The Effect of Competition on Creativity

Source: Pixabay

Daniel Gross has published an interesting NBER working paper titled, "Creativity under fire: The effects of competition on creative production." Gross writes the following in describing his key findings:

This paper studies the incentive effects of competition on individuals’ creative output, exploiting a unique field setting where creative activity and competition can be precisely measured and related: tournaments for the design of commercial logos and branding. Using image comparison tools to measure originality, I show that intensifying competition both creates and destroys incentives for creativity. While some competition is necessary to induce high-performing agents to develop original, untested designs over tweaking their existing work, heavy competition discourages effort of either kind.

The key idea here is that a certain amount of competition can encourage people to continue exploring original ideas, rather than simply becoming conservative and making only incremental changes to previous work because of positive initial feedback.  Of course, as Gross notes, the ability to find just the right level of competition to properly motivate creative work is very tricky.  He describes the challenge of achieving the "Goldilocks" level of competition - just balanced in the optimal way.  It's hard to do.  The paper is interesting, nonetheless, because it seems to counter some arguments that have been made in the past suggesting a simple negative relationship between competition and creativity.   In short, those past arguments tend to be very negative toward extrinsic rewards and favor methods for fostering intrinsic motivation as a means of encouraging creative work.   They favor collaboration over competition.  Gross' work suggests that competition can play a favorable role, but only if managed carefully.  

Solo Founders or Teams: Who Has More Success?

None of us is as smart as all of us. Right?  Teams are smarter and more effective than individuals at challenging tasks, right?  Not so fast.  New research by Jason Greenberg and Ethan Mollick examines new ventures.  They found that solo founders tend to achieve better results, at least in terms of certain metrics, than entrepreneurial ventures founded by a team of people.  Here's an excerpt from an NYU summary of the research:  

Common wisdom has assumed that the value of having a team is additive or even synergistic, based primarily on the theory that starting a business requires a portfolio of skills and resources that few individuals possess. However, in “Sole Survivors: Solo Ventures versus Founding Teams,” Professor Greenberg and his co-author, Wharton’s Ethan Mollick, showed that companies started by solo founders survive longer and generate more revenue than those started by teams, while not performing significantly differently across various operating categories.

The authors’ unique dataset was comprised of companies that were crowdfunded via the Kickstarter site between 2009 and 2015, were eventually established formally, and whose performance could be followed for several years. For-profit and nonprofit companies were analyzed separately, and collectively they raised $151 million in crowdfunding and generated approximately $358 million in revenue.

Of course, these results do not suggest that teamwork is not essential for a new venture.  It speaks to the possible frictions and dysfunctional conflict that can occur when you have multiple founders though.  Moreover, it may speak to the speed of decisions in situations where multiple founders must come to an agreement on key strategic choices.  Still, one should not conclude that a solo founder does not need  a strong team around them.   Collaboration is essential in many aspects of a startup, regardless of the structure at the very top.  

Knowing Other People's Salaries at Work

Source: picpedia.org

In recent years, we have heard some people advocate for pay transparency in organizations.  The recommendations in this regard have received a great deal of publicity, with arguments for and against the concept being made in the press.  Now we have a well-crafted research study that examines the topic.  How does knowledge about fellow employees' salaries affect a worker's motivation and effort? Zoë Cullen and Richardo Perez-Truglia examined this question in a paper titled, "How Much Does Your Boss Make? The Effects of Salary Comparisons."  The scholars conducted a study of over 2,000 workes at a large commercial bank.  They discovered that knowledge about your manager's salary can enhance your motivation.  However, having salary information about your peers can be demotivating.  Here's a summary of the findings from HBS Working Knowledge:

The research results were sometimes counterintuitive, Cullen says. For example, employees worked harder after discovering how much their managers made. For every 1 percent higher in the perceived salary of a manager, employees clocked 0.15 percent more hours.  

But the employees’ extra effort diminished as the difference in rank between employee and manager widened. In some cases, “We were looking at how employees responded to managers who were five promotions away and who they explicitly thought were in positions they themselves would never achieve,” Cullen says. In those cases, the work-harder reaction was much smaller but did not become negative. When employees received salary information about managers who were closer to their own rank, they may have found the salary difference aspirational—just a promotion or two away, she says.

