Marina Gorbis's Blog, page 779

Research: Whistleblowers Are a Sign of Healthy Companies

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Some of the worst corporate disasters of the past two decades were heralded by whistleblowers: Sherron Watkins raised the red flag internally at Enron, Cynthia Cooper let management know of major accounting problems at WorldCom, and Matthew Lee brought problems to his management team at Lehman Brothers. The whistleblowers weren’t able to halt their companies’ declines and—in some cases—faced punishment for calling attention to internal misdeeds. Looking at these examples, it would be easy to say that whistleblowers have little impact on how companies both conduct themselves and weather corporate storms. But that’s not the case.

In 2018, NAVEX Global, the leading provider of whistleblower hotline and incident management systems, provided us secure, anonymized access to more than 1.2 million records of internal reports made by employees of public U.S. companies. Our analysis revealed that whistleblowers—and large numbers of them—are crucial to keeping firms healthy and that functioning internal hotlines are of paramount importance to business goals including profitability. The more employees use internal whistleblowing hotlines, the less lawsuits companies face, and the less money firms pay out in settlements.

Our conclusions are in many ways counterintuitive to how many executives manage complaints. Many companies continue to ignore—or misuse—whistleblower hotlines, and most don’t know what make of the information that is provided through them. Even when firms want to support whistleblowers, managers don’t know what to make of reported level of internal reports. Are more internal reports of problems a signal of widespread troubles within the firm? Research on external whistleblowing events, by Robert Bowen, Andrew Call, and Shiva Rajgopal finds that more external reporting events is associated with increased future lawsuits and negative performance. Does this finding on external reporting hold true for internal reporting events? Or do more reports instead reflect employees’ trust in management and a communication channel that allows management to more effectively prevent public disasters before they occur?

More whistles blown are a sign of health, not illness  

We found that firms actively using their internal reporting systems face fewer material lawsuits and have lower settlement amounts than firms ignoring—or minimally using—similar information. While all firms are likely to have some frequency of issues, firms where these are reported early are more likely to address them before they become larger problems resulting in costly litigation.

We measured activity from the perspectives of employees and managers, assessing both the number of internal reports filed and the amount of information provided in each report. We also measured the number of times reports were accessed and reviewed by management. We found that a one standard deviation increase in the use of an internal reporting system is associated with 6.9% fewer pending lawsuits and 20.4% less in aggregate settlement amounts.

We also found that higher use of internal reporting systems is not associated with a greater volume of external reports to regulatory agencies or other authorities. This suggests that a higher volume of internal reports does not imply that problems at the company are more frequent or severe. Instead, internal reports indicate open communication channels between employees and management and a belief that issues raised will be addressed. At the same time, when employees do report externally, it reflects management’s failure to address issues internally.

Types of firms that actively use internal whistleblower hotlines

While the use of internal reporting systems, proxied by the number of reports filed, has increased over time, how those systems are used varies substantially across firms and industries.

What types of companies are actively using internal reporting systems? We saw a few common characteristics in our research. Using an index developed by Lucian Bebchuk, Alma Cohen, and Allen Ferrell in 2009, we found that firms with more powerful management—e.g., firms with governance protocols that limit shareholder power relative to firm leadership—are less likely to actively use their internal reporting systems. Fast-growing companies are also less likely to use their internal reporting systems, as are firms that show signs of potential earnings misstatements. Firms that are more active in using their systems tend to be more profitable (as measured by return on assets) than firms that are less active users of their systems.

We found that companies that more actively use their internal reporting systems can identify and address problems internally before litigation becomes likely. Significantly, our analysis shows that a one-standard-deviation increase in the use of an internal reporting system is associated with 3.9% fewer pending material lawsuits in the subsequent year and 8.9% lower aggregate legal settlement amounts. Over a three-year period, a one standard deviation increase was associated with 6.9% fewer lawsuits and 20.4% lower settlement amounts. Avoiding lawsuits is important for reasons beyond just the direct financial costs of legal defense and settlements. Although settlement costs can often be in the hundreds of millions of dollars, the hit to brand reputation and stock price can easily exceed all other out-of-pocket expenses. We found that in addition to reduced legal exposure, firms that more actively use their internal reporting systems are typically more profitable and have been in business longer.

What this means

In our discussions with compliance officers at firms, many executive leadership teams stated a “goal” to have zero reports. This is not hard to accomplish if you simply don’t make your employees aware of the system or comfortable using it. There is evidence that this is often the case: In 2014, Bruckhaus Deringer found that nearly 30% of managers in their survey reported that their company actively discourages whistleblowing.

Other executives seem to understand that having few or no reports signals a poorly used system, but they also seem to think that going beyond the industry average number reports is a sign that the firm has more problems than they should.

