Generational Diversity in the Workplace

One of my students, Caitlyn May, just completed her senior Honors thesis here at Bryant University on the topic of generational diversity in the workforce.  She examined how people perceive others from their own generation, as well as how they perceive individuals from other generations.  Because I have just finished reading her work, I was struck by this article from the Kellogg School about Professor Nicholas Pearce's research on generational diversity in organizations.  Here's an excerpt from the excellent article published on the Kellogg Insights website:

To make diversity work, Pearce says, leaders need to be more aware of the “pain points” that are likely to cause generational tension. “Many times, the tension is blamed on differences in maturity, when in actuality, generational differences are often the source of the conflict,” he says.... Traditionalists and Baby Boomers, for example, tend to give respect deferentially based on one’s position in the hierarchy, while Generation Xers and Millennials are more likely to give respect to those who are seen as deserving—regardless of where they fit in the organization’s hierarchy... One significant cause of intergenerational tension has to do with conflicting attitudes towards loyalty. Older generations tend to be more loyal to institutions—they still believe in what Pearce calls the “implicit social contract,” an understanding that those who pledge their commitment to one company will eventually reap the long-term benefits. Millennials, by contrast, are loyal to individuals. “Many of them saw their parents or grandparents play by those rules and get severed or fired just shy of the retirement party, the gold watch, and the pension that had been promised” he says, which caused a generation-wide shift from institutional loyalty to interpersonal loyalty. 

Getting Started in a New Job

Ximena Vengoechea has written a good article for Fast Company about taking a new job.  The article is titled, "10 Ways to Make the Most of Your First Month at a New Job."  I especially liked the first three tips:

• Prioritize what are the most important things to learn:  What do you need to know, and what matters most when it comes to that initial learning curve?   Think broadly, not just in terms of technical expertise.  Think in terms of what you need to learn about the social network at the firm -  the influencers, the gatekeepers, and other influential players.   Think also in terms of what you need to learn about the culture and values of the organization. 

• Find someone you can ask all the embarrassing questions:  Who will you turn to in order to learn the truth about certain topics?  Which topics are tough to address publicly?  Who can be trusted?  Who can be a good private sounding board?

• Identify opportunities for quick wins:  To me, this step is most important. Find the low hanging fruit.  Achieve some small victories so that you can build allies, deter opponents, prove that your ideas can work, and build powerful momentum.  

Why Sleep is Essential to Creativity

Art Markman, Professor of Psychology and Marketing at the University of Texas at Austin, has written an informative article for Fast Company regarding the relationship between sleep and creativity.  Markman writes the following:

To understand how, it is helpful to know a bit more about creativity. When you are trying to develop a creative solution to a difficult problem, you need to find some knowledge that you already have that will help you take a new approach. That means that a big part of creativity is allowing the problem to remind you of things you know about that probably come from another area of your expertise and that are relevant to your current problem. In short, you are seeking a good analogy.

 

Why then does getting a good night's sleep matter? Markman explains that, when you sleep, your memories are consolidated.  The brain does not remember everything about your day.  It has a way of retaining the most crucial events, ideas, and interactions.  If you want to be creative, and perhaps discover a relevant analogy, you do not want your thinking cluttered with non-essential information.  Getting a good night's sleep helps your brain sort out what's important and what is not essential.  In that way, you have a better shot at discovering that key analogy that might lead to a creative breakthrough.   

Amazon Reports Earnings for AWS

Amazon reported quarterly earnings yesterday.  For the first time, the company split out financials for its Amazon Web Services (AWS) business.  That unit provides cloud computing services.   Amazon indicated that AWS generated $1.57 billion in revenue and $265 million in operating income for the quarter.  Overall, Amazon reported revenue of $22.72 billion and a net loss $57 million for the company as a whole.  Amazon continues to argue that they are investing for the future, thereby explaining the continuing escalation of expenses and yet another net loss. 