While knowledge of managerial compensation seemed to coax more effort out of workers, the exact opposite happened when employees learned what peers were making. For every 1 percent higher salary a co-worker earned over the employee’s expectation, they worked 0.94 percent fewer hours, the researchers found.  

In a global environment where companies are scrambling to find qualified workers to fill vacancies, another important finding emerged. When an employee learned a co-worker’s salary was 1 percent higher than estimated, chances rose by 0.225 percent that they’d leave the company.

In Search of Humble Bosses

Source: Flickr

Sue Shellenbarger has written a column for the Wall Street Journal today titled, "The Best Bosses are Humble Bosses."  Schellenbarger notes that many firms are now trying to assess humility right from the start, during the hiring process, because they believe that it's a vital attribute of effective leaders.  She cites a variety of studies suggesting that humility can be a positive characteristic for leaders.   When leaders exhibit humility, positive results include better collaboration among team members, more team learning, and lower employee turnover.  She doesn't discuss psychological safety specifically, but I suspect that humility on the part of leaders tends to make it safer for team members to speak up, and that open dialogue and collaborative learning leads to better team performance.    Here's Shellenbarger's summary of some of the research findings: 

Workplace researchers often rely on subordinates’ reports to assess leaders’ level of humility. In a 2015 study of 326 employees working on 77 teams at a health-care company, researchers asked team members to assess their managers’ humility, based on a scale including their willingness to learn from others or admit when they don’t know how to do something. Team members also assessed their teams’ attitudes and performance.

Teams with humble leaders performed better and did higher-quality work than teams whose leaders exhibited less humility, according to lead researcher Bradley P. Owens, an associate professor of business ethics at Brigham Young University.  The performance gains held up independently of how much team leaders exhibited other positive leadership qualities unrelated to humility.

I know what you might be thinking at this moment.  What about Jeff Bezos, Elon Musk, Steve Jobs, Larry Ellison, Bill Gates, and the like?  They don't strike us as very humble leaders, yet they revolutionized entire industries in many cases.  Of course, Shellenbarger is not suggesting that you MUST be humble to succeed.  However, she's making a case that, for most of us, pulling off the arrogant and largely benevolent dictator model of leadership is highly likely to lead to failure!  The bigger question is: Can firms actually assess humility effectively during the hiring process?  Plenty of research suggetsts that the hiring/screening process at many firms is highly problematic.  So, there's more work to be done, even if we know that humility is a desirable characteristic.   

Disagreeing with the Boss

Source: maxpixel.net

Vivian Giang has written a useful article for Fast Company about how to disagree effectively with your boss or other senior leaders in your organization.  She draws on the expertise of Priscilla Claman of Career Strategies, Inc.  Giang provides several recommendations:

1.  Know Your Boss' Decision-Making Style

Are they influenced by data and formal analysis?  Do they worry about how their decisions affect interpersonal relationships?  In short, you need to know what type of argument or presentation will be most influential with your boss.  Speak and make your case in a format and style that will make the most impact with that person.  

2.  Recruit Credible Allies

Don't go it alone.  Find others who can rally behind your argument and stand with you.  Perhaps they can even join you in making the case to your boss or other senior leaders.  Or, perhaps, you can identify the leader's confidante or trusted adviser.  Make your case first to that person, as they may be your best channel for presenting a constructive dissent and persuading your boss to listen carefully.  

3.  Identify Your Baggage

Consider your past experiences and your reputation/track record.  Now put yourself in your boss' shoes.  What will they automatically assume about you and your argument?  What will they expect of you?  If you can recognize any baggage that you may bring to the conversation, you can anticipate roadblocks and objections much more effectively.  

Gender Diversity and Venture Capital Firm Performance

Source: Pixabay

HBS Professor Paul Gompers and his colleagues have conducted impactful research on the impact of gender diversity, or lack thereof, in the venture capital industry.  Not surpisingly, they found that venture capital firms tend to have homogenous management teams.   Most of the partners tend to be white men with liberal arts undergraduate degrees and MBAs.  A significant portion attended Harvard Business School.   The representation of women in the venture capital world has not increased much since 1990, according to Gompers' research. He notes, "“We really saw how powerful the force of ‘birds of a feather flocking together’ was. The more similar you are to someone, the more likely you are to work with them.”  The scholars discovered that, "Partners who came from the same school achieved an 11.5 percent lower success rate for acquisitions and IPOs; those who were ethnically homogenous saw a success rate 26 to 32 percent lower."  

