebrity flair that has produced a star-studded, tabloid-worthy launch party and a feature-rich user interface—perfect for the ADD-generation.

These examples demonstrate the shift in celebrity/brand deals from awareness to authenticity and from superficial to substantive. There are powerful forces behind this shift. In the past, signing a celebrity endorser was a quick, easy way for a brand to get attention. Companies could generate brand awareness simply by aligning with a visible figure. For celebrities, providing a brand endorsement enabled them to earn a significant fee for minimal work.

The needs of companies and celebrities have changed. The primary challenge for most brands today is differentiation. Engaging a celebrity with a unique personality or point of view can help separate a brand from its competitors. Also, today's consumers expect and even demand companies operate with greater authenticity. Doing more than using celebrities in ads enables them to do so.

Companies are also more focused on innovation than ever before, so they need fresh perspectives—especially from outside their industries. Celebrities' ideas and insights can help companies better understand their target markets, and because celebrities are often the ones leading the trends, they can help companies anticipate cultural movements.

At the same time, these deals make sense for celebrities, too. Celebrities now engage with their fan bases directly and need to sustain compelling conversations with them. Working on interesting projects like designing a new product or starting a new program provides a steady stream of news and insider information for celebrities to post updates about. And now that becoming a celebrity is easier than ever before, some stars want to differentiate themselves from wannabes and shore up their credibility as real artists and savvy businesspeople. What better way to do so than with a substantive title and voice at a reputable company?

Then, of course, there's the obvious business case. Compared to previous eras, musicians now make far less money from music sales, so they're looking to diversify their revenue sources. Signing on as a company's creative director usually involves a longer term, more profitable deal than offering their likeness for an ad campaign.

Today, companies no longer simply need bold-faced names and faces to associate their brands with. And many have found the value of such fleeting arrangements easily compromised when their spokesperson is discovered using their competitor's product (e.g., Pepsi-sponsored Britney Spears was photographed drinking a Coke) or caught engaging in inappropriate behavior (e.g., Accenture was compelled to terminate its sponsorship of Tiger Woods after his multiple infidelities became public). While new, more substantive brand/celebrity relationships are not immune to complications such as these, the incidence with which they happen and the impact they have can be minimized since the relationships are formed more selectively and developed over time.

In the new environment of authenticity and impact, it's not just the celebrity endorsing the brand. The brand also endorses the celebrity. This is a fundamental shift that results in a more equitable, and more interesting, relationship between both parties. Consider what the antiperspirant brand Secret did for Olympic hopeful Lindsey Van.

As a female ski jumper, Van (not to be confused with Olympic skier Lindsey Vonn) was blocked from participating in the 2010 Olympics in Vancouver because the Games only included ski jumping events for men. The Secret brand managers picked up Van's cause and lobbied for her inclusion by producing an emotional video that spread in social media channels. Subsequently, the sport was added to the Olympic Games, and Van is hoping to make the 2014 U.S. team, so she seems to have benefitted from Secret's endorsement. By endorsing Van, Secret was able to express with authenticity its brand purpose of encouraging women to be fearless, and significant gains in product sales and customer affinity followed.

With results like these, it's easy to see why celebrities and companies alike are interested in this new way of working together. It's why Red Bull built a special halfpipe for snowboarder Shaun White and why pop band OK Go is actively seeking a "brand partner" to work with on videos, apps, and other content connected to its upcoming record release.

To achieve authenticity and impact, companies need to approach celebrity engagements in new ways. Selecting a celebrity should no longer be based on his or her general familiarity and appeal. There needs to be a meaningful tie, and sometimes selecting a lesser-known person is actually a better choice because doing so can contribute to the perception of an authentic relationship. For instance, Van wasn't well-known before P&G picked up on her cause; and indeed, that's part of what makes the spot so effective: you're rooting for her as the underdog. Also companies should engage celebrities based on the quality of their ideas and their willingness and ability to engage with corporate representatives. Both of these criteria aren't as easy to assess as a Q Score, so the best approach may be to take a few small, selective steps in this direction before making a big public announcement and using a moniker like creative director.