Our research provides strong evidence that neither of these assertions are true: high usage is more often a sign of a healthy culture of open communication between employees and management than a harbinger of real trouble. After all, all large organizations face a large amount of common, unavoidable, and unobserved problems. Internal reporting systems simply make those problems visible to management.

Managers should view hotlines as a critical component of traditional audit mechanisms and board of director meetings. The reports seem to be a valuable resource to identify and quickly address concerns arising within the firm. And regulators are on the hook, too. Given what we learned about how companies with strong internal reporting systems fair, regulators might rethink the recent prioritization of external over internal whistleblowing and provide greater incentives for companies to implement their own effective solutions.

Why Management History Needs to Reckon with Slavery

Caitlin Rosenthal, assistant professor of history at UC Berkeley, argues there are strong parallels between the accounting practices used by slaveholders and modern business practices. While we know slavery’s economic impact on the United States, Rosenthal says we need to look closer at the details — down to accounting ledgers – to truly understand what abolitionists and slaves were up against, and how those practices still influence business and management today. She’s the author of the book, Accounting for Slavery: Masters and Management.

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What Stan Lee Knew About Managing Creative People

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Stan Lee hated to see an idle artist. The renowned comic book writer and publisher, who died this week at 95, thought idle talent was bored talent, and bored talent was easy to lose to the competition. It also personally bothered him that the people in his employ might be scrambling to earn enough money.  So Stan made sure to provide continuous employment, sometimes to the detriment of the company.

In one famous anecdote, Stan doled out more assignments than the company needed—and didn’t bother to tell boss Martin Goodman about the extraneous inventory. He stuffed the extra comic books into a closet, intending to use them when the time was right.  When Goodman saw the closet, he ordered Lee to fire everyone in the bullpen. Lee followed his boss’s orders. But he still felt it was a mistake—he needed to assign the extra stories, he argued, in order to invest in his people.

I studied Lee for my book, Superbosses. As I explained in HBR, a superboss isn’t just a really good boss. They don’t just build an organization or surpass a revenue target; they identify, train, and build a new pipeline of talent. The way Jon Stewart’s Daily Show launched the careers new comedians, or Alice Waters launched the careers of new chefs. Through spotting, nurturing, and developing talent, superbosses — like comic book superheroes — have an outsized impact.

Keep talent busy was just one of the lessons I took from Lee’s example. A second, but equally important lesson, was don’t censor talent. Lee preferred to let his talent sort out the creative details. He remembered working on a comic strip that used the word pogo stick in the punch line. The editor felt that pogo stick wouldn’t resonate with rural audiences, and he instructed Lee to change the gag so that the punch line had the word roller skates instead. It deflated the joke, but Lee changed it anyway. The strip was eventually dropped, and Lee said, “this type of censorship, to me, is almost indecent.” When you hire an artist to do a job, you let them do the job. Lee elaborated, “It seems to me that if a person is doing something creatively, and he feels that’s the way it ought to be done, you’ve gotta let him do it.”

Lee put his words into action years later when the Hulk, a Marvel franchise, became the subject of a popular primetime television show. He was amazed to see how the creative team transformed the Hulk for this new medium, and he was glad to stay out of their way. “I learned a helluva lot about TV from Ken Johnson during the many discussions we had about how to best adapt The Incredible Hulk to television. The success of that show, under Ken’s direction, proves beyond any doubt how important it is to put creative projects in the hands of truly creative people.” Lee enjoyed being fairly hands off as a boss, and extended that courtesy even to younger staffers, who more-traditional bosses might have said were too green.

A third lesson I took from Lee’s example: give credit where it’s due. It sounds so straightforward, but in reality, it’s very rare. One way Lee gave credit was by creating a credits page, written in a chatty tone. The credits page was unique in comics; up until then the artists drawing and inking the panels had remained anonymous. The credits might read something like this: “Written with Passion by Stan Lee. Drawn with Pride by Jack Kirby. Inked with Perfection by Joe Sinnott. And lettered with a Scratchy Pen by Artie Simek.”  He also talked about the staff frequently in his monthly newsletter The Bullpen Bulletin.  These shout-outs occasionally changed or shaped the careers of the people in his department. For instance, in the middle of his career, artist Jack Kirby was nicknamed the “King of Comics” by Stan Lee, and Stan reported that he was the “artists’ artist.”  To this day, Kirby is known as the King of Comics, or “King Kirby.” This kind of publicity was not only good for the artists, but made it possible for a young reader to become particularly devoted to their favorite artist. It branded certain artists as Marvel artists, enabled readers to feel another level of intimacy with the product, and allowed Lee to promote the careers and further the professionalization of the field, another passion of Lee’s.

