CEO Tenure: What Does the Evidence Indicate?

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

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

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

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

The Downside of Testing, Prototyping, and Experimentation?

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

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

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

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

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

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

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

How Leaders Shape Team Creativity

Source: Pixabay

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

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

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

Do Intercultural Relationships Enhance Creativity?

Source: Flickr

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

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

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

Beware When Leaders Blame the External Environment

Source:  pexels 

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

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

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

Building a Healthy Board of Directors Culture

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

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

Key Action Steps: 

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

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

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

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

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

Orangetheory's Success & Behavioral Science

Source: Flickr

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

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

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

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

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

How Might We?

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

Source: Blue Diamond Gallery

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

Musk, Tesla, and the Leap of Faith

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

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

Retraining Workers as Jobs Evolve

Source: Pixabay

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

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

Learning Something New... Without Forgetting the Old

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

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

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

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

Who Asks For Feedback?

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

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

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

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

Getting the Most out of College

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

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

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

The Benefits of Losing a Star Employee (Temporarily)

We often convince ourselves that star employees are indispensable.  We worry about losing them, even for a short time.  At some firms, managers restrict the ability of star employees to attend professional development opportunities, because they fear letting them leave even for a week.  Or, they resist attempts to rotate high potentials to other units, even though such lateral transfers might be very beneficial for the individual's development and for the organization's long term effectiveness. Such attitudes about star employees merit examination. Are stars actaully so indispensable? Might losing them, perhaps for a short time, actually be beneficial for a team? John Chen and Pranav Garg examine these issues in a fascinating new paper titled, "Dancing with the stars: Benefits of a star employee’s temporary absence for organizational performance" - published in Strategic Management Journal.  

The scholars obtained statistical data on individual and team performance in the National Basketball Association from 1991-2015.  They examined how teams performed when a player was lost due to injury for a period of time.  Not surprisingly, the researchers find that team performance declines when a star player is absent due to injury.  However, they find that team performance rebounds to a level higher than pre-injury when the star player returns to the basketball court.  The scholars argue that performance increases because team members develop new knowledge and find new ways of working together in the star's absence.  The improved routines and teamwork lead to higher performance when the star returns.   Moreover, the star's absence provides opportunities for other team members to display and enhance their skills.  

Should you send your star employee to that leadership development program or other professoinal development opportunity? Yes. The authors argue that it's a win-win scenario, benefiting the individual employee and the team overall. Here is an excerpt from their paper:

Sending a star for a training program may be a win-win scenario. While the star is away, the firm can discover new routines and provide opportunities to non-stars that might actually improve the firm’s overall prospects on critical projects. At the same time, training programs can help the star develop team building or leadership skills that contribute to the firm’s longer-term roadmap upon her return... Our study underscores the idea that disruption may foster learning. In doing so, we echo recent thinking that an organization “periodically needs to shake itself up, regardless of the competitive landscape” (Vermeulen, Puranam, and Gulati, 2010: 71) and search for new routines, even when it is performing well.

Stop Telling People to Find Their Passion

Source: Public Domain Pictures

Paul O’Keefe, Carol Dweck, and Gregory Walton have written a forthcoming article in Psychological Science titled, "Implicit Theories of Interest: Finding Your Passion or Developing It?"  In this paper, they draw upon Dweck's work on growth vs. fixed mindsets, and they apply this framework to the topic of people's passions and interests.   In this paper, they contrast individuals with a fixed theory of personal interests to those with a growth theory.   Those with a fixed theory believe that they possess a passion for certain types of work, and they simply must discover those interests.  Individuals with a growth theory believe that interests must be "cultivated through investment and persistence."  

The scholars conduct a series of studies to examine the impact that these different theories have on motivation and behavior.   They discovered that, "A fixed theory was more likely to dampen interest in areas outside people's existing interests."  Moreover, they found that people with a fixed theory believed that they would be highly motivated once they discovered their passion.  In a sense, they foresee an easy path once their underlying interests and passions are revealed/discovered.  Those with a growth theory of interests tend to adopt a more realistic outlook, namely that they will encounter difficulties as they pursue a passion.  

