Lessons on the Anniversary of the Three Mile Island Accident

Today marks the anniversary of the infamous Three Mile Island nuclear accident.  It occurred on March 28, 1979.  Given the date, I thought that I would share a few lessons from that catastrophic failure.  Here are a couple short excerpts from a book chapter that I wrote several years ago about catastrophic failures. 

Research on catastrophic failures traces its roots to a groundbreaking study of the Three Mile Island nuclear power plant accident and the development of normal accident theory.  In his 1984 book, Normal Accidents, Charles Perrow examined the structural characteristics of organizational systems that involve high-risk technologies such as nuclear power.  Perrow’s conceptual framework classifies all high-risk systems along two dimensions: interactive complexity and coupling.  Interactions within a system may be simple/linear or complex/nonlinear.  Coupling may be either loose or tight.  Perrow argues that systems with high levels of interactive complexity and tight coupling are especially vulnerable to catastrophic failures.  In fact, he argues that accidents are inevitable in these situations; certain failures constitute “normal accidents.”  Perrow concludes that, “Normal accidents emerge from the characteristics of the systems themselves.  They cannot be prevented.” 

Later in the chapter, I talk about more recent research that has examined "high reliability organizations" - that is, entities that operate complex systems with a high degree of safety.  

 As researchers began to gain a better understanding of why catastrophic failures occurred, a group of scholars started to work concurrently to study complex organizations that have operated with very, very few major safety incidents for many years.   Scholars coined the term “high reliability organizations” (HRO) to describe these entities... They have studied organizations such as aircraft carriers and air traffic control centers.   The error rates for these organizations are remarkably low, given the hazardous conditions in which they operate... In 2001, after roughly a decade of HRO research, Weick and Sutcliffe wrote a book, titled Managing the Unexpected, in which they tried to synthesize and integrate what they and others such as Karlene Roberts had learned about these complex organizations that performed very reliably in hazardous conditions.  They coined the term mindfulness to describe the simultaneous existence of five key characteristics of HROs.   

What are these five key characteristics of high reliability organizations?

1. Preoccupation with failure - "They did not dismiss small deviations, or settle on narrow, localized explanations of these problems. Instead, they treated each small failure as a potential indication of a much larger problem." 
2. A reluctance to simplify interpretations - "HROs try to maintain a healthy diversity of perspectives within the organization, and they constantly test their simplified models of reality."
3. Sensitivity to operations. - "They do not allow the emphasis on the big picture – strategic plans, vision statements, etc. – to minimize the importance of front-line operations, where the real work gets done."
4. Commitment to resilience - "They develop mechanisms for catching and recovery from small failures before they cascade through multiple subsystems of an organization." 
5. Deference to expertise -  "HROs ensure that expertise is tapped into at all levels of the organization. They push decision-making authority down, and they migrate decisions in real-time to the location in the organization where the most relevant expertise lies."

Entering Foreign Markets: Coping with Political Instability

The events in Ukraine have reminded us of the risks that firms face as they expand internationally.   Political instability can take a significant toll on a firm's performance.  More importantly, it can create unsafe conditions for employees and lead to high levels of stress and anxiety.   As firms consider the lessons from the events of the past month, they ought to:

1.  Revisit their entry strategies as they move into other geographic regions.   Should they enter via wholly owned subsidiary (if legally possible), or should they enter via joint venture or franchising?  Retailers and restaurant chains may choose franchising, for instance, not simply because it enables a firm to expand faster.  Franchising also may be advantageous because it minimizes the capital that you put at risk in a potentially unstable environment.  Moreover, franchising, alliances, and joint ventures enable a firm to access the specific local knowledge of people who understand the region, culture, politics, etc.  

2.  Reconsider the reliance that they may have on ex-pats.   Should the organization recruit more local citizens, so as to gain more knowledge of the region and so as to build relationships with local officials?   It's a tricky balancing act.   If you use fewer ex-pats, you may be relying initially on more inexperienced people without deep knowledge of the company operations and culture.   However, in a politically unstable situation, having locals involved could be advantageous.

3.  Reexamine the risk assessment that they have done with regard to each country in which they operate.  Does the organization have an accurate, updated assessment of the risk of political instability?  Is there someone monitoring geopolitical events closely?   Are these risk assessments factoring into the capital investment decisions that they company is making?  

Three Classic Team Design Mistakes

When we create teams in the workplace, we often find ourselves frustrated with the results.  We anticipate that the whole will be greater than the sum of the parts, yet the team does not achieve this potential.  When a team falters, we should examine several potential causes:  bad leadership, poor team design, flawed team process, and a climate in which people not feel safe speaking up.  Leadership, design, process, and climate are key enablers of high team performance.  

Let's take a look at team design for a moment.  What are some of the classic design mistakes that organizations make?  

1.  Leaders build teams that are too big.   In this story in today's Wall Street Journal, Apple engineer Greg Christie describes how the original iPhone development team was "shockingly small."   In this great blog post by Stanford Professor Bob Sutton, he explains that the optimal number for most teams is seven, plus or minus two.   In my latest book, I talk about Intuit's "two-pizza" rule - build teams that can be fed with two large pizzas.  The "two-pizza" rule fits pretty nicely with Sutton's guidance, which is based on research by scholars such as the late Richard Hackman. 

2.  Leaders create teams with "invisible" homogeneity.  Many leaders focus on gender, racial, and ethnic diversity when building a team.  Can a "diverse" team along these dimensions still be considered quite homogenous along other important dimensions?  YES!   Many teams with "visible" diversity have "invisible" homogeneity.  In other words, many members come from the same educational institutions, have the same functional backgrounds, and have worked in the same company or industry for years.    Homogeneity along these teams mean that the team members think alike in many ways and do not bring fresh alternative perspectives to the table. 