Finally, Stan Lee’s example is a reminder to dream big. There’s no better way to motivate the best people. “We’re trying to elevate the medium,” he once said. “We’re trying to make [comics] as respectable as possible.” Lee felt that comic books had the power to make important social commentary, to be incisive and satirical and smart. He believed that a day would come when an intelligent adult wouldn’t be embarrassed to be seen walking down the street with a comic strip, and he constantly pushed toward that goal. He suggested that comics should be studied at the college level, saying, “If people are going to study movies, TV, opera, ballet, concert, sculpture, painting, and other media, they might as well study comic books because comic books are just as profound and strong a factor in shaping, and moving, and molding people’s thoughts.”  He argued there was no reason comics shouldn’t be seen as viable art. That attitude drew the best artists to want to work with him.

Lee wasn’t perfect—no person is. Ultimately, he repositioned comics, professionalized the industry, and launched the careers of dozens of proteges. It’s a legacy any boss would call super.

Why It’s Easier to Make Decisions for Someone Else

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Why is it easier to see the best solution to other people’s dilemmas than our own? Whether it’s about someone deciding to pursue a new job, or ask for a raise, or someone simply mulling over which ice cream flavor to choose, we seem to see the best solution with a clarity and decisiveness that is often absent when we face our own quandaries.

People have a different mindset when choosing for others: an adventurous mindset that stands in contrast to the more cautious mindset that rears when people make their own choices. In my research with Yi Liu and Yongfang Liu of East China Normal University in China and Jiangli Jiao of Xinjiang Normal University in China, we looked at how people make decisions for themselves and for others. We were interested in the process and quantity of information a decision maker uses when choosing for others versus choosing for the self. We wanted to know: Is more information searched in the process when people choose for others versus for themselves, and does the way they evaluate that information change based on whom they are choosing for?

To test our hypotheses, we performed eight studies with over a thousand participants. Throughout the series of randomized tests, participants were given a list of restaurants, or job options, or dating profiles — each with detailed information and then participants were asked to make choices for themselves or for someone else based on that information.

What we found was two-fold: Not only did participants choose differently when it was for themselves rather than for someone else, but the way they chose was different. When choosing for themselves, participants focused more on a granular level, zeroing in on the minutiae, something we described in our research as a cautious mindset. Employing a cautious mindset when making a choice means being more reserved, deliberate, and risk averse. Rather than exploring and collecting a plethora of options, the cautious mindset prefers to consider a few at a time on a deeper level, examining a cross-section of the larger whole.

But when it came to deciding for others, study participants looked more at the array of options and focused on their overall impression. They were bolder, operating from what we called an adventurous mindset. An adventurous mindset prioritizes novelty over a deeper dive into what those options actually consist of; the availability of numerous choices is more appealing than their viability. Simply put, they preferred and examined more information before making a choice, and as my previous research has shown, they recommended their choice to others with more gusto.

These findings align with my earlier work with Kyle Emich of University of Delaware on how people are more creative on behalf of others. When we are brainstorming ideas to other people’s problems, we’re inspired; we have a free flow of ideas to spread out on the table without judgment, second-guessing, or overthinking.

Upon reflection, these results should feel familiar. Think about the most recent time you asked for a raise. Many people are initially afraid to ask (employing a cautious mindset); however, these same people are often very supportive in recommending to others (such as their friends or colleagues) that they ask (employing an adventurous mindset). When people recommend what others should do, they come up with ideas and choices and solutions that are more optimistic and action-oriented, focus on more positive information and imagine more favorable consequences. Meanwhile, when making their own choices, people tend to envision everything that could go wrong, leading to doubt and second-guesses.

How can this research be applied? First, we believe that it suggests that everyone should have a mentor, or a blunt friend who can help people see and act on better evidence.

We should also work to distance ourselves from our own problems by adopting a fly-on-the-wall perspective. In this mindset, we can act as our own advisors—indeed, it may even be effective to refer to yourself in the third-person when considering an important decision as though you’re addressing someone else. Instead of asking yourself, “what should I do?” ask yourself “what should you do?”.

Another distancing technique is to pretend that your decision is someone else’s and visualize it from his or her perspective. This can be very easy when thinking of famous exemplars, such as how Steve Jobs would make your decision. By imagining how someone else would tackle your problem, people may unwittingly help themselves.

Perhaps the easiest solution is to let others make our decisions for us. By outsourcing our choices, we can take advantage of a growing market of firms and apps that make it increasingly easier for people to “pitch” their decisions to others. For example, people can have their clothes, food, books, or home decor options chosen for them by others.

Our research underscores a basic human desire: we want to feel like we’ve made a difference. We are wired for connection with others and an interesting part of making decisions for other people is that it is possible to have a bigger impact. Since managers and leaders are tasked with making decisions for others on multiple levels—everything from daily minutiae to personnel conflicts to long-term strategic planning—our results point the way to helping these employees find greater degrees of creativity, effectiveness, and fulfillment in their work.