Finally, perhaps most importnatly, in their final experimental study, the scholars discover an important relationship between a growth theory and persistence in the pursuit of an area of interest:

Inducing a fixed theory led students to discount a newfound interest more definitively upon exposure to challenging content. Difficulty may have signaled that it was not their interest after all. Taken together, those endorsing a growth theory may have more realistic beliefs about the pursuit of interests, which may help them sustain engagement as material becomes more complex and challenging.

This new research strongly complements earlier work at Stanford by Bill Barnett and Dave Evans. In their book, "Designing Your Life: How to Build a Well-Lived, Joyful Life," Barnett and Evans apply deisgn thinking principles to the process of discovering and building a career.   They argue that one does not find his or her passion by sitting in a dorm room pondering life's big quesitons.  Instead, they argue that one should adopt a learn by doing approach, much like a design thinker.  You prototoype as a design thinker, and you can do the same with regard to building a career.  In short, you try various things, by shadowing an alumnus for a day, taking an internship, meeting with mentors in various fields, attending a professional conference, or trying a course in a different field.  Through these actions, you learn about what interests you and what does not.  In many ways, Barnett and Evans are arguing that you must cultvate and develop your interets through action, rather than waiting for a passion to be revealed through some "aha" moment.  Now, O'Keefe, Dweck, and Walton provided sound psychological research that complements the practical guide to designing a career offered by Barnett and Evans in their terrific book.  

Spanx CEO Sara Blakely: Workarounds, Questions, Observation

This Stanford interview with Spanx founder and CEO Sara Blakely is chock full of leadership insights.   For those who do not know the story, Blakely came up with her initial product idea when she designed a simple workaround before heading to a party.  One night, she cut the bottom of of a pair of pantyhose so that she would have the appropriate undergarment to go with her white pants.  As design thinkers often say, a workaround is a bright flashing light indicating a customer pain point or frustration.   In this case, Blakely didn't notice some other user's workaround; she developed it herself.  

In the video below, take special note of how she talks about always observing and asking questions. She says, “I think of a lot of ideas at traffic lights. I pay attention to things that haven’t evolved and why. I ask myself questions all day, every day. I could be looking at a table and be like, ‘Why is the table like that? When was the table first created? Is that the actual best design for a table? Or could there be something different?'"   

Blakely also discusses her philosophy about failure in this video, something I write about in my upcoming book on creativity.   From identifying workarounds to asking questions and sharing failure stories, Blakely's approach to leadership and innovation bears close examination.  

Avoiding Leading Questions

In yesterday's blog post, I discussed the way you frame a question has a significant influence on whether others will reveal problems, risks, and bad news to you as a leader.   In this blog post, I would like to expand on the topic of asking the leading question.   

We often find ourselves asking leading questions without even being fully aware of our behavior.  We do not recognize how our mental models and assumptions have shaped our inquiries in ways that may influence the way people respond to us.   

Years ago, psychologist Elizabeth Loftus studied the issue of leading questions.  She found that small changes in the way that we phrase a question can matter a great deal (similar to the research cited in yesterday's blog post).   For instance, she showed research subjects the video of a car accident in one study.   For some individuals, she asked them how fast the car was traveling when it drove through a stop sign.  Fo others, she simply asked them about the car's speed when turning right, without mentioning the stop sign.   Later, not surprisingly, when asked if they had seen the stop sign, more people responded affirmatively if the question referred to the road sign.   Loftus describes the inclusion of the stop sign as a "presupposition" - “a condition that must hold in order for the question to be contextually appropriate.”

In a later experiment, Loftus examined the impact of including false presuppositions in our questions.  After showing research subjects a video of another car accident, she asked some of them, “How fast was the white sports car going when it passed the barn while traveling along the country road?” She posed others a similar question, but without mentioning the barn at all.   The barn actually never appears in the video.  Later, she asked all the research subjects if they had seen the barn in the video.  Sure enough, many individuals in the first group reported spotting the barn - they were led to believe it existed by the phrasing of the question posed to them.  

