Monday, June 26, 2017

Unilever: Algorithms Replace Humans in Hiring Process

Kelsey Gee wrote about Unilever's "radical hiring experiment" in this morning's Wall Street Journal. Gee explained that, "To diversify its candidate pool for early-career roles that are a fast track to management, Unilever has ditched resumes and traditional campus recruiting. Its new process relies on algorithms to sort applicants and targets young potential hires where they spend much of their time: their smartphones."  

Algorithms have analyzed 275,400 job applications to date and chosen 1/2 of those candidates to advance to the next round of evaluation.  At that point, applicants "play a set of 12 short online games designed to assess skills like concentration under pressure and short-term memory."  Roughly 33% of those candidates move on to the next round of evaluation:  a video interview analyzed through artificial intelligence tools.  Finally, the top 300 candidates or so traveled to Unilever for in-person interviews.   The company claims that they saw top notch applicants in this final round, and they hired many of the candidates. 

What are the benefits and risks of this approach?  For Unilever, it enabled them to branch out beyond the usual small number of college campuses from which they recruited.   More and more companies are realizing that they are missing out on top notch talent by relying only on a few "prestigious" schools for recruiting.  This approach also tries to mitigate some of the bias effects from in-person interviewing.  Much has been written lately about the biases and other problems with usual job interviews.  What's the downside?  Perhaps certain types of candidates don't do well with techniques such as video interviews.   What about those online games?  Are you measuring the right types of skills?  What about "soft" skills that are harder to measure?   Companies will have to monitor such efforts to be sure that they aren't filtering out certain types of talented individuals because of the methods chosen.   

Saturday, June 24, 2017

Please Consider Supporting My Run For the Troops

During my sabbatical year from Bryant, I'm training to run the Minneapolis Marathon on October 1st. I'm running to support Homes for our Troops (HFOT). This organization builds and donates specially adapted custom homes nationwide for severely injured Post-9/11 veterans, to enable them to rebuild their lives. I'm honored to be running to support these men and women who have sacrificed so much to defend our nation and protect our freedom. 

Most of these veterans have sustained injuries including multiple limb amputations, partial or full paralysis, and/or severe traumatic brain injury (TBI). These homes restore some of the freedom and independence our veterans sacrificed while defending our country, and enable them to focus on their family, recovery, and rebuilding their lives. 

Homes for our Troops is a privately funded 501(c)(3) nonprofit organization rated four out of four stars by Charity Navigator. Since its inception in 2004, nearly 90 cents of every dollar donated to Homes for Our Troops has gone directly to their program services for veterans. Charity Navigator has given the charity a perfect 100 score for accountability and transparency. Your money will be going directly to help veterans rebuild their homes and their lives. 

Please join me in my efforts to support this wonderful organization! You can donate here. Thank you very much!

Why Your Cellphone Bill is Decreasing

In an article by Ryan Knutson, the Wall Street Journal reports this morning that, "The cost of U.S. cellular service is rapidly plunging, reversing years of increases that have squeezed consumers’ budgets and generated huge profits for wireless companies." We are in the midst of a massive price war among the key players: AT&T, Verizon, Sprint, and T-Mobile. Knutson reports that prices have declined sharply in recent months: "The consumer-price index for wireless phone service, an indicator of current offers from cellphone service providers, dropped 12.5% in May from a year ago, according to the Labor Department. The index earlier fell 13% in April, the largest decline in the history of the category..." 

Why is the price of cellphone service dropping sharply? Why are we experiencing a price war among the major players? First and foremost, we have an industry with incredibly high fixed costs and relatively low variable costs. The cost of the infrastructure and the technology is astronomical. The marginal cost for you to speak one additional minute or send one additional text is virtually zero. Thus, the service providers have an incentive to cut price in an effort to cover their high fixed costs. The same dynamic exists in the airline industry. The airlines have an incentive to cut price so as to fill every available seat, since the marginal costs of an additional passenger are very low. Moreover, the growth in the market has slowed. Since most Americans now have a cellphone, the service providers have very few new customers to grab. Instead, they find themselves fighting over each other's customers and trying to steal them from one another. These dynamics have sparked the price war. As customers, we benefit.

Friday, June 23, 2017

Three Lessons from the Uber Mess

Yesterday, we learned that venture capital investors forced the resignation of Uber CEO Travis Kalanick.  The company has undergone a tumultuous year, including a massive sexual harassment scandal as well as accusations about stolen files from Google.  What can we learn from the challenges that the company has faced?  There are many lessons; here are three big ones:

1.  We have to be very, very cautious about situations in which investors place seemingly blind faith in a charismatic, successful CEO who is succeeding by challenging conventional wisdom and "breaking all the rules."  Where was the Board when clear warning signs had emerged about improper behavior quite some time ago?

2.  Startups cannot simply ignore human resources rules, policies, and procedures.  They matter.  You have to have guidelines for employee conduct.  There's a point where you stifle people with too much bureaucracy.  However, Uber seems to have gone too far in the other direction.

3.  Culture eats strategy for breakfast, lunch, and dinner.  Uber might have an amazing strategy that has catapulted it to remarkable success in a short period of time.  However, a rotten culture has taken down its CEO and many other top executives, caused lost market share to Lyft, and could be the downfall of the firm.  You have get culture right.   Values matter more than strategy.