Containing the Latest Ebola Outbreak

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Last month, a rebel attack in Beni, the epicenter of the ongoing Ebola outbreak near the eastern border of the Democratic Republic of Congo (DRC), once again halted the efforts of response teams working to contain the virus. With over 10 major episodes of violence since the outbreak was declared in August, insecurity and community mistrust has made it difficult to gauge the true extent of Ebola’s spread. Though the outbreak could still be limited, cases appear to be increasing — especially in Beni, where cases have doubled in recent weeks — with 80% of new infections arising among people with no link to “known transmission chains” (where everyone who is infected is known and you can track who has been exposed with some accuracy). This means that we might only be seeing the tip of an iceberg of hidden transmissions and the outbreak could spiral out of control and spread into neighboring countries. Given this danger, the current strategy for containing the disease needs to be adjusted.

Eastern DRC has been home to one of the deadliest and most intractable conflicts in modern history; over 50 armed groups are still active in the region. Originally formed to protect their communities, many of these rebel militias have become entangled in the messy web of politics, shifting allegiances, and underhanded mining deals that fuel the conflict.

This backdrop and the inability of the government or international agencies to assure basic safety, much less basic needs, has entrenched a distrust of formal institutions in the population. These dynamics have been made more complicated by the fact that DRC is supposed to hold elections in December that have already been delayed twice since 2016.

Given that outbreaks can grow quickly and exponentially, definitive action is needed now.

The current plan for stopping this outbreak is based on contact tracing (the identification and monitoring of people who were exposed to Ebola-infected individuals for the 21 days during which they may develop infection) and “ring” vaccination (immunizing these contacts and those close to them with an experimental Ebola vaccine). This approach efficiently contained an Ebola outbreak in western DRC just a few months ago but requires a comprehensive and precise understanding of who is infected and who their contacts are — something that necessitates having unimpeded daily access to their communities for months.

That has not been possible this time around: Areas affected by violence have been inaccessible for days at a time. Therefore, while contact tracing and ring vaccination should continue where transmissions can be tracked, mass vaccination of larger portions of populations should be considered in areas where that is not possible such as Beni, which has a population of about 230,000. Expanding vaccinations in this manner could immediately halt the spread of the disease.

While such a mass vaccination sounds ambitious, the World Health Organization (WHO) and others have executed much larger national campaigns  in over 40 low-income countries, including DRC, where millions of children were immunized against polio or measles within a single week. These campaigns were also implemented successfully during conflicts in Somalia, Afghanistan, and Liberia. Though a mass-vaccination effort targets an entire population, it need only reach the proportion required for “herd immunity” — immunizing enough people so that the virus cannot spread. Early studies of the Ebola vaccine found that it might be possible to achieve herd immunity by vaccinating as little as 42% of the population.

To be successful, the mass vaccination effort would require the buy-in of the communities and the Ebola response teams being able to securely access the areas in question for the day or two it would take to immunize everyone. Promisingly, a recent study showed that even communities with high levels of distrust appear to be open to vaccination.

Anthropologists are already on the ground working tirelessly to engage community leaders and armed groups. In areas not amenable to outreach, a neutral “white helmet” security force, ideally drawn from the African Union or other countries without past involvement in the DRC conflict, should be deployed with the sole mission of securing vaccination efforts. It should be made abundantly clear to the population that this force has no allegiance to any political or institutional actors and is there only to deter violence against responders. At the end of the day, communities and militias do not want their loved ones to die from Ebola and would respect such a presence if they were reassured its mission is strictly medical.

Mass vaccination will also require an adequate supply of the Ebola vaccine. Its manufacturer, Merck, has committed to maintaining a supply of 300,000 doses at all times. Doing so could become difficult if vaccination efforts are expanded, but at the current juncture, the number of people who would need to be vaccinated in order to stunt the outbreak still appears to be within the range of existing stockpiles. Nonetheless, production of the vaccine should be increased and the bottlenecks to doing so should be assessed and cleared to ensure an adequate supply.

It’s true that the Ebola vaccine is still experimental and its health risks are not yet fully known. However, for people living in areas where everyone who is infected is not known, the heightened risk of unknowingly contracting a fatal Ebola infection may, at this point, outweigh the potential danger posed by the vaccine.

After the West African Ebola epidemic spiraled out of control, many wondered why more aggressive measures were not taken sooner. We may be at a similar make-or-break point in this outbreak.

How We Help Employees Pay Down Student Loans and Save for Retirement at the Same Time

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A small percentage of U.S. companies — including PwC, Fidelity, and Aetna — have stepped up to help their employees cope with the education loans weighing them down by offering them cash to help them reduce their debts. While I applaud them, one downside of their approach is simply giving their workers cash raises their income taxes, diminishing the impact of their efforts.

To address this dilemma, Abbott, where I lead Human Resources, took a different approach. We introduced a program last August to contribute 5% of pay to a tax-deferred 401(k) plan for full- and part-time workers who direct at least 2% of their pay toward paying down their student loans. The Internal Revenue Service reviewed — and ruled favorably on — the 401(k) plan structure we came up with to make this possible.

