Is Getting Rid of Performance Reviews Really a Good Thing?

The Huffington Post reports today on a new study about employee performance reviews by CEB, a consulting firm that offers talent management solutions to its clients.   In recent years, some firms have chosen to do away with the traditional annual performance review.   Some good reasons exist for eliminating these reviews, as the process often does not deliver desired results.  CEB finds, however, that eliminating such review systems may do more harm than good.  Here is an excerpt from the CEB report of their findings:

What’s more, the improvements in measures of employee performance that companies expect actually fall because managers struggle to make and communicate performance and pay decisions without ratings. In fact, less than 5% of managers are able to effectively manage employees without ratings. CEB analysis shows that eliminating ratings leads to four unintended outcomes.

• Manager conversation quality declines by 14% because managers struggle to explain to employees how they performed in the past and what steps to take to improve future performance.
• Managers have more time, but time spent on informal conversations decreases by 10 hours because managers do not shift that extra time toward ongoing, informal performance conversations.
• Top performers’ satisfaction with pay differentiation decreases by 8% because managers have trouble explaining how pay decisions are made and linked to individual contributions.
• Employee engagement drops by 6% because managers are unable to do the very things that are proven to engage employees, such as set expectations for their, hold clear performance and development conversations, and provide appropriate rewards and recognition.

In sum, the theory of removing the annual review process is that more frequent, informal feedback could be more effective than an annual "event" at which managers employ a formal ratings system to evaluate and rank employees.   In reality, it appears that many managers simply do not provide sufficient feedback when formal annual review systems are eliminated.  Perhaps we should not be surprised by these findings.   Many managers would rather jump in the water off the Maine coast in January than deliver feedback to their subordinates!   

What People Really Mean at Meetings!

Innovations in Teaching at Bryant

I'm very excited about the innovations in teaching and learning taking place on our campus at Bryant University and looking forward to the opening of our new Academic Innovation Center later this summer.

Inculcating Your Organization's Core Values in Your Employees

How do you inculcate your organization's core values in your people?  How do you make sure people understand and live out those values in their day-to-day work?   Here are a few tips:

1.  Take the opportunity to communicate the core values on many occasions in many different arenas.  Communicate those values simply and consistently.

2.  Recognize and reward those people whose extraordinary efforts embodied those values and made the organization better as a result, even when they could have taken an easier road perhaps with better short term results.

3.  Be consistent.  Make sure that top leaders act in a way that is consistent with the values that they articulate.  They can't just espouse certain values; they must back it up with action.

4.  Engage your employees in an ongoing discussion of the merits of these values.   Why do they matter?  How do these values manifest themselves in day-to-day work?  Don't just talk at them.  Create a conversation with them about those values.

5.  Create case studies of situations in which the organization may have strayed from those values.  Talk candidly about what the negative consequences were, and discuss the lessons learned from that experience.   Focus on learning, not on blame.

What Do Job Seekers Want?

Wade Burgess, VP of talent solutions at LinkedIn, wrote an article for Fast Company this week.  He explains the findings from the company's 2016 Talent Trends study.   In that research, LinkedIn asked more than 26,000 people about their job search process.   These job seekers reported that they cared the most about the following three things:

1.  Culture:  Burgess writes, "More than two-thirds (66%) of survey respondents wanted to know about a company’s culture and values above all else when considering changing jobs."  

2.  Big-Ticket Benefits:  Burgess writes, "Our research suggests that job seekers will pass on smaller luxuries in favor of familiar items that have a bigger impact on quality of life.  Just over three-quarters of U.S. workers prefer great health care packages over schedule flexibility and remote working, parental leave, free food, onsite daycare, gym memberships, or allowing pets in the office."

3. The Company's Mission: Burgess writes, "Job seekers in our survey care quite a bit about prospective employers' missions but want to know how they make them a reality."

Is Experience Overrated?

In this month's issue of Harvard Business Review, we read about fascinating new research by Jeffrey Cohn, of the executive search firm DHR International, and J.P Flaum, of the consulting firm Green Peak Partners.  They have studied the CEO hiring practices and philosophies of 32 private equity firms.  Why examine these companies' selection processes for bringing new CEOs on board?   Cohn and Flaum argue that these firms are different than most publicly traded companies, because the private equity partners have far more skin in the game than the board members of most public firms.  Thus, the private equity partners worry a great deal about getting the hiring decision wrong.  

What did these researchers find?   First and foremost, Cohn and Flaum argue that, "Experience is overrated."   Here's an excerpt from the Harvard Business Review feature on their research:

When filling a CEO position, there’s comfort in hiring someone with prior CEO and industry experience. But the first criterion can dramatically narrow the pool, and the second can yield candidates who are so familiar with the industry that they’re hidebound or likely just to recycle the strategic playbook from their last job. Similarly, overemphasizing quantifiable success in prior positions can be misleading, because results are often a function of “right place/right time” or organizational or team factors rather than one individual. And even within an industry, different competitive positions can demand very different skills—cost cutting versus product innovation versus business model change, for instance. The researchers write, “Past accomplishment and current challenge is rarely an apples-to-apples comparison.” Many of the interviewees said that over the years, they’ve become more open to “nontraditional” candidates who lack degrees from blue-chip schools and haven’t checked the usual boxes in a career progression. One put it this way: “You need someone who can come into a new situation and pick up the fundamentals quickly. A great athlete…is more important than someone with years of experience in an industry.”

You need to be careful about the conclusions you draw in this case.  I don't think private equity firms believe that experience does not matter.  They have concluded that experience is overrated.  I think that is probably true in many circumstances.  Why?  As the excerpt above states, past success may not simply be a function of individual skill.  It may have to do with "right place/right time" as well as a series of organizational and team factors that contributed to high performance.   

