Stanley's Having a Moment: Should They Be Worried?

 

Everyone seems to want a Stanley water bottle these days.  The 40 ounce bottle has become a social media sensation, and it has skyrocketed in popularity with young people.  According to Fortune, the recent introduction of a Target-exclusive Valentine's Day product line created quite a stir: " People are camping outside Target stores, and there have been reports (and social media videos) of physical alterations as people try to get the special edition of the cup that has become something of a multi-generational craze."  

Interestingly, the company has been around for more than 100 years (founded in 1913). The brand enjoyed popularity with construction workers and outdoor enthusiasts for its rugged, utilitarian products. I remember my dad owning an all-steel thermos bottle, as did many other of his fellow factory workers. Trendy it was not.  

In 2016 the company launched the "Quencher" - a very large water bottle (40 ounces) with a handle and a straw whose narrow bottom fit into a car's cupholder. The product did not enjoy market success until a 40-something blogger named Ashlee LeSueur started touting the product online.  She even advised the company to market the product to women, rather than to the men the firm typically targeted.  She encouraged them to create a line of Quenchers in many bright colors.  The company's executives resisted for some time.  Then they shifted gears, and they began to adapt the product and the marketing.  The product has become immensely popular.  Great news, right?  Well, perhaps executives should still be worried.  

When a brand explodes like in this case, executives need to ask themselves:  Is this surge in popularity likely to generate a permanent lift in revenue, or are we experiencing a temporary spurt of growth that may subside?  Could the bubble burst quickly, as other companies introduce copycat products, or as consumes move on to the next big thing?  Given these questions, leaders need to think about how to mitigate the risks associated with scaling up quickly to meet this surge in demand, only to be left facing challenging circumstances if the popularity wanes quickly in the near future.  Think Peloton, who did not mitigate these risks effectively.   Here are a few thoughts about managing the potential downsides at Stanley: 

1.  Don't forget the traditional core customer, and certainly don't neglect their needs.  Sometimes, firms take their eye off the ball in pursuit of new customers, and then capable rivals emerge to attack their core.  What do the construction workers and outdoor enthusiasts need?  How should we continue to innovate for them?  Invest some of the new profits back in the core.  

2.  Scale up with caution.  Don't over-hire in pursuit of the growth.  Cutting workers later will be mighty painful.  

3. Get comfortable with some product scarcity.  That may even enhance the product's popularity.  It may be better to stock out then to be stuck with a ton of excess inventory if the product suddenly loses its "cool" among these new customers.  Moreover, too much product out there in too many places can actually contribute to a sudden turn in popularity, as people begin to complain that "everyone" has what they once considered a more exclusive product.  

4.  Be cautious about extending the brand further into new product categories.  Investing some of the new profits in innovation makes good sense (rather than simply pocketing all the cash), but you have to ask yourself:  Will we have a competitive advantage in this new category or market segment? If so, what precisely is our advantage?  Don't just pursue growth without understanding the nature of the the firm's competitive advantage.  

5.  Watch product quality like a hawk.  As production scales up rapidly, many firms encounter quality problems that quickly become a brand's downfall.  Put in place strong measures to insure that product defects remain very low. 

Stuck in a Rut

Source:  https://hrcsuite.com/pioneers/ 

Alicea Lieberman, On Amir and Ziv Carmon have published an interesting new paper titled, "The entrenchment effect: Why people persist with less-preferred behaviors."   The scholars conducted a series of experiments to examine why people become stuck in "behavioral ruts."  We can all relate, of course. At times, we find ourselves continuing to engage in undesirable activities even though we could rather easily switch to a more enjoyable or beneficial course of action.   The scholars note that many explanations exist for this suboptimal behavior, including the sunk cost trap.  However, they explore another potential explanation for behavioral ruts.  They describe this causal mechanism as entrenchment, defined as "the increased accessibility of a task set which strengthens with repetition and continuity and makes constructing an alternative task set feel difficult, leading people to forgo opportunities to make beneficial changes."  

In their first set of experiments, the scholars show that people can get stuck in behavioral ruts rather easily.  Then, they demonstrate that the more we have engaged in a suboptimal activity, the harder it can be to envision an alternative course of action.   In their language, the alternative becomes less accessible to individuals.   Therefore, people tend not to switch to a more desirable activity.   This entrenchment occurs even when switching is actually not difficult at all, and the other course of action is clearly more desirable.  

However, the scholars find that the continuous repetition of a mundane task leads to more entrenchment than when individuals have the opportunity to intermittently perform other task.  The interruption of the less desirable activity reduces entrenchment and enhances the likelihood of switching to a preferred course of action moving forward.  

The authors argue that the research has important implications for how we structure work for our employees.  Sometimes, requiring employees to take a break, or adding some variety to their work flow, will increase the likelihood that they will seek out and adopt better ways of working rather than staying entrenched in a less productive course of action.  Breaking up the mundane has some really important benefits, as it could stimulate the search for, and adoption of, more efficient ways of working.  

Lesson from the Closing of the Belichick Era in New England

 

Source: ESPN

Simple, but powerful, lesson from the Belichick era's closing chapter in New England: Open up your inner circle as you grow older, invite new voices inside, and keep questioning whether the formula for past success continues to apply in a changing environment. 

Changing Behavior by Making a Process MORE Difficult Rather than Less

https://buffalo7.co.uk/blog/how-to-get-buy-in/

Holly Dykstra, Shibeal O'Flaherty, and Ashley Whillans have written a fascinating new Harvard Business School working paper titled, "The Buy-In Effect: When Increasing Initial Effort Motivates Behavioral Follow-Through."   They begin by noting that many behavioral scientists advocate the removal of friction as a mechanism for stimulating people to adopt a new behavior (or to change their existing behavior).   In other words, make a new course of action easier for people to adopt, and you are more likely to get people to engage in that desired conduct.  However, these scholars posit that sometimes it might make sense to actually ADD friction - in short, make it MORE difficult to pursue a new course of action, and you might actually induce behavioral change.    They argue that adding some friction can increase a sense of ownership and buy-in toward a new course of action.  