In addition to the tax issue, our program — called Freedom 2 Save — helps tackle another problem: two-thirds of millennials aren’t saving for retirement. For every decade a person delays saving for retirement, the amount he or she ultimately needs to save doubles. Unless they start putting aside money now, many graduates will have to work into their 70s.

Over 10 years, an employee with a starting salary of $70,000 could earn $54,000 in his or her 401(k) account — assuming a 6% annual return and yearly pay increases of 3% — without contributing a dime toward retirement. Thanks to the power of tax-deferred investment returns, that amount could grow to hundreds of thousands of dollars by the time he or she turns 60.

Freedom 2 Save offers Abbott a number of benefits. We believe that it will easily pay for itself by helping us retain employees — a big deal in an era where millennial turnover alone costs businesses more than $30 billion every year. (Ninety percent of young workers say they’d commit to a company for five years if it gave them some loan relief, and workers with student debt stay at their jobs 36% longer if employers help pay off loans.) In addition, it will help take a load off of workers burdened by debt who say the resulting stress negatively impacts their job performance.

Americans are carrying a record $1.5 trillion in student loan debt, a sum that has more than doubled in the past decade and now surpasses our nation’s level of credit card debt. The typical graduate leaves school owing about $40,000. Many face larger burdens. About 2.5 million Americans have debt loads in excess of $100,000.

So far, 400 Abbott employees have signed up for the Freedom 2 Save program. Once it is well-established, we anticipate thousands will take advantage of it.

Although we’re the first company to work with the IRS to structure a program like this, it’s possible that more companies will be able to do something similar with time. (An employer group has asked the IRS commissioner to expand the ruling it gave us to all companies.)

There are no easy or universal solutions to America’s student debt crisis. But as employers, we are in a unique position to come up with innovative benefits that have a tangible positive impact on employees’ lives. By increasing our ability to recruit and retain the best people, such efforts are highly worth it.

5 Ways Smart People Sabotage Their Success

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Mark was always one of the smartest kids in his class. He’s done well in his career, but when he checks Facebook, he sees people he outperformed at school who have now achieved more. Likewise, there are colleagues at his firm who have leapfrogged him. Sometimes he wonders, “What am I doing wrong?”

Sound familiar? You might relate to Mark yourself, or have an employee or loved one who struggles with similar feelings. Raw intelligence is undoubtedly a huge asset, but it isn’t everything. And sometimes, when intellectually gifted people don’t achieve as much as they’d like to, it’s because they’re subtly undermining themselves. If you’re in this situation, the good news is that when you understand these foibles you can turn them around. Here are five I’ve seen smart people particularly struggle with:

1. Smart people sometimes devalue other skills, like relationship building, and over-concentrate on intellect. Very smart people sometimes see their success as inevitable because of their intellect, and don’t see other skills as important. For example, an individual who finds workplace diplomacy difficult might write this off as an irritation rather than as a core skill required for their role. Similarly, they might see it as critical for a secretary to be personable, but not an executive. Therefore they don’t invest time and effort in developing these skills.

These views don’t come out of nowhere. Most people have a natural bias towards wanting to capitalize on their strengths and, conversely, would prefer to avoid thinking about areas in which they’re not naturally as strong. Bright kids typically receive a lot of reinforcement throughout their early lives that their intelligence is valuable. They grow up being told they’re smart, and during their schooling, experience that success comes more easily to them than to others. It’s easy to understand why, as a result, they would continue to focus on their intellect as a adults.

But in most workplaces, you need more than raw intelligence to get ahead. And only focusing on your greatest strength, rather than also addressing your weaknesses, tends to be self-sabotaging.

Solution: Use your strengths to overcome your weaknesses. If you’re good at learning you can simply learn the skills that don’t come as naturally to you. You don’t need a personality makeover, you just need a game plan and a genuinely constructive attitude. For instance, identify three specific workplace diplomacy behaviors that would improve your success in that area. 

2. Teamwork can be frustrating for very smart people. When someone grasps concepts quickly and has high standards for their own performance it can create difficulties when working with others who take longer to process information and pick up concepts. If a person felt held back at school by being in a class with less smart kids, this frustration with teamwork can develop early — you know what this feels like if you routinely did most of the work on group projects, or got scolded for daydreaming during a class that was moving too slowly for you. These feelings can get re-triggered throughout life. When people develop an emotional raw spot as a child, they often have outsized internal reactions when that raw spot is rubbed in their adult life.

Smart people also sometimes find it difficult to delegate because of a sense they can do a task better (regardless of whether this is actually true.)  This is especially likely for those who have a perfectionist streak.

Solution: Be self-compassionate about your internal reactions and understand where they come from, but also learn to genuinely appreciate what diverse minds bring to a team.