Moreover, I would argue that experience can be a curse as well as a blessing in many situations.   Successful people do get trapped into believing that they have discovered a "formula" for managing that can be applied in all future situations.  Years ago, Chuck Knight, the former CEO of Emerson Electric, visited my class.  He had retired after several decades at Emerson, during which time the firm enjoyed remarkable success.  A student asked him, "Mr. Knight, if you were asked to lead a Silicon Valley firm today, would you apply the highly celebrated Emerson strategic planning process that you employed with much success for years?"   He replied, "I probably would try, and I probably would fail... and so, I'll stay retired."  Everyone laughed.  However, he made the powerful point that it would be so enticing to try to apply his winning formula in that new job, but the context would be so different.  That same formula would not be ideal in that new circumstance.  However, most leaders has a tendency to rely too heavily on what worked for them in the past.  That's the potential curse of experience.  

Brainstorming at Google

Fast Company has published an article this week titled, "How to Brainstorm Like a Googler."  The author is Veronique Lafargue, global head of content strategy at Google Apps for Work.  In many ways, the title ought to be, "How Google Employs IDEO's Design Thinking Process."   The article highlights the three broad phases of design thinking:  understanding and empathizing with the users, brainstorming, and prototyping.   The video below shows you a bit more about how this process works at Google.

The article has a couple of helpful tips and reminders for those engaged in brainstorming in their own organizations.  First, Google practices 10X thinking when they brainstorm.

"The notion of "10x thinking" is pretty familiar in the business world by now, and it's at the heart of how we innovate at Google. It's about trying to improve something by 10 times rather than by 10%. One example is Project Loon, our initiative for providing internet access to everyone: An incremental solution would be to just install more fibers, whereas a "10x" idea is Project Loon—a network of balloons traveling on the edge of space, designed to connect people in rural and remote areas and help fill the hardest-to-reach gaps in coverage."

Second, Google encourages people to try to state their ideas as concisely and crisply as possible.   Google talks about writing headlines.

"Being able to describe an idea in less than six words helps you clarify it. Imagine your favorite media outlet or magazine covers your great idea: What would you want the headline to read?"

Third, don't wait to prototype.  Move quickly from brainstorming to prototyping.

Most brainstorming sessions end with an agreement to have another meeting later, to take those ideas and work them up further. It's a common mistake. You want to strike when the iron is hot—you don't want to walk away or agree to follow talk with more talk. Here at Google, we like to build a quick prototype pretty much right away.

GE's Beth Comstock on Bad News & Innovation

Source:  General Electric

Adam Bryant has a terrific interview with GE Vice Chairwoman Beth Comstock in this week's edition of the New York Times Corner Office column. Comstock has a few gems in this interview. Here's one about inviting bad news:

As you get more senior in your career, people often don’t want to tell you the truth because they want to please, and they want to handle things so that they’re not bringing you just the problems. So a great question I’ve started using is, “Tell me one thing I don’t want to hear. It’s O.K. to give me some bad news. In fact, I want it.” 

Here's another about encouraging innovation:

A large part of your job is to drive innovation...It really comes down to this thought: Permission granted. Having seen so many change situations in my career, change often starts with ourselves. Every company has people who don’t want to change the way things have been done. But often people are looking for an alibi to not try something new. And maybe people themselves aren’t willing to do what’s required to make the change. So the message I try to convey is, you have the permission to try something new. Another way to think of it is don’t wait for the invitation. There are a lot of opportunities to grab. If you see a better way, you have an obligation to do it.

Venture Capital Investments that Suppress Innovation?

Rory McDonald, Emily Cox Pahnke, Benjamin Hallen, and Dan Wang have written a new paper titled, "Exposed: Venture Capital, Competitor Ties, and Entrepreneurial Innovation."  In this article, the scholars examine the impact on startups when venture capital firms invest in multiple firms in the same industry.   The researchers argue that startups seek out venture capital investments for a variety of reasons, not simply access to funds.  They also want the expertise, skills, and advice that venture capitalists have to offer, as well as access to a network of potential partners and customers that the VC firm can tap into for them.  What happens though when venture capital firms invest in more than one firm in the same industry?  Will their divided attention hurt the startups in which they invest?  Will conflicts of interest damage innovation at the startups?    In other words, might the venture capitalist end up picking favorites among the startups in which they have invested?  

To study these questions, the scholars examined roughly 200 firms working on medical devices related to minimally invasive surgery over a twenty year period.   They identified which firms were working in the same market spaces, and they examined the venture capitalists investing in each of these firms.   Ultimately, they tracked the new product introduction rate for each firm.  What did they find?  According to Harvard Business School's Working Knowledge website, "The data showed that companies tied to a competitor by at least one VC firm in common were indeed less innovative than those unencumbered by such ties; in fact, they were 30 percent less likely to introduce a new product in any given year."  

The scholars found some other impacts.  According to HBS Working Knowledge, "The first was the level of “commitment” a VC had to a particular company, judged by the amount and frequency of funding. The same way a teacher may lavish more attention on a favorite student, the researchers found that VC firms also tended to pick favorites, which did better overall; their competitors were 55 percent less likely to introduce a product."  

Microsoft Acquires LinkedIn: Separate or Together?

Chris O'Brien has written a thought-provoking piece for Venture Beat about the Microsoft acquisition of LinkedIn.  O'Brien has a bearish outlook on the deal.    In his article, he cites many reasons why the deal may not work out, including the fact that Microsoft has had a less-than-stellar record of making major deals (Skype, Nokia, Yammer).    I don't know if I'm quite as bearish as O'Brien on the deal, but I certainly have some doubts.   What I found most interesting, though, was O'Brien's take on the issue of how Microsoft will manage LinkedIn going forward.  Here's an excerpt, in which O'Brien describes the "acquisition double-talk" taking place at Microsoft:

Acquisition double-talk, part 1: On the one hand, this deal is all about the oft-vaunted idea of “synergy” (even if that word is not used). The idea is presumably to build LinkedIn into all sorts of Microsoft products. Great! But, does this mean I’m going to get all sorts of messages suddenly asking if I want to share my Word doc through LinkedIn or have some LinkedIn integration with an Excel spreadsheet…or…what? There’s a lot of talk today about how this is going to broaden Microsoft’s reach into all sorts of new channels for selling stuff like cloud services. But does one of the largest tech companies in the world really need to spend $26 billion to reach new customers?

