CHANDRAN NAIR
ADAM KINGL
Q3 2019
THE NEW BUSINESS CONTEXT FOR LEADERS
The sustainable state Understanding Gen Y MARTINA MILBURN DIALOGUEREVIEW.COM
THE NEW BUSINESS CONTEXT FOR LEADERS
Gut instinct
LEADERSHIP FOR GOOD
Better leadership Looking within for the decency factor
Q3 2019
LEADERSHIP
INNOVATION
FINANCE
MARKETING
STRATEGY
Rejecting feedback
Digital HR
In your hands
Radical marketing
Agility dashboard
How to say no successfully
Keep putting people first
Fixing gender bias in finance
Serious about sustainability
Metrics for modern business
THE VOICES BEHIND THE
THINKING
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CONTENTS
3
Digest 14 FOCUS
LEADERSHIP FOR GOOD
16
The decency factor
20
Defining purpose
24
Sustainability and the state
28
Investing in wellbeing
REGULARS 7
80
My edit
News nation
Patrick Woodman on leadership for good
The Philippines – the optimistic economy
8
Spark What you need to know
9
Great minds Michael Chavez on chief purpose officers
82
Reviews Books and apps recommended for you
13
30
86
Michael Canning on digital disruption
Ben Walker meets Martina Milburn
Liz Mellon on transformation
Upfront
The big interview
Last word
Q3 2019 Dialogue
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CONTENTS
5
In depth LEADERSHIP & PEOPLE
I N N O VAT I O N & TECHNOLOGY
35
47
36
48
Kate Cooper: The leadership column Making sense of Gen Y
40
Vivek Wadhwa: The innovation column Getting digital transformation right
50
Take time to think
HR: people first
42
Saying ‘no’ to feedback
FINANCE & AC C O U N TA N C Y
MARKETING & SALES
53
65
Phil Young: The finance column
Giles Lury: The marketing column
54
66
Transforming Nedbank
Radical marketing
58
70
Reshaping the role
The rise of the micro-influencer
60
Fixing gender bias
S T R AT E G Y & O P E R AT I O N S
73
Ben Walker: The strategy column
74
The agile dashboard
78
Peter Drucker on data
Q3 2019 Dialogue
AGENDA
6
Contributors
BILL BOULDING
Bill Boulding is dean and JB Fuqua professor of business administration at Duke University’s Fuqua School of Business. Passionate about the role of business schools in society, Boulding serves on the World Economic Forum’s Council on Values and the board of Duke Corporate Education, and works with major corporations and the US government to improve trust in business and financial systems.
Chandran Nair picture © Hong Kong Tatler / Kalun
DORIE CLARK
Dorie Clark is an adjunct professor at Duke University’s Fuqua School of Business and the author of Entrepreneurial You, Reinventing You and Stand Out. Described by the New York Times as an “expert at selfreinvention and helping others make changes in their lives”, Clark is a former presidential campaign spokeswoman, awardwinning journalist, documentary filmmaker and producer of a multiple-Grammy-winning jazz album. Dialogue Q3 2019
SUDHANSHU PALSULE
Sudhanshu Palsule is a leading thinker on complexity and transformative leadership. An award-winning educator and leadership adviser, Palsule’s work blends his training in quantum physics with research on human cognition and behaviour. He has been an educator at Duke Corporate Education for more than a decade and holds a senior associate post at the Møller Institute, Cambridge.
SHEILA HEEN
A lecturer at Harvard Law School and co-founder of Triad Consulting Group, Sheila Heen is a renowned expert on managing difficult negotiations, helping executive teams work through conflict, repair working relationships and make sound decisions. She is co-author with her Harvard colleague Douglas Stone of two New York Times business bestsellers, Difficult Conversations: How to Discuss What Matters Most, and Thanks for the Feedback.
CHANDRAN NAIR
Chandran Nair is the founder of The Global Institute for Tomorrow, an independent think-tank based in Hong Kong. A member of the World Economic Forum Global Agenda Council for Sustainability, Nair is an influential advocate of radical economic model reform and resource consumption limits. He is author of The Sustainable State: The Future of Government, Economy, and Society.
DOUGLAS STONE
Douglas Stone delivers Harvard’s acclaimed programme on negotiation and has lectured at Harvard Law School for more than two decades. He is co-founder of Triad Consulting Group with Sheila Heen, and co-author of articles which have appeared in the New York Times, Harvard Business Review and Real Simple. Stone and Heen have appeared together on many TV, radio, and podcast broadcasts, including Oprah and TED’s WorkLife with Adam Grant.
AGENDA
7
My edit
What is the role of business in promoting social good? It’s a critical question for leaders in 2019. In the decade since the financial crash, the relationship between wealth creators and wider society has often been under the microscope, and the debate is as lively as ever. This year’s Davos conference was marked by a viral video calling out business chiefs over wealth inequality. Big tech’s attitudes to privacy are being challenged like never before. And recent months have seen climate change pushed up the news agenda in extraordinary new ways. Swedish schoolgirl Greta Thunberg has inspired school children around the world to strike; the Extinction Rebellion group launched global protests, leading to more than 1,000 arrests in London alone; US politicians have proposed a ‘Green New Deal’; and Netflix launched Sir David Attenborough’s series, Our Planet, winning rave reviews for stark warnings of ecosystem collapse. How should business leaders react to this atmosphere, and what part should they play in solving society’s common challenges? Dedicated to the notion of leadership for good, our Focus section this issue offers arguments and insight that linger in the mind long after first reading. In our cover feature (page 16), Bill Boulding surveys the changing landscape, pointing out to leaders the perils that lurk in a more polarized world – not least, the risks of failing to speak out for what’s right. The answer? A focus on hiring and developing leaders with personal decency and integrity. That’s surely overdue. Personal values are also brought to the fore by Michael Chavez and Sudhanshu Palsule, who argue (page 20) that the conversation about corporate purpose has skated over a crucial fact: we each bring our own sense of purpose to work. The task of good
leadership is not only to define grand strategic aims that benefit society, but to deliver on those aims by helping individuals to understand their purpose and align it with the business. Leaders who get that right have a winning formula: better for their businesses, and better for the societies in which they operate. Elsewhere, Chandran Nair throws down a gauntlet to business, arguing that only the state can deliver a sustainable future (page 24). For those steeped in Western economic thinking, it is a vital – and challenging – read. John Davis, meanwhile, makes a compelling call-to-arms for marketers, urging a radical rethink of the discipline’s priorities, while Liz Mellon has the Last Word on the nature of transformation – and its absence in the oil industry. Of course, if leadership is evolving, we also need to think about how we measure success. Steven P MacGregor examines the case for better measurement of investment in employee wellbeing; while Joe Perfetti, Scott Koerwer and Michael Canning pick up where their ‘Agility Architects’ article (Dialogue, Q1 2019) left off, with a superb feature on the new metrics for measuring performance in an agile world (page 74). And if the number-crunching gets too much, you’ll find relief in Bill Cohen’s piece (page 78): was Peter Drucker right that data is not the beall and end-all of management decision-making? If nothing else, this issue of Dialogue stands as a reminder that every leader – whatever their organization, their paygrade, and their job title – has the power to do good. How you use that power is something only you can decide. Enjoy the issue. Patrick Woodman is editor of Dialogue
Q3 2019 Dialogue
8
Spark
W H AT YO U N E E D TO K N O W
Work, tomorrow? Embracing the digital revolution was a major theme at this year’s Future Talent summit Hosted at London’s Royal Geographical Society, Changeboard’s Future Talent Conference 2019 welcomed HR professionals from across Europe to discuss the next chapter of the working world. It’s time to embrace change. HR must help people to befriend rather than fear the rise of the machines, argued Jonas Prising, chairman and CEO of ManpowerGroup. After all, tech frees people to work at the top of their ability and is revolutionizing industries – including healthcare, as outlined by Professor John Mattick from the University of Oxford. Rather than being engaged in a power struggle with machines, humans must achieve power over themselves in order to identify and dissolve the limits we have
digital natives of Generation Y, noted Duke Corporate Education’s Adam Kingl. He added: “Gen Y is giving us a model for more human-centric leadership.”
unconsciously accepted, added author and philosopher Robert Rowland Smith. Tech will revolutionize the jobs and leadership of tomorrow. Katy Hampshire of Education and Employers urged business leaders to help train and inspire the next generation of employees. Equally, we have much to learn from the
We should own the skills gap. All learning must be redefined for the 21st century, explained City & Guilds Group managing director Kirstie Donnelly. That has to include a shift in mindsets towards lifelong learning, delivered in a variety of ways that suit individual preferences and learning styles. As the world changes, only those who adapt will survive, warned author and psychologist Matthew Syed, while Dr Nigel Spencer, senior client director at Said Business School, proposed that ‘poly-technic’ (many-skilled) professionals will be the business differentiators in the automated world that lies ahead.
The fuss about cybersecurity New research shows why cybersecurity should be high on the agenda The digital transformation required by enterprise to unlock future business growth is intrinsically linked to the cybersecurity challenge: the more tech a company uses, the more entry points for ill-wishers. Technology is developing at such speed that regulatory bodies cannot keep up with its demands – the primary defence is for corporations themselves to invest significant resources and develop barriers inhouse. Yet businesses could be falling victim to ransomware attacks every 14 seconds in 2019, according to forecasts by Cybersecurity Ventures. Whether it is financial loss due to stolen information, regulatory fines or brand equity, repairing cyber attack damage is significantly more difficult than Dialogue Q3 2019
patching vulnerabilities and preventing attacks, said organizers at this year’s Cloud & Cyber Security Expo. Gartner has forecast that the market for cybersecurity solutions will grow 8.7% this year, from more than $114
billion in 2018 to $124 billion. It may be time to put cybersecurity at the top of the business agenda.
T H E C O S T O F C Y B E R AT TAC K S 43% of cyber attacks target small business (Symantec) In 2018, nearly 70% of businesses had experienced some form of cybersecurity attack, and over half of them had experienced a data breach (Ponenmon Institute) 60% of small businesses will close
within six months of a major cyberattack (Vistage, 2018) As of April 2019, 1 in 13 web requests lead to malware (Symantec) Ransomware attacks are growing more than 350% annually (Cisco) Ransomware costs will rise to $11.5 billion in 2019 (Cybersecurity Ventures)
9
GREAT MINDS WITH MICHAEL CHAVEZ
Roche India’s Lara Yumi Tsuji Bezerra sets an example for organizations
BECOME A PERSON-FIRST FIRM
Shutterstock
Accounting is a people business Amid the swarms of accountants and fintech professionals at QuickBooks Connect, one of the world’s best attended forums, GoProposal software founder James Ashford declared that accounting has moved from a numbers-game to a peoplefirst mission. “Cloud accounting has removed a lot of the monotonous routines that used to take up our time,” Ashford said, referencing developments in digital tax management, time tracking and smart accounting tools. “Our clients are more knowledgeable than ever before,” added accounting transformation consultant and Intuit business developer Alex Davis. “But if we delegate those tasks and shift our focus, we can elevate our service and maximize the value we offer to clients – and get back in return.” Learning to love your clients and their people more than your own products and services is a change, Ashford added, but when a firm frees itself to become human-centric and person-first, it is set for the future. — For more on the human side of accountancy, see page 58
Enter the chief purpose officer The C-suite is growing in names as well as number. Where there were once a CEO and a CFO, the COO, CMO and CDO are now key roles. As the scope of business responsibilities has broadened, so has the executive function. Some call for a CWO – chief wellbeing officer (see page 28). Is it time, too, for a chief purpose officer? My recent encounter with the Great Mind that is Lara Yumi Tsuji Bezerra suggests it is. Bezerra became chief purpose officer at Roche India 18 months ago, having been its managing director. Before I met her, I hadn’t heard of anyone who had held the title. Why was Roche’s innovative appointment necessary? The company’s Indian arm is operating in a fundamentally troubled paradigm: there are 1.3 billion Indian nationals, of whom only a tiny fraction are able to access cancer treatment. “The gap between the opportunity to have a real impact on patients and our capability to do so was enormous,” Bezerra told me. Roche India’s challenge was to create a burgeoning sense of purpose amid this restricted reality. “I asked the organization, ‘What is the first thing you’d like me to do?’” They were clear: “Create a new shared aspiration.” Roche’s well-formulated global purpose — doing now what patients need next — was powerful, but Bezerra recognized that it was too removed from India’s unique challenges. First, she recognized that to have impact on 1.3 billion patients, ‘doing now what patients need next’ could not just be about some patients, but all of them. Second, it could not only be about medicines, but the whole health context. Roche India’s contemporary purpose was born: ‘We inspire people to transform healthcare in India and care for every patient’s life through sustainable, innovative solutions.’ It is framed by the corporate purpose, but unique to India.
I challenged Bezerra about this second element. She told me that she wanted Roche India to become the ‘Uber of healthcare’, bringing together all the players in the healthcare ecosystem to convene a holistic network for all Indians. Surely, by harnessing other companies, this would cut into Roche’s potential profits? “The purpose states that we enhance access to healthcare and our products. Otherwise, it would be inauthentic,” she said. “If I want to increase the market, we must also increase the pie’s size.” Bezerra’s role as chief purpose officer has been transformative. Prior to her appointment, Roche India was troubled. “We were very command-and-control,” Swati Yadav, director of people & culture at Roche India admitted. “The result was a reactive, risk-averse organization, with no intrinsic motivation.” With the newfound clarity of purpose, self-organized teams reshaped the company’s rewards framework. Traditional pharmaceutical sales metrics were replaced with self-selected ‘patient-impact’ targets. Meantime, Bezerra connected everything to individual purpose. “We asked how can we as a leadership team be a collective that is driven by higher service.” Two factors of Roche’s CPO strategy stand out. First, Roche India’s honed purpose speaks to a human-first, holistic approach. Second, Bezerra is CPO at the very top of the company. She is not a concession by HR to tick a box. It is crucial that companies that want to follow Roche’s lead do so wholly by granting the CPO power and scope to lead and change from the heart of the business. Like Bezerra, the CPO could be the key Great Mind in your organization: as long as you allow her to be so. — Michael Chavez is chief executive of Duke Corporate Education — A version of this piece appeared in Forbes. Q3 2019 Dialogue
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13
MICHAEL CANNING
Form alliances with your digital aggressors
Time to join Team Disruption Michael Canning is global head of new businesses at Duke Corporate Education
The magic happens when you move with commitment to change your game
Digital disruption is a clear and present danger. A recent Forbes Insights survey reveals that 51% of executives consider their businesses at risk from digital disruption in the next five years. From discussion with our clients, digital disruption is one of the most critical and pervasive challenges and opportunities for leaders around the world. No industry or organization is immune. So how can we transform and thrive through it? I recently worked with N Venkat Venkatraman, author of The Digital Matrix. Venkatraman points out that digital – the convergence of computing power, connectivity and the cloud – is impacting every industry, and is accelerating. Many leaders have yet to get to grips with this new reality and are still searching for answers by extrapolating forward from an industrial age. Yet digital transformation enables companies to change the game along three dimensions: they can attract new audiences all over the world via the web; they can enter and create new industries; they can spot needs and serve customers faster than ever before. This disruptive change is certainly not going to follow a smooth curve from past to future. In every industry, incumbents are being challenged simultaneously by digital giants like Google and Amazon using data and new analytic capabilities, and by technology start-ups changing what’s possible. Take cars as an example. In working with executive teams in the automotive industry, it is clear that more change will occur in the sector in the next five years than has happened in the past hundred. Google and others are hard at work on driverless vehicles. Tesla is changing what’s possible in electrification. The big telecoms are working to connect cars to the internet of things and make automobiles an integral part of smart cities. Meantime, Uber and others have upset the longstanding orthodoxy of car ownership. Together, these new players are changing the scope, scale and speed of change at an exponential rate. So, what’s the right move for an incumbent? Porsche’s chief executive, Oliver Blume, made clear in the carmaker’s
2025 strategy that it understood and embraced the challenge. It sees the digital revolution in autos as kind of a Big Bang: a seminal moment that will change every aspect of its product and company. Porsche embraced the challenge and began to accelerate its own transformation. It partnered with Rimac, a Croatian firm known for production of electric race-cars, electrical components, powertrains and the development of digital interfaces between man and machine. In terms of connectivity, it is part of a partnership with US telecoms major AT&T – which is creating technologies to help driverless vehicles make virtually real-time decisions based on information that goes beyond the individual sensors onboard the vehicle. It will also provide wifi hotspots, internet radio and live traffic and traffic management. The days of differentiating models of car by the quality of their proprietary navigation and communications system are over. Today, carmakers compete on the quality of their cars’ connection to the outside world. In terms of ownership, Porsche has just introduced a car subscription service called Porsche Passport, which is being piloted in Atlanta. Rather than buying a car, you pay a monthly subscription and the passport gives you access to a range of cars and SUVs. And, after final testing, it will launch its first fully electric car, the Taycan, later this year.
What to do?
“Companies fail because they still overinvest in what they are good at now and underinvest in what they need to be good at in the future,” Venkatraman says. As the Porsche example demonstrates, industry incumbents don’t have to become Google or Amazon, nor should they. But the magic happens when you get much closer to your customers, invest in digital partnerships, and move with commitment and speed to change your own game. You won’t beat them. So join them. — Listen again to the Duke CE Leadership Series webinar with N Venkat Venkatraman and Hari Nair at bit.ly/LSepisode5 Q3 2019 Dialogue
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14 FOCUS
15
Focus
Leadership for good In the decade since the Great Recession, the role of business in society has been a topic of constant debate. In a world defined by social, political and environmental change, we ask: can leaders combine a social conscience with the fundamental drive of business to create wealth? How do leaders harness the power of purpose? Can business be a true force for sustainability, or must it fall to the state to deliver what the planet plainly needs? And, is it possible to measure the impact of good leadership?
ARTICLES 16
24
Decency: the missing factor
Enter the state
20
Measuring the ROI of wellbeing
Discovering purpose
Discovery path Learn more‌ About leading with integrity and social conscience bit.ly/ ddpleadershipforgood
28
FOCUS
16
Decency: the missing factor Integrity has never been a more important part of leadership, writes Bill Boulding
I recently had the pleasure of sharing a stage with P&G chief executive David Taylor and interviewing him in front of Fuqua students. Four years earlier, we had sat in the same spot and engaged in a similar conversation about leadership. Yet instead of a sense of déjà vu, I was struck this time by how much had changed in the last four years. Taylor moved from president of a P&G division to company chief executive during that time. He stepped into the role when expectations of chief executives had never been more demanding. The leader of a company now must not only ensure profitability and sustainability, but also publicly exemplify the brand and values of the company. Business leaders are increasingly faced with complicated decisions that go far beyond the bottom line. I found myself asking Taylor questions about his role that I wouldn’t have even considered four years earlier. How does he navigate issues outside P&G which may impact his employees? Dialogue Q3 2019
How does he think about the power of his voice as a chief executive on a political or social issue? How does he bring different people together to work towards common goals during such a polarized time? The changing role of business leadership demands we consider a new framework for how we think about it. It’s essential we acknowledge the shift in what’s required to be successful today. Why? Because I firmly believe business can be the transformational engine for the 21st century. It can solve some of the world’s toughest challenges, in ways that governments or NGOs can’t. However, that kind of transformation demands leadership that can bring people together to work toward a common goal – which is increasingly challenging.
The evolving role of business leadership
As dean of a business school, I spend much of my time thinking about how the world is changing
17
Q3 2019 Dialogue
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18
Sharp political divisions have driven more business leaders to take public positions on controversial topics
and how business education needs to adapt in order to prepare future business leaders to meet the big challenges. We are fortunate at Duke that our faculty research can help students understand the new context in which leaders are operating. For example, Professor Aaron ‘Ronnie’ Chatterji has been studying CEO activism (the concept of chief executives speaking out about political or social issues), starting several years ago when a number of US states were considering religious freedom laws. He researched the impact on Apple, for example, when Tim Cook took a stance in 2015 against the Religious Freedom Restoration Act, an Indiana state law that allowed for discrimination against same-sex couples. Since then, we’ve seen chief executives speak out with a more regular cadence in the US, particularly as sharp political divisions have driven more business leaders to take public positions on controversial topics at both the state and federal levels. “Neutrality used to be admirable, but now, as more and more issues become political, to be in the middle can be seen as worse than taking a side,” Chatterji says. “CEOs are being forced to make binary decisions, a choice between 0 and 1. And if both sides are keeping score in a polarized environment, it’s really hard to maintain the middle.” This challenge is not unique to US leaders. We’ve seen similar business outcry internationally, with Brexit in the United Kingdom, and in other parts of the world where a rise in nationalism is putting the case for globalism on the defensive. These challenges have implications far beyond public perception. For example, employees can feel marginalized if they don’t think a leader supports them. Customers are sometimes demanding a leader speak out on an issue. Other customers are boycotting companies when a leader does speak out. All of this can happen at lightning speed in the age of social media. A leader or company can be just one tweet away from a crisis involving any number of stakeholders, including employees, customers and shareholders. There is no playbook for leadership today, and action will always depend on circumstances. However, the leaders who succeed in this context have what I call ‘triple threat’ leadership capability.
