Planet Fitness Case Study

Source: Wikipedia

My newest strategy case study, Planet Fitness:  No Judgements, No Lunks, is now avaiable in the Harvard Business Publishing catalog.   (The case was published by the University of Michigan's Davidson Institute).  The case study focuses on how the company has managed to position itself and create a competitive advantage in a very tough industry.   Moreover, it examines whether the firm will be able to sustain that advantage moving forward given its aggressive growth plans.   Finally, the case enables students to examine the issue of vertical integration and the pros and cons of a franchising model.   Interestingly, Planet Fitness was co-founded by a Bryant alum, Marc Grondahl.  

The NFL Draft & The Sunk Cost Trap

Back in graduate school, I read an excellent paper by Barry Staw and Ha Hoang titled, "Sunk Costs in the NBA: Why Draft Order Affects Playing Time and Survival in Professional Basketball." The authors found that NBA teams fell into the sunk cost trap when it came to high draft picks. If the team expended a highly valuable first round pick on a player, they tended to stick with that player far longer than they should have. The NBA teams gave those players more playing time and retained the player longer than other players of similar ability who were drafted in later rounds. At times, coaches and general managers think to themselves, "We can't put a high first round pick on the bench." It's irrational, of course. They shouldn't be worried about sunk costs. However, we know that human beings have a hard time letting bygones be bygones. In fact, we throw good money after bad. That's precisely what happened to NBA coaches and general managers in this study. 

As a graduate student in the late 1990s, I decided to see if the same effect occurred in the National Football League. Since tonight is the NFL draft, I thought that I would look back what I discovered in that paper. Note that this dataset is from a very different NFL era. For a variety of important reasons, I looked back at NFL drafts in the 1980s, prior to free agency in the NFL. What I found was slightly different than the NBA study. NFL teams did fall into the sunk cost trap in the first few years after drafting running backs out of college. That was the same as the NBA. However, I found that teams disproportionately disposed of high draft picks starting around year 4. In short, there seemed to be a reversal of the sunk cost effect. Why? It turns out that historical data clearly showed that NFL running backs had a very short career, on average. They peaked in Year 4, on average. Almost no one became a star running back for the first time (defined by having their first 1,000 yard season) after Year 4. (see chart above) So what? Well, teams seemed to be quite aware of this history, and thus, they started dumping high draft picks around Year 4 who had not performed as stars in their first few years. In fact, they dumped them at a higher rate than lower round draft picks with similar performance to date. I described this as a reversal of the sunk cost trap.

In other words, the direction of the sunk cost effect may actually change over time. Traditionally, sunk cost research has demonstrated that individuals fail to ignore prior investments when deciding future courses of action. Consistent with prior research, my examination of NFL running backs demonstrated that prior investments can lead to additional investments in the future, and to an escalation of commitment to a course of action. However, the analysis also demonstrated that sunk costs may serve as inducement for divestment, rather than additional investment, as an asset matures. In short, a large prior investment may lead to the de-escalation of commitment in certain situations.

My conclusions focused on the importance of beliefs and expectations. When we throw good money after bad, we do so because we have a strong belief that a little more investment can somehow yield a better outcome. What happens, though, if that belief is strongly contradicted by well-known historical data? Perhaps the sunk cost effect wanes or even reverses itself. 

I concluded that sunk costs begin to become an inducement for divestment, rather than continued utilization, when individuals can no longer sustain the belief that this additional investment and/or utilization will yield improvement in the future. My analysis demonstrated that historical data regarding asset improvement appears to play a significant role in shaping these beliefs. In the case of NFL players, the historical data strongly suggests that players are not likely to improve after Year 4 in their career. Therefore, as assets mature, it appears that sunk costs can become an inducement for divestment if people no longer believe that improvement is possible, and if they believe that the assets have underperformed the expectations typically associated with their acquisition cost.

It's the hardest decisions often have to make in a variety of fields. When do I cut my losses? Perhaps there are a few lessons to learn from the mistakes made by NFL coaches and general managers in all too many situations. 

Don't Overestimate Your Powers of Prediction

This week is the NFL Draft. Here's my analysis of 15 years of data on 1st round picks at QB. Conclusion: It's very hard to predict success. True in other fields too. Lessons for us all: don't overestimate powers to predict; don't misattribute forecasting success/failure based on few data points.

A Few Words for Bryant University's Admitted Students, Class of 2024!

