Monday, December 31, 2012

Beware of Shiny Objects!

Adam Bryant interviewed Sandra Kurtzig, CEO of software management firm Kenandy, in a recent Corner Office column for the New York Times.  Kenandy offers some great advice for leaders regarding the need to stay focused despite some dazzling and attractive distractions that sometimes appear.   Here's an excerpt:

I don’t run after “shiny objects.” That’s a mistake that a lot of people make in running a company, especially in starting one. They tend to get a lot of opportunities from people who want to partner with them. And these are just shiny objects, because there are very few partners that end up being right for your company. So I’m much more selective. If I hear something, I’m very quick to think, ‘Hey, that’s a shiny object; let’s get back to work.’ I think that’s what’s so distracting to a lot of companies — they see a big customer or some other distraction, and they spend too much time on it and they lose their way. 

I agree wholeheartedly.  Leaders get approached all the time with interesting proposals both from potential external partners as well as from internal folks.   They see opportunities for new investments and initiatives emerging all the time.  Opportunities abound in many cases.  The question is how to screen those opportunities and put scarce resources to work on a few key priorities.  The scarcest resource often is not financial capital; it's management time and attention.   Top leaders simply can't focus on a laundry list of new initiatives.  Leaders also can't forget that execution on current initiatives will likely suffer if they turn their attention to new pastures too quickly.   Strong execution requires discipline not just from the troops, but from top leaders as well.    

Friday, December 28, 2012

Anxiety and Advice

Wharton Professor Maurice Schweitzer, PhD student Alison Wood Brooks, and Harvard Business School professor Francesca Gino have examined the impact that anxiety has on a person's receptiveness to advice from others.    The scholars explain that, ""In almost every domain, individuals discount the advice they receive. In contrast to this finding, we identify an important aspect of a decision-maker's internal state that causes individuals to be very receptive to advice: anxiety."    Ok, now here comes the really bad news.  Brooks explains that, "People in an anxious state were really bad at differentiating between good and bad advice."  

Why might that be the case?   They argue that people who exhibit high anxiety may be feeling a lack of confidence at that time.  Therefore, they look to others to help them figure out what to do in a particular situation.  The desire to resolve the anxiety may make it difficult for individuals to distinguish between helpful and harmful advice.  Individuals may move hastily to resolve the anxiety by making a decision and moving forward, even if they are basing that decision on advice that may not be very good.  

The scholars recommend that people step back and reflect a bit before making decisions in an anxious state.  I think that I would go a bit further though. I would argue that we could all benefit by taking more care in discerning what advice to take, from whom, and in what situations.   Getting advice from multiple parties, hopefully with diverse perspectives, can be very helpful.  Building a trusting relationship with an "experienced confidante" can be beneficial as well.   Thinking carefully about whether someone's expertise actually applies to your situation can be very important.  We sometimes rely on others for advice because they are very smart and successful.  However, that can get us in trouble if that person's experience is not very applicable to our situation. 

Thursday, December 20, 2012

Staples: Innovating The Multi-Channel Experience

Staples ranks as the second largest online merchant  behind Amazon.  Now it hopes to expand upon its prior success on-line.  The company hopes to provide an improved multi-channel experience for its customers.  In other words, the firm wants to meet the needs of customers no matter how they shop, while providing a seamless experience across multiple platforms and channels.   To move forward in this regard, the company has opened a new Velocity innovation lab in Cambridge, MA.  Senior Vice President Brian Tilzer explains to the purpose of the new lab:

"The vision for this center is to create a place where we can test, learn and iterate as rapidly as possible around new technologies," says Tilzer. As examples, he cited "thinking about how to leverage big data to deliver personalized experiences" and "helping consumers understand what services are available related to a particular product, like a laptop." But there will also be some blue-sky brainstorming, too, to "produce really cool stuff that's meaningful to our customers."

