Monday, December 11, 2017

Do Materialistic CEOs Take More Risk?

Professors Robert Bushman, Robert Davidson, Aiyesha Dey, and Abbie Smith have written a fascinating paper titled, “Bank CEO Materialism: Risk Controls, Culture and Tail Risk.” They actually measured how materialistic bank CEOs were, and they examined the impact that the CEO's personal value system might have on the risk culture of the banks that they led. 

Their sample included 284 firms and 445 CEOs during the 1992-2013 time period.   They examined personal ownership of luxury goods as a proxy for the "materialistic" nature of a bank CEO.    They labeled CEOs as materialistic if they owned an automobile that cost more than $75K, a boat longer than 25 feet, or a home worth more than twice the median price of homes near their company's headquarters.  They also ran their analysis using higher cut-offs for each of these luxury goods (for example, they raised the purchase price of cars to $110,000).   Then, the researchers also examined the banks' risk management cultures.  They did so by collecting data on the risk management index of each bank.  This index draws on data from reports that the banks file with the Federal Reserve each year, and it strives to evaluate the "strength and independence of the risk management function" at each institution.  

What did they find?  The scholars report, "Using an index reflecting the strength of risk management functions (RMI), we find that RMI is significantly lower for banks with materialistic CEOs, and that RMI significantly decreases after a materialistic CEO succeeds a non-materialistic one and increases after a non-materialistic CEO replaces a materialistic CEO."  

Finally, the scholars report an increase in the number of materialistic CEOs over the years.  I find the study very interesting, both because of the findings and the great care that the scholars took to try to measure key variables.  We all might believe intuitively that value systems matter, but this study actually shows a relationship between a leader's values and the behavior of the organization that he or she leads.  Naturally, these scholars are not saying that buying a big house or a large boat is inherently bad.   However, they are suggesting that we should pay attention to actions and decisions that may reveal a leader's value system.   Their personal purchasing decisions are one piece of a larger picture, and we should pay attention to all the cues available to us.  In the end, it doesn't mean we should reject a leader who may display signs of being materialistic...but we should be a bit more vigilant about the impact that the leader may have on the organization's culture.  

Thursday, December 07, 2017

Fewer Experts, More Innovation?

Riitta Katila, Sruthi Thatchenkery, Michael Christensen, and Stefanos Zenios have conducted some fascinating new research about the role of experts during the innovation process.  They studied over 200 surgical instrument ventures.  The scholars examined the role that physicians played during the growth and development of these new ventures.  Here's what they concluded:

To be sure, entrepreneurs in highly specialized and technical industries need the knowledge that only users (doctors, lawyers, engineers, and the like) can provide. Doctors understand what other doctors will value in a new product; lawyers know what other lawyers need. But you can have too much of a good thing — including input from such experts. In fact, my colleagues and I have found that innovation thrives when expert users make up about 40% of an invention team. Any less and the company will lose sight of what its customers need; any more and the group will tend to converge on old ideas.

The researchers found that having a doctor serve as CEO of the new venture served as a key impediment to innovation.  Why is the presence of many experts a liability for these ventures?  Remember that experts provide important knowledge about the use of products, the problems with existing products, and the opportunities for improvement.  However, experts also are very entrenched in the existing ways of working.  They often cling to conventional wisdom and find it difficult to shake loose from certain long-held assumptions and beliefs.   Katila explains the particular liabilities that emerge when a doctor serves as CEO:

Why do firms led by doctors tend to lag behind in innovation? In part, we think it’s because expert users have spent lots of time getting comfortable with existing tools and methods. As a result, they’re invested in their field’s status quo and may have trouble seeing the value in a novel idea. We found that although expert users excelled at refining existing products, they couldn’t always recognize a potential breakthrough innovation when they saw one. As one physician CEO we interviewed for our study confessed, “If you show me a prototype, I can say, ‘Well, you could do this better.’ … I know very well how to help a company optimize its product … but I don’t know how to invent something that was never invented before.”

Wednesday, December 06, 2017

All-New Version of the Everest Leadership and Team Simulation!