Thursday, June 22, 2017

Sabbatical Life

Creating Great Ideas: Combining Open Innovators and Extroverted Peers on a Team

Sharique Hasan and Rembrand Koning have conducted research on idea generation in teams, using a unique field experiment design.  These scholars conducted their field experiment within the opening week of an entrepreneurship academy in India during the summer of 2014.  The scholars begin by noting that prior research suggests that, "Individuals with higher openness are more creative because they seek out diverse information and experiences, but also recombine these more effectively into novel ideas."  However, they explore how creativity may be enhanced when we combine these open innovators with extroverted peers.  Why does the combination of individuals enhance creativity within a team?  They argue that extroverted peers provide new, unique, interesting, and diverse information to the open innovators,   In short, those conversations with extroverted peers provide fuel for the open innovators.  Here's a summary of their conclusions:

Contrary to prior research, we find that being open to experience alone does not lead individuals to generate better ideas (e.g. McCrae, 1987; Feist, 1998). Our findings suggest that this individual capability depends on the types of peers with whom a focal innovator converses. When open innovators are exposed to extroverted peers, they are more likely to develop higher quality ideas–ones that are evaluated higher, are more detailed, and have more distinct word usage compared to other ideas. Conversely, more open innovators whose peers are not extroverted appear to produce mostly average ideas. In terms of magnitude, while this effect alone will not make the lowest-quality ideas the best ones, it can shift ideas at the margins of “good” to “very good” or “very good” to “great.” This is equivalent of moving an idea from being at the 80th percentile of quality to being in the top decile. Overall, our findings highlight the importance for considering the specific nature of social inputs in to the production of good ideas. Moreover, this insight—about the value of a dyadic interaction for information acquisition and ideation—can fruitfully be used to design teams that have a preponderance of those individuals who can help develop high-quality ideas within teams.

Tuesday, June 20, 2017

You Don't Always Want To Focus


Dr. Srini Pillay, an author and executive coach who teaches part-time at Harvard Medical School, has written an intriguing HBR post about the value of "focus" in our work. Pillay argues that focus can enable us to perform outstanding work, but certain negative consequences may emerge if we are "too focused." Pillay argues, "The brain operates optimally when it toggles between focus and unfocus, allowing you to develop resilience, enhance creativity, and make better decisions too." 

What's an example of the value of "unfocus" in our work? Pillay points to a study by Denis Dumas and Kevin Dunbar in which the scholars found that one can solve creative problems more effectively by pretending to be someone else.  Assuming a different identity, or pretending to stand in someone else's shoes, can help people achieve better results at creative problem-solving tasks.  Specifically, Dumas and Dunbar invoked two stereotypes for their research subjects:  the "rigid librarian" and the "eccentric poet."   They asked subjects to either imagine themselves as the librarian or the poet, and of course, they had a control group in their study as well.  The students who imagined themselves as eccentric poets exhibited more divergent thinking than either the librarian group or the control group.  They conclude that, "divergent thinking... is a highly malleable rather than a fixed trait."  

Friday, June 16, 2017

Design Thinking: Observation Tips

When conducting field research as part of the design thinking process, we should keep in mind some of the key do's and don'ts of observational research.  Here are some key tips:

Source:  M. Roberto, Know What You Don't Know (2009). 

Monday, June 12, 2017

Will Immelt's Retirement Lead to the Break-up of GE?

Stunning news from General Electric headquarters this morning;  Jeffrey Immelt will step down as CEO, and John Flannery will succeed him.  Many people wonder what's next for GE given the leadership change.   Immelt has transformed GE in many ways, but some big strategic questions remain.  While he divested a number of businesses during his tenure, the company remains a conglomerate with some seemingly unrelated businesses.   As the stock has languished in recent years, many analysts and observers have asked:  Should GE break up? Is the whole not worth the sum of the parts?   After all, one has to wonder how powerful the scope economies (synergies) are when combining a healthcare company and a jet engine manufacturer under one corporate parent.   Flannery's background and initial comments suggest that a broad strategic review will take place, and nothing is off the table.  

Conglomerate strategies may have made sense many decades ago, but focused firms and related diversifiers have outperformed unrelated diversification strategies in recent years.  In GE's case, it often has been viewed as an exception to the rule when it comes to unrelated diversification.   While many such conglomerates have faltered and broken up in recent decades, GE prospered.  Recent performance has not been as good though.  GE does not seem to have powerful economies of scope (typical synergies), but in the past, it has exhibited strong governance economies. In other words, it used common management systems and methods (the GE way) across the range of businesses, adding value as a result.  Moreover, it had a strong talent management system that moved people across the business and enabled highly effective management of a diverse array of businesses.  Are those governance economies still as strong as they used to be?  Is that enough to justify keeping some unrelated business units together.   John Flannery will have to answer those questions.  

One final note:  John Flannery is a fair bit older than Jack Welch and Jeff Immelt were when they became CEO.  He is 55 years old.  Welch and Immelt were each ten years younger when they became CEO in 1981 and 2001 respectively.   One might conclude, therefore, that the Board does not expect Flannery to serve for as long as his predecessors.  Could that mean Flannery will have more urgency to conduct a strategic review and make substantial changes in the near future?   I think so.