Wednesday, June 26, 2013

Do You Wear Rose-Colored Glasses?

NYU Professor Nathan Pettit and LBS Professor Nino Sivanathan have written a new research paper titled, "The Eyes and Ears of Status: How Status Colors Perceptual Judgment.”  They conducted a series of experiments examining how a person's status affects his or her perceives feedback from others.    The studies show that people of high status felt that people were applauding louder and responding more favorably to them than those of lower status.  For instance, in one study, one half of the audience members exhibited favorable facial expressions, while the other half reacted negatively.  However, the high status presenters perceived that almost two-thirds of the audience members were reacted positively to their presentation.  

I'm sure you are not surprised by these results, but they do offer an important reminder to leaders of organizations.  Leaders need to be mindful that they often underestimate the negative reaction to their decisions, presentations, and other interactions with members of the organization.  Therefore, leaders need to take a second look at how people are receiving their messages.  Perhaps they should use a sounding board, a confidante, who can help check the pulse of the organization.  Sometimes, they might check in with small groups of people in an informal way to see how they are really feeling about a new plan or proposal.   At the extreme, on certain occasions, it's useful to watch yourself on video.  On many occasions, a leader's speech is captured on video to put on a company intranet or share with remote geographical locations.  An astute leader takes the opportunity, on from time to time, to take a look at himself or herself on video.   Watching themselves can be incredibly revealing.  They often will see things that they never realized. 

Tuesday, June 25, 2013

Tina Fey - The "yes, and" Rule of Improv

In this terrific interview at Google, Tina Fey explains one of the basic rules of improv (starting at around 2:46).  Fey describes how actors and actresses use the "yes, and" rule in improv comedy.   In other words, you are trained to build on others' ideas.  Accept what they have said, and take the idea further.  Do not reject what someone has said.  Eliminate the "yes, but" mentality that can derail a sketch.  The "yes, and" rule is instrumental for teams in the workplace too.    It can help make brainstorming sessions more effective, and it keep debates constructive.  

Sunday, June 23, 2013

Should We Bring Reality TV Into The Workplace?

Should companies actually bring reality television techniques into the workplace?  Does creating your own version of Shark Tank or the Apprentice serve a useful role in the selection process for an attractive new assignment?   Fortune reports that some firms are using these types of competitions, modeled after reality television, to do everything from fun team-building to actually trying to select people for an important new role.  Jennifer Alsever writes,

When insurance executives at Aflac sought employees for plum assignments last year, they abandoned the traditional resumes and job interview routine.  Instead, they found inspiration from reality TV competitions like American Idol.  Aflac employees in search of promotions became "contestants" who would walk into a room inside the company's Columbus, Ga., headquarters and stand before a panel of five Aflac "judges." While cameras rolled, they could do whatever they wanted to sell themselves as the best one for the job. The idea? Get candidates to think on their feet and show a side not seen in a formal interview. Performances ran the gamut -- from the ill-prepared one-minute speech to shticks with personal slogans, PowerPoint presentations, and props. "It was kind of like American Idol in corporate America -- except we didn't ridicule them," says Blake Voltz, Aflac vice president of claims and a judge. "It puts them under the heat, much like they would face if they got the job."

I'm skeptical - very skeptical.   I'm not speaking to this particular situation at Aflac, since we don't know the full details of this selection process.  I'd like to address the broader issue of using this type of competition in this manner.   I acknowledge that we have to see how candidates think on their feet, particularly for certain types of roles.   We do want to see how articulate candidates are, and how well they can present their ideas and proposals.  However, I fear that such competitions can put too much emphasis on how well someone can pitch their ideas, persuade others, and respond smoothly to questions.  Some people can make a great 2 minute pitch, but beyond that, the substance is very thin.  Some people are incredibly intelligent, but they tend to prefer thinking a bit more about questions before providing a response.   I can definitely recall students and classmates who are terrific at offering the 90 second sound bite in response to a professor's question...but beyond that, there wasn't much there.  They could sound incredibly smart and persuasive in those sound bites, but they didn't have the depth of knowledge we would want.  Such competitions described in this Fortune article can give too much credit to those who are very good at sounding smart in small doses.    

Thursday, June 20, 2013

Are Google Interview Brainteasers Useless?