I'm pleased to announce the release today of an all-new version of the Everest Leadership and Team Simulation.  This version (V3) provides an updated user experience, as well as all-new scenarios on the mountain.  Instructors can continue to use the original scenarios, or they can choose new situations and problems that students must address and solve.  For those not familiar with this simulation, it provides a highly engaging and interactive experience for students and executive education participants.  The simulation aims to teach important concepts about team dynamics, decision-making, and group learning.  I'm grateful to have collaborated once again with co-author Amy Edmondson and the incredible teams at Forio and Harvard Business Publishing.  I hope instructors will learn more about this new version and let us know if they have any questions!  The link above provides a description of the simulation as well as a preview of the experience.  

Apple's Jony Ive on Team Trust & Listening

Fast Company published some excerpts this week from Rick Tetzeli's interview of Apple design chief Jony Ive.   I especially loved Ive's comments on building trust within his design team, and how that helped them overcome the common problem of self-censorship.  Here's the excerpt:

In 30 years time, we’ll look back at, with such fondness, the way we worked, not necessarily what we did. I think the advantage is we have so much trust as a team that we don’t censor our ideas because we are nervous and scared that they will sound absurd . . . Very often it seems to be you listen to the biggest, loudest voice. A lot of this process is about listening, I think. What we’ve found is very often the very best ideas come from the quietest voice. And if you’re not listening, you’re going to miss that.

And also when you have trust, it’s not a competition. We don’t have to deal with the bizarre game of all of the problems involved with a thrusty sort of ego. Our interest isn’t some leaf table with points. What we’re interested in as a team is, we’re genuinely, genuinely trying to figure out how we can make the very best product possible. And of course, there are many occasions where we don’t get there. But that’s our sincere hope.

Tuesday, December 05, 2017

Creating a Culture of Accountability

How can I hold people accountable without creating a culture of finger pointing, blame avoidance, and excuse making?   Leadership coach and consultant Peter Bregman argues that leaders must achieve clarity on five dimensions if they wish to build a culture of accountability in their organizations. 
  1. Expectations - make sure your people know the objectives and outcomes that you expect them to achieve by a particular date. 
  2. Capabilities - make sure the people have the skills and capabilities to achieve those goals, and if they don't, put in place a plan to develop their capabilities accordingly. 
  3. Measurement - inform people of the metrics that will be used to evaluate performance 
  4. Feedback - put in place a mechanism for providing feedback on a regular basis 
  5. Consequences - insure that everyone understands the consequences of failing to fulfill key obligations 

Monday, December 04, 2017

Think Like a Traveler

IDEO's Tom and Dave Kelley wrote a wonderful book together a few years ago titled, "Creative Confidence."   In the book, they offer tons of ideas on how to spark creativity in your organization, based mostly on their work developing design thinking as a process and set of tools for creating breakthrough innovations.  One of my favorite passages has to do with encouraging people to "think like a traveler."  Here is an excerpt:

Ever travel to a foreign city?  We've all heard that, "Travel broadens the mind."  But beneath this cliche lies a deep truth.  Things stand out becuase they're different, so we notice every detail, from street signs to mailboxes to how you pay at a restaurant.  We learn a lot when we travel not becuase we are any smarter on the road, but because we pay such close attention.  On a trip, we become our own version of Sherlock Holmes, intensely observing the environment around us.  We are continuously trying to figure out a world that is foreign and new. Too often, we go through day-to-day life on cruise control, oblivious to huge swaths of our surroundings.  To notice friction points - and therefore opportunities to do things better - it helps to see the world with fresh eyes.

Psychologists distinguish between two ways of perceiving the world around us and processing information - top down vs. bottom up processing.  In top down processing, we draw on our past experiences and "fill in the blanks" when we encounter a particular place or situation.   We don't have to notice every detail, because a few signs prove sufficient to let us know what we are seeing.  We walk into a library, and we know quickly based on a few visual cues that we are in a library.  We don't need to attend to all the details.   In bottom up processing, we start by perceiving all the little details, and we put the pieces of the puzzle together gradually.   In day-to-day life, as the Kelleys explain, we are on cruise control, using top down processing to capture the essence of a situation quickly and fill in the blanks to paint the picture in our mind.   When we travel, we engage in bottom up processing, because we can't rely on past experience to help us.   As such, we notice lots of little things.  Noticing the little opportunities for improvement and innovation can be crucial in the creative process.  Thus, thinking like a traveler is essential to creativity.  