Triple threat leadership
Three common factors define triple threat leaders: IQ + EQ + DQ. IQ Intelligence is probably the most obvious requirement for leadership. Let’s face it, nobody wants to follow someone who isn’t smart. Competency in business is Dialogue Q3 2019
essential to lead a company. EQ Most managers are familiar with the concept of emotional intelligence, the awareness of emotions - both of others’, and of your own. It indicates a manager can understand how someone is feeling, can ‘read a room’ and act on that information. However, EQ doesn’t mean a leader’s actions take into account what is best for others. Emotional awareness and empathy don’t equate to integrity. EQ, like any leadership attribute, can be used to manipulate people for selfinterest. DQ Decency quotient goes a step further. DQ means that a leader has the genuine desire to do the right thing for employees and colleagues. DQ means wanting something positive for everyone in the workplace and ensuring everyone feels respected and valued. DQ is evident in a manager’s daily interactions with others, as well as in setting goals for the company that meet fiscal objectives and improve lives. DQ implies your focus is on doing right by others. I first heard about DQ from Mastercard chief executive Ajay Banga, and the concept instantly resonated. Banga is passionate about a leader’s responsibility to care for employees, and told me: “IQ is really important. EQ is really important. What really matters to me is DQ.” He explained: “If you can bring your decency quotient to work every day you will make the company a lot of fun for people – and people will enjoy being there and doing the right thing.” Banga is definitely a triple threat leader. So is David Taylor, who champions the concept that “none of us is as smart as all of us.” Another example is Jeff Weiner, chief executive of LinkedIn. Weiner and his team have established a mission to “create economic opportunity for everybody in the global workforce”. There is no doubt that many people get jobs based on their network, and LinkedIn has a goal to give everyone that same ‘social capital’ by connecting them with mentors and opportunity through its platform. Weiner personally believes in what he calls “compassionate leadership”. He openly talks about the importance of compassion at work, and understanding what people need to feel supported and valued. It doesn’t take long when talking with people who work with him at LinkedIn to realize that his approach has won hearts and minds at the company and beyond. Which leads me to my next point – triple threat leaders have a competitive advantage, particularly with DQ.
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DQ is a competitive advantage
Decency quotient has to start at the top. It’s essential that leaders and managers model this type of behaviour more than ever, because outside forces of polarization are working against us. The world feels like an ugly place for many people. It’s impossible for employees to check their feelings at the door, and naïve to think they can. Leaders with DQ will better navigate what’s bleeding in from outside the office to instil a sense of common purpose and shared values at work. Employees will know the leader always has their best interest at heart. People want to work for decent people, and they will give those leaders their best. Decency is at its core a moral obligation, but it can also be key to a winning business strategy. After all, there is much research linking diverse teams to innovation. However, there is one caveat. Everyone on a diverse team must feel like they are on the team. In other words, each member must bring his or her true selves and authentic best to work toward a common goal. People won’t do that if they don’t feel genuinely supported and valued, and when that’s the case, a team can quickly turn dysfunctional. The triple threat leader instils appreciation for difference through high DQ.
DQ starts with intentionality
If business becomes intentional about decency, it can become the healing force our world so badly needs
If a company is serious about decency in leaders and managers, they must be intentional about screening for decency in the hiring process. By the time most people start their careers, their values and moral compass have largely formed. I applaud efforts by Weiner and others who have recognized the potential to help shape decency at a young age. Weiner started an effort called The Compassion Project, which helps teach and reinforce the importance of compassion in elementary schools. This is the right intervention at the right time in a child’s life and will help grow a new generation of decent leaders. By the time people hit their twenties and are entering the workforce, their DQ is largely formed. That means you can’t leave hiring for decency to chance. I’m challenging companies to be intentional about factoring decency into the qualities they are actively assessing. After all, you can’t find what you aren’t looking for. IQ is relatively easy to assess with quantitative testing and EQ can be assessed through scales that measure emotional intelligence. DQ is different, in that there is no instrument to quantify a decency rating – thus it requires effort and creativity to assess. Mastercard assesses DQ through a very robust interview process involving many people in the company who share a culture in which decency is valued and prized.
Decency is at its core a moral obligation, but it can also be key to a winning business strategy
At Duke, we’ve made it no secret to prospective students that we are screening for IQ, EQ and DQ in our application process. We feel it’s essential we admit people who share our values and develop them to be the kind of leaders who can make business a force for good in the world. Our application essay questions are designed to get at a candidate’s values. One of our questions is simply to write down 25 random facts about yourself. Collectively those facts reveal so much about a person. We also look for decency in our interview process. The result has been a community of future leaders who support, nurture and learn from each other during their time at Duke. My hope is that DQ becomes as important as IQ and EQ in business. Workplaces will be happier and workforces healthier. Teams will be more productive and innovative because each member feels valued. However, I’d also suggest a higher calling for DQ in business. We can make the world a better and more humane place. If business becomes intentional about decency, it can become the healing force our world so badly needs. It can be the model for how people who are very different come together to work with common purpose. It can demonstrate respect and caring that transcends difference and polarization. It can solve some of the world’s toughest problems by uniting people to find solutions. But first, decency must win the day in business – one hire and one leader at a time. — Bill Boulding is dean of Duke University’s Fuqua School of Business Q3 2019 Dialogue
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Discovering purpose Michael Chavez and Sudhanshu Palsule explain why defining purpose is a continual task for leaders at all levels
The financial crash of 2008-2009 didn’t just topple some of the biggest financial institutions in the world: it crystalized a sense that business as a whole had lost its way. The dominance of Wall Street at the expense of Main Street was thrust into the limelight. The role of business in society was questioned. The system was broken. It was in the wake of that crash that ‘purpose’ became one of the biggest buzzwords of business thinking. Yet despite all the thought pieces, books, panel events and webinars, the purpose discussion has struggled to get out of second gear. We have been stuck on purpose evangelism, Dialogue Q3 2019
with true believers preaching the good news about why purpose matters and how it could solve all our business ills. That evangelism has its place, and it’s been undeniably tough to get the message through to some leaders. But it’s well past time that we moved on to talking about how leaders can make purpose a reality for people at all levels of our organizations. We need to look at the lessons learned by companies on the purpose frontline, about what works and where there are pitfalls to be avoided. Through our research into how business can rehumanize leadership, three major lessons
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have emerged about what purpose is and how it needs to be managed. First, purpose has limits and constraints. Second, purpose exists at every level: not only at the corporate level, but at the individual and team level as well. Third, as a result, nurturing purpose is a continual task for leaders in every part of an organization.
Limits and constraints
One of the most important lessons learned about purpose is that it has limits and constraints. Purpose isn’t ‘blue sky’: it has to be firmly rooted in the business model and realistic about its
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scope. If not, companies run the risk of losing touch with their customers. Perhaps worse, they risk falling into an authenticity trap. Some companies have illustrated these risks by taking wrong turns in their purpose journey, before adjusting course. McDonald’s is one. It shaped its company purpose around ‘honest food’, which was new territory and represented a stretch to answer the public’s concerns about ingredient sourcing and healthy eating. But the new tone failed to capture why customers come to McDonald’s. The company adopted an amended purpose, of ‘making delicious, Q3 2019 Dialogue
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Purpose has to be firmly rooted in the business model and realistic about its scope Dialogue Q3 2019
feel-good moments easy for everyone’. That does a good job of translating McDonald’s principles of service, value and convenience into a more aspirational, human experience. As Deborah Wahl, former head of US marketing for McDonald’s, told us: “Purpose should help you get back to your core, not away from it.” Purpose has to start from the fundamental business drivers, she added: “Purpose cannot exist in isolation.” The other reason that purpose has to align with business drivers is because it has to be authentic, or it risks falling into an authenticity trap. Another fast-food chain, Chipotle, has illustrated that danger. Its inspirational campaign, ‘cultivating a better world’, was ambitious and exciting – but it crashed hard into reality when a food safety scare broke out. The result was a 40% fall in shareholder value in 2017. Other firms illustrate the benefits of well-crafted purposes that are aligned with the business drivers. A number of them are in financial services, a sector where many businesses have worked hard to develop effective ways of implementing purpose in the decade since the crash. Around the world, there are banks which have discovered a new sense of purpose – or, very often, rediscovered an old purpose rooted in their history, made relevant to today’s challenges. Take Australia’s ANZ Bank, which has returned to its roots with a purpose of “shaping a world where people and communities thrive”. In its 2018 annual report, it can now point to its impact in reaching more than 889,000 people to help enable social and economic participation; to A$137m in community investments; to commercial outcomes that include a great net promoter score, placing the bank third for retail in Australia; plus, a healthy bottom line result in 2018 of A$6.5bn in profits. Nedbank is another example. One of the ‘big four’ South African banks, it defines its purpose as being to “use our financial expertise to do good for individuals, families, businesses and society”. It’s a solid purpose, but on its own, not exceptional. It is, though, well-rooted in the bank’s business drivers – taking heed of its limits and constraints, as well as the customer perspective. The narrative and context that Nedbank brings to this statement shows that it is clear about how its expertise relates to the society it operates in, and it has used that insight to guide major business decisions. In some instances, that has enabled it to make investments and acquisition decisions that might not immediately deliver huge commercial benefit, but which lay the foundations for solid long-term growth, and have developed significant goodwill from customers (for more on Nedbank, see page 54).
It’s vital that we build organizations where we can all realize our ‘small p’ purpose
Purpose at every level
The second key insight from our work has been that purpose exists at all levels. Much of the conversation about purpose so far has been about corporate purpose at a strategic level. The discussion has rarely joined the dots to two other critical areas where purpose exists: individual employees’ sense of personal purpose in their work, and the collective sense of purpose shared by teams. For individuals, it’s vital that we build organizations where we can all realize our ‘small p’ purpose, as business author Daniel Pink calls it, which is about how we contribute every day – in contrast, or in addition to, the ‘big P’ life purpose that has become fashionable. Even if our current job is not quite our dream job, we still need to feel we are making a useful contribution through our work. This individual sense of purpose has to fit with the broader corporate purpose. We call this the purpose ‘line of sight’. Our research suggests many organizations still struggle to create that line of sight. Take the pharmaceutical sector, to pick one. There could hardly be a sector with richer potential for inspiring purpose than one which produces products that actually save lives. In a given company, senior leaders might feel confident that they have a clear, customer-focused, inspiring and relevant purpose. Product managers and laboratory-based scientific staff will certainly be able to see a direct link between that purpose and their work. But what of an employee in accounts payable? Do they feel ownership of the purpose and play a part in its success? How about the IT services manager, or the fleet manager? In large companies, hundreds or thousands of employees fall into these categories. They might appear to be a step removed from the purpose, yet their contribution is vital to the successful functioning of the company. Leaders cannot neglect this group. Rather, they need a three-pronged approach. One is to go the extra mile to translate corporate purpose to these areas. Secondly, they have to recognize and nurture the small p purpose. A sense of drive to make sure that customer accounts are in order, or that the enterprise IT systems are quick, reliable and secure, is enormously valuable to the company – and should not be ignored in the effort to establish a corporate
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purpose. The third area where purpose exists, is team purpose. Leaders have to not only translate the corporate purpose and tap into individual small p purpose, but also cultivate a sense of why specific teams exist and their role in the functioning of the organization. Kevin Cox, former HR director for American Express, told us about his approach when onboarding new executives. Cox would sit down and ask the new starter why they thought their box on the organization chart existed, and why they had been recruited to fill that post. The same process could be used effectively with teams: what is the team there to do as a team? Why is it comprised of these individuals?
how the team contributes to the corporate purpose. Do you have a clear, one-sentence definition of your team’s purpose? Would your team members say the same thing? If unsure, ask them individually to test their views, then hold discussions to shape a shared view. Once established, refer to it continually to keep it alive and relevant.
A continual task
Creating purpose is an ongoing task for leaders at all levels. Companies which have an effective purpose recognize that it is not a one-off event where purpose is defined, added to the corporate brochure, put up on the wall, and then just allowed to sink beneath the waves of corporate memory. Purpose has to be a living, breathing idea. That demands the engagement of leaders at all levels of a business, at every phase in a purpose journey: in shaping purpose when needed and in keeping it relevant for those that have it. We have identified three key elements.
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Translate and narrate purpose Leaders have to continually join the dots between the corporate purpose and business decisions. A decision that looks obvious in the management team meeting is not obvious for someone outside the room, let alone an employee in another office or another territory. How does a new product, a new hire, or even a challenging redundancy announcement relate to purpose? Effective purposeful leaders continually refer back to purpose in their internal and external communications alike, and they make sure to communicate a lot. There is an old Native American saying that important news needs to be said three times: once for each ear and once for the heart.
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Start conversations about team purpose One of the perks of leadership in business – and one of its responsibilities – is the power to start conversations. Leaders in the middle of organizations cannot rewrite a corporate purpose, but they do have the power to talk with their team members about
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Help unlock ‘small p’ purpose Helping employees to understand and fulfil their personal purpose is hugely powerful. We know from multiple studies that intrinsic motivation trumps extrinsic – that is, incentives and rewards – when it comes to improving performance, especially for high-value creative work. A sense of personal purpose is aligned with employee engagement and satisfaction. It connects personal motivation to the organization’s purpose. Use coaching techniques to help individuals identify their personal purpose and shape performance indicators to align with that purpose, as well as the overall business and team objectives. It may have come to prominence in the wake of the last financial crash, but purpose is here to stay. It provides a stable point of reference for leaders in today’s volatile, uncertain, complex world. As the world shifts around us, knowing what we stand for is priceless: with shared purpose, we can build businesses that are truly agile and can operate at pace, freed from 20thcentury models of management that date from an industrial age. Rehumanizing leadership, and remembering that we are purposeful beings, is at the heart of business success. — Michael Chavez is chief executive of Duke Corporate Education. Sudhanshu Palsule is an award-winning educator, CEO adviser and leadership guide. Their book, Rehumanizing Leadership, will be out in October 2019 (LID) Q3 2019 Dialogue
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Enter the state The Western economic model won’t work for developing nations, writes Chandran Nair – it’s time for the state to flex its muscle
Earlier this year, I travelled to a rural part of India’s Maharashtra state, far from the urban hustle and bustle of Mumbai, to run a leadership programme for corporate executives from around the world. The area is suffering from a major drought. Access to water has become the difference between farmers staying on their land and keeping their livestock, or abandoning it entirely. The proud and hardy community is doing its best to sustain itself, and is being assisted by various local donor-backed initiatives to provide free fodder and water to cattle, but it is clear the problem is not going away. The drought is not a short-term emergency. It is a long-term
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structural problem. Decades of neglect and mismanagement of water resources, including over-exploitation, have drastically reduced river flows and ground water tables across a region that is prone to low rainfall. Rich farmers, who can afford to drill deeper, stay productive, while poorer farmers are pushed off their land or become indentured. Economic distress is disproportionately cited as the reason for thousands of farmer suicides – and climate change is threatening to make things much worse. The question to be asked is: where is the government, and what is its role? Where are the water-management plans – reservoirs,
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The fundamental cause of our unsustainable global economy is the Westernderived, free-market model of economic development
irrigation systems – and regulations that might have avoided over-exploitation and depletion of ground water aquifers? Where is the strategy to restore water tables and the ecological landscape, like large-scale tree planting, or programmes to help farmers adapt to their new harsh reality? The situation is a stark reminder of one of the core arguments in my book The Sustainable State: that business, civil society and communities can only do so much with regard to the manifold challenges of sustainability. This will become more problematic as climate change and resource constraints rise in prominence over the coming decades, especially in large developing countries like India. Without the presence of a strong and effective state, communities like those of rural Maharashtra will be fighting a losing battle.
The sustainability dilemma
This sort of scenario is playing out in many parts of the world, both rich and poor: fires in California, floods in Europe, heatwaves and typhoons in Japan, and so on. Yet one still encounters the same denial-laden narratives at sustainability conferences across the world. They are dominated by presentations and panel discussions that fail to connect with the real issues, offering pious, facile answers and none of the hard-hitting solutions that are urgently needed. Chief executives pledge that companies will improve their resource use and reduce their environmental impact. Thought leaders and consulting firms argue
that innovations in technology will eventually overcome our need for resources. Heads of NGOs show picture-perfect examples of communities practising sustainability at the local level, while multilateral agencies present the UN’s Sustainable Development Goals as a magic wand solution. Yet few of these people are grappling with, or even willing to acknowledge, the fundamental cause of our unsustainable global economy: the Western-derived, free-market model of economic development, which pursues relentless consumption-driven growth at any cost by under-pricing resources and externalizing costs. It is a model that has been exported globally and is almost universally accepted as the only way to sustain economies, alleviate poverty and create prosperity. This leaves large developing nations with a problem. They need to improve living standards for their large populations who still lack access to basic necessities and the ‘rights of life’, while protecting resources, yet that economic model will deplete their (and the world’s) common resources. The externalities it produces not only reduce the quality of life today, but impinge on the rights of future generations. By contrast, the developed world has a relatively easy task, having already provided a basic standard of living for most of its people. Yet there are now high expectations about rights, living standards and quality of life, which the state dares not challenge in the pursuit of
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Businesses, even when they claim to be green, cannot be the vanguard of such an approach to sustainability
sustainability. No sacrifices can be called for. This often defines the political discourse and actions that follow. The developing world does not have that luxury. Its priorities require very different political objectives, and new approaches to governance and public policy-making. The only option is a strong and effective state that can improve access to basic needs for the disenfranchised majority, while preserving resource stocks for future generations – thus managing the tension between collective welfare and unfettered individual rights.
Why the state?
Businesses, even when they claim to be green, cannot be the vanguard of such an approach to sustainability. They are in the business of producing and selling more, externalizing costs as they pursue their overall aim of growth. When they think of sustainability, they are limited to focusing on harm reduction and improved efficiency. However, sustainability requires not just doing more with less, but actually doing less; or, in some cases, complete avoidance. That can only be under the purview of the state. Nor are technological solutions the panacea they are often made out to be. Innovations won’t be spread if a market encourages business-asusual, because under-priced and unsustainable goods and services – not to mention monopolies – price out better technologies. It can take several decades for a new innovation to become widely affordable in the developing world. The fact that millions around the world still lack access to basic water supplies and sanitation, arguably the most important technologies for human life, should tell us that innovation alone is not enough to overcome powerful economic and political barriers. Viewed through the lens of the developing world, it is evident that sustainability requires strong governance of the economy. The state is the only entity with the legitimacy, authority and resources to do that. The alternatives are simply not viable. On one hand, global governance fails if not backed by states with the power and will to take action: think of how the Paris Agreement on carbon emissions has been undermined by the US’s withdrawal. Equally, local communities do not have the reach needed to transform the economy. Many good local initiatives are halted by an inability to organize nationally, and by national governments that are either unwilling to act or, worse, are actively anti-sustainability.
The sustainable state
The sustainable state – a strong government with the capacity and competence to intervene consistently in the economy – would have three major objectives. Dialogue Q3 2019
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Protecting common and public goods for the basic rights of life
First, the sustainable state would protect common and public goods to ensure that both current and future generations receive the basic rights of life. This is the state’s core human rights obligation. Society depends on common and public resources that cannot be properly managed by an unregulated free market. Without controls, common resources are overexploited and depleted, so the state must invest in strong institutions, reliable monitoring and independent enforcement agencies to determine how resources are used, distribute access licenses, and punish those who cheat. A strong state could encourage better use of public resources by seizing any illegally extracted resources and counting them towards annual quotas for that resource. This would encourage companies that do want to follow the rules to put serious effort into any ‘self-policing’ initiative. Protecting common goods is a critical challenge, not only for current generations, but so that future generations can access basic resources and necessities. In Maharashtra, the lack of water management means that hundreds of farmers and their children now struggle to preserve even a basic standard of living. Water is a fundamental human right. Contrast the effect of its shortages with the freedom of speech: they all still have that, but it counts for little when water is short. Better water management would have preserved a path to development and provided those people with the chance to overcome the drudgery of their current existence, by creating “moderate prosperity”.
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Moderate prosperity
The second task for the sustainable state would be to manage its population’s expectations through wellstated policies, to create a vision of moderate prosperity: a comfortable standard of living that remains within reasonable planetary boundaries in our hot, crowded and constrained future. Defining moderate prosperity would be a challenge. Currently, the only vision of the “good life” is the wholly unsustainable American one: a large suburban home, two cars, meat with every meal, and so on. Even populations that have followed a very different model of economic development, such as China’s, still have the American way of life as their ultimate objective. Governments need to define what kind of lifestyle can exist within planetary boundaries and thus help mould truly sustainable societies where it is not a free-for-all when it comes
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to resource access and wealth creation. Social justice and the cohesion of these societies depend on such a vision. It requires thinking about what people actually need and want to do, rather than what they can or want to own. Once those needs have been clarified, governments can determine more efficient ways to achieve those results. For example, car ownership is often considered one of the signifiers of prosperity. But is car ownership in itself prosperous, or is it the ability to travel from one point to another at some reasonable level of speed and convenience? If it’s the latter, then we may be well advised to invest in efficient public transportation systems and better urban planning, allowing people to be mobile without relying on mass car ownership. Thinking about aspirations and comfort in this way allows people to live prosperous lives without creating the externalities that go along with American-style excess.
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Income and wealth inequality are hot political issues, but consumption inequality is also important
Constraining over-consumption
The third task for the sustainable state would be to constrain over-consumption at the top of the income scale, beyond the level of moderate prosperity. It is not enough for governments to help those at the bottom, because elite consumption places excessive costs on the rest of society. This means pricing in externalities to ensure that true costs are reflected in market prices. It means taxing over-consumption, through an array of economic instruments like road pricing, or outright bans, for example of plastic bottles. Income and wealth inequality are currently hot political issues, but consumption inequality is also important. Ensuring that people do not consume too large a share of resources will be critical in a more resource-constrained future. This will mean making important choices. Should cities continue to expand along coastlines if sea levels threaten to rise? What about suburban sprawl in places prone to wildfires? Should households in arid environments expect to have a lawn and a swimming pool? And should people in hot or cold environments expect their homes to be exactly 22oC? These questions get at core redefinitions needed under the sustainable state: those of ‘rights’ and ‘freedoms’. In today’s consumerist society, consumers act as if they have a right to their consumption – if they can afford something, they should be allowed to purchase it and use it as they wish, regardless of consequences. The sustainable state needs to set some firm rules about what, and how, things can be consumed. In such a state, people in arid environments could still choose to have a swimming pool: they would just need to be
willing to pay the true price, which may be exorbitant.
The strong state: China?