I can remember going on interviews when I was an MBA student at Harvard from 1993-1995.  Certain firms, particularly in the consulting industry, used to love using brainteasers as questions during interviews (along with the usual case interview methodology).  My first experience with such a brainteaser was the following question:  How many gas stations are there in the United States?   The questions allegedly helped the interviewer understand your thought process and your approach to solving problems.  Google, of course, became famous for using such brainteasers often during their job interviews.  One of my former students was asked at a Google interview:  "How many golf balls can you fit in this room?"  

Now, we hear from a senior executive at Google that such questions did not predict effectiveness on the job.   Here's an excerpt from an interview that the New York Times' Adam Bryant conducted with Laszlo Bock, senior vice president of people operations at Google:

"On the hiring side, we found that brainteasers are a complete waste of time. How many golf balls can you fit into an airplane? How many gas stations in Manhattan? A complete waste of time. They don’t predict anything. They serve primarily to make the interviewer feel smart.  Instead, what works well are structured behavioral interviews, where you have a consistent rubric for how you assess people, rather than having each interviewer just make stuff up.  Behavioral interviewing also works — where you’re not giving someone a hypothetical, but you’re starting with a question like, “Give me an example of a time when you solved an analytically difficult problem.” The interesting thing about the behavioral interview is that when you ask somebody to speak to their own experience, and you drill into that, you get two kinds of information. One is you get to see how they actually interacted in a real-world situation, and the valuable “meta” information you get about the candidate is a sense of what they consider to be difficult." 

I wonder how other firms feel about these types of brainteasers.  Will Google start a trend?  Will other firms finally ditch these silly questions?   I do think that Google's Laszlo Bok is correct - many interviewers are probably more interested in looking smart when they ask these questions, as opposed to truly learning something valuable.  One must also wonder if there's not some element of this line of thought:  "I went through this crucible; you should have to do so as well.  Let's see how you fare."  I'm sure some interviewers think this way when they consider asking one of these brainteasers.  

Tuesday, June 18, 2013

Lululemon: How Much "Discretion" Should a CEO Exercise?

This week Lululemon CEO Christine Day announced that she would be stepping down.   Her resignation comes just three months after the substantial product recall of yoga pants that led to the departure of the firm's Chief Product Officer.   On the day of Day's surprising announcement, Lululemon shares fell 17%.  Investors wondered if other bad news might be coming from the company that has been a terrific growth story over the past several years.  Day chose not to discuss the detailed reasons for her departure.  She told Fortune, "There is no difference in strategic vision for the company, we were and are aligned... My values include discretion. While I know everyone would like to know 'the reason' [I'm leaving] there are some things that should remain private because the truth is the good things outweighed the bad and by being respectful and grateful one can remember that."  

I find this incident very interesting.  It raises some difficult questions regarding the responsibilities of a public company CEO.   While I respect Day's right to privacy, I can't help but look at that stunning 17% drop in the firm's shares.  Do the shareholders deserve more information?  Does Day have a responsibility to disclose more information about her departure so as to prevent such a drop in the firm's shares?   It's hard to say, of course, given that we don't know the reasons.   However, it seems clear that investors were spooked by the surprise departure.   Investors simply do not like being left in the dark. 

Monday, June 17, 2013

Is Reputation a Bigger Motivator Than Money?

Erez Yoeli, Moshe Hoffman, David Rand, and Martin Nowak have conducted a fascinating new study that suggests reputation sometimes can be a bigger motivator than money.   They conducted a field experiment associated with a utility company's program in California to try to prevent blackouts. Some individuals were offered financial incentives to participate.  For other individuals, sign-up sheets were posted in common areas of apartment buildings.  Financial incentives did boost participation in the program.  However, the sign-up sheets had a much more significant impact!   Rand explained to the Harvard Gazette:  “When people know it’s a cooperative effort, they feel peer pressure to take part.  They think, ‘If I don’t do this, I’m going to look like a jerk.’ But if it’s not observable, then there’s no problem with not participating.”   Making behavior observable brings reputation to the forefront.  People care a great deal, in many cases, about how others perceive them.   Hoffman explained that Toyota may have used this self-perception concern to its benefit when designing the Prius.    “In fact, we think this is one reason why the Prius, for instance, is such a different-looking car. The designers at Toyota seem to have intuitively had this idea: designing a car that didn’t look like any other car so your neighbors can tell you’re driving a hybrid." 

Friday, June 14, 2013

JetBlue: Does Adding Business Class Seats Make Sense?

