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The Journal of the American Management Association

Volume 12, Number 1

Spring 2013

RAM CHARAN EXPLAINS

“GLOBAL TILT” OTHER ARTICLES Building a Culture of Growth The Matter of Clarity in a VUCA World Make Uncertainty Comfortable Play to Your Strengths: Understanding Your Capabilities

Ram Charan

More Innovation, Less Risk The Athena Doctrine: How Feminine Values Can Foster a Better World Constructing an Early-Warning System (EWS) Awakening Leadership at All Levels Planning to Become an Employer of Choice

COMMENTARY

FIRST PERSON

SOUNDINGS

MANAGEMENT NOTES

OUR VIEW

Strategic Thinking in Changing Times

Overcoming Sacred Cows: An Interview with Jake Breeden

10 Resolutions for Globally Mobile Talent in 2013

Adapt or Atrophy

Great Leaders Know What They Don’t Know

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The Journal of the American Management Association

Volume 12, Number 1

S PRIN G 2013

RAM CHARAN EXPLAINS “GLOBAL TILT.”

Ram Charan explains the shift in business and economic power from countries of the North to the fast-developing markets and economies of the South—not only China, India, and Brazil but also the Middle East and parts of Africa. PAGE 6

10 14

Building a Culture of Growth. It isn’t easy to build a culture of growth given today’s fast-changing world, but it is still feasible if you follow these eight guidelines. By Tom Peterson.

The Matter of Clarity in a VUCA World. As volatility, uncertainty, complexity, and ambiguity— the characteristics of a VUCA World—increase, there will be many people who want help,. The author offers 10 leadership skills to build successful companies despite a VUCA World. By Bob Johansen.

execute them during turbulent times. By Philip Kotler and John A. Caslione.

Leadership at All Levels. In the world40 Awakening class organizations of the future, slowing down may very well become a competitive advantage. By Maril MacDonald.

to Become an Employer of Choice. 44 Planning Many companies know they need to stop high turnover,

Make Uncertainty Comfortable. How do you

but in their search for answers, it seems not to occur to them to look for the root causes. By Leigh Branham.

manage uncertainty when it is a norm? Here are five ways to deal with crises—most important, how to weigh the cost of failure against the cost of doing nothing. By John Baldoni.

Play to Your Strengths: Understanding Your Capabilities. Learn how to use the concept of an activity system to identify core capabilities and use them to determine where-to-play and how-to-win choices to succeed in the marketplace. This is a vital step in strategic planning. By A.G. Lafley and Roger L. Martin.

an Early-Warning System (EWS). 38 Constructing Prepare to move your business strategies forward and

More Innovation, Less Risk. We’ve been taught to

FROM THE EDITOR

3 COMMENTARY Strategic Thinking in Changing Times. Managers as well as executives have to have a strategic mindset. Edward T. Reilly.

4 FIRST PERSON Overcoming Sacred Cows That Hold People Back at Work: Differentiating Vices from Virtues. Too often, in the workplace, we regard specific behaviors as virtues when in truth they are more like vices in the effect they have on work performance. Interview with Jake Breeden.

think, “More innovation, more risk.” However, in today’s rapidly changing, highly dynamic marketplace, where competition can come from anywhere, and the power of the customer is growing stronger, a more apropos assertion is “less innovation, more risk.” By Richard Czerniawski.

13 SOUNDINGS Time to Do It Right: Mercer’s 10 Resolutions for Globally Mobile Talent in 2013. Mercer Consulting

The Athena Doctrine: How Feminine Values Can Foster a Better World. There are masculine

22 MANAGEMENT NOTES Adapt or Atrophy. Discover how adaptation is essential to

and feminine values that influence behavior. Whereas in the past, masculine values dominated, in the 21st century, there is a growing shift and feminine values are more evident. By John Gerzema.

48 OUR VIEW Great Leaders Know What They Don’t Know.

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provides 10 resolutions that multinationals should follow to keep costs down yet attract the best hires in building a globally mobile workshop.

healthy growth and economic vigor. By Brian Klapper.

By Robert G. Smith.

FROM

THE

EDITOR

No More Negativity How can we lead successfully in today’s fastchanging world? The answer lies in a willingness to take reasonable chances, whether it is to release a new product, insource manufacturing, or expand globally. The less intimidated we are by the decisions we must make, the more likely we will be in control of our futures. Remember what Franklin D. Roosevelt said during the Great Depression: “The only thing we have to fear is fear itself.” As leaders, we are managing our organizations in an age of turbulence, and our attitudes will make a big difference in the decisions we make—and their consequences. If we make wise decisions, we can out-execute our corporate competitors, imbed resilience in our organizations and grow successful companies. This issue of MWorld looks at the conditions we now face and how we can transform problems into opportunities. Consider the great economic power shift, for instance. Ram Charan answers a series of questions based on his book Global Tilt. The world’s economic power is tipping from the North— the U.S., Europe, and Japan—to the South—India, China, and Brazil—and Charan suggests what business leaders must do to succeed in the new global game. We also consider the actual environment in which we operate and tools we can apply to help our organizations to grow. A.G. Lafley and Roger L. Martin describe an activity system we can use to better position our organizations in the marketplace. Two other leadership experts—Philip Kotler and John A. Caslione—recommend steps we can take to move our business strategies forward. Finally, Leigh Branham suggests how our companies can become employers of choice and the benefits thereof, and Richard Czerniawski counters the idea that innovation is too risky in today’s times; instead, he writes about the value of more innovation and, subsequently, less risk. Bob Johansen introduces us to VUCA, the acronym for Volatility, Uncertainty, Complexity, and Ambiguity, and what we can do to handle the problems it can cause in making dayto-day decisions. He proposes 10 skills that are needed for leaders to deal with these realities. John Baldoni offers ways we can become comfortable—would you believe?—with ambiguity, and Brian Klapper offers examples of companies that adapted successfully to the times and thereby grew. Finally, John Gerzema points to the growing shift to feminine values and the impact on corporate culture. No question, this issue of MWorld makes clear our need to continually transform our companies as circumstances demand, and the demands are ever-increasing.

MWorld The Journal of the American Management Association EDITOR

Florence M. Stone CREATIVE DIRECTOR

Seval Newton COPY EDITORS

Geoffrey Gneuhs, Laurie Russo GRAPHIC ARTIST

Tony Serio PRODUCTION MANAGER

Laura Grafeld

PUBLISHER

Robert G. Smith PUBLIC RELATIONS MANAGER

Roger Kelleher

Edward T. Reilly PRESIDENT & CEO

MWorld© (ISSN 1540-2991) is published quarterly by American Management Association International, 1601 Broadway, New York, NY 10019-7420, Spring 2013, Volume 12, Number 1. POSTMASTER: Send address changes to American Management Association, 600 AMA Way, Saranac Lake, NY 12983-5534. American Management Association is a nonprofit educational association chartered by the Board of Regents of the State of New York. MWorld is an independent forum for authoritative views on business and management issues. Submissions. We encourage submissions from prospective authors. For guidelines, write to The Editor, MWorld, 1601 Broadway, New York, NY 10019-7420 or email fstone@amanet.org. Unsolicited manuscripts will be returned only if accompanied by a selfaddressed, stamped envelope. Letters are encouraged. Mail: Letters, MWorld, 1601 Broadway, New York, NY 10019-7420; email: fstone@amanet.org. MWorld reserves the right to excerpt and edit letters. Names and addresses must accompany all submissions. Subscriptions. Executive and Individual Members of American Management Association receive MWorld as part of their annual dues, a nonrefundable $50 of which is allocated for the subscription to MWorld. Single copies are available at $25 plus shipping and handling. Requests should be sent to sgoldman@amanet.org Rights and permissions. ©2013, American Management Association. No part of this publication may be reproduced or transmitted in any form or by any means without written permission. Requests should be sent to Joe D’Amico, at jdamico@amanet.org Editorial Offices 1601 Broadway, New York, NY 10019-7420 Tel: 212-903-8075; Fax: 212-903-7948 Email: MWorld@amanet.org Opinions expressed by the editors, contributors or advertisers are not necessarily those of AMA. In addition, the appearance of advertisements, products or service information in MWorld, other than those of AMA itself, does not constitute endorsement by AMA.

Florence M. Stone Editor, MWorld 2

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COMMENTARY

Strategic Thinking in Changing Times In this excerpt from AMA Business Boot Camp, edited by Edward T. Reilly, we point to the importance of balancing your roles between operational management and strategic thinking, often adopting the mindset of a visionary. The shift toward a strategic mindset is essential for managers who must help their organizations succeed in an environment of continual change. While ultimately driven by the marketplace, companies must also respond to changes in the economy, technology, social and lifestyle choices, the political landscape, and global competition. As a result, the very nature of organizations is changing. The way information and ideas flow needs to change to reflect this dynamic nature of today’s organizational structures. Senior management is listening as well as telling; it is watching as well as showing; and it is expecting employees at all levels to be producers (and not just users) of information, new ideas, and solutions. Employees at all levels should be encouraged to develop, suggest, and implement new strategies for: ᔢ Increasing organizational effectiveness ᔢ Reducing costs ᔢ Improving customer service levels ᔢ Making a positive contribution to the bottom line As organizations continue to flatten, the traditional role of the manager has undergone a dramatic redefinition. Previously expected to simply execute tasks, plans, decisions, and policies made by senior management, operational managers are now asked to participate in the planning process as well. That means they must understand the direction of the organization, foreseeing potential problems and challenges that are on the horizon while also offering solutions and strategies for dealing with an uncertain future. WHY MANAGERS NEED TO THINK STRATEGICALLY

“One of the key characteristics of a strategic thinker is the ability to think concurrently along dual tracks.” MWORLD SPRING 2013

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Strategic contributions take shape in such areas as creating a vision for the organization, effectively utilizing and capitalizing on resources to implement activities needed to move Edward T. Reilly toward the vision, fostering innovation through conversations that reflect diverse points of view, and continually asking “what if ” to keep employees sensitive to the ever-changing needs of customers and tactics of competitors. One of the key characteristics of a strategic thinker is the ability to think concurrently along dual tracks. A strategic thinker must consider and incorporate data that may include short- and long-term challenges, systems and people, and innovation and imitation. An effective strategic thinker/manager makes decisions and takes actions, having constantly explored and considered these dualities. To do this well, a strategic frame of reference needs to be defined and applied to the organization and its business environment. The frame of reference will guide you through the maze of options that can occur. The strategic frame of reference is a planning tool. As effective as it is in planning, though, it is also an implementation tool, to help your department or work unit and entire organization to: ᔢ Establish goals ᔢ Define tasks ᔢ Clarify roles and relationships ᔢ Monitor progress As such, the frame of reference should be dynamic, not static. MW A STRATEGIC FRAME OF REFERENCE

This article is excerpted, with permission of the publisher, from AMA Business Boot Camp: Management and Leadership Fundamentals That Will See You Successfully Through Your Career, edited by Edward T. Reilly. Copyright 2013, American Management Association. Published by AMACOM. For more information, visit www.amacombooks.org Edward T. Reilly is the president and chief executive officer of American Management Association International.

FIRST

PERSON

Overcoming Sacred Cows That Hold People Back at Work Differentiating Vices from Virtues INTERVIEW WITH JAKE BREEDEN BY FLORENCE STONE

Too often, in the workplace, we regard specific behavior as virtues Jake Breeden when in truth they are more like vices in the effect they have on work performance. Jake Breeden, from Duke Corporate Education, has studied this phenomenon while coaching thousands of leaders in 27 countries and studying new research in economics, neuroscience, and psychology. The result of his study is his book, aptly titled, Tipping Sacred Cows: Kick the Bad Work Habits That Masquerade as Virtues. In the book, he identifies seven of the most common sacred cows at work, including balance that turns bland, creativity that conceals narcissism, and passion that becomes obsession.

When can collaboration be a problem? How can someone avoid this issue?

Breeden: Of course. Narcissistic creativity, for instance, occurs when we develop and defend new ideas instead of pursuing profitably existing work. Another virtue that becomes a vice is collaboration. I call it “automatic collaboration,” which occurs when employees work with colleagues out of habit instead of from a purposeful choice. Still another vice is outcome fairness. It happens when everyone receives the same treatment instead of treatment based on individual performance.

Breeden: Just as fish swim together in a bait ball to avoid a predator, we workers hide out in task forces and groups as a way to avoid accountability. There’s a cost to collaboration. It takes longer, creates a safe place for low performers to hide out, and tends to diminish differences between people. Sometimes, the benefit to collaboration outweighs the cost; but too often it doesn’t. The best way to avoid the costs of collaboration is to get stuff done, alone. Some people spend most of their working days in meetings, and they’ve lost the ability to produce things individually. If you work on that weakened muscle, the next time you truly need to collaborate you can bring more to the team than a cooperative spirit.

Breeden: Absolutely. Too many tough conversations end up with a cop-out. Taking the “middle way” is probably the wrong way. Remember the 2006 launch of the “Ultra Mobile PC”? Don’t worry, no one else does either. As David Pogue wrote in The New York Times, “It’s sad that the Ultra Mobile PC feels so wrong. It aims to bridge the size gulf between a palmtop and a laptop, but winds up inheriting the worst aspects of each. Like a palmtop, it feels claustrophobic, clumsy for

Breeden: Creativity doesn’t lead to narcissism so much as it masks it. Picture the leader who takes over a new organization and immediately sets out to make changes. She feels the need to put her fingerprints on the group. It’s like buying a home and painting it even if the existing paint job is fine. You want to make your new house into your home. But when leaders create unnecessary change to cater to their own ego, it wastes time and energy. It creates tumult and drama at exactly the moment when stability is needed most.