Do managers include presuppositions in their questions?  Sure, we all do at times.   Consider the question, “How much will market share rise if we increase our advertising spending?” This question presumes that more advertising spending will increase sales, and more so for the manager's firm than for competitors.  What if the advertising drives primary demand, increasing sales for the entire prodcut category (but therefore, not improving market share)?  What if competitors respond/match the spending hike, and therefore, it has no effect on market share at all?   The words "how much" at the start of the question may distort the responses that one receives.   

[This post summarizes the discussion of leading questions in my book, Know What You Don't Know.]  

Phrasing the Question: Start by Presuming a Problem

Julia Minson, Eric VanEpps, Jeremy Yip, and Maurice Schweitzer have published a new paper titled, "Eliciting the truth, the whole truth, and nothing but the truth: The effect of question phrasing on deception."  They report their research regarding the impact that question phrasing has on a counterparty's willingness to reveal critical information.  They examine this issue in the context of negotiations and job interviews.  

Minson and her colleagues contrast three types of inquiries:  positive assumption questions (presume that no problem exists), negative assumption questions (assume a problem exists), and general assumption questsions (no mention of a problem). The authors provide an example of positive vs. negative inquiries. Positive: “This car doesn’t have any problems, right?” Negative: “What is wrong with this car that you are trying to sell me?”  

The authors conduct a series of studies to examine the impact that different types of questions have on a counterparty's behavior. They find that negative questions elicit the revelation of more critical information about problems.  In an interview with Knowledge@Wharton, Van Epps concludes, "“People are much more likely to disclose problems when you presume [there is a] problem.”  

These scholars examine questions in the context of job interviews and negotiations, but I think an even more important application might be for leaders assessing risk in their organizations.  We know that bad news often does not rise to the top in organizations.  How can leaders uncover hidden risks before small problems have become major crises?  This study suggests that leaders should ask probing questions that presume a problem exists, rather than inquiring in ways that assume things are going smoothly.  

We Underestimate the Power of a Thank You Note

Source: Pixabay

Several months ago, I drafted a blog post about a rather discouraging piece of research on gratitude. Jeremy Yip, Cindy Chan, Kelly Kiyeon Lee, and Alison Wood Brooks conducted a study regarding competitive negotiations. They discovered that "negotiators are likely to respond selfishly and opportunistically to gratitude expressed in competitive deal-making situations." 

Today I have some encouraging news about gratitude. Amit Kumar and Nicholas Epley have published some interesting work in Psychological Science based on a series of experiments that they conducted. The scholars asked people to write thank you notes to people who had a positive impact on them in some way. The researchers also asked each note writer to predict how the recipient would feel upon receiving the expression of gratitude. The British Psychological Society's Research Digest recently summarized the key findings from this research. 

The senders of the thank-you letters consistently underestimated how positive the recipients felt about receiving the letters and how surprised they were by the content. The senders also overestimated how awkward the recipients felt; and they underestimated how warm, and especially how competent, the recipients perceived them to be. Age and gender made no difference to the pattern of findings.

Other experiments showed that these same misjudgments affect our willingness to write thank-you messages. For instance, participants who felt less competent about writing a message of gratitude were less willing to send one; and, logically enough, participants were least willing to send thank-you messages to recipients who they felt would benefit the least.

Kumar and Epley believe that this asymmetry between the perspective of the potential expresser of gratitude and the recipient means that we often refrain from a “powerful act of civility” that would benefit both parties.

The lesson is clear... take the time to write that thank you note, becuase it will probably have more of an impact than you believe. You might just make someone's day, and it won't take much effort on your part to do so.

Should You Hire for Cultural Fit or Not?

For decades, executives have stressed the importance of hiring for cultural fit.  You often hear discussions about cultural fit among people on recruitment and selection committees, as well as by people working for executive search firms.   Recently, though, Adam Grant of the Wharton School has made an important point about the downside of hiring for cultural fit, and he's received a great deal of attention for his thought-provoking and insightful comments.  Here's what Grant has said, as reported in an interview with Dan Schawbel for Fortune. 

First, stop hiring on cultural fit. That’s a great way to breed groupthink. Emphasizing cultural fit leads you to bring in a bunch of people who think in similar ways to your existing employees. There’s evidence that once a company goes public, those that hire on cultural fit actually grow more slowly because they struggle to innovate and change. It’s wiser to follow the example from the design firm IDEO, and hire on cultural contribution. Instead of looking for people who fit the culture, ask what’s missing from your culture, and select people who can bring that to the table.

