Monday, January 29, 2018

Why Corporations Love Strategic Planning: The Illusion of Control

Roger Martin has been a long-time critic of traditional strategic planning processes in many companies.  Several years ago, he wrote:

Virtually every time the word “strategy” is used, it is paired with some form of the word “plan,” as in the process of “strategic planning” or the resulting “strategic plan.” The subtle slide from strategy to planning occurs because planning is a thoroughly doable and comfortable exercise...This exercise arguably makes for more thoughtful and thorough budgets. However, it must not be confused with strategy. Planning typically isn’t explicit about what the organization chooses not to do and why. It does not question assumptions. And its dominant logic is affordability; the plan consists of whichever initiatives fit the company’s resources.  Mistaking planning for strategy is a common trap.  

Others also have been critical of annual strategic planning exercises.  Russell Ackoff once wrote,  “Most corporate planning is like a ritual rain dance: It has no effect on the weather that follows, but it makes those who engage in it feel they are in control.”  Indeed, human beings have a powerful need to feel a sense of control.  A sense of control actually has many positive benefits for people.  Some studies show that a strong sense of control fosters better mental and physical health.   Corporate planning exercises feed that need.  Of course, human beings are susceptible to what Ellen Langer calls the illusion of control, i.e. when we think we have much more ability to control outcomes than we actually have.  That illusion, as Ackoff suggests, drives a lot of the energy and effort poured into strategic planning.  

Thursday, January 25, 2018

Attracting Talent: What is Your Employer Brand Strategy?

Matt Handford, the SVP of People for Hootsuite, has written a good article for HR Morning about how to attract and retain talented employees in a tight labor market.  He focuses on your "employer brand" strategy.   Handford explains: 

It should go without saying that in order to develop a strategic and effective brand persona, there needs to be a plan behind it. First off, it’s critical to understand that a brand is not the perks or salary associated with working at your company. While perks like dog-friendly offices, free beer, extra vacation and ping pong are elements of creating a positive workplace it does not, and should not, define you as a brand.

Take a critical look at your current brand and define what you want to be known for; when a potential employee thinks of your company, what is the ideal perception you want to create? By thinking from that perspective, you can work backwards and develop steps to increase your brand’s strategic positioning until you are attracting the type of talent that aligns with your vision. Ultimately you want to capitalize on what makes your brand unique, and build from there.

Handford is right on the money.  The key question is:  How do you build such an effective employer brand strategy?   I would argue that it begins with an in-depth examination of your current competitive position in the labor market.  Clearly, you need to speak with your employees.  What does the brand mean to them?  More importantly, however, you must spend time with two other groups of people:  those who you hope to recruit (perhaps college students, for instance), and those who have rejected you.  The latter group is especially important.  You need to speak with those who have either connected with your firm in some way, but ultimately did not choose employment with your company, or those who have chosen not to engage with you at all.   What's driving them away?  Answering that fundamental question is the first step in building an effective employer brand strategy.  

Wednesday, January 24, 2018

Lifelong Learning: Think Deep AND Broad

The most successful leaders are lifelong learners.   As their career progresses, they master new skills and seek out experiences that will build their capabilities in key areas.  For many people, career development efforts focus on building expertise in a particular area.  They want to develop specialized knowledge of high importance to their organization, and hopefully, of high value to other firms in the marketplace.  Becoming an expert in a valued domain is certainly a good career strategy.  However, it's not enough.  Lifelong learning should involve broadening efforts, as well as deep dives in your area of specialization.   

You should ask yourself:  What adjacent domains should I be exploring?  What societal and technological trends should I be learning about right now?  Beyond that, you should seek out interesting topics, even if they don't seem directly relevant at the moment.   Become a bit of a polymath.  Such learning will stretch your mind and expose you to new ways of thinking.   Moroever, broadening your knowledge to new areas will help you in conversations and networking opportunities.  Being able to carry on a conversation on a variety of topics is a very useful skill as your career progresses.  

Imagine that you have an opportunity, as a young employee, to spend tim at dinner seated next to the CEO.   Could you carry on a conversation on a range of topics?  Would you be able to speak intelligently about issues outside of your specialization?   Answering these questions affirmatively proves to be very important if you hope to advance successfully in your career. 

Tuesday, January 23, 2018

Consolidation Has Not Helped the King of Beers Regain Its Crown

Source: Wikipedia
Fortune reports today that Budweiser is now the #4 beer in America. Thirty years ago, Anheuser Busch sold 49.2 million barrels of the core Budweiser brand in the United States, accounting for more than one in four beers sold. In 2016 the company only sold 14.4 million barrels of Budweiser. Today, Bud Light is the #1 beer in America, and the traditional Budweiser brand has fallen behind both Coors Light and Miller Lite. Of course, Budweiser's struggles are not unique.  Bud Light has lost volume as well over the past decade, as Americans turn to craft beers and imports.  According to Fortune, the top ten brands account for only 50% of the beer sold in America, whereas they once accounted for 2 out of every 3 beers purchased by consumers.  