There's also a need for the company to be crystal clear about its brand position and vision before engaging a celebrity—and to ensure the star embraces these. This alignment is critical, since the celebrity will wield more influence on the future direction of the brand internally through his or her contributions and on the public perceptions of the brand externally through their messages about the partnership.

Celebrity creative directors are popular these days because they allow brand and celebrities alike to play on higher ground. No longer are either simply promoting an image. They're making a difference.

The Three-and-a-Half-Day Job

Many people seem to feel that if the market can't offer them a brilliant job, there's not much point looking.

But you don't need a perfect job. Every job is a compromise between what you want to get out of life and what an employer wants to get out of you. Keeping this reality in mind will help you challenge perfection-focused thinking and increase your options.

Remember, all roles — the great and the not-so-great alike — include some uninspiring tasks. While jobs that are a poor match often provide fewer opportunities for autonomy and growth, even they usually reveal some positives. Work is rarely as monochrome as we like to make it.

Even if the perfect job existed, searching for one would be a fool's errand. Detailed reviews with hundreds of clients have convinced me that you don't need a job you love five days a week. Three-and-a-half days out of 5 seems to do the trick. It's enough space to thrive, learn, and feel you're making a contribution. The rest of the working week may be paperwork or dull meetings, but you can live with that.

Career management in tough times is also about calibrating expectations. Your next role probably won't tick all your boxes, but that doesn't mean you can't shape it in your direction more than a little — at the point of accepting the offer, and maybe 12 to 18 months down the line when you've proved yourself. Knowing what's good enough is about creatively accepting compromise.

Take a job that only meets half your wish list, perhaps, but make sure it's a stepping stone towards 7 out of 10. Which is enough for anyone.

So how do you find your three-and-a-half-day job? It takes more than diligence. Today's market needs cunning. That's a very old Norse word, which before the Middle Ages didn't mean deceitful guile, but special knowledge and skills — the ability to track down what you need in unfavourable conditions when everyone else is hungry.

Applying cunning to the market often means new thinking, new strategies. Jobs are far more hidden away than they were a decade ago, and filled by complex routes, so it makes sense to look carefully at what's working in any job search process, and how much your picture of the market is getting in the way of discovering what's really out there.

Those who have made big step towards a life-enhancing role nearly always tell you about the conversations which made that journey possible. Ask them what they could have done to get quicker results, and they're likely to say something along the lines of, "I should have talked to the right people earlier." This isn't networking, but simply learning, planning, absorbing.

So, talk to people who have found roles they feel are worth getting up for in the morning. Ask how they turned the odds in their favour; you'll discover the toughest step wasn't applying for the job or getting selected. It was a long way further back when they took their first exploratory step. This step is nearly always a conversation, usually with someone who will inspire as well as inform. Reach out to someone who already does what you'd love to do. Then do it again. And again.

You can also put energy into transforming your current job. Fixing the role you're in rather than rushing to the job market to solve career problems. Moving on should be about the attraction of the new outweighing the repulsion of the old — actively going to, not just wanting to get out.

When people do start to build their job in half day increments they start to gain control. They learn how to coax hidden aspects of their job into the daylight. They learn smart but diplomatic ways of saying to an employer "here's how to get better value out of me...."

Holding out for the perfect job is a brilliant avoidance strategy when jobs are thin on the ground. Playing "100% or nothing" is a great way of giving yourself permission to do absolutely nothing. Don't get caught in this trap and suspend belief in your future.

Avoid the temptation to rush down corridors, always trying to find the next level, but ignoring the half-open doors along the way. Sometimes you simply need a quiet faith that behind some doors is a person who will take you seriously, and that, with some effort, you can be quite happy with three-and-a-half good days.

We've All Probably Eaten Counterfeit Food

An estimated 10% of food that consumers buy in the developed world is adulterated in some way by counterfeit ingredients, Shaun Kennedy of the University of Minnesota says in a report by The New York Times. Perpetrators of this fraud are trying to make money, rather than cause harm to consumers, but in some cases the ingredients they add can be dangerous. A company in the UK that made fake Glen's vodka added bleach as well as methanol, which can cause blindness, the Times says.