To disentangle correlation from causation, Paul Gompers and Sophie Wang conducted another fascinating study.  They reviewed alumni data from universities that accounted for most of the venture capital partners in their sample. They discovered that partners with daughters tended to hire more women as partners in their firms. Then they examined venture capital fund performance, and they found a substantial advantage for funds with at least one woman serving as a partner. According to HBS Working Knowledge, "While the median venture capital fund return is around 14 to 15 percent, funds with a female partner returned 16 to 17 percent. Moreover, having women as partners increased the percentage of successful startups supported by those firms—that either went public or sold for more than their total capital investment—from about 28 percent to about 31 percent." 

Reducing Leader Overconfidence

Daniel Walters, Philip Fernbach, Craig Fox, and Steven Sloman have developed an intriguing and apparently quite effective technique to curb overconfidence.  They published their research in a paper titled, “Known Unknowns: A Critical Determinant of Confidence and Calibration."  Walters described the key findings and implications from this research in a web essay published by INSEAD,  where he serves on the faculty. 

The scholars describe a technique in which people are asked to "explicitly consider the missing pieces of information in a judgment." In other words, they try to identify and write down what they don't know about a situation, i.e. what are the key unknowns? They compared this methodology to another technique often recommended for improving decision-making effectiveness: devil's advocacy. Walters reports that identifying unknowns can be more effective than devil's advocacy. Why? In one of their experiments, they examine two situations: one setting in which people were overconfident and another where they were underconfident. They found that devil's advocacy reduces confidence in both settings. On the other hand, considering unknowns only reduces confidence in the situation where people were initially overconfident.  Devil's advocacy proves to be a "blunt instrument" in their words.  Here's Walters' summary of the research:

The third study allowed us to test whether considering the unknown reduced confidence or improved calibration. In many domains, people demonstrate underconfidence and are overly cautious. A true improvement in calibration would mean that considering the unknowns reduces confidence when people are overconfident, but not when people are well-calibrated or underconfident. In this study, participants answered two sets of general knowledge questions. The questions were divided into nine knowledge domains (e.g. state populations, calorie counts), for which participants varied in their level of overconfidence versus underconfidence. As in the second study, participants either considered the unknown, or considered the alternative (the devil’s advocate technique). Both interventions were compared with a group which had no prompting to ponder additional information. As we predicted, considering the unknowns only reduced confidence when it was misplaced (in overconfident domains), whereas playing devil’s advocate had an equal impact in the subject areas that encouraged overconfident and underconfident responses.

The research is intriguing.  I would offer two caveats.  First, I would argue that many organizational leaders display overconfidence much more frequently than underconfidence.  Second, I have come to believe that WHO plays the devil's advocate, WHEN they play that role, and HOW they serve as the devil's advocate matters a great deal.  Indeed, it is a blunt instrument, particularly if not used properly. However, with some care, the technique can be deployed with much success.   

CEO Tenure: What Does the Evidence Indicate?

John Stoll has published an interesting article in the Wall Street Journal today about CEO tenure. He  describes academic research by Xueming Luo, Vamsi K. Kanuri, and Michelle Andrews. Their work examines the optimal tenure of a chief executive. The scholars conclude that the optimal tenure is roughly five years. Here's Stoll's summary of their work, with some comments from the researchers: 

We tend to celebrate long tenure, but there is evidence that boards are becoming less patient, and that’s a good thing. Researchers, studying a decade’s worth of financial and share-price performance of hundreds of large-cap companies, found that the “optimal tenure length” is 4.8 years.

Xueming Luo, a professor at Temple University’s Fox School of Business and one of the authors of a widely cited 2012 study, said CEOs are most effective in the initial years because they are more open to outside opinions and less risk-averse. “The search for external knowledge tends to end,” he told me this week.

“It eventually becomes a situation where the CEO surrounds themselves with a lot of ‘yes’ people,” Michelle Andrews, a coauthor of Dr. Luo, said. “At a certain point, there are diminishing returns.”  Leaders operating in declining markets and other volatile environments, Dr. Luo said, tend to turn inward faster than if things are going smoothly.

The Downside of Testing, Prototyping, and Experimentation?

