Harvard Business Review 5 years 2004 – 2009

6 Ways to Sink a Growth Initiative by Donald L. Laurie and J. Bruce Harreld. Taking a start-up into uncertain terrain is fundamentally different from and tougher than running a multibillion-dollar business with established controls. Consequently, a company’s best, most experienced general managers should lead these initiatives. Big companies often apply the same metrics and milestones to running their early-stage businesses that they use in managing mature businesses. These are worse than useless and actually harmful. Without appropriate leadership, funding, measurement mechanisms, and governance, growth initiatives will fail.

Your Brain at Work by Adam Waytz and Malia Mason. Companies that maintain a reasonable level of internal pay equity would do well to publicize that information among employees. Conversely, widespread knowledge of sky-rocketing executive pay is sure to turn off the reward network. But it is not just that fair pay matters. When people feel out of strategy sessions despite being qualified to participate they become demotivated. The withholding of information also creates an inequitable environment between those in the know and those not in the know – which is why transparency is so important.

Goals are good, of course, but it is important to note that the reward network seems to respond more positively to less stringent ones. Highly specific, challenging goals can actually be harmful because they curb curiosity and inhibit flexible thinking. When GM set a target of 29 % of the American car market it lead to pouring inordinate amounts of money into advertising and marketing, rather than funding innovations. Overly precise goals often engender myopic responses like that, which endanger companies’ long-term health. / My view is that goals should not be more than five for any individual, the last one being, “using your best endeavour to further the interest of the organization” /

Intrinsically interesting work of solving novel problems is also a great stimulus making the work as satisfying as the reward. The employer can do many things ‘on the cheap’ for motivation by fostering a culture of fairness and cooperation, offering opportunities for people to engage their curiosity, and providing plenty of social approval.

Notes by [e-mail] 14 July, 2013

Harvard Business Review June 2013

The theme of this issue is Strategy for Turbulent Times. Quite a few interesting articles here. The one that stuck with me is about alumni. It says what we perhaps all know but few practice – it is worth a lot to have the people who leave your organisation leave on a high and it is worth money and effort to keep them as positive ambassadors for your company. When I have had to let people go from my organisations I have always aspired to make sure they leave happy and well supported. Spending time and effort on achieving this has a pay back. Perhaps the essence of the articles on strategy in modern times is that strategy needs to be reviewed every day and regular reinvention must be built into the plans. Move to something new swiftly rather than trying to suck blood out of a dying horse. “The challenge now is to perpetually innovate, creating a portfolio of advantages that can be built quickly and abandoned just as fast.”

Please find below a few notes from the June issue.

Online video offers a way to achieve higher engagement with consumers for far less money.

Companies whose top 4 non-CEO executives are appointees of the current CEO are about 35% more likely to engage in fraud – and 20 % less likely to get caught – than companies where none of the four were appointed by the present CEO (what isn’t revealed is how prevalent CEO level fraud is – my guess is that it is very rare – if one country has 1/ 100,000 committing suicide annually and another has 2/ 100,000 it is 100% more likely that you will commit suicide living in the second country? – small numbers render the statements misleading).

E-mail is not dead, it is just evolving. People still spend half their working day dealing with it, they trust it, and overall they are satisfied with it according to a survey of 2,600 workers in the US.

Is the Business of America Still Business? by Niall Ferguson, history professor at Harvard University. Graduates of Harvard Business School overwhelmingly favour foreign over US locations for new investment. 607 Harvard alumni who were asked favoured US investment only in 16 % of the cases. Asked why they favoured foreign locations, the respondents listed the areas in which they saw the US falling behind the rest of the world. The top 10 included effectiveness of the political system, simplicity of the tax code, regulation, efficiency of the legal framework, and flexibility in hiring and firing.