Is he right?  I htink he makes a strong argument for avoiding groupthink.  Managers do have a very unfortunate tendency to hire people who look, think, and act much as they do.  To be effective, leaders need to consider hiring people who think differently, who complement and augment their own skills and abilities (rather than replicating the expertise and modes of thinking already on the team).   

Having said that, I think there are some important aspects of "fit" that need to be considered when hiring.  Otherwise, new employees will either face organ rejection at their new firms, or they will have an adverse impact on the organization's effectiveness.  First and foremost, it's very important to make sure that a new hire shares the same values as the organization he or she will be joining.  Second, does the new hire believe in the mission of the enterprise?  Do they feel passionately about the organization's purpose?   They may have different views about the means to achieve those objectives.  That's healthy.   Finally, will the person's leadership approach enable others to succeed?  Hopefully, the hiring organization has leaders in place who have created a safe place where others can speak up, discuss mistakes, express dissent, and ask challenging questions.   New hires have to be able to create a safe climate for their employees as well.  If they a history of acting in ways that discourage others from speaking up, then they won't "fit" and they will have an adverse impact on the organization's effectiveness.  

Preparing for a Storm: Lessons for Business Leaders from Hurricane Research

Knowledge at Wharton features an interview this week with Professor Robert Meyer regarding his research on hurricane preparation (or lack thereof, by many citizens). Here's an excerpt: 

Knowledge@Wharton: How difficult is it to get people to be proactive?

Meyer: It varies. We’ve done some studies as to who is prepared for storms and who isn’t. What we find is that the people who are the most at danger of not preparing are those who have been through a storm but not a very strong one. Effectively, they think that they’ve survived a hurricane, but they actually haven’t.

On the other hand, surprisingly, people who are often better prepared are people who move into an area and have never been through a storm. They’re listening to the end-of-the-world broadcasts that are coming on television and saying, “I’ve just moved to Miami or the mid-Atlantic, and I’m going to believe what they tell me on the news, that I’d better really prepare.” These people do prepare. Unfortunately, what happens is that then when the storm comes through and they find nothing really happened, then the next time they figure, well, maybe I might prepare a little bit but not as much.

Source: Wikipedia

What's the lesson for business leaders?  How does this research finding apply beyond the scope of hurricane preparation?  Consider the types of competitive threats that your company faces?  Have you coped with similar threats in the past?  If you have, and if the threats were mild in nature, that might make you less likely to take future threats seriously.   You might think, "I've been through this before, and it wasn't so bad. It won't harm our business."   

Repeated mild threats leads to a sort of dampening of our sensivity to risk.  Diane Vaughan wrote about this concept many years ago in her research on the Challenger space shuttle accident.  She described the phenomenon as the "normalization of deviance."  Basically, the unexpected can gradually become the expected, which can then gradually become an acceptable risk.   To an outsider, of course, a threat can seem much more serious and severe. They have never seen this type of risk in the past.  The lesson, then, is that you might want to make sure that you engage both new leaders and incumbent managers in a constructive debate when assessing competitive threats.  The new voices can bring a necessary sense of urgency to the conversation, and they can perhaps help the organization assess the risk in a more accurate way.  

Generalists vs. Specialists: Boosting Creativity on Your Team

Scholars Florenta Teodoridis, Michael Bikard, and Keyvan Vakili have completed a new study regarding the role of generalists vs. specialists in the creative process. They posed the following hypothesis, as described in a recent Harvard Business Review post:

We theorized that the benefits of being a generalist are strongest in fields with a slower pace of change. In these fields (think oil and gas, mining), it might be harder for specialists to come up with new ideas and identify new opportunities, while generalists may be able to find inspiration from other areas. We also theorized that the situation flips for fields with a faster pace of change. In this case (think of quickly evolving fields such as quantum computers and gene editing), generalists may struggle to stay up to date, while specialists can more easily make sense of new technical developments and opportunities as they arise.