Acquisition double talk, part 2: Structurally, LinkedIn is going to remain independent. Per the Nadella memo:

“LinkedIn will retain its distinct brand and independence, as well as their culture which is very much aligned with ours. Jeff (Weiner) will continue to be CEO of LinkedIn, he’ll report to me and join our senior leadership team. In essence, what I’ve asked Jeff to do is manage LinkedIn with key performance metrics that accrue to our overall success. He’ll decide from there what makes sense to integrate and what does not.”

So, we will all work together. But we will work together while remaining separate. We call it: Separate Togetherness. (I’m going to copyright that and write a book on it one day.)

O'Brien raises an interesting issue that arises in many acquisitions.   On the one hand, the acquirer wishes to realize substantial synergies.  After all, those synergies are the very reason why the acquirer pays a large premium to purchase the target firm.  On the other hand, the acquirer does not want to spoil all that is good about the target firm.  Thus, they promise to provide the target firm a great deal of autonomy moving forward.  They promise to keep it separate.   You can see the conundrum here.  Keeping it separate means probably forgoing key synergy opportunities.  Pressing for too many synergies too quickly might alienate employees at the target firm, infringe on the innovative culture of the target, etc.   One also has to raise a broader question though:  If you are going to manage the target separately, then could you have achieved many of the collaborative benefits without actually acquiring the firm.  Could you have pursued some other organizational arrangement, such as a strategic alliance?  Could you collaborate, but without the risks and costs associated with a merger?   

New Case Study Published

Professor Roger Anderson and I have published a new case study titled, "Belmont Abbey College:  Strategy Formulation in Turbulent Times."   The case is available from Ivey Business Cases and soon will be available through Harvard Business Publishing as well.  The case study explores the strategic challenges facing small, private colleges with largely tuition-driven revenue models, with a focus on this particular Catholic institution in North Carolina.  The case study is well-suited for courses in strategic management, as well as for those interested in issues about the future of higher education in the United States.  

Introducing The Food Truck Challenge!

I am very excited to announce the launch of a new online experiential exercise that I have developed in collaboration with Harvard Business Publishing and Forio (the same partners with whom I collaborated on two prior simulations including the Everest Leadership and Team Simulation).   This new teaching tool is titled, New Venture Exercise: The Food Truck Challenge.  Unlike my prior simulations, this exercise is designed to be run in just 30 minutes.  Faculty members should be able to run the exercise and debrief it in a single class session.   In this online exercise, students try to run a successful food truck in the city of Boomtown. Students work individually or in teams to achieve maximum revenue over 5 simulated weeks and win the "Food Truck Challenge." In each round, students make decisions about where to park and what menu item to offer in hopes of finding the best menu-location combination and yielding the highest sales.  We believe that this exercise is well-suited for instructors teaching entrepreneurship, design thinking, new product development, innovation, and team/organizational learning topics and courses.   I hope that many professors will take a look!  

Predicting Accurately: Focus on Outcomes First, Not the Details?

Theresa F. Kelly and Joseph P. Simmons have published a new study in the Journal of Experimental Psychology regarding our ability to make accurate predictions.   Kelly and Simmons conducted 19 experiments involving over 10,000 research subjects.  They studied people's ability to predict the outcomes of 724 professional sports contests.  Interestingly, they found that participants were less effective at predicting the outcomes of games if they also were trying to predict details about the contests (e.g. if they tried to predict the number of hits each team would get in a baseball game, while also trying to predict the final score of the game).   

Why might people become less effective in predicting the outcomes of games if they were also trying to forecast specific details about those contests?   The scholars explain, 

We believe that this happens because having people predict the details of an event makes them think about additional information that is unimportant for predicting other related outcomes; however, once this information is made accessible in memory, people are more likely to use it in their forecasts, decreasing the weight given to more important information. This suggests that a relatively simple way to improve predictions could be to take a top-down approach and start by first predicting the most general outcomes and then letting those forecasts guide predictions of more detailed outcomes. Importantly, this prescription is not intuitive, as most decision-makers feel compelled to try to think through all of the available details about an event before making their forecasts (Lovallo & Kahneman, 2003).

How To Run a Meeting Effectively

Dropbox CEO Offers Great Advice for College Graduates

In this week's New York Times Corner Office column, Adam Bryant interviews Drew Houston, the CEO of Dropbox.   Houston has some terrific advice for college graduates.   I would argue that it's great advice for all of us, of any profession or stage of life.

I did the commencement speech for M.I.T. in 2013. I said that if I had a cheat sheet that I could give myself at 22, it would have three things on it: a tennis ball, a circle and the number 30,000.

The tennis ball is about finding the thing you’re obsessed with. The most successful people and successful entrepreneurs I know are all obsessed with solving a problem that really matters to them. I use the tennis ball for that idea because of my dog, who gets this crazy, obsessed look on her face when you throw the ball for her.

The circle is really about the idea that you’re the average of your five closest friends, so make sure to put yourself in an environment that pulls the best out of you. And the last is the number 30,000. When I was 24, I came across this website that says most people live for about 30,000 days. So you have to make every day count.