 The lab concept sounds very interesting, particularly when you note the location.  Staples is headquartered in Framingham, MA - in the suburbs about 15 miles west of Boston.  The lab is located in Cambridge, MA - right near where innovative partners have chosen to set up shop, including Endeca, Akamai, and Google.   The location is key to the concept in my view, because Staples understands that the cross-fertilization of ideas skyrockets when you put folks in close proximity to a number of other firms working on related issues and concepts.  It also moves these employees away from the "mother ship" so that they can think more freely, and not be trapped by the conventional wisdom and ingrained processes of the corporate center. 

Wednesday, December 19, 2012

Does GM Lose Car Sales Because of the Bailout?

Joseph White of the Wall Street Journal reports today that the Obama administration and General Motors have announced plans for the firm to buy 200 million of the Treasury’s GM shares at $27.50 a piece.   That move will begin the process of unwinding the government's stake in the firm.  White explains that the move to eliminate the "Government Motors" stigma from the company may be quite beneficial:

Once the last government share is sold, GM also can get to work unloading the pejorative “Government Motors” image that has weighed on the company in the U.S. market. It’s not clear how many potential GM customers have turned to Ford Motor Co. or other rivals out of distaste for the federal bailout. But they’re out there.

Call me skeptical, but I wonder how much removing the "Government Motors" label will really help GM sell more cars.  Are customers unhappy with the government bailout, particularly given that taxpayers will not come close to breaking even on their "investment" in the firm?   Sure, the bailout has many opponents.  Does that mean the company was losing significant sales as a result of the bailout?  I'm not so sure.  As White acknowledges, no one really knows how many customers have turned to rival car companies as a result of distaste for the bailout?  One could argue that the firm hasn't delivered the kind of attractive, high quality vehicles that it needs to produce in order to generate stronger revenue growth.   At the end of the day, the bailout may have improved the balance sheet and cost structure.  However, GM will only survive and thrive if it makes products that customers want.  I don't see a ton of evidence that the firm has become significantly better at doing that since the bailout.   

Tuesday, December 18, 2012

Leadership Development is for Top Executives Too!

Building on the last post, I think it's important to address one other problem with leadership development programs.  In many firms, high potentials and mid-level executives attend leadership development programs, receive 360 degree feedback, work with mentors, and receive coaching.   Companies invest a great deal at times to groom these mid-level executives for more senior positions.  However, they do not make a similar investment in members of the top management team. 

What's the problem with that approach?  First, it presumes that people do not need further learning and development once they reach the top level of the organization.  It suggests that they "know it all" at that point.   In fact, members of the top team often can use a break from their day-to-day work to think about broader strategic and leadership issues.  Investing in their development may not only improve their skills and capabilities, but it may help shake the conventional wisdom and groupthink that can emerge from an intact and cohesive team that has worked together for a long time in a particular company.  

Second, mid-level executives receive the wrong message.  They see top executives as not "walking the talk" regarding leadership development.   Somehow, what's good for the troops is not good for the top team.  That can't be the right message to send to future leaders of the organization.  

Monday, December 17, 2012

Retaining Top Talent by Making People More Attractive to Outside Firms

Elizabeth Craig, John Kimberly, and Peter Cheese have written a good column for the Wall Street Journal about how to retain your top executive talent.   They argue that we ought to be investing in leadership development, even if it means that our people become more attractive to other companies.  We might lose some people because we've made them more employable by outside firms.  However, in many cases, that type of investment in our people will actually increase retention.  Here's an excerpt:

That's why it's crucial that companies get serious about retention now. And that means giving executives opportunities to take on greater responsibility, broaden their skills and cultivate a network of relationships with their peers. These are the things that executives we have surveyed consistently say they want most from their jobs.  Of course, executives want these opportunities largely because the skills, experience and relationships they acquire make them more valuable on the job market. So there is always the risk that a company may invest in building its executives' talents only to see some of them take those talents elsewhere.  But our research shows that executives intend to stay longest with those companies that offer the greatest opportunities to enhance their employability. On balance, a company will keep more talent by helping its executives grow than it would by denying them these opportunities. And as a bonus, its executives will be more valuable to the company itself.