How did they study this question, and what did they find? The researchers examined the breakthroughs in mathematics by scholars in the Soviet Union from 1980-2000. They specifically wanted to look at the work being conducted during the Soviet era, when the pace of change was slow, to the period after the Soviet Union collapsed, when the pace of change increased substantially. Their detailed study confirmed their initial hypotheses. As they noted, "Generalists appear to be relatively successful as long as the pace of change is not too rapid, but their productivity decreases when the pace of change increases. At the same time, specialists appear to perform better when the pace of change accelerates."

Experts and Innovation

Stanford Professor Riitta Katila describes the role experts should and should not play on a team when it comes to developing breakthrough innovations. Check out the video clip below, in which she describes lessons from her research:

The Economics of Vacations

Kellogg Insight has published an interesting feature about key research findings from its faculty with regard to the economics and psychology of summer vacations. One of my favorite segments focuses on Tom Hubbard's research on demand shocks. Full disclosure: Tom , his sister, and I went to high school together. He's a terrific strategy researcher. Here's an excerpt, explaining what he learned about demand shocks by studying how the interstate highway system's development affected the gas station industry:

Perhaps you’ll decide to drive to your destination. You probably didn’t know that the gas stations you will pass reveal an interesting economic lesson about demand shocks.  Demand shocks represent a sudden rise or drop in consumers' desire to purchase a good or service. Empirical evidence of how companies and industries respond to demand shocks is hard to come by in large part because shocks, such as a particularly effective advertising campaign, happen everywhere at once.

Strategy professor Thomas Hubbard found inspiration for a way to study demand shocks in memories of family vacations.  "When I was a kid riding in the car to Florida, I-95 wasn't completed yet, and we had to take side roads," he says. What, he wondered, happened to the gas stations in towns after the interstate arrived? "I realized that these were demand shocks."

Studying demand shocks to gas stations during the construction of the interstate highway system was useful because "they're observable many times over many years in many regions," Hubbard says.  He combined government data on gas stations with data on when every mile of the interstate opened. He also poured over old maps to figure out what the best route was between two cities in the 1950s, before the interstate arrived, then measured how far that route was from the new interstate.

Hubbard found that when interstates were built close to existing roads, gas stations responded to the increased demand by expanding in size and hiring more employees, but few additional stations were built. When a new interstate opened several miles or more from the previous highway, entirely new gas stations opened up to service the demand, but the size of existing stations stayed the same.  The results suggest that entry opportunities in expanding markets are not as simple to exploit as they might seem.

New Version of Columbia Multimedia Case Study

I'm pleased to announce that Harvard Business Publishing has released a completely updated version of the award-winning multimedia case study about the Columbia space shuttle accident that Amy Edmondson, Richard Bohmer, and I created, along with our research associates Erika Ferlins and Laura Feldman.  The updated technology provides a much better experience for students and instructors, while maintaining the rich detail about the communications and information flow among managers and engineers during the shuttle mission.  The case offers important lessons about how to manage ambiguous risks and threats, create a culture where people feel comfortable speaking up and sharing bad news, make timely and effective high-stakes decisions, and build high performing teams.  Thank you to the entire technology team at HBS for working so hard to design this updated multimedia experience!  

Design Thinking is Hard on the Brain

In a new article published in Research-Technology Management (When Cognition Interferes with Innnovation:  Overcoming Cognitive Obstalces to Design Thinking), my colleague Allison Butler and I offer one plausible explanation for why many individuals struggle with the design thinking process. We argue that design thinking is "hard on the brain."   In developing our argument, we draw upon six years of work in curriculum design, teaching, and research on design thinking - including the creation and execution of Bryant University's IDEA program (an intense, three-day design thinking experience that all 850+ first-year students undertake each year).   

We believe that all individuals have the capacity to be creative, yet we often think, reason, and process information in ways that hinder our ability to innovate. Our brains are wired to operate as efficiently as possible, which is ideal for making our way in the world in daily life, but an impediment to successful design thinking.  The article examines the cognitive obstacles at each stage of the design thinking process, and we offer strategies for overcoming these impediments.  