The beer industry has consolidated dramatically in recent years, as brewers engaged in a wave of mergers and acquisitions.  While they have achieved considerable cost synergies, these mergers have not solved the fundamental growth problem that the mainstream brands have in the United States.  Consolidation often occurs when companies experience top line pressures.  That may help improve earnings in the short run, but often mergers do not recharge growth.  The King of Beers needs help, and the solution won't come from further dealmaking.  

Monday, January 22, 2018

Delegating Tough Choices to Avoid Responsibility and Regret

Mary Steffel and Elanor Williams have published a study on delegation in the Journal of Consumer Research.    They conducted a series of experimental studies to determine when and why consumers delegate difficult purchasing decisions.   They found that people tend to delegate tough choices to avoid responsibility/blame and to avoid the possible feelings of regret that emerge when one makes challenging decisions.  Steffel and Williams summarize their findings as follows:

This research shows that consumers cope with difficult decisions by recruiting others to choose for them. Across eight experiments, participants were more likely to ask others to choose on their behalf when choices felt difficult than when they felt easy. Delegation increased when choices felt difficult regardless of whether that feeling was because the choices themselves were more difficult (e.g., with a larger number of alternatives, with difficult tradeoffs, or with a smaller difference in relative attractiveness between the alternatives), or because the choices were processed less fluently for superficial reasons (e.g., the options were presented in jargon). Delegation increased when choices felt difficult regardless of whether the consequences were real or hypothetical and regardless of the importance of those consequences.

Does the same type of pressure and behavior emerge when managers make decisions at work?  It would be interesting to take a look at those situations, as opposed to consumer purchasing decisions.  

Thursday, January 18, 2018

What Information Do We Wish That We Had?

Over the years, Garold Stasser and his colleagues have demonstrated that many teams exhibit "shared information bias" - i.e. teams spend a great deal of time discussing information common to all team members, and they do not share, discuss, and integrate privately held information effectively.   As a result, teams make poor decisions because they do not leverage the unique knowledge and expertise of some team members.  

How can teams overcome the shared information bias?   People have described a variety of strategies, many focusing on a climate of psychological safety as well as strong process facilitation by the leader.   I would argue that one other techique can be very helpful.  Team members should ask the following question as they engage in collective problem solving:  What information or data do we WISH THAT WE HAD in trying to solve this problem?  Think about that question for a moment.  In most cases, team members focus on what they already know, rather than thinking about what information they wish they had in order to solve the problem.  By asking, "what data do we wish that we had," teams might encourage members to come forward with critical information that they might not have already shared for a variety of reasons.   In short, building a wish list might invite those who can help fulfill those wishes to come forward.  

Tuesday, January 16, 2018

The Hawaii False Alert: Is It Really Human Error?

Don Norman has written an outstanding article for Fast Company about the false alert that caused panic in Hawaii over the weekend.  In the aftermath of the incident, we heard that "human error"  caused the false alert to be transmitted widely to citizens of the state. Norman challenges this initial conclusion. Norman writes:

When some error occurs, it is commonplace to look for the reason. In serious cases, a committee is formed which more or less thoroughly tries to determine the cause. Eventually, it will be discovered that a person did something wrong. “Hah,” says the investigation committee. “Human error. Increase the training. Punish the guilty person.” Everyone feels good. The public is reassured. An innocent person is punished, and the real problem remains unfixed. The correct response is for the committee to ask, “What caused the human error? How could that have been prevented?” Find the root cause and then cure that. To me, the most frustrating aspect of these errors is that they result from poor design. Incompetent design. Worse, for decades we have known how proper, human-centered design can prevent them.

Norman points out several egregious design flaws with this alert system.  First, why was a confirmation not required before the alert was sent?  Ideally, he notes, the confirmation should be provided by a second person working independently from the person who selected the alert message.  Second, when operating in test mode, the messages should all start with a clear indication that it is only a test.  That should be in bold!  It should be capitalized!  It should be crystal clear!   Finally, the system should be designed to enable immediate correction.   The delay was preventable with better design.  

In sum, you can look at any failure in two contrasting ways.  You can examine it individualistically, i.e. it is human error.  Or, you can look at it systemically, i.e. what systems, procedures, and situational factors contributed to poor actions or decisions?   The latter approach is much more likely to lead to learning, improvement, and future accident prevention.   We have shown that in our own research on tragic accidents such as the Columbia space shuttle accident.   