3. Smart people often attach a lot of their self-esteem to being smart, which can decrease their resilience and lead to avoidance. If a lot of your self-esteem rests on your intelligence, it can be very difficult to be in situations that reveal chinks in your armor. That might be working with people who are even more skilled or intelligent, or receiving critical feedback, or taking a risk and failing. Any situation that triggers feeling not- smart is experienced as highly threatening. The smart person may even seek to avoid those situations, which ultimately holds the person back.

Solution: Take an objective view of the benefits of working with people who are, in some respects, smarter than you. If you’re surrounding yourself with smart people, you’re doing something right. Remember, iron sharpens iron. Develop relationships with people who you trust to give you help constructive feedback. The more you become accustomed to receiving critical feedback from people who believe in your overall talents and capacities, the easier it will become.

4. Smart people get bored easily. Being smart is not exactly the same as being curious, but if you have both these qualities you might find yourself becoming easily bored with executing the same behaviors over and over. Some types of success stem from creativity, but other types come from becoming an expert in a niche and performing a set of behaviors repeatedly. If you’re smart, curious, and have a love of learning, you might find you quickly lose interest in anything once you’ve figured it out. The execution side of performance might bore you, and you’d rather constantly be learning new things. This can end up being less lucrative than finding a niche and repeating the same formula, but that might seem too boring or unchallenging to you.

Solution: Try taking a 30,000-foot view of when it’s worth tolerating some boredom to collect easy wins when it comes to your overall success. Instead of attempting dramatic change, decide when tolerating short periods (a few minutes or hours) of boredom could have a very beneficial impact on your success. For instance, devoting 5 hours a week to an activity that’s monotonous but lucrative. Additionally, make sure you have enough outlets for your love of learning across the various domains of your life, including your work, hobbies, physical fitness, understanding yourself etc.

5. Smart people sometimes see in-depth thinking and reflection as the solution to every problem. Bright people are accustomed to succeeding through their thinking skills, but can sometimes overlook when a different approach would be more beneficial. For example, the smart person might attack every situation by trying to think it to death (over-researching every decision and ruminating over every mistake) when other approaches would be more fruitful.

Solution: Notice when thinking becomes an unhealthy obsession. Consider when strategies other than thinking are more likely to result in success. Experiment with taking breaks to get unstuck, and allow yourself to learn by doing rather than through exhaustive advance research. Expand your range of skills for reaching insights so that you’re not the person who sees every problem as a nail because their only tool is a hammer. Finally, whenever you find yourself ruminating (doing negatively toned overthinking), disrupt it by doing a few minutes of an absorbing activity (such as a puzzle). This can be a surprisingly effective strategy for breaking out of negative thinking.

Which of these five patterns do you identify with the most? Try rank-ordering them. Are there colleagues or other people in your life who seem to fall into these traps? Try to let go of any sense of shame or judgment — it’s not necessary or useful for overcoming these habits. For any of the tendencies you personally relate to, know that even longstanding and deeply psychological patterns can be turned around with the targeted, practical, problem-solving approach I’ve outlined here.

Your Parental Leave Stories

We bring you three stories about parental leave, from listeners whose experiences with it changed them, for better or for worse. They talk about having to fight for more time off, go back to work before they were ready, care for sick babies, and try to hide their exhaustion and stress. Ultimately, they’re stories about how inadequate leave policies hurt families and companies.

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How to Tie Executive Compensation to Sustainability

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The challenge of running a sustainable enterprise has taken center stage among shareholders. Last year, for example, Russell 3000 companies received 144 shareholder proposals requesting action on social and environmental issues. Meanwhile, in a survey of 89 institutional investors by Callan, 43% of respondents said they incorporate sustainability factors into their investment decisions — up 21 percentage points from 2013.

The dilemma for directors, however, is determining what aspects of sustainability, or ESG performance, should have priority — and should be linked to pay incentives. The UN, for example, has outlined 17 broad Sustainable Development Goals for 2030. Progress is measured with 169 targets. The goals include eliminating poverty, offering affordable and clean energy, achieving gender equality, protecting ecosystems, increasing responsible consumption and production, and much more. Meanwhile, a number of business organizations have created their own sustainability measures, including the Sustainability Accounting Standards Board, Sustainalytics, Bloomberg, and MSCI. And at many companies, sustainability efforts are measured with well over 10 internal metrics.

Compensation committees often start by tying bonuses and long-term incentives to goals related to compliance and risk management. That approach pleases some stakeholders, but it may put the focus on issues far removed from the company’s core mission. For example, measures of regulatory fines gauge only a company’s environmental “hygiene,” which may reduce risk but doesn’t incentivize executives to increase the company’s broader environmental impact.

What’s a better approach? Have bonuses depend largely, or solely, on executives’ success in tapping big strategic opportunities related to sustainability. By pushing the top team to go on the offense strategically, this change brings the work of advancing sustainability from the periphery of the business to its heart.