According to Businessweek, JetBlue will be rolling out a 16-seat business-class cabin on certain transcontinental routes aboard new Airbus 321 planes in the near future.   JetBlue VP Scott Laurence told Businessweek,  “I think the incumbent pricing at $2,500-plus, each way, is something we think doesn’t make a lot of sense.  It doesn’t stimulate an already existing market. We think we can stimulate demand there and really have an impact on that market.”  In other words, look out legacy carriers!  Your first class service is about to be challenged by a less expensive, high quality service from JetBlue.  

Is this a good idea?   It strikes me that an opportunity does exist in the market.  A significant gap exists between the price (and associated service) of a first class seat on one of those transcontinental flights and the price and service associated with an economy seat.   JetBlue may be able to come in with an attractive offering at a price point that induces some economy customers to upgrade, while stealing some first class customers from other airlines. 

What's the downside?   JetBlue has succeeded in part because it made good tradeoffs.  It chose NOT to do many of the things legacy carriers do (no first class, no bulky cart used to deliver drinks, no hub and spoke system, etc.).  Those tradeoffs made JetBlue unique and hard to imitate.  Now the company is relaxing one of those key tradeoffs.   Companies often find that they violate key tradeoffs when they strive to grow.  Sometimes, abandoning key tradeoffs damages the power of a unique business model.  JetBlue will face some questions: Will it slow down the boarding process when you add a business class cabin?  Will stocking the cabin require more time, and thus slow down turnarounds?   Will providing service to the business class cabin cause flight attendants to sacrifice the quality of service to the rest of the passengers?  Given these questions, it's a good idea that JetBlue is launching this new model as an experiment.  The key will be to learn and adapt quickly as challenges arise.  The deeper question will be:  Are we sacrificing key elements of our competitive advantage by pursuing this opportunity, or are we enhancing our competitive advantage by further differentiating from the competition? 

Wednesday, June 12, 2013

Would You Like That Bonus in Cash or Some Other Form?

How should you reward people?  What concerns should you have about offering rewards to your employees?   One important factor to consider: Will the employees compare rewards with one another?  Will those who receive smaller rewards be highly dissatisfied?   Extensive research shows that people engage in social comparisons.  They care not just about how much they receive, but how much they receive as compared to their peers.  Kellogg Professor Neal Roese and doctoral student Jingjing Ma have conducted some fascinating research with regard to reward comparisons.   They have shown that making rewards less "countable" can reduce the "likelihood that recipients will compare rewards, which in turn increases their satisfaction." 

The original experiment went as follows.  They created two groups of students: an "overbenefit" group and an"underbenefit" group.   The groups split a fixed reward 60/40.   One half of each group received a "countable" reward - i.e. cash.  The other half received an "uncountable" reward - i.e. a slice of cake.   Naturally, people who received higher rewards were more satisfied in both cases (cash and cake).  However, between the two "underbenefit" groups, the recipients of cake were much less dissatisfied than the recipients of cash rewards.  

Kellogg Insights provides the scholars' explanations of this result: "According to Ma, offering cake encouraged the recipients to focus on the experiential aspect of their reward—'oh, this cake is delicious,' she says—instead of 'thinking about how they received less than the other guy.'"

Tuesday, June 11, 2013

Grandiose goals at Lenovo: Drinking games & hazing rituals?

Did anyone else find this Fortune magazine article about Lenovo a bit disconcerting?    The article describes a "lighthearted drinking game" that occurs each year among top executives at which they set their ambitious goals for the coming year.  The head of human resources even endorsed the ritual!  I understand cultural differences should be respected, but should a global company really be setting management goals while executives engage in "good-natured hazing" rituals?   The phrases in quotes come from

"Even without a few drinks in them, Lenovo's top executives are a cocksure crew these days, and for good reason: The company's contrarian bet to double down on the PC business has paid off handsomely. In recent years Lenovo invested heavily in R&D and acquisitions. It beefed up its own network of factories, allowing the company to bring innovations to market more quickly than competitors that outsource most of their manufacturing. As a result, Lenovo's growth has outpaced the industry's for the past 16 quarters, and it has tripled in size since the IBM deal to more than $33 billion in sales. This year it's on track to edge out HP to become the world's No. 1 PC maker."