No state has adopted the type of governance needed to overcome the sustainability crisis. But the one that comes closest is China. It is one of only two countries on track to achieve its Paris climate targets. It has embarked on a number of ecological restoration projects and supported important industries: the plummeting price of solar power is due almost entirely to Chinese support of the industry. But more importantly, China’s state-driven path to development means that it already has the tools to intervene and manage its economy. It can orient those tools towards greater sustainability without needing to spend time and political will on building them. Other countries, both developed and developing, need to create or recreate them. True, China has made many mistakes. It has significant problems with air, soil and water pollution. It has treated rural labour like an unending resource for its growth, depopulating rural areas and communities. And more importantly, the Chinese people still define prosperity as Western over-consumption, which will be completely untenable for a population of over a billion. But when Beijing decides to change its approach – and, as recent statements from the National People’s Congress show, it seems to have already done so – it has far more tools at its disposal.
The importance of the state
A discussion of strong states and sustainable development should end with this cutting question: if you are poor, would you rather be poor in China or in India? An honest reading of the situation would imply that China is the right answer. The key difference is that China understands that governance and a strong state is critical when it comes to development for large poor nations trying to give their people a chance. India has sadly struggled to realize the same, despite its democracy and rich resources including its human capital. Developing and developed countries alike should take this lesson to heart. As the world becomes more resource-constrained, businessas-usual won’t get us to a sustainable future. Only the strong sustainable state can. Only it can then direct and unleash the private sector to solve the true challenges of our time – which go far beyond building another app or e-commerce platform to order more stuff online. — Chandran Nair is founder and chief executive of the Global Institute for Tomorrow, and author of The Sustainable State: The Future of Government, Economy and Society (2018) Q3 2019 Dialogue
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Measuring the ROI of wellbeing The transformation of Barcelona shows why leaders should rethink how they assess wellbeing at work. Steven P MacGregor explains
There are many dates in Barcelona’s history that, given their significance, have a clear sense of a before and after. 17 October 1986 is surely one of the most important. This was the date that Barcelona was selected to host the 1992 Olympics, which were to utterly transform the city and its people. As well as the usual construction of sports and hotel facilities, major infrastructure projects were initiated that significantly improved the wellbeing of residents, and do so to this day. The Olympic Village was constructed at the port, opening the city to the sea, making it fit once again for leisure, and transforming the coastline from an industrial area to what National Geographic now calls the best beach city in the world. Other major projects included modernization of the airport with two new terminals, and construction of the city ring roads to reduce traffic congestion in the centre. Does it matter, then, that the Games had one of the highest cost over-runs in Olympic history? In an age where the Olympics is under increasing scrutiny regarding sustainability and legacy, Barcelona is – rightly – held up as a success case, rather than one of the most debt-laden in history. It made the city what it is today. But that verdict prompts questions: what is the return on investment (ROI) of any significant endeavour? Should ROI be measured only in monetary terms?
Thriving at work
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Such questions have to be asked about the measures used to gauge wellbeing at work – and indeed, what benefit wellbeing has for business. It is increasingly clear that wellbeing is core to performance. Researchers at the Ross School of Business have looked at the factors that support sustainable high performance. They use the term ‘thriving’ to describe employees who are not just satisfied and productive, but also engaged in creating the future. They see thriving as present when people believe what they are doing makes a difference and that they are learning. The researchers found that people who were thriving
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People who were thriving had 16% better overall performance and were 46% more satisfied with their jobs
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had 16% better overall performance, as reported by their managers, than their peers; they were 32% more committed to the organization and 46% more satisfied with their jobs. They also had 125% less burnout (self-reported), missed much less work, and reported significantly fewer doctor visits, which meant healthcare savings and less lost time for the company. Professor Scott DeRue, dean of the school, is convinced of the increasing importance of wellbeing for leadership and performance. He highlights the concept of ‘spillovers’, noting that wellbeing isn’t just something that matters at work: “We’ve found that if people aren’t well at work, they aren’t well at home, and vice versa.” The impact of business on healthy communities and societies is clear. Wellbeing has a formal presence in most large companies today, yet it typically exists at a relatively junior level of the organization and is focused on the reduction of risks, including absenteeism and sickness. Many programmes take a clinical-based approach, rooted in the insurance industry. Absence is often reduced, yet the dangers of presenteeism – long hours and low productivity – or people returning to work before they are ready and negatively affecting those around them, through sickness or emotional spillover, are significant. The financial return on wellbeing programmes is a matter of debate. The Rand Corporation found that although four-fifths of all US employers with more than 1,000 employees are estimated to offer such programmes, there are no cost-savings associated with the management of high-risk employees (those who smoke or are overweight). Rand contrasts its findings with Johnson & Johnson, one of the longest-running programmes in the US, which has found that ROI ranges from $1.88 to $3.92 saved for every dollar spent. Rand also found participation in programmes to be low, in the range of 20-40% of the workforce.
opportunities of wellbeing. It lies in recognizing that wellbeing improves executive performance, through increased energy, creativity, resilience, and leadership. It is widely recognized today that health should be defined not just as the absence of sickness, so why does health and wellbeing management in the enterprise still suffer from a negative approach? One answer could be that the narrow, risk-focused view of wellbeing at work is easier to measure. Some of the business leaders we have engaged with believe this to be part of the company journey – the concept of wellbeing needs to gain a foothold by demonstrating impact on traditional measures, before wider efforts to change the leadership culture gain traction. Our own experience goes beyond the narrow confines of risk-focused wellbeing programmes towards leadership development, which in turn affects organizational culture. The discrete behaviours of leaders powerfully influence the behaviours of the people they lead – whether indirectly, through the example they show, or directly, through their people management. Leaders’ behaviours are critical to shaping a wellbeing culture that helps people to thrive. As recent work on organizational culture by PricewaterhouseCoopers suggests, tackling a “critical few behaviours” is the most feasible and effective approach to changing culture. The 1992 Olympics put Barcelona on the world stage, where it has stayed ever since. The ROI of the massive infrastructure spend may be questionable if viewed only on narrow terms. It becomes more convincing when viewing how the city has become a truly global pull for tourism. Yet the biggest benefit may be in the deep cultural change of the city’s people, who were given confidence and belief, and whose daily behaviours were changed forever. The people of Barcelona embraced wellbeing. The same transformation is needed today in workplaces around the world.
Changing measurement and culture
— Steven P MacGregor PhD is chief executive of The Leadership Academy of Barcelona and author of Chief Wellbeing Officer (LID Publishing, 2018)
There is another way, though, of perceiving the
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The Trust in me
The chief executive of The Prince’s Trust, Martina Milburn, listens to her instincts
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Phil Adams
Leadership is about trusting your instinct. When I ignored it was when things went wrong Dialogue Q3 2019
“If you meet the kids in week one of our programme, on the whole they won’t talk to you,” says Dame Martina Milburn, chief executive of The Prince’s Trust, the Prince of Wales’ UK charity for vulnerable youngsters. “They won’t even talk to each other. Some of them are there because they have been told by the local police that unless they go on the programme they are going to court. And then we say, ‘next week, you are going on a week’s residential, where you’ll share the cooking, you are going to do coasteering, you are going to do mountain biking’. And they will universally say, ‘absolutely not’ – usually with a lot of expletives added.” By the end of the programme, in week 12, the same young people have to report on what they liked best: “Inevitably, they will all say that the best bit was the residential. And they will all tell you that the programme wasn’t long enough.” Milburn is in the business of building confidence. “You can’t do that in a classroom. The only way you can do it is provide those kinds of opportunities. You have got to let them fall off their bike! You have got to let people make mistakes so they can learn and build their confidence. I’ve seen kids in tears at the top of an abseil, and it might take four days to persuade them to do it. But when they do it, you can see that switch; ‘If I can do that, I can do all of the other stuff’. It should be a key part of what we do with our young people.” Milburn’s passion for making positive changes has led her to the chairmanship of the UK government’s Social Mobility Commission. She has been emphatic about the challenges: social mobility in the UK is among the lowest in the OECD, she says, and has remained flat since it was first measured in a consistent way in 2010. She thinks that those who believe the key to increasing mobility is to encourage more people to go to university, leave their hometowns, seek professional employment, “are looking at the problem the wrong way”, and that local
solutions – non-graduate apprenticeships and the like – might offer a better route. She thinks Britain’s apprenticeship system offers too many places at graduate level and far too few at lower levels, and that entry requirements heavily based on students’ grades in academic school subjects are blocking some good candidates. “All the course leaders tell me that they hire for attitude – so if you got a D and a C in Maths or English, but you are the right person to do it, does it matter?” Her view is controversial. Does she think it will resonate with the government? “Possibly not.” Does she care? “No. I’m there as an independent commissioner and we will pay for the research, look at the evidence, then say what we think the evidence is showing us.” Milburn began her career as a trainee reporter in the 1970s. Journalism typically breeds scepticism: so how did someone from this most cynical of professions come to work in a field where hope is a vital currency? “Oh, I think that being sceptical is good,” says Milburn. “Particularly in the aid world, you need people who come and say, ‘well, hang on a second, does this add up? Does this look right? Does it feel right?’” Milburn is a proponent of what might be termed the ‘sniff test’ – her instincts tend to lead her to the evidence, rather than vice versa. After her days as a journalist, she worked at a spinal injury charity in London called Aspire. She found the place “inspiring”, she says, but even great organizations have their problems – and she used a reporter’s sixth sense to identify them. “Leadership is about trusting your instinct,” she says. “I learned quite quickly that when I ignored it, that tended to be when things went wrong. There were things that you started to look at in the charity and you thought just didn’t feel right.” She sniffed out the story, the data backing her gut more often than not. “I would go through it all with the chairman and say, ‘here’s the evidence, this is what I think isn’t
Tenures on boards are good, because at the end of them you can say, ‘we need to look for a new skillset’, and generally people accept that
quite right,’ and both he and the board were supportive in the changes I wanted to make.” I suggest that the science is with her: several academics, and writers like Malcolm Gladwell, have suggested instinct is an instantaneous aggregation of experiences. Did she sense that the evidence didn’t support a particular course of action before she was able to prove it? “Yes, I think that’s what you learn,” she says. It’s like interviewing to fill a position, she says: you sometimes know “almost instantly whether you think they are going to fit, and you just spend the rest of the interview confirming your initial views and impressions”. This rapid learning mechanism, these heuristic shortcuts, were crucial at an organization which, she jokes, comprised “two people and a dog”. Yet the role shaped her. “I said I would do a year and stayed for seven,” she says. “I had to do everything. I was the HR director, technically the chief executive, the PR person, the fundraiser. It was a real baptism of fire and it taught me huge – huge – amounts.” Milburn says she has been “extraordinarily lucky” in her career, yet it has not all been plain sailing. She is the eldest of five girls from a Catholic family “who grew up with charity as a key part of our lives”, but a job at the Catholic international development charity CAFOD – just after she had the first of her three children – was to prove turbulent. “That was one of my toughest Dialogue Q3 2019
experiences,” she recalls. “They were not keen on my taking maternity leave, because no-one had taken maternity leave before. And, also, as a new mother with a child that didn’t sleep, I was totally unprepared. I ended up handing my notice in after about six months. I couldn’t cope at all, and was not supported in the workplace at that point. The end point at CAFOD was probably the lowest point in my career.” It was an intense ordeal, but short-lived, and she moved on quickly. “But it did make me determined, if I was ever in a senior position in an organization, to make sure we looked at proper flexible maternity leave. I look now, and it’s a year. In those days, you were lucky if you got six weeks.” The working world, she says, “was very different” when she set out. She was among the first-ever cohort of women entered to a Press Association traineeship. “Before then it was only open to chaps… they decided to employ a girl, and I got the job.” What would now be clear cases for disciplinary action were commonplace and acceptable, she says. Did she encounter prejudice? “It depends how you define prejudice, doesn’t it? If you were a young woman in the workplace, nowadays it would be called sexual harassment. But there was a lot of it and – I am absolutely not saying it was right – you just put up with it. And on the whole when you said, ‘no’, it was fine. There was a lot of banter and – probably – getting your bottom smacked
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It was different then, but I don’t remember prejudice in the sense that they said, ‘you can’t do this because you’re a girl’
by the photocopier, and nobody thought that was unusual. You just made sure you went to the photocopier when nobody else was around. It was just different. I am really not saying it was right. You put up with all that, but I don’t remember prejudice in the sense that they said, ‘you can’t do this because you are a girl’.” Milburn makes a habit of playing down adversity and focusing on the positives. Yet tackling 1970s social attitudes, running charities virtually singlehandedly, and raising a big family while trying to earn a living, all undoubtedly helped prepare her for life at the top of a sector which can be haphazard, demanding and fraught with risk. At The Prince’s Trust, she works with vulnerable people aged 11-30, to bring their lives back on track. The nature of the work means that success is uneven; the very best projects can fail. I put it to her that some – perhaps many – of the Trust’s programmes wouldn’t ever see the light of day, were they assessed for risk in the private sector. “I don’t think you can look at it like that,” she says. “If you did, you probably wouldn’t do anything. People, just by their nature – and teenagers even more – are inherently risky. When you add that to all the social facts, they are even more risky. We have always had the view, and even from the Prince of Wales, that if things don’t go wrong, we are probably working with the wrong group of young people. You just accept, right from the beginning, that what you do is a risk. It just comes with the territory.” She is clear that those young people’s needs come first. “You have to start with the young person, work out what works for them, and then find the funding that fits – even if that means you will be a smaller organization for a longer period of time.” A determination to keep refreshing organizational structures has been evident throughout her career. Before she came to work for Prince Charles, she landed the chief executive role at Children in Need, a charity wholly owned by the BBC. When she arrived there in 2000, she found it failing. “It didn’t have a high profile within the BBC,” Milburn recalls. “I gathered my evidence, sat down with the chairman and said, ‘the BBC needs to make a decision, do they want to support this? In which case, they need to give it more resources and a different profile. Or, do they want me to close it?’” Income had gone down, as had viewing figures. “Luckily for me he said, ‘yes, you are right, I think we should invest’.” By the time of her departure to The Prince’s Trust four years later, the charity had been reinvigorated. BBC governor Sir Robert Smith commented on her remarkable success and increased public support. What’s her secret? How does she deal with board members whom she considers misplaced or misguided? “Assuming one of those people
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isn’t your chairman, the first thing you do is talk it through with them. Then it’s very important to find a way where everybody saves face. Allow people their dignity. When people are giving their voluntary time and their passion, you need to acknowledge that. And that’s why I think tenures on boards are so good, because at the end of them you can say, ‘we need to look for a new skillset’, and generally people accept that.” How does she channel the zeal of the newcomer? At The Prince’s Trust, like everywhere, there were challenges. “I didn’t take any notice of the ones who didn’t want any change; and I didn’t take any notice of the ones that wanted change immediately,” she says. “I just did it in what I felt was the right time, and delivered it.” What amount of thinking time is enough? “You can’t leave it two years. For me, it was four to six months, but there was quite a lot to be fixed, so it took quite a long time!” In 1999, five charities had been merged to form the Trust, but it was a merger in name only. The predecessor bodies continued to operate quasi-independently. The senior management team was 22-strong. “They had merged them, but they hadn’t integrated them.” Several governance problems bubbled up – she had to bring many volunteer boards under direct control to ensure compliance with stringent new regulations. Several trustees weren’t happy with her appointment. “And, when they heard about the things I was going to change, they felt even more uncomfortable. At least two of them wrote to the Prince. What they don’t know is that I got to see all the letters! But you don’t take any of this stuff personally. You have to decide what you think is right for the organization because, if it all goes wrong, it’s your shoulders that it all falls on.” And nobody remembers the other stuff? “Nobody remembers the other stuff!” She has refocused the Trust on helping the long-term unemployed, increasing the proportion of vulnerable young people it successfully gets into work or training. She emphasizes the power of people ensuring that endures. “In terms of the young people’s follow-on journey,” she says, “mentoring is enormous. A lot of young people stay in touch with their mentors long after the official relationship has finished.” Milburn pulls people together. She’s at the top of her field now, but her personal credo has remained with her since her days as a cub reporter. “Journalism gives you the ability to talk to people,” she says. “Because if you can’t talk to people and you don’t get on with people, then you are never going to get any stories. That curiosity for finding out about stuff is really great. I think that’s a hugely transferable skill.” Through exploration and connection, Dame Martina Jane Milburn tells her own story by changing the lives of others. — Ben Walker is editor-at-large of Dialogue Q3 2019 Dialogue
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KATE COOPER
Many cultures are comfortable with not knowing
Certainty is overrated for some Kate Cooper is head of research, policy and standards at the Institute of Leadership & Management
The UK’s ability to tolerate uncertainty and ambiguity is probably what is making the Brexit process tolerable for the British
What are the consequences of culture? Professor Geert Hofstede and his team have for over 20 years been undertaking research into culture, both national and organizational. The work started in the 1970s with a study of IBM employees. More than 100,000 questionnaires were completed, and Hofstede claimed with confidence that national cultures could be differentiated in four main ways. The research continued, and now six dimensions of difference are explored. The research is used worldwide in both academic and professional management settings. It has been critiqued – but it continues to be considered, along with the work of Trompenaars and Hampden– Turner, as offering useful insights into cultural difference. It forms the basis of much advice offered to leaders and managers who operate across cultures. The ‘uncertainty avoidance’ dimension expresses the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity. Whatever the culture, the future can never be known. Hofstede’s work measured the degree of discomfort with this ‘not knowing’. Countries where the national culture exhibits low uncertainty avoidance ranking implies societies where people tolerate ambiguity and are willing to rely on flexible guidelines more than rigid rules. The UK, along with Hong Kong, Denmark, Sweden, Jamaica and Singapore score low for uncertainty avoidance, suggesting the people of those countries are comfortable with unknown, unexpected – even surprising – situations. They tend not to look to rules, regulations and strict protocols to quell their anxiety about an uncertain future. The rest of the world might regard somewhat critically the UK’s seeming inability to negotiate an exit from the European Union. Yet the UK’s ability to tolerate uncertainty and ambiguity, and to zealously maintain points of difference, is probably what is making the process
tolerable for the British – and unfathomable to other cultures with what Hofstede would consider to be a high uncertainty avoidance ranking. Hofstede’s analysis would indicate that the UK national culture is quite well-suited to these volatile and ambiguous times. Given that, listeners to a recent BBC radio programme might have been surprised to hear a former British secretary of state asserting – somewhat aggressively – that what people want from their leaders is ‘certainty’. He appears not to be alone in his view – the ‘not knowing’ that Brexit has caused is often cited as the necessity for reaching a solution. The British prime minister is accused of ‘weak’ leadership for allowing us to remain in this state of uncertainty – as if ‘strong’ leadership would somehow change the passionately held beliefs of so many British people. I have even heard knowledgeable economists cite an absence of leadership as contributing to the lack of consensus. This wrongly presumes that ‘strong ‘ leadership would somehow simplify the complexity of world trade or the paradoxical requirement of the Irish border having to be two things at the same time. Peter Bloom and Carl Rhodes, in their book CEO Society, warn of the dangers of over-identification with individual leaders, specifically chief executives who “have become, despite their actual records of ineffectiveness and ethical malfeasance, the 21st century icons upon which we increasingly judge our political leaders and ourselves”. Like Rhodes and Bloom, I would question the possibility of any one individual being able to solve complex problems through ‘strong’ leadership – even in societies where there is little tolerance of ambiguity and uncertainty. Instead, I wonder why we are not celebrating our national ability to tolerate difference, and challenging the misconceived notion of heroic – and certain – leaders. Q3 2019 Dialogue
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Making sense of Gen Y Trying to understand what makes 20- and 30-somethings tick? Start with the economic turmoil of the Great Recession, writes Adam Kingl
There is an argument commonly deployed by sceptics of generational theory: “Surely we’re all the same in the end: the differences we see among generations at any point in time are just functions of life stage.” The quickest retort is to point out that if every generation is the same, then patterns of education, work and retirement should be identical at corresponding ages. But if those patterns are different, then there must be something more going on. It’s clear that Generation Y is, indeed, different. Motivating, engaging and retaining this oft-misunderstood generation is a challenge for many organizations, especially in the face of fundamental challenges to the psychological contract created by pay and pension provision. Understanding this complex demographic starts with a look back at the crisis that rocked the global economy a decade ago.
Defining a generation
It became apparent to many of Gen Y that betting on the long-term was for suckers
The differences between any generation and another are of course those of nurture rather than nature – of social context, not biology or genetic code. Any generation, with all its strengths and maddening quirks, is shaped by the epoch or context in which it is raised – a point made by Karl Mannheim in his essay on “The Problem of Generations” as long ago as 1952. I would define an epoch as the political situation, economic state, dominant parenting style, national and world attitudes that dominate each generation’s developmental years. This explains why the number of birth years used to
define one generation is not the same as another: rather, it is when the dominant paradigms change significantly that we draw a line and begin to define a new generation, raised in different circumstances. A common word of caution about generations – with which I entirely agree – is that one cannot make sweeping statements that apply fully and equally to every individual within a generation. Inevitably, in characterizing huge populations, we must make generalizations: for any given example, I have no doubt that you could think of one, several, or many people for whom the common claims do not apply. The point is that if these claims are broadly true, then they are helpful for decision-making and planning for the future, whether looking at generational issues through the lens of a company, government, family or community. A little more clarity about trends can only help us to be confident in navigating the future.