For instance, we describe how our tendency to engage in top down processing when we observe a situation can cause us to miss important details about user behavior.   Moreover, we explain how inattentional blindness and confirmation bias afflict many people trying to conduct field research and empathize with users.  During the ideation stage of the design thinking process, fixation becomes a significant problem.  People get stuck on ideas within a particular category during the brainstorming process, and they fail to generate a sufficiently diverse range of concepts and solutions.   Finally, during the prototyping and testing stage, a number of cognitive obstacles impede our ability to learn, adapt, and iterate effectively.  For instance, our tendency to rationalize our own failures as due to external circumstances rather than internal causes (the fundamental attribution error) prevents us from using feedback effectively to iterate and improve our solution.   Similarly, the sunk cost effect means that we often find ourselves throwing good money and effort after bad, rather than abandoning solutions that receive negative user feedback. 

How do individuals overcome these obstacles?   That's the key contribution of our article.  Based on our work with many students and practitioners, we describe countermeasures to address these cognitive obstacles.  The article offers a number of such strategies.  One of my favorite is the notion of engaging in parallel rather than serial prototyping.  We draw upon research that shows how parallel prototyping can help people avoid fixation and premature convergence on one type of solution, and it can help individuals receive and utilize user feedback more effectively.   For an in-depth explanation of each our countermeasures, I hope you will take a look at the article.  

Looking for Labor Market Inefficiencies

Miriam Gottfried and Laura Cooper have written an article in the Wall Street Journal this week about billionaire investor Robert Smith and his private equity firm, Vista Equity Partners. The article examines the company's secretive "formula" for evaluating investment opportunities and enhancing performance in portfolio companies. I was particularly struck by the fact that the company uses an intelligence test to evaluate job candidates. Here's an excerpt describing this test: 

A proprietary cognitive assessment, similar to an IQ test, includes questions on logic, pattern recognition, vocabulary, sentence completion and math. The test inspires consternation and fear among existing employees, according to former employees. Vista primarily hires job applicants who do well, often young people with modest credentials or experience. These are its “high performing entry-level” workers, or HPELs.

Later in the article, Gottfriend and Cooper describe the people often hired by Vista Equity Partners:

Most of the people Vista hires score highly on the cognitive test. Often they are young employees with less-impressive credentials or experience. These HPELs, as they are known, may have gone to state universities and be willing to do a job for $75,000 that an Ivy League graduate in a high-cost market would demand twice as much for.

I've always been highly skeptical of using intelligence tests to evaluate job candidates for several reasons. First, I'm never quite sure of the validity of the tests being used. Second, I think performance on the job is driven by many factors beyond raw intellectual horsepower. Emotional intelligence, ability to work on a team, communication skills, and other skills play a major role in a new employee's success in the workplace. Finally, I wonder if these tests do have a bias toward younger candidates who have recently completed school (the article discusses this point). 

Having said that, the interesting part of Vista's strategy seems to be its use of the test to target exceptionally intelligent candidates from lesser-known colleges and universities. Vista seems to recognize that companies often pay a hefty premium for graduates from elite institutions such as Columbia, where company chief executive Robert Smith earned his MBA. Companies have a hard time evaluating young candidates, and so they use a diploma from an elite school as a signal of quality. 

However, firms may be missing the opportunity to recruit great talent if they focus exclusively on the "signal" provided by a degree from an elite institution. What if a firm could identify the best talent from the non-elite schools and thereby acquire great talent at a much lower price? That seems to be the question that Vista has asked and tried to answer using this intelligence test and other tools. They appear to be using the test to exploit a labor market inefficiency. The article, unfortunately, does not have too much detail on the Vista approach, given the highly secretive nature of the firm's methods. It would be interesting to know more so as to ascertain the merits and drawbacks of this aproach.

Shrink to Grow: Why Don't More Companies Adopt This Strategy?

As we witness the breakup of GE, a thought comes to mind regarding a rarely used corporate strategy - namely, the "shrink to grow" approach.   Many years ago, I went to work for General Dynamics after graduation.  When I began working there, General Dynamics was #44 on the Fortune 500 list of the largest American firms by revenue.  However, the company had been hit by acquisitions scandals and a string of very disappointing financial results.  Then the firm witnessed the fall of the Berlin Wall and the collapse of the Soviet Union, and the US government began to shrink defense spending in key areas affecting the firm's businesses.  The company's leadership knew that consolidation needed to occur in the defense industry.   General Dynamics sold many of its major businesses, including its largest business unit (which manufactured the F-16 fighter jet) as well as smaller units such as its Cessna Aviation division.  