In your book, you label some common sacred cows. Can you share some with us?

Let’s look closer at some of these behaviors. For instance, can someone perform poorly because he or she unnecessarily compromises?

text input and, with its exposed touch screen, vulnerable. Like a laptop, it’s expensive, has short battery life, and requires two hands to operate.” The easiest thing for smart people to do is come up with a long list of smart options. It’s much tougher to pick one. It’s the same with products as people. Beware of the compromise that aims to be many things to many people but ends up meaning nothing to anyone.

How can creativity lead to narcissism? Need a few more words?

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FIRST

Unfortunately, the disruptive leader can just tell herself that she’s being creative and justify the drama with a virtuous excuse.

Which virtue hurts most when thinking about future goals?

Breeden: Excellence. As we think about important goals, it’s natural to have high ambition. Mediocrity isn’t motivating, so leaders naturally point to a destination of real significance and meaning. The problem comes in the day-to-day work toward that important goal. If we hear the leader’s voice in our heads, constantly encouraging us to keep our standards high, we can feel paralyzed. We wind up wasting emotional and intellectual energy worrying about perfection instead of making progress. Leaders must help teams see a worthy, inspiring purpose for their work. But they must also make it safe for the rough work and multiple revisions needed to get to the desired destination.

Which virtue hurts most when thinking about the present circumstance?

Breeden: Fairness. We’re social creatures hardwired to help each other. We naturally have empathy, which is mostly a good thing. But it’s easy to mistake sameness for fairness. As we look around at our present situation, it’s easy to spot differences: bigger offices, more mentions at the company meetings, or exciting, new assignments that someone else gets. So the system in our brain that normally helps humans stay socially responsible can backfire. Confusing sameness with fairness leads to bad behavior. When someone at work engages in spiteful behavior to even the score, that’s an unintended consequence of fairness.

How can you achieve harmonious passion instead of obsessive passion?

Breeden: Obsessive passion in the workplace often stems from contingent self-esteem. When you work because you feel compelled to get someone’s approval or love, you risk the downsides of obsessive passion: burnout and/or bad behavior. If you find yourself focused relentlessly on proving something, work to find new places to focus your passion. Serena Williams has transitioned into a more harmoniously passionate tennis player while sustaining MWORLD SPRING 2013

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PERSON

a longer career than many of her peers. Just as Williams has pursued interests in fashion and language study that sometimes frustrate the tennis establishment, you should work on putting your heart into things that you want to do purely because you enjoy them. Give yourself permission to invest some time and energy in outside interests, and you might find a more sustaining, harmonious passion for your work.

Can someone prepare too much? What’s the downside of overpreparation?

Breeden: Everything you do in your life prepares you for something else. Every complex glass of wine you savor helps you prepare to appreciate even more demanding wines more completely. The same goes for work. All work is preparation, as long as you remember to stay alert. The problem comes when people engage in too much backstage preparation, hiding out and perfecting their work before sharing it. I suggest people consider every practice and every performance as a chance to keep getting better at whatever they’re working on.

What can you do as a leader to avoid these negatives?

Breeden: Each particular vice hidden in each virtue requires some unique strategies to spot and overcome, and that’s the ground I cover in depth in the book. Generally, I advocate three things. First, increase your self-awareness. Become more rigorously honest with yourself about your motivations. Each time you justify an action with a virtue, hold yourself to tough scrutiny. Second, find ways to become a humble contrarian. The trick is to be a skeptic about virtues in a way that is respectful of your culture and your colleagues. Third, increase your ability to live with—and savor—paradox. Virtues like passion and fairness are indeed virtuous. But they have a dark side: hidden side effects and unintended consequences. Like a complex wine, these seemingly benign beliefs deserve a close inspection. MW Jake Breeden teaches on the faculty of Duke Corporate Education, the world’s top-rated provider of custom executive education.

COVER STORY

RAM CHARAN EXPLAINS “GLOBAL INTERVIEW BY FLORENCE STONE

Ram Charan, a highly sought-after business advisor, and coauthor of the number one New York Times Ram Charan

bestseller Execution: The Discipline of Getting Things Done, has spent considerable time observing and analyzing the shift in business and economic power from countries of the North to the fast-developing markets and economies of the South—not only China, India, and Brazil but also the Middle East and parts of Africa. MWorld’s editor asked him a number of questions based on his latest book Global Tilt to help its readers better understand what is happening right now and what they should do about it. What do you mean by “global tilt”? Charan: For decades, it has been believed that the transfer of technology, managerial know-how, and capital was from West to East; from the United States and Western Europe to Japan, South Korea, and the Asian tigers. But today the flow is generally considered to be from North to South. The center of gravity for economic opportunity has shifted away from what has traditionally been called the advanced or Western countries of the northern hemisphere to the fastdeveloping countries of the South, including China, India, Indonesia, Brazil, and others in the Middle East and even parts of Africa. In geographic terms, the dividing line is roughly the 31st parallel. What are the forces causing the tilt? Charan: The global tilt is being caused by a number of factors. The changes in the global financial system, the expanding footprints from digitization, mobile communication and the innovation it unleashes, changing demographics that have created a new global middle class of 6

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TILT” consumers, and different rules of competition have all played a role in the shift of economic activity. Another huge driver is the enormous talent and ambition of leaders in the South. Leaders in the North tend to underestimate this factor, but I have seen powerful examples from across the globe, including Sunil Mittal of Bharti Airtel and G. M. Rao of GMR (both based in India), Zhang Ruimin of Haier (China), and Carlos Brito of AB InBev (Brazil). What are the consequences of the global tilt? For example, what shifts in power and resources can we expect? Charan: Economic power (and eventually political power) among countries will shift. This movement is already under way. One billion new consumers have joined the world economy in the past 10 years and 2 billion more are coming in the next decade. This new middle-class global consumer base will add roughly $10 trillion to the global economy in the coming decade. The North stands to lose this business—and jobs—to countries of the South if it doesn’t seize global opportunities. Leaders of northern companies have a narrow window of time in which to make a decisive tilt in their approach to running businesses and may not only lose the chance to gain footing in the South, but also be vulnerable to attack on their home turf later on. Resources will become more limited as the southern countries continue to gain power. Availability and price will come under increased pressure, and resources, including talent, especially technical and managerial talent with local knowledge of a foreign market, will become increasingly hard to secure. Finally, the pace of change and complexity will keep increasing. Those who can deal with it better than others will have an edge. What is the strategic thinking about how the tilt will change in the North? What about the South? Charan: Business leaders of the North have been conditioned by slow growth and are thinking small, looking for incremental gains in low-growth markets. They may miss out on the biggest opportunities by waiting too long to jump into those markets. They don’t realize that after struggling through the desert of slow growth, they are now standing on a dune overlooking an immense lake of opportunity. Bold thinkers in the South, on the other hand, are ready to make strategic bets. They are making sizable investments and assigning top-notch people, effectively seizing the competitive edge. What do successful global companies look like and how do they achieve market growth? Charan: Successful global companies look and behave differently from most companies today: ៑ ៑

Headquarters may be in the South, or in several locations Leaders have a keen eye on the macrolandscape and have an informed opinion about it

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“Changes in the social system are more important than changes in the actual organizational chart of the company, which can be altered later to reflect the changes in power achieved through changes in the social system.” ៑

៑

Goals, performance targets, and accountabilities are linked to the challenges leaders are facing in real time Resources are redirected as one market softens, another heats up, or competition gets tougher Decision makers are closely connected to each other regardless of their physical proximity and stay close to information that decisions are based on

What is the best strategy for a tilted world? What do you mean by “Outside-In and Future-Back”? Charan: Companies have to create their own unique strategies, but leaders need to change their approach to strategy in the global tilt. They put their companies at risk if they rely too much on existing core competence and incremental growth. It is time to forget the old lessons that were the business mantra of the last several decades, which was largely built on the idea of “sticking to your knitting.” It’s time for companies to make bold moves and strategic bets and build whatever capabilities they need to pursue the opportunities they choose. The concepts of Outside-In and Future-Back are guidelines for leaders to expand their lens and lengthen their time frame as they seek to understand what changes are occurring in the macroenvironment and how those changes create opportunities for their business. Outside-In thinking means looking at the businesses through the lens of a leader sitting elsewhere and identifying global trends without the existing assumptions, biases, and rules of thumb. Future-Back requires leaders to extend their time horizons as they assess the world and to imagine what the competitive landscape will be some 20 years out. Then they must jump back to consider its implications for the present. Leaders in the South are not mired in “strategy as usual” and are taking bigger chances to seize bigger opportunities. You mention in the book the need for changes in organizations’ social systems. What are these? Charan: Social system is a term I use to capture the interactions among people where information and ideas are exchanged and decisions get made. This is apart from the organizational structure you might put on a piece of paper to depict formal reporting relationships. Every company’s social system is characterized by values, beliefs, and behaviors. Leaders need to shift decision-making power. They need to shape the right behaviors through existing or new mechanisms, such as reviews of various kinds. Changes in the social system are more important than changes in the actual organizational chart of the company, which can be altered later to reflect the changes in power achieved through changes in the social system. 8

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How can Northern companies win in a tilted world? Charan: There are five keys for Northern companies that are eager to grab hold of the new landscape in the South. First, they must grasp the immensity of the opportunity and make concrete plans and decisions to move into these markets. They must consider whether they will need to acquire or build new capabilities to expand into these markets. Next, they should put a stake in the ground globally and begin dedicating managerial muscle and ample resources into the markets they select, while not abandoning the North all together. Fourth, they must shed assets whose value is likely to decrease to free up resources. Finally, they must fight the short-term beast of shareholder return, as it may take a longer time frame to start delivering results in these global markets. What can we expect from companies in the South? We can expect to see more of the same, with competition coming to the North as well as across the South. Charan: Now that capital and expertise are readily available, the limitations of the past no longer exist, and some Southern companies have incredible competitive strength. They are expert at learning new business, they can buy their way into the big leagues, and they are well equipped to create innovative new business models. Overall, these companies are winning by aiming higher and assembling the resources and capabilities they need. What is the basis for leadership in a tilted world? Charan: It is crucial that our leaders begin to adapt their thinking, as I mentioned earlier, to win in this emerging environment. I believe they must first possess the ability to cut through the complexity of the external change taking place. Then they must rapidly master the local context for markets they enterâ&#x20AC;&#x201D;not just local laws and mores, but more subtle parts of the culture that matter in conducting businessâ&#x20AC;&#x201D;by abandoning their old rules of thumb. They have to be able to cut through those different contexts to the business fundamentals. They must boldly create a tangible vision that is understood and inspires their team to conquer this new challenge. And they must build their teams and mobilize their social organizations. MW Ram Charan is the coauthor of the bestsellers Execution and Confronting Reality and the author of What the CEO Wants You to Know and 10 other books. A noted expert on business strategy, execution, building a high-performance organization, 21st century leadership, corporate boards and succession, he has worked with leaders of some of the world's most successful companies, including GE, Bank of America, Verizon, Coca-Cola, 3M, Merck, Aditya Birla Group, and Tata Group. Global Tilt: Leading Your Business Through the Great Economic Power Shift by Ram Charan. Published by Crown Business. Copyright 2013, Ram Charan.

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Building a Culture of

GROWTH

BY TOM PETERSON

Building a culture of growth within a small business is no easy task, especially in today’s troublesome economy and fast-changing world. This is especially true when you are selling a service that is not easily understood by all and can’t be explained in 140 characters. You are bound to get blisters along the way and an occasional poke in the eye. We’ve certainly had our share. But we have weathered these growing pains and, while not taking anything for granted, have been able to build a company that has seen double-digit growth year over year for the past five years. Clear Vision Information Systems operates in an industry undergoing mammoth upheaval— health care. We also touch a world that is constantly evolving (technology) and one that is seeing tremendous growth (seniors). This is no accident. In fact, part of our reason for success and our optimistic outlook for our future is precisely because we sit at the confluence of these three incredibly dynamic businesses. Clear Vision was founded in 2006 to provide software solutions, strategies, and services to health plans and physician groups nationwide who participate in Medicare Advantage programs (in essence, health plans for seniors). Our products and services allow our clients to improve quality of care and maximize their revenues by ensuring that patients receive appropriate treatment for their chronic conditions and that those conditions and the treatments provided are properly coded and submitted to Medicare for payment.