Crony capitalism used to be what Americans complained about in Asia. No longer. At least seven Asian countries now score above the US on this measure. Many development economists argue that poor countries can get richer if they improve their institutions, particularly the rule of law. The converse also applies: Rich countries can get poorer if their institutions deteriorate, particularly the rule of law. Today only lawyers think the United States has the best legal system. Everyone else knows it has become a nightmare of impossibly complicated statutes (example Dodd-Frank), open ended liability tort costs are the highest in the industrialized world relative to GDP, and eye watering billable hours. The World Justice Project’s Rule of law Index for 2012 – 2013 ranks the US 26^th out of 97 countries on effectiveness of the criminal justice system, 25^th on fundamental rights, and 22^nd on access to civil justice.

In only 21 countries has the ease of doing business declined. The sixth worst decline – not as bad as Zimbabwe’s but worse than Burundi’s, Congo-Brazzaville’s, and Yemen’s - is that of the United States.

The political debate in America today is all about symptoms, from slow growth to large deficits, when it should be about the underlying malaise. Face it: The country that used to have the best institutions in the world is suffering a great degeneration. The chief business of America is no longer business. I fear it may be bureaucracy.

How I did it – Honeywell’s CEO on how he avoided layoffs by David Cote. When the great recession hit, many companies ‘restructured’ and laid off thousands of workers. By asking employees to take unpaid leave instead, Honeywell positioned itself for the recovery. Most managers underestimate how much disruption layoffs create; they consume everyone in the organization for at least a year. Managers also typically overestimate the savings they will achieve and fail to understand that even a bad recession usually end more quickly than people expect. People could see that things would not stay awful forever so they generally hung in there. Most people aren’t mercenary, and they want to be part of something successful that is bigger than themselves.

Tours of Duty – The New Employer-Employee Compact by Raid Hoffman, Ben Casnocha, and Chris Yeh. A workable new compact must recognize that jobs are unlikely to be permanent but encourage lasting alliances nonetheless. The key is that both the employer and the employee seek to add value to each other. Employees invest in the company’s adaptability; the company invests in the employee’s employability. Three simple policies can make this new compact tangible. They are 1) hiring people for explicit ‘tours of duty,’ 2) encouraging employees to build networks and expertise outside the organization, and 3) establishing active alumni networks to maintain career-long relationships between employers and former employees. Essentially you want to tell your workers, “We will provide you with time to build your network and will pay for you to attend events where you can extend it. In exchange we ask that you leverage that network to help the company.

Massachusetts companies typically preferred secrecy to openness and rigorously enforced non-compete clauses to prevent employees from jumping to rival firms or starting their own. Silicon Valley has long had a more open culture (and lacks enforceable non-compete clauses), and this has permitted the development of much denser and more highly interconnected networks – which make it easier for people to innovate. The area even gave rise to a term, “coopetition,” that reflects the fact that working with competitors can be mutually beneficial.

Just as an individual’s power rises with the strength of her network (I -We), a company’s power rises with the strength of its employees’ networks value; each person’s network and her ability to tap it for intelligence; make it an explicit, acknowledged asset.

The first thing you should do when a valuable employee tells you he is leaving is try to change his mind. The second is to congratulate him on the new job and welcome him to your company’s alumni network. McKinsey & Co has operated an alumni network since the 1960’s and now has 24,000 members including more than 230 CEOs of companies with at least $ 1 billion annual revenue. Booz Allen Hamilton has 38,000 people networked.

If the employee who’s leaving is one of your stars, you should provide an even higher level of service (assuming he handles his departure professionally and doesn’t take the rest of the organization with him). Such folks are likely to go onto great things and to be the hub of their networks, which could prove very valuable to you. You need to provide benefits if you expect to receive them. Most employees don’t leave because they are disloyal – they leave because you cannot match the opportunity offered by another company. The new compact is an alliance between an organization and an individual that’s aimed at helping both succeed.