Clearly, losses in the retail business are more substantial than previously thought.  AWS appears to be profitable, while the company as a whole lost money.  The earnings reports raises a few questions for me, inquiries that I believe many investors and analysts will be putting forth in the coming months.  

• Has Amazon been reluctant to split out financials for AWS because they know that it may cause more questions to be asked about the profitability (or lack thereof) of the core retail business?   
• Are the continuing losses related to investments and expenses that will eventually create a high profit retail business, or are those costs associated with many diverse lines of business that have been launched?  
• Is Amazon spreading itself too thin with so many strategic moves in a wide variety of areas?  
• Perhaps most importantly, what is the strategic logic for keeping AWS and Amazon's retail business together?  Will some investors begin to argue for a breakup at Amazon?

Should Your Firm Dump Its Employee Grading System?

The Wall Street Journal published an article this week titled "The Trouble with Grading Employees."  The article, authored by Rachel Feintzeig, focuses on some companies that have chosen to abolish their performance evaluation rating systems for employees.  Feintzeig also reports on some firms that have considered eliminating their rating systems, but were reluctant to abolish them.  Intel was one such firm.  Here's an excerpt that focuses on why rating systems are being questioned by companies such as Intel:

Intel Corp. has long rated and ranked its approximately 105,000 workers on a four-level scale, from “outstanding” to “improvement required.” Devra Johnson, a human-resources director at the chip maker, observed that ratings tended to deflate morale in a good chunk of the 70% of the company’s workforce that receives a “successful” rating each year—the second-lowest label.  “We’d call them the walking wounded,” she said.

I think the debate about ratings systems actually misses the point.  Companies should focus less on whether they use ratings and more on how they optimize performance overall.  To do so, firms should focus on four big ideas.  First, employees need to know where they stand.  That's the core principle that all performance evaluation systems must adhere to regardless of whether firms use a rating system or not.   In too many situations, employees simply do not understand how they are doing.   Second, differentiation is essential.  Not everyone is above average.  Even with ratings systems, some firms do not do enough to distinguish between high and low performers.  Others take rankings to an extreme.  Third, good performance management rests more on the informal modes of communication between manager and employee than on formal evaluation systems.  Communication between manager and employee must be frequent, open, and two-way.  Waiting for the formal review to take place is a recipe for disaster.  Finally, great companies create environments that foster intrinsic motivation.  They do not rely solely on the extrinsic rewards or punishments that come with formal evaluations. 

 

The Great Courses: My New Lecture Series on Business Strategy

I am very excited to announce the release of my new lecture series from The Great Courses (some of you may know them as The Teaching Company).   The new course is titled Critical Business Skills for Success.  It has five components, each consisting of 12 lectures.  I have created the 12 lectures on business strategy.  The other four components focus on finance, marketing, operations, and organizational behavior.   Those components are taught by Thomas Goldsby of The Ohio State University, Ryan Hamilton of Emory University, Eric Sussman of UCLA, and Clinton Longenecker of the University of Toledo. 

In my strategy course, I cover topics such as industry analysis, competitive positioning, defending and sustaining competitive advantage, competitor analysis, diversification, vertical integration, mergers and acquisitions, and entrepreneurial strategy.   Examples and case studies include Netflix, Trader Joe's, Disney, Zara, IKEA, Costco, LinkedIn, and Apple.  

Mistakes that Serial Entrepreneurs Make

Professor J.P. Eggers of the NYU Stern School of Business and Lin Song of the Central University of Finance and Economics in Beijing have conducted an interesting new study regarding serial entrepreneurs.   They examined data on Chinese entrepreneurs as well as startups supported by venture capital in the United States.  Their paper is titled, "Dealing With Failure: Serial Entrepreneurs and the Costs of Changing Industries Between Ventures.” It will be published soon in the Academy of Management Journal.