EIGHT WAYS TO BUILD A BETTER COMPANY My two future partners and I had been working in this industry for many years and saw a tremendous need to help health plans and medical groups do a better job capturing, acting on, and reporting clinical data. Certainly many systems and processes existed but customers routinely complained about the lack of access to consistent and actionable data in a simple and easily understood manner. With the senior marketplace growing (someone is “aging into” Medicare every eight seconds) and Medicare Advantage plans becoming more and more popular (today a record 13 million Medicare beneficiaries are enrolled in such plans representing 27 percent of all Medicare recipients), we found this void curious. Moreover, we knew that if we got our hands dirty and really committed ourselves to the task, we could do a better job than what existed in the marketplace. So combing our joint expertise, we left our jobs, rolled the dice, and set out to build a better company. We started with a basic premise: If you strive to do the right thing, nobody can fault you. That 10

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was our belief six years ago; and after processing data for nearly two million members each month, it remains our mantra today. Along the way, we’ve learned and reaffirmed some other things as well about building a culture of growth within a small company. Here are eight things we’ve learned: 1. Build from a foundation of trust. I grew up in the

Midwest where I learned the importance of trust, and that is the core value we have tried to instill into Clear Vision. Trust is the most complex and most fragile of all of the ethical principles contained in character, and it is also the most vital. In our startup phase, our client base came from companies and individuals we had worked with in the past who trusted that we would strive to do the right thing. They also believed that we would every day attempt to uphold the four key elements of trust: integrity, honesty, promise keeping, and loyalty. Trust is hard to achieve and easy to lose. 2. Share a common mission. While working in the same general industry, my two partners and I come from different backgrounds and bring different skills to Clear Vision. Vice President and COO Pam Klugman was manager of information technology for large companies and possesses incredible strength in issues pertaining to reimbursement and finance. Compliance and Contracts Officer Donovan Ayers is certified in health-care compliance and has been influential in regulatory reform and in setting direction for compliance and operational activities for both health plans and employers. My background encompasses more than 20 years of experience working with data for health-care companies and the Medicare program. But what we all shared from the start was a common mission to build the “right kind of company” and service our clients in the right way. 3. Hire from the heart. As clichéd as it sounds, the success and long-term sustainability of any

business depends on the quality, competencies, and ethics of its people. By the time a potential employee walks through our doors, he or she is already fully cooked: The person can’t say, “Starting tomorrow I am going to have integrity.” Either he has it or doesn’t. If you hire people with good values and good heart, the technical aspects of any task can be learned. How do you know if the person has these attributes? Trust your gut. Do you think this person understands compassion? Can you speak with her comfortably? Is she comfortable with you? Is this the kind of person you want representing your company? I have always believed that “good attracts good.” If you look for and hire good people, good will come from it. 4. Understand balance in life. Clear Vision is not someone’s life; it is a part of the person’s life. MWORLD SPRING 2013

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“Good leaders surround themselves with smart people, often smarter than they are; and they encourage debate and honest discussion. ” People have families, outside interests, and nonwork commitments. It is important that a company recognizes this and allows employees time for family matters, whether illness or a celebration.When you show employees this kind of understanding and respect, it is returned many times over in loyalty and commitment 5. Reward and recognize achievement. Thirty percent of the employees at our company started as part-time. Employees know that great work—and great work ethics—will be valued and rewarded. 6. Welcome debate. Nobody has all of the answers. Good leaders surround themselves with smart people, often smarter than they are; and they encourage debate and honest discussion. There is an old expression in business that if two partners always agree, one of them isn’t necessary. Too much agreement has never been a problem at Clear Vision. My two partners and I have built a company where disagreement is embraced, new ideas are encouraged, and creativity is rewarded. All are necessary. All are welcomed. But along with this, make sure you have a system where final decisions can be made once all the information has been gathered and the debate has subsided. Know when it’s time to stop discussion and come to a decision. At Clear Vision, my two partners and I have the final say; and once a decision has been made, we expect all of our employees to be on the bus.

7. Decide how you want to grow. All businesses talk about growth, but there are different roads to get there. Early at Clear Vision we made the decision that our path to success would be based on measured, conservative growth. We would never spend more than we have and not buy what we don’t feel we really need. While we know that this may not be the fastest way to grow, for us it has been the smartest. Following this philosophy has allowed us to have no debt and be financially beholden to no one. Most important, we have never laid off anyone in our six years. We have been able to give employees raises and bonuses and offer our employees the same kind of health-care benefits that large companies give, as well as a matching IRA contribution. 8. Have a passion for what you do. There are many ways to make a living; and many of us, fortunately, have choices. There is no value in spending time doing something to which you are not fully committed and don’t look forward to doing. I was blessed to find something about which I am passionate and then to find two partners who shared that same interest. Together we are continuing to build a company that attracts individuals who have this same passion and who share our values.

People often ask me if we are doing something noticeably different from the other competitors in our industry. After all, with America aging and living longer, the Medicare market is a highly attractive space for startups, entrepreneurs and others who want to “fish where the fish are.” I tell them that everyone has a recipe for spaghetti, but with the right ingredients and the right amount of personal attention, some just taste better. For six years we’ve tried to satisfy the appetite of the market with a product that tastes better. And we intend to keep doing that for years to come. MW Tom Peterson is president and CEO of Clear Vision Information System, located in Westlake Village, California. AMA’s seminar Achieving Leadership Success Through People will enhance your ability to lead more effectively by creating rapport, synergy and two-way trust. For more information, visit www.amanet.org/2128

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SOUNDINGS

Time to Do It Right: Mercer’s 10 Resolutions for Globally Mobile Talent in 2013 According to Mercer’s survey findings, many multinational companies have identified finding qualified candidates for global assignments as a big concern. Multinationals are also concerned about managing costs, especially since the total cost of moving a senior employee and his or her family abroad for a multiyear commitment— including compensation, benefits and housing—can easily cost three times base compensation. However, attracting the best candidates and managing costs can be contradictory goals. To help HR professionals balance these goals while managing a globally mobile workforce in 2013, Mercer suggests these 10 resolutions:

It may be a cliché, but you can’t manage what you don’t measure. Ask questions like: Can you give an ROI for your mobility programs? Would centralizing or decentralizing program management be more efficient and effective? What is the turnover rate of your mobile talent? 5. MEASURE WHAT NEEDS TO BE MANAGED.

Are vendors fulfilling their service-level agreements? Would you hire the same vendors if you had to choose them today? From relocation management firms to tax preparers to cost-of-living data suppliers to compensation managers, organizations should look critically at their vendors’ recent performance. 6. REEVALUATE VENDORS.

7. RETHINK HOW HEALTH CARE IS SUPPLIED. Review

2. KNOCK THE BARNACLES OFF PROCESSING EXPATRIATE ASSIGNMENTS. Look critically at the entire process of selecting, recruiting, enrolling, orienting, compensating, housing, managing, and repatriating expatriates.

Housing costs can constitute one of the largest portions of total mobility costs and local housing markets can be volatile. Use timely, accurate, neighborhood-specific housing cost data for “host” cities. Set appropriate, reasonable-cost rental guidelines and communicate them clearly to expatriates and relocation firms before the hunt for housing begins. 3. RATIONALIZE HOUSING POLICIES.

4. MATCH EXPATRIATE PROGRAMS TO TALENT

Define specific competencies for global leaders and then ensure their global mobility programs build “bench strength” to fill future leadership slots. MANAGEMENT STRATEGIES.

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mobility health care and wellness options. This aspect of living abroad can vary dramatically from country to country. 8. CONSIDER “LOCAL PLUS.” Carefully examine why expatriates are working abroad. Are they on temporary international assignments and are likely to be repatriated after their objectives are met? Or are some employees locally hired foreigners or directly hired on one-way or indefinite assignments for a permanent role? 9. LOCALIZE WHEN IT MAKES SENSE. If expatriates have been in-country for five or more years, it may be time to consider localizing them. 10. RECALIBRATE INDEXES. Now is a good time to reexamine assumptions made when computing both cost-of-living allowances and hardship premiums based on differences between home and host locations. MW

Mercer is a global consulting leader in talent, health, retirement, and investments. Mercer helps clients around the world advance the health, wealth, and performance of their most vital asset: their people. Mercer’s 20,000 employees are based in more than 40 countries.

COURTESY OF MERCER CONSULTING

1. AIM BEFORE YOU FIRE. It is important to ensure that global mobility programs meet both talent needs and business needs. Now is the time to elicit feedback from line managers and senior leaders to ensure that mobility programs are doing the right things—and not just doing things right.

The Matter of Clarity in a BY BOB JOHANSEN

As Volatility, Uncertainty, Complexity, and Ambiguity—the characteristics of a VUCA World—increase, there will be many people wanting to be led out of the mess. People will be so confused that they will be grasping for clarity. Especially in a VUCA World, clarity will be a prerequisite for compelling leadership. As the world gets more confusing, it will become harder to have legitimate clarity, to see through the mess to a better future. False clarity will abound. The best leaders are seers, sensors, and listeners. They seek clarity from many sources, even as they hone their own inner clarity. The future will be loaded with contradictions, but leaders with clarity will need to see through those contradictions and have the ability to discern what to do and where to go—when neither is apparent. In order to grapple with complex questions, leaders will need to resist the temptation to oversimplify. One of the most difficult dilemmas for leaders will be to provide clarity without false hope.

CLARITY DEFINED Clarity requires inner strength and discipline—even when you are exhausted. It also requires great self-knowledge; leaders will have to look within and sort out what is most important to them. That can be very difficult when you are worried or upset. When I was preparing for a trip to a dangerous part of the world recently, I found myself worrying about my own safety and dreading the trip. A friend suggested that I should focus on the purpose of the trip—not the things that could go wrong. I tried to do all I could to prepare and take reasonable safety precautions and then focus on the purpose of the trip. Why was I going? I was indeed very excited about the mission of the trip, but my clarity got blurred when I started to worry. We each need our own ways of fueling our own inner clarity and quelling the fears that can eat away at it. An inner purpose is an important element of clarity, but it is not enough. Clarity must be communicated. One leader’s clarity may make others uncomfortable or may even lead to polarization. Still, if all sides are clear, the disagreements will at least be authentic, and people want authenticity in their leaders. Clarity requires external engagement. Leaders must express themselves clearly in ways that 14

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VUCA World inspire others to follow and must be able to make sharp statements about the future with an enthusiasm that attracts others.

FLEXIBILITY COMBINED WITH CLEAR INTENTION Clarity in the VUCA World requires flexibility. The best leaders will be clear about their long-term intentions but very flexible about how to get there. Clarity sets the parameters within which creativity can occur. As with jazz, the structure sets the limits within which improvisation is encouraged. Years ago, my family went rafting on the Middle Fork of the Salmon River in Idaho. Our guide taught us to concentrate on the water that flowed through these world-class rapids, rather than on the rocks we wanted to avoid. I also learned that the very act of paddling provides stability and some sense of direction—though certainly not control. When you find yourself in extreme rapids, you must be clear about where you are going and keep paddling, no matter what. Clarity in a business context is a precise statement of your strategy, sometimes called strategic intent. It lays out where you are going and how you intend to get there. Strategy thought leaders Gary Hamel and C.K. Prahalad talked about strategic intent as “an ambitious and compelling…dream that energizes…that provides the emotional and intellectual energy for the journey…to the future.” They go on to describe how an effective strategic intent should not only indicate direction, but also relay a sense of discovery and even destiny.

A WINNING PROPOSITION Willie Pietersen from Columbia Business School, a former CEO himself, emphasizes clarity when he talks about his notion of a Winning Proposition: What does a company do better than its competitors to give value to its customers as well as maintain successful financial performance? “If strategy is about winning,” he says, “we need to be clear about the measures of success. In business, success means winning against the competition for value creation on two fronts: greater value for customers and greater profits for your company and its shareholders.” Pietersen says the Winning Proposition should be expressed in a concise phrase that is honed to bring clarity. The Winning Proposition should be both clear and inspirational. The best ones demonstrate a very clear future intent, but they should also stretch everyone in the organization beyond the MWORLD SPRING 2013

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10 LEADERSHIP SKILLS FOR VUCA How can you prepare yourself for the VUCA World of the future? In his book Leaders Make the Future, Bob Johansen describes 10 skill sets in a VUCA World. 1. Express Your Own Maker Instinct. Tackle a task to make something you’ve never made before, or at least engage with the making. Get your hands dirty. Ask yourself, too, how you played in sand or dirt as a child. What kinds of things did you make? What did you enjoy the most? How has your early maker experience contributed to your leadership style as you have matured? What about the way you express your do-it-yourself urges today? How do these contribute to your role as a leader? 2. Improve Your Ability to Communicate with Clarity. Ask your team, your boss, your friends, your family, or someone else close to you to assess your clarity in communicating with them. Think about people you have known or you have seen in public life who were decidedly not clear. What lessons do you have to learn from them? How would you express your organization’s strategic intent or winning proposition in a single compelling sentence?

3. Improve Your Ability to Flip Dilemmas. Flipping dilemmas or resolving a problem calls for an understanding of how problem resolution has been done in the past and how it can be done again. Have you explored ways to flip a dilemma around so that it can become an opportunity? List each challenge you face in your work or your life and assess whether they are problems that can be solved and how.

4. Grow Your Own Immersive Learning Ability. How do you seek out new experiences from which you learn—especially situations that make you feel uncomfortable in the pit of your stomach? How about participating in management games or simulations in your organization? If so, think of a recent example and how that experience has contributed to your leadership. What did you learn? How did your learning get expressed in your leadership?

5. Seed and Cultivate Your Own Bio-empathy. Do you have an emotional need to be in natural settings and learn from the experiences you have in nature? How do you satisfy that need? How does this emotional connection to nature contribute to your leadership? For instance, how do animals help us understand our choices as learners? Could you learn from your dog or cat? How do animals help us understand our choices are leaders?

6. Improve Your Abilities to Constructively Depolarize Conflict Situations. Look at the world through the eyes of others, especially those with whom you do not agree or who make you feel uncomfortable? How do you express a curiosity about other cultural practices that are different from your own? How are you judgmental—if at all—about

cultural habits and practices that do not conform to your own? Try to figure out what is going on—without picking sides. How do people interact with each other? Are some people looking for ways to constructively depolarize? What strategies do they try? Think back over your life to situations where you have been in polarized situations. For each case, what did you do and what might you have done to help constructively depolarize the situation?

7. Present Yourself with Quiet Transparency. Share your reasons for doing things with others, especially with those whom you are leading. Ask yourself, “Would the people I lead characterize me as transparent?” How do you embody trust and express it toward others—particularly people you are leading? Do the people you lead feel that you trust them? How do you embody this trust in your leadership style? What can be learned from these negative models? 8. Develop Your Rapid Prototyping Abilities. Try out things as soon as possible in order to learn what works and what does not. Think of an example where you kept trying out different approaches to a new idea over and over again, in a rapid prototyping process. What did this experience reveal about your leadership style? What is an example where you were able to learn from your own failure? How does your approach to failure fit in which your own leadership style? Do you encourage people you lead to learn from their own failures? 9. Reimagine Your Leadership Role as Smart-Mob Organizing. Reach out and network with others, both in person and through online media. Look for examples of smart mobs in your work, community, or public news world. Think through your own criteria for choosing which medium is good for what. How do you express your leadership through various electrical media?