Generation Y
Clarity is much in demand when it comes to Generation Y. By Gen Y, I mean those in their mid-teens to mid-thirties today. I intentionally avoid the term ‘Millennials’, which is sometimes misunderstood to mean people born in the new millennium – rather than its usual meaning of those who came of age around, or soon after, the year 2000. One of the epoch-defining events with which Gen Y grew up was the most traumatic economic convulsion of the past 80 years, the Q3 2019 Dialogue
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Longer lives mean Gen Y will take a much more flexible, evolutionary and personal approach to their careers
Great Recession of 2007-2009. While the crash and downturn that followed weren’t as severe as the Great Depression of 1929-1939, its impact on Gen Y’s sense of security and trust was fundamental. Observing their parents losing their jobs, overhearing hushed conversations behind half-closed doors about money, seeing banks closing their doors, pension plans decimated, and houses foreclosed, Gen Y’s attitude toward economic security was formed by some tough life experiences in these years. The lessons they learned? You must be self-reliant. Companies will not look after you for life, so as soon as you have acquired what you sought from one employer, you move on somewhere else. What sometimes looks like impatience with employers can also be seen as seizing the present, since we may not be here tomorrow. After all, Gen Y also watched as terrorism became more prevalent, both in the West - not least on 9/11 - and globally. This contributed to a carpe diem philosophy. Bluntly, it became apparent to many of Gen Y in the late noughties that betting on the long-term was for suckers. The Great Recession was what academic Warren Bennis would call a “crucible of experience” or “a transformative experience through which an individual comes to a new or altered sense of identity” (Bennis and Thomas, Crucibles of Leadership, Harvard Business Review, September 2002).
Gen Y’s world of work
Against the backdrop of upheaval and change in Gen Y’s formative years, we can also see two related macro-trends that make the world of work fundamentally different for younger employees.
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Significantly longer forecasted life-spans offer young people an uncertain retirement, but more opportunity to explore and experience different jobs, and even different careers.
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Today’s typical pension plans contribute to an uncertain retirement and are dramatically less attractive in their ability to retain employees. Today’s youngest employees know that they will live much longer and will enjoy a higher quality of life for more of their old age. As Lynda Gratton and Andrew Scott pointed out in their influential 2016 book, The 100-Year Life, people born today in developed countries have a better than 50% chance of living beyond 100 years. As the reality of their likely longevity becomes apparent to Gen Y, they will take a much more flexible, evolutionary and personal approach to their careers than that of generations past. This means that the classic
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retirement age of 65 is quickly becoming anomalous. If graduates expect that they can and will work from, say, the ages of 22-82, they have huge scope to reinvent themselves professionally several times over. One could earn a degree, train and work as a doctor for 30 years, then earn a degree, train and work as a lawyer for another 30 years. Forget loyalty to a single company: Generation Y, with the luxury of time, doesn’t even have to be loyal to a single career.
Retirement risk
The second macro-trend is related to the first. Companies started to break the psychological contract with employees in the 1990s, when contract terms moved from ‘employment for life’ to ‘employability for life’ – that is, the opportunity to update skills and stay employable, though not always with the same company. The golden handcuffs were off. The pension crisis that followed only exacerbated this trend. Because of longer life spans, companies have had to radically change their pension plans over the last 25 years, in order for both pension funds and corporate balance sheets to be sustainable. The most significant change has been the switch from Defined Benefit (DB) to Defined Contribution (DC) pensions. A DB pension is correlated to one’s final salary on retirement. The retiree earns a fraction of their final year’s salary – the fraction being a function of the number of years of service – which is guaranteed for every year of their retirement until death, after which any surviving spouse often earns a fraction too. While the annual payment is usually adjusted for inflation, it is fixed, hence a ‘defined’ benefit. Obviously, this is hugely desirable, because it is a guaranteed income, regardless of how long one lives. It is essentially an annuity, without the exorbitant cost that a bank usually charges for an annuity off the shelf. Like all pensions and public schemes, such as social security, the plan only funds itself if the revenue put into the pot by current employees exceeds the outgoing costs. Today, with life expectancy in the developed world over ten years longer than it was in the 1980s (and rising), the DB pension plan doesn’t balance. This imbalance has been the source of a fullblown crisis over recent decades. In response, many companies have turned their plans into DC schemes. Under these, employees pay into investment funds, portfolios of assets which operate like mutual funds, often with some employermatching payments. In this manner, companies have insulated themselves from the risk of not knowing how long retirees will live. But employees now assume the risk that the value of the DC retirement pot might decline if investments don’t perform well.
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Gen Y faces a perfect storm of longevity, disintegrating pensions and social security. Their old age will be uncertain and difficult
While DC pensions offer retirees flexibility about how much to withdraw at any one time, the total value of an individual’s fund is finite. If the retiree withdraws all their money, and they’re still alive, they had better have another source of income. It is typically estimated that a middle-aged person needs to invest at least 2025% of their income to finance their retirement. The conclusion most of us reach: we will simply have to delay retirement. We’re facing a perfect storm of longevity, disintegrating pensions and social security (or ‘national insurance’ in some countries). This storm will force Gen Y to consider the unpalatable truth that their old age will be more uncertain and difficult than that of any previous generation in almost a century.
Rebuilding loyalty
DB plans rewarded employees for staying with their company for as long as possible, but most of today’s DC plans allow the employee to carry their pension anywhere – known in the US as the 401(k) – so employers have lost what was historically their most powerful tool for retaining talent. Is it any wonder that businesses now find it difficult to keep their young employees? Pension problems have been compounded by the fact that average salaries have failed to keep pace with inflation, especially since the Great
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Recession. For example, adjusted for inflation, the US federal minimum wage has slipped from $10.90/hour in 1960 to $7.25 in 2015, a drop of a third. There’s no point in blaming Gen Y for their lack of loyalty. They’re only responding to the world of work that older generations created. What, then, can managers do to engage and retain their Gen Y employees? As tangible benefits like salary and pension are watered down, companies must turn to the intangible yet hugely powerful levers of personal and professional development, creating a strong culture, and helping their employees articulate their purpose and how it relates to the company purpose. It means changing the classic job interview question, “Why do you want to work here?” A better question for understanding applicants is, “Why do you work in this function, in this industry, in this country, or for these customers or clients?” This human-centric approach, versus a traditional KPI-centric approach to success, will help companies navigate turbulence in the employment market – and begin to demystify Gen Y. — Adam Kingl is regional managing director Europe for Duke Corporate Education. His new book, Next Generation Leadership, will be published by Harper Collins in 2020 Q3 2019 Dialogue
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Time to think
Being busy simply means being at the mercy of someone else’s schedule. It is not a badge of honour Dialogue Q3 2019
Walks have a distinguished role in business. Many leaders and strategists mention how marching outside, through the streets or the park, triggers their best ideas. Stanford University discovered that taking a walk is the single thing in business most likely to make you more productive. Contract-winning ideas have been won on the back of an afternoon stroll. Fresh air, it turns out, is a powerful catalyst for innovation. Sitting at a desk, devouring the endless Niagara of data, is massively overrated. As the entrepreneur Derek Sivers says, “If more information was
all that we needed to be successful, we’d all be billionaires with perfect abs.” A disrupted world calls for lateral strategic thinking. The new age of the ecosystem is a time where the companies that succeed will look outside their industry and discover opportunities to create customer value through new partnerships that span traditional silos and sectors. You won’t find the perspective you need by locking down your thinking. Studies show that almost identical numbers of senior businesspeople think that spending time on strategy is key to success (97%) as think
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Leaders and strategists are paid to think. They should start doing so, writes Dorie Clark
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It doesn’t take time to come up with a great idea, it takes mental space
they lack the time to spend on strategy (96%). This paradox – that we don’t do what we need to – goes to the very core of why companies are going wrong in the age of information overload. If we think strategy is so essential, why are we not making space for it, going for walks, experiencing the world outside our windows? The answers are: negative perceptions and perverse incentives. In much knowledge work, it is hard to quantify in real time the impact an employee has on the business. Therefore, face time – hours at work – has become a proxy for productivity. Employees who take time to think strategically – such as on walks or with unstructured time – risk looking like slackers. Meanwhile, those who work extra-long hours, 50 or more a week, are paid an average 6% more than colleagues who work normal hours. Yet research has shown that’s exactly the wrong thing to be rewarding. Stanford University discovered that the point on the work-time curve that begins to attract a pay premium – 50 hours a week – is also the exact point where one’s total productivity starts to decline. But perverse external incentives, as formidable as they are, might be a lesser force that those within us. In 2014, the Oxford English Dictionary first permitted ‘crazy’ as an adverb, as in ‘crazy busy’. This phrase is now ubiquitous. It can confer on the speaker a pride in being extremely busy – being important and in demand. Busyness has become a form of status. Yet being busy simply means being at the mercy of someone else’s schedule. It is not a badge of honour. It is not a mark of prestige. It is a passport to distraction. These forces – organizational and internal – are preventing us from doing the exact things that we need to do to improve our productivity, and boost our rate of innovation. So how do we fight back? There are three key countermeasures that leaders can employ.
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Countermeasure #1 Recognize the 15-minute power break Leaders must recognize that it does not take a lot of time to set aside time for thinking. Time for away-days, for twoday residential retreats, almost never come when you are a leader. David Allen, the productivity expert, says: “It doesn’t take time to come up with a great idea, it takes space.” What he meant was mental space. We have to wilfully shut out – for just a moment – the emails, the demands, and make mental space. You can make that time for good strategic thinking in the time you have –15 minutes, 30 minutes. You don’t need much.
Countermeasure #2 Understand where your time is going currently In winter 2018, I embarked on a time-tracking experiment. Every day in February I marked down every 15 minutes between 9am and 6pm, to see where that time went, and where it was being wasted. You need to identify the pockets where you can build in more time for strategy.
Countermeasure #3 Reframe what busyness means Shift from a culture where busy means you are important and in demand to meaning you are in control of your own time. If we can make that shift in our own minds, we can realize that busyness is a choice.
First steps
How do we begin this journey? By accepting that strategy is important, we are already on the right path. It is the second step that leaders find much harder: if we know that strategy is important, we have to stop making excuses not to do it. Leaders have a perverse bias towards busyness. Making the case to others for their having thinking time is relatively easy. Making the case to themselves is infinitely harder. — This article is based on Dorie Clark’s presentation to the Global Peter Drucker Forum 2018, hosted by Duke Corporate Education’s Professor Tony O’Driscoll Q3 2019 Dialogue
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How to say “no” to feedback Douglas Stone & Sheila Heen explain how to reject feedback – without getting fired
As communication consultants, we spend a lot of time extolling the benefits of feedback to both individuals and organizations. Feedback helps you learn and improve; if you receive it well you are seen as being more competent and easier to work with, and the organization benefits from your improved skills and relationships. It all seems clear-cut. Until, that is, you place this pro-feedback stance into the context of real people, with real jobs, in real organizations, surrounded by real colleagues. The abstract advice to “take feedback” gets complicated quickly. “What about bad or wrong advice? What if I’m already at maximum capacity for Dialogue Q3 2019
personal change? What if I know they’re just giving me this feedback to tick the boxes?” Are there times when a person is better off not taking feedback? Of course. The question then becomes, how? Can you turn down feedback at work without it damaging your reputation, relationships and job security?
Three kinds of coaching
In our book Thanks for the Feedback, we observe that, broadly, there are three kinds of feedback. They are: appreciation – “thank you for your efforts”; evaluation – “here is where you stand compared to others”; and coaching – “here’s
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Are there times when a person is better off not taking feedback? Of course. The question then becomes, how?
what you could change to improve”. We’re going to focus here on coaching feedback, because coaching asks something of us: we take it or dismiss it, we change or we don’t. There are three kinds of coaching. Understanding which kind you are getting is the first step in engaging skilfully with the feedback. Improvement coaching This is the kind of feedback most of us think of when we talk about coaching: if I am a feedback giver, my goal with improvement coaching is to help you get better at something. “Here’s what you are doing that is getting in your way, and here’s what you could
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do that would help you get better at it.” Relationship coaching My goal in giving you relationship coaching is to make you aware of how your behaviour affects me and our relationship. For example: “I worry that when you introduce me to clients as your ‘young colleague’, the client will hear that as a sign that I’m inexperienced or unqualified.” With relationship coaching, I want you to change, not because it will be better for you, but because it will be better for me, and for our relationship. Command coaching In a hierarchical Q3 2019 Dialogue
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organization, you will sometimes be on the receiving end of a command: “Do this or else.” What makes something a command is partly a function of the intention of the giver – “I’m the boss, and I’m telling you what to do, so do it” – and partly a function of the “or else” element – “if you don’t do this, you won’t be staffed on the project.” You can say “no” to all three kinds of coaching. But if feedback is a ‘gift’, it is true that some gifts are easier to return than others.
can find ways to move forward that work as well as possible for both of us.” So when your boss says, “From now on, we’re all going to work from the office and not from home,” instead of giving a blunt yes or no, you could say: “I will of course do what you decide. I’d like to understand more about your thinking on that, what interests you are hoping to meet, and to discuss whether there may be legitimate reasons for sometimes working from home that will not create bad precedents or undue administrative burdens.” You are respecting your boss’s authority, while still inviting problem-solving. It won’t always go your way, but often, you can meet some of your more important interests – and you can do it without incurring costs to your reputation or relationships.
Command coaching
Saying no to command coaching is the hardest. If I give you command coaching, and by actions or words, you reject it, I am left to think one or several of the following: you are insubordinate; you don’t care about succeeding; you are selfish; you are not a good communicator; you aren’t a good match with this organization. Is it possible to reject command coaching without creating these impressions? To a degree, yes. The key is to recognize that you can have a conversation and problem-solve, while at the same time respecting the fact that your boss is the ultimate decision-maker. You aren’t saying, “You’re the boss, so ‘yes’.” Nor are you saying, “I don’t care that you are the boss, ‘no’.” You are instead saying, “You’re the boss. This is your decision to make and I’ll respect that decision. And, let’s problem-solve and see if we
If feedback is a ‘gift’, it is true that some gifts are easier to return than others Dialogue Q3 2019
Declining feedback that is given in an attempt to improve a relationship can be tricky. The first step is to determine whether a piece of coaching is relationship coaching or improvement coaching, and that’s not always easy. Continuing on our earlier theme, imagine that a colleague – not a boss but someone lateral to you, or perhaps even a subordinate – offers you this bit of coaching: “Being in the office more, rather than working from home, will make you better at your job.” This is framed as improvement coaching, and as such, is easily dismissed: “Hey, I work far more efficiently from home, so that’s what I’ll continue to do.” But what if your colleague isn’t intending to give you advice for your sake, but for hers? Let’s imagine that your colleague actually wants you in the office because she periodically needs you to sign cheques to pay the contractors she’s hired. Your uncertain whereabouts creates stress for her, and sending out emails hunting you down takes time and emotional energy. That moves the discussion into the realm of relationship coaching, which at its heart contains information about the impact your behaviour is having on the other person. It boils down to this: “When you do x, it has y impact on me. Please don’t do x (or please do z).” When you receive relationship coaching, it’s crucial to seek to clarify the impact your behaviour is having: “Tell me more about how my
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Relationship coaching
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If you eventually choose to say no to the feedback, how you do it makes all the difference
unpredictability affects you. How often do you write cheques, and what happens when you’re waiting for me to come in and aren’t sure when that will be?” Communicate to the other person that you care about this impact, and then, as with command coaching, negotiate. If you eventually choose to say no to the feedback, how you do it makes all the difference. “Hey, I work far more efficiently at home, so that’s what I’ll continue to do” fails to acknowledge that you understand or care about the other person’s concerns. Better to say: “Now that we’ve discussed it, I understand that my work patterns are causing extra work and anxiety for you. Here are the costs to me of coming in more regularly. Let’s consider whether there are ways to reduce some of the work and anxiety on your end that don’t cost me as much in lost time and productivity.” Just as you can dis-aggregate authority from problem-solving when given command coaching, with relationship coaching, you can dis-aggregate care for the impacts of your actions on others from problem-solving.
Improvement coaching
The easiest kind of feedback to dismiss is improvement coaching. Improvement coaching is about me and for me, so it stands to reason that I am in the best position to know whether it will actually help me. But while improvement coaching is mostly about me, it is rarely only about me. The person giving the coaching has an ego interest in knowing that their coaching is respected. No matter how much they stress that the feedback is just for my benefit, they are watching to see what I do with it. If I don’t take it, they might also conclude that I’m simply not interested in improvement. So, though easier to navigate, setting aside improvement coaching is not without its challenges. Let’s return to our scenario about working from home. In our first iteration, a boss commands you to come in; in our second, a colleague wants you to come in mostly for her benefit. In this third iteration, let’s assume a mentor gives you genuine improvement coaching, with the sole purpose of helping you with your career: “I know it’s more efficient to work from home. At the same time, getting to really know the head people here is going to help you in your career. So, whether it’s efficient or not, you should plan on coming in a couple of days a week.” Before deciding whether to take this coaching, you should work to understand it and to make sure the person giving the advice knows you understand it. Start with inquiry. Ask about how coming into the office helped your mentor, and how he imagines it will help you. Once you’ve made a decision, circle back and share it with your mentor. Share not just your
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conclusion (“I’m not coming in”), but also your reasoning. Explain your thinking about what you imagine you’d gain by coming in and how you see the costs. Make clear that you have carefully weighed the decision: “When you started here four years ago, the organization was really small and the founders made all the decisions about advancement. It’s my understanding that now, decisions about my career are made not by the founders but by the VP for production, and I know him really well. I live one town over, and he and I have lunch at least once a week. While coming in to the office might help me in other ways, in terms of career advancement, I’m better off devoting my time to developing content rather than commuting.”
Trust in transparency
In all of these conversations, transparency is your ally. You don’t have to guess whether a comment is a command or a suggestion, or whether it’s for your sake or for the benefit of the feedback giver. You can ask. If you’re unsure about what sort of conversations your work culture supports, you can ask about that too: “We’re being told to work at the office from now on. If we have thoughts or questions about that, what’s a respectful way to raise those?” Turning down feedback is rarely easy, but in many situations, with skill, it’s possible to do so without incurring undue costs. Determine which kind of coaching you are getting and inquire into the other person’s interests. Once you’ve made a decision, share your conclusions, and also the reasoning that led you to your conclusion. You can say no, but how you say it matters. — Douglas Stone and Sheila Heen are founders of Triad Consulting Group, lecturers at Harvard Law School, and the authors of Difficult Conversations: How to Discuss What Matters Most, and Thanks for the Feedback: The Science and Art of Receiving Feedback Well Q3 2019 Dialogue
9 Join Sophia the Humanoid Robot and her Creator Dr David Hanson
along with other well known thought leaders for the Duke CE Davos of Human Capital 2019
11 July 2019
The Campus, Sloane Street, Bryanston, South Africa - www.dukece.com/Africa
For special packages with options to live stream/group bookings/branding at this event please email Julia.cook@dukece.com
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VIVEK WADHWA
Nobody is born into business
Who wants to be an entrepreneur? Vivek Wadhwa is distinguished fellow at Carnegie Mellon University’s College of Engineering and author of Your Happiness Was Hacked
Maybe she’s born with it? Actually, it turns of American business founders. They out she isn’t. And nor is he, or them, or discovered that, just like me, most came any of the other millions around the world from modest, non-entrepreneurial who have made a great living as successful backgrounds and had demonstrated little businesspeople. Research from Duke and or no prior interest in striking out alone. Harvard universities reveals that anyone What most did share was the academic and can be an entrepreneur. lifestyle foundation of a college major. Many The old myth ran that entrepreneurship had tired of working for someone else; some was in the blood. Like business Jedis, if your had a great idea and didn’t trust others to father had it, you had it. Yet in reality there commercialize it; or they’d simply woken is no bloodline: familial business success up one day and decided they needed to turns out to be a poor indicator of one’s rapidly build wealth before retiring. own success. Moreover, prior interest in The final point speaks to another entrepreneurship – even extreme interest important finding: age is no barrier. in it – show similarly low correlations. Indeed, being over 40 at the point of entry So what does point the way? Attending was a strong indicator of success. The university, it transpires, points a clearer average founder of a high-growth company path to business excellence than your launched his venture at 40, was married father’s footsteps. and had two or more Anybody can be an children. These family entrepreneur. Yet the men (and women) To start a business: world does not see had several years of have a great idea, it. The myth is that work experience and pursue your passions tech innovation is the understood the real rightful province of a world, having worked handful of genetically in it. They had simply entrepreneurial types in Silicon Valley. The had enough of grafting for ‘The Man’ and simple truth is that tech entrepreneurs lack wanted to rise above a comfortable, salaried anything special about them – they merely middle-class lifestyle and into real wealth. saw an opportunity and grabbed it. And as for my fellow Indians? Don’t I became an entrepreneur at the tender believe what the graduates of the Indian age of 33, having developed a revolutionary Institutes of Technology (IITs) say, they technology at investment bank First don’t dominate Silicon Valley. A college Boston. IBM offered to invest $20 million in degree is a major factor, but it need not it – provided that we spun the technology be from an IIT – those august institutions into a new company. I was a living, are the alma mater of only 15% of Indian breathing exploder of the myth. My father immigrant tech and engineering company was an official for the Indian government; founders. A much less elitist public my mother, a teacher. I had precisely zero university, Delhi University, graduates entrepreneurial ambitions, no particular twice as many Silicon Valley founders. This interest in becoming a businessman, nor is the same all over the world: graduates any uncles or aunts hidden away who had of elite schools don’t have any advantages themselves been innovators. Yet I thrived. other than the designer university label. Years later, when I eventually hung Time at college is very useful. But the up my entrepreneur’s hat, I moved into oldest lessons about going into business academia and set out to discover what prevail: have a great idea, pursue your factors in individuals’ lives predicted an passions – and ignore anyone who says you entrepreneurial life. My teams at Duke have the wrong background. In business, and Harvard began researching thousands the apple rarely falls close to the tree. Q3 2019 Dialogue
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Digital transformation: getting it right Digital demands different strategic approaches. Radhika Palany explores six make-or-break areas
Digital is no longer just a buzzword: as Gartner’s 2018 CIO Agenda Report showed, it is a top three business priority. Yet digital transformations continue to suffer from high failure rates. Most companies struggle to move past experimentation, with only a minority reporting successful scaling or harvesting of their digital investments. There are six critical areas where digital transformation demands a different approach to conventional business strategy and management practice. Relevant in Fortune 500 global companies, start-ups and the public sector alike, they can each be the difference between success or failure.