To test their hypothesis, they conducted a field experiment with Oregon Department of Transportation.  Several years ago, the department migrated to a new carpool platform for residents of the state.  The scholars noted that there were many inactive users on the old platform (87% of all accounts).  In other words, they had established accounts, but they were not actually using the carpool services.  

The scholars examined whether a slightly different procedure for migrating inactive users to the new platform might have an impact on sign-ups and usage.   Some users were provided information regarding a low-effort method for moving to the new platform.  Others received information regarding a sign-up process that involved more effort.   Here's what the scholars found:

"More Effort group took more trips overall, despite there being fewer participants who signed up to the platform: while 694 signed up from the Less Effort group, only 511 signed up from the More Effort group. During our 122-day study period, we observed 9,147 total trips; out of these, the More Effort group took 5,106 trips, while the Less Effort group took 4,311, meaning that More Effort group took 795 more trips overall than our Less Effort group."

Why did adding friction actually increase usage of the carpool platform?  The scholars don't have a way of actually determining the psychological mechanism underlying individual behavior in this case.  However, they offer some possible explanations.  For example, they suggest that people may "feel a greater sense of psychological ownership over the action and value it to a greater extent, which would increase their likelihood of following through."  They also note that the sunk cost effect may be at play here.  If you are invested some time and effort into a process, you may continue down that path because you don't want to "waste" the initial investment you have made.  

Some Great Reads from 2023

 Here are some of my favorite books that I read in the past year:

• The Devils Will Get No Rest, by James Conroy
• Outsmart Your Brain, by Daniel Willingham
• Hero of Two Worlds, by Mike Duncan
• Unscripted, by James Stewart and Rachel Abrams
• Right Kind of Wrong, by Amy Edmondson
• The Revolutionary Samuel Adams, by Stacy Schiff
• The League, by John Eisenberg
• The Restless Republic, by Anna Keay
• The Power of Regret, by Daniel Pink
• It's Not TV, by Felix Gillette and John Koblin
• Elon Musk, by Walter Isaacson
• Our Man in Tokyo, by Steve Kemper

Getting Comfortable with Discomfort

Physicist Peter Carruthers, once the leader of the theoretical division at Los Alamos Laboratory, had a wonderful viewpoint about the discomfort that comes with taking on an interesting challenge:  

“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 I reflect on the past few semesters of teaching, I'm reminded of the profound insight captured in this quote.  Moreover, I'm mindful that many students are deeply troubled by the discomfort that comes with learning something new and difficult.  Or, they shy away from particular activities that they find uncomfortable, such as making a public presentation or speaking up in class.  In education today, I think we are often allowing students to nestle in their comfort zone.  As a result, they are missing tremendous fairly low-risk opportunities to stretch and grow their skills in the safety of a classroom.  

What happens when they enter the workforce?  Will they seek opportunities that "fit" their skills, or will they look for challenges that will grow their skills?  For those who seek comfort and fit, they may excel early in their career, but will they plateau at some point?  Will they grow bored eventually with repeating tasks at which they have become quite adept?  Meanwhile, what about those who stretch themselves?  We need to prepare them for the failures that will undoubtedly occur.  We need to encourage them to be self-reflective, to learn quickly from their mistakes, and to adapt based on the feedback of others.  If we teach them to be resilient learners, they will thrive in the long run. 

Leaders need to think about how to best develop talented young people in their organization.  They need to insure that these future stars don't limit their potential by simply seeking comfortable opportunities in the early part of their career.  I told my students the other day that they should not shy away from the mess in their future organizations; they should sometimes run to the mess.  In those situations, there's the opportunity to fix broken things, and to learn a ton from that process.  Leaders, of course, need to support those who take on these challenges.  They will need to be encouraged, and they need some help not being frustrated by the failures along the way.  

The Erosion of Brand Loyalty

In my discussions about competitive strategy with many clients, the topic of brand loyalty always arises.  Many companies have experienced a decline in brand loyalty, as this report indicates.  Some of this decline has occurred because of the recent bout of high inflation, as consumers have traded down to lower-priced products including private label goods in many categories.  However, some of this decline in brand loyalty began long before the recent inflationary experience.  The erosion has many causes.

However, I think it is important to think about consumers and brands in terms of both loyalty and desire for variety.  I use this simple 2x2 matrix to illustrate my point.  You may have a brand for which there is a great deal of loyalty or not.  However, you also have to think about the demand for variety in your particular product/service category.  

For some product categories, customers demand a great deal of variety.  They do not want to consume the same good/brand each time they shop.  In some cases, we have low loyalty because customers are constantly trying new things.  They love to explore and discover.  Wine definitely fits in this category. Many people are always trying new wines, and they exhibit very little loyalty.  Craft beer fits here too for many people.  In other categories, there is some loyalty, but the high demand for variety means that the brand sits firmly within the regular repertoire of the consumer.  A product such as M&M's fits in this category.  People love the brand, but they don't always want that type of chocolate.  For Trader Joe's, the brand has a cult-like following, but few people do all their shopping at Trader Joe's. They buy their groceries at several different stores, but Trader Joe's is always in their repertoire.   For companies, they need to think about where their products fit in this matrix.  Do they have a product that is not sufficiently differentiated?  Is it a commodity product, and is that the reason competition always seems to revolve around price?  Or, is the challenge that consumers want variety and love to try and to discover new things?  The response to that competitive challenge can and should be very different than the problem of a lack of differentiation.  

Are You a Perfectionist? Is That Always a Bad Thing?

Source: https://www.verywellmind.com/signs-you-may-be-a-perfectionist-3145233

In Fast Company this week, University of Texas Professor Art Markman describes some of the pitfalls of being a perfectionist. He writes, "It’s wonderful to have high standards. But, at some point, those high standards cross the line from a benefit to a hindrance." Throughout the article, he describes some symptoms that might suggest you have crossed that line. He concludes the article as follows:

"Success in life is less about mistake elimination than about mistake recovery. Do enough work on projects to know that you have covered the major bases. Focus on detecting problems that come up after the work you do. Fix problems as they arise. And if you discover that a problem reflects an error on your part, apologize for the error, take steps to repair the problem, and make a note of it so that you don’t make that mistake again."