3.  Leaders build teams in which members do not have a clear commitment to making the team's work a high priority.  In many cases, people serve on multiple committees or task forces at work.  They are serving on a team in their "spare time" at work.   The team's task is not a focus of their attention.  If too many members fall into this camp, the result will not be successful.  Leaders need to think carefully about how team members are selected, as well as how many teams a particular individual is serving on simultaneously.   In an odd way, the star performers in an organization can become the problem here.  They are often assigned to many teams and task forces because they are so smart and effective.  However, they can easily find themselves spread too thin.  As such, they become a liability to certain teams on which they serve, because they cannot provide the group enough attention and effort. 

When Should You Respond to a Negative Review or Online Complaint?

A customer has had a negative experience.   He or she takes to social media to register a complaint.  Does your company have a fast response capability?   How do you decide when to respond to a poor review?   If you think that you move quickly, check out this amazing story from a recent Fast Company article by Stephanie Vozza:

While dining at the Mexican fast food chain Boloco, a customer sent out a tweet complaining that the music was too loud. Boloco, which operates 22 locations in New England, prides itself on responding to all feedback within 24 hours. This time, they set a record. “We saw the tweet right away, called the restaurant and told the staff to turn down the music,” says Allison Doyle, director of marketing for Boloco. “We also described what the woman looked like from her Twitter picture and had the staff deliver a cookie to her. Then we retweeted her tweet, adding the word ‘done.’ She was floored.”

As the article rightly points out, not every complaint or negative review warrants an immediate response.  Sometimes, people are simply expressing a preference, and that person may not be in your target market.   Most customers in your target market may, in fact, like a particular attribute of your product or service that is the subject of a negative comment.  You do not want to overreact in that case.   Some situations may require a bit more time to study and evaluate.   In those instances, you may wish to let the customer know that you are investigating, without offering a particular remedy.   You need to do your due diligence first before offering a knee-jerk reaction via social media to a negative comment.  

Interviewed by Robert Morris

Robert Morris is a prolific business book reviewer and the author of a popular management blog.  He interviewed me recently about my background, the books that I have written, and my thoughts about leadership.   Here is the link to that interview. 

Choosing Our Leaders Wisely

At Bryant University, our Hassenfeld Institute for Public Leadership focuses on providing leadership development opportunities for individuals, teams, and organizations in the public and non-profit sectors.   Gary Sasse serves as the Director of the Hassenfeld Institute.  In yesterday's Providence Journal, we authored a column pertaining to the mistakes organizations (and voters) often make when choosing leaders.   Here is the link the column.

What do you want to learn next?

Adam Bryant of the New York Times recently interviewed Jeff Lawson, CEO of Twilio.  Here's a great exchange from that interview:

How do you hire?

I look for a certain spark. It’s almost like having a chip on their shoulder — there’s something they want to get done in life, and they’ve got something to prove. If I can help them do that, they will be massively contributing to the company. That’s where you get the passion and drive and energy to do great things.  One of my favorite questions is, “What do you want to learn next?” Another way to ask that is, “What are the properties of the next role you want?” Some people say, “I want to join a start-up,” or they give some attributes of a company. Then I’ll say, “What I’m really trying to understand is, what is it that you are going to find interesting?” I’m trying to find if they have a clear sense of what makes them tick.

What do you want to learn next?  Now that is a terrific question.  We want people who are eager to develop and improve.  We want people in our organizations who have not, or are less likely to, grow stale in their development.  This question focuses them not on the company that they are joining, or the specific title that they will hold. Instead, it focuses  them on how they will grow by taking on a new challenge.  The answer undoubtedly tells the interviewer a great deal about the person's drive and capacity to grow and adapt over time. 

Planet Fitness Does it Again!

Planet Fitness does it again. Here's a new TV commercial from the company.   As you can see, they continue to make it clear that they have no intention of being all things to all people (unlike many of their competitors).   This ad makes it clear who is NOT their target customer.  In so doing, they make it clear who they are trying to serve successfully. 

Social Media Strategy

My former colleague Mikołaj Jan Piskorski of Harvard Business School has written a new book titled "A Social Strategy: How We Profit from Social Media. In this interview excerpt from Forbes.com, Piskorski offers two important pieces of advice for companies as they engage customers via social media platforms. I highly recommend reading the book.


Brands often are too eager to inject themselves into conversations about their product. Despite a brand’s best efforts, most consumers are not going to identify with or trust a brand the way they would a friend. To alleviate this problem I recommend that companies focus on facilitating interactions between their customers.

The second issue is that companies often engage socially without clear business goals. Instead, they focus on getting the highest number of likes or followers, or getting highest rates of engagement. At the end of the day, none of these metrics matter if they do not lead to higher sales or lower costs. Companies that have mastered the social space start with their business objectives and ask: “What is the source of my competitive advantage, and how can I use social platforms to strengthen it further?” Without asking this question first, many efforts in this sphere end up having no business results, even if they create a lot of engagement with their customers.

The Braintrust at Pixar

In this Fast Company excerpt from his book, Creativity, Inc., Pixar President Ed Catmull describes the company's "Braintrust."   Catmull explains the concept of the Braintrust: 

"The Braintrust meets every few months or so to assess each movie we're making. Its premise is simple: Put smart, passionate people in a room together, charge them with identifying and solving problems, and encourage them to be candid. The Braintrust is not foolproof, but when we get it right, the results are phenomenal."