Eggers and Song find that serial entrepreneurs often change industries after an initial startup failure.  However, changing industries often proves to be a mistake.  Why do entrepreneurs switch industries?  Consider the fundamental attribution error, a phenomenon discovered years ago by psychologists.  When others fail, we look inside of them to identify the reasons for their failure.  We examine their expertise, capabilities, personality, and motives.   However, when we fail, we tend to blame external factors.  We attribute the failure to uncontrollable factors in the environment.  For this reason, serial entrepreneurs sometimes blame their initial startup failure on the industry environment, and they change industries for their next venture. 

These serial entrepreneurs may encounter difficulty, though, because they are not leveraging the learning  fully from their initial startup.   Moreover, they may not be leveraging their social networks as well as they can.  Changing industries may mean having to build entirely new networks.  Finally, they may not be taking a hard look at internal issues such as leadership style, ability to work with others, and other competencies that may be at the heart of their initial failure.  Not correcting these issues may lead to a subsequent failure.  

Elements of a Creative Culture

Matt Williams, CEO of The Martin Agency, shared his insights about the elements of a creative corporate culture with Kellogg Insights.   I think two points are worth emphasizing here.  

First, Williams argued that leaders should "celebrate the work, not just the wins."  In other words, be sure to honor and reward people for terrific work even if they don't land the big contract or make a key sale to a potential customer.  Sometimes you do great work, but you don't achieve the ultimate goal.  Celebrate that creativity.  

Second, Williams argues that we should "avoid hiring a lot of people who are 'similarly creative."" He argues that we need to be wary of "creative redundancy."   There are different types of creative people.  Some people are very broad thinkers; they are all about big ideas.  Others are wonderful at challenging the existing ideas on the table and making them better.  Some people are very visual in the way that they process information and share ideas.  Others tend to be excellent writers.  You want a mix of creative types to create a successful organization, and you want some level of healthy tension among these types. 

Jack Welch on the Role of a Manager

With Jack Welch visiting campus today here at Bryant University, I thought that I would share one of my favorite Welch quotes:

I see my job as a manager today so much clearer.  I see it as walking around with a can of fertilizer in one hand and a jug of water in the other.  Think of the employee population as a garden, and you are pouring the water and the fertilizer on.  You want the flowers to grow.  Some will grow.  Some you will have to cut out.  But your job is to constantly pour the water and the fertilizer, and give everyone a chance to flourish.

Welch shared this particular story in an interview with Harvard Business School Professor Chris Bartlett in 1999.

Loyalty: 60 Minutes Segment on Bryant Lacrosse Coach Mike Pressler

GE's Changing Corporate Strategy

General Electric announced this week that it would divest nearly all of GE Capital, the financial business that had been a major profit generator in the past.  The latest strategic shift at GE marks the continued move away from the firm's historic strategy of unrelated diversification.  Few true conglomerates (i.e. unrelated diversifiers) remain in the United States.  Investors can diversify risk more efficiently than corporate executives.  Without true economies of scope, conglomerates could not justify their existence.  The argument that governance economies existed did not hold water in many cases, i.e. corporate parents could not argue that they simply had better many management systems through which they added value to each of the business units.  For this reason, many conglomerates have broken up over the past two decades.  GE remained an exception to the rule for many years.  Investors did not push for a breakup when the company routinely outperformed competitors for each of its major business units.  The whole seemed clearly greater than the sum of the parts.  Governance economies did seem to exist.   People raved about the quality of the management systems and the leadership talent at GE.  A lagging stock price in the past decade shifted the conversation.  Investors begin to ask a question that once seemed unthinkable to ask: Should GE break up?   Could the whole no longer be worth more than the sum of the parts?  

The divestiture of GE Capital does not end this conversation though.  GE has returned to its industrial roots in many ways.  It no longer owns a television network or a major financial business.  However, it still owns quite a wide array of industrial businesses.  Investors will continue to ask the question:  Are these businesses worth more together than apart?  They will continue to ask:  Where are the economies of scope (i.e. the synergies)?   Are the governance economies sufficient to justify keeping all the units together?  Yes, these businesses are more similar than the portfolio was in the past.  However, we still aren't talking about the type of relatedness that we see at a company such as Disney.  If performance lags, the questions will continue.  GE has moved in the right direction, but the strategy will likely continue to evolve. 

