Friday, February 17, 2017

Why People Quit

Why do people quit their jobs?  Fast Company reported this week on a new analysis conducted by Glassdoor.   The firm studied approximately 5,000 workers who switched jobs over the past decade.   They found that three most important reasons for quitting are:
  • Company culture
  • Employee salary
  • Getting stuck in the same job for long periods of time
The firm discovered that, "On average, we find that a 10% higher base pay is associated with a 1.5% higher chance that a worker will stay at the company for their next role."  In addition, the probability of quitting rises by 1% for every 10 extra months someone stays in the same role at a company. 

What didn't matter as much with regard to quitting?  Interestingly, "they found that while work-life balance, liking their senior leadership, and benefits may matter for overall employee satisfaction, they don’t impact turnover."

Tuesday, February 14, 2017

Marketing Your Products as Designed by Users: Benefit or Hindrance?

The Boston Globe reported this weekend on the fascinating new research of Vienna University Professor Martin Schreier.   He studied the marketing of crowdsourced products.  Schreier found that marketing an item as user-designed tended to increase sales more than marketing a product as created by a firm's own designers.  Why this positive effect?  Schreier discovered that, "People believe their peers understand their needs better, and therefore, come up with better solutions."   Moroever, Schreier found that people tend to react more positively if informed that the user-designers had something in common with them.   For instance, female consumers tended to prefer user-designers who were women similar to them.  

Is there a potential downside to marketing a product as "user-designed"?  Schreier found that the effect does not appear to be positive for luxury items or high tech goods.  Why?  For technologically sophisticated products, the consumer trusts experts with high levels of knowledge and expertise more so than fellow users.  As for luxury items, the explanation is quite different.  In those cases, consumers "want to set themselves apart."  Thus, they tend not to prefer something sourced from the crowd.  

Friday, February 10, 2017

Shorter Lines at Starbucks and Dunkin' Donuts

Several weeks ago, The Street reported the following news regarding Starbucks: " Starbucks also seems to be having trouble dealing with the rapid rise and popularity of its mobile order and pay technology.  On a conference call with analysts, executives said there has been significant uptick in the usage of mobile order and pay. The jump created operational challenges, especially at its highest volume stores at peak traffic hours. The congestion at the beverage hand-off counter resulted in some customers who entered stores or considered visiting a location, but decided not to complete a transaction, the company said."  

Meanwhile, this week The Street reported that Dunkin' Donuts would be trimming its menu to improve wait times:  "We have thousands of combinations of drinks and sandwiches on our menu, in some cases more than McDonald's (MCD) and other competitors -- we have perhaps gotten too complex," acknowledged Dunkin' Brands Chairman and CEO Nigel Travis in an interview with TheStreet. Travis believes simplifying the menu will help speed up lines both in stores and via drive-thrus."  

The issues facing both Starbucks and Dunkin' are not unique.  As retail chains mature, they face formidable challenges regarding same-store sales increases.  How can they continue to increase comps year after year, even as their industry and their chain matures?   Many restaurants resort to "menu innovation" as a means of jumpstarting growth.   However, menu innovation inevitably means menu expansion at many restaurant chains.   Therefore, operations become substantially more complex.  Operating efficiencies diminish, and wait times increase.  Customer service begins to suffer.  The best chains prune their menus from time to time, so as to regain efficiencies and reduce wait times.  Of course, some customers will miss certain items that they have grown to love.  Chains need to be prepared for such complaints and train their staff members as to how to handle this pushback appropriately.   The chains that are most successful are ready and able to discuss the changes with customers, and they provide a consistent and effective response to customer questions across all locations.  


Wednesday, February 01, 2017

How Successful Leaders Make Decisions

Lydia Dishman has written a column for Fast Company titled, "How Leaders at Google, Buzzfeed, and More Make Decisions."   She has a number of interesting tidbits from various leaders.   A few key themes emerged:

The Value of Seeking Small Wins:

In a recent report for Fast Company, Harry McCracken asked staffers of Facebook how their leader has pulled off some of the company’s recent major achievements.  "I don’t hear a lot of anecdotes about him swooping in and personally making genius-level decisions that suddenly changed everything. Instead, they praise his inquisitiveness, persistence, ability to deploy resources, and devotion to improving Facebook and himself. He has a knack for carving up grand plans into small, doable victories."  

Ask Good Questions

Mark Parker, CEO of Nike: "You can’t always predict the winners. I end up asking a lot of questions, so the team thinks things through. I don’t say, ‘Do this, do that.’ I’m not a micromanager. I don’t believe in that. My father, when I was growing up, would say to me when I had to make a decision, ‘Well, what do you think?’ And I’d say, ‘Well, I think this.’ And he’d say, ‘That seems like a good idea.’ And over time, I started picking for myself. I didn’t need to go to him. At Nike, we have incredibly strong people. They know what to do."