Transient Advantage by Rita Gunther McGrath. Achieving a sustainable competitive edge is nearly impossible these days. To stay ahead you need to constantly start new strategic initiatives, building and exploiting many transient competitive advantages at once. Transient advantage is now the new normal. Often the very success of an initiative spawns competition, weakening the advantage. In a world that values exploitation, people on the front lines are rarely rewarded for telling powerful senior executives that a competitive advantage is fading away.

Ask yourself which of these statements are true of your company: I don’t buy my company’s products or services. We are investing at the same or higher levels and not getting better margins or growth in return. Customers are finding cheaper or simpler solutions to be ‘good enough’. Competition is emerging from places we didn’t expect. Customers are no longer excited about what we have to offer. We are not considered a top place to work by the people we would like to hire. Some of our best people are leaving. Our stock is perpetually undervalued. If you nodded in agreement with four or more of these it is a clear warning that you are facing imminent erosion.

When opportunities don’t fit the structure, firms often simply forgo them rather than making an effort to reorganize. The notion of transient advantage is less about making more money and more about responding to customers. Fall in love with the problem you are trying to solve rather than with the solutions.

One of the few barriers to entry that remain powerful in a transient-advantage context has to do with people and their personal networks. Avoid brutal restructuring and learn healthy disengagement.

Great leaders figure out some key directional guidelines, put in place good processes for core activities such as innovation, and use their influence over a few crucial inflection points to direct the flow of activities in the organization. Strategy is more important than ever – it just isn’t about the status quo any longer.

What is the Theory of Your Firm? by Todd Zenger. Focus less on competitive advantage and more on growth that creates value. Despite strong position and a successful strategy Walmart’s equity price has seen little growth over 12-13 years. That is because investors seek evidence of newly discovered value – value of compounding magnitude. A good theory incorporates foresight about an industry’s future, insight into which internal capabilities can optimize that future, and cross-sight into which assets can be configured to create value. Only when your company is armed with a well-crafted corporate theory will its search for value be more than a random walk.

The New Dynamics of Competition by Michael D Ryall. The article introduces the Value Capture Model suggesting it as an explanatory, predictive power that no other theory of competitive strategy can claim.

Dysfunction in the Boardroom by Boris Groysberg and Deborah Bell. Survey results showed that women had to be more qualified than men to be considered for directorships. Although boards say they like diversity, they don’t know how to take advantage of it. Female directors tended to be younger than male directors. In comparison to male directors, fewer female directors were married with children. What was also striking was the higher percentage of women than men who named arts and culture, travel, and philanthropy and community service as outside interests.

In response to the survey male and female directors repeatedly named open communication, well-run general meetings, a candid but collegial tenor, and productive relationships with senior management as attributes of a successful board. Yet research suggests that too many boards ignore the need for those qualities, and recent efforts to overhaul governance have clearly failed to address the question of how to compose a knowledgeable, inclusive body that possesses them. The article recommends: build and strengthen group dynamics; recruit more female and diverse director candidates; develop more female and diverse candidates internally; and, conduct rigorous and regular board assessments and evaluations.

It‘s All About Day One, How to give a new executive the best possible start by Suzanne de Janasz, Kees van der Graaf, and Michael Watkins. This article points out the importance of careful on-boarding for any executive /and others too/ to get onto a good start – particularly when there has been a surprising choice, causing questions, scepticism or envy/ anger.

Notes by [e-mail] 9 June, 2013

Harvard Business Review May 2013

Due to irregular mail delivery I received two HBR issues two days apart. This plus my aim to finish reading a book called GDP Gross Domestic Problem made for a busy week end. Perhaps it was just as well that the weather was wet and grey. The May issue has an outstanding article which all those managing people should read and also all those who are being managed. It is called ‘Creating the Best Workplace on Earth’ and it closely aligns with my experiences and ideals. Please find below a few notes from the HBR May issue.