What's missing from this paragraph lavishing praise on the company for its performance?  One little word:  profit.   Yes, the company has grown rapidly. Yes, it has achieved an impressive market share in the PC market.  Has it made any money?   Hmm... that would seem to be a desirable metric on which we should focus.  Late in the article, the author finally gets around to a discussion of margins.  Here's what Helft writes:

"At the same time, Lenovo benefited from its Chinese cultural heritage, in particular the propensity to focus on long-term goals. Lenovo approaches every new market with a similar strategy: pricing products aggressively at first, sacrificing margins. Executives are expected to deliver profitability only after market share gets to double digits. The risky approach has largely paid off. "The company has surprised me over and over," says Alberto Moel, an analyst with Sanford Bernstein. Its continued growth amid the industry's disarray, Moel says, "is a major achievement." But Moel warns that expanding margins, which at 2.5% are about half those of Dell's and HP's PC units, will be harder than management thinks. Such concerns have weighed on the stock, which has been stuck in a narrow range for the past year (its ADRs, now at $18, are down from $23 a share). With net income of $575 million over the past four quarters, Lenovo has a market capitalization of about $9 billion." 

Margins are half of those found at Dell and HP, and as it is, those American rivals have very thin margins in the PC business.  The firm apparently focuses on margins after getting to double-digit market share.  Yet, Lenovo has 15% market share in the PC business.  Will the margins improve?  How much?   Consider that the personal computer industry has been one of the least profitable markets on earth in recent years.   A simple structural analysis of the industry shows that it is highly unattractive - high buyer and supplier power, high threat of substitutes, and intense rivalry.  Increasing margins will be challenging. Lenovo has brought many product innovations to market.  It has developed strong relationships with many corporations and institutional buyers.  It has many positive attributes.  However, it will be challenging to make high profits in the PC business.  As Warren Buffett once said, "When an industry with a reputation for difficult economics meets a manager with a reputation for excellence, it is usually the industry that keeps its reputation intact."

Monday, June 10, 2013

The Power of Independent Executives

Does a CEO bring in many new members on his or her top management team after taking charge at a company?  Or, does the CEO have a number of key holdovers from a previous administration?  Does this key factor in the composition of the top team make a difference?  New research by Augustin Landier, Julien Sauvagnat, David Sraer, and David Thesmar (published in the Review of Finance) suggests that having more "independent" executives on the senior team can have positive effects on decision making and financial performance.   The scholars define "independent" to mean executives not appointed by the current CEO.  

The scholars collected data on over 1,800 American companies over a 17 year period.  According to this article in Strategy and Business, here are their results: "Controlling for a variety of factors, they found that even the smallest uptick in the nonindependence of executives caused a decrease in the firm’s annual return on assets of between 0.5 and 0.8 percentage points."

What's going on here?  They argue that CEOs tend to hire people who think like they do. Moreover, executives hired by the current CEO may feel more beholden to that leader.   As a result, they may not be as willing to express dissenting opinions.   On the contrary, an executive hired by a previous CEO may be more willing to push back on high-stakes, potentially risky decisions.  The authors go on to argue that "independence" of senior executives may matter much more than the independence of board members, since the top team meets much more frequently and is much more directly responsible for strategic choices and performance at most large corporations. 

Additional research by these scholars shows that firms with fewer independent executives on the top team also are more likely to make acquisitions that destroy shareholder value.  Here is the key finding:  "Although acquisitions, on average, led to decreases in shareholder value for the companies in the study, firms with fewer independent top subordinates fared much worse, losing about 45 percent four years after they made an acquisition, almost triple the 16 percent loss posted by firms with more of those executives." 

Friday, June 07, 2013

Do you care? How to increase employee engagement

In this Fast Company interview, Gallup's Jim Harter comments on the sad state of employee engagement in American corporations.  According to Gallup's research, only 30% of the U.S. population is engaged in the workplace, i.e. deeply committed to their jobs.  52% of the employee population is disengaged, and 18% is actively disengaged, meaning that they are "actively against what the organization, and their boss, is trying to get done."  Those statistics are rather alarming. Some companies, of course, have begun to focus intensively on employee engagement over the last decade.  Harter comments on what leaders need to do to increase employee engagement:

So, what are the qualities of leaders that businesses must now be seeking? According to Harter, it begins with a combination of being results oriented and authentically concerned about the development of every worker. “Some people are better at getting results and some are better at developing. But, we’ve found both are equally important.”  Harter describes the most effective managers as being deeply caring--and capable of seeing, supporting, and adjusting to the differences in people. “They help people build jobs that fit them as an individual person, while still helping them get to the outcome they need from an organization perspective.”