Help Me Understand: Three Powerful Little Words

Tapping Into Your Employees' Creativity in a Time of Need

Bryant University just released this short article that I've written, titled "Tapping Into Your Employees' Creativity in a Time of Need."  

During this tumultuous time, organizations face a variety of perplexing problems and challenges. Some of these issues may seem intractable to the senior management teams at many firms. Executives will need to think creatively to develop solutions that meet the pressing needs of their customers and other constituents. The answers will not always come from the top. The best leaders will tap into the creativity of all employees, no matter their level in the hierarchy or level of formal authority. For far too long in far too many firms, executives have sent the implicit message that they desire compliance and control, rather than creativity. They talk a good talk about innovation, but don’t walk the walk. That must change during this time of crisis. 

What can senior leaders do to unleash the creativity of their employees to solve a myriad of challenging problems? Here are five simple strategies that they can employ: 

1. Assemble several virtual “kitchen cabinets” of employees who are likely to bring fresh perspectives. Create a direct line of communication between the top team and these kitchen cabinets. For instance, bring together a group of highly talented young employees, many of whom will not be beholden to the conventional wisdom or past patterns of behavior. Ask them what assumptions need to be challenged and what processes need rethinking. Encourage the youngest to teach the oldest about new trends in technology, consumer behavior, and the like. Or, assemble a team of front-line employees who are interfacing with customers directly each day, and ask them what obstacles they are facing. Then, ask them how senior leadership can help and support them in addressing these challenges. 

2. Invite employees to reach outside their industry for creative ideas. Specifically, encourage them to reason by analogy. Are you facing a customer service problem? What situations are analogous to your own? Invite employees to consider what firms in other industries might be doing to address a similar issue. Or, ask them how people with different technical backgrounds and expertise might approach a similar problem. Then encourage them to adapt and apply those lessons to your organization. 

3. Champion experimentation. Offer to provide resources and other support to employees who design simple, low cost, rapid experiments to test out new ideas and solutions. Insure them that people will not be punished for failed experiments, provided that employees demonstrate that they are learning from mistakes and sharing those lessons with others throughout the organization. Create recognition and offer small awards for people who conduct the most interesting experiments. 

4. Invite employees to role play other key constituents. How might our customers react to a particular situation or proposed solution? What about our suppliers or other external partners? Research shows that we often are more creative when we imagine that we are someone else facing a similar predicament. Imagining ourselves in someone else’s shoes can stimulate fresh ideas. 

5. Create virtual brainstorming sessions where small teams can come together to generate many divergent ideas in a short period of time. Ask participants to withhold critique during this time, focusing instead on building on one another’s ideas. Encourage them to propose ideas that may not seem feasible, or that even may seem a bit quirky or unconventional. Tell your employees that a discussion of feasibility will come later, after a wide variety of options have been put on the table. 

These strategies offer practical ways in which leaders can engage with a broad set of employees in critical problem-solving work. Most importantly, though, leaders need to send the signal that they genuinely believe that they have much to learn from their employees. They need to demonstrate some vulnerability and acknowledge what they do not know in these turbulent times. Stress that you don’t have all the answers and that you appreciate all the help you can get. Identify specific issues about which you believe others may have something valuable to contribute. Making people feel valued in this way can often stimulate them to come forward with terrific ideas. In sum, if you acknowledge you don’t have all the answers, and simply pose a few thoughtful questions to your people, you will be amazed at what you can learn from them. 

Time to Write a Thank You Note

Source: Bloomberg

During this crisis, we have an even greater need to express our gratitude to hard-working, dedicated employees in our organization.   Recognizing people's efforts and achievements can be instrumental to cultivating high employee engagement, fostering their well-being, and increasing productivity.   Doug Conant, former CEO of Campbell's Soup, has been an ardent proponent of the handwritten thank-you note for years.   Here's an excerpt that he wrote for Harvard Business Review several years ago about the importance of acknowledging what people have done for the organization.  

Believe it or not, I have sent roughly 30,000 handwritten notes to employees like Patti over the last decade, from maintenance people to senior executives. I let them know that I am personally paying attention and celebrating their accomplishments. (I send handwritten notes too because well over half of our associates don’t use a computer). I also jump on any opportunities to write to people who partner with our company any time I meet with them. It’s the least you can do for people who do things to help your company and industry. On the face of it, writing handwritten notes may seem like a waste of time. But in my experience, they build goodwill and lead to higher productivity.

