Wednesday, May 04, 2016

Do Ping Pong Sales Predict Tech Downturns?

Source: Wall Street Journal
Zusha Elinson has written a fun and thought-provoking article in today's Wall Street Journal.  The article is titled, "Is the Tech Bubble Popping?  Ping Pong Offers an Answer."   Elinson found that ping pong table sales decreased 50% in the first three months of 2016.   Venture capital financing decreased by 25% in the same time period.  Elinson cites information from retailers and wholesales indicating that firms such as Twitter, Intel, and Yahoo have all reduced or stopped their purchases recently.  

Is there any truth to the theory that ping pong sales are a leading indicator?  Who knows?!  However, it's worth noting that many large companies have purchased ping pong tables (and other games) in recent years, in hopes of emulating the culture of start-ups in Silicon Valley.   They have learned a hard lesson.  Buying ping pong tables does not create an innovative culture.  In fact, it does nothing really unless you transform the fundamental attitudes, beliefs, and values of the organization.  In fact, you create a skepticism in many employees if you add ping pong tables, but fail to change the shared norms, expectations, reward systems, and leadership style of the organization.   They see the move for just what it is - a superficial attempt to influence employee satisfaction without an underlying shift in how work actually gets done.  

Tuesday, May 03, 2016

Constraints Promote Creativity

Many people often think that creativity flourishes when people are not constrained in any way.  Give people total freedom to think and generate ideas, and they will be highly creative.  That's the conventional wisdom.  However, some research shows that constraints actually can enhance creativity.   The Boston Globe reported this weekend on a study by Catrinal Haught-Tromp.  The forthcoming article is titled, "The Green Eggs and Ham Hypothesis: How Constraints Facilitate Creativity."   The scholar chose this title because the highly creative book by Dr. Seuss only uses 50 words.   Haught-Tromp conducted experiments to examine whether constraints can stimulate creativity.   Haught-Tromp asked the research subjects to develop two-line rhymes for greeting cards. In some circumstances, she required the subjects to include a particular noun in their rhyme.  Outsiders judged the rhymes developed with this constraint to be more creative.  Moreover, she found that subjects working without the constraint tended to be more creative when developing a rhyme after they had worked in the constrained condition (as opposed to before they faced the constrained condition).  The constraint did not just generate more creativity in the moment; the effect seemed to persist.  

Is there a practical example of how constraints can fuel creativity.   Consider IDEO, one of the world's leading product design firms.  At first glance, when you walk into their offices, you might think that they provide their staff members the freedom to design as they wish.  However, a closer look reveals a clear method/process by which they work.  Moreover, as IDEO staff members brainstorm, they follow certain ground rules for how such sessions should take place.   In short, constraints do exist at the firm, and they seem to enhance rather than detract from the creativity of the solutions that they design.  

Monday, May 02, 2016

Funny Take on Interview Mistakes!

Five Dimensions of Employee Engagement

The Sloan Management Review published a piece recently about the connection between employee engagement and profitability growth. V. Kumar and Anita Pansari conducted research on employee engagement in a wide range of companies.  They first set out to define engagement, given that many people look at the concept differently.   They settled on a definition that encompassed five dimensions of engagement:

We wanted to use our discussions with managers and a review of the literature to understand how employee attitudes and behaviors affected company performance. This led us to define employee engagement as “a multidimensional construct that comprises all of the different facets of the attitudes and behaviors of employees towards the organization.”7 The five dimensions of employee engagement are: employee satisfaction, employee identification, employee commitment, employee loyalty and employee performance.

The scholars used their "employee engagement scorecard" to measure engagement in 75 companies in 7 different countries.  One year later, they examined profitability growth at 30 of those firms in depth.  Here's their conclusion:

After controlling for other relevant factors including GDP level, marketing costs, the nature of the business and the type of goods, we found that the highest level of growth in profits (10% to 15%) occurred in the group of companies whose employees were highly engaged; the lowest level of growth in profits (0% to 1%) occurred in the group of companies whose employees were disengaged.

Wednesday, April 27, 2016

Is Market Share a Useful Metric?

In a short article for Sloan Management Review, Neil T. Bendle and Charan K. Bagga argue that managers should be cautious about using market share as a key metric for their businesses.  I concur wholeheartedly with their concerns about using market share as a primary objective.  I believe that efforts to grow market share often cause managers to pursue misguided strategies that ultimately undermine competitive advantage and damage long-run profitability.   Bundle and Bagga argue:

In some markets, bigger can be better; the most obvious examples are markets with economies of scale. Companies in such markets can reduce their cost per unit by selling more — thus increasing overall profits. If you think you are in such a market, you should confirm that the economies of scale you think exist actually do. Economies of scale do not automatically apply to all markets. For example, consulting does not get substantially cheaper per hour to provide at higher volumes... In some settings, market share can be a proxy for power. Depending on the setting, relative size can matter, and having a bigger market share can encourage others to treat your company more favorably. For example, when it comes to dealing with retailers, a category leader such as Coca-Cola may be able to negotiate better deals than a weaker brand can; retailers need Coke on their shelves more than they may need a smaller brand. A similar logic applies to network goods, which are products for which the benefit to consumers increases when more people use them. For example, Facebook’s value to its members increases when more of its members’ friends use it. Overall, though, the research on the relationship between profits and market share is ambiguous. There is no general rule; the importance of market share varies from market to market.