I agree wholeheartedly. I would simply stress that companies cannot simply put efforts into leadership development without actually delivering exciting opportunities that come with increased responsibility.  If someone gets mentored, sent to executive education programs, and assigned a coach... but has to wait and wait for that chance to take on new responsibility... well, then they are likely to leave.   People want to know that their efforts at self-improvement are going to yield opportunities to practice their new skills and capabilities.   They want to learn by doing.   Moreover, employees don't just want more responsibility.  Promotions alone won't do the trick. They want exciting opportunities.  They want to tackle new challenges and explore new aspects of the business or of their discipline.  Meaningful work is key, not just a new title and more direct reports

Saturday, December 15, 2012

Struggles at Build-a-Bear

The Wall Street Journal reports that Build-A-Bear, the once high-growth retailer, has begun a search for a successor to founder and CEO Maxine Clark.  The company has struggled recently, even closing some locations.   What happened to this retailer, which had been growing rapidly and profitably several years ago?

Build-A-Bear offered a unique retail concept.  It truly provided an "experience" for the customer, not just a set of products.  In that sense, it should have been insulated a bit from the pressures that other children's toy retailers faced from internet retailers such as Amazon.  However, I think Build-A-Bear's growth strategy had some weaknesses that are not uncommon in retail.  First, it grew very rapidly, opening stores in malls throughout the nation.  However, the appeal of Build-A-Bear was, in part, because it was a destination.  You don't go to such a store on numerous repeat occasions.  You go rather infrequently - special occasions mostly, like birthdays and holidays.  When you have so many stores, it's hard to support them all given that you don't have customers coming back again and again each month.

Second, Build-A-Bear didn't innovate enough with regard to the store experience.  Children did not see or do unique things over the years; they were doing precisely what they had been doing on prior occasions.  That inability to innovate the experience meant that repeat visits were increasingly unlikely.

Third, the tie-ins to movies such as Smurfs are great; they produce a surge in sales.  However, you have to pay royalties on those products, and then you face the challenge of continuing to grow revenues after those movie promotions have ended. 

Finally, the company didn't generate enough of a powerful razor-and-blades business model to truly drive the type of profitability that they hoped to achieve. Compare them to American Girl.  In that case, young girls play with those dolls often, and they come back to the stores, catalog, or online store to buy new accessories, clothing, and other products that can be used with the dolls.   Build-A-Bear did not have that type of powerful razor-and-blades model.  Yes, kids bought outfits for the bears when they made the bear.  However, children didn't tend to come back often to buy other accessories.  Bears aren't like dolls, after all, in that they aren't played with repeatedly in the same way.  

Friday, December 14, 2012

Associational Thinking & Creativity

Entreprenuer Kevon Saber has written a good column on creativity for Fast Company.  He focuses on the notion that we should expose our people to ideas from different industries and disciplines to help stimulate creativity.   Saber points that many new ideas come from "associational thinking" - the ability to draw unique connections among seemingly unrelated concepts from different fields.  His column offers some ideas for stimulating associational thinking, drawing on the practices of various innovative companies.   I liked this particular technique quite a bit:

The event website Eventbrite hosts “Brite Camps,” internal training events led by different team members. Held during company hours, team members lead how-to sessions on varied topics from photo editing to options trading to poker. These interactive sessions not only strengthen company culture, they also build dexterity in team members to better conceptualize new ideas. It’s another case of diverse stimuli boosting the creative potential of a team.

While I do love these types of activities, I think that they cannot replace the most important method for stimulating associational thinking - READING.  Individuals can derive tremendous value from making a habit of reading voraciously about what is going on in other industries and disciplines.  We should not trap ourselves by only reading in our own specialized domain. 