Friday, December 01, 2017

Learning from the Young People in Your Organization

The youngest can teach the most experienced in an organization at times.  They have a fresh perspective, and they are often more up to date about new societal and technological trends.  Moreover, they may not fear challenging the conventional wisdom, as compared to some more experienced employees.   Organizations have formalized this notion, describing it as reverse mentorhship.  My earliest memory of such a practice comes from Welch's time as CEO of GE.  (video below). 

I had an interesting discussion today, though, with a group of executives about the notion of reverse mentorship.  One executive mentioned that it can be frustrating at times when young employees put forth new ideas on a frequent basis.  It's easy to push back and reject what feels like "pestering" or "badgering" by that individual.   As he said to me, you just want to say, "Look, I have more experienced than me.  Trust me.  There's a reason why we do it this way."  However, this executive noted that he has learned to restrain himself.   He tries hard to stay open to these new perspectives, and to withhold any frustration.   Why?  This young person has developed a solid track record.  The individual is getting the job done, with a strong likelihood of becoming a future leader in the organization.  That track record and potential has earned the executive's trust.  It translates into a willingness to listen, even if some of the ideas are off track.  If the person wasn't getting the job done, that would be another matter.   What a fascinating discussion about monitoring and controlling your own response to young people's ideas in your organization, as well as thinking about when you might be willing to tolerate a little more "badgering" and "pestering" by an inquisitive young mind.  

Thursday, November 30, 2017

Becoming a Terrific Facilitator: All About Preparation!

I recently read a blog post by Hannah Feldberg-Dubin of the Design Gym.   She describes the capabilities required to be a highly effective facilitator.   Several of her key points pertain to preparation for an important meeting or workshop.   Let's focus on that important preparation phase f or a moment.  Drawing from her article, here are a few lessons that you might apply the next time you have to lead a team meeting: 

1.  Physical space & materials:  What type of physical space do you require?  What materials should you have available for the participants?  Remember that environment shapes behavior.   How you design the environment will have a significant impact on the way people interact during your meeting or workshop.  If you want collaboration, think about how to promote that.  If you want to stimulate creativity, consider the types of materials that might be fuel for innovative thought.  

2.  Purpose & desired outcomes:  What is the intent of this meeting or workshop?   What are the desired outcomes?  Make sure that everyone understands the intent and the desired end state.  

3.  Shared norms and ground rules:  How will the group members interact with one another?  What rules of engagement do you want to establish and enforce during the meeting?  I suggest creating a poster for the wall that defines these norms and ground rules.  

4.  Pre-work:  Often, we skip the pre-work because we are not sure that members will actually complete it.  However, we can get much more accomplished if people come to a meeting or workshop already having done some reading, conducted some analysis, or reviewed certain data.  Keep the pre-work manageable, but consider assigning some work to be done before you gather together.  

5.  Instructions:  If you have certain activities planned, be sure you are prepared to offer clear and concise instructions.  Run the instructions by a colleague before the meeting, and ask for feedback.  Make sure that these instructions make sense to your colleague, and that he or she interprets them as you intended.  

6.  Technology:  What technology will enable an effective conversation?  Don't overdo the slides.  Focus on creating a good dialogue, and use technology to stimulate that healthy give-and-take.   Don't put excessive technological demands on the participants, particularly if they are not particularly tech-savvy.  Test the technology beforehand.  Nothing derails a meeting more than having to fiddle with a computer that isn't working properly, or waiting for A/V help to arrive.  

7.  Food!  Ok, nothing derails a good workshop like bad food and drink, or a lack of food and drink.  Maintaining energy in the room is key to good facilitation, and a bit of fuel can be very helpful.