Does Your Firm Conduct "Declined Offer" Interviews?

In a blog post for Harvard Business Review, executive coach Ben Dattner makes the case for conducting "declined offer" interviews at your organization.   He argues that organizations should interview job candidates who are made an offer, but who choose to work somewhere else.   Why did they take another offer?  What made your firm less attractive than another organization?  Was it simply money, or were there other key factors in the decision-making process?   Here's how he describes this technique and the reasons for employing it: 

Successfully competing for top talent involves both selling jobs to the best candidates and retaining the highest performing incumbents. In order to be seen as an employer of choice with a compelling value proposition for employees, many companies measure turnover and conduct exit interviews with departing employees to gather feedback about the experiences people had working there and the reasons why they’re leaving. But a less common practice is to track how many people turn down job offers at your company, and an even less common practice is to actually gather feedback from candidates who receive offers but don’t accept them. Like “exit interviews” these “declined offer” interviews can yield a lot of information about your own organization as well as valuable data about your industry and competitors.   While academic institutions often gather feedback from students who are accepted but do not matriculate in order to improve student recruitment and retention and to better compete with rival institutions, doing so with job candidates in a systematic and consistent manner is rare in the corporate world. As with other kinds of selling and marketing, you may learn as much, if not more, from the feedback of customers who choose not to buy as you learn from those who do.

Does Hosting the Olympics Make Economic Sense?

Each year, we hear about the amazing construction programs embarked upon by countries and cities hosting the Olympic Games.  The cost of hosting the Olympics has skyrocketed.  The Beijing Olympics reportedly cost more than $40 billion!  No worries, claim the host cities... The economic benefits will be tremendous and long-lasting to boot!   Is that actually true?  Does hosting the Olympic Games make economic sense?  Is there a positive return on investment for host cities?   Most academics argue that hosting the Olympic is a losing proposition, from a purely financial perspective.  One or two cities have seen a positive return on investment, but most have not.   The research is abundant and quite clear.   Here's an excerpt from an NPR article describing one such study: 

Allen Sanderson, senior lecturer at the University of Chicago who specializes in sports economics, investigated that question. He and a student, Samantha Edds, compared cities that hosted the Olympics with similar cities in the same country or region that did not. The cities were also comparable in other ways — size, population and tourist appeal.

They compared Atlanta, which hosted the Olympics, to Charlotte, which did not. They pitted Olympic city Barcelona against Madrid, and matched up Sydney, Australia, against Melbourne. They checked for marked growth in construction, tourism and the financial-services sector over a nine-year period — four years before the games, and five years after.

"We couldn't find any difference in terms of building permits, tourism, anything before or after," Sanderson says. "If you masked the name of the cities, you would not be able to tell which of these two cities had the Olympics and which did not."

According to Sanderson, this doesn't mean cities should stop competing to host the Olympics; it just means they should stop claiming that the games make economic sense. "We do lots of things that don't turn a profit," he says. "We own dogs. We have boats. Those things lose lots of money, but we know it." So cities, go ahead and host the Olympics. It's a great party. It's just a terrible investment.

Five Questions Your Strategy Should Answer

Ken Favaro, contributing editor of Strategy+Business, has a good article today about the key questions that every strategy should answer.   Here are Favaro's five crucial questions.  

How Fearful is Your Organization?

INSEAD Professor, Gilles Hilary, and Managing Director of Alchimie Asia, Vip Vyas, have written a good blog post about fear in organizations.  They argue that a culture of fear does not reduce the risk of major failures; it actually enhances the probability of a catastrophe.   They offer a list of signs that your organization may possess a culture of fear that enhances risk of failure and stifles innovation:  

• An absence of frank and open dialogue. For example, when important conversations happen either before or after meetings, but everyone remains silent during the official discussion.

• A resistance to participate, for fear of being ridiculed, overlooked or “shot down”.

• Only notional alignment (“lip-service”) on action plans, underpinned by a collective belief that those plans will be ineffective anyway.

• A partial or total reluctance to pass any bad news upwards.

• A culture of “going through the motions” without any real engagement; and

• A focus on salient but unlikely catastrophic outcomes.

Does your organization have these characteristics? Are senior leaders aware of the climate of fear that they have created? The opposite climate, on the other hand, is a climate of candor. In those climates, people talk openly about problems and issues, and they are not afraid to share bad news. Those types of cultures not only help senior leaders spot hidden risks, but they also promote creativity and innovation because people do not fear being labeled a failure.

What is Yahoo? What is Every Firm's Toughest and Most Important Question?