Don't Let Your Best-Connected People Become Bottlenecks

By now, most HBR readers should understand the informal influence that stems from being central to an organization's network. Well-connected people have enormous power to drive change, as this recent article from Julie Battilana of Harvard Business School and Tiziana Casciaro of the University of Toronto's Rotman School of Management, makes clear. But, when a company has only a few network-central players, they can become significant points of weakness.

Consider the situation faced by a leading provider of outsourcing and information technology consulting services with approximately $1.5 billion in revenues and 10,000 employees spread across more than 70 offices globally. The company wanted to move to a matrixed structure, with globally integrated business lines and vertical practices working in conjunction with regional sales groups. The idea was to increase the focus on clients, improve flexibility and scalability, eliminate redundancy and excess costs, accelerate growth and profitability, and improve career opportunities.

But network analysis revealed that the company had a long way to go. Information flowed through hierarchies; geographies and functions operated in silos; most people weren't aware of expertise elsewhere in the company; and few were collaborating to transfer best practices and help clients. The 5% most central people — despite working to their limits — had in various ways become bottlenecks, unable to fully participate in projects, sales efforts and decisions. And if you took them out of the network, the number of relationships in the company would drop by 29%!

Management responded by launching a number of connectivity-improving initiatives. First, they developed an expertise locator to help people find resources across the organization instead of passing requests up the hierarchy. Second, they offered educational sessions on topics such as service offerings, delivery experience, and rules of engagement between regions and business units. Third, they established global teams of subject matter experts. Finally, they emphasized a new culture of responsiveness by encouraging employees to return calls and e-mails within 24 hours regardless of the information-seeker's title or position. Rather than further overloading the small set of people in the center of their network, leaders worked to lessen their load. They pushed decision-making responsibilities down to other levels and prompted other employees to become more central.

That freed up those who were already highly networked to help steer change. For example, the head of client services began to draw on the people that network analysis showed to be central in each region, which helped her understand who knew what much more effectively than meetings with those higher in the formal hierarchy could.

Six months later, the results were impressive. Network connectivity was much more evenly distributed and the most central people were much more responsive. There was 17% increase in ties to and from people in the periphery, many of them client-facing, which improved service and account penetration. And the ratio of employee ties external to their functions to all connections increased by 13%. Sales collaborations up to $500,000 increased by 27%; those between $500,000 and $2 million were up 15%; and those in the $2 million to $10 million range got a 9% boost.

The lesson? People central to your organization' network can help you. But you need to make sure they're not hurting you first.

Leading Like Nelson Mandela

Linda Hill, Harvard Business School professor, shares her memories of meeting the leaders of South Africa's anti-apartheid movement, and what she learned from them.

One Difference Between a Great Recession and a Great Depression: Jobs

On Friday we learned that the U.S. added another 195,000 (seasonally adjusted) non-farm jobs in June. That was a bit better than expected, and another sign that the economic recovery may be, ever so tentatively, gaining speed. But it will take 12 more months like June just to get non-farm employment back to the level of November 2007.

That's when employment peaked before the onset of the Great Recession at more than 139 million non-farm jobs; the fact that it's going to take close to seven years, if all goes well over the next year, just to get us back to that level is an indication of how bad the recession was and how weak the recovery has been. And getting back to the 2007 level isn't getting back to normal; the U.S. will have added about 17 million inhabitants between 2007 and 2014, a healthy labor market thus requires millions more jobs.

No other U.S. recession since World War II has been nearly this devastating to employment, as Calculated Risk's Bill McBride documents every month with the chart that Business Insider dubs "The Scariest Jobs Chart Ever."

But just because the Bureau of Labor Statistics' official employment numbers only go back to 1947 doesn't mean there isn't data available from before then. In the National Bureau of Economic Research's Macrohistory Database, one can find a series of monthly non-farm employment numbers running from 1929 to 1939, compiled by the BLS. And guess what: they make for a much scarier jobs chart than the current recession:

What lessons can one draw from this? Basically, if you think this downturn was comparable in origin and inherent severity to the other recessions since World War II, then we've been the victims of economic-policy bungling of epic proportions. If, on the other hand, you think the proper comparison is the Great Depression, the last U.S. downturn brought on by a severe financial crisis, you'd have to say the White House, Congress, and most of all the Federal Reserve have done an absolutely brilliant job relative to their early-1930s counterparts. I'd lean toward explanation No. 2 — we did actually learn something from the Great Depression, although probably not enough.