The Braintrust includes some of the best and brightest folks at Pixar.   The core value at the heart of this feedback process is candor.  As Catmull explains, "Believe me, you don't want to be at a company where there is more candor in the hallways than in the rooms where fundamental ideas or policy are being hashed out."

What's interesting about the Braintrust, however, is that these people do not seek to dictate to a movie director what to do.    They share ideas with the director so as to "bring true causes of problems to the surface."   They do not advocate particular solutions.   Their feedback is designed to stimulate the director's thinking, and perhaps to encourage him or her to think differently about an aspect of the film.   The director must then take that feedback and find a way to address to the issues that have been raised. 

Too often, I think that people who are offering feedback and criticism do not follow this path.  They advocate their preferred solution.   Recipients of the feedback become defensive, and the entire conversation takes on a very negative tone.  The Pixar process tries to avoid that fate.

Do CEOs Matter More Today Than In Decades Past?

Do CEOs matter more today than in decades past?  A new paper by Timothy Quigley and Donald Hambrick suggests that they do.  According to this HBR blog post by Walter Frick, "The new paper confirms a pattern discovered by previous research: the CEO effect seems to be increasing over time. In other words, the CEO of a company is a more significant predictor of that company’s performance than at any time since the question has been measured, starting in the mid-twentieth century."  The scholars argue that perhaps the big strategic choices made by CEOs matter more as industries, and the economy as a whole, have become much more dynamic.   However, the paper cannot identify the main cause of this enhanced CEO effect, nor can it rule out any particular explanations.  It simply has documented this substantial increase in CEO impact. 

the 

Price Hike for Amazon Prime

Amazon announced a $20 price increase for its Amazon Prime service.  Does it make sense?  It appears so, based on a quick-and-dirty financial analysis.   First, analysts estimate that 20 million people subscribe to Amazon Prime at the present time.  If they all pay the $20 price increase, that would generate $400 million in increased revenue.  The key question is:  How many people will drop their Amazon Prime membership because of the price increase?  Does the additional revenue from the increase more than offset any lost revenue from cancelled memberships?  

Here's the simple math.  The increase in revenue from the price increase equals $20 * (20 million subscribers - the number of cancelled memberships).  The lost revenue from cancelled subscriptions equals $79 * the number of cancelled memberships.  What's the break-even point here?  If the company has less than 4 million cancelled memberships, then the price increase is a net revenue generator.  Do we think Amazon Prime will lose 20% of its members due to this price increase?  That does not seem likely.   Analysts told the Wall Street Journal that they expect no more than 10% of Prime members to drop their subscriptions.  

One final note - Amazon probably is losing money on some Prime memberships, because those folks take frequent advantage of free delivery.  Those heavy Prime users are not likely to cancel.  They are getting a great deal.   Who is likely to drop their Prime memberships?  That would be the folks who are probably not using the free delivery feature very often.  In other words, the lightest shoppers are the ones who may be most likely to cancel.   That's good news and bad news for Amazon.  It's great to retain the loyal customers who buy tons of stuff from Amazon.   However, those folks also incur a great deal of delivery expenses.   That leads to an intriguing question:  At $99, does Amazon still lose money on a substantial number of Prime memberships due to heavy delivery expenses?  It would be interesting to know!

Effective Crisis Management

Given the unfolding mess at General Motors, you might want to take a look at this excellent video from Kellogg Professor Daniel Diermeier.   In this clip, he talks about building an organization's crisis management capabilities.


Video highlight: Diermeier on Crisis & Reputation Management

Chasing Stars: Lessons from NFL Free Agency

In New England this morning, the gnashing of teeth and cries of agony can be heard in the streets.  The Patriots have let another star player leave via free agency.   Why can't the Patriots just pay the money!?!  Belichick and Kraft are too cheap.   You hear all these complaints.   However, several NFL writers have commented that signing high-priced free agents has been fool's gold for the most part in past years.  The Patriots fans do not want to hear that evidence. They want stars. 

Is there a lesson here for all business leaders?  Boris Groysberg has done fascinating research on the mobility of star performers.   He began his work by focusing on superstar Wall Street analysts.  He found that many firms pay top dollar to recruit away superstar analysts from competing firms.  In the end, many of those superstars experience a performance decline at their new firm.  Why?  Groysberg argues that we underestimate the extent to which that high performance was driven by the team around that superstar, the supporting organizational context, etc.   In other words, we attribute too much of their high performance to their internal abilities.  We underestimate external factors.  We also discount the difficulty of adapting to a new organizational system and structure.  Groysberg has argued that the same trap of chasing stars occurs in many fields.

Several years ago, he studied punters and wide receivers in the NFL.   He found that wide receivers experienced a decline in performance when they switched teams (above and beyond the normal decline associated with age).  Punters, on the other hand, did not suffer a performance decrease after switching teams. What's going on?  Groysberg and his colleagues argued that some positions involve much more interaction with fellow players.   A wide receiver's performance depends on the knowledge of a particular offensive system, experience within that system, time spent working with a particular quarterback, etc.  A punter's performance is not dependent on those around him to nearly the same degree.  Now think about other NFL positions.  Many of them are much more like the wide receiver than the punter.  Therefore, many players often have a hard time sustaining their high performance after switching teams via free agency.  Still, some positions may have less dependence on interaction with teammates, knowledge of a particular system, etc.  Coaches and general managers should be thinking about the "portability" of each position.

For business leaders, the question is:  Which stars in your firm have talent and skills that are more portable than others?  Think carefully about the work that these stars do.  Think about their position/role, not just their individual ability.  In which cases will one experience a performance decline when switching organizations?  For what types of positions will people be able to maintain high performance in a new system and with new colleagues? 