Though not all businesses today are in a position to implement big strategic initiatives based on sustainable thinking, the opportunities to pursue them are growing fast. According to a survey by the UN and Accenture, 63% of executives believe that sustainability will cause major changes in their businesses in the next five years. And if that shift ends up determining which companies thrive in the future, then it’s likely that incentive goals must apply to bold business opportunities.

One major heavy-equipment manufacturer, for example, has 14 sustainability goals. Only one of them, however, stands out as big and strategic, with the prospect of significant returns: remanufacturing products and components, which can save customers money, extend product life cycles, and reuse materials. A logical measure for this goal — a measure to tie incentives to — would be growth in revenues from remanufacturing and rebuilding, or the percentage of revenues or profits derived from both.

By limiting the number of sustainability goals in its incentives, companies can wield huge power to change leaders’ behavior. An auto executive’s bonus might depend on advancing the company’s electric vehicle, connected and autonomous vehicle, or ride-sharing business. A financial services firm’s executives might be rewarded for the percentage of affordable capital that’s allocated to worthy sustainable projects, such as renewable energy or sustainable agriculture.

Boards should demand entirely new kinds of strategic thinking from management, the kind of thinking that not only makes the company more sustainable but also aids suppliers and customers in becoming so. If you’re a food company, can you produce healthy products that address the growing rates of obesity, diabetes, and heart disease? If you’re in agriculture, can you devise rice strains that grow in less water and yield more for farmers? If you’re in health care, can you improve care quality for the employees in the companies you insure?

To take this approach to heart, boards should ask several questions:

Where does the company have a unique opportunity to differentiate?
Does the company have the core competencies, or can it acquire them, to take advantage of the opportunity?
Is there an adequate return on investment over the long term to justify moving forward?

As a sign that many executives are thinking along just these lines, a recent McKinsey survey of retailers and consumer goods manufacturers found that almost half of those undertaking sustainability initiatives were pursuing new business or growth opportunities.

That doesn’t mean companies should abandon traditional strategies for reducing costs, mitigating risks, and preserving a “license to operate.” And when those strategies are core to the business, incentive plans should link bonuses to fulfilling them. If you need water for beverages — think Coca-Cola or PepsiCo — a bonus for preserving water sources would be strategic. If you need ore bodies to mine — think Rio Tinto or Teck Resources — a bonus for top-tier environmental protection would make sense. If you need to demonstrate appropriate labor practices — think McDonald’s, Dunkin’, and Nestlé — a bonus based on mitigating risks might be critical (as would a provision for clawing back bonuses if the risks are not discovered until after harm is done).

Directors should, of course, continue to monitor and disclose many other aspects of ESG performance. In fact, they should insist on seeing ESG metrics in corporate or individual scorecards — assuring that executives act responsibly, mitigate risks, and comply with regulations. The compensation committee can then use its discretion to adjust pay after the fact for sustainability performance in these areas. Alternatively, sustainability performance can be addressed in the objectives of individual executives or business units, rather than being used in company-wide objectives.

As with all targets for executive incentives, directors need to choose carefully to avoid unintended consequences. Do new targets motivate undesirable trade-offs? If executives hit sustainability targets at unacceptable cost, safeguards are needed to make payouts contingent on meeting core financials. Directors should remain focused, however, on isolating a limited number of sustainability goals that deliver the most value. And that value should be of such scale that it will energize executives to go after it, in turn yielding the biggest reward for shareholders, other stakeholders, and society.

Motivating Your Most Creative Employees

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In any team or organization, some individuals are consistently more likely to come up with ideas that are both novel and useful. These ideas are the seeds of innovation: the intellectual foundation for any new products and services that enable some organizations to gain a competitive advantage over others. However, organizations are often unable to put in place the right processes, leadership, and culture to turn creative ideas into actual innovations, which causes even their most creative employees to underperform. This mismanagement of innovation is further exacerbated by the fact that managing creatives tend to require special attention and consideration. Indeed, decades of psychological research suggests that creative people are quite different from others when it comes to personality, values, and abilities. In light of that, here are eight evidence-based recommendations to get the most out of your creative employees and to stop them from underperforming:

Assign them to the right roles: No matter what industry or job people are in, they will generally perform better when you can maximize the fit between their natural behavioral tendencies and the role they are in. This is why the same person will excel in some roles but struggle in others. Thus, if you want your creative employees to do well, you should deploy them in tasks that are meaningful and relevant to them. In fact, research shows that while creative people are generally more likely to experience higher levels of intrinsic motivation, they also perform worse when not intrinsically motivated. There is therefore a higher cost and productivity loss when your disengaged employees are creative; but the benefits of engaging them are also higher.
Build a team around them: It’s been said that there are “no statues of committees,” but innovation is always the result of coordinated human activity — people combining their diverse abilities and interests to translate creative ideas into actual innovations. Just try managing a team full of creatives and you will see that very little gets done. In contrast, if you can surround your creative employees with good implementers, networkers, and detail-oriented project managers, you can expect good things to happen — such are the benefits of cognitive diversity. Whether in sports, music, or regular office jobs, creatives will thrive if they are part of a team that is able to turn their ideas into actual products and services, freeing them up from implementation.