10. Include Commons Creating. Seek out and try to create situations where multiple parties benefit (as opposed to a situation in which you alone win). Can you give recent examples when you have tried to do this, whether or not your efforts were successful? Think, too, of an example where you have given something away in order to get more in return. Think back and describe how this situation worked. Was it a win-win situation in the end? Did you succeed? Did others succeed as a result of your actions?

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“A Winning Proposition does not guarantee success, but it positions companies very well for the uncertainties of the future.” present toward a desired future state. The Winning Proposition provides great flexibility for people to pursue the dream in varied ways. Consider the clarity in these statements from four very different big brand companies:

—Global branding agency Ogilvy & Mather: “The brand of choice for those who value brands.” —Southwest Airlines: “On-time airline performance that rivals the cost of automobile travel, with a touch of fun.” —Consumer products leader Procter & Gamble: “…improve the lives of the world’s consumers, now and for generations to come.” —Agribusiness leader Syngenta: “Bringing plant potential to life.” All of these companies are leaders in their industries. Each has a strong future orientation that is clearly articulated. A Winning Proposition does not guarantee success, but it positions companies very well for the uncertainties of the future. Even in a VUCA World, these companies are very clear about where they are going, yet very flexible about how they might get there. MW Bob Johansen has been helping organizations around the world prepare for and shape the future for more than 30 years. Currently, a Distinguished Fellow with the Institute for the Future (IFTF), he was its president from 1996 to 2004. He is the author or coauthor of seven books, including Get There Early. Excerpted, with permission of the publisher from Leaders Make the Future: Ten New Leadership Skills for an Uncertain World (Second Edition) by Bob Johansen. Copyright 2012, Bob Johansen. Published by Berrett-Koehler Publishers, Inc., San Francisco. AMA’s Moving from an Operational Manager to a Strategic Leader will give you the skills to become an innovator, a persuasive player and a champion of strategic change. For more information, visit www.amanet.org/2242

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Make UNCERTAINTY BY JOHN BALDONI

Hard times provoke a certain unease that accompanies not knowing what comes next. As with the Great Depression, people remain uneasy, even when better times are clearly in view. We think, “What if this happens again?” As uncertain as things may seem today, modern crises pale against the backdrop of American history. The outcome of the American Revolution was never certain until the very end, six years after shots were first fired, and even then, the establishment of the new nation took another seven years. Then, the integrity of the Union was torn asunder in the Civil War, and it took four long years of fighting, the bloodiest in our history. Another century would pass before “equal justice before the law” would apply to all citizens. In hindsight, perhaps owing to too many John Wayne–type movies, the Second World War seems more a pageant than a painful struggle that required the mobilization of 12 million civilians. That war’s end offered peace, but it deteriorated into the Cold War, which brought the United States and the USSR into conflicts, both hot (Korea and Vietnam) and frightful (the Berlin Airlift and the Cuban Missile Crisis). Our nation has experienced a number of economic depressions, only the last of which (1929– late 1930s) we call the Great Depression. Recessions are too many to count—at least seven since the mid 70s. Each of these recessions brought people into confrontation with things greater than themselves and too often put them in seemingly unwinnable situations.

THE RECENT GREAT RECESSION The good news is that we have always prevailed. The nation and its people have held together. But today’s challenges are not regional; they are global. And although global trade has been a boon to the developing as well as the developed world, for many less-educated workers in the United States and Europe, cheaper labor in Asia and South Asia has brought high rates of unemployment. The recent Great Recession eradicated more than eight million jobs and created staggering levels of uncertainty. “The ambiguity of the present is matched by the ambiguity of the past,” says Dan Denison of IMD Business School. In other words, we have always faced challenges. In such situations, a leader must make people feel comfortable taking risks. 18

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Comfortable “What we need now are leaders who can recognize what they don’t know, who acknowledge that they don’t have to be the smartest people in the room,” says George Reed, the retired Army officer who teaches at the University of San Diego. “Leaders must be able to say, ‘I understand you need direction so I’m going to give it to you, but we may have to go in a different direction tomorrow.’ And that’s because the environment’s changing so fast.” One general whom Reed worked for in the Army did exactly that. He would say, “Folks, I’m not exactly sure what the right answer is on this thing. But I know you need direction so I want you to go this way. Hold on to that loosely—tomorrow I may come back and tell you to go another way because we’re continuing to collect information.” He also invited people who disagreed with him to voice their opinions. Reed asserts that this approach works conceptually, but can be hard tactically, when progress is based on executing directives. Too much change precludes accomplishment, because people are always having to throw out what they just did and begin anew. That can be frustrating. “I think that one of the important roles that leaders can take is to give people things to hang on to,” says Reed. “It may not be a strategic direction because that’s change based upon the environment, but it could relate to values, which are not going to change.” Reed suggests that a leader could say, “I am not sure about what the future will bring but here’s what you can count on. I care about you and you care about me. If we have that, we can weather everything else.”

UNDERSTANDING UNCERTAINTY AS A NORM “I think the leader has to be comfortable with ambiguity,” says Jim Guest, president and CEO of Consumers Union. “I thrive on ambiguity.” That is good for the Consumers Union as a publisher of information (Consumer Reports), which consumers use to make informed purchasing decisions. Like all publishers, it has migrated many of its services from traditional print to the web. It was a change that was uncomfortable for some employees, but over time they became accustomed to it, recognized that it was necessary, and ultimately embraced it. Going through the change together and experiencing success helped people become more comfortable with the change process. Not everything went smoothly, however. Guest tells a story about offering a car’s gloveMWORLD SPRING 2013

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“We follow leaders not because they bring us down but because they lift our spirits with their attitude, words, and examples.” compartment organizer as a premium for new subscribers. The organizer contained, among other things, a tire pressure gauge and flashlight. The premium stimulated new subscriptions, but the gauge didn’t work and the flashlight overheated. Two of the marketing people came to Guest to apologize. He assured them that they had done what he had challenged them to do: Be creative and entrepreneurial. And so Guest suggested, “Let’s do the best recall anybody has ever done; we’re big on safety.” The Consumers Union reported the problem to the Consumer Product Safety Commission and gave new subscribers a “free subscription for a year if they disposed of the flawed products.” Guest was also insistent that such a problem not keep staff from thinking outside the box. “Don’t let this problem make you gun-shy about taking risks in the future,” he told them. Guest sent an email to the staff “praising the marketing team as a way of reinforcing the concept that it was okay to take risks. It’s okay to make mistakes.” Or, as Guest puts it, “rather than heads rolling, people got a pat on the back.”

TAKING RESPONSIBILITY FOR UNCERTAINTY As part of the setup for each question posed to employees, a leader can open with, “Here’s how I see it.” Then he or she can follow up with, “What do you think?” This question-and-answer process presents a dialogue between boss and direct report that gives each the opportunity to express his or her views. Marshall Goldsmith believes strongly in the concept of “mutual responsibility” when it comes to times of rapid change. “While managers can be effective in letting people know their views, their vision, their direction, and their feedback, employees need to be given the responsibility of talking to the manager if there is doubt or ambiguity about goals and objectives.” In periods of transition, these things will change, but Goldsmith believes “there’s no excuse for any employees to have confusion about what their priorities or directions are.” As obvious as it may seem to assure employees that they can speak up, Goldsmith maintains that “most people underestimate the degree of difficulty in communication, especially during periods of rapid change and ambiguity.” Providing structure for conversations to occur can give both manager and employee the framework they need to connect one on one. Goldsmith suggests six questions that leaders can regularly ask their people: 1. Where do you think we should be going? 2. Where do you think you and your part of the business should be going? 3. What do you think you’re doing well? 4. If you were the leader, what ideas would you have for you? 5. How can I help? 6. What suggestions or ideas do you have for me?

Goldsmith believes that making a habit of asking these questions will help people feel more comfortable with the notion of ambiguity. The answers they evoke should lead people to understand more clearly what is expected of them and what they can do themselves to prepare for what may happen next. 20

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METHODS FOR DEALING WITH AMBIGUITY Dealing with a crisis, big or small, tests the mettle of any executive. It is particularly tough now because few, if any, have dealt with an economic crisis as severe as the one we face today. Fortunately, there are methods for dealing with it: HOW TO PROVIDE CLARITY FOR Square the circle. Look at your situation in terms of THE ORGANIZATION what you know. Itemize the known quantities, that is, what you can control, whether that is cost, quality, Leadership questions: resources, or other factors. Draw a boundary around ᔢ How well does my team understand what is that list. Outside this boundary lie factors such as expected of them? competition, consumer spending, government ᔢ How well have I made it known that my role is policy, and global trends. Then, leverage your to support the mission of the team? strengths; use them to give you clarity about your Leadership directives: operations so that you are prepared to deal with any crises that emerge from “outside the circle.” ᔢ Make it known that there is no such thing as Be pragmatic. The American philosopher of

pragmatism, William James, wrote, “The greatest discovery of my generation is that a human being can alter his life by altering his attitudes”; on which Franklin Roosevelt, an ardent admirer of James, expounded, “The only limit to our realization of tomorrow will be our doubts of today.” Keep trying, even in light of failure. More than

a dumb question. Ignorance thrives when people do not ask questions. ᔢ Teach critical thinking skills; how to assess a situation, consider the variables, and make an informed decision. ᔢ Challenge managers to make decisions based on what they know now, rather than waiting for all the variables to be determined.

90% of all new products fail. The challenge is to keep moving forward and realize that failure is part of the management process.

ᔢ Encourage seasoned managers to make decisions based on their experience. Teach up-and-coming managers to learn from experience.

Remain resolute. Failure is never desired, but it can be an outcome. You need to weigh the cost of failure against the cost of doing nothing.

ᔢ Preach pragmatism: the art of thinking creativity and the practicality of commonsense action steps.

Spread cheer. The economic situation we are going

ᔢ Encourage employees to think and act pragmatically—that is, to apply good ideas with practical solutions.

through is unprecedented for recent times. The worst may or may not be over in terms of unemployment levels, so it is up to the leaders on the ground to maintain perspective. They must lead from the front, dispensing confidence and good cheer. We follow leaders not because they bring us down but because they lift our spirits with their attitude, words, and examples. MW

John Baldoni is an internationally recognized leadership educator, executive coach, and author of many books, including Lead by Example, Lead Your Boss and Great Motivation Secrets of Great Leaders, as well as Lead with Purpose: Giving Your Organization a Reason to Believe in Itself. Excerpted, with permission of the publisher, from Lead with Purpose: Giving Your Organization a Reason to Believe in Itself by John Baldoni. Copyright 2012, John Baldoni. Published by AMACOM. For more information, visit www.amacombooks.org Deepen your self-awareness with executive leadership training and empower your staff to improve performance at AMA’s Developing Executive Leadership. For more information, visit www.amanet.org/2501

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MANAGEMENT

NOTES

Adapt or Atrophy

BY BRIAN KLAPPER

In 1917, Forbes published its first list of the 100 most valuable companies. Here we are, almost a century later, and only 15 of those companies still exist (with several of them struggling mightily to endure troubled conditions). One company, U.S. Steel, which in 1917 towered above the other 100 companies with three times the holdings of the second company on the list, today has an adjusted value just one-fifth its 1917 value. True, it has entered its second century of doing business, an impressive accomplishment, whereas 87 of the 100 were acquired, went bankrupt, or otherwise sank to the bottom of the corporate well. Still, U.S. Steel’s once tremendous might has ebbed, as it employs less than one-fifth the people it did in 1917.

Only one company, General Electric, has consistently outperformed the market for its more than 130-year history, its stock remaining one of the most highly valued in the world. According to Bill Rothschild, former GE senior strategist, two of the five primary strategies that have led to the company’s persistent success are an ability to adapt and being proactive to the changing environment. Adaptation is essential to healthy growth and economic vigor, and this axiom is truer in this second decade of this second millennium than it has ever been in history. An ability to embrace industry changes, technological advancements, and evolving customer demands opens THE NEED TO ADAPT

UNABLE TO ADAPT BLOCKBUSTER In the year 2000, Blockbuster could have bought Netflix for $50 million—peanuts, considering Blockbuster’s IPO in 1999 was $5 billion. Since then, the videorental chain has unnecessarily lost much of the value of its brand. Why? Inability to adapt quickly led this once ubiquitous chain to fail to keep up with videos by mail, dollar-anight video vending machines, and videos immediately available via iTunes, Hulu, Amazon, and many other sites. A brand that could have evolved has instead filed for Chapter 11 bankruptcy, shuttered many of its locations, been acquired by Dish Network for $320 million, and faces an uncertain future. EASTMAN KODAK For almost 100 years, Kodak and cameras were practically synonymous, with the company controlling up to 90% of the North American market share. Then came digital photography, at-home printing, online picture sharing, fun apps, and other trends that consumers love. Kodak’s stock peaked in 1997. Fifteen years later, it was down over 80%. It’s not that Kodak didn’t see or understand these trends—in fact, the first digital camera was invented and built by a Kodak engineer. The company simply wasn’t able to adapt to these unstoppable changes and profit from them.