Saying No at Work

How to Encourage Persistence

Wharton Professor Rom Y. Schrift and Georgia State Professor Jeffrey R. Parker have written a new paper titled, "Staying the Course: The Option of Doing Nothing and Its Impact on on Postchoice Persistence."   They discovered that people are more likely to persist in pursuit of their objectives if they originally had an option of doing nothing.  In other words, imagine that someone had the option of choosing a membership at Gym A or Gym B.   Now imagine that they were explicitly presented the option of not joining any gym at all.   In the case where this third option of doing nothing is explicitly presented to them, people are more likely to stick to their original goals.  Parker explains, "The intuition is we don’t want to give them the option.  ‘Not doing whatever’ may sound like giving up. But what people decide for themselves is, ‘I didn’t have to do it and I decided to do it, so I’ll stick with it for a longer period of time.'"  The authors explain their conclusions in the paper:

“Sticking to a diet, completing drug regimens, regularly visiting the gym and working through personal or professional challenges are all instances in which persisting is beneficial and important,” the authors write. “Using the right incentive structures, one can drastically reduce or eliminate the tendency of opting out, while maintaining the positive impact that affording no-choice options has on persistence.”

"Annie" Parody - It's a Freelance Life!

Does Owning a Corporate Jet Make Sense?

The company owns a corporate jet to fly the CEO and other top executives to meetings around the globe.  Does it make sense financially, or is it one of those corporate perks that should be abolished?  New research by NYU Professor David Yermack suggests that shareholders should think twice about investing in a company with its own jet, or even worse, its own fleet of jets.   Yermack's latest study, published in the Journal of Financial Economics shows that, "Average shareholder returns underperform market benchmarks by more than 4% annually, a severe gap far exceeding the costs of resources consumed."   4% is a significant number.   What's going on there?  Of course, many explanations exist for why this underperformance might exist.   One interesting tidbit in the study... companies with jets also tend to have CEOs with long-distance golf club memberships.   I'll let my readers noodle over that interesting finding for a moment. 

Briefing Your People Effectively

How do you brief your people when you make a decision?  Do you communicate your decision rationale effectively?   Are you helping them identify potholes that they may encounter in the road ahead?  Are you checking to see if they understand what their roles and responsibilities are?  To help you brief your people more effectively, I advocate a methodology described by Gary Klein, Karl Weick, and Kathleen Sutcliffe.  It's a simple five-step process:

1.  Situation:  Here's what I think we face.
2.  Task: Here's what I think we should do.
3.  Intent:  Here's why I think that is what we should do.
4.  Concern:  Here's what we should keep our eye on, because if that changes, we are in a whole new situation.
5.  Calibrate:  Now talk to me.  Tell me if you don't understand, cannot do it, or see something I do not. 

Abercrombie to Reposition Hollister Stores: Will it Work?

The Wall Street Journal reports today that Abercrombie and Fitch plans to reposition its Hollister chain of apparel stores.    Abercrombie has been struggling lately, after many years of success.   The flagship brand has seen a substantial drop in sales, and Hollister has experienced problems as well.  Hollister same stores sales decreased by 14% last year.  Now Abercrombie apparently plans to reposition Hollister as a "fast fashion" brand in the mold of Zara and Forever 21.  Fast fashion retailers do not place big bets on bold new cutting edge fashions.  Instead, they assess fashion trends, and they move very quickly to "follow" the hottest apparel industry developments.   Fast fashion firms do not place huge bets.  Instead, they build an agile supply chain, and as a result, they are able to cut their losses quickly on fashion misses and move to pursue trends that are more promising.  

Can Abercrombie reposition Hollister successfully?  They might be able to do so, but it will require rethinking the ENTIRE VALUE CHAIN for the company.   They will need to rethink how store operations work, the structure of the supply chain, the merchandising strategy, the way they market and price their products, etc.   Changing only one, or even just a few, of these items will not enable a successful transition to a "fast fashion" model.   Companies that have succeeded in fast fashion have rethought the entire way of doing business in the apparel retailing industry.  Abercrombie will have to do the same. 

RealBusiness Interview: Why Great Leaders Fail

Does Busywork Actually Make Us Happier?

Rachel Emma Silverman of the Wall Street Journal reported this week on a new study by University of California-Irvine's Gloria Mark and co-authors from Microsoft Research.   Mark and her colleagues tracked 32 workers at Microsoft for more than 1,500 hours.  They found that people's moods brightened when they performed busywork (i.e. rote activities), and they were less happy when they tackled challenging tasks.   The article quotes Mark:  “Focus involves a kind of stress and people aren’t generally happy when they are stressed,” says Dr. Mark. By contrast, “rote work is effortless, so you can get gratification for getting things done.”

What do I make of these findings?  I think we have to take them with a large grain of salt.  Years of research on intrinsic motivation shows that people value work in which:

• they have autonomy
• they feel that they are making a contribution to a greater goal
• they find challenging and rewarding
• there is some variety in the tasks being performed over time

What accounts for the difference in the findings?  Well, if you evaluate people in the moment, I think you get different answers.  In other words, the Microsoft study appears to examine people who are performing challenging work, and then from time to time, they perform some busywork.   Of course, the busywork may be a great relief, a nice break from their tough duties.  However, that's not the same as saying busywork is always mood brightening.  If all you did was rote work, you might not be so happy.   So, busywork can lighten the mood, but perhaps only when it comes in small doses amidst a stream of work that has the characteristics I listed above in bullet points.