A note on methodology: There are a few caveats about that 1930s data, the main one being that back then much more of the workforce was still on the farm, so the same percentage decline in non-farm employment might not have had quite the same impact on the economy. When I made versions of this chart during the Great Recession, I sometimes attempted to account for this, but it doesn't seem worth the effort here. Also, because the numbers from the 1930s weren't seasonally adjusted, I've used unadjusted jobs numbers for recent years, too, which explains why the chart is a little jumpy (without seasonal adjustments the June jobs gain was 422,000, for example).

Why Comcast Would Rather Be Feared Than Loved

When Machiavelli wrote that it is better to be feared than loved, what he had in mind was the nature of commitment and obligation. Allegiances built on good feelings evaporate when times get tough, he reasoned. Those sealed by fear are more durable:

[M]en have less scruple in offending one who is beloved than one who is feared, for love is preserved by the link of obligation which, owing to the baseness of men, is broken at every opportunity for their advantage; but fear preserves you by a dread of punishment which never fails.

It may not surprise you to learn that what got me to look up Chapter 17 of The Prince was a recent experience trying to give my cable box and modem back to Comcast, America's biggest cable TV provider. Cable executives think a lot about the feared-vs.-loved tradeoff, I wager. Subscription television services and internet service providers, both dominated in the U.S. by the cable industry, make up two of the three lowest-scoring categories in the American Customer Service Index (the other is airlines). And while this is to a certain extent just a byproduct of their semi-monopoly status, I'm now convinced there's calculation and strategy behind it as well.

Yes, the cable companies do make occasional superficial attempts to be better-liked. And the services they provide do keep improving (along with the prices, of course, but that's mainly sports fans' fault). But the companies continue to keep one crucial element of the customer experience as difficult and frightening as possible. That would be the experience of disconnecting.

My disconnection was of the most benign sort — I was simply moving out of Comcast's service area. A little checking on the company's website revealed that while I could make pretty much any possible change to my service online, I couldn't disconnect; I had to call and talk to an actual human being. So I did. I waited on hold for only a minute or so, and after I'd told the customer service rep that I was moving out of Comcastland, meaning that he didn't have to run through the usual epic customer-retention script, he was hilariously effusive about how wonderful it had been to have me as a customer these past three years and perfectly efficient about making the necessary arrangements. All that was left to do, he told me, was to "drop off" my cable box and modem at a local service center.

I've had to do this before, with RCN, Time Warner, NTL, and others (probably including Comcast). Maybe the passage of time has dulled my memory of what it was really like, or maybe the wonderfulness of the phone rep led me to believe that this was a different sort of operation. So I really thought I was going to be able to just drop the equipment off, and decided to do so as my final errand on the way out of town on a Friday afternoon.

When I got to the Comcast service center in Cambridge, though, the door was locked. A sign said the office was closed from 2 to 2:30, and that they were sorry for the inconvenience. It was inconvenient, and kind of ridiculous, but I dutifully returned 20 minutes later. I passed through the now-unlocked door into a scene from pre-1989 Eastern Europe. There were four or five service windows in the grim little office; all but one had "closed" signs. The one window that was staffed had seven or eight oppressed-looking people waiting in line, and wasn't moving at all. I stood there for a while, wavering between waiting and heading back to the car where my wife, the dog, and the goldfish awaited me.

Then a guy breezed in with a box containing his cable equipment, and called out from the back of the line, "Hey, can I just leave this here? I already settled everything over the phone." The woman behind the counter responded that he wouldn't get a receipt, and she couldn't guarantee that another customer wouldn't take his cable box (as if anyone waiting in that office would want to take a cable box). He walked to one of the closed service windows and said, "How about if I just leave it here?" I followed him, and said I wanted to do the same.