Don't Pay for Past Performance!

This week marks the beginning of another major league baseball season.   Hope springs eternal.  In my home state, fans believe that our beloved Boston Red Sox will engineer another  magical "last to first" season, much like the 2013 campaign.  In Chicago, fans of the downtrodden Cubs believe that this season might just be the year that they return to respectability.  Of course, most teams have welcomed some new players in the offseason, including some high-priced free agents.  In addition, they have had to say goodbye to some key players who were signed by other teams.  In Boston, we lost ace pitcher Jon Lester to the Cubs.  Fans were not happy.  Management of the Red Sox claimed that they did not want to commit to a 6 year, $155 million contract to a pitcher in his 30s.  The philosophy is clear: Don't pay for past performance.   Fans don't like to hear that.  We fall in love with players based on past performance, and we aren't worried much about what that player will be like in three years.  Management, though, must think about the future.  Smart baseball teams, as well as other sports teams, do not pay for past performance. 

Business leaders should take a cue from the smart general managers in sports.   Of course, in sports, the reason we don't want to pay for past performance is because skills deteriorate with age.  In business, that is not the case.  In fact, performance can increase as managers gain more experience.  However, we still should be worried about paying strictly based on past performance. Why?  What made a manager and an organization successful in the past may not be the key to future success.  Competitive environments, technology, and consumer preferences can change dramatically.  As a result, the needed employee skill sets change.  Someone may have excelled in the past, but they may not have the skills required to succeed in the future.  They may have mental models that are rooted in the past, and they may have a hard time changing those mindsets.   For these reasons, companies need to think about the future drivers of performance, and not simply pay for talent that has excelled in the past. 

Don't Brag About Being a Dinosaur

The Boston Globe published an interview with Jack and Suzy Welch today (the two will be speaking here at Bryant University on Monday, April 13th).   I thought the excerpt below about the adoption of technology in the workplace was important to highlight. 

 Jack: Nothing is worse than the person in their 40s who says, ‘I’m not going to learn this.’ ‘I don’t carry an iPad.’ That will label you and put you right in the corner. Some people do it as a badge of honor. I’ve seen them myself, they walk around bragging [about not knowing much about technology].

Suzy: Why don’t you carry a placard saying ‘I am a dinosaur.’ You’ve got to dig in [and learn about things you don’t know] if you want to stay in the conversation.

I agree wholeheartedly.   I can never understand the rationale of those who brag about being dinosaurs. "Oh, I don't get the whole Twitter thing."  "I can't figure out how to sync my calendar across all my devices."  "I don't really need most of the functionality of my smartphone; that's why I haven't bothered to learn about those apps."  I think people put a target on their back when they make such statements.  I understand that one does not have to embrace every new social media platform, and some will rely on certain devices more than others.  However, bragging about being a dinosaur signals to others a reluctance to learn new things, make mistakes, and take risks.   The last thing that many leaders want in their organizations want is someone who is not a voracious lifelong learner. 

What do we want from our managers?

Gallup has released some interesting findings from a survey of 7,200 employees across a wide array of organizations.  Gallup has done some outstanding work in the past showing that many workers are not engaged or even actively disengaged at their jobs.  The lack of engagement often has much more to do with a bad boss than it does with other broader attributes of organizations. In this survey, Gallup's results help us understand what employees desire from their managers.  Here are three big takeaways:

1.  People want their managers to communicate very often with them... daily seems to be the desired frequency.   They also want their bosses to be approachable.  Engaged employees tend to be those who feel very comfortable asking their boss a question at any time.

2. Employees desire clear guidance regarding objectives and priorities.   They want to know: What should I be working on right now?   What's most important?

3.  People want everyone to be held accountable in a fair way.  Equal standards for all: that's the desired state.