I'm a big fan of the concept of testing, prototyping and experimenting during the product development process.  I believe in David Kelley's philosophy: Fail often to succeed sooner.   I think that "test and learn" and rapid iteration beats formal planning every time in highly ambiguous environments.  However, new research suggests one very important limitation to testing that involves going to market with a minimal viable product (MVP).  

Andrea Contigiani, a researcher at the Mack Institute for Innovation Management and a Wharton doctoral candidate, assembled a fascinating dataset on the product development efforts at over 1,000 software startups. He looked at how these firms' approaches to product development changed after a landmark court decision, Alice Corp v. CLS Bank International, made patenting software less effective.  He wondered if firms changed their behavior after this court ruling, for fear that prototyping and testing might invite many imitators and therefore make it harder to establish and defend competitive advantage.  He explains his findings:

I found two things, broadly speaking. One is that after Alice took place, the affected companies changed strategies. In particular, they seem to be less likely to test their product; they do less experimentation. Given that they can no longer use patents to protect their ideas, experimentation becomes risky. Sure, you get the benefit of learning, but the cost of doing so goes up. So it’s not necessarily a good idea.

On the other hand, they seem to launch their product faster. They go to market sooner and so they can start getting feedback. Adapting your product, or pivoting, once you are in the market is a little harder [than early testing], because adaptation costs are higher. But on the other hand, once you do that you are essentially creating other barriers to imitation, like brand and network effects. So it is safer.

The second result is more about performance, and there I looked at what happened to companies that did a lot of experimentation while in the new post-Alice regime where they could not really protect through patents. I saw a negative correlation between doing that and performance.

Companies that experimented a lot without potential access to patent protection were less likely to get funding, and they also seemed less likely to get acquired. And so overall, this choice seemed to really affect the performance.

The findings are fascinating.  I would offer one important caveat though.  Contigiani is studying testing that involves actually going out into the market with a product, or at least exposing ideas to public inquiry and study.  Much testing, prototyping, and experimentation can take place in a very private way, so as to not enable potential rivals to learn about innovations.  It seems to me that firms ought not to be eliminating testing and prototyping, but thinking instead about how to do it in a way that protects their ideas from imitation.  

How Leaders Shape Team Creativity

Source: Pixabay

I recently came across an interesting article by Lei Huang, Dina Krasikova, and Dong Liu. It's titled, "I can do it, so can you: The role of leader creative self-efficacy in facilitating follower creativity."  They find that teams produce more creative work when leaders are highly confident in their own creative capabilities.   Writing in the BPS Research Digest, Alex Fradera points out that this result is not necessarily what one might predict.  the opposite could very well be true - leaders with confidence in their own creative abilities could focus on performing well individually, rather than faciliating the creative work of their team members.  Fradera writes: 

You could imagine the opposite to be the case: that creative leaders pursue their own creative ideas to the cost of supporting their followers, and are reluctant to view what their followers produce as creative, due to their own higher bar for what counts as such. No doubt such cases exist. But this study suggests that in normal functioning leadership contexts, managers recognise that the route for delivering the kind of work they care about is through their followers, so if they want creative results, they have to facilitate it, not produce it personally.

Naturally, a follow-up question might be:  What builds a leader's creative self-efficacy?  How do you build up what IDEO's David and Tom Kelley call "creative confidence"?  I believe that you can only enhance your self-efficacy through action.  You must learn by doing.  If you engage in small projects that require you to exercise your creative muscles, and if you are provided support and training, you can produce good creative work and build your confidence.  Practice, practice, practice.  Stop believing that creativity is simply a genetic trait, and start acting in ways that prove to yourself that you have creative capabilities.  

Do Intercultural Relationships Enhance Creativity?

Source: Flickr

MIT Professor Jackson Lu and his co-authors have published an interesting new study regarding the impact that intercultural relationships can have on creativity. They conducted a series of studies to explore this relationship. What did they find?

Experimental research showed that dating others from different cultures seemed to have a positive impact on divergent thinking. To build on their experimental studies, the scholars then explored a large dataset of more than 2,000 professional repatriates from many different countries. They found that, "Participants’ frequency of contact with American friends since returning to their home countries positively predicted their workplace innovation and likelihood of becoming entrepreneurs." The scholars go on to conclude that, "Going out with a close friend or romantic partner from a foreign culture can help people 'go out' of the box and into a creative frame of mind." 