Understanding Personal Goals to Drive Team Performance

Several years ago, HBS Professor Amy Edmondson and I developed a simulation to teach about team decision making.   The Everest Leadership and Team Simulation has become a common teaching tool at many business schools and executive education programs around the world.   Interestingly, several scholars have used the simulation to study interesting questions about team dynamics.  One such study was published recently in the Journal of Applied Psychology.  The study, authored by Matthew Pearsall and Vijaya Venkataramani, examined teams of undergraduate business students as they tackled the simulation.   The scholars wanted to explore the impact of team bonding and identification.  Does coming together as a team and engaging in some team bonding have a big impact when tackling challenging tasks?   After all, many organizations send teams off for bonding experiences of various kinds, thinking it will have a positive impact.  Specifically, the scholars were interested in exploring teams where members also had strong personal goals, as well as a common goal that they were trying to achieve together.  They recognized, as we did in developing our simulation, that balancing common and personal goals can be very challenging for many teams.

The scholars studied 56 teams of students, five students per team.   The scholars asked each team to complete a team identification assessment after working together for eleven weeks.   That assessment measured the extent to which members identified with the team, i.e. did they feel a strong a sense of belonging to the team.  The teams also completed a team learning assessment.  That tool measured "the extent to which team members were likely to learn about and understand each other’s goals."   One week later they engaged in an intervention with the 1/2 of the teams.  The intervention served as an effort to strengthen team identification and a sense of belonging.  Here is what happened:

A week later, the 28 teams in the high team identification group got a brief lecture about the importance of team commitment and identification for effective performance. They then competed in a contest to see which team could build a paper airplane that flew the farthest. They also were asked to create a team name and make a banner or flag for their team.

Then all 56 teams participated in the Everest Leadership and Team Simulation that Amy and I developed.   In the simulation, team members have some common goals and some personal goals that they would like to achieve.   The inherent goal asymmetry means that you can't accomplish all the team and personal goals.  Something has to give.  

The scholars examined how the different teams performed.  They also assessed the teams once again after they had completed the simulation.  What did they find?  Interestingly, the "high identification" teams did not do better than the other teams in the control group.    How about team learning orientation?  Did being oriented toward learning about one another's goals and interests help drive performance?  Yes, it had a positive effect, but not a large one.  The best teams scored highly on both team identification and team learning orientation.  You need both to succeed.  Yes, you need to bond with your team members and feel a sense of belonging.  However, that only helps if part of that bonding and identification process involves trying to truly understand the goals and interests of other team members.   At the end of the day, personal interests matter.  We succeed as a team if we can help individual members achieve their goals.  We can't simply ask members to put aside all personal goals for the sake of the team.   

Performance Appraisals: Are "A" Players Always "A" Players?

Peter Cappelli and Martin Conyon have conducted some interesting research regarding performance appraisals.  The topic has received much attention lately, with a great deal of criticism leveled at this common management practice for evaluating and rewarding employees.  However, limited empirical research has been done in the field, according to these scholars.  Cappelli and Conyon studied a number of issues related to performance appraisals.  Perhaps most interestingly, they examined whether people scored consistently on their appraisals year after year.   In other words, managers often about having A players, B players, and C players in your organization.   Capelli and Conyon asked:  Are "A" players always "A" players?  Are results consistent year after year?  Surprisingly, perhaps, they found that results were highly inconsistent.   Cappelli explains in this interview with Knowledge@Wharton: 

Cappelli:  As far as we can tell, no one has ever looked at this before or at least published it. Are the people who do well always doing well, or not? If we know your scores this year for everybody in the company, how much of next year’s score could we predict or explain? If the good people are always good and the bad people are always bad, we can explain 100% of your scores because next year’s score will be identical to this year’s score. If it’s random, which would be kind of astonishing, then it would be zero. There’d be no relationship between how people on average perform this year and how they perform next year. The good people could be good, the bad people could be good or bad.

Knowledge@Wharton: But you would think that they would follow a pattern. If you’re good in 2014, unless something has drastically changed, you’re going to be pretty good in 2015 as well.

Cappelli: Right. It’s between zero and 100%. If you think this A-player, B-player, C-player model is right, it’s going to be closer to 100. If you think it’s all just random or it’s kind of noise or people vary a lot, you’re closer to zero. So, that’s the question.

Knowledge@Wharton: I’m going to say that it would probably be closer to 70 or 75.

Cappelli: That’s a very common answer. People in human resources guess 80%. The correct answer is 27%, so it’s way closer to zero than it is to 100%.

Knowledge@Wharton: Why so much lower? I would think that it would be almost an automatic that it would be on the higher end.

Cappelli: Many people seem to believe that, especially people in human resources. But when I ask them if they have ever actually looked at it, the answer is no. They just assume it’s that way. Maybe they assume it’s that way because that’s what you hear from the A-player, B-player, C-player kind of story, and you could see some of this is a cognitive bias. There’s something in psychology known as the fundamental attribution error. It means that when you see somebody behave in a particular way, we are inclined to assume it is because of who they are rather than the circumstances. The classic example is somebody racing by you on the expressway going home. They’re driving on the shoulder and whipping past. Your inclination is to say, “That guy’s a jerk,” rather than to even entertain the idea that maybe it’s an emergency. We seem to be wired to think everything is due to the person. If you believe that, then you would be inclined to think the A-player, B-player, C-player model is right and good players this year are going to be good players next year, etc.C

Specialists vs. Generalists: How Do They Fare in the Labor Market?

Tulane Professor Jennifer Merluzzi and Columbia Professor Damon Phillips have conducted some interesting new research on the labor market for graduates from top MBA programs.   They studied approximately 400 graduates of top business schools in the United States.   These graduates too jobs in the investment banking industry.   They discovered that students with broader and more diverse backgrounds and experiences received more job offers and secured higher signing bonuses than those individuals with prior specialization in investment banking/finance both at work and in school.   Here's how the scholars explain their findings:

First, in labor markets with strong institutional screening mechanisms, specialization won’t be as valuable. In the absence of other information, it’s an important indicator of skill, but graduation from a top MBA program is a strong signal to the market that someone is qualified. In that scenario demonstrating consistency is no longer advantageous. Second, employers may discount experiences that incrementally extend previous efforts. Among MBAs, there’s now a strong emphasis on building a consistent profile as a finance person or a marketing person. You end up with many similar people in the market. Specialization becomes commodified, giving you less bargaining power, because you’re easily substitutable. Plus, when the firm is used to hiring a lot of people like you, it’s easier to calculate your value compared with someone with diverse accomplishments.