By the mid-1990s, General Dynamics had two major divisions remaining:  one unit produced nuclear submaries, and other manufactured tanks and other armored vehicles.   In 1996, General Dynamics ranked only #350 on the Fortune 500 list.  In the years that followed though, the company began to grow again, building on these two remaining platforms.  It acquired Bath Iron Works, for instance, to expand its shipbuilding business beyond submarines (Bath produced destroyers).   It made a series of other acquisitions as well.  By 2005, General Dynamics had risen to #115 on the Fortune 500 list.   Moreover, the company became highly profitable and delivered strong shareholder returns in this era.   

Why don't more companies adopt a "shrink to grow" approach when experiencing poor financial results and/or other crises/scandals?   Many executives hate the thought of shrinking, of leading a much smaller organization.   They focus on the top line (revenue) and market share, rather than thinking about how to position the organization to thrive in the long run.   As we watch GE shrink now, perhaps we will see that it positions the organization to succeed and grow again over time.  More companies should consider this strategic approach. 

The Downside of Open Office Environments

Harvard scholars Ethan Bernstein and Stephen Turban have published an intriguing new study regarding open office environments. The study is distinctive because of its methodology. The scholars used sociometric badges and microphones to monitor the face-to-face interactions of employees before and after the switch from cubicles to an open-office layout. As a result, they did not rely on people's feelings and perceptions about the layout, but instead, they collected objective data about the impact that a change in office environment had on human interactions. The scholars discovered that face-to-face interaction dropped substantially after the shift to an open-office layout. Here is a summary of the research findings, from the British Psychological Society's Research Digest:  

The results were stark: after the shift to an open-plan office space, the participants spent 73 per cent less time in face-to-face interactions, while their use of email and instant messenger shot up by 67 per cent and 75 per cent respectively.

A second study involving 100 employees at another Fortune 500 company was similar but this time the researchers monitored changes to the nature of the interactions between specific pairs of colleagues before the shift to an open-plan office compared with afterwards.

There were 1830 interacting dyads and, of these, 643 reduced their amount of face-to-face interaction after the workspace became open-plan, compared with just 141 showing more physical interaction. Overall, face-to-face time decreased by around 70 per cent across the participating employees, on average, with email use increasing by between 22 per cent and 50 per cent (depending on the estimation method used).

How Do You Respond to Bad News?

Source: Flickr stock photo

As a leader, you should be creating an environment where people feel comfortable sharing bad news.  You don't want them hiding problems, or worse yet, manipulating data to make it seem as though things are proceeding smoothly.   When people do surface issues and concerns, leaders face a moment of truth.  How should you respond?   You only need to shoot the messenger once to poison the organizational culture for years to come.  People have long memories.  They will remember if a prominent leader reacted poorly to the messenger who delivered bad news.   

What is the right way to respond to someone brings forward a key risk or problem with potentially damaging ramifications for the business?   

• First, leaders need to express their gratitude and praise the courage that it took to raise the issue.  
• Second, they need to point out the harm that hidden risks can pose to the organization, and encourage others to come forward in the future with similar concerns or problems.  
• Third, leaders have to avoid the natural instinct to ask, "Why did this happen, and who is responsible?"  Certainly, there will be time to delve into the causes of this problem.  However, in the moment, leaders want to avoid finger-pointing and assigning blame.  Instead, they must focus on bringing people together to solve the problem.  They need to ask, "How can we resolve this problem?  What do we need to do moving forward?"  Naturally, answering these questions will require some investigation as to the cause of the problem.  However, the focus on problem solving rather than "investigation and interrogation" will mean a world of difference moving forward.  
• Fourth, leaders must encourage the team to look systemically at the problem, rather than individualistically.  They can't focus on the individual(s) involved, but instead must address the systemic issues that led to this failure.  It's not about the one rotten apple usually... it's about the damaged barrel that caused the apples to spoil.  
• Finally, leaders must look inward.  How did their behavior, leadership style, goal-setting tactics, and means of rewarding employees lead to this problem?  Acknowledging your own role in the situation not only helps the organization improve and avoid making a similar mistake again, but it makes others more comfortable discussing the mistakes and errors that led to this failure.  