Past studies have shown similar impacts from travel experiences. Spending substantive amounts of time immersed in other cultures can have a positive impact on creativity. These studies speak to the importance of hearing and learning about others' disparate experiences, breaking out of our normal routines and getting away from our perhaps homogenous work groups, and honing our empathy skills, as important drivers of creativity and innovation.

Beware When Leaders Blame the External Environment

Source:  pexels 

My favorite comments from corporate quarterly earnings reports tend to be those that blame the weather for poor same store-sales growth, when no natural disaster or major weather event has occurred.  They simply blame the unusually rainy month of May or the above-average snowfalls in the month of February for lackluster sales.  Hmm..... what's really going on?    Analysts and investors must accept these explanations with great caution.

Remember that human beings tend to exhibit what psychologists call the fundamental attribution error.  When others fail, we look inside of them for their faults or their inadequacies that may have caused that failure.  When we fail, we look outside of ourselves, blaming external conditions or unforeseen situational circumstances.   Corporate leaders do the same, of course.  It's easy to find fault with external conditions, rather than looking in the mirror.

How does one distinguish between invalid attributions or honest assessments of external factors that may have inhibited performance?   One easy way is to look at competitors.  Are they suffering the same fate?  The analysis applies to many metrics, not just sales.  If a few rivals are doing exceedingly well in the same competitive environment, then one has to ask why executives are so readily blaming external circumstances for the poor performance.  

Building a Healthy Board of Directors Culture

Several years ago, I served as an adviser for the Alliance for Advancing Nonprofit Healthcare as the organization produced a terrific report titled, "GREAT GOVERNANCE:  A PRACTICAL GUIDE FOR BUSY BOARD LEADERS AND EXECUTIVES OF NONPROFIT HEALTH CARE ORGANIZATIONS.  I think the recommendations in this report apply to any board of directors, not simply those operating in the nonprofit or healthcare space.  One aspect of the report focused on developing a healthy board culture.  I'm glad to have contributed to that portion especially, because it is such a challenging, yet important, aspect of effective governance.  Here's the excerpt on board culture:

Great boards intentionally focus their time on critical issues, dedicating a substantial portion to strategic thinking, in addressing critical issues, they find ways to create healthy tension, constructive debate and respectful disagreement in the boardroom so that diverse perspectives are brought to bear in the decision-making process. 

Key Action Steps: 

Agenda Planning. Taking into consideration the overall board schedule for the year, the board chair and CEO jointly set in advance the meeting agenda, dedicating a substantial portion to strategic issues or ideas. 

Agenda Construction. The agenda should be annotated with a clear description of the issue and purpose of each agenda item and/or required action. Time should be allocated proportionate to the importance of the matters to be discussed. Consequently, board meetings should begin with agenda items that require action at that particular meeting. The next significant block of time should be devoted to learning about and deliberating on critical strategic issues that are likely to require action in the intermediate-to-longer term, with the board chair prepared with specific questions to be addressed in order to focus those discussions. Routine presentations and reports should follow the action items and strategic deliberations, with as many as possible being handled via a “consent agenda.” As appropriate to the agenda, committee chairs should be given the opportunity to make presentations. The agenda should include an item at or near the end of each meeting for the identification and assignment of follow-up actions. 

Preparing to Make Major Decisions.The board should rarely, if ever, make decisions on highly significant issues the first time they appear on the agenda. Adequate time should be provided for discussion at one or more meetings, with the decision made at a subsequent meeting. As noted earlier, the necessary information should be provided in a timely manner in advance of discussion, and the board should consider having at least one “outside” member to help stimulate robust discussion on major issues. In addition, the board chair should use one or more of the following techniques to help stimulate effective discussion: 

• In advance of the meeting discussion, assigning alternative positions to two or more groups, requesting each group to make the best case for its position (irrespective of members’ personal views)
• Appointing “devil’s advocates,” on a rotating basis
• Encouraging all board members during the meeting to express and debate their diverse opinions and even, on occasion, to register minority votes 

Oversight of Committee Work. Where committees are needed, the board should establish charters spelling out their charges, which should relate to the organization’s strategic priorities approved by the board. In addition, the board should challenge committee recommendations wherever appropriate and require periodic assessments of such committees, by their members and by the full board.