Friday, January 12, 2018

Managing Promotions Effectively

How do you maximize employee productivity? To answer that question, many companies focus a great deal on the extrinsic reward system. Others recognize, rightfully, that intrinsic motivation matters more than the compensation scheme. These firms focus on the organizational culture, mission statement, and other factors that may shape the work environment and employee behavior. Jeff Haden, contributing editor, points out that one factor may be more important than all the rest. Here's an excerpt from this article:

A survey of over 400,000 people across the U.S. found that when employees believe promotions are managed effectively, they are more than two times as likely to give extra effort at work -- and to plan for having a long-term future with their company.  But wait, there's more: When employees believe promotions are managed effectively, they are more than five times as likely to believe their leaders act with integrity.  The result? At those companies, employee turnover rates are half that of other companies in the same industry. Productivity, innovation, and growth metrics outperform the competition.

Why such a significant impact with regard to promotions?  I think it's because employees care a great deal about what scholars call procedural justice.   In short, we don't just care abou the outcomes that we experience at work.  We care about the process by which decisions are made.  If we perceive those processes to be inequitable, unjust, or illegitimate in any way, then our commitment, satisfaction, and trust in leadership will decline.   So, as you think about promotions, remember that everyone is watching, not just the people in that particular department.  They are looking to see if the process is just.  

Wednesday, January 10, 2018

Reaching Your Goals: The Value of an "Emergency Reserve"

What are some techniques for helping individuals achieve their goals?  Wharton Professor Marissa Sharif has conducting some useful research on this topic.  She argues for the value of establishing an "emergency reserve" when setting objectives.  

Consider one experiment that she conducted.  She examined how people performed when setting goals for how steps they would walk each day.   For one group of research subjects, she asked them to try to reach their step goal (either 7,000 or 10,000 steps) during all seven days of the week.  For a second group, she asked them to try to achieve this objective during any five of the seven days.  Finally, for a third set of research study participants, Sharif asked them to reach their steps goal each of the seven days, but she provided them an "emergency reserve" in the form of two "skip days" that they could use at their discretion.  What did Sharif find in this experiment?   The people provided the skip days did a better job of achieving their step goals, and in total, they walked more steps during the week!  

Why is the emergency reserve so effective? Human nature seems to cause us to cling to those skip days. We don't want to use them unless it's a true emergency. People feel bad about using them simply because of a lack of willpower. That feeling causes us to walk more steps each day. 

Sharif also finds that individuals enjoy having emergency reserves. It makes them feel better about setting aggressive goals, and it makes them more likely perhaps to set out to achieve an ambitious objective. She concludes,

"I found that if people have these bigger goals of trying to lose weight or trying to become fitter, they prefer goals with emergency reserves to goals without. What this means is that not only can companies help their consumers perform better by incorporating emergency reserves into their goals, but they can also attract them to sign up initially by offering emergency reserves within their program."

Tuesday, January 09, 2018

The Middle Manager as Translator

Middle managers often are bombarded with information from above and below in organizations.  They must share directives and plans with the people working on the front lines of the organization.  At the same time, they must listen carefully to their team members and communicate their concerns, questions, and ideas upward in the organization.   In so doing, they play the role of translator in many cases.  Why?   Top executives and front-line employees do not speak the same language at times.  In fact, they speak starkly different languages - Greek and Japanese, if you will.  

Consider the goals established by senior management.   The CEO and his or her team often speak in terms of broad financial and strategic goals such as Return on Invested Capital, Market Share, Total Shareholder Return, and Asset Turnover.    The language fits the audience that they must deal with most regularly:  outside investors, Wall Street analysts, credit rating agencies, board members, and fellow members of the top management team.  

Consider, though, the meaning of this language system to front-line employees.  In many situations, they do not understand these goals clearly.  How exactly do you calculate Asset Turnover, and what does it say about the health of the organization?  Perhaps more worrisome, front-line workers may not care much about these objectives.  It's hard to imagine a retail cashier or assembly line worker, such as my parents, eager to get to work in the morning to achieve a higher return on invested capital.  What do they care about?  How do they find meaning in their work?  What motivates them?  The middle manager must answer those questions, and they must translate those top-level financial and strategic goals into a set of concrete objectives that are meaningful and important to the front-line employees.   Then, they must connect those objectives, and the work people are doing in pursuit of them, to the bigger picture.  In so doing, middle managers help workers understand the role they play in helping the firm achieve its larger objectives.   

At the same time, middle managers must listen carefully to their team members.  They speak their own language about the work being done, the concerns of customers, and the problems with the firm's processes and systems.   The middle managers must translate what they are hearing, so that they can communicate these issues clearly and concisely to top managers.  The middle managers must ask themselves:  How do these concerns or problems get in the way of achieving the firm's top level goals?  What resources and management support do my employees need to make the improvements that they suggest?  Top management may not understand these issues clearly, as they are so far removed from the work itself, and from the customers.  By translating their team members' ideas and concerns appropriately, middle managers can achieve the type of alignment required the organization and its employees to thrive.  