SONY Enjoy your jog this morning listening to your Sony Walkman? Of course not. In the 1980s, the Walkman was as hot as the iPod has been for the past decade. Sony also dominated the market for TVs, video recorders, and other consumer electronics. Then along came more adaptable competitors like Apple, LG, Samsung, and other companies that responded to consumer wishes and evolving technologies. The result? Sony still succeeds in some spheres, but it lost big in others. BLACKBERRY Adored by hordes—especially businesspeople—BlackBerry was once the top smartphone. Lately, though, BlackBerry is withering on the vine. Arrogance, poor management, quality issues, outages (just as the iPhone 4S went on sale, no less), and lack of innovation have led to plummeting stock prices and dwindling sales. The potential to dominate the consumer electronics market was in the palm of its hand—literally—but was handed off to Apple, Google, Samsung, and other more adroit companies.

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MANAGEMENT

up your organization to opportunities that your competitors fail to see. It’s a chance to shed your skin and explore new and profitable innovations. It’s how an organization thrives now and long into the future. Ultimately, an organization’s only chance for real and lasting success in this rapid-change environment is to be extremely nimble, flexible, and responsive to the constantly changing stimuli that impact what and how it develops, builds, and delivers products and services. Unless an organization is at the forefront of responding to change, it could easily be left in the dust. Yet a paradox exists. While an overwhelming percentage of organizational leaders recognize the need to adapt, transformation rarely takes root in any lasting way. Why? And what can be done to convert this shocking rate of failure into overwhelming success for any astute organization that recognizes the necessity? The challenge is to: ᔢ Recognize the need for change and overcome fear of it ᔢ Be scrupulously honest about your organization’s current shortcomings

NOTES

ᔢ Get everyone in the company to buy in to your vision for the future ᔢ Successfully coax a behemoth from where it is today to where it needs to be tomorrow MW Brian Klapper is the president and founding partner of The Klapper Brian Klapper Institute. He is an internationally recognized expert in business process transformation who has worked with global companies in financial services, consumer products, manufacturing, food service, utilities, retail, and health care, and is the author of The Q-Loop: The Art & Science of Lasting Corporate Change. Excerpted, with permission of the publisher, from The Q-Loop: The Art & Science of Lasting Corporate Change by Brian Klapper. Copyright 2013, Brian Klapper. Published by Bibliomotion, 2013. Respond to complex and unpredictable business changes by mastering the competencies of agile leadership at AMA’s Strategic Agility and Resilience: Embracing Change to Drive Growth. For more information, visit www.amanet.org/2546

ABLE TO ADAPT DUPONT In 1802, DuPont made gunpowder. From there, it expanded into dynamite and other explosives. The company went on to invest in the early auto industry, moved into materials science, produced many of the raw materials for World War II, and was crucial to the U.S. space program. Today, DuPont is a veritable compendium of brand names, including Teflon, Kevlar, Mylar, Nylon, and Lycra, to name just a tiny percentage. Like other companies poised for centurieslong success, DuPont is agile enough to fulfill its potential by persistently embracing change.

CAPITAL ONE Capital One is unique. And it didn’t become that way by accident. Embedded in the company by careful design is a culture that not only embraces change but requires it, measures it, and rewards it. Each year, Capital One creates and tests as many as 50,000 new ideas. Remaining focused on the future, the company considers changes to be a core element of its identity. When dealing with a number that high, there are bound to be failures. More important, there will assuredly be profitable successes.

APPLE Singlehandedly changing the music industry, redefining the way computers, phones, and tablets fit into our lives, and rewriting the rules of brand marketing, Apple is a company with innovations that can’t be overstated. And these innovations are the reason the company’s profits nearly doubled in 2012. Yet it’s had failures. Remember the Newton? Another underperforming product was the QuickTake, the first consumer digital camera that connected to a home computer, introduced by Apple in 1994. Both were consumer flops. Yet these “failed” products were revolutionary, and were indicators of a healthy company aggressively pursuing innovation and risking failure.

NOKIA From paper to power and from cables to car phones, Nokia has spearheaded many industries and trends. Founded in 1865 in Finland, the company has today established itself as a leader in telecommunications technology. It is the second-largest cell phone manufacturer in the world, only recently bumped down one notch by Samsung, ending Nokia’s unprecedented 14-year reign. The company has a heritage of bold adaptation that will likely keep it moving forward instead of standing still.

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PLAY TO YOUR STRENGTHS: BY A.G. LAFLEY AND ROGER L. MARTIN

An organization’s core capabilities are those activities that, when performed at the highest level, enable the organization to bring its where-to-play and how-to-win choices to life. They are best understood as operating as a system of reinforcing activities—a concept first articulated by Harvard Business School’s Michael Porter. Porter noted that powerful and sustainable competitive advantage is unlikely to arise from any one capability (e.g., having the best sales force in the industry or the best technology in the industry), but rather from a set of capabilities that both fit with one another (i.e., that don’t conflict with one another) and actually reinforce one another (i.e., that make each other stronger than they would be alone). For Porter, a company’s “strategic position is contained in a set of tailored activities designed to deliver it.” He calls the visual depiction of this set of activities an activity system. Since “competitive strategy is about being different...[and] means deliberately choosing a different set of activities to deliver unique value,” an activity system must also be distinct from the activity systems of competitors. In his landmark 1996 article What Is Strategy?, Porter illustrated his theory with examples from Southwest Airlines, Progressive Insurance, and The Vanguard Group, articulating the way in which each organization made distinctive choices and tailored an activity system to deliver on those choices. The activity system is a visual representation of the firm’s competitive advantage, capturing on a single page the core capabilities of the firm.

P&G CORE CAPABILITIES In 2000, Procter and Gamble’s where-to-play choices were coming together (i.e., grow from the core; extend into home, beauty, health, and personal care; and expand into emerging markets), and its how-to-win choices were also becoming clear (i.e., excellence in consumer-focused brand building; innovative product design; and leveraging global scale and retailer partnerships). These choices needed to be translated into the set of capabilities required to deliver. The thinking process was kicked off at an offsite meeting for business and functional leaders. Leaders were placed into teams by business and by function and then asked to capture what they thought were the key strengths of the company. After a long day of discussion and debate, the teams had generated more than 100 potential competitive strengths on charts around the room. As might have been predicted, every function had identified its unique set of disciplinary capabilities and competencies. Every business had identified capabilities that were 24

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Understanding Your Capabilities unique to its industry. Consequently, the question needed to be reframed. The next morning, everyone would be given three votes on what constituted the core capabilities of the company, along the following criteria: First, for a given capability, the group had to be reasonably sure P&G already had real, measurable competitive advantage in that area and could widen its margin of advantage in the future. Second, the capability had to be broadly relevant

A.G. Lafley

Roger L. Martin

and important to the majority of P&Gâ&#x20AC;&#x2122;s businesses; that is, it had to be a company-level rather than business-level capability that distinguished P&G from its competitors. Third, the capability had to be decisive; a real competitive advantage that was the difference between winning and losing.

WINNING CAPABILITIES With capabilities, again, winning is an essential criterion. Companies can be good at a lot of things, but there are a smaller number of activities that together create distinctiveness, underpinning specific where-to-play and how-to-win choices. P&G certainly needs to be good at manufacturing but not distinctively good at it to win. On the other hand, P&G does need to be distinctively good at understanding consumers, at innovation, and at branding its products. When articulating core capabilities, you need to distinguish between generic strengths and critical, mutually reinforcing activities. A company needs to invest disproportionately in building the core capabilities that together produce competitive advantage. When thinking about capabilities, you may be tempted to simply ask what you are really good at and attempt to build a strategy from there. The danger of doing so is that the things youâ&#x20AC;&#x2122;re currently good at may actually be irrelevant to consumers and in no way confer a competitive advantage.

FIVE CORE CAPABILITIES The group settled on five core capabilities: 1. Understanding consumers: Really knowing the consumers, uncovering their unmet needs, and designing solutions for them better than any competitor can. In other words, making the consumer the boss in order to win the consumer-value equation. 2. Creating and building brands: Launching and cultivating brands with powerful consumer value equations for true longevity in the marketplace. MWORLD SPRING 2013

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3. Innovating (in the broadest sense): R&D with the aim of advancing materials science and inventing breakthrough new products, but also taking an innovative approach to business models, external partnerships, and the way P&G does business. 4. Partnering and going to market with customers and suppliers: Being the partner of choice by virtue of P&G’s willingness to work together on joint business plans and to share joint value creation. 5. Leveraging global scale: Operating as one company to maximize buying power, crossbrand synergies, and development of globally replicable capabilities.

These capability choices would guide P&G’s strategic choices for the next decade. The five P&G capabilities can be understood as forming the basis of P&G’s company-level activity system. In our adaptation of Porter’s original concept, the activity system captures the core capabilities required to win, the relationships between them, and the activities that support them. This map supports where-to-play and how-to-win choices, as shown in the accompanying figures (Figure 1). In this system, the core capabilities are shown as large nodes, and the links between the large nodes represent important reinforcing relationships. These reinforcing relationships make each capability stronger, which is an essential characteristic of an activity system: The system as a whole is stronger than any of the component capabilities, insofar as those capabilities fit with and reinforce one another. For instance, there is a close connection between consumer understanding and innovation. For P&G, innovation must be consumer-centered if it is to be meaningful and provide competitive advantage—so innovation requires a deep understanding of the needs of consumers.

The subordinate nodes are the activities that support the core capabilities. Scale, for instance, is supported by the way in which P&G is structured. At P&G, global business units (GBUs) oversee categories, brands, and products, providing a holistic, consistent approach to each element on a worldwide basis. At the same time, market development organizations (MDOs) have responsibility for a continent, region, country, channel, or customer, paying close attention to its specific needs and demands. The GBUs and MDOs work together to create a global approach with local applicability and customization. This matrix allows P&G to drive scale where it is needed but to stay nimble on the ground. Scale is also supported by global purchasing and global business services. In addition, scale enables, and is supported by, customer teams (i.e., teams that work solely with specific customers, like Tesco or Walmart), agency relationships (P&G has the largest ad budget in the world), and consumer- and customer-driven measurement systems (qualitative and quantitative approaches to understanding and reporting performance). Through the sheer size and volume of activity, P&G is able to afford more resources than competitors in each of these areas—and to get better performance (Figure 2).

MAKING THE RIGHT CHOICES An activity system is of no value unless it supports a particular where-to-play and how-to-win choice. Again, the various choices along the cascade must be considered iteratively. You need to 26

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CHARTS COURTESY OF A.G. LAFLEY AND ROGER L. MARTIN

New innovative products keep retail channel partners excited about P&G and reinforce the close relationship between the company and its best customers—but only if P&G takes care to think of both retailers and end-consumers during the R&D process.

FIGURE 1

FIGURE 2

Procter & Gamble activity system

Reinforcing rods

Agency relationships

Global purchasing

Brand building

Global business services

Design

Brandbuilding framework

Distinctive activity systems P&G

Consumer research

Leadership culture

Category A Scale

Consumerdriven measurement systems

e.g., innovation

Consumer understanding

Brand B Innovation

e.g., scale

Customer teams

GBU/MDO structure

e.g., consumer is boss

Connect + Develop

Go-to-market capabilities Globally Shopper distributed marketing R&D

Subordinate nodes support core capablities.

go back and forth between the choices. You can think through a tentative where-to-play and how-to-win choice. Then you can ask what activities system would effectively underpin this choice? Once you lay out such a system map, you can ask a sequential set of questions about feasibility, distinctiveness, and defensibility. In addressing feasibility, ask several questions: Is this a realistic activity system to build? How much of it is currently in place, and how much would you have to create? For the capabilities you would need to build, is it affordable to do so? If upon reflection you find that the activity system isn’t feasible, then you need to reconsider where to play and how to win. When you have a feasible activity system, you can ask more questions: Is it distinctive? Is it similar to or different from competitors’ systems? This is an important point. Imagine that a competitor has a different where-to-play and how-to-win choice, but a very similar set of capabilities and supporting activities. In such a situation, the competitor could shift to your potentially superior where-to-play and how-to-win choices. If the activity system isn’t distinctive, the where and the how and the map must be revisited until such time as a distinctive combination emerges. As Porter notes, not all of the elements need to be unique or impossible to replicate. It is the combination of capabilities—the activity system in its entirety—that must be inimitable. MW A.G. Lafley is the former chairman of the board, president, and CEO of Procter & Gamble. Roger L. Martin is dean of the University of Toronto’s Rotman School of Management and an advisor to CEOs on strategy, design, innovation, and integrative thinking. Excerpted, with permission of the publisher, from Playing to Win: How Strategy Really Works by A. G. Lafley and Roger L. Martin. Copyright 2013, A.G. Lafley and Roger L. Martin. Published by Harvard Business Review Press. Develop the best strategic planning to support your company’s goals at AMA’s seminar Strategic Planning. For more information, visit www.amanet.org/2526

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MORE INNOVATION, LESS RISK BY RICHARD CZERNIAWSKI

“More innovation, less risk” sounds like an oxymoron. But it is not, if managed appropriately. We’ve been taught to think, “more innovation, more risk.” However, in today’s rapidly changing, highly dynamic marketplace, where competition can come from anywhere, and the power of the customer is growing stronger, a more apropos assertion is “less innovation, more risk.”