Authentically concerned - it's such a simple, yet powerful idea.  Think about what makes great professors or teachers.  Beyond simply knowing the material or being able to explain concepts clearly, great teaching is about showing students that you care.  My colleague, Jane McKay-Nesbitt, has this great saying about teaching: "They must know that you care before they will care what you know."  The same principle holds true for leaders.  People will not follow you if they do not believe you care about their well-being and development.  Engagement starts with authentic concern. 

Thursday, June 06, 2013

Decision Narratives at Amazon

In this article by Drew Hansen as well as this one by Adam Lashinsky, we learn about an important facet of the decision-making process employed by Jeff Bezos and his top management team at Amazon.  Here's an excerpt from the latter article:

Meetings of his "S-team" of senior executives begin with participants quietly absorbing the written word. Specifically, before any discussion begins, members of the team -- including Bezos -- consume six-page printed memos in total silence for as long as 30 minutes. (Yes, the e-ink purveyor prefers paper. Ironic, no?) They scribble notes in the margins while the authors of the memos wait for Bezos and his minions to finish reading.

Amazon executives call these documents "narratives," and even Bezos realizes that for the uninitiated -- and fans of the PowerPoint presentation -- the process is a bit odd. "For new employees, it's a strange initial experience," he tells Fortune. "They're just not accustomed to sitting silently in a room and doing study hall with a bunch of executives." Bezos says the act of communal reading guarantees the group's undivided attention. Writing a memo is an even more important skill to master. "Full sentences are harder to write," he says. "They have verbs. The paragraphs have topic sentences. There is no way to write a six-page, narratively structured memo and not have clear thinking."

The use of narratives at Amazon reminds me of this article written many years ago in Harvard Business Review about strategic planning at 3M.   The innovative industrial conglomerate had adopted the use of storytelling during its strategic planning.   In the article, the authors explained that bullet points on Powerpoint slides have several deficienciesBullet point lists often prove rather generic, fail to clarify causal relationships, and leave crucial assumptions unstated.   One manager quoted in the article explains, "If you read just bullet points, you may not get it, but if you read a narrative plan, you will.  If there's a flaw in the logic, it glares right out at you.  With bullets, you don't know if the insights is really there, or if the planner has merely given you a shopping list."  Stories or narratives enable you to think more holistically, and they provide the basis for a more thoughtful dialogue and debate.  Finally, stories prove much more compelling than lists.  If we hope to persuade others that a strategy makes sense, a good story works much more effectively than a set of bullet points. 

Tuesday, June 04, 2013

How Should You Balance Your View vs. Your Team's Perspectives on a Key Decision?

Leadership coach and blogger Julie Pierce has an interesting blog post on the question of how leaders should balance the desire to solicit input from their team with the desire to make the call based on their convictions?  She offers three tips:

1. Be clear on who is making the final decision.
2. Be specific on what kind of input you need from the team.
3. Be selective with your “no”. 

First, you need to be clear whether you are making this decision on your own vs. facilitating a highly collaborative process in search of consensus.  Second, you need to be clear about the type of feedback and advice you want from your team. Do you want them to generate options, critique a proposal, explain potential obstacles during implementation, etc.?   Finally, be judicious with your vetoes.  Exercising veto power over the team if all members feel strongly something is never easy.  If the stakes are small, consider acquiescing and holding onto that veto for a bigger issue. 

Monday, June 03, 2013

Leaders, Listen First!

Here's some great advice for leaders from Deborah Triant, CEO and President of Check Point Software Technologies.  She tells Fast Company:

Making and implementing decisions boils down to a key ingredient: listening. I often wonder why schools emphasize debating. Why not have listening classes as well? Debating is easy; listening with an open mind is not. The worst thing that you as a leader can do in the decision-making process is to voice your opinion before anyone else can. No matter how open and honest your people are, stating your opinion first will short-change the discussion process and taint what you hear later. I've learned this the hard way.

I agree with Triant.  In my work, I have argued that leaders who state their positions firmly at the outset of a decision-making process can affect their teams adversely in three different ways

  1. Decision Framing Effect:   You may trap your team into one way (your way) of thinking about a problem or issue.
  2.  Conformity Effect:  You may discourage those team members with a dissenting view from expressing their ideas, options, or feedback. 
  3. Legitimacy Effect:  You may create the impression that the decision has already been made, that the process of consultation is simply a facade since the choice is a fait accompli.

The Asch Experiments

I discovered that YouTube features a good video on the famous Solomon Asch experiments regarding the pressures to conform in groups.  It's worth watching to remind us that the pressure to conform can cause us to make very poor decisions at times.