Jimmy Kimmel on Shark Tank

As I was looking for some creative ways to teach my students about building new business models, I came across this hilarious Jimmy Kimmel video.  In this clip, he takes his "bold" ideas to Shark Tank and pitches to the panel.  Let's just say he doesn't receive an overwhelmingly positive response.  

The Value of a Decision Journal

Source: Wikimedia Commons

Village Global, an early-stage venture capital firm, recently posted some excerpts on Medium from a talk that Pinterest CEO and co-founder Ben Silbermann gave at the company.   In particular, I was intrigued by this suggestion that leaders keep a decision journal.  Here's Silbermann explaining the concept and why it's valuable for leaders: 

Write down decisions you make — and your rationale at the time — into a “decision journal.” Next time you hire someone, cut a partnership deal, decide on a key product spec — or make any hard decision — write down your reasoning in a journal. Later, you can see how the decision played out relative to your reasoning at the time you made the decision. You can learn whether you should have trusted your gut at the time or not.

Ben has been doing this for awhile and swears by the technique: I feel like if you don’t write down a decision you made and why, there’s so many things going on that it’s very hard to remember exactly what you were thinking at the time, because you have this kind of running dialogue that’s being updated along the way. So that’s been really helpful for me.

I love the concept because it provides leaders a structured opportunity for reflection and learning.   I think it has additional value though.  For many leaders, performance suffers not because they made a poor decision, but because they communicated it ineffectively to others in the organization.  Why can the decision journal help?  By forcing themselves to write down the rationale for their decisions, leaders then have an opportunity to improve the clarity of their explanation.  They can clarify their own thinking about the criteria they used to make critical choices, and consequently, they can explain that rationale clearly and concisely to their team members.  Before people commit to and support a decision, they want to know more than just WHAT the plan is... they want to know WHY leaders chose those particular actions and strategies.  The decision journal can help leaders clarify their own thinking about the WHY behind their decisions.  

Lessons from the Theranos Debacle

Several years ago, journalists far and wide heralded college dropout Elizabeth Holmes for her bold vision, innovative strategy, and charismatic leadership at her well-funded startup, Theranos. Holmes proclaimed that she had invented an entirely new blood testing regimen for patients.  Journalists drew parallels to Steve Jobs, even noting that she dressed in a similar fashion. Holmes did not only fool journalists though.  She allegedly managed to deceive an array of investors and board members with extensive experience in industry and government.   Of course, the governnent now charges that the entire organization turned out to be a massive fraud. Last week, Elizabeth Holmes and her firm's former president, Ramesh Balwani (also her boyfriend at one point), were indicted for engaging in an elaborate scheme to defraud investors, patients, and doctors.   

What can we learn from this debacle?  Dr. Greg Licholai, a Yale faculty member and biotech entrepreneur offers the following advice regarding how to prevent another Theranos from occurring:  

So what can we do? First, investors should maintain a “trust but verify” attitude toward companies. We want to enable innovation by providing appropriate resources to creative people—but simultaneously scrutinize their claims, especially when it comes to technology that affects patient safety. Second, companies should foster open cultures and allow for feedback and safe environments for whistleblowers when necessary. Third, industry must continue to embrace transparency and recognize that in the long run, those companies that listen to their constituents achieve sustainable success.

These lessons are highly valuable.  I think there's a broader point though.  We have to be careful about becoming too enamored with a bold and highly appealing vision.  We fall in love with dreams.  We have to ask: Is this vision technically feasible and economically viable?  Sometimes, we find the vision and the desired end state so desirable, and the leader proclaiming that vision so appealing, that we begin to put too much faith in their ability to do the highly improbable.  We stop asking tough questions.  We want to believe that the vision will become reality, and that fervent belief erases some of the natural skepticism that would be healthy in scrutinizing the organization.   Does this make you think of any other visionary leaders these days pursuing what are perceived to be very socially beneficial outcomes?  Hmm...