Thursday, December 13, 2012

Rules are made to be broken

You have all heard the phrase, "rules are made to be broken." Of course, the phrase makes compliance professionals cringe! The bottom line, though, is that it is very difficult to count on rules and procedures alone to govern behavior. If we want to insure that people do the right thing, we need to inculcate a strong set of values throughout the organization. We need people to understand the criteria they ought to use to make key decisions. We need to establish a framework that guides decision making, because we will never anticipate all situations, and we can never design "perfect" rules.

Tuesday, December 11, 2012

Overcoming Our Rigidity, Opening Our Minds

Ben Weinlick has a terrific article over at The Creativity Post blog.  The post is titled, "Defeating Rigid Habits to Spark Creativity."  He has some good suggestions including:
  • Defeat habits by being curious about interesting ideas and interesting people
  • Defeat habits by engaging lots of interests and hobbies
  • Defeat habits by consciously shaking up routines
  • Defeat habits by asking the “dumb questions”
  • Defeat habits by hanging out with weird
  • Defeat habits by focusing on a problem and then letting go; do something totally different
  • Defeat habits by including people in your projects who are from outside your domain
  • Defeat habits by developing a culture of serious play.  

Monday, December 10, 2012

Do we really care about internet privacy?

Why do people disclose so much personal information on Facebook?  Harvard Business School Professor Leslie John and her colleagues have conducted several fascinating experiments regarding internet privacy.   For instance, they developed a set of provocative questions regarding activities such as the use of drugs, viewing of pornography, etc. - creepy questions according to Professor John!   Then they examined whether the form in which they asked the questions might impact the extent to which people disclosed private behavior.  In one experiment, they established three conditions - all with the same questions - with data collected from respondents passing by a set of laptops set up on the Carnegie Mellon campus.   HBS Working Knowledge describes the three conditions as follows:

In some cases, they took an online survey titled "How BAD Are U???" - deliberately designed to look unprofessional, it featured red font and a pixelated cartoon devil.  Other participants received a deliberately professional-looking survey titled "Carnegie Mellon University Executive Council Survey on Ethical Behaviors," which sported the school's official crest. A third set, the control group, received the relatively neutral "Survey of Student Behaviors." 

What did the scholars find?   Students taking the purposely unprofessional-looking survey tended to admit to many more of these private behaviors than the students in the control group or the professional condition.  It seems odd, in a way, because you would think folks would be more hesitant and concerned about privacy on a site with a very unprofessional appearance.  Instead, it makes them less inhibited!   According to John, "When you're on a very official-looking site, it sort of cues you in to think about the concept of privacy.  We argue that oftentimes, privacy isn't something that's at the forefront of people's minds until you cue it." In fact, further experiments showed that privacy cues embedded in the surveys tended to make people more hesitant to disclose certain private behaviors. 

Friday, December 07, 2012

When Should Corporate Governance Become More Vigilant?

Dalida Kadyrzhanova and Matthew Rhodes-Kropf have written a new working paper that I found intriguing.  They examined how corporate governance changes as firms enter periods of high performance, even perhaps periods of equity over-valuation (they use some interesting measures to examine potential over-valuation of equity).  They found that, "Firm performance seems most impacted by governance when firm and industry deviations are high."  

The scholars argue that, during periods of equity over-valuation, executives are most likely to pursue investments and other decisions that may maximize personal utility at the expense of shareholders.  They do so because they essentially have some slack - plenty of resources at their disposal, and presumably some credibility with investors given the high performance.  During these times, then, corporate governance should become more vigilant so as to protect shareholders from "misbehavior" by executives.  The paper has important implications for boards of directors.  We typically think that the board role is most important during a crisis, when performance is poor.   That is probably correct. However, this paper reminds us that the board also has to be careful during periods of abundance.  That may be the time when the seeds of future crises are planted, as managers make flawed decisions - putting excess cash flow to work in ways that are not in the best interests of shareholders.  