Clearly, some jobs require specialists.  We cannot generalize these findings to all circumstances in the labor market.  However, the research does remind us that the trend toward specialization in education  and training may be counterproductive in some ways.  I don't think that the findings suggest that we should ignore the development of specialized skills though.  We need to educate students with breadth and depth.  I don't think it's either an either/or proposition.    We need students to have distinctive skills that employers value and that can enable them to hit the ground running when they enter the workforce.  However, we want them to have a broad background that enables them to make connections among ideas in various domains, and that enables them to put their work in context.  We also need them to be able to work with others who have different skills, backgrounds, and experiences.   

At Bryant University, we require our undergraduate business students to complete an extensive general education curriculum, AND we require them to minor in a liberal arts and/or sciences area.  Thus, our finance graduates come out with minors in areas such as history, political science, or psychology.  We believe that this combination makes them highly valuable as they enter the labor force, and our placement statistics confirm the validity of those beliefs.  

Can a Team Have Too Much Talent?

Emotions, Digital Communications, and Risky Decisions

Brian Uzzi, Bin Liu, and Ramesh Govindan have conducted research on whether digital communications tell us something about our emotional state and the quality of our decision making.  They examined people's electronic communications and tried to understand their emotional condition.   They wanted to know how emotions tied to decision making.  Here is what they found: 

The researchers analyzed all 886,000 trade-related decisions and 1,234,822 IMs from 30 professional day traders over a two-year period. They also tracked each trader’s median daily profit—the best measure of trading performance. IMs were coded for level of emotion, based on the specific words used. For example, “nice,” “gold,” and “hit” were associated with moderate levels of emotion.

The study showed that traders were more likely to use IMs when making trades—meaning they were eager to talk about their risk-related decision—and that the emotion expressed in IMs correlated with profitability. As predicted, traders made the highest-quality decisions at a moderate level of emotional activation.

Excessive emotion is problematic. “If you’re over-activated, your emotional state is drawing cognitive resources away from the analytical brain,” Uzzi says. “You then fail to attend to the right information or your perception of the information becomes distorted.”

But perhaps surprisingly, zero emotion is also not ideal. “We show that unless you reach a certain level of emotionality, you can’t pull the trigger on the trade, and you don’t buy the stock at just the right time,” Uzzi says. The finding goes against conventional wisdom that an emotionless state—the proverbial poker face—is best for decision making in business. As the authors note, even Warren Buffett emphasizes controlling emotion in investing, rather than channeling the right amount of it.

Several points are worthy of emphasis here.  First, people do like to discuss situations with others before making risky choices.  Those discussions reveal something about their emotional state.  Second, removing all emotion from a decision - being "super rational" - is not the answer when it comes to improving the quality of choices we make.  Third, perhaps we can use various tools to monitor the emotional state of people tasked with making very risky decisions.   One tool might be an evaluation of key words used in their digital communications.  

The Budweiser Rebranding Campaign

By now you probably have heard that Budweiser plans to rebrand itself as "America" for the summer and fall.  The Wall Street Journal reports on the move, and it explains the rationale:

Budweiser has been making a concerted effort to shake up its image in recent years with bold marketing campaigns. The brand has been losing market share for more than 25 years as younger drinkers increasingly opt for pale ales and cocktails over the King of Beers. The company’s “Brewed the Hard Way” ad, launched during the 2015 Super Bowl, criticized craft brewers for making beer to be fussed over while Bud brewed beer “for drinking.”  This summer’s packaging builds on that by framing Budweiser as more American than competitors. “This is bold and new,“ said Ricardo Marques, vice president, Budweiser. He added that the brand needs “to surprise” consumers, especially during the key summer sales month.

Budweiser clearly is searching for ways to combat the loss in market share.   The brand has lost share both to light beers in the mainstream portion of the market, as well as the emergence of a strong craft beer segment in the industry. Bud Light displaced Budweiser as the top beer brand in the U.S. in 2001, and Coors Light overtook Budweiser for the second spot ten years later.   Meanwhile, craft brews accounted for more than 10% of the market for the first time in 2014.  

What are the risks of this rebranding campaign?  The Financial Times reported on a few potential downsides in an article this week.  Here's my take.  First, it might seem odd to actually take your brand's name off of the product.  Will people still recognize it on the shelf?  I don't think that is a problem at all. The Budweiser can is iconic.  People will easily spot it on the shelf.  Perhaps more seriously, one has to wonder whether some customers will complain since Budweiser is no longer owned by an American company.  AB Inbev is the parent company, and it's based in Belgium.  Finally, how might the rebranding play out on social media?   Could the campaign shift in unexpected directions, particularly as an incredibly unpredictable and perhaps tumultous US election campaign unfolds?  The rebranding is a bold effort to jumpstart a slumping brand, but it does have some potential risks. Executives might feel that they have no choice.  Miller's core brand was once Miller High Life.   Look what happened to that once iconic brand.  

For more on this issue, check out my Facebook Live chat with The Great Courses.  

Advice for College Graduates As Commencement Approaches

For the past several years, I have re-run this old post with some advice for new college graduates.  I hope my students at Bryant University, and seniors at other institutions, will read and ponder these thoughts. Congratulations to the Class of 2016!  May you achieve great personal and professional success.  

A few words to those graduating from college this year...

As you leave this place, you will become builders. You will build a career, a home, and hopefully a family. For many of you, life will take on a certain rhythm eventually. Routines and rituals will mark your days. You will experience a measure of comfort with the familiar – familiar people, places, and activities. As you grow older, the unfamiliar will jar you, unsettle you, at times. You will want to retreat to that which is comfortable and familiar.