Excessive Worrying About How Others Judge Us

Source: Wikimedia

Alice Moon, Muping Gan, and Clayton Critcher wrote a paper last year titled, "The Overblown Implications Effect."   They studied how people think about how others are judging them.  They conducted a series of experimental studies on this topic.   The researchers found strong evidence that, "Actors overestimate how much observers think an actor’s one-off success or failure offers clear insight about a relevant competency.  Furthermore, actors overblow performances’ implications even in prospect, before there are experienced successes or failures on which to ruminate."

The researchers uncovered a particularly interesting phenomenon.  People tend to assume that others are making blanket judgments about their overall afbilities in an area based on upon a very specific result. In an interview with Knowledge@Wharton, Professor Moon explains:

"Our key finding was that people overweigh how omuch both failures and successes factor into observers’ perceptions of them. That is, if you bake a bad batch of cookies, you assume that now others will think you are horrible cook, and if you bake a good batch of cookies, you think that others will now assume you are a fantastic cook. Interestingly, both you and the observer agree on whether the batch of cookies is good or bad, but the error arises in the greater implications from that performance: how good of a cook you are, and also, how good you are at related skills, such as making an omelet."

The study has some interesting implications for how managers provide recognition and constructive feedback to their employees.  They need to keep in mind that employees often think managers are making broad sweeping conclusions based on the one incident or project.  Managers need to remind employees that the feedback pertains to the particular situation.  Moreover, they need to clearly distinguish between specific incident feedback and broader pattern recognition.  Clarity here is essential.  Are you commenting on a pattern of good or bad performance, or are you simply trying to identify and provide feedback on a specific situation?  Employees will think you are commenting about a pattern unless you specify otherwise.  They assume you think a pattern exists, in a sense.  

Sharing Learning Across the Organization: The Power of Near-Misses

Source: Moody Air Force Base

I'm working on a new case study about the Boeing 737 MAX crisis right now, and I've come across a very interesting incident that arose before the first crash.  I think there is a key lesson from that incident that applies to all organizations as we cope with the COVID-19 crisis today.  

On the day before the crash of Lion Air Flight 610 in Indonesia, pilots flying the same plane nearly experienced tragedy.   Fortunately, a third pilot happened to be in the cockpit that day.   He observed the captain and co-pilot struggling to understand and react to the fact that the stall-prevention system was pushing the nose of the plane down repeatedly.   Finally, the observer recognized what was happening and identified how to rectify the situation.  He intervened and saved the day.  Unfortunately, the lessons from this "near-miss" never flowed to other crews at Lion Air.   On the very next day, flying the very same plane, tragedy ensued.   Pilots experienced a mis-fire of the stall-prevention system, brought on by a faulty sensor reading.  They did not know how to address the sitaution, and the plane crashed into the sea, killing everyone on board.

What's the lesson for us today?   We have to make sure that teams are reflecting on what they have learned, particularly after failures, and sharing their lessons learned with others throughout the organization.   Of course, failures often get a lot of attention, and people do hear about what went wrong and what the lessons learned are from those situations.  However, people often do not hear about the near-misses, yet they are some of the most valuable learning opportunities.   Near-misses are those situations when a failure almost occurred, but thankfully, someone intervened to take action, avoiding a major negative consequence.   

Why don't we hear about the near-misses?   Often, people's natural reaction is to simply say, "Phew! Thank goodness!"   Then they don't share the news of the situation with others.  In part, they do it to avoid scutiny or perhaps the assignment of blame.  Sometimes, they simply don't think about how the lessons from that incident can be helpful to others in the organization. 

Years ago, Amy Edmondson, Anita Tucker and I wrote a case study about Children's Hospital and Clinics in Minneapolis/St. Paul.   They wanted to surface near-misses, rather than sweep them under the rug, so as to learn from them and avoid future medical accidents.  Someone there came up with the brilliant idea to rename the near-misses!   They started calling them "Good Catches."   Clinicians were asked to record these "good catches" in logs, and then a team studied the lessons from those situations.  The term "good catch" emphasized the heroic action to intervene and avoid tragedy, rather than focusing on the bad things that happened leading up to the problem.   I since have encountered another organization, in a manufacturing environment, that actually borrowed the phrase "good catch" and actually created an award for plant employees who initiated a "good catch."  As a result, they learned about many more near-misses than ever before, studied them closely, and over time, they reduced quality defects in the factory considerably!  