Orangetheory's Success & Behavioral Science

Source: Flickr

Charlotte Blank, Chief Behavioral Officer of Maritz, has written an interesting article called, "Sweatin' to the Behavioral Sciences."  In the article, she tries to explain some of Orangetheory's recent success in the fitness business. For those who are not aware, Orangetheory offers boutique exercise studios at a substantial price premium to many gyms.  It has attracted many fans.  Of course, the fitness industry's history is littered with fads that have come and gone.  Exercise gyms and clubs have notoriously fickle customers. Still, for at least awhile, Orangetheory has attracted a large following.  The question is why.  Blank offers some interesting explanations drawn from behavioral science.   Here's one portion of her explanation:  

Embrace the "Medium Effect." Orangetheory has become a phenomenon because it masterfully gamifies the workout experience. In each high-intensity interval workout, participants wear heart-rate monitors and track their stats on overhead screens.

Their goal is to reach the desired “orange zone” for at least 12 minutes, each one represented by a “splat point.” Earning 12 splat points “unlocks” up to 36 hours of post-workout metabolism “after burn.” Free calorie-burn! To me, all the fast-turning points, rounds and rewards make an Orangetheory class feel like an intense 53-minute video game (minus the luxury of sitting on my couch).

One explanation for why these point-based gamification systems are such powerful motivators could be the “Medium Effect.” In their research at the University of Chicago, Christopher Hsee and his associates demonstrated that when there’s a medium point between our effort and our goal, we have a bias toward maximizing the medium itself.

In this way, the “splat points” serve as a medium between our effort (panting on the treadmill) and our goal (fitness). “Fitness” is an ambiguous concept, so we focus on earning points and trust that have a linear relationship to fitness. Hitting our 12 points each day is a satisfying proxy for reaching our fitness goals.

How Might We?

Too often, we find it easy to poke holes in a proposal put forth by colleagues.  We find all the flaws rather easily.  However, we don't provide feedback that actually helps strengthen the proposal, nor do we offer any plausible alternatives.  In those moments, team leaders need to consider what might be the best secret weapon at their disposal. It's a simple question:  How might we?   In those cases, when the discussion is quite negative, focused only the flaws in a particular idea, the leader might interject by asking:  How might we make this idea work?  How might we address the shortcomings that have been identified?  How might we find a different way to achieve the same objectives?  How might we deisgn a test or experiment to validate the assumptions that are being scrutinized here?  The goal with a good "how might we" question should be to encourage the team to consider new possibilities.  Moreover, it should help shift the dialogue and the mindset from "it will never work" to a "maybe we can find a way to get this done."  

Source: Blue Diamond Gallery

The question, of course, presumes that the group agrees on the goals and objectives, but simply disagrees on the path to achieving those outcomes.  What if the team doesn't actually agree on the goals?  Then the leader needs to step back, put aside the proposals on the table, and try to clarify why alignment does not exist.  In some cases, leaders may be taken aback by lack of agreement on core goals and objectives.  It may be because people feared speaking up and expressing their disagreement regarding a particular goal.  A lively dialogue about goals need not be a negative occurrence.  Sometimes, such discussions can really help clarify the strategy moving forward.  From time to time, it's useful to check in and make sure that a team is aligned with regard to the outcomes it is trying to achieve.  A shift or evolution in the goals might just be in order.  

Musk, Tesla, and the Leap of Faith

Elon Musk and Tesla have dominated the business news over the past several months.  Observers and analysts have watched closely to see if Tesla can successfully ramp up production of the Model 3 sedan.  The ability to scale production will prove essential in the organization's efforts to achieve profitability.  The company has little chance to turn a profit, regardless of the appeal of the brand and the quality of the vehicles, if it cannot produce higher volumes so as to lower manufacturing cost per unit.  Of course, more recently, Tesla has made news of a different sort, as many people have questioned Musk's ability to manage an increasingly complex organization.   Late-night tweets, strange comments with regard to the Thai cave rescue, surprise pronouncements about taking the company private, and even smoking marijuana on a podcast have all captured a great deal of attention.   People wonder if he can keep up the long hours, as well as whether he can retain executives on his team.  He has churned through a great deal of managers in the past year, just as he needs the ability to delegate key operational responsibilities to trusted subordinates.   