The Wall Street Journal has a good article today about Yahoo discussing the company's lengthy struggles leading up to its sale to Verizon.  Jack Nicas writes, "Yahoo’s prolonged demise serves as a classic business case, with an existential question its numerous chief executives struggled to answer: What is Yahoo?"  He goes on to cite a famous memo written by Brad Garlinghouse, a former Yahoo executive.   That memo, written a decade ago, questioned the firm's strategy.  Here's an excerpt from Nicas' article today in the Wall Street Journal: 

“If you’re everything, you’re kind of nothing,” said Brad Garlinghouse, a former Yahoo executive who in 2006 wrote the “Peanut Butter Manifesto,” an internal memo criticizing the company for spreading itself too thin. “The sad reality…is it never solved its core identity crisis.”  Mr. Garlinghouse said Yahoo’s fluctuating strategies often confused employees. He recalled asking managers at a retreat in 2006 the first word they thought of when he named a company. Google, eBay and others yielded clear answers—“search” or “auction.” Yahoo didn’t. Managers said “mail,” “news,” “search,” and other things.

Does your firm have a good answer to this question? Can you define your organization's purpose/mission in a simple sentence? Marc Gobe, author of Emotional Branding, puts it slightly differently, but he gets at the same issue. He asks: Can you tweet your brand promise? In other words, can you express your core pledge to your customers in 140 characters or less? FedEx can do it: "Absolutely, positively overnight."  Ritz Carlton can do it as well: "Ladies and gentlemen serving ladies and gentlemen." What was Yahoo's brand promise? It's hard to find a way to describe its pledge to its customers in 140 characters or less. In the end, the lack of a clear identity led to its demise, and it hurts many other firms as well.

Jonah Berger on Social Influence

Building on the recent blog post about social influence, here's Jonah Berger himself talking about his research.

Video on Social Influence: Mob Rules

Building on the last blog post, check out this National Geographic video about social influence.

When Do Others Help Us Make Better Decisions, and When Does the Influence of Others Hurt Us?

Jonah Berger of Wharton has written a new book titled, Invisible Influence: The Hidden Forces that Shape Behavior.   He was recently interviewed for an article on the Knowledge@Wharton website.   In that interview, he discusses how the presence and influence of others sometimes helps us, and on other occasions, can have a detrimental impact.   Here's an excerpt from that interview:  

There’s this wonderful old study on motivation. This researcher was interested in just the question you were interested in. He looked at a bunch of research and said, “Well, sometimes others seem to be motivating. They lead us to work harder, do better. Sometimes they lead us to get demotivated, do worse. Why is that? What are situations that lead to one versus the other?”

He wanted to figure out a way to test that. He designed this amazing experiment with running, looking at how running was affected by other individuals watching you run. But he didn’t do it with people. He did it with cockroaches. He built this cockroach stadium, where these little cockroaches would run cockroach races — run from one stadium side to the other. But then he could manipulate whether other cockroaches are watching them…. He’s interested in, “Well, how does the mere presence of others affect what we do?”

He had them run one of two mazes. One that was either straight ahead, just really easy, or one where you had to run straight and then make a left turn, really difficult — “Do I go right? Do I go left? What do I do?” What he found is, when the task was easy, when it was well-learned, running straight — something cockroaches know how to do well — having others around helped them do better. They ran faster with others than they did by themselves. But when it was a difficult task, when they had to figure out, “Do I go left or do I go right?” Then it was more complicated. The mere presence of others actually made them do worse.  

As you mentioned, parallel parking. If we know how to do things well, if they are easy things we’ve already done a bunch, then having others around makes us do them better. If you’re great at shooting pool, for example, shooting pool with someone else will actually make you better at shooting pool than by yourself.

But if you’re not so good at shooting pool, if it’s something that you’re not used to doing, if it’s difficult for you, then having others around can make you do worse. Parallel parking, for example, maybe some of us are good at it. But most of us tend to be a little bit nervous to begin with. We’re not excellent parallel parkers. Merely having someone else in the car can make it more difficult for us. It makes us more nervous, more anxious. While that anxiety can help us do better when it’s easy for us to do those tasks, they can lead us to do worse when it’s a difficult or complicated task.

Alumni & The Recruiting Process

Scholars Jason Greenberg and Roberto Fernandez have conducted an interesting new study about job searches and MBA recruiting. They studied approximately 600 students from a top MBA program over two years.  They conducted the research from a sociological perspective, comparing students who landed jobs through connecting with alumni at various companies (search through social networks) to those students who were hired through formal on-campus recruiting programs (formal search).   They refer to connections with alumni as weak ties (i.e., the students did not necessarily know the alumni prior to the search process; they connected with them through a variety of networking activities).  They found that MBAs are much more likely to accept a job offer landed through alumni networking than through formal on-campus recruiting processes.   That's true, even though the compensation tended to be higher from offers derived through on-campus recruiting programs.   Why is the networking so influential and effective?  Those conversations and connections help the students understand the growth potential associated with a particular job, and that proves to be very important to many talented students... more important than compensation perhaps.   Here's an excerpt from the abstract of the academic paper that the scholars published:   

We find that contrary to conventional wisdom, search through social networks typically results in job offers with lower total compensation (-17 percent for referrals through strong ties and -16 percent for referrals via weak ties vs. formal search). However, our models also show that students are considerably more likely to accept offers derived via weak ties. They do so because they are perceived to have greater growth potential and other non-pecuniary value. On balance, our tests are consistent with Granovetter’s argument that networks provide value by facilitating access to information that is otherwise difficult to obtain, rather than providing greater pecuniary compensation.