Coping with Quarantine: Learning from the Polar Explorers

Source: history.co.uk

Daniella McCahey, a history lecturer at the University of Idaho, has written an inspiring column for Fast Company this week.   She takes a look back at the Antarctic explorers of the early 1900s and examines how they coped with months of isolation, darkness, and surviving in close quarters with fellow adventurers.   She argues that seven things helped the explorers cope effectively, and that we can use some of these same strategies today during the COVID-19 crisis. 

1. Music: McCahey quotes Apsley Cherry-Garrarde, an English explorer and member of Robert Falcon Scott's expedition of 1910: “It is necessary to be cut off from civilization … to realize fully the power music has to recall the past…to soothe the present and give hope for the future."

2.  Books:  She reminds us that, when Shackleton's ship sank, he made sure to grab his favorite Rudyard Kipling poem.  Grab that book you have been meaning to read.  Dive into a subject you would love to learn more about, or expand your understanding into a related domain.   Reading widely can help spur creativity and innovation, as we sometimes find ideas in adjacent fields that are applicable to our own.   Read a few fun books too... a mystery that captures the imagination or keeps you in suspense.

 

3.  Diary Writing:  Taking the time to record key events and reflect upon them can have value.  It also helps people release a bit of their stress.  

4.  Expedition Newspapers:  Some explorers also chose a different form of writing.  Not only did they record personal diaries, but they also produced newspapers for the expedition as a whole.  These basic newspapers included poetry, humor, games, and puzzles. 

5. Games: She quotesCarsten Borchgrevink, leader of the Southern Cross Expedition: “The sameness of those cold, dark nights attacks the minds of men like a sneaking evil spirit. We found that … playing chess and cards were very valuable pastimes.”   I can attest to the value of playing games.   My family and I have been enjoying many game nights amidst the crisis.  As the kids grew older, we played board games much less often.   Now we are revisiting our game night tradition, and we have enjoyed the break from our remote work.  

6.  Food:  Here's one that I can relate to very much.   She says that the meals quickly became monotonous.  Out of boredom and at times necessity, the explorers experimented with new foods and recipes.  I've found myself doing the same thing.  I've always enjoyed cooking, but often don't have the time. Now, I'm usig my time at home to try new recipes, and the practice has not only lifted my spirits but made the entire family happy.  (well most of the time... there have been a few misfires!) 

7.  Alcohol:  I don't think that I need to say much about this one.  We all agree it has a role to play!  Of course, some research does suggest that drinking wine can enhance your creativity! 

Doing the Right Thing: Kent Taylor at Texas Roadhouse

Source: bizjournals.com

This morning, I read some terrific news about a leader doing the right thing for his organization amidst the COVID-19 crisis. Kent Taylor is co-founder and CEO of Texas Roadhouse, the popular steakhouse restaurant chain. According to this article by Leo Shvedsky, Taylor has chosen to give up his 2020 salary and bonus.   He's giving the money to his employees who are hurting financially due to the crisis.  He's also made an additional $5 million donation to help his people.   Here's the excerpt:

Texas Roadhouse CEO Kent Taylor announced on Thursday that he is forgoing the rest of his 2020 salary and bonus and instead directing the funds toward paying his employees during the coronavirus outbreak. The remaining salary and bonus both amount to $525,000 each for a total of $1,050,000.  "Kent Taylor has always said that Texas Roadhouse is a People-company that just happens to serve great steaks. His donation of his salary and bonus to help employees is the embodiment of that saying," a Texas Roadhouse spokesperson told The Hill. "We are blessed to have his leadership."  The spokesperson also told The Hill that Taylor has already donated $5 million of his personal funds to Andy's Outreach, a non-profit run by Texas Roadhouse to help employees in times of need.

Paul Levy, former CEO of the Beth Israel Deaconess Medical Center, argues that all leaders should be taking these types of actions. In a blog post for Harvard Business Review, Levy, Atta Tarki, and Jeff Weiss write:

"If you are doing cut backs to save job losses, you must lead by example and do cut backs that impacts your own day-to-day as well. If you don’t, there is a danger that your staff will feel like saps, doing sacrifices while the C-suite continues unaffected. Get a commitment for a pay cut from your senior leaders. As CEO, you should take the largest salary cut yourself."