London School of Economics Professor Thomas Curran has studied perfectionism for years.  In article for the LSE website, Peter Carrol describes Curran's comments about the downsides of crossing the line from high standards to perfectionism:

"Each form of perfectionism comes with 'negative baggage' Dr Curran says, but this is particularly acute with those that suffer from socially prescribed perfectionism. 'Socially prescribed perfectionists don’t feel valued in social situations and have a chronic need for other people’s approval, while being extremely down on their implicit value,' he says.

While some may view perfectionism as a 'necessary evil' that helps people become become highly successful, Dr Curran argues that this is a myth, and that in fact perfectionism can be detrimental to performance and health. 'There is a lot of evidence to say you are not going to get any real performance benefit from perfectionism, and that it’s actually really damaging for lots of people,' he adds."

I think Markman and Curran offer some important insights about the downsides of perfectionism.  I believe, however, that we have to distinguish between easily preventable errors and other types of mistakes that might occur.  Submitting a memo that has multiple spelling and grammatical errors is inexcusable.  Proofing the memo carefully is essential.    Moreover, the stakes will differ across a variety of situations.  Our level of perfectionism should vary by situation. If the downsides of failure are quite low, then we don't want obsess over every detail to the point of creating undue anxiety or stress of ourselves and our team.  On the other hand, if the stakes are quite high, we might want to change our standards.  Finally, we all have to get better at setting priorities.  What really matters in a piece of work that we are doing?  The substance probably matters much more than the wordsmithing, or the formatting of the slide deck.  I believe that we sometimes obsess over things such as formatting because we are trying to distract ourselves from the tougher issues or choices that need to be confronted in a particular situation.  

Does Merging Two Struggling Firms Create Value?

https://dealroom.net/

Fortune's Chris Morris has reported that Neiman Marcus has rebuffed an acquisition offer from Saks, a competitor in the luxury retail market.  Apparently, merger talks continue, with Neiman Marcus hoping that Saks will increase its $3 billion offer.

This potential merger raises an interesting question for me:  Will merging two struggling firms create value?  Both brick-and-mortar retailers are struggling to compete as e-commerce rivals soar, and specialty retailers such as Zara and Lululemon outperform them.  Morris explains some of the challenges at each firm: 

The potential matchup comes at a time when luxury retail is in a down cycle, as consumers focus on bargain hunting and economic headwinds continue to keep them on edge. Neiman, in 2002, filed for bankruptcy, but has emerged in a better position, with less debt. Saks has reportedly been late with several payments to vendors, some of whom temporarily halted shipments. Hudson Bay Company, which owns Saks, sold real estate holdings recently, raising $340 million to help pay bills.

Saks believes that some synergies will be created as a result of the deal.  According to the article, management believes that combined entity will have more negotiating leverage with powerful luxury brands, particularly those that have become part of very large luxury conglomerates such as LVMH in recent years.  Moreover, management believes that the elimination of certain duplicative functions will reduce costs.  

These synergies may be real, and cost savings may result.  However, a fundamental question is:  Will merging the firms help them turn their revenue problem around?  Can they develop a stronger competitive advantage that enables them to grow in the face of strong headwinds in the brick-and-mortar retail industry?  It seems unlikely that a merger solves the growth problem at these firms.  In addition, one has to wonder about the burden of merger integration hoisted upon two organizations that are already struggling in many ways.  Will the merger integration effort make them more inwardly focused, when they should be paying ever-closer attention to changing consumers?  How much distraction will an integration effort create?  

Two wrongs don't make a right, and two weak firms don't necessarily make one stronger one after a merger.  If this deal does occur, it may lead to value creation, but formidable challenges lie before them if they are to create and sustain value and competitive advantage for the long haul. 

Should We Micromanage Sometimes?

Source: https://day.io/blog/

Adam Bryant recently posted a terrific interview on LinkedIn with David Wilkie, CEO of World50.  Wilkie ended his comments with the following story:

The other thing is that people often struggle with the sheer volume of work they face. I like to ask the CEOs I meet, what is your management hack? One gave me a great piece of advice. “Micromanage,” he said. “I know. Everyone tells you don’t micromanage, but you should micromanage 20 percent. In every business, 80 percent of your business needs to be good, but 20 percent of it needs to be very, very good, and that’s the differentiator for you in the marketplace. Your job as CEO is to know what 20 percent that is and over-index on that.” So I tell leaders, “Figure out what your 20 percent is and focus on that.”

The sentiment here definitely surprised me at first, but then it stimulated my thinking on the subject.  I believe this leader has made a fascinating point.  Leaders sometimes have to take a deep dive on certain matters and get their hands dirty a bit. They need to dig into a project or an issue, and they need to understand it a great deal of depth.  Which areas require this type of extra attention?  It makes a great deal of sense to focus on those key areas of differentiation for the company. What are the make-or-break elements of the firm's value proposition?  Where are the key points where a customer experience can go from good to great, or from good to terrible?  What truly distinguishes the firm from its competition?  In these areas, perhaps a bit of micromanagement from time to time can actually do a great deal of good.   Of course, the key is how the leader behaves when they dive into these matters.  Do they just tell people what to do? Or, do they ask good questions, coach people through the situation, and empower others to help craft a solution collaboratively?

Unhappy and Disengaged: What's Happening with American Workers?

Source: The Human Capital Hub

Vanessa Fuhrmans and Lindsay Ellis have penned a Wall Street Journal article titled, "Why Is Everyone So Unhappy at Work Right Now?"   They report:

Despite wage increases, more paid time off and greater control over where they work, the number of U.S. workers who say they are angry, stressed and disengaged is climbing, according to Gallup’s 2023 workplace report. Meanwhile, a BambooHR analysis of data from more than 57,000 workers shows job-satisfaction scores have fallen to their lowest point since early 2020, after a 10% drop this year alone.