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Clarity and commitment
Making digital a strategic management priority is key. A digital investment in one part of the business often requires cross-financing, cutbacks or change in another, causing conflict and delay. By incorporating digital success metrics into business-unit goals, leaders can ensure cross-functional alignment and commitment. Paradoxically, digital visions are often unclear, based as they are on evolving technologies whose business applications are not yet fully understood. Education ministers’ inspiring visions, such as ‘digital education 4.0’ and ‘anytime, anywhere learning’, often cause widespread confusion in the public administration and resistance from teachers as they are light on detail. Visionary leadership must be combined with execution clarity. Having the right metrics can help unblock resistance to change, as one major software firm found out. Having missed first quarter sales targets for a new flagship digital product, leaders realized that the problem lay with their
Dialogue Q3 2019
conventional sales metrics: commissions were based on total revenue, across all products, and since the new product was heavily discounted to gain market access, it was demotivating sellers. By switching the metric to units sold, the company created immediate sales momentum.
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Culture of learning and growth
Digital puts organizations under unprecedented pressure to learn on-thego at the same time as delivering growth. A strong learning culture, open to risk-taking and failure, is crucial – yet all too often, companies underinvest and even ignore this critical soft capability. Take the example of a global consumer electronics giant – a $32 billion business with 1,000 employees across 40 geographies. Embarking on a major digital transformation, the company president said: “We will see if we have the DNA for this.” He was referring to the Herculean effort required for people to unlearn old practices, learn new skills, and find new ways of creating value. Digital transformation presents a major test of how far the organization’s culture supports its people in that effort.
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Workplace of the future
Digital affects organizations at functional, operational and resource levels, and often in unexpected ways. For one mid-sized office supplies company, the decision to switch to a customer relationship management (CRM) platform initiated a series of unanticipated changes that included setting up a new sales operations function, outsourcing unmanaged
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Visionary ideas about digital investment must be combined with execution clarity
sales, reorganizing key accounts, making external hires, and re-aligning roles and responsibilities across various customerfacing functions. Creating the workplace of the future means planning for a dynamic future state. It starts with transitioning to flexible and scalable resource models, investing in digital skills development, and modelling future workplace scenarios where technology and talent augment each other in deeper ways.
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Digital portfolio
Most companies today have a website, mobile app and social media presence – essential digital assets for staying relevant. Every company must go further to ask: “How can newer technologies be exploited to enhance our mission or core competency?” The challenge for digital native businesses is doing this profitably, while for traditional brickand-mortar businesses, the question is how to migrate towards a blended portfolio. What is the right digital/physical mix for your business? Strategic investments over two decades have enabled Whizz Education, a British scale-up, to evolve to the right mix and continually advance its mission of delivering personalized learning at scale. Whizz switched from CD-based content to a web-based platform to reach new learners, and is currently migrating to HTML5 to further expand its reach to mobile learners in emerging markets. Continuous research and development has resulted in cutting-edge personalization, learning intelligence and implementation expertise, transforming the product to a profitable software-as-a-service portfolio.
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Digital backbone
Leaders must take a comprehensive view of the organization’s readiness to support the digital vision, including its backbone: infrastructure, systems and processes. The leadership challenge is to ensure business continuity while switching critical business infrastructure. When the legacy sales reporting system of a leading
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European enterprise IT company failed to provide the level of intelligence required to support business growth decisions, the company decided to switch to a sophisticated real-time, big-data capability. This meant structural changes to the back-end, affecting both internal systems and the sales infrastructure and commercial agreements of over 75,000 external partners. A two-year transition period allowed the firm to successfully manage the inherent risks and ensure continuity.
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Digital marketplace
New technologies tend to disrupt the regulatory, technical and commercial environment, creating high levels of volatility, uncertainty and change. When the EU’s General Data Protection Regulation (GDPR) came into effect in 2018 it effectively pulled the plug on a major cloud provider’s strategic investment in building a solution tailored to German data privacy regulation. One highpotential digital music start-up had to file for liquidation due to weak productmarket fit: after spending significant time and funds on building a world-class product, the company discovered that customers were not willing to pay for it. Participating in the digital economy calls for brave leadership, foresight, speed and sharp business acumen. Decisions on when and how to enter the digital marketplace determine competitiveness and profitability. Market leaders tend to take key positions in shaping the digital economy by providing thought-leadership, building advocacy and community engagement, influencing industry standards and regulation, forging strategic partnerships, and incubating the partner ecosystem. As technology development cycles shrink and tech-biased Millennials drive consumption and business decisions, industry will be compelled to continuously digitize. It may be time, therefore, to re-position digital transformation as a sustainable investment strategy much like product R&D, rather than a one-time fix aimed at bolting-on the latest technology. A longer-term view will shift the focus to building the critical underlying capabilities needed to thrive in the digital economy, which so many companies lack today. — Radhika Palany is a global technology leader and managing director of Bluesea International, an advisory firm specializing in digital and commercial leadership Q3 2019 Dialogue
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Digital in HR: people first Technology will transform HR, but people need to be at its heart. Sharmla Chetty, Hans Kuipers & Yann Letourneux look to the future
Transforming recruitment
With firms competing for the best talent, recruitment is an area of potential strategic advantage, yet HR often struggles to deliver excellence. The day is long gone when HR could simply post a job advert and wait for applications to flood in. HR has to actively hunt out the best candidates and attract them to the organization. Doing so is time-intensive – which is where AI can help. Automated search processes can free up HR professionals to spend more time where it counts. Plus, technology enables companies Dialogue Q3 2019
Automated search processes can free up HR professionals to spend time where it counts
to tap into far bigger candidate pools. When automated systems can scan thousands of profiles in moments, screening processes need not be constrained by the hours in the day. They can also help reveal hidden talent among internal candidates and can support diversity, bypassing the proven biases of traditional candidate screening processes. One ground-breaking system is HireVue. Candidates record short video answers to a set of questions. The first stage of screening is done by the software, assessing not only the words used by candidates, but their tone of voice and audible signals of stress. Such technology is unlikely to replace job interviews, but it can help ensure that only the very best candidates make it to the interview. Yet for all the sophistication of digital recruitment software, its application still rests on the very human work needed from HR to define the skills and capabilities required in any given role. That demands real understanding of the business, and it requires focus: some companies claim to need up to 15,000 skills, when a more realistic number is usually 200-400. Software alone cannot make those decisions, so HR’s work is crucial, laying the foundations that underpin digital processes.
Onboarding
Another key advantage of digital is in onboarding
The Marketing Society
HR professionals: welcome to the early stages of a profound transformation. The digital revolution is starting to reshape the HR profession in fundamental ways. Technology is already able to deliver some of HR’s core responsibilities better, faster, and with greater reach than humans. Yet people cannot be designed out of HR. In fact, the opposite is true. Digital allows HR to refocus on its central purpose – people. That focus must be at the heart of the plethora of changes that digital is beginning to unleash across HR. Smart use of HR analytics can underpin improved strategic workforce planning, with better projections enabling earlier action. More targeted employee branding can improve the attraction of talent. Chatbots and virtual assistants can support training and development, as well as helping employees with questions about company policies or benefits, while development needs can be identified through better HR analytics and the pro-active management of the competency matrix. AI can also support engagement and retention, predicting if an employee is about to leave the company, enabling timely counter-measures. No business can yet claim to have exploited the full range of these potential benefits, but there are examples that point the way ahead – especially in recruitment and onboarding.
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talent. New hires need to be productive at the outset. One American bank found that its preparation for new recruits was so poor that only 10% were fully ready to work on day one; for 30%, it took more than ten days for the company to provide everything they needed, whether it be laptops, email accounts, or building access. A major global healthcare company calculated that chasing the teams responsible for delivering these preparations ate as much as 5% of recruiting managers’ time. Yet this could straightforwardly be automated: the (electronic) signature of an employment agreement should trigger tickets with relevant teams, with the hiring manager able to monitor the process much more efficiently. This frees up time that can be more productively spent on the work that adds real value to their organizations: the human dimension of providing leadership to the people they work with.
AI can also support retention, predicting if an employee is about to leave
Leading change
It has been estimated that 800 million workers globally could lose their jobs by 2030, thanks to automation. Almost all of us will see significant changes to our work as different tasks are automated and as our roles are re-aligned with the digital model, and HR will have a critical role to play in providing effective support and development opportunities for employees –
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many of whom will struggle to cope with change. Of course, like other support functions, HR also has to evolve and grow its own digital capacity. Fully realizing the potential benefits will demand that HR develop a better grasp of technology, but that cannot be at the expense of the human skills required for engaging and working effectively with partners across their organizations. Success means putting people first. HR, with its responsibility to develop talent, must also have its finger on the implications of change more broadly. There is a role for HR to engage with communities and society to prepare for the future. Like any area of business, digital has transformative potential for HR. The potential of new technologies to help HR leaders support business success is increasingly clear. This will lead to an augmentation of people’s roles, not their wholesale replacement. Digital has to make HR more human, not less. — Sharmla Chetty is president, Africa, and global managing director, Europe and Africa, for Duke Corporate Education. Hans Kuipers is partner and managing director, and Yann Letourneux is director, at Boston Consulting Group. — Duke Corporate Education is hosting The Davos of Human Capital in South Africa on 11 July. The event will explore the impact of technology on business and society, with keynote speakers Dr David Hanson and his robot creation, Sophia (pictured above). More information at www.dukece.com Q3 2019 Dialogue
Immediate impact, growing advantage. At A.T. Kearney, we pride ourselves on our uniquely collegial culture and care passionately about our work and our people. We offer our clients a range of global capabilities anchored in our heritage of essential rightness. The same promise we make to our clients—immediate impact, growing advantage—we offer to our people. Working together, we drive immediate results and help build lasting, transformational advantage. Consulting Magazine has recently named A.T. Kearney as one of the Best Firms to Work For 2014 and honored the firm with an Achievement Award for Excellence in Diversity. For more information about A.T. Kearney and to read some of our latest thinking, please visit www.atkearney.com.
A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world's foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues. For more information, visit www.atkearney.com.
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PHIL YOUNG
Human forecasting wins the race when data is absent
Riders in the storm Phil Young PhD is an MBA professor and corporate education consultant and instructor
The story that goes along with the numbers is just as compelling as the numbers themselves, if not more
The apocalyptic effect artificial intelligence will have on financial planning and analysis (FP&A) jobs presents as a foregone conclusion. But it isn’t. In my previous column (Dialogue, Q2 2019, page 53), I showed how FP&A professionals can confront the gathering storm by working closely with other functions to find ways to grow their company’s revenue. There are further opportunities. FP&A professionals should consider their role in cases where data is quite limited. There are countless examples of this – most dramatically the high valuations given to digital and tech companies that have yet to go public. What drives the billion-dollarplus valuations of these ‘unicorns’? Many are unprofitable. Some have not been in business long enough to have sufficient data points for reliable statistical forecasts. Few have much to commend them other than a great idea. Take, for example, Peloton, a New York City-based company that makes and sells exercise bikes. By securing $550 million in its most recent round of funding about a year ago, it had an implied valuation of $4 billion in only its sixth year of business. At first, Peloton had trouble convincing investors that it had the potential to rise above the many existing forms of bike exercising. And its lack of financial history made it difficult to convince venture capitalists that the risk-reward trade-off was worthy of investment. No amount of pro-forma projections could get the wheels turning. In those early days, it had to scrape together money from angel investors. Could a professional of the type found among FP&A teams in large companies have been of much help to Peloton in its early days? Probably not, because there was very little financial data. And what data it could project was mistakenly compared to the wrong type of business model. Yet things eventually got into gear – Peloton’s most recent round of funding brings the total amount of equity capital raised to $1 billion. In retrospect, we now see that what fuelled Peloton’s phenomenal growth was
the recognition by a few brave investors that it is a provider of an innovative exercise-bike experience, rather than just a seller of exercise bikes. Its customers are willing to pay about $2,000 for the bike, a $250 installation fee, and $39/month to enjoy live streaming cycling classes. Peloton cyclists also comprise a kind of community, using social media to exchange fitness stories and motivate each other. Reports of Peloton’s most recent round of funding indicate that it encountered little trouble raising the money. After six years, it has achieved some very impressive financial results. It has been growing its top line by over 100% every year since it began, and was scheduled to be worth about $700 million by the end of its 2019 fiscal year. Moreover, says its chief executive John Foley, the company is profitable, unlike some of the more valuable and wellknown private companies such as Uber. An FP&A professional would have no trouble presenting these kinds of numbers. But in my view, the story that goes along with the numbers is just as compelling as the numbers themselves, if not more. In my opinion it is most likely the story, rather than the numbers, that drew in the big-time investors in Peloton’s latest funding round. Indeed, the general partner of TCV, one of its major investors, says that Peloton’s business model reminds him of Apple’s App Store, and that its subscription model – aka recurring revenue – recalls that of Netflix. In Peloton’s early days, a comparison to these two market-cap giants would have been as good – probably better – than any dreamt-up pro-forma hockey stick graph of revenue and cash flow. Everything is clear looking back, but wouldn’t it have been nice if Peloton had told this story to its early investors? And, for financial professionals, wouldn’t you have been proud if a finance person, steeped in the mantra of recurring revenue, had been the one to advise Peloton to pitch the Apple/Netflix story? Now that’s FP&A going beyond the numbers – and making themselves fit for the future. Q3 2019 Dialogue
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Dialogue Q3 2019
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Transforming Nedbank A fast-changing business environment demands speed and agility from executives. Dean Retief explains how Nedbank shifted gear
To be successful, the bank had to change faster than the world around it
Like many banks, in 2015 Nedbank faced a combination of circumstances that were reshaping the business environment. Increasing regulation, competition and changing customer expectations were combining with a macroeconomic slowdown. The advent of fintech – technological innovation used to support or provide financial services – was creating many new business models, applications, processes and products. The rate of change was accelerating. Chief executive Mike Brown believed that the bank faced a choice – between turning inwards and looking outwards and embracing change. He says: “As incumbents facing disruptive fintech companies, we have many advantages, such as our customer base and our trusted brand, based on a strong history of successful financial trading. That puts resources at our disposal that, if we invest wisely, can be used to transform our business to be a leader in digital banking. The challenge was to create our own burning platform for change and not be drawn into complacency. My mental picture was that to be
successful and grow, the bank had to change faster than the world around it.” The challenge for Nedbank’s leaders was that the skills needed to lead and inspire change are generally very different from those required to manage the status quo and deliver to budget. Many of our people were risk averse, with a managerial bias for hierarchy, reviewing and monitoring. However, those attributes also made us inward-looking, less nimble and slow to change. We wanted to balance our existing skillset with leaders who could speed up our rate of change, shifting from slow and top-down, to fast and dispersed, yet aligned. In short, we needed a culture change. Brown elaborates: “If the key focus of our strategy is innovation to provide market leading customer solutions, then we need the culture and values of our leaders to align to deliver the strategy.”
From the top
To be effective, change has to start from the top. We started with the Nedbank Executive team (Exco), working with consultants to explore the Q3 2019 Dialogue
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strategies of the leading digital players in the world, and to shift our agendas from a process orientation to focus on working as a team to lead accelerated change for the benefit of our customers. The Exco’s learning journey is still ongoing – but we have changed our mindset to be more learning-oriented, more client-focused, more competitive, more digital and more agile. The next challenge was to spread this outlook wider so that other senior leaders felt the same level of ownership for leading change and delivering strategic outcomes. We wanted the next level of leaders to become invested in the strategy – and to stop kicking problems and blockages back up to the Exco. We had a well-established set of leadership development programmes, but we wanted to create a new experience for executives that could deliver something very different: radical new ways of thinking; the capability to look critically at the bank and devise solutions that would create competitive advantage. Our existing development programmes were no longer fit for purpose. Working in partnership with Duke Corporate Education, in 2017 we launched the Executive Business Transformation Programme (EBT) to enable key executives to look at the bank from outside-in. Our driving idea was that the future is uncertain and no-one has the answers, so we need our leaders to be more curious, more comfortable with the unknown, more open-minded and more willing to learn.
Developing learning leaders
We wanted to make learning fun, to create executives as curious and open to learning as they had been at the start of their careers. Our new programme focused less on sitting in classrooms listening to great ideas, and more on active participation in new ventures. The EBT has many of the hallmarks of a top-level development programme that you would expect from a global company. We created three modules, on strategy execution, customer centricity, and disruptive leadership in a digital economy, linked by inter-session work like webinars and coaching. But two things really made a difference. The first was the decision to travel to observe and learn; and the second was how we actively engaged participants in enhancing the strategy of Nedbank. Instead of sitting at home in South Africa or going to a world-class business school, we held each of the three modules in a location where radical change is happening in real time: the three ‘Silicon Valleys’. The first visit was to Silicon Cape, a catalyst for tech innovation in South Africa, home to a community of entrepreneurs, developers, creatives, angel investors and venture capitalists. The second module was in Kenya, where techies are creating the so-called Silicon Savannah. This $1 billion Dialogue Q3 2019
tech hub is home to more than 200 start-ups, as well as established companies like IBM. We looked at design solutions to match customer needs, rather than trying to put customers into marketing boxes. For example, we saw ‘ATMs’ that provide a cup of milk, and learned how the company BRCK is connecting off-thegrid schools to the internet with innovative technology. And the third module was in the iconic Silicon Valley in San Francisco. These visits immediately took participants out of their comfort zones, a precursor to unlearning and subsequently adopting new ideas. Participant Lizzy Mogale said: “It was my second visit to Kenya, but it was interesting to hear some other participants initially question whether there would be anything to learn there. The elections in Kenya were announced and this made some people nervous about going there at all! We were so risk averse – it was good to have our landscape shaken so that we could grow and transform as leaders.” The second difference was how we engaged participants in our strategy. Our chief executive set the participants, working in syndicate groups, a strategic challenge. In some development programmes, this sort of exercise can be somewhat rote: not particularly strategic, or something that already has a fulltime team working on a solution. Not so for us, as Mike Brown elucidates: “The challenge we set was critical to the long-term success of our organization. It forced the cohort to become incredibly engaged with the current strategy, rather than sitting back and criticizing a strategy or an emerging environment they haven’t really understood. They moved from questioning to participating and enhancing.”
The EBT was touch and feel – really experiential – and I find learning and doing to be transformational Brinsley du Plessis
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It was good to have our landscape shaken so that we could grow and transform as leaders Lizzy Mogale
Outcomes
The real success of any development initiative lies in its legacy. What has really changed in Nedbank as a result of the EBT? Do our senior leaders act differently and can our customers, and the business, observe and benefit from the changes? Brinsley du Plessis, business design and enablement executive for business banking, was a participant in the first cohort in 2017. “I had been on a lot of our existing leadership programmes, which I really benefited from, so I was both curious and a little bit nervous to see how the new programme would work. You get a lot of theory on a business school programme like Insead. The EBT was touch and feel – really experiential – and I find learning and doing to be transformational in a way that theory isn’t. “Soon after the programme I convinced my boss that our next strategy session should follow a framework I learnt through the EBT, with the premise that if you focus on answering customer-centric questions, the financial target will follow – the opposite to what we usually do. “It was the best transformational meeting we had held. We have also been proactive in adopting the design thinking competencies and our customers have noticed the difference, as we have used these practices and routines to identify real staff and client problems – often the problem you start out to fix turns out to be an adjacent, rather than the core, challenge. “Using this methodology we have significantly reduced turnaround times for two of our product lines: in one case we improved from an average of 40 days down to seven, and in the second case, from 25 days to 12. Customers and staff alike are delighted with the improvements, as these were previously significant pain points for them. Now, we know we can improve even further.” Lizzy Mogale again: “On the EBT, the calibre of speakers was excellent: global trailblazers who understand the ‘why’ behind what they do, who live life for a bigger purpose and who want to change the world. Every day I now ask myself, ‘what am I doing to change the world?’ It’s about being curious, passionate and having the desire to have a positive impact. Environment and context can shape your thinking, so I proactively
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take myself out – read different topics, work in different locations – so that my thinking doesn’t get stuck. I am responsible for driving our annual leadership conference every year and at our last one, participants said they didn’t even feel like they were at the bank. The space, the activities and the speakers were hugely energizing.” Veona Watson, executive head of HR, strategy and special projects for group finance, was probably the most reluctant participant recruited to the programme – and is arguably now its biggest advocate. “I had for many years wanted to attend the Insead AMP and was thrilled to have been nominated for 2017, but not by any means thrilled to hear that I would be on the new EBT pilot instead,” she said. “I had reservations about it being a pilot, I had reservations about a programme where all the delegates were from the same industry – actually the same bank - and I had reservations about the emphasis being on digital and client-facing delivery while I was seeking personal growth as a leader. “I could not have been more wrong. I was entrenched in one way of thinking based on my 30 years of experience. The EBT has been a catalyst for me and I am now on a completely different leadership trajectory. In fact, one colleague said to me recently: ‘Who are you and what have you done with Veona?’ “In the past I would jump fast to problem resolution – today I have learnt to fall in love with the problem, to understand it in all its complexity, and only then to move to an answer in collaboration with others. People in the finance function tend to be very black and white about issues and we see it as our job to maintain financial control through educating and correcting others. Now I have broadened my view to understand that we are uniquely placed to provide strategic insight. We can maintain financial probity while at the same time being open-minded and willing to engage with others in resolving challenges. It’s about how we work with others and take their perspectives into account – we need to listen and learn, not act through decree.” Chief executive Mike Brown reflects on the impact of the programme. “It is energizing to hear feedback from the groups. It is clear they have learnt a significant amount, but more importantly, they have a different level of energy around teamwork, growth and innovation. They also have a significantly improved network, which is vital, as we can only deliver our strategy together. Our leaders have never been short of analytical skills. Through a programme like the EBT, they are shifting to be more people-centred and creative as well, and I have no doubt the customers of Nedbank will feel this change.” — Dean Retief is the HR executive for organizational effectiveness at Nedbank Q3 2019 Dialogue
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Reshape the role, shape the strategy Chief finance officers must embrace soft skills to become the most valuable voice in the room, writes Donna Williams
Who best understands the universe? Might it be astronomers, or quantum physicists? Actually, it could be accountants, according to famed particle physicist and broadcaster Professor Brian Cox, OBE. Numbers and analysis, Cox declared at finance conference QuickBooks Connect earlier this year, are vital skills when it comes to sensing patterns in our wild, uncertain world. Certainly, the point can be made for boardrooms everywhere, where finance officers are using their analytical skills – and increasingly being asked to take the helm in today’s choppy Dialogue Q3 2019
VUCA waters. Examples of chief financial officers who have successfully taken the wheel of their company ship include Indra Nooyi at PepsiCo, Peter Voser at Royal Dutch Shell, John Dasburg at Northwest Airlines, and the former bean counter whose 23 years at Capita made him one of the longest ever serving FTSE 100 chiefs, Paul Pindar. They all share and utilize the key tools for deciphering the way forward: steadiness, focus, a finely tuned analytical mind and sharp critical thinking. But what makes them stand out from the crowd is an ability to collaborate.