Monday, January 08, 2018

Big Data and The Analytics Paradox

Kellogg School Professor Eric Anderson describes an interesting phenomenon that he calls the “Analytics Paradox.”  Anyone grappling with how their firm employs data science as part of their business strategy should become familiar with this concept.  Anderson explains:  

A young firm starts out making many mistakes. Eager to improve, they collect lots of data and build cool new models,” he says. “Over time, these models allow the young firm to find the best answers and implement these with great precision. The young firm becomes a mature firm that is great at analytics. Then one day the models stop working. Mistakes that fueled the models are now gone and the analytic models are starved."

Anderson offers an example of the analytics paradox.  Imagine that a firm provides two-day delivery services.    They consider using data analytics to help make an important decision: whether or not to offer one-day delivery services to customers.  You might be hard-pressed to answer that question using analytics.  Why? An effective organization becomes proficient at executing two-day delivery.  If the firm can't meet two-day delivery deadlines on a regular basis, processes and systems are changed.  Employees who can't meet the two-day delivery schedule get admonished or even dismissed.  In short, a firm that is very effective at execution will drive all variability out of its "production" system.  Yet, without variability, you will find it very difficult to use analytics to drive improved decision making. 

What can you do to conquer the analytics paradox?    Put simply, you need to inject variability into your system by promoting thoughtful and systematic experimentation.   The use of experiments enables you to test different models and systems, and in so doing, generate the type of data that can be analyzed effectively to enhance decision making.  

Saturday, January 06, 2018

How You Think vs. What You Know

Philip Tetlock wrote a terrific book last year titled Superforecasters.  In that book, he describes the  decades of research he has conducted on expert predictions. Put simply, he has found that experts don't make great prognosticators, despite their vast knowledge and experience. Knowing a great deal does not enable you to see the future. In fact, it can be a handicap at times, because you may be tied down by conventional wisdom, long-held assumptions, and pre-existing beliefs. In Tetlock's research, he has found that a small set of people have an uncanny ability to make accurate predictions. These people are not experts in the domain in which they made those forecasts. What enables them to predict so effectively? Tetlock conclues that the key is HOW THEY THINK, not what they know. The best forecasters exhibit the following characteristics:
  • They are open-minded, reflective, and intellectually curious. 
  • They acknowledge what they do not know. 
  • They gather information from a wide variety of sources and question the validity of each source. 
  • They enjoy pondering a range of diverse views, and they update their conclusions as facts change. 
  • They treat beliefs as testable hypotheses rather than hard truths.
In my view, the same might be said about the best leaders.  They often distinguish themselves by how they think, not what they know.   The best leaders are reflective and intellectually curious, question the conventional wisdom, do not become wedding to existiing beliefs, admit what they do not know, critique the validity of information sources, and gather diverse opinions before making key decisions.  

Tuesday, January 02, 2018

Nick Saban and the Power of Small Wins

One more blog post about goal setting as the new year begins!  At this time of year, I always find it useful to reconsider Karl Weick's famous article about the power of small wins.   He wrote the article back in the 1980s, and it still resonates so powerfully today.  Here's an excerpt:

A small win is a concrete, complete, implemented outcome of moderate importance. By itself, one small win may seem unimportant. A series of wins at small but significant tasks, however, reveals a pattern that may attract allies, deter opponents, and lower resistance to subsequent proposals. Small wins are controllable opportunities that produce visible results... Once a small win has been accomplished, forces are set in motion that favor another small win. When a solution is put in place, the next solvable problem often becomes more visible. This occurs because new allies bring new solutions with them and old opponents change their habits. Additional resources also flow toward winners, which means that slightly larger wins can be attempted.

As you think now about setting ambitious goals for yourself and your organization, develop a "small wins" strategy as well. What are those near-term victories that you will achieve that will create a sense of accomplishment, persuade naysayers to support your efforts, and attract other allies?  

Last night, the University of Alabama defeated Clemson in the college football semi-finals.  Alabama Coach Nick Saban will now have an opportunity to win sixth college football national championship. Saban understands the value of a small wins approach. Naturally, each season begins with the long term goal of winning another national title. However, he focuses on many small wins along the way, rather than dwelling on the big picture each day. He calls it "the process." Author Ryan Holiday describes how Saban addresses his team throughout the season: 

Don't think about winning the SEC Championship. Don't think about the national championship. Think about what you needed to do in this drill, on this play, in this moment. That's the process: Let's think about what we can do today, the task at hand.