My advice to you today: Do not become wedded to the old and familiar in your lives. Cherish the past, but always look ahead. Seek out novel experiences. Keep breaking new ground, even as the hairs become gray. When in his 80s, Michelangelo, the great Renaissance painter and sculptor, once said, “Ancora imparo.” – I am still learning. I hope that you will live to such a ripe old age, and that you will utter those same words. Researchers have shown that novelty stimulates the brain. So, I tell you know: Exercise your minds throughout your lives. Memories do not nourish the brain. New challenges do. They say that you cannot teach an old dog new tricks. Do not listen to such rubbish. I’m confident that you have the ability to transform yourselves, to make yourselves new, time and again throughout your lives.

As you experience the new and unfamiliar, you will feel discomfort, even fear, at times. Do not let that apprehension get the best of you. Dr. Peter Carruthers of Los Alamos National Laboratory once said, “There’s a special tension to people who are constantly in the position of making new knowledge. You’re always out of equilibrium. When I was young, I was deeply troubled by this. Finally, I realized that if I understood too clearly what I was doing, where I was going, then I probably wasn’t working on anything very interesting.”

As you learn and grow as individuals, do not keep your new knowledge and skills to yourself. Share your knowledge and insight with others. Do more than that; serve as an exemplar to others. Mentor young colleagues, teach your children well – through actions as well as words. Your impact on the next generation will become your enduring legacy.

Singer and songwriter Ben Folds once wrote to his daughter Gracie, “One day you’re gonna wanna go. I hope we taught you everything you need to know.” I love that song, but I know that we have not taught you everything you need to know. I sincerely hope, though, that we have cultivated your intellectual curiosity and nourished your love of learning. May that spark of youthful curiosity remain with you all the days of your lives.

Leader Self-Awareness: Do You Understand Signals You Are Sending?

I continue to be amazed by the extent to which many leaders fail to recognize the signals that they are sending through their actions.   Consider the following situation.   A leader gives a variety of speeches and presentations in which he says XYZ is the highest priority for his or her organization. That particular leader then spends a disproportionate amount of time and energy focused on another objective/activity of the organization.   He or she recognizes accomplishments with regard to the letter, while offering few moments of celebration or recognition for those who are achieving progress now what was allegedly the highest priority of the firm.  

Employees pay attention to how you spend your time, what you celebrate or recognize, what you are passionate about, and even the order in which you address topics during speeches or presentations.  You can't say one thing and do another without someone noticing.  In fact, a lot of people will notice. As the disconnect becomes apparent, you lose credibility as a leader.  In many cases, leaders simply do not have the self-awareness to understand the extent of this disconnect.  The signals they are sending are indeed rather subtle.  Nonetheless, people notice.  You have to understand the symbolic nature of your actions.  You have to put yourself in the shoes of your workforce and understand how they might interpret your actions.   

Why Do We Stick with Poor Hiring Practices?

Iris Bohnet wrote in Harvard Business Review last month about the hiring process. She asked the question: Why do employers continue to use unstructured interviews as their primary method of evaluating candidates when this technique has many known flaws?   She points to many studies showing that unstructured interviews are not effective predictors of on-the-job effectiveness.  Biases plague the unstructured interview methodology.  Bohnet writes:  

Why do we stick with a method that so clearly does not work, when decision aids, including tests, structured interviews, and a combination of mechanical predictors, substantially reduce error in predicting employee performance? The organizational psychologist Scott Highhouse called this resistance “the greatest failure of I-O [industrial and organizational] psychology.”

The unwillingness to give up a much-loved evaluation approach seems to be driven by two factors: Managers are overconfident about their own expertise and experience, and they dislike deferring to more structured approaches that might outsource human judgment to a machine.

Bohnet argues for much more emphasis on procedures such as work-sample tests, structured interviews, and comparative evaluation.  These procedures help overcome many of the biases inherent in the unstructured interview process.    

Jimmy Kimmel on Uber's New Late Fee

Lands' End: Another J.C. Penney Scenario?

Columbia Business School Professor Rita McGrath asks an interesting question on her blog this week. She ponders whether the situation unfolding at Lands' End may be eerily similar to the fiasco that took place at J.C. Penney when Ron Johnson was hired as CEO. She's commenting about a Wall Street Journal feature story about the culture clash taking place at Lands' End as new CEO Federica Marchionni attempts to revitalize the apparel retailer. The former Ferrari and Dolce & Gabbana executive has taken over as CEO of the Wisconsin-based retailer, and she's trying to make the brand more fashionable. She tells the Wall Street Journal that her goal "is to evolve Lands’ End into a meaningful, global lifestyle brand.”  The key question:  Can she reignite growth at the firm without alienating traditional customers as well as her long-tenured employees?  

Why has a culture clash emerged? For starters, Marchionni has decided not to work primarily from the corporate headquarters. The Wall Street Journal reports:

As part of her contract, the Lands’ End board agreed to let Ms. Marchionni work primarily from an office in New York’s garment district—an arrangement that rubbed some in Dodgeville the wrong way, according to former employees. Her employment agreement says she must be in Wisconsin for holiday parties and other social events that the Lands’ End CEO “historically has attended.”  Joining her in Manhattan is a small group of fashion veterans including Joseph Boitano, a former Saks executive who serves as the company’s chief merchandising and design officer.

Marchionni has also been critical of some of her own company's clothes, describing certain traditional Lands' End items as "ugly" in one presentation.   There are other changes that have made some waves:  

The CEO ordered up a slate of new ads to run in the September issue of Vogue and other fashion titles. She commissioned celebrity photographer Bruce Weber to shoot a major holiday campaign. The full-page newspaper and magazine inserts showed patrician-looking models in coastal settings. Spiked red heels now featured alongside comfy slip-on moccasins.