Netflix Pokes Fun at Amazon

Two Rules: How Should a Leader Spend His or Her Time?

Several weeks ago, Adam Bryant of the New York Times interviewed David Rosenblatt, chief executive of 1stdibs, an online marketplace for high-end goods.  He asked Rosenblatt about some of the key lessons he has learned in his career.   Rosenblatt talked about struggling to determine how he should allocate his time during his early days as a chief executive.  He then explained that he had established some rules that helped him in this area. Here's an excerpt:

I learned Rule No. 1 from Irv Grousbeck, who teaches an entrepreneurship class at Stanford Business School. And that is, very simply, “You can hire people to do everything but hire people.” Rule No. 2 that I think about every day is, “Only do the things that only I can do.” So if it’s someone else’s job to do it, I try not to do it. If I find myself doing too many of those things that are actually someone else’s job, then it relates back to Rule No. 1 — I probably don’t have the right person in that role. But just like anyone in any role, it’s important to understand, where is my comparative advantage? What am I better at than almost anyone else? 

The article contains more on this subject.  I recommend taking a look.  The two rules are a great start though.  I think the second one needs to be an explicit question that each leader poses to himself or herself.  As the leader on a major program here at Bryant University, I know that I need to address this question.  As I launched the program, I was doing many things.  Now, as the program matures, I have to think about the way I'm spending my time.  I'm clearly not playing to my comparative advantage.   Many leaders find themselves doing a bit of everything when an organization is in start-up phase.  Then, as the firm grows, they need to focus on that comparative advantage question.  It's hard to let go, but you can't make the organization successful without addressing this issue. 

Evaluating Your People: The Bell Curve Does Not Apply

Josh Bersin has written a fascinating article for Forbes about measuring the performance of your people.   He argues that many performance appraisal systems are flawed because they presume that performance follows a Bell Curve (normal) distribution.   However, Bersin points out some new research that suggests that a Bell Curve does not apply.  He states, "Research conducted in 2011 and 2012 by Ernest O’Boyle Jr. and Herman Aguinis (633,263 researchers, entertainers, politicians, and athletes in a total of 198 samples). found that performance in 94 percent of these groups did not follow a normal distribution. Rather these groups fall into what is called a “Power Law” distribution."  

What does that mean?  A "Power Law" distribution has a very small number of exceptional performers, a wide swath of people who are solid, but not great, performers and a few folks who are substantial underperformers.   The high performers are so exceptional that they drag the mean up quite significantly.  In other words, it's a skewed distribution.   The median falls below the mean.   Put another way, most people fall below the mean.   

You can see the problem with performance appraisal systems, particularly those "rank and yank" systems that assume a normal distribution.  You can also see why some factors other than public policy may be driving income inequality.   In many industries, these "hyperperformers" get paid extremely high sums of money.  Finally, Bersin offers some thoughts on how we think about the large number of people "in the middle" of the distribution:

The power law distribution (also called a Paretian Distribution) shows that there are many levels of high performance, and the population of people below the “hyper performers” is distributed among “near hyper-performers” all the way down to “low performers.” [] You still have a large variation in people and there will be a large group of “high-potentials,” a group of people who are “potential high-potentials,” and a small group who just don’t fit at all.  The distribution reflects the idea that “we want everyone to become a hyper-performer” if they can find the right role, and that we don’t limit people at the top of the curve – we try to build more of them.

Compelling Others to Lie: The Power of Social Pressure

Two weeks ago, the New York Times ran an article titled, "Would You Lie for Me?"  The article featured the work of scholar Vanessa Bohns and her colleagues.  In a series of studies, Bohn and her co-authors examined whether people could compel others to engage in unethical acts.  Moreover, they looked at whether people thought that they could persuade others to behave unethically.  The results demonstrated that most people underestimated the extent to which they could pressure others to comply with their requests.   Here's an excerpt:

In one study, 25 college students asked 108 unfamiliar students to vandalize a library book. Targets who complied wrote the word “pickle” in pen on one of the pages.  As in the Milgram studies, many of the targets protested. They asked the instigators to take full responsibility for any repercussions. Yet, despite their hesitation, a large portion still complied.  Most important for our research question, more targets complied than participants had anticipated. Our participants predicted that an average of 28.5 percent would go along. In fact, fully half of those who were approached agreed. Moreover, 87 percent of participants underestimated the number they would be able to persuade to vandalize the book.

The scholars replicated this finding in a series of different studies.  What's the implication of these findings?   In my view, leaders need to take stock of their actions.   They need to think about how much their behavior, however subtly, may be affecting others' behaviors.  Leaders may not realize how much they may be influencing their organization members.  We may not think we are placing undue pressure on others, yet in fact, these colleagues are feeling compelled to act in a certain way.  In some cases, we may be pressuring them to behave in ways that are not consistent with their values or the stated organizational values.  We may not even intend to pressure them.   Nevertheless, we are influencing them.  In addition, we may fail to appreciate how difficult it might be for lower level employees to ask questions, push back, or resist engaging in certain conduct.  They may comply without ever questioning a course of action. We may fool ourselves into believing that they would object if they felt strongly.   Bottom line - they may not object because they feel such social pressure to comply. 

Funny SNL Parody of a CVS Advertisement

If you are CVS, you probably don't mind this SNL ad parody.   It has generated a ton of free publicity for the firm.  Some companies would get upset at comedians poking fun at them.  Thankfully, CVS understood that it was all in good fun, and that it was actually a positive thing for the firm.  In GoLocalProv, CVS Spokesperson Erin Pensa commented, "We did see it and feel that parody is a form of flattery! And we encourage our shoppers to check out the truly fun and unexpected Valentine's Day gifts that we are offering this year."  Now that's the way to respond to a bit of comic relief.  More firms should take a cue from CVS and not take themselves too seriously. 