Tuesday, December 04, 2012

Beware! We Overvalue Growth

Earlier this year, Michael J. Schill, Associate Professor of business administration at the University of Virginia Darden School of Business, wrote a terrific column for the Washington Post.  He offered a simple example of two mining companies. One had embarked on a growth strategy that involved expanding its balance sheet through major asset investments.  The other had embarked on a contraction strategy, spinning off certain parts of its business and shrinking its balance sheet.  Schill asked the question:   In which firm are people likely to invest?

Schill explains that many investors tend to flock toward the growth company.  They are attracted by the prospects of expansion and the new opportunities that those recent investments may bring.  However, that tendency to prefer the growth company may be a mistake.  Here's Schill explaining the potential bias that may be hampering investors' efforts to maximize returns:

Do investors have a good track record in pricing rapidly expanding or contracting companies? History tells us that investors tend to overprice expanding firms and underprice contracting firms. As an example, take a person who systematically invested over 35 years an equal amount of money in the stocks of firms whose balance sheet growth put them in the top 10 percent each year of U.S. public firms. That investor would find that the average annual performance of that portfolio would barely match the returns achieved by U.S. Treasury bills over the same period: about 4 percent. On the other hand, an investor who systematically bought the stocks each year of firms in the bottom 10 percent of balance sheet growth would be delighted to find average portfolio performance over the same period to be more than 22 percentage points above the returns achieved by Treasury bills: about 26 percent. The pattern suggests that expanding firms tend to be overpriced and contracting firms are systematically underpriced.

Monday, December 03, 2012

Your Front-Line Employees are Your Brand!

Companies spend a great deal of time and money building advertising campaigns, social media strategies, and other promotional vehicles to build brand equity.   For many firms, though, their front-line employees represent the most significant way that customers experience the brand.  Those employees become crucial ambassadors for the brand.  

Starbucks understands the crucial role that front-line employees (the baristas) play.  It has invested heavily in a program to inspire and motivate the baristas, and to help them bring the brand's values to life in each Starbucks location.   The company has created the "Starbucks Leadership Lab" to inculcate the core values of the brand in its workforce.  Here's an excerpt from a Fast Company article about this program:

Starbucks’s Leadership Lab is, as its name implies, part leadership training, with a station that walks store managers through a problem-solving framework. It’s also part trade show, with demonstrations of new products and signs with helpful sales suggestions, such as “tea has the highest profit margins.” The majority of experiences are meant to be educational, including several that give store managers access to top managers of the company’s roasting process, blend development, and customer service.  

But what makes the Leadership Lab different than a typical corporate trade show is the production surrounding all of this. The lights, the music, and the dramatic big screens all help Starbucks marinate its store managers in its brand and culture. It’s theater--a concept that Starbucks itself is built on.  “The merchant’s success depends on his or her ability to tell a story,” writes Schultz. “What people see or hear or smell or do when they enter a space guides their feelings, enticing them to celebrate whatever the seller has to offer.”

In this case, Starbucks is selling its employees the Starbucks brand. And it has given the Leadership Lab the same attention to detail as its store ambiance.  As Valerie O’Neil, Starbucks’ VP of global communications, puts it: “[The experiences] are wrapped in a very inspirational journey, so partners can walk away not only understanding and informed, but feeling it.”

Note that such programs cannot be efforts to simply dictate practices and policies to employees.  It cannot be an attempt to brainwash them regarding the company's goals and values.  It has to be a forum for two-way communication.   The messages and the values conveyed to employees must be authentic.  Store managers must "walk the talk" each and every day.  If not, then such programs will do more harm than good. Associates will feel that they have been misled.  They have to be part of the process, and there must be opportunities for them to express their ideas to management.  The photograph above demonstrates one of the ways in which the associates' ideas and thoughts are captured at the Starbucks Leadership Lab.