Monday, April 25, 2016

Changing the Town Hall Meeting

We have all witnessed how town hall meetings can be dreadful.  The CEO and/or some other senior executive shares an update about the company.  Then, supposedly, he or she would like to answer questions from the staff.  However, few meaningful questions surface.  People do not want to ask the tough questions for fear of being viewed as a "troublemaker" who is challenging or undermining company leaders.  I heard from a senior executive today who has a solution to this problem.  At his firm, they use audience interaction software to enable participants to offer questions anonymously.  Furthermore, the software enables other staff members to "like" the question.  The software then ranks the question by the number of "likes" it has received.   Executives, therefore, can identify quickly and easily the questions on top of mind for their staff members.   It facilitates a much more meaningful and substantive discussion during the town hall meeting.  Naturally, we would like to move beyond the need for such software.  We would like to create a culture in which people do not fear asking the tough questions.  Until that type of climate has been created and reinforced, this type of software may provide a vehicle to begin to open up the dialogue within the firm.  

Friday, April 22, 2016

Eliminating the Four Flaws in Leadership Development

My newest article has been published in the Journal of the American Management Association.  The article its titled, "Eliminating the Four Flaws in Leadership Development."  Please click here to read it.

Uncertainty More Stressful Than Knowing with Certainty That Something Bad Will Occur

What's more stressful for you: knowing for sure that something bad is about to happen or being highly uncertain about a possible negative outcome? Archy de Berker, Robb Rutledge, and their fellow researchers examined this question in a study in Nature Communications. The scholars conducted an experiment in which participants played a computer game. In the game, subjects looked under rocks, and in some cases, they discovered snakes. The subjects received an electric shock in the computer game if a snake appeared. The scholars embedded a great deal of uncertainty in the game, and it fluctuated significantly as participants played. They examined the stress that subjects experienced by measuring certain physiological responses (such as pupil dilation). Participants also reported their self-perceptions about stress as they played. 

What did the scholars find? Subjects experienced the most stress when uncertainty was at its highest levels. Perhaps most interesting though is the finding related to certainty vs. uncertainty. The Guardian recently reported on these findings: 

"So what’s the big deal? Everyone knows that uncertainty is stressful. But what’s not so obvious is that uncertainty is more stressful than predictable negative consequences. Is it really more stressful wondering whether you’ll make it to your meeting on time than knowing you’ll be late? Is it more stressful wondering if you’re about to get sacked than being relatively sure of it? De Berker’s results provide a resounding “yes”."

What's the implication for business leaders? You might be hesitant about communicating bad news because you know it will cause stress for others in your organization. However, this research indicates that the uncertainty leading up to a negative consequence could be much more stressful than knowing for sure that something bad will happen. Keeping people in the dark does not help them; it may cause more harm than good.

Thursday, April 21, 2016

Encouraging People to Ask for Help

The New York Times' Corner Office column, by Adam Bryant, featured an interview recently with Amy Pressman. She serves as President (and co-founder) of Medallia.   The firm provides customer experience management software for firms such as Paypal, Delta, Nordstrom, and GE Healthcare.  Pressman describes an important element of Medallia's culture in her interview.  Here's an excerpt:

We work hard to overcome the “impostor syndrome” that a lot of people feel. People present themselves with résumés of unbroken success. But none of us are perfect. Unfortunately, when we hit roadblocks and need help, many of us don’t feel like we can ask for it. So we’re essentially curtailing the pace at which we can learn, because it’s much harder to learn in the shadows without asking for help than to just come out and say, “I am really struggling with this. Please help me. What do I do?” A lot of people are hiding, and we have created environments where we do not learn quickly. Ultimately, the one sustainable competitive advantage that a company can have is a culture that enables its people and the entire organization to learn faster. Fast learning has to come from a place of people feeling safe to talk about what’s working and not working, of recognizing that their job is not to appear perfect but to get better. We run a week-long onboarding to expose new hires to all these ideas. Also, one afternoon during the week we tell them, “Go out and do something that is holding you back and scares you.” It sounds kind of faddish, but the exercise is actually really powerful. It makes a point: Don’t let the fear of failure — or even of imperfection — hold you back. 

I love the concept, and I'm curious about what the onboarding process entails at Medallia.  How does the firm inculcate these values right from the start?  How do they expose people to these ideas?   Most importantly, I love the goal that they have set out to achieve:  How do we create an environment that enables people to learn more quickly?  Every firm should ask themselves that question.