Furhmans and Ellis explain that many companies increased wages amidst the tight labor market that emerged after the initial lockdowns eased.  Moreover, a large number of firms enhanced employee benefits.  For instance, many organizations offered improved mental health benefits and increased support for childcare.  The spending doesn't seem to be paying off.  The battle over remote work vs. returning to the office doesn't seem to fully explain the level of disenchantment either.   While some bemoan having to commute into the office again, others seem to have much less connection to their organizations because of remote work arrangements.

For me, the discussion in the article suggests that leaders need to rethink their approach to engaging and retaining employees. Compensation matters, but it simply isn't enough to drive engagement. Purpose matters, but that alone doesn't create highly committed and engaged employees either. I think leaders need to take a systemic approach. In so doing, they should recognize that pulling one or two levers alone will not have a significant positive impact. They need to think about their entire system. It would be helpful if leaders reconsidered the seminal work by Hackman and Oldham on job design. They described five factors that create a high level of intrinsic motivation, productivity, and commitment.

• Skill variety – People don't enjoy doing the same work day after day.  They want to tap into a variety of their skills and capabilities over time.   Some tasks must be completed each day, but other projects can and should vary.  
• Whole task  – Yes, it may seem that we can be more productive through division of labor.  However, employees find it more satisfying when they can see a job through from start to finish at times.  They don't want to just do a bit part without seeing the finished product.  I would add that these two first points suggest that it is important to provide interesting challenges to your employees. They will find a great deal of satisfaction from accomplishing a difficult task, provided that they have enough support in that effort.  Strive for what educators describe as desirable difficulty.  In other words, it can't be too easy, but if it's ovewhelmingly challenging, they will get frustrated quickly.  
• Task significance  – How important is the work being done?  Do employees recognize and understand the importance?  Here, organizations can do much more to show employees the impact that their work is having on people's lives.  I'm reminded of the CEO of a defense contractor explaining to me that she has her team film videos of soldiers thanking factory workers for making vehicles that keep them safe amidst the threat of roadside bombs and IEDs.   
• Autonomy – Give people some latitude regarding what to do and how to do it.  Sometimes, leaders have to direct people as to what to do.  However, they might still be able to find ways to provide choice regarding how to accomplish those tasks.  Find ways to ask workers often if they have better ideas as to how the work should be done.  
• Feedback – Make sure you recognize hard work and accomplishment in small ways on a day-to-day basis, not just in terms of pay and promotion increases that might come only once per year.  Provide constructive feedback so that people can course correct if they aren't meeting expectations.  Encourage workers to ask for help when they need it.  

It's not enough to pull one of these levers.  You need to work on ALL of them across the board.  Moreover, employees need to be part of the conversation about how to improve on these five fronts.  

How Gratitude Decreases Burnout at Work

 

As Thanksgiving approaches, we should consider the role that gratitude plays not only for our personal well-being, but for the engagement we create among our employees at work.   Amber Kersten and her colleagues have published a new paper in the Journal of Personnel Psychology titled, "Paying Gratitude Forward at Work."  The scholars studied more than 350 employees from companies in the Netherlands, Germany, Finland, Belgium, and Malta.  They found that work-related gratitude is associated with lower levels of exhaustion and disengagement.   In short, those employees who are more thankful and appreciative about elements of their worklife tend to have lower levels of burnout.  Moreover, they found that interpersonal helping behavior (i.e., do people go out of their way to assist others at work?) plays a crucial mediating role in this relationship.  In other words, "gratitude stimulates interpersonal helping behavior, thereby alleviating disengagement."  

Can leaders cultivate a culture of gratitude in their organizations?   Kersten and her co-authors point to a paper by Ryan Fehr and colleagues that recommend certain human resource initiatives that can cultivate employee gratitude.   First, Fehr and his co-authors suggest employee appreciation programs.  Second, they recommend that organizations consider facilitating contact between workers and those customers (internal and external) who benefit from the work that they have done.  In other words, help people see the impact that they are having, even when they don't always see the impact on a day-to-day basis.   Third, offering employees constructive developmental feedback and opportunities to advance their personal development also can enhance gratitude at work.   Together, these three interventions can create a culture of gratitude that goes beyond simply recognizing people for their efforts from time to time on an ad hoc basis.   

Rethinking The Push to Sign Customers Up for Your Loyalty Program

Source: www.technologyinsights.com

Black Friday is almost upon us.  As consumers shop at many retailers, many people will be asked if they are members of the company's loyalty program.  If not, associates will ask customers if they would like to join.  Do loyalty programs add value?  Clearly, most retailers seem to think so.  Yet, I'm always intrigued by the retailers that don't have loyalty programs.  Consider Trader Joe's, one of the most successful grocery retailers in the world.  They have developed a cult-like following without offering customers a rewards program of any kind.  

Recent research suggests that companies might want to rethink the standard approach to loyalty programs.  Scholars Wayne Taylor and Brett Hollenbeck conducted a fascinating study of a major home improvement retailer's loyalty program. Thye examined transaction data for more than 10,000 customers at five store locations over two years.  15% of these customers were members of the retailer's loyalty program, which only offered customers rewards for purchases in a particular product category.  The scholars found that customers do spend more when they join the program, but the cause-effect relationship is unclear.  Did customers spend more because they became members, or did they become members in advance of making some planned major purchases?  Overall, the scholars don't see a substantial positive impact on profits from signing new people up for the program.

Interestingly, however, the scholars do find that a certain subset of customers do deliver additional profits when they become new members of the retailer's loyalty program.  The customers that reside a considerable distance from the retailer's store locations, but in close proximity to a rival's store locations, tend to be quite valuable as new members of the loyalty program.  In other words, loyalty programs work best when they induce customers to switch.   Otherwise, the rewards simply eat into your margins on purchases that would otherwise occur at your stores anyway.  For marketers, the results imply that one could and should focus direct marketing efforts on specific customers in particular locations when trying to increase membership in a loyalty program. 

Customer Experience: Does it End with a Bang?