Small Wins: More Important Than Ever

Source: https://michiganross.umich.edu/faculty-research/faculty/karl-weick

In the 1980s, the great social psychologist Karl Weick wrote a paper about the importance of small wins. Weick argued that some problems can be cognitively and emotionally overwhelming. In these cases, people may find it very difficult to make progress toward addressing the issue and achieving their goals. Weick advocated breaking down large, complex problems and goals into smaller, intermediate objectives. Pursuing a small wins strategy could then help people achieve their goals, but lowering stress, creating a powerful sense of accomplishment, and motivating people to continue working on a tough project. Here's an excerpt from that paper:

A small win is a concrete, complete, implemented outcome of moderate importance. By itself, one small win may seem unimportant. A series of wins at small but significant tasks, however, reveals a pattern that may attract allies, deter opponents, and lower resistance to subsequent proposals. Small wins are controllable opportunities that produce visible results.

The idea of small wins seems more important than ever right now, amidst the COVID-19 crisis.  It's easy to feel overwhelmed at times.  Thinking in terms of concrete small wins may help us work toward longer term, stretch goals as well as to tackle very challenging projects.  

Why Companies May Benefit from More Transparency about Product Drawbacks

Source: Pixabay

Most companies, quite expectedly, focus intensely on the positive attributes of their products and services when communicating with customers.   They market all the benefits, and typically, they minimize any discussion of the limitations or drawbacks of the product. After all, who would want to shine a spotlight on negative attributes of your products? 

Well, Harvard Business School scholars Ryan Buell and MoonSoo Choi decided to challene the conventional wisdom.  They sought to examine whether a bit more honesty and transparency might actually be beneficial for companies.  Buell and MoonSoo Choi published their findings in a paper titled, "Improving Customer Compatibilitywith Operational Transparency."   

The scholars worked with Commonwealth Bank, a large Australian financial services company, to conduct a randomized field experiment.  On the bank's website, potential new customers received one of two offers: one highlighted the best attributes of the company's credit card, while the other also mentioned key drawbacks that firms often tend to place in the fine print only.   In short, the company made explicit some of the key tradeoffs inherent in the company's strategy and product offering.   In other words, you get these wonderful features, but here's what we don't offer, or what we don't provide at the same level of service.   Think about Southwest Airlines... we offer you on-time flights, low fares, friendly service, and no baggage fees, BUT we don't assign seats, have no first class and no meals, and won't transfer your bags to other airlines.  The company makes the trade-offs quite clear to consumers.  

The scholars tracked customer behavior at Commonwealth Bank for the next year.  What did the researchers find?   HBS Working Knowledge summarized the key results:

"The researchers found that people who opened an account after learning about a card’s downsides spent 10 percent more each month than customers who heard only the benefits. Their nine-month cancellation rate was also 21 percent less, and they were 11 percent less likely to make late payments on a month-to-month basis... Although the team didn’t probe why customers spent more, they suspect that providing more information helped people choose products that were more compatible with their financial needs, creating a better customer experience."

Now, clearly, companies need to be careful with this added level of transparency.  They can't just dump a bunch of negative information on customers and hope to succeed.  However, they can think about how providing more transparency may help them gain consumers' trust and help customers self-select in a way that creates a more enduring and better fit between company and customer.  

Now is the Time: What is Your Organization's Purpose?

Source:  Needpix

Over the past decade, we have seen more organizations come to the conclusion that they must become purpose-driven.  They have come to realize that an authentic higher purpose (that connects to business goals and objectives) can be motivating and inspiring, and it can advance efforts to develop a highly engaged and committed workforce.  I would argue that now is the time for organizations to think deeply about purpose, specifically as it relates to the current COVID-19 crisis.  What is your organization's role in helping our society cope with this crisis?   How can your firm help our society preserve and improve public health, promote economic recovery and protect jobs, insure that global supply chains remain functioning effectively, etc.?   Even if you already have a clearly articulated purpose, now may be the time to adjust that purpose to suit the specific situation in which we find ourselves.  Or perhaps more appropriately, to communicate how your purpose connects to and can contribute to addressing the crisis in which we find ourselves.  