Professor McGrath acknowledges that Lands' End faces substantial challenges and needs to change.  She wonders, however, whether Marchionni can lead in a way that brings her people along.  Can she create an inclusive vision for the key employees?   Or, will culture eat her bold new strategy for lunch?  I don't know the answer to these questions, but I cannot imagine how leading a company from 1,000 miles away makes much sense.  It creates problems at two levels.  First, symbolically, it sends a message to employees that you don't want to engage with them, be available to them, etc.  Second, substantively, it isolates you from the rank-and-file, making it more difficult for critical information (including bad news) to reach you in a timely manner.  

20 Years Later: The Mount Everest Tragedy

Source: National Geographic

This week marks the 20th anniversary of the tragedy that took the lives of Rob Hall,  Scott Fisher, and other members of their expeditions. Many of you may have read Jon Krakaeur's book, Into Thin Air, which chronicled the events of May 1996 in detail.  Others may have watched the Everest movie that came out last year.  Still others have seen the tremendous documentaries produced by David Breashears about the events of May 1996.  

As most of my blog readers know, I've conducted extensive research on the decision-making processes of Everest climbers.    As part of that research, I've spent a considerable amount of time learning about the events of May 1996, including through multiple conversations with the leaders of the IMAX expedition team, Ed Viesturs and David Breashears.   Ed and David turned around, while the Hall and Fisher teams continued up the mountain.   Later Viesturs and Breashears helped rescue the survivors of the tragedy that took place when a blizzard occurred.  

What are some lasting leadership lessons from that tragedy?  

1.  Great leaders exercise restraint.   As David Breashears has told me, the best leaders don't simply order you up the mountain no matter what.   They listen to others' ideas before expressing their views.  They must be willing to gather input from a variety of people.  Unfortunately, he says, some leaders are not willing to listen to dissenting views.   The best leaders create a climate of psychological safety, where everyone is willing to speak up.   After gathering input and advice from multiple sources, the leader can make a more informed and thoughtful decision.  

2.  Great leaders don't attribute all their past success to their own qualities and choices.  Instead, they acknowledge that past success hinged upon favorable environmental conditions, a strong team to support and assist them, an effective support network back at base camp and at home, and a significant dose of good fortune.   When leaders begin believing that past success is all about their own excellence, and fail to recognize other contributing causes, they get in big trouble.  

3.  Great leaders recognize how cognitive biases can impair decision making, particularly in stressful situations.  They don't escalate commitment to failing courses of action in the presence of substantial sunk costs.   In other words, climbers don't simply keep climbing because they have put so much into the expedition (money, effort, time, and other resources that they cannot get back).   You can't look back; you must look ahead.  Don't keep moving forward simply because  you don't want to waste the investment you have already made.  Don't throw good money, or good effort, after bad!  Other biases include confirmation bias (looking for data that confirms what you already believe) and compensatory behavior (taking more risk because you know a safety mechanism or system redundancy is in place; in Everest's case, carrying supplemental oxygen can create a false sense of security according to Ed Viesturs).  

4.  Great leaders don't build rigid plans.  As Dwight Eisenhower once said, "Planning is everything.  Plans are useless."   In other words, be incredibly prepared.  Be ready for all scenarios.  Prepare meticulously.  However, once the execution of your plan begins, be ready to adjust and adapt to conditions on the ground.  Don't build a rigid plan in a turbulent environment.  Retain flexibility.  Don't just try to work harder to "get back on plan" when things start unfolding in ways you did not predict.  In fact, great planning is not about predicting the future.  It's about preparing for multiple scenarios that might unfold in the future.  

5.  Great leaders build a team around a shared vision, not simply a common goal.  What do I mean by that?  The Hall and Fisher expedition team members certainly all had a common goal: to reach the summit (we might argue that the more appropriate goal is to return safely to base camp).  The problem, though, is that each person was focused on their own personal attainment of that goal.  They didn't strive necessarily to achieve the summit as a team.  Contrast that with the shared vision of the IMAX team there in May 1996.  They strove to put a fifty pound camera on top of the mountain.  They wanted to create a great documentary.  It was not about individual accomplishment; it was truly a shared vision to create something extraordinary.   

For more of my work on the 1996 Everest tragedy, see the HBS case study that I wrote, as well as the California Management Review article that I published.  In recent years, I also co-created (with Amy Edmondson) the Everest Leadership and Team Simulation, available from Harvard Business Publishing.  

A Conference Call in Real Life

Using Big Data to Create Better Presentations

Matt Abrahams has written a good article for Stanford Business School's Insights website. He describes the research conducted by Noah Zandan, founder and CEO of Quantified Communications. Zandan's company has used analytics to identify the key attributes of the most effective presentations by speakers and leaders of various kinds. Zandan's conclusions are based on the study of more than 100,000 presentations. Abraham's article is filled with great suggestions for improving your public speaking. Here are a few of the key points (excerpts below):

Avoid hedging language. Qualifying phrases such as “kind of” and hesitant language like “I think” can be beneficial in interpersonal communication, where they invite contribution and adjust your status relative to the person with whom you are conversing. But in contexts like presenting in public, they can reduce your credibility.

Vocal elements include volume, rate, and cadence. The keys to vocal elements are variation and fluency. Think of your voice like a wind instrument. You can make it louder, softer, faster, or slower. We are wired to pay attention to these kinds of vocal change, which is why it is so hard to listen to a monotonous speaker. In fact, even just a 10% increase in vocal variety can have a highly significant impact on your audience’s attention to and retention of your message.

Vital elements capture a speaker’s true nature — it is what some refer to as authenticity. For authenticity, Zandan’s team has found that the top 10% of authentic speakers were considered to be 1.3 times more trustworthy and 1.3 times more persuasive than the average communicator. Authenticity is made up of the passion and warmth that people have when presenting.  Passion comes from exuding energy and enthusiasm.