THE NATURE OF RISK Risk envelops us. If we were to think about it, we would recognize it is present in nearly every facet of our lives. We face risk around the clock, each and every day. We risk an accident when we buckle up to brave crowded highways and byways to drive to work in inclement weather and, for that matter, even perfect weather conditions. We risk when we receive a medical diagnosis that it may not be the correct one, and we will not be properly treated by those we entrust to care for us. We risk when we purchase a stock that it might be a poor investment and depreciate in value; get a home via a loan that we will not be able to repay, default on a mortgage and have the home taken from us; send our children off to school along a route that may be unsafe, eat in a restaurant that we not get food poisoning; awaken in the middle of the night and navigate our way to the bathroom in the dark without stumbling into something hard (or fragile); step into the shower without slipping and injuring ourselves, and the like. MWORLD SPRING 2013

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But while we may acknowledge that these are risks, however unlikely, we don’t obsess over these things as such. They are in the far recesses of our collective mind. If we did think about each and every potential risk we face, it could lead to paralysis or, worse yet, make us raving mad. Risk is part of the business world. The word “risk” is defined as endangering somebody or something; inviting a bad consequence. The consequences of taking risks in the business world are numerous and rather grave. And we are reminded of them. Our choices may be perceived as endangering our career, or someone else’s career (such as our bosses or teammates). A risky action could lead to loss of reputation, promotion, or even our jobs. It could result in failure to achieve profit goals. If it is substantive, it could trigger a drop in the stock price or bankrupt the company. Or, a less visible but real consequence of a risky choice could be those “opportunity losses” brought about by an inability to provide capital for promising opportunities. Yes, risk in the corporate world is made obvious and linked with rather dire consequences. We risk “our necks” or “getting our necks chopped off ” as if we were turkeys. Perhaps that is why there are many managers in business who have become turtles, keeping their necks tucked into their shells and out of harm’s way. Neither turkeys (those who behave recklessly) nor turtles (those who avoid anything new) have a place in our competitive environment. Unfortunately, innovation is linked with risk, often irrationally so.

THE NATURE OF INNOVATION We desperately need innovation. Innovation fuels competitiveness. Innovation fuels growth. Innovation fuels business health. It’s hard to get ahead without innovation. We need to distinguish innovation from invention. Invention is a new discovery. It probably originates with engineering or R&D. It is a nascent idea that may require huge investments in time, talent, and funding. For example, the invention of manned flight took many years and attempts. Innovation takes invention and commercialization. In fact, it took more than 30 years to commercialize air transportation following the Wright Brothers’ invention. Steve Wozniak created the Apple computer. Steve Jobs commercialized it. Innovation is the essential link to “cross the chasm” (a term established by Geoffrey Moore in his book Crossing the Chasm, which is a must-read for marketers) and gain a wider customer base. Innovation is essential to commercial success. Innovation is a major part of our job as marketers if we are going to drive customer preference and make our marketing matter more. Innovation is offering or doing something different (Pixar Animation). It could be a product (iPhone). It could be a business model (Starbucks, Amazon.com). It could be a brand idea (Axe). It could be a new way of reaching potential customers and winning them over to our brands (introduction of direct-to-consumer advertising by pharmaceutical companies, or the Obama campaign’s use of social media). It could take many forms. We cannot point the finger of blame for poor business performance at R&D for not developing new products (although this is undoubtedly important!). We must innovate—even when we have new products, if we are to leverage their full potential—to stay ahead of the competition and achieve our business goals. MasterCard is a wonderful example of innovation in advertising with its development of a BIG Campaign Idea—the “Priceless” campaign. Its product was not changed, nor is it different from the competition. Yet the development of the Priceless campaign in 1997 has fueled significant growth over the past 15 years, and continues to do so. 30

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“We all have competitors on our tails who have us in their sights and are eager to shoot our brands out of the marketplace.” LESS INNOVATION, MORE RISK By now, most of us may be familiar with Einstein’s definition of insanity: Doing the same things, in the same ways, and expecting different results. This is the antithesis of innovation. Why, then, would we choose insanity? It’s because of this irrational link between innovation and risk. The underlying unstated assumption, but visible practice, is “less innovation, less risk.” Our senior managers boldly call for innovation, but we (and these same senior managers) fear and loathe it. It is the right message, but the wrong action—if we want to keep our jobs, and “necks.” The actual suggestion of doing something that is innovative is often undermined by assertions that it isn’t the way we do, or the industry does, business (and the inference that those suggesting the specific innovation, therefore, do not understand the business); the observation that no one else in the category is doing it (therefore, it can’t be right or it is unproven, which poses significant risk and makes us all appear foolish); and/or stalling tactics consisting of endless rounds of revised PowerPoint presentations without gaining approval for action, while the proverbial deck chairs of the Titanic are rearranged (i.e., personnel assignments are changed and the recommended innovation is forgotten). In reality, however, it is “less innovation, more risk.” Let’s refer back to that quote from Einstein. We are not going to get the results we seek, the results senior managers and stockholders demand. Nor can we cut (as in people, budgets, etc.) our way to leadership. Moreover, we are vulnerable to those competitors who do innovate. They change how customers perceive the marketplace in ways that favor their brand, which I call “Marketect” thinking—Steve Jobs was the Marketect of our generation. Blackberry, Nokia and Motorola, former leaders in mobile phones, are shining examples of the consequences of “less innovation (or, perhaps, not relevant innovation), more risk.” Consider this: As a former military pilot, I know that the safest way to fly is “straight and level.” That’s the way all of us want commercial pilots ferrying us around the world to fly. But, in a military situation, if an enemy plane is on our tail, and has us in his sights, then flying safe and level is not the safest way to fly. In this instance, flying straight and level puts us at great risk of being shot out of the sky. We all have competitors on our tails who have us in their sights and are eager to shoot our brands out of the marketplace. Flying straight and level (no innovation) will not keep us safe. The only way we will be truly safe is to “juke and jag” (innovation).

RISK MANAGEMENT STRATEGIES Here are marketing innovation risk management strategies for your consideration: 1. Conduct “due diligence.” This is about challenging assumptions that we hold dear. This is about investigating the “conventional wisdom” of our company and category. Instead of clinging to what and how we conduct business, and dismissing what is novel, conduct due diligence to determine the productivity of each. Hold up the conventional wisdom and generate potential ways to better or beat it. Assure all that the conventional wisdom will not be overturned unless we prove conclusively to have a more productive course of action. While an MWORLD SPRING 2013

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“It is not about the percentage of successful ideas that come out of testing, but the percentage of ideas that we put into the marketplace (after testing!) that achieve our business goals.” error in commission (poor execution) can hurt the brand, an error of omission (innovation) is more likely to cripple it. 2. Collaboration of the matrix (multidiscipline) team. Each member of our team (i.e., product R&D, marketing research, agency, promotion, and finance) has a specific expertise and with it a unique point of view and set of experiences that they can bring to bear on exploiting opportunities for growth, resolving critical issues, and solving knotty problems that stall progress. Each member has a piece of the puzzle that constitutes the larger mosaic of success. Utilize the diverse team of expertise to contribute to the development of innovation, and to pressure-test it. By the way, this is not a ploy for sharing the risk so as to avert blame, but to ensure we have the necessary input to see the whole field and deal intelligently with contingencies. 3. Generate many ideas, frequently. As marketing guru Seth Godin would express it, “slay the sacred cow.” Then seek to generate ideas, lots of them, across all aspects of the business. The more shots we take, the better the opportunity to score. It is not about the percentage of successful ideas that come out of testing, but the percentage of ideas that we put into the marketplace (after testing!) that achieve our business goals. This is akin to diversifying our investment portfolio (e.g., stocks, bonds, real estate, or cash). We want to entertain innovation across a wide swath of business areas (e.g., packaging, clinical studies, promotion, or product) with a variety of ideas in each. Idea generation should not be a “sometimes” thing, but an “every time” activity. The worst time to begin developing ideas is when we desperately need one. The forces in the universe will be working against us and we will desperately adopt what seem to be promising ideas that really prove unproductive and, consequently, fulfill our worst fears regarding the risk of innovation, failure in the marketplace. 4. Inspect what you expect. Simply stated, set action standards and test against them, using

marketing research. Each and every innovation should have clear business goals and an estimated ROI. If we cannot identify these measures, then we are not deserving of receiving funding to support the recommended innovation. However, we need to go beyond our expectations to actually determine that we have achieved them. This requires thoughtful analysis following execution, which, in turn, enables us to gain precious feedback, leading to adaptations that improve marketplace performance, or convincing us to abandon what we had hoped to be productive innovation in favor of another, more productive activity. It should be noted, however, the level of risk has increased dramatically over the past few years as a result of deep cuts in marketing research funding and organizations moving forward with initiatives for which they do not know the outcomes—which is the single biggest risk for any organization. That’s gambling! 5. Roll out to field test and adapt. Things don’t always go as planned, or, for that matter, as suggested by marketing research. So to mitigate the level of risk, it is wise to proceed in a stepwise fashion to confirm the marketing research and adapt to optimize the innovation as it is rolled out to generate more favorable results. 32

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6. Share learning. Now we get to another important facet essential to creating a “learning enterprise” and mitigating risk. We share the results of our testing with everyone in the organization. This saves us from marketers reinventing the wheel and making the same mistakes that the organization has paid for with past failures. However, because something produced sterling outcomes with one brand does not guarantee it will do so with another, particularly if it is in another category, in which case we must go back to steps 4 and 5. Above all, we should not launch any perceived innovation until we know what it will bring the organization in terms of business success.

The choice is ours: will we be turkeys with “more innovation, more risk,” turtles with “less innovation, more risk,” or fly like eagles with “more innovation, less risk”? MW Richard Czerniawski is the founder of Brand Development Network International, Inc., a marketing resources company empowering marketers to create brand loyalty. Previously, he held brand marketing management positions with Procter & Gamble, Johnson & Johnson, Richardson-Vicks, and the Coca-Cola Company (where he served as Director of Marketing for all soft drink brands in the United States). You’ll learn methods to get maximum mileage from market research at AMA’s Planning and Developing New Products. For more information, visit www.amanet.org/4259

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The Athena Doctrine: How BY JOHN GERZEMA

Nagato Kimura was in his office at the fish cannery as a 30-foot high wall of water raced toward him. Moments later, the tiny port town of Ishinomaki, Japan, was devastated. While Kimura and most of his workers survived, Kinoya, the seafood company his father had started, was completely destroyed. As rescue workers combed the rubble, they began to notice little tins caked in mud and debris. The labels were washed away, but the cans were intact. A group of people in Tokyo traveled to the town, gathered and cleaned the cans, and brought them back to sell in order to help the company recover. But how do you sell something that has no label? With no other choice, the cans were stocked bare on the shelves. And then something happened: Shoppers started decorating the cans with messages of support and unity like “Help each other in Japan” and “We can recover if we do it together.” As I ate canned mackerel with Kimura-san, he told me how complete strangers helped recover 800,000 cans to help rebuild his factory. Across Japan, they became known as “Cans of Hope.”

A CAUTIONARY TALE Five thousand miles away, a Lutheran minister named Orn Johnsson was named a constitutional committee member of Iceland’s new government. Bankers there inflated a financial bubble that wrecked the national economy. In a remarkable display of egalitarianism, the government sent 1,000 invitations at random to citizens, inviting them to join a constitutional forum. A call went out for those who wanted to serve on the elected assembly that would write a new national constitution. Johnsson leapt at the chance and was elected. The assembly went to work—not behind closed doors, but in public view and with real-time reports to the public on YouTube, Facebook, Twitter, and Flickr. Citizens offered instant feedback and their comments fed the deliberations. The result was the first “crowd-sourced” constitution of a nation.

RISK AND UNCERTAINTY Here we have two island countries mired in catastrophes brought about by risk and uncertainty. In both cases, people took to the streets in rage and protest, and yet rather than perpetuating further damage and instability, both nations found resolution through an unlikely source—their feminine values. 34

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Feminine Values Can Foster a Better World

There are masculine and feminine values that influence behavior. And whereas in the past, masculine values dominated, in the 21st century, there is a growing shift and feminine values are more evident. We live in a world that’s increasingly social, interdependent, and transparent. And in this world, feminine values are ascendant. In business, politics, and society at large, the most innovative among us are breaking away from traditional structures to be more flexible, collaborative, and nurturing. They are following the Athena Doctrine, named after the Greek goddess whose strength came from her wisdom and fairness. All over the world, people are deploying feminine thinking and values to make their lives, and the world, better.

Everywhere we went, we asked a lot of questions about life today; about what makes us happy, and gives our lives meaning. We found that people talk as if they live in an age of “extended” anxiety. Most question whether their children will have better lives than their own (51% thought not), while 86% of people feel institutions and corporations have accumulated too much power. Three-quarters questioned society’s basic fairness, while 76% felt their country “cared less about their citizens.” And when we examined the reasons why, we found that there is a global referendum on men. The majority of people are dissatisfied with the conduct of men, including 79% of people in Japan and South Korea and two-thirds of people in the U.S., Indonesia, and Mexico. Interestingly, Millennials have a fundamentally stronger appreciation of femininity and the role of women in their society—three-quarters of Japanese and South Korean youth are critical of male behavior, as are two-thirds of global youth. What can we make of this? People are frustrated by a world long dominated by codes of male thinking and behavior: codes of control, aggression, and black-and-white thinking that have MWORLD SPRING 2013

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PHOTO: THE STATUE OF GODDESS ATHENA IN FRONT OF THE UNIVERSITY OF ATHENS, GREECE

In The Athena Doctrine, a book I coauthored with Michael D’Antonio, we surveyed 64,000 people in 13 countries across a wide swath of cultural, political, and economic diversity. We gathered data from Canada to Indonesia. And we traveled nearly four times around the world conducting interviews in another 18 nations. We talked to people in the favelas of Peru and in villages in northern India. We interviewed world political leaders in Brussels and Jerusalem—we even visited the tiny kingdom of Bhutan, where we met the secretary of the Gross National Happiness Commission

“In our research we found that countries whose citizens were more balanced in thinking in both a masculine and feminine way not only had more developed economies, they had greater quality of life.” contributed to many of the problems we face today, from wars and income inequality to reckless risk-taking and scandal. In fact, two-thirds of people “feel the world would be a better place if men thought more like women”—including 75% of French and Brazilian citizens and 70% of Germans. Again, Millennials in the highly masculine societies of China, Japan, South Korea, and India “agree even more strongly than women.” How could the world be a better place if men thought more like women? What does thinking like a woman mean? To understand this, we conducted two separate studies. In the first study, we asked half our sample—32,000 people around the world—to classify 125 different human behavioral traits as either masculine, feminine, or neither. Next, we presented the same list of traits to the other half of our sample without attributing gender to the words. We simply asked them to rate the importance of these traits on leadership, success, morality, and happiness—the very things people said were in crisis today. By comparing the two separate studies, we could statistically model how masculine and feminine traits related to solving today’s challenges.