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Reward innovation: You get what you measure, so there’s no point in glorifying creativity and innovation if you then reward people for doing what they are told. Paying lip service to innovation will frustrate your creative employees, who will feel underutilized if you show indifference to their creative ideas and imaginations. Conversely, if you actually incentivize people to come up with new ideas, to think outside the box, and to devote some of their energy to improving existing processes, products, and services, you will notice that even those who are not naturally creative will attempt to do things differently and contribute to innovation.
Tolerate their dark side (but only up to a point): Everybody has a dark side, defined as his or her undesirable or toxic behavioral tendencies. Research has shown that creative individuals are naturally more irritable, moody, and hard to please. Furthermore, because of their imaginative disposition, creatives may come across as odd or eccentric, and they often specialize in making simple things complex, rather than the other way around. However, these non-conformist and individualistic tendencies also provide some of the raw ingredients for creativity: it is usually those who are likely to question the status quo and defy existing norms and traditions that push the most for innovations to happen. As the artist Banksy recently posted on Instagram when he made one of his art works self-destruct at a recent auction (just after the buyer spent over $1.3 million on it): “The urge to destroy is also a creative urge”. In contrast, if you only hire people who are well-behaved and do what you tell them, you can forget about innovation! However, it should be needless to say, no matter how creative employees are, there is no excuse for misbehaving or harming other employees and the organization.
Challenge them: Few things are more demotivating than being asked to do very easy and unchallenging work, and this is especially true when employees are creative. Data show that in the U.S., 46% of employees see themselves as overqualified for their jobs. This makes it critical to push your employees beyond their level of comfort. Failing to do so will significantly increase disengagement, turnover, and poor psychological health. Investigating this issue, researchers found that situational factors can mitigate these effects. Organizations that provide their most talented people with personalized development plans and mentoring opportunities, and that promote a culture of support and inclusion, will benefit from increased creative performance. Providing such opportunities may be a heavy lift for some organizations, yet failing to do so will risk losing their creative talent to competitors.
Apply the right amount of pressure: It is often said that necessity is the mother of invention — if a problem must be solved within a given timeframe, it probably will. Yet research shows that working in high-pressure environments can harm an employee’s well-being and in turn reduce their productivity. Yet, when it comes to maximizing one’s creative output, applying some pressure can be a good thing: indeed, scientific evidence indicates that there is an optimal amount of pressure to drive creativity. Not enough pressure will lead to a lack of motivation, and too much of it will create stress that inhibits one’s ability to think creatively. Managers must get this balance right and induce a moderate (optimal) amount of pressure by first defining resource boundaries and expected output, and then clearly communicating their support for the creative process.
Promote cognitive diversity: When organizations look to hire new employees, their “fit” with the culture is often an important selection criterion, and there is good reason for this (see again point 1). Evidence suggests that employees whose psychological profile and skills match the organization’s culture and mission are more motivated and productive. Yet, if organizations are pursuing innovation, they should in fact promote cognitive diversity amongst their teams. Specifically, leaders should build teams whose members have compatible, yet significantly different, psychological profiles. This is because teams that are cognitively diverse are more likely to view problems differently and produce better decisions. This rule also applies to leaders: if you want leaders to drive any sort of transformation or entrepreneurial activity, you are better off hiring moderate misfits than perfect fits!
Be humble: With narcissism on the rise, humility is an underrated virtue in today’s society. Narcissists often become leaders thanks to their charisma, charm and confidence, which helps them attract followers and persuade others that they are more competent than they actually are. Yet such leaders are rarely more creative, even when they manage to come across as innovative to others. In fact, leaders who want to produce a creative team should practice humility. A recent study found that a leader’s humility was a significant predictor of a team’s creative output, as they evoke feelings of safety, trust, and cooperation among their followers. To practice humility, leaders should become more willing to publicly admit their mistakes and limitations and become more forthright in displaying appreciation and giving credit where it is due (Elon Musk should take notes).

As individuals are increasingly turning to self-employment and entrepreneurship, organizations are at risk of losing the talent needed to drive growth and fend off disruption. The ability to successfully manage and retain creative talent is therefore critical. While stories of innovative and revolutionary breakthroughs speak of their organic and mythical origins, the reality is that turning creative ideas into an actual reality is hard — and it requires great leadership. Fortunately, there is enough evidence to help leaders develop an effective strategy to not just manage, but also leverage, their creative employees.