Getting the Dream Job: Focus on Actions, not Adjectives

Fast Company has an article this week about the "language of hiring."   In this piece, Donna Svei, a professional resume and LinkedIn profile writer, offers some sound advice for job seekers.  My favorite piece of advice is: "Show, Don't Tell."   Here's an excerpt:

Make your middle school English teacher proud. Svei says adjectives and adverbs should be swapped out with anecdotal examples such as how you used Excel to build a model that went on to bring in XY and Z for your department.  To cater to an ATS (applicant tracking system) and a human hiring manager looking for a good collaborator, she suggests adding details such as a role you played on a team that resulted in the development of a product or process. “If they never talk about ‘we’ they probably won’t progress,” through the search process Svei says.

I see many students make this mistake.  They cite their grade point averages, area of concentration, skills, and the like... but they don't offer enough concrete examples of projects that they have done.  Employers want to hear about the work that you have done.  Of course, students will not have much work experience (perhaps only an internship).  What can they do in that circumstance?  In my view, they should turn to the applied learning projects that they have done for courses.  Talk about the project you did for a local company as part of your market research class, or the consulting project you did for a factory in your region for an operations management class.  Those projects, often conducted as part of a team, represent concrete examples of how you can accomplish a challenging task, meet a tight deadline, work as a member of a team, and interact with professionals in your field.  Actions, not adjectives, should be the point of emphasis.  I would argue that the same mentality should flow through to the interview.  Don't tell the interviewer about your courses and grades. Tell them about the projects you completed in specific courses, in which you had to leave campus, enter the real world, and actually accomplish something for a client organization.     

Individualistic vs. Systemic Views of Failure

When a failure occurs, people can adopt two different mental models for explaining the reasons for that poor performance.   The "individualistic" perspective looks to blame the "rotten apple" for the failure.  Who made serious mistakes, and what should we do about those people?  In these cases, the emphasis is often on holding people accountable.   By contrast, the "systemic" perspective asks the question:  "Is there a rotten apple or two here, or do we have a bigger problem - i.e., is the barrel itself rotten?"   In other words, do we have cultural and organizational problems that contributed to a failure?   Here, we ask the question:   If we just replace a few individuals, would other new people in those roles behave in a similar manner?  Would they behave similarly because they will face the same culture, environment, structure, etc.? 

In my view, managers make a mistake when they go to the extreme in adopting one perspective or the other.  If you emphasize the "individualistic" perspective too much, you may engage in too much finger pointing.  The blame game may drive out all opportunities for learning and improvement.  Moreover, you may repeat failures, because you have not addressed underlying causal factors beyond human error.  If you emphasize the "systemic" perspective exclusively, you create a perception of a lack of accountability.  High performers question why low performers are allowed to continue behaving as they do without being sanctioned in any way.   In my experience, most organizations make the mistake of relying far too much on the "individualistic" perspective.   As a result, we condemn ourselves to repeat the mistakes of the past. 

Can Creativity Be Taught?

Fast Company polled the individuals on its "Most Creative People" list to ask them about their views on the question: Can creativity be taught?   73% of them believe it can.   What are the qualities of a creative individual?  Here's what they said:

 

 A whopping 35% of respondents said that the most important quality in a creative businessperson is a willingness to kill ideas they love. Having a lot of those ideas in the first place was most important to 28% of people polled, and being an easy collaborator topped the list for 29%. Being a good manager? Important to business, but not necessarily to creativity.

How does one become more creative?   According to Fast Company, "An overwhelming number of those polled tied increased creativity to breaking out of patterns, exploring new environments, and being open to the unfamiliar."  

Question for all those reading this blog: What are you doing to expose yourself to new disciplines, ways of thinking, environments, people, and ways of doing business?  How can you access the unfamiliar, rather than just focusing narrowly on what you know best? 

Profiling the Fortune 100's Top Executives: A New Study

Peter Cappelli, Monika Hamori, and Rocio Bonet have published a fascinating article in Harvard Business Review about the backgrounds of the top executives in Fortune 100 companies.  Their analysis compares executives today to those at the top of Fortune 100 companies several decades ago.  Not surprisingly, they find that many executives graduated from top business schools.   Interestingly, Sears (75%), Sunoco (70%), and Disney (63%) have the highest number of senior executives with MBA degrees.  Of course, given Sears' performance in recent years, this data may not support those who champion the value of an MBA degree!  Ouch!  

The study offers some other fascinating results.  For instance, their analysis examines the amount of "lifers" at these large firms.  In other words, how many top executives have spent their entire career at  one company?   Some firms have seen major changes in the percentage of lifers since 1980.   For instance, Honeywell has experienced an 80% decrease in lifers since 1980.   However, other firms still have many people who started their career at the same firm. Here's a fascinating excerpt:

The 20 companies that have been in the Fortune 100 since 1980—the most firmly established of the great corporations—still had at least one foot in the Organization Man era even in 2011. Almost half their senior executives were lifers. At Chevron and UPS, that was true of 90% of top-team members.

Finally, the study does show an increase in diversity in the c-suite.  Many more women and people of international backgrounds occupy senior roles today as compared to 1980.  However, the scholars note, "Both groups are still far from achieving parity with U.S. men."