For me, the interesting part about Tesla's situation has to do with the way people value the company.  How can a firm lose tons of money quarter after quarter, yet until recently maintain a market value over $50 billion?  Faith.  Lots of it.  Investors believe that the company has a promising future.  In particular, they have a great deal of faith in Musk himself.   Investors have viewed him as a visionary, and they expect strong future cash flows because of the strong brand that he has built and the lead he has taken in building electric vehicles.  However, in these cases, where so much of the market value is predicated on the faith in one leader, much risk comes along too.  What if investors lose faith in the leader?  How damaging will that be both to the firm's market value and its ability to raise additional capital?  In the case of Amazon, the firm lost money for years, yet investors and analysts retained a great deal of faith in Jeff Bezos not simply as a visionary, but as an operational leader.  They believed that he could execute.  Musk faces an inflection point now.  Can he inspire renewed faith among the investor community?  Can he regulate his behavior so as to make people comfortable with his ability to lead the organization as it scales production substantially?  Can he build a management team that is willing and able to work for him, despite his micromanagement tendencies?   Amidst all the numbers and the debates about production costs, margins, and the like, the future of Tesla rests in large part on the "soft stuff" - the behavior of a leader and the faith of others in that leader.  Small stuff matters.  Musk has to recognize that his every action and word will be scrutinized closely, fairly or unfairly.  Words and small deeds do matter, regardless of how beautiful the car looks and how well it drives.  Meanwhile, the Board has a crucial responsibility.  The directors must exercise their duties and obligations vigorously, to insure that Musk addresses some of his shortcomings quickly and effectively.  The coming weeks and months are sure to be fascinating to watch.  

Retraining Workers as Jobs Evolve

Source: Pixabay

The Wall Street Journal published an interesting article today by Austen Hufford titled, "Companies Ramp Up Worker-Retraining Efforts."  Hufford explains that many firms are struggling to find good people given the very tight labor market.  Moreover, many jobs have evolved due to technology innovation.  Thus, companies have invested in new initiatives to retrain workers for their emerging needs.  As an example, Louisiana-based Lamar Advertising is retraining workers accustomed to painting billboards to now repair digital billboards.  These digital displays only account for a tiny fraction of the company's billboards, yet they generate more than 20% of the firm's billboard revenue.  

How should firms think about launching worker-retraining initiaves?  First, I think that companies have to recognize that these investments, while perhaps quite substantial, often pale in comparison to the alternative.  Firms have to weigh the cost of retraining against the extraordinary expenses that they often must incur to recruit and onboard new talent.   In high employee turnover situations, the recruiting and onboarding costs can be astronomical.   Retraining often proves to be a worthwhile investment when judged in this way.   Second, retraining efforts often yield other substantial benefits.   For instance, organizations may find that employee engagement increases when people feel valued and have the opportunity to better themselves through retraining.  Third, investing in internal retraining efforts enables companies to customize their worker training, development, and education to suit their organization's specific needs.   Finding talent from the outside often means that firms rely on training that is quite general and does not meet their particular needs.   Finally, retraining efforts enable dedicated employees to share their newly developed skills with others.  As people master new skills, they can become the trainers for the next group of workers who enter training programs.   Sharing expertise in this manner often has two important benefits.  It reinforces the skills that one has learned, while offering a tremendous sense of satisfaction and pride for workers.   

Learning Something New... Without Forgetting the Old

Kristin Wilson and Scott Rockart have published an intriguing paper titled, "Learning in Cycles."  In this article, the scholars examine how firms learn and adapt over the course of business cycles.  They examine a critical challenge that organizations face as they encounter cycles.  Firms must learn and apply new lessons and skills at different points in a business cycle, but they must not forget old lessons and capabilities... as they may need them again in the future as the cycle changes once more.   In a feature on Duke's Fuqua Insights web page, Rockart explains some of their findings:  

“What people learn, and what people need to do well, differs at different points of a cycle,” Rockart said. “Imagine you’re a waiter, and during the week you are working with families, taking time over a meal, whereas on the weekends your customers are college kids looking to party. In order to be a good waiter during the week, you introduce yourself, you take time to talk, but on the weekends you are moving fast and not spending as much time with each customer. The waiter knows they need to act differently in those different settings. They’re constantly being reminded because the cycle is so fast.”