Traditional finance officers who embrace collaboration become the most valuable voice in the room
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Skill up or step down
Chief finance officers are natural primary stakeholders of both big data and big decision discussions. They empower decision-makers with salient, simplified, detailed analysis. Facing increasing levels of uncertainty and relying on technology and processing power, leadership regularly turns to the finance function for the voice of reason. Today, the chief financial officer is a leader of analysts, accountants and hyper-intelligent techies. Tomorrow, they may find themselves with the majority stake in any number of business sectors. The success of the CFO-turned-companywide-leader is determined by one thing: their ability to collaborate.
The CFO used to be the person in the organization who knew the most about the financial state of the business and could choose how to share this knowledge. Today, the CFO needs to be more transparent and make financial information available to other departments so they can operate more efficiently, make decisions quicker, and do the right thing sooner… CFOs are challenged with turning the numbers into something meaningful… The integrity, flexibility, and speed of that information enable your management and staff to more effectively manage the business. Chris Pass chief financial officer of John Muir Health
Shutterstock
Imagine a leader not only in possession of the strongest numeracy and analytical skills in your corporation, but who is also able to communicate valuable findings effectively, extracting information and opinion from the most insightful and experienced representatives of each and every department. Then consider the idea that that same leader could merge all of those resources into a single stream of strategic consciousness. When a CFO truly embraces soft skills, that becomes a reality. Deploying powerful collaboration skills can break down silos and see teams construct creative, costeffective solutions leading to a competitive edge in the market. But true collaboration is a far cry from the accountant’s abacus.
Don’t go it alone
Business unit specialists and heads of other core business divisions bring years of experience,
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insight and understanding of performance in their areas, and are able to lend big picture thinking, speed and accuracy to big data forecasts. Collaborating effectively with all of them, however, requires numerous new soft skills, including active listening, problemsolving, relationship-building and – the big one – actually valuing the opinions of colleagues and peers.
It’s not my style to sit in my office; I will go to where they [colleagues] are and engage them… You want to emphasize the importance of having good interpersonal skills with your fellow stakeholders and other departments. Part of my job is really to coach.” Raymond Yeo chief financial officer of Epsilon
As many companies push CFOs towards the very top of the tree, there can be a temptation for those who find themselves bestowed with new powers of influence to ignore the input of their peers. They must remember that those people have ideas and strengths, each with teams reporting into them. They are the leaders of their own core speciality areas. They are deputies to the CFO’s sheriff, without whose eyes, ears and reports it becomes tough to make good decisions. Furthermore, without the willingness and commitment of the deputies to take action, the business will stagnate and may even crash and the talent disappear. Automated processes and big data alone are not enough to power a corporation nor attract and retain the best people. The finance officer has to be able to act collaboratively and collectively with other senior members of the corporation. As Maersk’s Anders Liu-Lindberg has said, finance leaders need to “move from the role of commentator about what, where, and why things happen, to what might happen and how to make it happen.” Search ‘finance-led strategy’ and the trend is obvious: finance’s analytics and critical thinking increasingly sway corporate decision-making. It is well within reason that finance chiefs could ultimately supersede the chief executive as the most impactful C-level position in the company in the not too distant future. But success requires new skillsets. Without great soft skills, finance officers at the helm could spell disaster. — Donna Williams is a consultant planning director working with e-tailers and retailers including Pepco Europe and Aldo Q3 2019 Dialogue
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The future in your Everyone needs to fix gender bias at work – starting with women themselves. Ilka Dunne explains how Rand Merchant Bank aims to help them
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hands South Africa is still a highly patriarchal society. Inevitably, that affects the way that our businesses operate: and one of the biggest challenges it creates is that women can hold themselves back due to a lack of self-confidence. Many organizations today recognize the need to improve opportunities for women, with measures like parent-friendly policies, genderblind recruitment, or diversity training. But at Rand Merchant Bank (RMB), we realized we had to go further. We needed a fundamental shift in how women leaders are seen. A large part of our approach has been to help our female employees grow in confidence. As one woman explained: “How we grew up is important – my family cultured me. I don’t think my mom had a voice of her own, and so I still find myself responding to an older man almost like my dad.” Women’s own beliefs and unconscious biases can become a self-fulfilling prophecy, leading them to compromise their power. In 2015, seven courageous senior RMB women decided something had to change, so Athena was born – a gender-equality initiative to create an environment where women feel empowered to achieve, and to grow the number of women in financial services in South Africa. Athena is not, however, a women’s conversation: it is a business imperative and it has an agenda that focuses on both men and women. Athena was named after the goddess of wisdom, described by Arianna Huffington as embodying “strength and vulnerability, creativity and nurturing, passion and discipline, pragmatism and intuition, intellect and imagination, claiming them all, the masculine and the feminine” (Thrive, 2015). One of our first initiatives as the Athena team was to create Lotus, a seven-month women’s programme designed to enable women in the organization to find their personal power and the courage to change the direction of their lives.
The Lotus programme
The lotus flower is known for its ability to grow through murky waters, emerging beautiful and brilliant. Our programme provides the Q3 2019 Dialogue
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Lotus gives women the opportunity to confront their own unconscious biases
opportunity for women to get in touch with who they are, to confront their unconscious biases and perceptions of their own power, and to learn how to dial up their natural strengths. Lotus began with a pilot in 2016 with 40 women, and is now run yearly with up to 100 RMB women on each programme. There seems little question that women, despite being already overwhelmed by work, family and community commitments, feel that Lotus is valuable time spent. But exactly what is the impact of these women coming together on this seven-month journey? Ask that of the participants, and one word comes up consistently: courage. Women who have spent long periods of time struggling to make important choices speak clearly about finally finding the courage to have the conversation they have been avoiding, to ask for the raise they feel they deserve, to make the role or job-change they have been eager for, or to renegotiate family roles and behaviours. What has enabled this increase in courage? We believe that there are three aspects: selfinsight, asking for help and sticking together.
Self-insight: getting to know me
Getting in and getting on in the business world leaves little time for getting to know oneself. For many women, this was one of the first opportunities to reflect on how they potentially hold themselves back. Many spoke of the value of getting in touch with their strengths: “My strengths are super powers. Instead of trying to be something I’m not, I get better results being me.” Women at work often try to switch off their emotions because they don’t want to be labelled as ‘that emotional woman’. On Lotus, they learn to embrace their emotions when they realize the powerful insights they bring. As one participant put it: “I believed that it’s wrong to get angry,
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but actually it’s just a sign that something is wrong.” Through engagement with senior women on Lotus, participants have realized that: “You can be a woman but not a pushover. Learning to use your emotions in a better way is powerful.” The trick is to channel the emotion, not be subject to it. One participant reported feeling “quite liberated… more comfortable with who I am, and that has solved a lot of issues, just like that”.
Not doing it all on my own
The second key aspect is learning how to ask for help. Women talk about having a deep-seated need to be independent and self-sufficient. This plays out, not only in the workplace, but also at home and among their friends and community. Asking for support is seen as a sign of weakness, leaving women to struggle on their own – which also denies others the opportunity to be involved and contribute. The belief that asking for help means they are failing underpins unsustainable behaviours. On Lotus, women tell us that although they long for connection, the business environment encourages people to jump to solutions first, so they fall into the trap of trying to solve issues on their own. They take a pile of work home and struggle to complete it alone, worried that they will fail and that others might say they’re not good enough. The need for self-sufficiency also plays out in women’s other roles. Many women worry about how their career will be affected by choosing to be a mother, so they put off having children, or keep it secret when they are trying. When they finally make the call to have a child, they often fall into an unsustainable state of “wanting to work like you’re not a mother, and mother like you’re not a worker”. Traditionally, the mother has had the primary care-giving role in the household. This has historically been supported by workplace policies that give women maternity leave, while generally giving fathers little more than a day or two to bond with his child. Despite a new paternity policy in RMB, many women still feel an overwhelming responsibility to care for their child 24/7, even if this is contrary to what is best for the child, other family members and themselves. The reality is that they cannot be everything to everyone. One new mother admitted her surprise when, rocking her child, she realized how she really felt: “Loving my baby, loving my baby… oh, I’m so bored.” While she was mothering, it somehow didn’t seem right to yearn for the intellectual stimulation she got from working. Having to be perfect without asking for help can leave women feeling under-resourced, suffering burnout, and lonely. Taking some time for themselves is critically important. Then, when they do come back, they are far better
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FINANCE
It doesn’t mean you’re failing when you ask for help. It’s not selfish to take time for yourself
resourced to be “100% okay in every moment”. As women confronted their own biases on Lotus they realized that: “It is not a bad thing to ask for help. It doesn’t mean you’re failing. I used to always feel guilty. But it’s not selfish to take time for yourself. If you’re happy, the household is going to be happy.” This realization has opened space for others. One woman said it suddenly clicked that “it’s good for your husband to spend time with the kids”; another realized the importance of “making space for your children to become themselves – you can’t protect them from everything”. Ultimately, many of the Lotus women realized that they need to “keep the long game in your head. Stop trying to squish everything into every moment. You have another 40 years”.
The power of the tribe
The third and final critical aspect is sticking together as women. Women appear to spend a lot of time judging each other in the workplace. I clearly remember sitting with a group of women on an early cohort. Coming together on this first day, they were incredibly uncomfortable with each other. The space felt unsafe, filled with judgement and there was a tentativeness around how much they could share with each other. That night, they were encouraged to tell personal stories around the dinner table – and they opened up to each other. I will never forget what it felt like to sit in a circle the following morning. One at a time, the women admitted to the judgements they had held the day before, and to their new awe of, and respect for, each other. Having had a glimpse of the hardships that existed beneath each perfect façade, they felt a deep sense of community.
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Traditionally women have felt that the only way to get ahead in business is to “make it into the social clique that makes decisions”. They believed that, without being part of this clique, they couldn’t progress. Although there are, without doubt, still social structures in the workplace that are male-dominated, women have the power to choose whether they want to seek entry, or to “make your own clique at some point – your own tribe”, as one put it. Perhaps driven by their need to be self-sufficient, women often give up this choice and follow activities that don’t interest them at all. Said one: “I was just following society’s plan. I was following expectations, but I hate golf! What a massive waste of time chasing that little ball!” As the Lotus women shared and connected with each other, they realized that it is okay to be vulnerable. In one session on unconscious bias, they recognized that “uncertainty and discomfort push us into defensiveness, but we have common issues”. Experiencing this with others helped them realize they were not alone: “It took pressure off and made it okay. It was affirming, it made me more comfortable with who I am.” One recognized that “in accepting who we are, we could create a space so others could get to know you”. Surprisingly, even though women are known for their natural abilities at connection and nurturing relationships, these are exactly the skills they seem to lose when in the competitive work environment. In connecting with themselves and others they realized that “it’s all about relationships and we need to get better at this”. A tribe brings community, but it also has the potential to create exclusion, so it is exciting to hear that these women think of the tribe as a community of men and women: it is “a support group of your peers”; and one that brings responsibility too – that of “becoming role models ourselves”.
The future in your hands
The Lotus programme has helped women to realize they have the courage and determination to make the changes they want in their lives. Although many of the things they struggle with are not easily overcome, the programme has helped these women to feel more empowered and given them the confidence to act. For the Lotus women, the biggest realization has been to understand that their future is in their own hands. Getting their heads down, working hard and waiting to be noticed won’t work: making change is their job. As they laugh with each other: “Stop waiting for that knight in shining armour. No one is coming, ladies!” — Dr Ilka Dunne heads up leadership and culture at Rand Merchant Bank. She was formerly RMB’s head of learning architecture Q3 2019 Dialogue
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GILES LURY
Successful brand inspiration and innovation spring from many surprising sources
Inspiring innovation Giles Lury is director at The Value Engineers and author of How Coca-Cola Took Over the World: and 100 More Amazing Stories About the World’s Greatest Brands
I’ve just finished writing a new book, Inspiring Innovations. At heart it’s simply a story book for marketers, offering some 75 tales, all intended to help them find their business’s next big thing. Having completed the manuscript, I’ve been able to sit back and ponder what I’ve learned about innovation. Here are seven big lessons.
1
There is no single right way to go about innovation. There are many different and sometimes surprising sources of inspiration, including pain, shame and embarrassment. Diners Club – the first independent credit card company – was the result of the awkwardness felt by Frank McNamara when, having taken a client out to dinner, he discovered he had forgotten his wallet.
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Be curious and look at things afresh. Great innovators look at one thing and conjure up a different application. It was this ability that saved Kutol’s mouldable wallpaper cleaner from a premature end in the 1950s – and gave the world Play-Doh. Millions of cans have been sold since.
Surprisingly little research is done – or required. Whenever I told my late mum about the amount of research I was doing for a new product, she was always amazed and would say: “Why didn’t they just ask me?” I never did set up the SOO (sample of one) agency, but she had a point. A number of great brands initially relied on the gut instinct and conviction of their founders, far more than on extensive market research.
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2
Be ready to adapt and change direction when unexpected opportunities arise. Viagra was originally intended to help reduce blood pressure. Its commercial potential was only spotted when men in the clinical trials refused to give back the samples after enjoying surprising side effects.
4 As the old saying goes, success is 99% perspiration and 1% inspiration
moment that becomes an overnight success. That’s rarely the reality, as this brand’s story illustrates. In 2007, Joe Gebbia and Brian Chesky were struggling to pay their rent and needed cash fast. Their need coincided with an up-coming design conference. Spotting that the city’s hotels were fully booked gave them an idea: could they rent out the space in their flat? They bought three airbeds and, with the promise of breakfast, launched the not-very-creatively-named ‘airbedandbreakfast.com’. They got two customers. It took two years and two relaunches before Airbnb appeared in a form closer to the global success we know today.
Learn new things and be ready to do them for yourself. In their early stages, many major brands relied on their founders’ commitment and hard work. As the old saying goes, success is 99% perspiration and 1% inspiration. Will Shu, co-founder of Deliveroo, spent eight months as a delivery driver when he launched the company in 2013. He still does a shift every two weeks, feeling that it helps him better understand restaurateurs, customers and his drivers.
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Persevere. The idealized stereotype of successful innovation is the instant sales sensation: a new idea born in a eureka
A little luck goes a long way. There’s no escaping the fact that having a great idea sometimes just isn’t enough, as Sara Blakely, founder of shapewear firm Spanx, can attest. Having moved from cut-off pantyhose to specially made body-shaping garments, she secured a listing in the luxury department chain, Neiman Marcus. Sales were slow, so Blakely started calling everyone she knew who lived near the stores, asking them to buy a pair of Spanx, promising that she’d reimburse them. She was running out of friends – and money – when lady luck smiled on her. Or rather, Oprah Winfrey did, naming Spanx as one of her favourite things. It changed everything. Distribution spread quickly to other stores and she signed a contract with home shopping channel QVC, which sold 8,000 pairs in six minutes. According to Forbes, Blakely went on to become the world’s youngest female self-made billionaire. — Inspiring Innovations by Giles Lury is out now (LID Publishing) Q3 2019 Dialogue
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Radical marketing Marketing must help business become a force for good. John Davis makes a call to action
“The world is changing. It just isn’t changing fast enough,” says Dr Katharine Hayhoe of Texas Tech University. There is no question that our leaders and companies must change if they’re to survive in an increasingly chaotic world. But Dr Hayhoe’s comment is not a description of the business world. She is a climate scientist. According to a 2018 report by the UN’s Intergovernmental Panel on Climate Change (IPCC), the current pace of greenhouse gas emissions means that the Earth’s temperature will reach a critical threshold of 1.5oC (or 2.7oF) as soon as 2030. What happens then? We are likely to see the loss of key ecosystems, and the acceleration of irreversible damage to the natural world. Why, you might ask, does this matter for marketing? Because the monumental change under way in the climate will directly impact people everywhere. A business-as-usual mindset is fraught with risk, because each individual company assumes its own impact is relatively minor. Yet the collective impact is huge, and we have 100 years of industrial data to prove it. Corporate decision-making focuses on minimizing exposure to risks associated with uncertain factors, compelling leaders to simultaneously protect investments and maximize measurable value creation. But with irrefutable evidence of devastating ecosystem destruction worldwide, continuing to use traditional marketing to sell the next product or service conveys a tone-deaf indifference to climate change. Thus, dramatic solutions from every business are pivotal and essential to our future. It is our collective responsibility to solve, because the absence of a fix is too catastrophic to contemplate. The world’s businesses have a vast global reach and are far more than just commercial actors: they are leading societal actors, and that means they have a responsibility to people everywhere to create solutions that significantly reduce their carbon footprint. Businesses must stop being just makers of goods, and redefine themselves as a force for good. The global business platform is enormous, as is its capacity to solve problems, to engage people, and to
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S TA K E H O L D E R S
ENGAGEMENT
The four Ps are a quaint vestige of yesteryear when markets were more predictable, customers had limited choice, and people were more easily persuaded
SOLUTIONS
create goodwill that Why is this ENVIRONMENT positively impacts important? Because societies everywhere. climate change is an And marketing plays existential threat. Fail here a direct, vital role in this and your earnings per share effort. simply won’t matter. Ninety Given this, the four Ps of seven per cent of climate scientists marketing are clearly anachronistic. agree that mankind’s activities over the I respect the marketing gurus of the 20th past 100 years have helped accelerate climate century who gave the discipline its raison d’être change, disrupting ecosystems everywhere. This by conceiving of Product, Price, Place and fundamental fact is not open for debate. If you Promotion, but I now just as respectfully depart are a denier, then you are wilfully denying facts. from their teachings. As my research shows, Stop questioning the science; stop saying it is the four Ps lost relevance long ago. The original not your problem; stop investing in decadesdotcoms, social media, data analytics, digital old business practices and investments that disruption, political changes, VUCA, and more, are known to be deeply destructive; and start have all conspired to make the four Ps a quaint aggressively re-strategizing your company’s vestige of yesteryear when markets were more future by identifying how you can re-deploy predictable, customers had limited choice, and the very smart people who work for you to people were more easily persuaded by advertising collectively solve the formidable climate change messages. What should replace the four Ps? challenge. You cannot escape the evidence, but you can take part in solving the problem, and Radical marketing radical marketing shows how. ‘Radical marketing’ reflects today’s business Just as digital, social media and AI are world. For the past several decades, marketing substantially altering how we live our lives, has been narrowly defined as a communications- marketing must now be viewed as a legitimate dominated set of activities, with a minor update mechanism for compelling people to take action about 30 years ago to embrace ‘integrated as ambassadors for environmental responsibility. marketing’, which described the importance of Since reputation is earned from the experiences aligning all marketing communications. of stakeholders – and since stakeholders are In my research, leaders and their customers, employees, business and value-chain organizations consistently said that their partners, government alliances, NGOs and even company’s reputation is their brand, and social movements – every company has a vested brand is the entire organization as experienced interest in burnishing its reputation by fixing by stakeholders. Therefore, everything the climate change as a core part of its long-term organization does impacts its reputation, strategy. and marketing is a driver of this effort. In Indeed, businesses everywhere have a short, if you want your company to stand for clear responsibility to society to leverage their something truly consequential that positively considerable tangible and intangible assets impacts people’s lives, helps solve climate distributed around the world to solve this. change and strengthens its reputation, then Everyone plays a role – and we need to act now, making and marketing the next widget won’t since the scientific evidence says we have 12 years suffice. How will your shareholders feel about to solve our problems or we face the irreversible your company when its financial performance loss of many ecosystems required to sustain life. declines precipitously because you didn’t invest Being a radical marketer means you in the green innovations necessary to reduce must focus on four interconnected factors: environmental impact and ensure sustainable stakeholders, engagement, solutions, and living for future generations? environment. Q3 2019 Dialogue
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Customers Governments
Employees
S TA K E H O L D E R S
Value chain partners
NGOs
Social movements
Marketing is a legitimate mechanism for compelling people to take action as ambassadors for environmental responsibility
Shareholders
Radical marketing begins with stakeholders, since climate solutions must positively impact people everywhere. Most of today’s business operating structures were designed in the 20th century, born from the early days of industrialization. Business activity generated significant by-products, including rising prosperity, improved health and enhanced living conditions for many people, but the progress has been unevenly distributed, and we know that the business practices that drove these changes also harmed the environment in visible, measurable ways. This century, company leaders face a clear, omnipresent risk from climate change, and they have a moral, ethical and fiduciary responsibility to re-align their company’s strategy to benefit all stakeholders. Targeting micro-markets of customers through data mining and predictive
analytics is irrelevant if their interests have shifted from upgrading their widgets to simply surviving. Leaders must therefore redefine their relationship with, and understanding of, their stakeholder community. This will not be easy, because most stakeholders typically have a vested interest in the status quo and have difficulty imagining new solutions. But leaders must radically refocus their solutions to support responsible and sustainable environment impact. It can be done. For the past nine years, Sony Japan has been ranked among the top ten most reputable companies in the Reputation Institute’s annual research assessing the the top global corporate reputations. Sony’s ‘Road to Zero’ efforts to achieve a net-zero environmental footprint continue to reinforce the company’s stakeholder management emphasis. What can you do to push your organization to directly address stakeholders? Ask the following questions of your company, your leaders, your colleagues:
1 What do we need to understand about the plausible impacts of climate change and our stakeholder community’s corresponding pain points? 2 How can each of us galvanize our stakeholders and help them, and us, make the changes that are needed?