Step Out of Your Functional Shoes:

Ursula Burns, CEO of Xerox:  We don’t want to compartmentalize people’s expertise based on their internal organization alone. We try to give individuals parity–-equality-–in the discussion. In our leadership team, I expect all of them to check at the door their function as the primary thought process by which they give me input. I expect them to think more about the customer, competitors, employees, and shareholders. So, I give everyone parity to speak about an issue.

Test Your Hypotheses: 
Dao Nguyen, Publisher of Buzzfeed:  Publishing volume is actually really important. It's not that we want to crank stuff out there for no reason at all. The more you publish, the more opportunities you have to look at things that are happening, read comments, have a new hypothesis, test a hypothesis. And if you can do that relatively quickly, then you remember what you were testing.

Wednesday, January 18, 2017

Do Boards Pick the Right Person as CEO?

What happens when the Board of Directors appoints an internal candidate to the position of CEO?  Do they tend to pick the right person, or do they overlook/reject an alternative candidate that would have been a better CEO?  Stanford scholars David Larcker, Stephen Miles, and Brian Tayan examined this issue recently.  They examined 121 transitions at the 100 largest companies over a ten-year period.  They found that roughly 1/3 of executives who were not selected for internal promotion to CEO were, in fact, hired at other companies.  However, the internally promoted CEOs experienced higher shareholder returns than those executives who were not chosen and left to lead other firms.   

Tuesday, January 17, 2017

Don't Try to Imagine the Future! Ask Others Before You Decide

You have to make a decision. Suppose you are trying to decide on whether London or Dublin is a better place to visit with small children. You read the travel guides and try to imagine what it will be like in each city. You envision what your daily experiences will be like. Will you make a decision that your family finds acceptable and enjoyable? Alternatively, you could ask others who have traveled to London and Dublin. What were their experiences like? Which did they prefer for their small children? You might hesitate to use the latter strategy of consulting others. After all, your family is rather unique. What if those other families are very different from yours? 

It turns out that consulting others makes much more sense than trying to envision the future, at least in most cases. Harvard psychologist Daniel Gilbert has studied this type of decision. Gilbert describes the strategy of consulting others as "surrogation" - i.e. you are using others' experiences as a surrogate for your own. Harvard Magazine described one experiment that Gilbert and his colleagues conducted and summarized their findings:

In one experiment to test surrogation, the psychologists asked a sample of women to predict how much they would enjoy a “speed date” with a particular man. Some women saw his personal profile and photograph; others learned nothing about him other than how much another woman (a stranger) had enjoyed her speed date with him. The second group predicted their enjoyment far more accurately than the first. Both groups had expected the reverse, and oddly enough, despite the outcome, both groups preferred to have the profile/photograph for their next date.

This suggests that ideas trump reality. But in predicting your likings, even someone else’s direct experience trumps mental hypotheses—which is why surrogation works. But to be helpful, the surrogate’s experience must be recent. “People are very poor at remembering how happy they were,” Gilbert says. “So it’s not very useful to ask, ‘How much did you like something you experienced last year?’ People get most questions about happiness wrong. But there is one question they get right: how happy are you right now?”

Monday, January 16, 2017

Why Would Abercrombie & Fitch Pay Someone NOT to Wear Its Apparel?

When we think about social influence, we typically think about how and why people tend to feel pressures to conform to the behavior of their peers, colleagues, or teammates. We act a certain way, or make certain decisions, because others have made similar choices or taken similar actions. However, at times, social influence works in the opposite way. We do not want to be like certain people. Therefore, if they act a certain way, we most certainly do not want to behave in a similar fashion. 

Jonah Berger, author of Invisible Influence: The Hidden Forces That Shape Behavior, relates a story about this type of repellent effect of social influence in an episode of the Hidden Brain podcast.   Berger tells a story from the reality show, Jersey Shore, believe it or not!  He explains that Abercrombie & Fitch once paid Mike "The Situation" Sorrentino NOT to wear its apparel.   Similarly, a Gucci competitor sent Nicole "Snooki" Polizzi one of Gucci's handbags.  Why would that Gucci rival do that?  They knew that many luxury handbag customers would be turned off by the fact that Snooki was carrying around a Gucci handbag.  That would hurt the Gucci brand image, and perhaps help the rival's position in the market.   

Berger explained ,"It turns out influence is very much like a magnet...but it just as well repels us.  And the idea here is, well, if Mike 'The Situation' is wearing Abercrombie & Fitch, maybe other people aren't going to want to wear it anymore. Or if Snooki is hanging on to a Gucci handbag, maybe that will help their competitors because no one will want to wear Gucci anymore. So we need to understand how social influence attracts, but also how it repels."

Berger once conducted a study with Stanford's Chip Heath to demonstrate the power of this repellent effect.  Berger and Heath distributed Livestrong wristbands to residents of a particular dorm on the Stanford campus.  One week later, they distributed the wristbands to a nearby residence hall known on the campus as the "geeky" dorm.   The researchers tracked continued usage of the wristbands.  They found a 32% drop in wristband usage by the first group.  They had witnessed the "geeks" wearing the Livestrong wristbands, and a sizeable number of them had abandoned wearing them as a result!