If you are interested in this topic, I highly recommend an article from Harvard Business Review titled, "Creating a Purpose-Driven Organization" by Robert Quinn and Anjan Thakor, published two years ago.  They remind us that we have to take great care not to simply resort to cliches and platitudes.  We have to engage with our employees to discover that authentic higher purpose, and to get their buy-in as we align the organization with that new sense of mission.  Here's an excerpt:

At a global oil company, we once met with members of a task force asked by the CEO to work on defining the organization’s purpose. They handed us a document representing months of work; it articulated a purpose, a mission, and a set of values. We told them it had no power—their analysis and debate had produced only platitudes.

The members of the task force had used only their heads to invent a higher purpose intended to capture employees’ hearts. But you do not invent a higher purpose; it already exists. You can discover it through empathy—by feeling and understanding the deepest common needs of your workforce. That involves asking provocative questions, listening, and reflecting.

Don't Overestimate Your Multi-tasking Capabilities

Source: Pixabay

Given the COVID-19 situation, many of us find ourselves juggling a variety of unexpected tasks and obligations.   For many parents, working from home has become the norm.  In addition, parents have been asked to home school their children in conjunction with various online learning being faciliated by their children's teachers.  In our home, my spouse and I are both teaching online.  My oldest daughter is home from college taking classes online, and my other two children are engaging in online learning at the high school and middle school level.  The house is busy, and the schedule is complex.   

The natural tendency in these cases is to find ourselves multi-tasking often.  However, we have to be careful about overestimating our multi-tasking capabilities.  Research clearly shows that human beings struggle with trying to work on multiple streams of work simultaneously, yet we are overconfident in our abilities to juggle in this fashion.  Here's an excerpt from an article Kendra Cherry on the topic:

Take a moment and think about all of the things you are doing right now. Obviously, you are reading this article, but chances are good that you are also doing several things at once. Perhaps you're also listening to music, texting a friend, checking your email in another browser tab, or playing a computer game.

If you are doing several different things at once, then you may be what researchers refer to as a "heavy multitasker." And you probably think that you are fairly good at this balancing act. According to a number of different studies, however, you are probably not as effective at multitasking as you think you are.

In the past, many people believed that multitasking was a good way to increase productivity. After all, if you're working on several different tasks at once, you're bound to accomplish more, right?

Recent research, however, has demonstrated that that switching from one task to the next takes a serious toll on productivity. Multitaskers have more trouble tuning out distractions than people who focus on one task at a time. Also, doing so many different things at once can actually impair cognitive ability.

Ok, so how do we handle the current dynamic situation given these research findings?  Building a schedule is a start, as is dedicating particular spaces as quiet areas where people cannot enter and interrupt others.   Building in breaks is essential, so that you can step away and clear your head.   Research shows that "unfocusing" in this way can stimulate creativity and enhance productivity.   For us, we've started a family workout challenge.   That has been a nice diversion, and it addresses the issue of breaks and unfocus time.   Next, you need to find some time to step away from being connected so that you can get some of your work done without interruption by email, text, and the like.   Be sure to let others know when you are going to be focused on a task and not able to respond to messages.  Finally, you have to spend some time each day prioritizing tasks, so that you are focusing your efforts on the most essential duties.   Getting three things done very well is always better than doing a mediocre job at ten things.  

A few tips for leading virtual teams

Microsoft CEO Satya Nadella on Empathy

Source: Wikipedia

In this interview with IESE Business School, Microsoft CEO Satya Nadella describes the importance of empathy as a company tries to innovate and evolve. Empathy means more than asking customers what they want, as Nadella explains. It means truly trying to understand their pain points, frustrations, and unmet needs. Empathy means digging deep to understand the latent needs that may not be articulated by your customers when you ask them questions or conduct surveys and focus groups. It means stopping yourself from assuming that you know what the custonmer wants. Nadella, interestingly, connects empathy with a growth mindset. Here's an excerpt from this terrific interview with Nadella: 

My success depends on my customers’ success. That’s the essence of business. If we’re successful, it means we’ve somehow been able to meet the needs of customers, even their unarticulated needs. But where does that inspiration for being able to be in touch with that unmet, unarticulated need come from? It comes from empathy — that deep sense of understanding the real needs out there. It’s not, “Oh, I talked to 10 customers and I’m doing exactly what they told me to do.” It’s going deeper to understand what’s behind those words.

How does one invoke empathy? You can’t just go to work and hit the empathy button every morning: “Now I’m going to be empathetic.” Your entire life has to involve constantly pushing yourself to develop a deeper sense of empathy with those around you, recognizing that that journey never ends.