HBS Working Knowledge reports on interesting new research from Professor Julian De Freitas. He has studied customer journeys, and he finds that a strong memorable moment at the end of a customer journey can help shape a very positive longlasting impression.   As I read about the research, I was reminded about an article I read some years ago regarding Ritz Carlton's legendary customer service.  At the hotel firm, employees are allowed, and even encouraged, to spend up to $2,000 to address a customer's problem.  That holds even when the issue is not the hotel chain's fault, but instead involves  a customer error.   Now, not every firm can empower its employees to spend that much money.  Most firms don't have the margins that Ritz Carlton has, nor do they have the customer lifetime value that the luxury hotel chain generates.  Thus, firms might have a much lower limit.  Still, the concept is fascinating, because it often means that a customer's experience can end with a very memorable positive moment, rather than a frustrating memory.  

Consider a family that enjoyed a terrific stay at the hotel, but then managed to lose their son's favorite toy.   No matter how great the customer service was during the visit, the family will have a negative memory associated with that vacation.  It's not the Ritz Carlton's fault, but it still is a disappointing memory that tarnishes the entire experience.  Interestingly, the $2,000 rule enabled employees to transform that disappointment into a "big bang" positive moment which left a longlasting impression.  Micah Solomon explains in this Forbes article: 

The Rescue Of Thomas The Tank Engine (And Creation Of A Customer For Life)

This summer, a family with a two year old son spent a weekend at the Ritz-Carlton’s Dove Mountain Resort outside of Tucson. As the guests were packing up to leave for the airport the mom realized her son had lost his favorite Thomas The Tank Engine toy.

She found two Ritz employees, Jessy Long and Nathan Cliff, and explained what was at stake: that this Thomas toy was her little boy’s favorite and the loss would be heartbreaking for him. Jessy and Nathan couldn’t locate the lost Thomas train anywhere, but realizing how much this mattered to the guests agreed together that something must be done. After the guests left the property for their flight home, Jessy and Nathan drove to a toy store and purchased an absolute dead ringer of the original train for the little boy.

Then, they composed a note in longhand to the boy–in the voice of Thomas The Tank Engine himself –telling a sweet tale about the extended vacation Thomas had taken after being accidentally left behind. The account included adorable pictures (see above) of Thomas exploring the property, cooking in the Ritz-Carlton kitchen, and more. Four days after the disappearance of Thomas, he arrived by mail to a family that was, understandably, blown away, and that has shared the story at every chance they can find on Facebook and elsewhere, proclaiming that “The Ritz has earned our business for years to come!

Your Brain on Zoom: Not Good?

Fortune's Orianna Rosa Royle reported this week on a new study by Nan Zhao, Xian Zhang, J. Adam Noah, Mark Tiede, and Joy Hirsch, published in Imaging Neuroscience.  The research examined the brain activity of people engaged in Zoom meetings vs. in-person meetings.  The scholars discovered that face-to-face interactions led to enhanced brain activity.    They wrote that,  "the exchange of social cues is greater for the in-person condition."  Specifically, the scholars reported:

Findings from this investigation suggest that differences occur at the visual sensing level (mean and standard variation of eye contact duration); the behavioral level (coherence and diameters of pupils); the electrocortical level (theta oscillations); the neuroimaging level (contrast between in-person and on-line faces); and the dyadic neural coupling level (coherence between neural signals in the dorsal parietal regions).   

Co-author Joy Hirsch told Fortune, “Zoom appears to be an impoverished social communication system relative to in-person conditions. Overall, the dynamic and natural social interactions that occur spontaneously during in-person interactions appear to be less apparent or absent during Zoom encounters.”  She concluded, "“Online representations of faces, at least with current technology, do not have the same ‘privileged access’ to social neural circuitry in the brain that is typical of the real thing."

What does it mean for those of us who do engage in hybrid work?  We have to think carefully about the type of work being done virtually vs. in-person, and we have to focus on the intensity of the collaboration required during meetings.  Some types of collaboration may be more suited to in-person interaction.  Moreover, we must consider how virtual engagement with others may affect our ability to read social cues and ultimately how the ability to read those cues impacts our ability to build effective working relationships.     

Does Your Personality Shape Your Investment Strategy?

Source: www.towardsdatascience.com

Kellogg Professor Zhengyang Jiang, LSE Professor Cameron Peng, and DePaul Professor Hongjun Yan have written an interesting new paper titled, "Personality Differences and Investment Decision-Making."  They found several significant links between personality characteristics and the strategies individuals employed when making financial investment choices.  

First, they found a link between neuroticism and investment decisions. Neuroticism refers to a "tendency toward emotional instability and psychological distress including anxiety, depression, self-doubt, and other negative feelings." Jiang explains to Kellogg Insight that, “People with high neuroticism tend to be the ones who invest less in the stock market, even after we control for the other types of individual differences. People with lower neuroticism tend to take more risks and buy more stocks rather than safer bond assets."  

Second, the scholars discovered that openness is another personality trait that matters. In other words are people "intellectually curious, willing to try new things, and aware of their feelings?"  People who rate high on openness tend to invest more in equities and less in fixed income assets.   

Third, the examined whether certain traits make people more likely to follow the crowd with regard to investment choices.  The scholars discovered that, 

"Personality traits also shape how investors react to the behavior of people in their social circles. The study revealed that both neurotics and extroverts are more likely to adopt a certain investment when it becomes popular among the people around them, but their path to this decision is likely different.

'An extravert derives utility (and pleasure) from interacting with others and tends to copy their investment decisions after such social interactions,' the authors write. Neurotics may also copy their friends, but 'one possible explanation is that more neurotic investors have more fear of missing out (FOMO), and therefore tend to follow the crowd.'”

What does it mean for us as individual investors, as well as for the investment firms and financial advisers interacting with us?   The scholars conclude that we need to look beyond demographic attributes such as age or wealth, or typical questions about people's aversion to risk.  Understanding our personality can help us determine whether we might be making suboptimal decisions at times.  