UNDERSTANDING THE DATA Overall, we found strong consensus on what is feminine and masculine—and discovered that feminine traits are perceived as more vital to making the world safer and more secure. In response to the frustration of posturing and brinksmanship that has led to fiscal cliffs and global market instability, there is a mandate for a more expressive style of leader, who shares feelings more openly and honestly along with patience and reason to break gridlock and end conflict. These feminine qualities were evident in one leader we interviewed, Catalina Cock Due Que, who helped abate what seemed to be an intractable civil war in Colombia through a network of Casas de Paz, or Peace Houses. In these homes on farms outside of Medellin, former FARC rebels lay down their arms and live with victims they once terrorized. Catalina’s programs are about contrition and understanding. Such programs have helped nearly 32,000 soldiers reintegrate back into society, while setting Colombia on the path to a more hopeful future. What people saw as more masculine qualities like decisiveness and resilience are still important, but they were less correlated to exemplary leadership than feminine qualities like flexibility in order to build consensus and address the major challenges of the modern world: climate change, poverty, economic reforms, and war and conflict. Critical in their assessment is the shortage of long-term thinkers who can dig in and plan for the future, both decidedly feminine qualities in our surveys. We met Emily Bolton at London’s Social Finance office, where social impact bonds are an ingenious attempt at long-term thinking. Here, the government will pay investors if desirable social outcomes lower future government costs. Once social impact bond is aimed at reducing the rate of re-offenders from Peterborough prison by at least 7.5% in order for investors to profit. In this model, private investors become socially responsible in assisting inmates with job counseling, drug and alcohol education, and other forms of betterment. 36

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Citizens around the world also believe that (masculine) traits like aggression and independence are less pliable in today’s world than the feminine values of collaboration and sharing credit. We interviewed Leo Riski, the cultural attaché of The Felleshus, which is Danish for House for Everyone—the first shared embassy in the world and home to the five Nordic nations of Denmark, Iceland, Norway, Sweden, and Finland. This 21st-century model of diplomacy is about putting aside cultural differences in order to envision long-term structural goals that benefit all member nations. I couldn’t help noticing, as I left my meeting with Leo, that across the street was the Syrian embassy, shuttered and covered in graffiti.

OUR COMMON FEMININITY In the year spent traveling the world, I discovered that the most promising innovators of our time rely on feminine thinking to make their lives, and the world, better. But feminine traits don’t belong to one gender. Our ability to navigate an increasingly fragile world depends on accessing our common femininity: In our research we found that countries whose citizens were more balanced in thinking in both a masculine and feminine way not only had more developed economies, they had greater quality of life—81% of people said that “man or woman, you need both masculine and feminine traits to thrive in today’s world,” and people who think in a more feminine way are nearly twice as optimistic about their future. As a result of my experience, I believe that feminine values are the operating system of 21stcentury progress. By embracing the ways of women, we can double the resources applied to problems and expand our potential for growth and prosperity. This shift toward the feminine does not portend the end of men, but does suggest a natural rebalancing that vastly increases the capacity of both men and women to solve problems and create greater prosperity. From this point of view, an embrace of feminine qualities can be thought of as a competitive advantage, not unlike a breakthrough technology or a new form of innovation. This is important because perhaps the greatest risk to all of us is the harm we do to ourselves when we mistreat and disrespect women. Women’s issues are “our issues,” and I believe that the best way to advocate for the rights of women around the world is for men to model their approach. Perhaps the more we see and appreciate the sheer brilliance in feminine thinking, the more we will see and appreciate our common humanity. MW John Gerzema is executive chairman of WPP’s BAV Consulting. For more information, contact jgerzema@bavconsulting

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Constructing an Early-Warning BY PHILIP KOTLER AND JOHN A. CASLIONE

Just as a jumbo jet’s pilot and crew prepare for each of its flights, so too must business executives and their organizations prepare steps to move their business strategies forward and execute them during turbulent times. They first have to develop an effective early warning system that will detect as much turbulence as possible, as quickly as possible and as far in advance as possible. As business executives begin to consider developing an effective early-warning system in their companies, they need to be very clear about the goals. In addition to issuing warnings and alerts, goals should include identifying and reducing risk, uncertainty, and vulnerability, as well as recognizing and exploiting opportunities. Two respected thought leaders in the development of business early-warning systems are George S. Day and Paul J. H. Schoemaker of the Wharton School’s Mack Center for Technological Innovation. In their book, Peripheral Vision: Detecting the Weak Signals That Will Make or Break Your Company, they state that “the biggest dangers to a company are the ones you don’t see coming, and understanding these threats—and anticipating opportunities— require strong peripheral vision.” For example, they cite Mattel, the perennial leader in children’s toys and dolls, which lost 20% of its share of the worldwide fashion-doll segment between 2001 and 2004 to smaller rivals, including MGA Entertainment, which created a new line of dolls called Bratz. MGA recognized what Mattel didn’t—that preteen girls were becoming more sophisticated and maturing more quickly. They were outgrowing Barbie earlier than ever before, and they preferred dolls that looked more like their teenage siblings and the pop stars they idolized. As the target market for Barbie narrowed from girls aged 3 to 11 to girls aged 3 to 5, the Bratz line cut Barbie’s market share rapidly and deeply. By the time Mattel finally moved to rescue Barbie’s declining fortunes with a new line of hipper fashion dolls, the damage was done. Barbie, queen of dolls for more than 40 years, had lost a fifth of her realm almost overnight— and Mattel didn’t see it coming. Day and Schoemaker make the further point that “when a company examines its main areas of focus, its questions are targeted and the answers precise: What are the potential market and industry developments to which a company would be vulnerable? What is our market share? What are our profits? Have our sales volumes increased? What is our employee turnover? What 38

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System (EWS) are our competitors up to? But the questions used to examine the periphery need to be much more open-ended and the answers far less precise.” “Good facts, and lots of them, lead to good decisions,” says Russell Chapman, a partner at Acclaro Partners in Reston, Virginia, a strategy consulting firm that provides advisory services to middle-market companies. “We have been extraordinarily successful helping our clients survive and thrive during even the most challenging times by getting them to accept an important but difficult lesson: Neither factbased decision making nor changing strategic direction when conditions warrant is a sign of weakness at the top. We are always fascinated by how enthusiastically CEOs embrace a structured decision-making process when they realize it takes the pressure off them to always be right.”

LESSONS FROM DETROIT’S BIG THREE To appreciate the worth of an early warning system, let’s visit Detroit’s Big Three automakers— GM, Ford, and Chrysler—and consider what even a minimal early-warning system might have told them. Even before they were lobbying the U.S. Congress in late 2008 for a $25 billion bailout of the industry, it was apparent that the Big Three’s major problems began a long time before the global financial crises and the recessions hit the United States, Europe, and most of the rest of the world in late 2008. One would have imagined that one or all of the Big Three automakers would have engaged in a bit of chaotic management long before the day they were called before the U.S. Congress. But they didn’t, nor could they present even an outline of a viable business model to lead their companies to success when asked pointedly by Congressional members who pressed the executives on how they would spend U.S. taxpayers’ monies if given to them. The perverse irony of the situation is that on the very same day, Honda was opening a new automobile production facility in Indiana, employing more than 1,000 new workers. In the first nine months of 2008, Honda registered a rise in U.S. sales to a record 11% market share, making it the world’s fourth largest automaker, behind Toyota, GM, and Ford. MW Philip Kotler is the S.C. Johnson Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University and the author of the seminal Marketing Management and several other influential books. John A. Caslione is the founder, president, and CEO of GCS Business Capital LLC, a global mergers and acquisition advisory firm. Excerpted, with permission of the publisher, from Chaotics: The Business of Managing and Marketing in the Age of Turbulence by Philip Kotler and John A. Caslione. Copyright, 2009, Philip Kotler and John A. Caslione. Published by AMACOM. For more information, visit www.amacombooks.org MWORLD SPRING 2013

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Awakening LEADERSHIP at All BY MARIL MACDONALD

In 1998, after serving across many industries in a variety of capacities, I left a job I loved at a corporation I loved to pursue the cause I love most. I founded my own firm, Gagen MacDonald, to help companies bring purpose and meaning to their existence as they deal with the human struggle of change. As I think back on the nearly 15 years that have transpired, it’s clearer than ever to me that the companies that do this well are the ones who are able to awaken leadership at all levels. Taking a step back, it’s important to consider how radically our world has changed over the last decade. The number of colliding forces that have rocked our world are countless and have been discussed at great length. For starters, of course, is the digital revolution we’ve experienced. According to the Arthur W. Page Society’s new report published in March 2012, “Building Belief: A New Model for Activating Corporate Character and Authentic Advocacy,” we send 2.9 million emails every second, upload 20 hours of video to YouTube every minute, publish 50 million tweets a day, and spend 700 billion minutes on Facebook a month. It’s hard to believe. As this digital revolution has occurred (and partly because it has occurred), other disruptive forces have simultaneously taken hold within our companies. During this same span, we have seen globalization shrink and diversify our worlds, making news anywhere news everywhere, and creating workforces (and often teams) with dozens of different languages and far more cultural nuances. Similarly, we’re in the middle of a generational shift that is brewing a conflict between the organizational values that have gotten us to where we are and the expectations of our rising workforce. According to Forbes, there are now one million more Millennials than Baby Boomers in the U.S., and, by 2025, they will account for 60% of our employees. As this table from Cisco’s “Workforce 2020” study shows, there are significant differences in what they seek and expect in their relationship with their employers. Traditional

Workforce 2020

Benefits

Opportunities

Taking Charge & Getting Ahead

Nurturing & Growing

Managing

Coaching

Developing Specific

Maximizing Potential Source: Cisco, Workforce 2020

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Levels

Many of my generation (Boomers) grew up with the goal of developing expertise and climbing the corporate ladder, all the while aspiring to the benefits and prestige of new titles and responsibilities. These values are not widely shared by our Millennial colleagues. Rather than being loyal to a company and seeking vertical advancement, our young workers are more likely loyal to a cause and are interested in opportunities that provide rich experiences and stretch and exercise their talent. As companies, if we want to successfully execute our long-term visions, we need to build cultures that feel meaningful in a world governed by these emerging values. So, the question is, with these factors (globalization, digitalization, and demographic trends, among many others) driving seismic change, how do we keep our employees engaged in where we are trying to take our companies? The answer lies in leadership. We can no longer control our stories: In a world of bloggers, tweeters, and cable-news pundits, we have lost the ability to manage what our employees or customers hear. Rather, we can only influence how they think and act by providing a trusted voice that helps them cut through the clutter and noise. That voice comes from our leaders. Recognizing this simple truth, 18 months ago, I launched a project called Let Go & Lead (www.LetGoandLead.com) to better understand what leadership means in this new global context. To gain perspective, I set out to talk with standout leaders and experts, both inside and outside of corporations, about their beliefs. Some very interesting people—ranging from author and journalist Mitch Albom to Starbucks CEO Howard Schultz—answered our call. After spending more than 30 years working with some of the world’s biggest and best known companies during critical moments in their history, the 14 conversations I have conducted to date have helped crystalize the lessons from those decades of experience. Here are three of the major insights that I have taken away so far.

SLOWING DOWN MAY BE OUR NEXT BIG CULTURAL FRONTIER When you talk with CEOs anywhere, they tell you that they are concerned with speed: speed to market, speed in decision making, speed of execution. On the surface, the rise of new technologies should make the quest to go faster significantly easier. Without question, information can travel at greater speeds and with less disruption than at any point in history. But, as recent research is beginning to show, these same technologies are MWORLD SPRING 2013

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“…if we want to unleash leadership, we have to unleash the humanity that comes with it.” having an effect on our brains that, as leaders, we need to be cognizant of as we try to mold execution-based cultures. In recent months, USA Today, The Huffington Post, and Newsweek (among others) have published reports on the effect that our addiction to social media is exhibiting. In essence, we are rewiring our brains so that we feed off of more and more digital activity: We need the chemical release that stems from emails, texts, and tags. Sometimes, in our desire for speed, we forget to give ourselves a chance to slow down and think. If we want our organizations to actually execute faster (rather than just act faster), this must happen. During a recent Let Go & Lead conversation I had with Bernard J. Tyson, the president and COO of Kaiser Permanente, we talked a great deal about the expectations we place on the “doers” on our front line. In our discussion, Tyson told me, “I’m very interested in figuring out how to make sure smart people at Kaiser Permanente are encouraged and allowed to think when they are working in this environment.” As he further explained, “We have more than 175,000 employees and about 16,500 Permanente Group Physicians who come here every single day. There are hundreds and thousands of decisions that are being made throughout the organization that I have no control over from where I sit.” His point is that what a makes a company superior is when these decisions are made correctly the first time and by the person closest to the issue, not just when frenetic action is taken for the sake of speed. To build a culture that operates with that kind of thoughtful efficiency, leaders need to provide context for employees to consider their decisions, and then give them the time, space, and freedom to really understand how they can drive execution of the company’s strategy from their perch. Sometimes, this means clearing times on calendars, shutting down cell phones, logging out of email, and creating opportunities for people to look at an issue, and really consider it, dialogue about it—and solve it. In the world-class organizations of the future, slowing down may very well become a competitive advantage.