Exploring GM's Decline: Trust vs. Legal Contracts

US Dept. of Commerce Chief Economist Susan Helper and HBS Professor Rebecca Henderson have written a new working paper examining the decline of General Motors.  They review many of the traditional explanations for the firm's demise, and they try to dig deeper to understand why GM failed to change sooner and more effectively in response to external threats.  Helper and Henderson base their explanation on the concept of "relational contracting" as explained here:

Here we make the case that GM struggled for so long because Toyota’s practices were rooted in the widespread deployment of effective relational contracts agreements based on subjective measures of performance that could neither be fully specified beforehand or verified after the fact and that were thus enforced by the shadow of the future and that GM’s history, organizational structure and managerial practices made it very difficult to maintain these kinds of agreements either within the firm or between the firm and its suppliers.

To step back, the scholars first argue that it was very difficult for GM to understand precisely what were the secrets to Toyota's remarkable success.   Strategy scholars refer to this barrier to imitation as "causal ambiguity."  In other words, the precise drivers of competitive advantage are not well understood by those outside the firm.  In hindsight, of course, we can explain Toyota's success with relative ease. At the time, though, the details of how the Toyota Production System worked, and how it could be imitated, were very difficult to ascertain.   Observation of the system at work, perhaps by touring the factories at Toyota, would do you no good.  Much deeper research was required.  

Beyond that, the scholars argue that emulating Toyota, even after an understanding had developed, was very challenging.  Here they base their argument on the relational contracts concept.  They describe this problem both with regard to how GM related to its employees, as well as to its suppliers. Here's an excerpt from the working paper, focusing on the workers in GM's factories:

It was, for example, very difficult to specify under exactly what circumstances a worker should pull the andon cord, or what behaviors constituted being an effective team member. Shutting down the line for a popular model could cost $10,000 in lost profits per minute (Helper 2011), so management setting up this system needed to be confident that a worker deciding to pull the andon cord would have both the knowledge and the incentive to exercise sophisticated judgment. Conversely, workers would only pull the cord if were confident that an appropriate relational contract wasin place (Gibbons and Henderson 2013). Similarly MacDuffie’s(1997) detailed description of the practices underlying shop-floor problem solving in the industry suggests that successful process quality improvement depended on processes that allowed for the inclusion of multiple perspectives on any single problem, the use of problem categories that were “fuzzy,” and the development of a common language for discussing problems. It seems implausible that employees could be motivated to participate in these kinds of activities through the use of formal contracts that specified in advance every kind of quality problem and its appropriate response.

Why did GM have a hard time building relational contracts?  Helper and Henderson offer several reasons.   In my view, the most compelling explanation is that GM lacked the credibility to work in this very different manner with both the employee unions and the external suppliers.  The lack of trust precluded working in this manner.  Toyota management, on other hand, had developed a deep reservoir of trust from which it could work much more flexibly with workers and suppliers.  Put simply, there are two ways to make a relationship work: trust vs. traditional legal contracts.  GM relied on the latter, but emulating Toyota required the former.  It could not make the switch.

Jos. A. Bank to Acquire Eddie Bauer: What Does "Related" Mean?

The Wall Street Journal reports that Jos. A. Bank has agreed to acquire Eddie Bauer for $825 million.  As you may recall, Jos. A. Bank has been in a back-and-forth contentious situation with Men's Warehouse, with each firm trying to take over the other over the past few months.  Now, Jos. A. Bank has moved in a different direction.   Does it make sense? Are there true economies of scope here between the retailer of men's suits and the seller of outerwear and sportswear? 

As an outsider, it's hard to determine if the synergies justify such a merger.  However, I would argue that we should be cautious about such a deal.  When we think about mergers, we often look for signs that the firms are engaging in "related" diversification, i.e. that significant synergies exist.   At first glance, we might conclude that these two firms are related, since they both sell apparel.  However, we should be much more disciplined about what "related" truly means.  Consider the cases from a decade ago, when many companies who sold alcoholic beverages combined in a wave of mergers and acquisitions.  Many people initially endorsed these deals.  After all, a beer producer buying a winemaker looked like "related" diversification . Surely, significant synergies existed.  Yet, it turns out that beer and wine companies are not as related as we might think, even though both are in the business of selling alcohol.  The synergies turned out to be much less substantial than many players thought.  The challenges of integration were substantial.   That lesson should be applied here, before we jump to the conclusion that these two apparel companies can easily combine to achieve significant synergies.  

The Proposed Comcast - Time Warner Cable Merger

Comcast has announced that it intends to acquire Time Warner Cable for $45 billion.  We really should not be surprised by this deal.  As industries mature and growth declines (or evaporates), firms look to consolidation as a means of cutting costs and enhancing the bottom line.  With cord-cutting a potentially growing phenomenon, the cable companies have to be wondering how they will grow profits moving forward.   Finding cost savings through consolidation may be a reasonable strategy.  Beyond that, the news raises several interesting questions for the key players in the media and entertainment business. 

1. Will federal authorities intervene to stop the merger on antitrust grounds?  

2. Will Comcast agree to expand its net neutrality agreement to cover TWC subscribers as well?

3.  Will cable television networks find themselves in a disadvantageous position as they try to negotiate with Comcast-TWC?  How much will the enhanced bargaining power of Comcast-TWC affect profit margins for the major entertainment content providers?

4.  Perhaps most interestingly, will this hasten or dampen efforts to crack the dominant position that cable has in distributing content?   Will firms such as HBO become more reluctant to strike new deals to distribute content, or will they become more emboldened to find new distribution avenues given the increased clout of Comcast-TWC?  In other words, is HBO now going to be more willing to sell HBO Go subscriptions directly to consumers?   Similarly, will ESPN become more or less willing to consider selling Watch ESPN subscriptions to consumers directly?  What about Netflix?  What are the implications for that firm, as the cable players are clearly concerned about cord-cutters that rely on Netflix for a large portion of their entertainment viewing?  