Chrysler's Brand Strategy

The title of this post may be a bit misleading. After all, these days, one really has to wonder whether Chrysler even has something that resembles a brand strategy. Several weeks ago, we heard from David Kiley at Business Week that the company was considering creating a new brand, Ram, which would cover its line of trucks (currently sold as Dodge Ram trucks). You would think the firm needs fewer brands, not more. Now, we hear again from Kiley that they are working with ad agencies on a concept whereby they would try to position Chrysler as an upscale brand, up there with the likes of Cadillac. Really? How will Chrysler achieve this, particularly given its poor reputation for quality and the dearth of exciting new products in its pipeline?

Clearly, Chrysler understands that it has a need to distinctly position its brands. For years, the firm sold Dodge, Chrysler, and Plymouth cars that were nearly identical. The brands had no distinct meaning. The firm killed off Plymouth, an understandable move given the brand confusion. Now, it's trying to position Chrysler as something quite different than Dodge. Again, conceptually, this makes sense. However, you have to have the product to support the positioning. You can't just use marketing and advertising to create a new brand positioning in smoke and mirrors like fashion.

Here's a thought... if Fiat wants to come up with distinct positioning for its various brands, why not make Dodge the truck brand, and Chrysler the car and minivan brand? That fits more closely with the product portfolio as it currently exists, and it doesn't stretch either brand to be something completely foreign to how it is currently perceived by consumers. Moreover, you wouldn't be worrying about selling cars under both brands that are essentially identical automobiles.

Risks of Using AI in Human Resources

Source: https://inc42.com/

Artificial intelligence has the potential to transform the way much work is done in the human resources divisions of companies. For example, Nickle LaMoreaux, IBM's chief human resources officer, told Fortune, “We’ve got over 280 different A.I. automations running inside HR right now. That’s what is different here. It’s making HR more human because we’re spending time on things that matter.” Fortune reports that IBM saved 12,000 hours in 18 months by applying artificial intelligence to a series of human resource tasks.  However, Paige McGlaufin has written an excellent article for Fortune highlighting several critical risks that may emerge as artificial intelligence transforms the way human resources departments do their work.

1.  The potential for bias:  Several companies have learned that artificial intelligence tools exhibit a bias against certain groups of employees or job candidates.  

2. The potential for data leaks:  Firms will have to be highly vigilant to be sure private information about employees and job candidates does not get leaked and misused by others.  

3.  The potential for relationship breakdowns:  Efficiency clearly can be enhanced using artificial intelligence.   However, one has to ask:  Will that efficiency have a detrimental impact on the social connections that are crucial to getting work done and retaining employees?  McGlaufin writes, 

"But that efficiency could come at the cost of interpersonal connections. Imagine a scenario where A.I. tools fully administer the hiring and onboarding process: “If I’m a new employee and A.I. is getting my materials and my laptop, onboarding, and online tutorials, I don’t feel connected to the organization,” says Dustin York, a communications professor at Maryville University. That could spell trouble for retention. “I can easily leave and go somewhere else.”

4. The potential for employee  pushback regarding AI tools:  Many employees exhibit an aversion to the use of artificial intelligence tools for certain tasks.  Julia Dhar, director and managing partner at Boston Consulting Group, told Fortune:   “Change doesn’t come super comfortably to human beings. And if executives and leaders are consistently out there only saying that this change is exciting and energizing, you’re unlikely to bring people with you."  

Low Quality Feedback Harms Employee Retention Efforts

Source: Thrive Global

Kieran Snyder, CEO of Textio, and Mallun Yen, CEO of the Operator Collective, have published some fascinating results of a study they conducted regarding employee feedback. You can read about their findings in this article they have written for Fortune, and you can examine their complete report here.  Synder and Yen describe how they studied feedback at one large organization in depth:

To explore this, we looked at the performance reviews of a large, international enterprise organization across a variety of roles. The data set contains performance reviews for more than 13,000 employees across two annual review cycles. Because we have two years of data, we can see whether an employee in the Year 1 data set is also included in the Year 2 data set. In other words, for each employee, we can see the quality of their written performance feedback, as well as their retention or attrition outcome the following year.

People who received low-quality feedback were more likely to leave the organization than people who received more actionable feedback. What’s more, this impact is causal, not just correlational: Our analysis controlled for potentially confounding factors such as numerical performance rating and employee tenure. People who received low-quality feedback were 63% more likely to leave their organizations than everyone else. This held true whether they were high, middling, or low performers.

Snyder and Yen go on to make a crucial point about some managers' unwillingness to provide direct feedback.  Trying to avoid a confrontation can be problematic. Some managers try to "soften" their feedback in ways that are detrimental to long-term employee retention.  They write: 

Shying away from giving direct feedback also causes employees to quit. Even when feedback is provided, it may be provided in conflict-avoidant and indirect ways. The practice of hedging, where the feedback provider couches their intended feedback in less direct language, is common... “I think” was by far the most common phrase used in hedging feedback. By introducing feedback with an “I think” statement, the manager is communicating that their point of view might just be a matter of opinion and that they might not be fully committed to it. This is problematic even in positive feedback, as the manager inadvertently communicates doubt about the praise they’re giving. For example, by saying “I think you did a good job on that presentation” rather than just stating that the report did a good job.

It matters. People who get performance reviews containing “I think” hedging statements were 29% more likely to leave the company within a year than everyone else.

So much attention has been placed on whether to eliminate annual performance reviews, or to alter various employee ranking systems. In some ways, we might be missing the most important point about developing our people - namely, the quality of the feedback (and the language we use in offering that feedback) matters a great deal regardless of the timing or the format in which we provide that feedback.  We have to overcome the tendency for conflict avoidance and train our managers to provide actionable, constructive feedback even when those conversations might be difficult.  

Is Office Chitchat an Unproductive Activity?