THERE’S NOTHING LIKE MESSING WITH SOMETHING As a firm, we have a saying that has informed the approach we take to a lot of our work: A story isn’t a story until everyone can tell it. By this, we mean that people need to internalize and viscerally experience something before they can really make it their own. This concept was reinforced in my Let Go & Lead sit down with Denise Ramos, the CEO of ITT Corporation. Denise took over ITT (where she had previously served as CFO) in 2011 when the company split into three parts. Given that enormous change, she understood that aligning and activating leaders around their strategy—the new “ITT Way”—was absolutely critical to gaining momentum and seeing success in the new venture. 42

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In our conversation, I asked her how she got leaders to tell their story and act as ambassadors. Her response was interesting. She said: “We had what we called our leadership summit. We nominated 150 delegates, ITT employees, from around the world to come together over a three-day period to be the spokespeople for the ITT Way. We thought there was no better way to build spokespeople than to bring them together and help them not only hear it, but feel it, understand it, and do exercises that allowed them to ask themselves questions like, ‘How does this apply to me? How can I bring it to my everyday life? How can I roll it out to the people that I work with?’” Often, when we roll out strategies, we become consumed with “what” we say. We pour hours of attention into the language, the bullet points, and the speaking notes. While, of course, language is critical, we can’t undervalue the experience that we deliver: How the message is realized is as important as what the message is. As people, when we help birth something, we own it. We need to act on this insight: Leaders become leaders when the story becomes theirs to tell.

LET HUMANS BE HUMANS One of the most amazing parts of this Let Go & Lead journey has been how often we’ve seen people from different walks of life speak to nearly identical concepts. That was certainly the case in my conversations with Dan Pink and Howard Schultz. Pink is one of the world’s leading thinkers, speakers and authors on the science of motivation. In our conversation, he reiterated constantly his belief, backed by more than 50 years of research, that if we want to promote creative problem solving and critical thinking among employees, we are best served by giving them a sense of purpose, mastery, and autonomy. He suggests that for creative workers, these are significantly more effective motivators than simple remuneration, or (what he calls) “carrot and stick” rewards. We all know Howard Schultz as CEO of one of the world’s most recognizable brands. When I spoke with him about his leadership at Starbucks, he also talked at length about purpose and autonomy. For instance, he told me: “We serve 90,000 different types of beverages. We started with five. That happened because the customer wanted to customize their beverage and our people wanted to customize it for them. That never would have happened if we told them, ‘this is the way it is.’ We want to create the kind of company where people believe in our mission and values but also have an opportunity for creativity.” His viewpoint was perhaps best expressed when he told me, “We don’t want robots.” Whether the conversation was about building strategy ambassadors at ITT, solving problems at a local level at Kaiser Permanente, or customizing beverages at Starbucks, it’s clear that awakening leadership at all levels is critical in the path to success. For executives, this often means being more directional (focused on providing vision, values, and guiding principles) and less prescriptive in instructing leaders on how to deliver on their piece of the strategy. If you don’t have faith that your leaders can see your strategy through, or if you don’t trust their judgment, you have deeper cultural issues to confront. Otherwise, let their potential shine. MW Maril MacDonald is CEO and founder of Gagen MacDonald. For more information, visit www.gagenmac.com Develop a collaborative style to enhance team commitment and individual performance at AMA’s Collaborative Leadership Skills for Managers. For more information, visit www.amanet.org/2186

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Planning to Become an Employer BY LEIGH BRANHAM

Many companies know they need to stop high turnover, but in their search for answers, it seems not to occur to them to look for the root causes. Instead, like many CEOs, the head of the company asks the HR department to do something about the worker shortage or turnover problem. Consequently, a search begins to determine “what other companies are doing.” The only problem with this approach is that the practices that fit the business strategies of one company may not fit others. For example, it may not be appropriate to implement engagement practices or increase hiring of temps, adjunct staff, or part-time workers.

TALENT ENGAGEMENT STRATEGIES IN ACTION The strategies companies use to engage their workers depend not only on their business strategies but also on the size and complexity of the organization and its workforce. Here are several examples of companies, big and small, that have implemented talent selection and engagement strategies differently, but successfully.

United Parcel Service (UPS) The Challenge: Engaging and retaining the young, mostly part-time workers who load, unload, and sort packages in the company’s 270,000-square-foot Buffalo, New York, distribution center. The turnover rate was 50%, creating customer service disruptions and proving to be costly in several ways. Strategic Actions: The new district manager, Jennifer Shroeger, created a five-part strategic

plan, as follows: 1. Meet the expectations of applicants. Instead of hiring anybody who walked in the door, which it had been doing, UPS started asking applicants if they were hoping for full-time jobs. If the answer was “yes,” then they were probably going to be disappointed at some point because full-time jobs rarely open up. It usually takes six years to work up to a full-time driver’s job. “I can’t hire workers who want full-time work if there aren’t any full-time jobs,” Shroeger said. Instead, the company sold part-time work for what it was—short, flexible shifts that could fit the schedules of students from the many colleges in the area. 2. Communicate differently with different groups of workers. To better understand the needs of her entire workforce, Shroeger analyzed information that broke down the worker 44

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of Choice

population into five distinctive groups, closely paralleling their age and the stage of their careers. She realized that those older than 35 valued different motivators than their younger coworkers. Understanding these differences, the company tailored its recruiting and re-recruiting messages accordingly. 3. Take better care of the new hires. To make the warehouse environment less intimidating to

new hires, UPS improved the lighting, upgraded the break rooms, and installed more personal computers on the floor, which provided access to training materials and human resources information on the companyâ&#x20AC;&#x2122;s intranet. The best part-time supervisors became trainers, spending a week shadowing new workers. Shroeger initiated an employee-retention committee, composed of both managers and hourly workers, to track new hires through their first few weeks on the job and to fix small problems before they became bigger ones. 4. Give supervisors the freedom and training to manage people their own way.

Supervisors completed training in how to handle difficult situations and respond to different career questions. They also learned how to have more flexibility with students and moms, who have frequent changes in their schedules, and were challenged to find out and remember something about the personal lives of workers. 5. Let them move on with new skills and good will. Shroeger realized that young, part-time

workers are going to move on with their lives. However, having given them the opportunity to build their skills via tuition reimbursement, Saturday computer classes, and career planning discussions, she expected they would leave with good feelings about UPS and perhaps become customers someday, as many have. The Results: Within four years of implementing these practices, part-time turnover dropped

from 50% to 6%, meaning that about 600 workers who would otherwise have left remained on the job. Annual savings due to lowered hiring costs totaled $1 million. Lost workdays due to work-related injuries dropped by 20%, and the percentage of packages delivered on the wrong day or at the wrong time dropped from 4% to 1%. MWORLD SPRING 2013

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Motek Software The Challenge: This southern California company, now a part of AFS Technologies, customizes industrial computers for use on warehouse forklifts and dominates its market niche. From the beginning, the goal of Motek’s founder and CEO, Ann Price, was to attract the very best IT workers and make them want to remain in a work environment that allowed them to have a life outside work. Strategic Actions: Price expects her 20 employees to keep 9–5 hours. She also buys lunches for them at the best restaurants, brings in a hairdresser for employees once a week, and gives new employees one month vacation per year.

When employees postpone taking their vacation, Price has been known to book it herself and go along with them to make sure they take it. “We’re robbing ourselves of the best years of our lives,” she says. “I’m living proof that you can achieve the same goals and not give that all up.” The Results: A turnover rate of less than 1% and a highly stable workforce, which helps to avoid disruption of service to the company’s clients.

IHS Help Desk The Challenge: Even though this IT consulting and training company was growing and

succeeding, owner Eric Rabinowitz realized that a 113% turnover rate was threatening the future of the business. On further inspection of company data, he found that 20% of turnovers were happening in new hires’ first month on the job. Strategic Actions: Rabinowitz began asking employees what he might do differently, and he got an earful. He had expected that offering full-time work and good benefits would be enough, but his employees saw themselves as temp workers with no career path and were always looking for their next job. Because most of them worked offsite, they felt as if they were working for the client. They also mentioned that they wanted more training and a clearly defined career path.

Rabinowitz realized that most employees would not stay with the company more than two years, but he resolved to give them whatever training would motivate them to stay at least that long. He surveyed employees to find out what kind of training they wanted, then set up webbased training programs that met their needs. He also started a communication program to make workers feel less isolated at remote locations; he created a newsletter and hired an employee advocate to visit work sites once a week and create a stronger bond between the company and its employees. The company also improved its benefits plan to include dental and life insurance and started incentive and employee recognition plans. The Results: Within a year, the company had lowered its turnover rate to 19%.

American Home Shield The Challenge: American Home Shield, the major appliance warranty arm of Service Master, with 1,500 employees based in Memphis, Tennessee, was experiencing 89% turnover in a critical department. The cost: $250,000 annually, plus erosion of employee morale and customer loyalty. Strategic Actions: The company recognized that it first needed to understand why some

employees left and others stayed. To capture this information, an employee turnover project team surveyed a sample of employees who had already left the organization. AHS also surveyed those who left the organization after the initial survey and surveyed remaining employees on a

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quarterly basis to discover which factors had caused them to stay or to consider leaving. The team found that the key factors were having supervisors available to employees, job training, and clear communication of job requirements, but these were also the most dissatisfying aspects of working at American Home Shield. The team recommended and led the implementation of these steps: 1. Reorganized the training schedule to match the typical learning curve of the specific job. 2. Increased the autonomy of frontline employees, freeing up supervisors to handle higher-

level issues. 3. Streamlined the procedure for communicating job-requirement changes by (a) giving only

department managers the authority to make job-requirement changes, and (a) assigning department employees email accounts through which all job-requirement changes would be communicated. The company also improved the hiring process by having a trained interview team ask prescreened behavioral questions. Results: American Home Shield was able to reduce turnover from nearly 90% to about 35% in one year. The company’s retention management plan allowed management to control employee turnover on an ongoing basis.

WHAT WE LEARN FROM THESE SUCCESS STORIES There are common threads that run through all these stories and are worth pointing out. Though there were significant differences in company size among all the companies studied and their industry, circumstances, and range of solutions, all shared a common approach: 1. Resolving to take action without delay as soon as they recognized there could be a serious

threat to the fortunes of the business. 2. Recognizing key employees on whom the business depended and attempting to understand

how to better meet their needs. 3. Implementing targeted initiatives to meet the needs of those key employees. 4. Tracking improvements to demonstrate progress and measure success.

These stories remind us of the business imperative for achieving “preferred employer” status. In order to reach our business objectives, we must consistently compete for talent and win, not just in terms of attracting talent but also in terms of engaging and retaining it, as well, knowing that current employees, especially the best, will always have the option of moving elsewhere. MW Leigh Branham is founder/principal of the consulting firm Keeping the People, Inc. and the author of Keeping the People Who Keep You in Business. He is also the coauthor, with Mark Hirschfeld of Re-Engage: How America’s Best Places to Work Inspire Extra Effort in Extraordinary Times. Excerpted, with permission of the publisher, from The 7 Hidden Reasons Employees Leave: How to Recognize the Subtle Signs and Act Before It’s Too Late by Leigh Branham. Copyright 2012, Leigh Branham. Published by AMACOM. For more information, visit www.amacombooks.org

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OUR

VIEW

Great Leaders Know What They Don’t Know “What we need now are leaders who can recognize what they don’t know, who acknowledge that they don’t have to be the smartest people in the room,” says George Reed, a retired Army officer who teaches at the University of San Diego. “Leaders must be able to say, ‘I understand you need direction so I’m going to give it to you, but we may have to go in a different direction tomorrow.’” This quote from John Baldoni’s article sums up the essence of the issue for me. And it’s not a new idea—it’s as old as ancient Greek philosophy and was considered at the time to be the essence of wisdom: the ability to know what you don’t know and take responsibility for these limitations; own them, and do the best you can in the face of them. And just as in the epic work of the Greek poet Homer, the fatal flaw of the protagonists was lack of wisdom—hubris, which is by definition maintaining the illusion that you know more than you actually do. Leaders fail, companies fail, and economies stumble and fall (recess and depress) because the leaders making the big decisions believe they can see the future and are holding all the cards. Wise people know more cards are always being dealt, and the future of what turns up is unknown. That’s why constant training and development are so important. Good leaders are conscious of the fact that there is a virtual firehose of information to manage. Today there are more global economic players then ever—see the interview with Ram Charan in this issue for a wakeup call on this subject. We won’t win because we know more—we’ll win because we know we don’t. And this will make us agile, forever open to learning and listening, and eager to understand. Socrates got to the heart of things not by being the smartest person in the room (he claimed the opposite), but by being the most curious. The philosopher was dissatisfied with the notion of a “final answer.” He understood that one never “steps in the same river twice,” and that life is a series of opportunities to adapt to new situations. For more on this point, see Brian Klapper’s article in this issue, Adapt or Atrophy. Hubris caused many of the economic problems we faced in 2008. Wisdom is the shovel digging us out of that hole. Heroes blinded by a sense of their personal destiny tend to make a mess (reread Hamlet or Oedipus Rex for a quick refresher). Wise leaders build legacies, community, trusted relationships, and value. They do this by knowing they don’t know everything, and encouraging their people to continually grow their skills so they and their organizations can adapt and create opportunities. We’re here to help.

Robert G. Smith Senior Vice President Marketing & Membership American Management Association

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• Moving Ahead offers management insights, strategies and best practices for all business professionals. • Leader’s Edge connects senior management with today’s top thought leaders. • Administrative Excellence addresses the specific career development needs and interests of administrative staff.