Ending the Wage Gap by Sudip Datta, Abhijit Guha, and Mai Iskandar-Datta. Looking at 1600 CFOs across America females did well at starting point achieving pay package of $ 1,552,000 average compared to males’ $ 1.339,000. But two years later the males’ package was $ 2,677,000 compared to the females’ $ 1,898,000. The article suggests four steps for females to keep on par. Move – or at least demonstrate that you are willing to. Compete within the firm and show your willingness to take on responsibility. Get it in writing – ensuring par with similar males. Do your homework before discussing pay. /I guess all these levels are so high so as to make it hard for the many discriminated women to relate to it/

Size Does Matter in Signatures by Nick Seybert. Companies led by CEOs who have large signatures – an indicator of narcissism – perform worse than ones led by CEOs with small signatures. Big signature CEOs will on average spend more on capital goods, R&D, and acquisitions than industry peers, yet show worse sales growth over the next three to six years. Narcisstic leaders often behave in ways that lead to poor outcomes – for example by dominating discussions, ignoring criticism, or belittling employees.

We also found a link between big signatures and higher pay. CEO’s with more components in their signature /self-important/ presided over worse performance, on average. Most people who have grandiose ideas about their own abilities and refuse input from others make worse decisions. And even the most successful narcissists, like Steve Jobs, leave collateral damage – frustrated employees, lost talent, and damaged industry relationships – that can hurt their companies even if the financial performance looks good.

Handling the Keys to Gen Y by Vineet Nayar. Management’s job is to support the energetic efforts of young workers, enabling and coaching rather than deciding and directing. They should provide greater access to knowledge and collaborative networks. They should make it easy for employees to build horizontal networks that span organizational boundaries and tap diverse areas of expertise. They should enable employees to temporarily step out of formal lines of management and join forces fluidly to respond to market opportunities.

In most businesses, true value is created in what I call the “value zone,” where employees work directly with customers to solve their problems.

Figure it Out by Beth Comstock. We (GE) expect employees to thrive in uncertainty, take initiative, and respond resiliently when their ideas fall short. Today, new disruptions hit and capabilities change at a dizzying pace; figure-it-out jobs are the building blocks for what will have to be figure-it-out careers. Forget your old job descriptions, I tell my people in the marketing team. You should be as central a part of the process of innovation as product managers and engineers.

Innovating for a Sustainable Strategy by Robert G Eccles and George Serafeim. ESG (environmental, social and governance) strategy must address the interest of all stakeholders: investors, employees, customers, governments, NGOs and society at large. Four board initiatives are required to develop the kind of innovation programs that create a sustainable strategy; Identify material ESG issues; Quantify the relationship between financial and ESG performance; Innovate products, processes, and business models; Communicate the company’s innovations to stakeholders.

Today corporations are larger than ever. Just 1,000 businesses now account for half the market value of the largest 60,000 companies. The large companies will be under increasing pressure to devise sustainable strategies, creating economic value in ways that are consistent with the interests of customers, employees, and society at large.

This vast concentration of economic power gives companies the ability and the responsibility to assume roles that were previously the provinces of nations. By building sustainable strategies the world’s most innovative firms can pave the way to a sustainable society, one that meets the needs of the current generation without sacrificing those of generations to come.

What Entrepreneurs Get Wrong by Vincent Onyemah, Martha Pesquera and Abdul Ali. Starting too late with getting feed back from buyers; Failing to listen to critique, Offering early discounts undermining future pricing; Selling to family and friends which can blind them; Failing to see strategic buyers. Other issues include efficacy, credibility, small size, and price –being too eager to get the sales; Switching costs. Early customer feed back is essential.

There are four more articles on Entrepreneurship which I will not comment on here. Why the Lean Start-Up Changes Everything; Six Myths About Venture Capitalist; How to Negotiate with VCs; and In Search of the Next Big Thing. Although they are all interesting, they don’t lend themselves to easy summaries.

Creating the Best Workplace on Earth by Rob Goffee and Gareth Jones. We call this ‘the organization of your dreams.’ In a nutshell, it’s a company where individual differences are nurtured; information is not supressed or spun; the company adds value to employees, rather than just extracting it from them; the organization stands for something meaningful; the work itself is intrinsically rewarding; and there are no stupid rules.