Prototype
Eliminate/ accelerate
SOLUTIONS Test
Iterate
We cannot wait for a perfect solution. We know the challenge: solve climate change. Therefore, your task as a leader is to help your company change and translate stakeholder insights into solutions. Divergent 3D is a Los Angeles-based company founded by Kevin Czinger and focused on radically changing the entire lifecycle impact from each stage of manufacturing by Dialogue Q3 2019
reducing the material and energy required to produce vehicles. In a Founders and Funders podcast (February 2019), Czinger discussed how Divergent 3D is using new technologies to substantially reduce resource and energy usage, reinventing every stage of the production lifecycle, and even the concept of a factory itself. What can your company do to develop bold solutions like Divergent 3D? Ask the following questions:
1 What systemic changes must we make in how we conceive, design, produce and deliver solutions? 2 Which people and partners can help us create new solutions?
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Measurable cultural benefits (employees...)
Operational effectiveness
Measurable atmospheric benefits (customers...)
Logistical effectiveness
ENVIRONMENT
Materials usage
Energy usage
Facilities/offices design
Distribution, B2B design
Supply chain contribution and participation
Value chain contribution and participation
Environment is both inside and outside the company. Inside refers to how the company designs its facilities to reflect the solutions and values it promotes. That might start with the business’s physical premises. Bangchak, a Thai energy company, has a corporate headquarters that is LEED Platinum Certified, demonstrating its energy efficiency, use of recycled materials
Authentic message
Community advocates
ENGAGEMENT
Immediate response
Co-creating outreach
Radical marketing means building engagement with stakeholders so that they become community advocates for your organization. A trusted community of supporters is far more impactful and influential than old-fashioned marketing communications. Aligning messages from your community of supporters with your own authentic outreach will strengthen the credibility of your engagement.
Businesses must redefine themselves as a force for good – and marketing plays a vital role
Urgent action
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Company reputations are the organization as experienced by stakeholders – which means that all of us must practise radical marketing. This is not a job, a title or a domain. It is a call to action. If you are queasy about becoming a radical marketer, then perhaps the words of Greta Thunberg, a 15-year-old climate activist from Sweden, will compel you to act. As she said to a packed audience at the World Economic Forum
and the smart technologies that minimize its carbon footprint. Outside represents how people find, interact with, and experience the company whenever they use its products or services. Bangchak customers buy the company’s green products, experience its natural lighting in service stations, and even see that the company collects rainwater for recycling. You must help your company by asking the following:
1 How do people inside see and experience us and what must we do to transform these areas to ensure we are practising what we preach? 2 How do people outside see and experience us, and what must we do to transform these areas to ensure we are delivering not just what we promise, but also what creates positive, enduring value for society?
Swell is an investment firm which invests in companies that are solving the world’s biggest challenges, defined as being aligned with at least one of the 17 UN Sustainable Development Goals. Swell engages its stakeholder community by encouraging them to shift their own investments, and thereby change corporate behaviour, based on how those firms directly address hugely complex global problems. The investors become advocates and catalysts for change. The questions to ask in order to develop deeper, influential engagement are:
1 What are our compelling reasons for stakeholders to become our ambassadors and advocates? 2 What are the specific actions we must take immediately to build a highly networked community of shared interest, which uses its own outreach to increase its impact?
in Davos in early 2019: “I don’t want you to be hopeful, I want you to panic.” We need urgent action. Radical marketing means it is time for everyone to step up, push for massive change, and advocate for decisions that help our companies use their considerable resources and assets to fix the most pressing existential problem of our lifetime. — John Davis is regional managing director Asia at Duke Corporate Education Q3 2019 Dialogue
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Small is beautiful The rise of the micro-influencer has begun, writes Kirsten Levermore
With the rise of celebrity culture, partnerships and sponsored promotion of products and services have played a significant part in many big marketing campaigns. Today, the use of popular personal social media accounts – so-called ‘influencer marketing’ – consistutes an estimated 10% of the average marketing budget, and a special report from Business Insider forecast that spending will rise to between $5 and $10 billion in the next three years. But the likes of the Kardashian-Jenners, Tiger Woods and David Beckham are no longer providing brands with bang for their buck. In fact, according to a new global study (The State
Dialogue Q3 2019
of Influencer Marketing 2019, from Influencer Marketing Hub), influencers with 50,000250,000 followers deliver a 30% better return on investment (ROI) compared to those with 250,000-1 million followers, and 20% better ROI than influencers with more than a million followers. Now is the time of the microinfluencer.
You’ve got a friend in me
Selling is hard. Reaching your target audience, approaching customers who may or may not be familiar with your offer, and earning trust are difficult, labour-intensive tasks. Influencer
MARKETING
In the West Micro-influencers and their audiences tend to be young creatives, some of whom have expertise in the creative/fashion/ beauty/sport industries There is a growing trend for influencers in politics, business and stewardship, as young audiences take more notice of social challenges In the East With an aspirational, workoriented audience, influencers tend to be business leaders or entrepreneurs
marketing side-steps these obstacles: a person already holding the eyes and ears of your target demographic casually drops an opinion of your new product, and the sales roll in. ‘Parasocial interaction’ (PSI) is key to the influencer marketing process. First coined in 1956 by sociologists Donald Horton and Richard Wohl, PSI describes our perceived intimate relationship with a media persona or impression of another being. If you have ever found yourself rooting for a TV character in a pinch, cheering for athletes because they “seem like good people”, or mourned a lost pop star, you have experienced the power of PSI. Much like corporate brands, an influencer’s persona is rarely more than an online representation of an actual person. Much of its content is the work of a marketing team or webmaster. Influencers, however, are masters of human qualities: they and their content appear regularly and frequently, they promote a sense of immediacy, and provide opportunities for exchanging comments. Through social and visual media, they offer their audience the feeling of a face-to-face encounter. Add in a conversational communication style, an attainable backstory and character development and, to the audience, there is everything needed for a great online relationship. So, when an influencer’s persona mentions a cool new product, the audience sees it more like a friend’s recommendation than a paid promotion.
The trouble with influencers
PSI is the perfect two-way mirror: the audience can see in, can interact (sometimes), can gawp, ogle, envy, pity and listen, all without the influencer ever personally engaging. It is an illusion of intimacy, where the personality drives the campaign. The problem for marketers is that the mirror’s glass is cracking. Some of the biggest influencers of recent years have come under fire: Kylie Jenner tanked $1.3 billion of Snap Inc’s shares in 2018 with a single ‘tweet’ declaring that she was done using the Snapchat app. In the same year, her ex-brother-in-law posted a paid promotion on his Instagram account – notes from a marketing manager included. And there is the welldocumented disaster of Fyre Festival, a failed ‘luxury music festival’ which saw thousands
An erosion of trust among users means the influencer is no longer everyone’s best friend
of social media users defrauded of millions of dollars by an inauthentic influencer marketing campaign. The emergence of allegations of fake accounts, inflated engagement numbers, disingenuous postings and an erosion of trust among users mean the influencer is no longer everyone’s best friend.
The rise of the micro-influencer
In the cold light of a saturated market and ‘#ad’ posts, users no longer listen to their PSI – which means they no longer buy what influencers and their sponsors are selling. Clever marketers have heeded the warning and believe that an emphasis on lesser-known figures, or micro-influencers, is the future of the influencer marketing strategy. Micro-influencers can have as few as 3,000 followers and are typically very close to their audience. Authenticity is their number one product, and their audience loves them for it, generating significant levels of engagement. They are perceived as trustworthy, real human beings with their ears close to the ground and a drive to produce genuine, creative content that makes a difference to their followers. Often opinionated and lacking any media teams, they can be hard to find and harder to manage, but if micro-influencers believe in your product, you can bet their loyal followers will too. Identifying micro-influencers will mean serious legwork for many brands, as they delve deep into the psyche and relationships of their target audience. The pay-off of these partnerships, however, could be a highly profitable – and authentic – way of reaching customers for years to come. — Kirsten Levermore is a neuroscientist and assistant editor of Dialogue. Additional reporting by Nicole Soames, author of The Influence Book Q3 2019 Dialogue
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WHO ARE THE MICROINFLUENCERS?
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We are a team of architects, designers and creative thinkers
East Studio, Riverside Walk Sea Containers 18 Upper Ground London, SE1 9PD T +44 (0)20 7559 7400 www.bdg-a-d.com info@bdg.com Photography credit: Maris Mezulis
STRATEGY
BEN WALKER
The public’s needs should define your strategy
Society holds the seeds of success Ben Walker is editor-at-large of Dialogue
The Hua brothers are fond of citing ancient understandable societal nervousness about Chinese wisdom. “In Chinese,” they write its power and reach. Yet we would doubtless in their newly translated book Super Signs, miss it, were it gone – which suggests that it “we say that you should care more about does benefit society, and that, as a business, the sowing than the harvest.” This most it has a handle on humanity’s needs and dynamic of duos are household names thus a ticket to almost irrepressible success. in East Asia, where their insights into Not everyone can be the size of Google, branding, R&D and consumer strategy are nor should they strive to be, yet Hua & revered. Core to their ethos on corporate Hua hit on something important when strategy is that organizations should seek to they urge companies to think first of their do good for society, and let other concerns benefit to society. Nail that, they say, and follow. Results should be what they suggest strategy itself becomes secondary. “Policy they are – a follow, not a lead. Endless is extremely important to a company,” battles to achieve results wear down a the brothers write. “Many problems are company, even when they are successful. poorly handled by companies because “Your goal should be to they have no policy and leave others in the dust thus no principles when after just one step,” they dealing with a situation. Those companies write. Citing the military When deciding whether that care more classic Wuzi, they add: to launch a product about the sowing than the or whether to keep a “Those who win five harvest will succeed battles find disaster… business, you shouldn’t those who win one be looking at sales become emperors.” metrics. Look at your The Hua way suggests that companies policy and decide if the action will affect find a niche that creates advantage for your social responsibility.” Those that care society and select that as their one key more about the sowing than the harvest battle, having already won it. Doing good will succeed; those who do the reverse for society can certainly include producing will fail. Societal benefit is different to products and services that achieve a classic corporate social responsibility, the Huas societal benefit – be it environmental, social stress, however noble and valuable some or economic. Yet it need not be so lofty or such schemes might be. They highlight high-minded. The Hua brothers’ definition the woes of a Chinese dairy company that of societal benefit is broad and simple: if seemingly forgot that its societal benefit that product or service disappeared, would was the supply of clean, good milk for the society think it had lost something? Chinese public – and wound up embroiled “Compare Apple with Nokia,” they in a tainted milk food-safety scandal. write. “One could argue that losing Nokia The Hua way is compelling. How many wouldn’t be much. Losing Apple would of the great companies that have fallen on be really losing something.” Their second hard times might have enjoyed a better test speaks to a hierarchy of loss: “Without future had they stopped to consider their Apple, we might be okay with a Samsung. societal benefit while things were still But without Google, we wouldn’t have going well? Defining that benefit, applying just lost a search engine – the whole of it and testing your every act against it will humanity’s progress would slow down.” bring the outcomes you want, eventually. This thinking is challenging. Until “Management is like life,” the brothers relatively recently, Google’s own motto suggest. “It can take a long time for karma was ‘Don’t be evil’, which reflects to get you.” Q3 2019 Dialogue
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The agile dashboard The old performance indicators paint an incomplete picture. Joe Perfetti, Scott Koerwer and Michael Canning look at the new metrics you need
Dialogue Q3 2019
STRATEGY
The highest performing firms share similar abilities to those of agile athletes
We all keep score in one way or another. Our businesses require it. Keeping score helps us to measure performance, calibrate change, improve, and create value for our customers. Business scorekeeping used to be fairly straightforward – but then the digital age dawned. Everything has changed. How do you keep score in a world where speed and agility are the most important attributes? In sports, it’s simple to measure an athlete’s speed. Their ability to change direction can also be measured, for instance by timing them over a pre-fabricated obstacle course. More recently, however, sports scientists have turned their attention to a more comprehensive idea – agility. Agility involves the application of an athlete’s interactive abilities in unpredictable environments. It is at a premium in team sports where players have to interact with the actions of multiple collaborating and opposing players simultaneously. Here, sporting agility is measured as a unique combination of abilities. They include physical abilities, namely, speed; cognitive abilities – especially making decisions while scanning the field and anticipating, interacting or reacting to the moves of other players; and
technical abilities – the athlete’s knowledge of the game, feet placement, body positioning, and ability to pivot and change direction. Businesses also have to anticipate, interact and react in unpredictable environments. The highest performing organizations share similar abilities to those of agile athletes. Speed How fast can the organization move? Interaction time How well does the organization scan the market, anticipate, make and implement decisions? Pivot How well can an organization reposition and change direction, to seize and commercialize a new opportunity outside the core of the business? In today’s agile world, leaders must adjust the key performance indicators they are tracking to include metrics for agility. For the purposes of this article, the first in a two-part series on agility dashboards, we will begin with the elements of speed and interaction time.
Production Cycle Time
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cling to old ways of selling fashion merchandise. Traditional retailers like Ralph Lauren or Michael Kors follow the well-worn path of exhibiting at fashion shows to introduce a product, then negotiate with buyers and see their products occupying store shelves three to six months later. Zara, on the other hand, goes to that fashion show, knocks off the product and delivers it to its stores in two to three weeks at 40-60% less than the cost of the brand. This is called ‘fast fashion’, moving nimbly from runway to store while competitors are still metaphorically putting their pants on. In response, companies such as Ralph Lauren have instituted a concept known as ‘see now, buy now’, which means they have the product available the day of the fashion show. This carries significant risks because they can show a new item, but what if nobody wants to buy it? Ralph Lauren is attempting to forecast demand in advance of receiving insight from the show. Zara has the advantage because of its ability to rapidly produce the most successful fashions. That’s the power of agile.
Financial cycle time
One important metric of speed is an organization’s financial cycle time (FCT), a measure that determines the length of the business process. Put another way, FCT shows how many days it takes to turn investment
TABLE 1
F C T I N M A J O R R E TA I L BRANDS COMPAN Y Amazon Michaels TK Maxx Walmart The Gap L Brands (Victoria’s Secret) Nordstrom Macy’s JC Penney
FC T (days) 32 51 52 72 78 80 105 108 152
into sales. If a fashion retailer takes 180 days to produce a sale and a fast fashion competitor can do the sale in 21 days, we have a clear winner. FCT is a straightforward calculation. To determine it, take the total investment figure from the balance sheet and divide by your annual sales. This will tell you what percentage of a year it takes to sell the investment. Multiply by 365 days and you’ll get an estimate of your average FCT, in days. Then divide the total investment by the FCT number to get an estimate of the cash tied up for each day. Take Macy’s, which has been struggling given the seismic changes in the retail market. It has also been slow to respond. Based on our 2018 FCT Rankings (see Table 1), Macy’s took 108 days to turn an investment into a sale – more than three times longer than Amazon at 32 days. So, what does it mean if you are the slowest runner in this race? How large is your competitive disadvantage? Macy’s average investment capital tied up per day is $70 million. If its FCT were 32 days like Amazon, instead of 108 days, it would have another $5.3 billion of cash on hand (108-32 days, times $70 million). Imagine all the ways Macy’s could improve the customer experience with that much cash: $5.3 billion would support some remarkable state-of-the art renovations.
As the Zara example illustrates, speed is essential but, by itself, is insufficient for agility. The power of smart, swift action is humorously illustrated in a meme comparing other delivery services to Amazon. One sends a message on the day of delivery, giving the time your parcel will arrive. Another takes a different approach: “You’ll get it when we give it to you.” The US Postal Service asks: “You ordered something?” Amazon, meanwhile, says: “We’re inside your apartment.” The meme captures Amazon’s extraordinary ability to know what customers want almost before they do, and to deliver an experience that Dialogue Q3 2019
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Decision cycle time
STRATEGY
leaves its competitors struggling in its wake. Not coincidentally, chief executive Jeff Bezos is on record describing what enables his quickness. “Most decisions should probably be made with somewhere around 70% of the information you wish you had,” he told shareholders in 2017. “If you wait for 90%, in most cases, you’re probably being slow.” High-frequency trading in financial markets is a great example of reducing decision cycle time (DCT). Financial firms work to gain advantage by securing data milliseconds before their competitors so that powerful computers can analyse data, make decisions and execute trades faster than their competitors. In his book, Flash Boys, author Michael Lewis details the lengths traders go to in order to minimize data travel times, including laying an impossibly straight fibre-optic cable between Chicago and New York. “The construction crews were… bewildered,” Lewis wrote. “Its sole purpose, as far as they could see, was to be as straight as possible, even if that meant they had to rock saw through a mountain rather than take an obvious route around it.” But straight cable – even for servers inside stock exchange buildings – provides more data at a faster speed. That is what mattered to the high frequency traders, to reduce their – or their algorithm’s – decision-making time.
METRICS
Predictive cycle time Production cycle time How fast you can take a new product to market
Financial cycle time How long it takes to turn investment into sales
Decision cycle time How fast you can make decisions
Interaction cycle time
It is no longer sufficient to react to the market. The world is moving too fast and nimble competitors will quickly seize the initiative. The question in an agile world becomes: how do you interact with your customers and how frequently? Do you check they are satisfied after consuming a product or service? Or do you have a real-time relationship with customers that includes socialization of realtime data collection? This is where interaction cycle time (ICT) comes into play. Take Spotify, the streaming music service. Spotify tracks the preferences of each individual user and delivers a curated Discover Weekly playlist of new music, tailored to that user, drawn from the tens of millions of songs in its library. This has been a critical feature in helping Spotify maintain advantage against competitors such as Apple Music. In the manufacturing world, a good example is Illumina, which builds and sells machines used to sequence genes in a DNA sample. In March 2018 it began providing a personalization dashboard called MyIllumina, which enables customers to share vital information about the performance of Illumina equipment. This gives the company realtime data, such as when a machine is in use, the results of an experiment and any problems with the machinery. Based on the shared information, Illumina can see if its competitor’s chemicals are being used for a test, and can see if a machine is being heavily used, prompting its salesforce CRM
system to suggest to the relevant sales rep the need for additional equipment.
Interaction cycle time The frequency with which you gain customer (and constituent) insight and can act to fill that need
Predictive cycle time Your ability to use AI, data analytics and your customer interactions to create the new products and services your customers don’t know they need… yet
Some companies are moving from ICT to PCT – predictive cycle time. Netflix deploys analytics as a competitive weapon, driven by customer behaviour and buying patterns. Its proprietary movie recommendation engine, Cinematch, was created by mathematicians hired by Netflix to devise the algorithms and write the code that segments movies into clusters and connects them to customer rankings, evaluating thousands of ratings per second. Netflix then uses this insight to personalize the web page seen by each visiting customer. Netflix adapted this technology to predict whether a TV show would be a hit prior to its introduction, thus entering the game of predictive analytics or, for our purposes, PCT. It uses as many as 70,000 attributes of movies and TV shows to find patterns across customers, and to predict what viewers might like. It can then put those ideas into development, making shows that viewers did not even know they wanted to watch. Six years ago, it used this approach to launch House of Cards, the first of many successful shows developed using data from customers. Entertainment is of course not the only sphere where PCT matters. In health care, physicians can now use information from genes to predict which patients are likely to get certain diseases, such as diabetes, cancer or heart disease, and can begin early intervention programmes with those patients.
What’s next?
Legacy metrics will remain important and useful to us as leaders of businesses, as well as to investors. However, in a business environment that is characterized by an exponential, as opposed to linear, pace of change, we must augment our performance dashboards. Just as the sports world has recognized that agility means more than an athlete’s straight-line speed or pace over a predictable obstacle course, we need a new dashboard for business. We must add measures of speed and interaction. There are many things left to work out to get the right dashboard for your business. But given how critical speed is to an agile world, we suggest you get started. It’s a good bet that you’re already behind. — Joe Perfetti teaches equity analysis at the University of Maryland and is an innovation fellow with Duke Corporate Education. Scott Koerwer is professor of organizational systems and innovation at Geisinger Commonwealth School of Medicine. Mike Canning is global head of new businesses at Duke Corporate Education. — Find out about Duke CE’s ‘Building Strategic Agility’ course at digital.dukece.com Q3 2019 Dialogue
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Data isn’t everything Peter Drucker argued that good management decision-making needs more than numbers. William A Cohen explains
On 10 March 2019, a nearly brand-new Boeing 737 Max 8 crashed shortly after taking off from Addis Ababa in Ethiopia, killing all 157 people on board. It followed the October 2018 crash in Indonesia, involving the same model plane under similar conditions, which killed 189 people. Many countries grounded the Max 8 instantly in response to the Ethiopian disaster, but the US Federal Aviation Administration (FAA) did not, stressing that it would not act until it had “better data”. Days passed before President Trump overruled the FAA’s decision, grounding the Boeing planes. A week later, a Wall Street Journal article pointed out the problem highlighted by the FAA’s inaction: “Data don’t always capture the unknown.” The fact that a plane had not experienced a problem didn’t mean that it would not have that problem in the future. In deciding not to ground the Max 8, the FAA claimed to be acting on the available data, but it was overlooking this critical fact. The incident highlights a challenge confronting us in every walk of business and organizational life today: there is more to management than data. It is a question that Peter Drucker explored in his seminal works.