Source: NBC

Several weeks ago, Rachel Feintzeig wrote an article for the Wall Street Journal addressing the issue of productivity and distractions at home versus in the office. I found the end of the article quite interesting. One interviewee notes that she "remembers walking into her office complex every day at 9 a.m. to face the long warm-up: colleagues exchanging hellos, putting away their lunches, filling up coffee cups. 'Nothing really got done that first hour,' she said. 'That was our work-life balance, right there.'” The interviewee continued her commentary by talking about the value of just getting right to work:

Same thing at the end of the day, as people wound down, she said. If she wrapped her work early, she felt unable to leave even though the job was done. Starting a remote job last year, she found the idea of working, and breaking, on her own time thrilling. “You don’t have to go up to everyone and go, ‘How was your weekend?’ ” she said. “You can just get to work.”

Whatever we think about the remote work debate, this story suggests that some people are misunderstanding the value of informal non-work-related talk at the office. Catching up about others' lives, children, or weekend activities over a quick cup of coffee is not "unproductive" chatter. It's an important part of how we build relationships with others, and those relationships can be crucial foundations for getting real work done.

Recent research examined the impact of "office chitchat." Scholars Jessica R. Methot, Emily H. Rosado-Solomon, Patrick E. Downes, and Allison S. Gabriel have found that office chitchat can certainly be distracting. However, they also found that, "Small talk enhanced employees’ daily positive social emotions at work, which heightened organizational citizenship behaviors (OCB) and enhanced well-being at the end of the workday." For more on this topic, see Lindsay Mannering's article for the New York Times titled, "The Awkward But Essential Art of Office Chitchat."

The Relationship Between Leader Tenure and Organizational Performance

Source: https://fs.blog/open-closed-minded/

Can CEOs stay in office too long?  Do lengthy tenures often lead to poor performance?  In an influential paper published in the 1990s, Donald Hambrick and Gregory Fukutomi argued that CEOs experience "seasons" of their tenure.  Performance increases as they learn during the early years.  In those initial years, they are more open to experimentation and alternative viewpoints.  If they stay too long, leaders become entrenched in their views, closed-minded, and less open to dissent.   They begin to believe their own press clippings if they have been quite successful.  They tend to overly attribute the organization's success to their own prowess, rather than recognizing the positive impact of other members of the organization, favorable industry dynamics, or even good fortune.   Perhaps most alarmingly, long-tenured leaders may be more likely to engage in unethical conduct because they are not subject to adequate oversight, monitoring, and control by ineffective boards of directors. Boards may be so impressed by performance during the early part of a CEO's tenure that they grow more lax in their oversight.  They engage in excess deference to these long-tenured leaders. Hambrick and Fukutomi wrote:

At some point, the positive effects of a CEO's continuing tenure (primarily in increasing task knowledge) are outweighed by the negative effects. Job mastery gives way to boredom; exhilaration to fatigue; strategizing to habituation. Outwardly, such executives may show few signs of this malaise because they may have been well socialized in the importance of keeping up executive impressions and appearances. However, inwardly the spark is dim; openness and responsiveness to stimuli are diminished. The continuing incumbency of these executives is dysfunctional for the organization. 

Recently, Markus Schmid, Francois Brochet, Peter Limbach, and Meik Scholz-Daneshgari published an empirical paper in The Accounting Review examining this hypothesis.  They concluded that the average S&P 1500 firm experiences a positive relatiohship between CEO tenure and firm value for the first 14 years of a leader's tenure.  Then, performance begins to decline.   In short, they confirm the main hypothesis proposed by Hambrick and Fukutomi.   

Schmid and his colleagues offer some important qualifiers though. They find that the decline in performance occurs mostly in highly dynamic industry environments.  In those situations, the decrease in performance starts around Year 11.   In stable environments, performance may plateau, but it doesn't experience this dropoff.  The scholars also discovered another interesting point of variability. They wrote:

"Our results show that firm value peaks earlier during a CEO’s tenure for leaders who are less adaptable to change, namely specialist CEOs with relatively low general managerial skills, relatively older CEOs, and those who were appointed internally, while it peaks later for generalist CEOs and increases over tenure if they are younger or were appointed from outside the firm."

Newest Published Case Studies!

My newest case study and teaching note is now available in the Ivey Case Collection. The case focuses on Viking Cruises and examines their entry into the expedition cruise segment. Great case about the power of making strategic tradeoffs.

This publication comes in addition to several other recent case studies that I have published. You may wish to take a look, particularly if you are teaching courses in strategy or leadership/organizational behavior.

• Tractor Supply Co.  (co-authored with David Ager) 
• Executive Decision Making At Zola (co-authored with Amy Edmondson)
• Boeing 737 MAX: Company Culture and Product Failure
• Case Companion (an online tutorial regarding how to analyze a case study)

Coddling Employees vs. Fostering Learning & Improvement

Source: https://sabrinabakare.com/zone-of-discomfort

Alexandra Buell and Lindsay Ellis have written a startling Wall Street Journal article that is sure to receive a great deal of discussion this week.  I'm grateful that they have written this piece. The article is titled, "‘Feedback’ Is Now Too Harsh. The New Word Is Feedforward." The subtitle is: "More companies are ditching anxiety-inducing corporate lingo for what they see as gentler terms. Reviews become ‘connect’ sessions.'" Buell and Ellis write:

Employers around the country have good news for workers who dread chats about their performance: Feedback is on the way out.  Many companies, executive coaches and HR professionals are looking to erase the anxiety-inducing word from the corporate lexicon, and some are urging it be replaced by what they see as a gentler, more constructive word: “feedforward.”  Feedback too often leaves workers feeling defeated, weighed down by past actions instead of considering the next steps ahead, but “feedforward” encourages improvement and development, its proponents say... Companies are also banishing another negatively charged term: “review,” which they are replacing with “connect” sessions, coaching, self-reflection and opportunity discussions."