But at firms, Rockart said, these cycles can last years.   “So it’s very easy for individuals to forget what they used to know, and even more importantly, to lose confidence in the importance of what they used to know,” he said. “If you’re a manufacturer, when things are booming, you need to make sure you can get supplies, hire workers, and expand a factory. During a downturn you may have to do very different things: make sure your customers won’t fail on credit; that your inventories are lean and your costs are controlled; and reduce your workforce.”

I think the finding is particularly important because we often hear that managers must "unlearn" old behaviors and ideas as they learn and adapt to new competitive realities.  Yet, this research shows that can't discard our learning completely.  Some of those lessons, skills, and capabilities will be useful again as business cycles change. How can we learn without completely forgetting? It's a fascinating challenge for many leaders. This work reminds me of a memorable quote from F. Scott Fitzgerald, who once said, "The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function."

Who Asks For Feedback?

Should leaders ask for feedback?  Of course.  Everyone should desire constructive input that can help them learn and improve.  Do they ask for feedback?  Oh, now we might have a very different story!  Bradley Busch recently wrote a blog post for the British Pyschological Society's Research Digest about a study of feedback-related behaviors by primary school teachers.   Busch summarized the research findings of James Spillane, Matthew Shirrell, and Samrachana Adhikari.  The three scholars recently published a paper in Educational Evaluation and Policy Analysis titled, "Constructing “Experts” Among Peers: Educational Infrastructure, Test Data, and Teachers’ Interactions About Teaching.  Spillane and his colleagues examined the tendency for teachers to ask for, or not ask for, feedback from their peers.  Busch highlights a key finding from this study:

The researchers found that the best teachers, as measured by those who had a higher percentage of students who met the minimum requirement to pass their class, and whose classes had higher than average test scores, were no more likely to be sought out by their colleagues for their advice. On the other hand, these expert teachers were the ones who were actually more likely to seek advice from their peers the following year. It seems that the better the teacher performed, the more likely they were to go out and obtain feedback on how to be even better.

The finding that the most able are not particularly sought after for their advice and are instead more likely to seek it from others is perhaps unsurprising. Other research, known as the Dunning-Kruger effect, has found that the least able tend to have an inflated view of their abilities, which would presumably lead to them seeking out less feedback. After all, why would one seek out advice if they think there is little room for development? As for the expert teachers in this study, the researchers speculate that their advice-seeking tendencies may be explained as “they represent a group of teachers who are constantly striving to improve by seeking out advice and information from others”.

For me, the study leads naturally to a question about leaders in a variety of organizational settings.  Do the highest performing leaders have a tendency to ask for feedback more often than lower performing individuals?  Are the highest performers not sought out more often by their peers for help and advice?  Future research should explore these interesting questions.   My sense is that we will find results quite similar to those described here in an educational setting. 

Getting the Most out of College

Tomorrow I'll head off to bring my oldest daughter off to college.  I'm incredibly excited for her, but I know that I'll miss her a great deal.  Each year on this blog, I often provide some advice for incoming college students... hoping my own students will take a look and perhaps heed some of my advice.  This year, I want to share some thoughts from a very good column in the New York Times this week.  Frank Bruni wrote a column titled, "How To Get The Most Out of College."   Among other things, he touches on some of the key findings from research by Gallup, Purdue University and the Strada Education Network.  Here's Bruni's summary of the results of that work (emphasis added): 

Previously known as the Gallup-Purdue Index and now called the Strada-Gallup Alumni Survey, it has questioned about 100,000 American college graduates of all ages about their college experiences, looking for connections between how they spent their time in college and how fulfilled they say they are now. The study has not found that attending a private college or a highly selective one foretells greater satisfaction. Instead, the game changers include establishing a deep connection with a mentor, taking on a sustained academic project and playing a significant part in a campus organization. What all of these reflect are engagement and commitment, which I’ve come to think of as overlapping muscles that college can and must be used to build. They’re part of an assertive rather than a passive disposition, and they’re key to professional success.

My experience validates this research finding.  My students who have achieved these "game changers" have achieved academic and professional success, while thriving personally as well.  Find a mentor, engage in an in-depth piece of academic work, and become a leader of a campus organization or initiative.  Those are key elements to a successful college experience.