What's the implication of this study?   Greenberg puts it this way:  “Based on our findings, recruiters earn a higher ROI when spending time and money on facilitating connections between current employees and potential recruits from their alma mater.   Students look to and trust an alumnus from their school who ‘looks like them in three years’ to provide inside information about growth opportunities within the firm. And that powerful association is a huge influencer when it comes time to accept or reject a job offer.”

Becoming a Better Listener

Judah Pollack and Olivia Fox Cabane have written an interesting article for Fast Company about how to become a better listener.   Pollack and Cabane explain how our mind works while we are listening to others.   They argue that we "mentalize" while we listen.   Here's their description of this important, but perhaps highly flawed, sense-making process. 

When we listen, we don’t just hear a person’s words, we try and put those words into context. Neuroscientists call this "mentalizing," the ability to understand another person’s internal motivations and desires. When we hear a person’s words, we also try to imagine why they're saying them. And some of us do this more successfully than others.

What's the problem?  Well, when we mentalize, we often make assumptions about others.  A variety of factors may shape those assumptions (our own beliefs about a subject, the appearance of others, the other party's background or prior statements, etc.).   Unfortunately, those assumptions may not always be correct.   The other party may be motivated by something quite different than we have presumed.   If we are incorrect about their motivations, then we may miss vital information that the other party is trying to convey, or we might misinterpret something that they have said.  

How do we become better listeners?  First, we have to question our assumptions about others.  Ask yourself:  What am I presuming about the other party's motivations and desires?  How might I interpret their statements differently if my assumptions are incorrect?   Second,  we have to engage in thoughtful inquiry.  We have to ask non-threatening questions to try to unearth and understand the other party's goals, interests, and desires.   

The Power of Wishful Thinking

Tim Harford writes a great column (The Undercover Economist) for the Financial Times.  This weekend's essay is titled, "Brexit and the Power of Wishful Thinking."   He derives an important lesson from the widespread Brexit analysis about the way we adhere to our preexisting beliefs.   

Harford begins by describing an experimental study conducted by Guy Mayraz.  In this research, Mayraz asks research subjects to predict the future price of wheat.   He first provides participants with 3 months worth of historical wheat price data.  He informs the subjects that they will be paid based on the accuracy of their forecasts.   Mayraz assigns 1/2 of the participants to play the role of a farmer, while the other 1/2 of the subjects play the role of the baker.  What happens?  According to Harford, "Nearly two-thirds of farmers predicted higher-than-average prices, and nearly two-thirds of bakers predicted lower-than-average prices.  People tended to predict that their dreams would come true."    Harford then draws a connection to the Brexit situation.   He argues that Remain supporters engaged in rampant wishful thinking leading up to the vote by they British public.  People tended to forecast that their dreams would come true, rather than looking objectively at the situation. 

Similarly, Harford argues that many people have displayed confirmation bias in their post-vote analysis.  He counts himself as one of the culprits.  Harford explains that he looked at the drop in the value of the pound and the decrease in the FTSE 100 index as support for his preexisting view that Brexit would have a painful impact on the UK economy.  On the other hand, he dismissed the subsequent stock market rebound because it did not support his position.  "I accepted bad news when it chimed with my beliefs, and dismissed good news when it did not." 

What should we do about this wishful thinking and confirmation bias?   Harford advocates for scenario planning rather than to construct single forecasts.   Harford writes, "Because scenarios are persuasive stories, they can help us face up to uncomfortable prospects and think clearly about possibilities we would rather ignore.  And because scenarios contradict each other, they force us to acknowledge that, in the end, we cannot actually see into the future."  

P&G Overhauls Bonus System

The Wall Street Journal reports today that Proctor and Gamble has chosen to overhaul its bonus system for managers. According to the newspaper, 

"Starting Friday, annual bonuses for thousands of senior managers will be tied more directly to the performance of each leader’s specific business unit instead of being based on the company’s broader, regional operations. “We are trying to get a clearer line of sight between an individual’s responsibilities and their results and their compensation,” Chief Financial Officer Jon Moeller said this week in an interview.

P&G has been trying to reduce bureaucracy, give managers more autonomy to make key decisions for their units, and hold people more accountable for results.  This compensation system change fits with those other efforts.  You should not tie compensation more directly to a specific unit's performance unless you provide the unit manager with a sufficient level of autonomy to make important decisions.

We should keep in mind, however, that no compensation system is perfect.  Diversified firms, in particular, always face a tension between tying compensation to local unit performance vs. the results of large segments or even the corporation as a whole.   One the one hand, you want people to realize the benefits of managing their units effectively.  On the other hand, related diversifiers such as P&G want managers to cooperate with the heads of other units so as to realize important synergies.  The risk of this latest move for P&G is that managers may become too parochial, not thinking enough about how to collaborate with other units to achieve economies of scope.   

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.