My initial reaction:  Are you kidding me?!?!?!   I certainly understand how employee reviews can be counterproductive at times.  Many managers struggle to provide evaluations and improvement recommendations effectively.  Employees sometimes become defensive, fail to acknowledge their own weaknesses, and do not heed the advice of their managers.  Yes, we have to improve the way we provide recognition, praise, and constructive criticism to employees.  There is no doubt about that.  I commend those experts in human resources and executive coaching who are working on these critical challenges.  However, there's a fine line between getting better at these important managerial processes and simply coddling employees.  It sure seems as though we might be crossing the line in some organizations.  Moreover, many employees may simply look at these changes in terminology as window dressing.  If they perceive the wording change as such, they may grow more cynical and skeptical about their leaders.  Trust and employee engagement may actually erode in those organizations.  In short, we may be doing more harm than good when we use terms such as "feedforward"or "opportunity sessions."  

Giving and receiving feedback induces anxiety and stress in many individuals.   We have all experienced it. However, our goal should not be to eliminate all discomfort in these difficult conversations. Some level of discomfort is critical to the self-reflection and learning process. We have to confront the truth, not run from it. Avoiding all discomfort should not be the goal.

I'm reminded of something my dissertation adviser and mentor, David Garvin, used to say to me as I worked on my thesis, developed my first case studies, and learned how to teach. He would quote Dr. Peter Carruthers of the Los Alamos National Laboratory:

“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.”

In short, David would remind me that discomfort was natural when receiving feedback. Being asked to make countless revisions in my work was frustrating at times. David would remind me of how far I had come thanks to the suggestions and recommendations of others. I'm thankful for all that constructive criticism early in my career. I benefited greatly from it.  I'm glad others strove to maximize my learning, rather than striving to minimize my discomfort.  

Lies, Lies, Lies: Hiring Managers and Job Candidates

Fortune's Paige McGlaufin and Joseph Abrams reported this week on some rather shocking survey results.  Resume Builder polled 1,600 hiring managers, and 36% of those individuals acknowledged they had lied to job candidates. McGlaufin and Abrams write, "Of hiring managers who admit to lying, around 75% say they lie during the interview, 52% in the job description, and 24% in the offer letter."  Moreover, many of these respondents indicated that they deceived candidates quite often.  Why do so many hiring managers lie?  The authors write,

"Some reasons hiring managers gave for lying include protecting sensitive company information, covering up negative company information, exaggerating benefits to attract job seekers, and generally making the job sound more attractive to find better candidates. What these managers falsify also varies—the most common lies are about the job’s responsibilities, growth and career development opportunities at the company, and company culture."

We have heard so much lately about the lack of trust and engagement among employees in many companies.  We've attributed these poor outcomes to a variety of leadership failures, but I've rarely read about how the problem may begin BEFORE the employee actually starts the job.  If someone is lied to during the hiring process, and then discovers the deception while on the job, they are highly likely to become disenchanted.  Many will simply quit.   In fact, the survey respondents indicated that roughly half of the employees who were deceived eventually quit the organization when they discovered the lies.

This article caused me to consider the incentive structure that these hiring managers likely face.  How are they measured and rewarded?  How does their ability to fill positions quickly affect their compensation and promotions?  By focusing on incentives, I'm not suggesting that we should excuse the unethical behavior.  However, we cannot simply hope to hire more trustworthy recruiters. The problem is not simply the ethics of certain individuals.  Given the widespread deception, we have to think systemically about the causes of the problem.  If we don't change the incentives, and the broader culture around recruiting, then the lies will likely continue.  

Tractor Supply Podcast and Case Study

Thank you to Joe Weisenthal and Tracy Alloway for having me on the Bloomberg Odd Lots podcast to talk about my latest HBS case study co-authored with David Ager.  The podcast episode is titled, "Why Tractor Supply is One of the Most Interesting Retailers on the Planet"

Will Rao's Thrive After Acquisition by Campbell's?

This week, Campbell's announced the $2.7 billion acquisition of Sovos Brands, a firm whose most famous and successful brand is Rao's.  If you aren't familiar with the brand, you should be.  It's simply the very best tomato sauce sold in the United States, and frankly, there shouldn't even be a moment of debate.  I should know.  As the son of Italian immigrants, I grew up never eating tomato sauce from a jar. We had a huge vegetable garden, and my parents grew tomatoes and made their own sauce. Still today, I grow my own tomatoes and store sauce for the winter, though I don't jar enough to last the entire year. When I have to purchase sauce, there's only one brand that I will purchase in a jar - Rao's marinara sauce. As a fan of the brand, I'm hardly alone. Ben Cohen of the Wall Street Journal writes, "Rao’s deliciousness is undeniable. Bon Appétit magazine called it “the best jarred pasta sauce there ever was.” When the Washington Post convened a panel of taste-testers, the judges tried a dozen brands and declared Rao’s their favorite."   Rao's is hardly a bargain though.  It's a premium brand.  A 32 ounce jar of Rao's currently sells for $10.29 at Stop & Shop.  You can purchase a 24 ounce jar of Ragu for $1.99.   Now you might think that I'm crazy to pay that kind of a premium for tomato sauce, but you would be wrong.  It's absolutely worth it! 

The Campbell's acquisition may be beneficial, but it understandably generates some concern.  Campbell's is known for selling a very affordable line of soups.  How will the premium brand Rao's fare within the Campbell's portfolio?  The company's track record of acquisitions is decidedly mixed.  In the late 1960s, it acquired Godiva's chocolates.  That brand thrived under Campbell's ownership for many years, but ultimately, the company divested Godiva because it didn't fit very well with the other products in the portfolio.  More recently, the company divested Bolthouse Farms at a steep discount to the price they had acquired the brand for just seven years earlier.  

The question remains whether valuable synergies exist between Campbell's and Rao's.  Why are these firms more valuable together than apart?  Can Campbell's manage the brand more successfully than it has already been managed?  That seems unlikely, given the parent company's lack of recent familiarity and success with super premium brands.  Moreover, they aren't buying a brand in distress; they are purchasing a brand that is already performing at a very high level.

Any attempt to drive synergies must be taken with caution as it may dilute the quality of the premium tomato sauce brand. For now, Campbell's has assured customers and investors that it won't change the taste and quality of the popular tomato sauce. Still,  we should expect some pressure to justify the acquisition premium by creating synergies.  That pressure can be counterproductive at times when mainstream companies acquire much more premium brands.