Going Public With Your Mistakes: The Brigham & Women's Hospital in Boston

Imagine a hospital that discusses its mistakes publicly.   Does that sound like a good idea?  Could it help advance the cause of patient safety.  Yesterday we learned that scholars at Johns Hopkins have conducted research demonstrating that medical errors are the third leading cause of death in the United States.   That's alarming in its own right, but especially so since many hospitals have been  trying to reduce medical accidents over the past decade.   

The Brigham & Women's Hospital in Boston has been trying to reduce errors, and now they have taken their efforts one step further.   They have decided to go public with a safety blog that they have been publishing internally for several years. I applaud their courageous decision. Karen Fiumara, senior director of patient safety at Brigham and Women’s Hospital, explains the decision to go public about the hospital's mistakes.  

Hospitals celebrate their safety records, but rarely discuss their mistakes. Yet it’s difficult, if not impossible, to improve safety without identifying and learning from errors. That’s why Brigham and Women’s Hospital has launched Safety Matters. This blog aims to describe mistakes made at the hospital along with steps the hospital is taking to prevent them in the future.  We began Safety Matters in 2011. At the time, it was an internal communication available only to Brigham and Women’s employees via the hospital’s intranet. One goal is to make sure that everyone on the staff knows that the hospital is committed to being open and transparent about mistakes and learning from them. Another goal is to convey that reporting mistakes is not only encouraged, but is also the right thing to do.  Another element of some blog entries is the “Just Culture Corner.” It helps promote a culture in which hospital staff and patients feel safe and supported when speaking up about mistakes and risks.

Safety Matters went public in January 2016. We did this for several reasons:

• It’s now more accessible to the entire staff, and can be read from home or a mobile device.
• It demonstrates to patients, prospective patients, and other stakeholders that the hospital is committed to transparency and continuous improvement.
• It can be a resource for other hospitals in the United States and around the world to provide safer patient care.

Do Ping Pong Sales Predict Tech Downturns?

Source: Wall Street Journal

Zusha Elinson has written a fun and thought-provoking article in today's Wall Street Journal.  The article is titled, "Is the Tech Bubble Popping?  Ping Pong Offers an Answer."   Elinson found that ping pong table sales decreased 50% in the first three months of 2016.   Venture capital financing decreased by 25% in the same time period.  Elinson cites information from retailers and wholesales indicating that firms such as Twitter, Intel, and Yahoo have all reduced or stopped their purchases recently.  

Is there any truth to the theory that ping pong sales are a leading indicator?  Who knows?!  However, it's worth noting that many large companies have purchased ping pong tables (and other games) in recent years, in hopes of emulating the culture of start-ups in Silicon Valley.   They have learned a hard lesson.  Buying ping pong tables does not create an innovative culture.  In fact, it does nothing really unless you transform the fundamental attitudes, beliefs, and values of the organization.  In fact, you create a skepticism in many employees if you add ping pong tables, but fail to change the shared norms, expectations, reward systems, and leadership style of the organization.   They see the move for just what it is - a superficial attempt to influence employee satisfaction without an underlying shift in how work actually gets done.  

Constraints Promote Creativity

Many people often think that creativity flourishes when people are not constrained in any way.  Give people total freedom to think and generate ideas, and they will be highly creative.  That's the conventional wisdom.  However, some research shows that constraints actually can enhance creativity.   The Boston Globe reported this weekend on a study by Catrinal Haught-Tromp.  The forthcoming article is titled, "The Green Eggs and Ham Hypothesis: How Constraints Facilitate Creativity."   The scholar chose this title because the highly creative book by Dr. Seuss only uses 50 words.   Haught-Tromp conducted experiments to examine whether constraints can stimulate creativity.   Haught-Tromp asked the research subjects to develop two-line rhymes for greeting cards. In some circumstances, she required the subjects to include a particular noun in their rhyme.  Outsiders judged the rhymes developed with this constraint to be more creative.  Moreover, she found that subjects working without the constraint tended to be more creative when developing a rhyme after they had worked in the constrained condition (as opposed to before they faced the constrained condition).  The constraint did not just generate more creativity in the moment; the effect seemed to persist.  

Is there a practical example of how constraints can fuel creativity.   Consider IDEO, one of the world's leading product design firms.  At first glance, when you walk into their offices, you might think that they provide their staff members the freedom to design as they wish.  However, a closer look reveals a clear method/process by which they work.  Moreover, as IDEO staff members brainstorm, they follow certain ground rules for how such sessions should take place.   In short, constraints do exist at the firm, and they seem to enhance rather than detract from the creativity of the solutions that they design.  

Funny Take on Interview Mistakes!

Five Dimensions of Employee Engagement

The Sloan Management Review published a piece recently about the connection between employee engagement and profitability growth. V. Kumar and Anita Pansari conducted research on employee engagement in a wide range of companies.  They first set out to define engagement, given that many people look at the concept differently.   They settled on a definition that encompassed five dimensions of engagement:

We wanted to use our discussions with managers and a review of the literature to understand how employee attitudes and behaviors affected company performance. This led us to define employee engagement as “a multidimensional construct that comprises all of the different facets of the attitudes and behaviors of employees towards the organization.”7 The five dimensions of employee engagement are: employee satisfaction, employee identification, employee commitment, employee loyalty and employee performance.

The scholars used their "employee engagement scorecard" to measure engagement in 75 companies in 7 different countries.  One year later, they examined profitability growth at 30 of those firms in depth.  Here's their conclusion:

After controlling for other relevant factors including GDP level, marketing costs, the nature of the business and the type of goods, we found that the highest level of growth in profits (10% to 15%) occurred in the group of companies whose employees were highly engaged; the lowest level of growth in profits (0% to 1%) occurred in the group of companies whose employees were disengaged.