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Use the liberal arts
Drucker didn’t say to ignore data: but he did argue that data should be but one factor in managerial decision-making, and not necessarily the primary one. Drucker’s definition of management (The New Realities, 1989) rejected much of contemporary thinking and much that was taught in the conventional MBAs of the time. He wrote: “Management is what tradition used to call a liberal art: ‘liberal’ because it deals with the fundamentals of knowledge, self-knowledge, wisdom and leadership; ‘art’ because it deals with practice and application. Managers draw upon all of the knowledge and insights of the
Dialogue Q3 2019
humanities and social sciences, on psychology and philosophy, on economics and history, on the physical sciences and ethics. But they have to focus this knowledge on effectiveness and results.” Drucker implied that liberal arts were superior to quantitative analysis of data for managerial decision-making. He told his students (including this author) that “managers must make decisions from the gut”. This was heresy. It feels even more controversial today, when the orthodoxy is that data should drive every business decision. Drucker recommended that management decisions be based on four fundamentals: knowledge, self-knowledge, wisdom, and leadership.
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Knowledge
Drucker regarded the liberal arts as encompassing humanities, social sciences, psychology, philosophy, economics, history, physical sciences and ethics. Yet each of these, properly defined, is huge in scope. The number of subjects that would need to be included in management as a liberal art would be almost infinite if all subcategories are included. A definition of what is required must be selective and based on situational factors, incorporating definite procedures for decision-making.
2
Self-knowledge In China, the importance of selfknowledge has been recognized since ancient times. Philosopher and military general Sun Tzu noted that a commander who knew himself as well as his enemies could not be defeated, while one who lacked self-knowledge was at risk.
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Western philosophers haven’t been silent on the importance of knowing one’s own sensations, thoughts, beliefs and mental states. The French philosopher, mathematician and scientist René Descartes wrote extensively on the importance of self-knowledge, and much of Western philosophy is a response to his writings. They underscore the point that self-knowledge requires serious reflection and review.
3
From where cometh wisdom?
It is often assumed that wisdom results from personal experience. This implies that one must act and do something before wisdom can be acquired. Yet while experience is one way to gain wisdom, it is not the only way, and in some cases is not the best. Experiential learning exercises, simulated scenarios, or real work of a nature which demands the application of theory under guided supervision, can be better ways to build wisdom and judgement.
4
Leadership
Leadership is possibly the most essential element of management as a liberal art – and perhaps the most misunderstood. Leadership is not manipulation. It is not being ‘a good egg’ or an autocratic dictator. Drucker defined leadership as being “the lifting of a man’s vision to higher sights, the raising of a man’s performance to a higher standard, the building of a man’s personality beyond its normal limitations”. Without leadership, the other fundamentals of management as a liberal art simply fall flat.
Moral and ethical components
Drucker also stressed the importance of
integrity, and viewed ethics as an integral part of management as a liberal art. He wrote that there are no special ‘business ethics’ which apply uniquely to business. There are only ethics. The “it’s only business” argument – the Mafia murder defence – is unacceptable. It’s still murder. Indeed, for Drucker, ethics are a critical test for all management decisions.
Practice, application and results
Drucker told his students that “managers must make decisions from the gut”. This was heresy
Critical to Drucker’s ideas was the point that management as a liberal art deals with practice, application and results. Experiments by Professor Carol Dweck at Stanford have explored whether there is a difference in performance among students who have only been taught a theory, compared with those who had in addition performed some task applying the theory. She found that if a new task was presented under conditions similar to those under which both groups had learned the theory, there was a slight difference in measured performance between the two groups. However, when a different type of task was presented, again requiring the application of theory, there was a significant difference. Professor Dweck described this as the difference between learning the grammar of a new language – the theory – and being able to converse in it. For Drucker, practical application is critical.
A numbers game?
Drucker’s argument that management using the liberal arts beats relying on data alone, or data as the primary factor in decision-making, is even more relevant to us today than when he wrote. His insights must be implemented with practice, and applied through effective procedures, to result in consistently effective results. Data is everywhere, but business is not just a numbers game. Drucker’s insights are a reminder that there is more to management than data. — William A Cohen is author of Peter Drucker’s Way to the Top (LID Publishing, 2018)
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NEWS NATION
The emergent economy The controversial but popular President Duterte of the Philippines wants to grow the country’s economy at a dramatic rate. A youthful population faces mass emigration and poor wages, but economists believe the archipelago still stands a chance
Top spot
1
Manila is the most densely populated city on Earth, with 41,515 people/sq km. Mumbai has 28,508
Young blood
24.3yrs
Median age of the population, making the Philippines one of the world’s youngest countries. In the US, the median age is 37.9
War on drugs
12,000 Alleged drug lords, criminals and others killed by the police on the order of President Duterte
FAC T F I L E P H I L I P P I N E S Land area
115,058
Official language
sq mi
(298,170 sq km) Population
100,981,437
Filipino GNI per capita
$10,030
Capital
Life expectancy
Manila
73 Women
Religion
Catholicism Dialogue Q3 2019
Poverty line
66 Men
The Philippines has the most favourable economic outlook in Southeast Asia Grant Thornton, based on its International Business Report, January 2019
40%
Proportion of the population who collect a daily wage of $2 or less
The grass is greener
11%
Filipino population living and working abroad
NEWS NATION
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BRIDGE BUILDING
$14.4bn
@DialogueTweets
Chinese finance for 23 major infrastructure projects
@dialoguereview
ONE SMALL STEP
Dialogue Review
3.3%
Inflation rate in March 2019, its lowest since December 2017
MOVING ON UP
6.2%
Full year GDP growth for 2018. Forecasts for 2019 have been cut from 7-8% to 6-7% amid concerns over the US-China trade war
ONE GIANT LEAP
20th
Position the Philippines is expected to occupy on the Goldman Sachs ranking of world economies by 2050. It is currently 34th
Duterte’s deadly narcotics crackdown… may be a crime against humanity Carlos Conde, Human Rights Watch
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DIALOGUE IS BROUGHT TO YO U B Y… EDITORIAL BOARD
Dr Liz Mellon, chairman Tom Albanese, chief executive, Vendanta Resources Michael Canning, Duke Corporate Education Professor Pedro Nueno, president, China Europe International Business School Ben Walker, editor-at-large, Dialogue EDITORIAL
Patrick Woodman, editor Kate Harkus, art director Luisa Cheshire, chief subeditor Kirsten Levermore, assistant editor MANAGEMENT
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Disclaimer Copyright 2019 by Duke Corporate Education and LID Publishing Ltd. All rights reserved. Material may not be reproduced without permission of the publisher. While we take care to ensure that editorial is accurate, independent, objective and relevant for the readers, Dialogue accepts no liability for reader dissatisfaction rising from the content of this publication. The opinions expressed or advice given are the views of individual authors and do not necessarily represent the views of Dialogue. This journal is also supported by Knowledge Partners, including Duke Corporate Education as Lead Knowledge Partner. Whenever an author is related to a Knowledge Partner it will be noted as such. Dialogue takes every effort to credit photographers but we cannot guarantee every published use of an image will have the contributor’s name. If you believe we have omitted a credit for your image, please email the editor. ISSN 2053-4361
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REVIEWS
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Turn your head A pattern of appointing incompetent male leaders starts at the very top of organizations. It’s time for change. Review by Kirsten Levermore
Why Do So Many Incompetent Men Become Leaders? (and how to fix it) Tomas Chamorro-Premuzic Harvard Business Review Press bit.ly/ incompetentleader
“Look around your office. Turn on the TV. Incompetent leadership is everywhere.” So says Tomas Chamorro-Premuzic in his provocative book, Why Do So Many Incompetent Men Become Leaders? (and how to fix it). Seventy-five per cent of people quit their jobs because of their direct line manager. Sixty-five per cent of Americans say they would rather change their boss than get a pay raise. As the old adage has it, the fish rots from the head: leadership matters, and what happens at the top is replicated throughout organizations. That includes who we appoint to positions of leadership. Chamorro-Premuzic’s latest book is an expansion of his famed 2013 Harvard Business Review article of the same name, and is a stark map of the leadership landscape in the modern world. It sets out the correlation between leadership incompetence and a lack of female leaders, and asks: if more women were in charge, would the prevalence of bad leadership decrease? You’ll note that I said ‘correlation’, not ‘causation’. The author makes it clear that he doesn’t necessarily believe that it is only men who make for incompetent leaders. Rather, it’s a simple fact that men outnumber women at the top, and so the survivorship bias would indicate that ‘bad leader = male leader’. Chamorro-Premuzic doesn’t use this simplistically to call for “more females in power!” Rather, he uses his book to challenge us all to elevate the standards of leadership.
of leaders with men in general. Nowhere is this more apparent, Chamorro-Premuzic writes, than in the double standard of overconfidence. Exhortions to “Believe in yourself! Don’t worry what others think of you!” suggest the speaker is self-confident and abrasive. In men, these qualities are perceived as ‘competence’ and ‘decisiveness’. In women, they can be seen as ‘arrogance’ and ‘aggression’. Very often, leaders hire other leaders. Those already in charge therefore bear weighty responsibility for recognizing their true value and efficiency as a leader, and recognizing what makes for a good leader – even if that is not something that they are themselves. It becomes a self-propagating prophecy that leaders employ others who look and sound just like they do. It is an inherent, often subconscious, personality nepotism. To break this cycle we need more leaders – yes, probably female – who exhibit the potential to be great leaders through their competency and integrity. The author puts these forward as new qualities that should become the most important factors for appointing leaders. Making the case for investment in leadership development, Chamorro-Premuzic believes those already at the top must be enabled to see a new, wider spectrum that doesn’t just focus on ‘personality’ as a guarantee for someone to be an effective leader. And that means learning how to hire differently.
Why do incompetent men become leaders?
How do we hire good leaders?
Humanity has associated the male specimen with leadership for millennia. In fact, as this book explains, we have done this with such regularity that we now often associate qualities
Humanity has associated the male specimen with leadership for millenia Dialogue Q3 2019
Organizations must put in place “much bigger obstacles for the disproportionate glut of incompetent men who are so skilled at becoming leaders, to everyone’s peril”, writes ChamorroPremuzic. Nine easily digested chapters set out the qualities of both the incompetent and good leaders of our day, including a fascinating discussion about our perception of key traits in effective leaders versus the actual traits – and a brief scolding of a society which continues to confuse confidence with competence. The award-winning business psychologist and chief talent scientist also imparts his passion for metrics and technology, urging us to look
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REVIEWS
past charismatic archetypes and how they blind even the most pragmatic of us when selecting and appointing a leader. Instead, Chamorro-Premuzic insists, we must all work harder to truly understand leadership talent and how to measure it. The book offers several research-driven strategies and tools for sussing out those best equipped to lead: network analysis, web scraping, gamification and of course people analytics all get the nod. Traditional interview techniques are classed as poor substitutes and victims of our biases – a fair point, when you
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consider Chamorro-Premuzic’s key message that we subjectively select leaders because we believe they share qualities with those who have gone before, good or bad. The close of this illuminating book sees the author rest his pen on one final point: as a society, we have to challenge who these current leaders are, regardless of gender; perform due diligence on their leadership competence and ability; and bring them to account sooner rather than later. Only then will the floodgates open to more competent leaders, of any gender. — Kirsten Levermore is assistant editor of Dialogue Q3 2019 Dialogue
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Take control with the GPA Kirsten Levermore is introduced to the supranational body that will save the biosphere
Global Planet Authority: How We’re About to Save the Biosphere Angus Forbes LID Publishing
What we have is a series of gamechanging reports and a passionate manifesto
One-and-a-half billion people and their mobile phones could save the biosphere. Such is the claim made by Angus Forbes at the start of his latest book. Glancing at the cover, I thought this slim volume was going to be yet another book on saving the rainforest; a cry for more reducing, reusing and recycling; or a pleading with oil companies. Yet Global Planet Authority is none of those things. What we have instead is a series of clear, game-changing research reports and a passionate manifesto advocating the installation of a supranational environment-focused Global Planet Authority (GPA). “Let’s imagine,” suggests Forbes, “a single supranational government body decides that all of South Africa, the massive Białowieża forest in Poland and the whole of Madagascar need to be protected... Hello, are those the Presidents of Poland, South Africa, Madagascar? We need to take your national parks to global status immediately, increase them in size fivefold within five years and then work out a plan for taking your entire country to Global Protected Area status.” Appealing to the world’s citizens aged 13 and over, this book sets out how 1.5 billion people might elect the first global government body made of up of the world’s top scientists, lawyers, logisticians, strategists and more, tasked with protecting the biosphere. The dedicated
environment-focused professionals would be given 6% of GDP per annum – a 15-fold increase on the UN’s pitiful $10 billion budget – and empowered to act as they see fit across business, politics and borders. Examining the need for the authority, the first half of the book paints a bleak – but necessary – fact-based picture of global climate change. The second half is devoted to the practicalities of voting for the GPA, complete with a step-by-step guide to how the authority will take shape and how readers can get involved in the movement. A particularly intriguing question-and-answer section is aimed at the most sceptical readers. Forbes’ natural dry humour infuses the text: “Most of the countries that we see today didn’t exist just 200 years ago,” he observes, “so what’s one supranational organization among friends?” With dozens of statistics in every chapter, it can get a little sticky, but the investment-bankerturned-environmentalist balances analytical cynicism and engaging optimism throughout in setting out his dream. Part hard-hitting research report, part passionate manifesto, Global Planet Authority is not a soft nor philosophical read. Rather, it is a factual explanation, and an urgent, emotive ask, which many readers might find themselves tempted to adopt. Global Planet Authority is available in bookstores from July 2019.
APPS FOR LEADERS: TRIPIT
Facing a complicated travel itinerary? Perry Timms has a solution We live in a world of video calls and virtual work – yet if you’re one of the many people who still find themselves travelling for work an awful lot, you’ll appreciate a well-organized itinerary. Welcome, then, to the app that can help you with a range of logistics, documentation and reminders: Tripit. Tripit aggregates information from flight confirmations, hotel reservations and even taxi bookings, so you need only go to one app for all the details you need. Creating a master itinerary is as simple as downloading the app and forwarding your confirmation emails to Tripit’s own email. The app synchronizes your Dialogue Q3 2019
calendar and even provides helpful tips, like recommending places close to your hotel, and information on getting around the city. There is a subscription service option and Tripit for teams, too, but the free app has most of the functionality that the typical user would want. Within the app, travel schedules show you where to be and when. The Navigator function shows you options to get from one point to another, like CityMapper or Maps, and includes handy maps of airports and terminals. Features like in-flight experience ratings, tracking compensation eligibility
due to delays or cancellations, and even a very handy neighbourhood safety feature for where you’re staying, ensure this app provides peace of mind as well as an at-a-glance view of your schedule. If you’re about to hit the road, Tripit is well worth a look. — Tripit is available for Android and iOS, and supports Apple Watch and Android Wear. www.tripit.com — Perry Timms is an independent HR/OD practitioner and CIPD adviser on social media and engagement. Follow him on Twitter @PerryTimms
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PIERS CAIN ON BOOKS
Leaders need to grasp the fundamentals of project management
Brexit: a project revolution?
Piers Cain is a management consultant
There is always someone who will be happy if your project fails
Antonio Nieto-Rodriguez, author of The Project Revolution: How to Succeed in a Project Driven World, claims that we are carrying out more projects today than ever before. A revolution is under way: projects are “on the march”, across the workplace, education, and government. Well, perhaps. Nieto-Rodriguez accepts that project management as a discipline is overengineered and relegated to managers who seldom make it to the top. Yet top leaders, across industry and government, clearly need to understand the fundamentals of project management if they’re to avoid costly financial overruns, delays or even complete project failures. Takeovers and mergers often struggle to realize their anticipated benefits due to poor project management, as with the 2009 acquisition of ABN AMRO by Fortis, Santander and RBS. Infrastructure megaprojects are woefully prone to problems: London’s Crossrail is just the latest example, now £3 billion over budget and running more than a year late. Political projects have their challenges too. What might we make of one of today’s most high-profile political projects, Britain’s exit from the European Union? Considering Brexit as a de-merger project, how well is the UK government applying the principles advocated by Nieto-Rodriguez? First, major projects need support and attention from the top: executive sponsors prepared to dedicate time to drive success. Prime Minister Theresa May has made Brexit the focus of her government, to the exclusion of almost everything else. It is hard to fault her commitment. Second, there is the need for a clear scope – an understanding of what a project will deliver. It is one of the raisons d’être of project management. As the project board, has the government’s ministerial Cabinet been clear about the benefits it aims to achieve? This is debatable. May’s early mantra, “Brexit means Brexit,” was a triumph of foggy thinking. She reached some clarity with her Chequers plan in July 2018, but it quickly became clear that the
project board was divided when pro-Brexit ministers David Davis and Boris Johnson resigned. Meanwhile, the UK Parliament – perhaps the equivalent of shareholders in a listed company – has been unwilling to approve the course of action recommended by the government. Third, what about stakeholder management? Has the business – in this case, the country – signed up to the project? The 2016 referendum was meant to settle this. But as with any major project that changes the status quo (that is, most of them), resistance can be expected – and the more people against a project, the harder it becomes to deliver. In this case, that’s 48% of the UK electorate. Nieto-Rodriguez warns that there is “always someone who will be happy if your project fails”, and for May this is a long list, including most of the UK’s other political parties, rivals in her own Conservative party, and the other 27 EU member states. With powerful opposition, she was always facing an uphill task. Finally, risk management. We all understand that projects should have a risk register and significant risks should be actively managed. The longer we wait to mitigate a risk, the more expensive it usually becomes. Yet examples like the award of a government contract for emergency ferry services to a firm that owned no boats – yes, really – suggest that the risks of Brexit, especially a ‘no deal’ departure, have not been managed as well as they might. It remains unclear how the Brexit project will conclude: it has been postponed and could yet be cancelled. While it’s naïve to think its challenges could have been solved by good project management practice, it’s remarkable how many preconditions for a successful project have been missing. It would be wise to review those fundamentals the next time someone proposes a revolutionary project in your business. — The Project Revolution: How to Succeed in a Project Driven World by Antonio NietoRodriguez, LID Publishing (2019) bit.ly/projectrevolt Q3 2019 Dialogue
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LIZ MELLON
It’s business as usual until we hit the triggers for change
Talking transformation Transformation: a noun meaning a marked change in form, nature, or appearance. Transformation is a consultant-driven nirvana, often sought but less often achieved. Can companies and entire industries really transform themselves? Incumbents frequently fail to change, so it is newcomers, like Airbnb, who transform markets. Some dramatic turnaround successes have been achieved, such as Apple’s resurgence from a decade-long plummet, almost reaching bankruptcy before Jobs rejoined in 1997. More often, the future creeps up unnoticed: Nokia fell from being the number one phone brand in the world in 2008 to become a division of Microsoft by 2013. It’s amazing how long a company can sit in denial, too busy with the daily grind to contemplate change. How do you transform a company? You need triggers that indicate the current strategic trajectory no longer works, such as loss of income – a sign that you are no longer meeting customer needs, or competitors gaining market share. You then need a tipping point, where carrying on with business-as-usual becomes more painful than pursuing change. Transformation follows: the company starts looking outward, closely tracking customers, markets and emerging technological, demographic and other trends. Leadership becomes open to change and experiments flourish. The culture changes to one of widely shared ownership for the future, rather than kicking problems upstairs. And renewed offerings to existing or new customers get positive feedback from markets in the form of recovering sales and profitability. Large companies, especially, can be too inward-looking to spot the early signs of market shifts and too timid to make the necessary changes. It’s one reason why the average lifespan of a company listed in the S&P 500 index has dropped from 67 years in the 1920s to under 20 years today. Now let’s consider a specific industry – oil and energy. The five majors are Chevron, ExxonMobil, Royal Dutch Shell, BP and Total. They face significant Dialogue Q3 2019
common challenges, not least around sustainability, since fossil fuels are a major contributor to climate change. In one of the most sceptical markets in the world, 73% of Americans now believe that climate change is real (Yale University poll, 2018) and that wily investor, Warren Buffett, is putting $30 billion into clean energy. As wildfires rage in Australia, Chicagoans freeze in temperatures colder than Mars, and Beijing halts outdoor construction work due to smog, surely the case for transformation has been made? The challenge is that none of the incumbents face any of the triggers for change listed earlier. Demand for oil is rising; employees and shareholders are happy. ExxonMobil alone intends to pump 25% more oil and gas in 2025 than it did in 2017. BP’s energy outlook says that total global demand for energy will increase by about a third by 2040, driven by rising living standards in China and India. Even if renewables fill the gap and emissions are cut in line with the 2015 Paris climate agreement, oil demand will still be 81.8 million barrels a day, compared to 95.1 million in 2018. Investment in new oilfields needs to continue to rise; without it, existing fields will decline and supplies fall to 34 million barrels per day by 2040. Regulation exists precisely to mitigate the unwanted side effects of profitability, such as pollution, but democracies won’t legislate against market demand. It is pointless vilifying an industry for its unwillingness to transform itself when we keep demanding more electricity, cars and clothes. The industry is not in denial, it’s acting rationally in finding more ways to get the stuff out of the ground (fracking helped Texas produce a record-breaking 1.54 billion barrels of crude in 2018), and making incremental changes (like BP investing in electric car charging points). If we want transformation of this industry, we need to think like Warren Buffet and direct our efforts to finding the oil equivalent of Airbnb. — Liz Mellon is chair of Dialogue’s editorial board
It’s amazing how long a company can sit in denial, too busy to contemplate change
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