At Microsoft we’ve been trying to develop what we describe as a learning culture. Stanford University psychologist Carol Dweck wrote a famous book called Mindset, which shares a simple concept. Take two schoolchildren: one has great innate capability but is a know-it-all; the other has less innate capability but is a learn-it-all. You know how the story ends: the learn-it-all does better than the know-it-all. And that applies to CEOs, to companies and to company cultures.

The goal is to adopt that growth mindset and use it to develop a deeper sense of empathy, so that you can create those products and services that meet the unmet, unarticulated needs of your customers.

CNBC Feature on Trader Joe's

CNBC's Cat Clifford and Helen Zhao have produced a video feature about Trader Joe's.  They interviewed me for this story.  Check out the video at this link. 

From CNBC:  People crowd into the new Trader Joe’s, located on Colorado Blvd. and East 8th Avenue in Denver, for the grand opening of specialty grocer.

RJ Sangosti | Denver Post | Getty Images

Do the Word Choices in Your Company Code of Conduct Matter?

Source: Needpix.com

Maryam Kouchaki, Francesca Gino, and Yuval Feldman have conducted a fascinating series of studies regarding company codes of conduct. These scholars examined many different codes of conduct. They noticed many similarities with regard to content. In other words, companies tend to prohibit the same types of misbehavior, as well as encourage the same types of positive conduct. However, the researchers found that word choices differed in at least one important way. Some codes of conduct employed "communal" words such as "we" and "us." Other codes spoke in more formal language: "Employees should not..."

Did these word choices matter? Initially, the researchers hypothesized that communal words would encourage more ethical behavior. Surprisingly, though, their research found the exact opposite! Through a series of experimental studies, Kouchaki, Gino, and Feldman discovered that people tended to engage in more unethical behavior when given a code of conduct including many communal words and phrases. 

The scholars then examined corporate misbehavior. Here's what they found, according to this description of their research by Kellogg Insight:

Finally, the team wanted to test whether communal language was linked to acts of corporate misbehavior in the real world. So the researchers examined codes of conduct from 188 S&P 500 manufacturing firms. They also looked up news articles about bad behavior at those companies, such as employees committing fraud or breaking environmental laws, and found 873 such violations from 1990 to 2012. Employees at companies with “we” language were more likely to act unethically.

What explains this surprising result? Kouchaki offers one interesting potential explanation: she argues that communal language create a situation in which, “the group is being seen as forgiving and tolerant." In those situations, perhaps individuals do not believe that unethical or inappropriate conduct will be punished in a substantial manner. If people believe that the response to bad behavior will be "soft" then perhaps they will be more likely to misbehave. The scholars don't argue that we should avoid trying to create a communal atmosphere, but they do prescribe a clear emphasis on an intolerance for inappropriate and unethical behavior, and a clear message that misconduct will be handled seriously and substantively.

Squandering Time: How Many Hours to Support One Executive Team Meeting?

Source:  Pixabay

Michael Mankins, a partner in Bain & Company’s San Francisco office, published a short blog post for Harvard Business Review several years ago.  Bob Sutton reminded us about the research this week on Twitter.  In the post, Mankins provided highlights from an in-depth study of meetings and time management at one large organization.  Here's what Mankins and his team found:

How much time does your organization squander? My colleagues and I gathered data about time use at one large company and found that people there spent 300,000 hours a year just supporting the weekly executive committee meeting.  

You read that correctly... 300,000 person-hours per year supporting one top management team meeting.   Where does the time go?   Hundreds of other meetings take place to prepare executives for this one senior meeting which they must attend weekly. Mankins writes, "Research shows that 15% of an organization’s collective time is spent in meetings—a percentage that has increased every year since 2008. No amount of money can buy back that time. It must be treated more preciously."

How can managers change their behavior in light of this research?  Here are five key questions one can ask as you call for and prepare for meetings:

1.  What is the purpose of the meeting?  What are we trying to achieve?  

2.  Who should attend this meeting?  Who does NOT need to be there?

3.  How should we structure the meeting?  How will that structure help us achieve the outcomes we desire?

4.  What pre-work should participants do, and what materials should we distribute in advance, so that we use our meeting time efficiently?  

5.  How do I plan to follow up so as to insure that we do what we say we are going to do after the meeting?  What will I do if we don't achieve the results we expect as a result of decisions taken during the meeting?