Highly engaged employees are 50% more likely to exceed expectations than the least engaged workers. Companies with highly engaged people outperform firms with the most disengaged folks – by 54 % in employee retention, by 89 % in customer satisfaction, and by fourfold in revenue growth.

When companies try to accommodate differences they too often confine themselves to traditional diversity categories – gender, race, age, ethnicity, and the like. Those efforts are laudable, but the executives we interviewed were after something more subtle – differences in perspectives, habits of mind, and core assumptions.

The ideal organization is aware of dominant currents in its culture, work habits, dress code, traditions, and governing assumptions but makes explicit efforts to transcend them – a culture where opposite types can thrive and work co-operatively.

Efforts to nurture individuality run up against countervailing efforts to increase organizational effectiveness by forging clear incentive systems and career paths. Competence models, appraisal systems, management by objectives, and tightly defined recruitment policies all narrow the range of acceptable behaviour.

Part of my job as chairman is to prevent it from becoming totally orderly.

Waitrose strives to create an atmosphere where people feel comfortable being themselves. Great retail business depends on characters who do things a bit differently. Over the years we have had lots of them. We must be careful to cherish them and make sure our systems don’t squeeze them out. When I was appointed CEO my biggest concern was; would this job allow me to truly say what I think? I needed to be myself to do a good job. Everybody does.

Some managers see parcelling out information on a need-to-know basis as important to maintain efficiency. Others practice a seemingly benign type of paternalism, reluctant to worry staff with certain information or to identify a problem before having a solution. Some feel an obligation to put a positive spin on even the most negative situations out of a best-foot-forward sense of loyalty to the organization.

A core team of facilitators (internal management auditors) with long organizational experience now regularly visit all the company’s worldwide affiliates. They interview randomly selected employees and managers to assess whether the company mantra is being practiced / I strongly endorse this – I think external auditors should interview many staff to assess culture and potential risk/ wrong doing – I have interviewed all my staff (particularly non-direct report staff) 50- 100 people during my last 20 years as a senior bank executive and it is amazing what you can find out and how many improvements it can lead to – 10 questions 70 staff – 700 ideas for making things better – my view is that managers who staff wouldn’t vote for if they had to be confirmed in regular elections should not be kept in their jobs/

Executives should err on the side of transparency far more than instinct suggest. /Tell all the staff the way it is and do everything possible to enlist support/

Elite organizations have all been adding value to valuable people for a very long time. They do this in a myriad of ways- by providing networks, creative interaction with peers, stretch assignments, training, and a brand that confers elite status on employees. Not rocket science. Key is how much value can be instilled in employees rather than extracted from them.

This is no place where we wriggle out of claims (New York Life). One man took out a life policy, went home to write out a check which was on his desk when he died that night. The policy was unpaid but we paid out the claim.

To make daily work make sense the aspiration cannot be fulfilled with bells and whistles. It requires nothing less than a deliberate reconsideration of the task each person performs. Do those duties make sense? Why are they what they are? Are they as engaging as they can be? This is a huge undertaking. /I think it rests on culture – no pretence, just adding real value/

Increasingly employees are sceptical of purely hierarchical power – of fancy job titles and traditional sources of legitimacy such as age and seniority.

Growing successfully, making a difference – aims at achieving both financial growth and social change. (E & Y UK) During the past 30 years employees have said: “I’ll be home late – I’m working for a cure on migraine” “Still at work – the album we will release tomorrow is brilliant.” “Very busy on the plan to take insulin into East Africa.” Never have we heard this: “I’ll be home late. I am increasing shareholder value.”

People want to do good work. They want to work in a place that magnifies their strengths, not their weaknesses. For that, they need some autonomy and structure, and the organization must be coherent, honest and open.

Work can be liberating, or it can be alienating, exploitative, controlling, and homogenizing.