5.  What about Apple?  Many people, including me, believe that Apple has the means to build a great television, but they are limited in their ability to provide great content.  Apple does not want to simply build a TV; after all, that business is intensely competitive.  They will only enter the market if they can have access to content, as they did with iTunes.  In the music business, the key players struck deals with Apple because selling their songs for 99 cents was better than watching their songs stolen.   With movies and television, the major content providers have been reluctant to offer their content to Apple.  Will things change, as the cable companies gain even more clout?

The Value of Naive Questions

Fortune magazine published an article recently that was titled, "The brilliance of asking incredibly naive questions." The article focuses on the work of Warren Berger, author of A More Beautiful Question: The Power of Inquiry to Spark Breakthrough Ideas.   Berger explains:

"In most meetings -- and in most everything we do in business -- we are usually trying to keep things moving forward and just 'get things done.' This is a natural impulse, and of course it's important to get things done and stay on schedule. The problem is, this leaves little time to question assumptions, as in, Why are we doing this particular thing? Have we really thought it through, and considered other possibilities?"

I think Berger is right about the "getting things done" mentality.   I would put it this way.  We often fixate on the "how" question - as in, how are we going to do this?   We often overlook at the more fundamental question:  Why are we doing this?  

The problem, of course, is that people are often afraid to ask the naive questions.  That's why leaders need to make sure they are asking these types of questions from time to time.  They accomplish two things when they pose such questions.  First, they might uncover some key assumptions and alternatives.  Second, they set a tone and an example.  They make it easier for others to ask such questions. 

One final thought - timing is everything.   You do have to consider the timing of your question.  You don't want to embarrass folks or become disruptive when you ask such questions.  You want to think about the audience, and consider how you may impact a colleague.   You certainly don't want to unintentionally undermine a peer or make them look bad.  

Do Military Veterans Make Better CEOs?

Efraim Benmelech and Carola Frydman have conducted some intriguing research regarding military veterans in the business world.   Three key findings emerge from their work.  First, CEOs who have served in the armed forces perform better than other CEOs in industries that are experiencing turbulence, distress, or decline.  Second, CEOs with military experience are more conservative in their investment behavior.  They are less likely to make bold, risky capital and R&D investments.  Finally, CEOs with military experience are much less likely to commit fraud.   

Based on those results, one might be eager to search for senior executives with experience in the armed forces.  However, the authors found a dramatic decline in the number of CEOs with military service.   According to Kellogg Insights, which featured these scholars' research, "Among large, publicly held firms, the proportion of CEOs with military service in their background has decreased by an order of magnitude since 1980—from 59% to only 6.2%."   In sum, military veterans appear to make good corporate leaders, but the competition to attract these top notch former soldiers has become much more intense. 

You Have To Sweat the Small Stuff

In this week's New York Times Corner Office column, Adam Bryant interviews Good Technology CEO Christy Wyatt.  I especially liked this comment by Wyatt:

We’re a Silicon Valley company, so we have a very full kitchen. I hired a new head of business operations, and she decided we were going to switch out the vendors. There was a week when the supply went very low because the next vendor was coming in a couple of weeks later to kind of set up. Because we hadn’t said anything about it, and the food was starting to run low, people started saying, “There’s layoffs coming; bad things are going to happen.”  I actually had to say in an all-hands meeting, “Guys, it’s just the nuts in the kitchen. That’s it.” But people look for symbols, and they look for meaning where maybe there isn’t any. So now we’re overcommunicating. You have to talk about the little stuff as well as the big stuff, just to make sure folks aren’t running away with ideas.

I can't stress this enough... if you leave an information vacuum in your organization, people will fill it... often with unfounded rumors and speculation.  That's why sweating the small stuff, and leaning toward "over-communication", is essential if you are a leader.   People will interpret actions based on their own worries and concerns, and they will infer important meaning even when you deem certain issues and actions largely inconsequential.   Remember that all eyes are on you as a leader. You may not intend to signal or engage in symbolism, but people are taking away meaning from even the seemingly small actions and issues that you may not think warrant much of your time and attention.

Attention Marketers: Consider How Age Affects What Makes People Happy

As companies look to market their goods and services, they should pay careful attention to how age affects happiness.  That's what a new study by Cassie Mogilner and Amit Bhattacharjee suggests.  These scholars examined how particular types of experiences affects our happiness.  Here's an excerpt from Knowledge @ Wharton that summarizes their findings:

After conducting eight different studies looking at a variety of influences and experiences, Mogilner and Bhattacharjee conclude that “younger people who view their future as extensive gain more happiness from extraordinary experiences.” As people get older, and more aware that their time on earth is finite, ordinary experiences become increasingly associated with happiness, and even begin to catch up to the extraordinary in the amount of joy and contentment they produce.

What's the break point in terms of age?  It appears to be the mid-30s (ouch, I'm in the older group!).  What do they define as ordinary vs. extraordinary?  Ordinary may be a wonderful meal shared between mother and daughter.  Extraordinary might be a trip to Paris or a weekend hiking in the Rocky Mountains.   

How can marketers capitalize on this research?  The scholars argue that firms can even tailor their advertising to account for these findings.  Featuring the extraordinary might be useful in an advertisement for a product aimed at teenagers.  Featuring a happy ordinary event might be best-suited for an advertisement targeted at Baby Boomers.