At that point the woman behind the counter started yelling that we couldn't do that. The other guy backed off, but I kind of snapped — moving is the third-most-stressful life event, after all — and went ahead and shoved the box containing my cable equipment through the service window. She shoved back, and said she was going to call the police. I pushed it back in through the window, and walked out.

I knew right then that this was probably an expensive move, but in my somewhat desperate state I figured that getting out of metropolitan Boston an hour or so earlier on a summer Friday afternoon, and not having to go back into that horrible service center, was worth a couple hundred bucks. After the weekend I called Comcast to get the price tag. The (perfectly nice) guy on the phone said there was no evidence in the system that my equipment had been returned, but that he'd put in an "equipment research ticket" to see if it could be located in the Cambridge service center. If it couldn't, I'd owe $250 for the cable box and $110 for the modem.

I had actually feared worse. Still, there's no way a three-year-old cable box and modem are worth $360 — not to mention that I've already probably paid that much in "rent" on the devices (I can't say for sure, because my files are in storage and the online access to my statements has been cut off). In the world of consumer electronics, three years is an awfully long time. My initial suspicion was that, upon getting my cable equipment, Comcast would just throw it away. So far I haven't been able to get Comcast's PR people to tell me what the odds of that are, but I did find a 2012 article from Multichannel News that said cable boxes have "an effective life of seven years," and that there are lots of things in them that can be repurposed after that. So some sort of deposit may make sense to keep the things out of landfills.

If the need to reuse the machines really was what was driving the cable companies' return policies, though, they would make returns easy. Comcast will send a prepaid shipping box to return your cable equipment in, but only to the address you're moving from. And while libraries, video rental stores, and banks long ago perfected systems that allow people to drop off books, DVDs, and deposits without waiting in line or talking to anybody — in the process both serving their customers and reducing labor costs — the cable companies have instead chosen to stick with their inefficient, labor-intensive, maddening equipment-return ritual.

The most plausible explanation for this state of affairs is the simplest one: The equipment-return rigamarole is a customer retention strategy. Customers who can't conceivably be retained, like me, are just collateral damage in the effort to scare potential cable defectors into staying put. If that's right, the cable operators will only get more aggressive about this as the years go by. Their market penetration has probably peaked, as younger consumers (among them many of my colleagues at HBR) increasingly opt for cheaper workarounds via their Internet connections. So the clearest path to continued profit is to lock in existing customers, and find ways to charge them more. Some of the cable industry's lock-in strategies actually deliver value in exchange for tying customers up — think of the "triple-play" plans that bundle cable, Internet, and phone service into one bill, or the increasing use by cable networks such as ESPN and HBO of apps that allow cable subscribers (and only cable subscribers) to view their programming on smartphones and tablets. But the equipment-return thing is pure coercion. Machiavelli would have been impressed.

He would also have been impressed with the cable industry's ability to maintain its equipment advantage in the face of political opposition. Making money off customers' laziness and fear of conflict is a common and perfectly legitimate, if less-than-inspiring, business practice. But the cable industry is a heavily regulated creature of government policy, and the U.S. Congress actually tried to end cable-box tyranny with the Telecommunications Act of 1996. An entire section of that landmark law (Section 304) is devoted to "Competitive Availability of Navigation Devices," with the idea that if customers could get their cable boxes from someone other than the cable company, switching providers would be much easier and true competition would ensue.

The result, after years of wrangling between the Federal Communications Commission and a foot-dragging cable industry, was something called CableCARD, which allows access to digital TV channels without the use of a cable box. The first CableCARDs came out in 2004; since then the FCC has issued repeated rules changes aimed at getting the things to catch on. But they've been a bust — in large part, one suspects, because the cable industry wanted them to be a bust.

Or maybe that's being too generous to the customers like me who chose not to embrace CableCARD (or Tru2way, a successor technology pushed by consumer-electronics manufactors that hasn't gotten caught on either). As I was reminded when I tweeted about my Comcast experience last week, raging against the cable machine is a national pastime. But actually doing something about it, well, that's too scary.