Earning not winning

Photo: Dave Bullock (eecue)

I am a regular reader of the Incentive Intelligence blog and enjoy it very much. Today, I read a really interesting post about the negative use of the word “but” titled: Incentives AND Recognition – Forbes Article AND Some Thoughts. You should read it. I was distracted by one sentence in the post, representing an idea Paul writes about in his blog a lot:

Incentive programs are NOT contests and awards are earned NOT won

The last part of the sentence is so important and so powerful I get blown away by it every time I read it. Some might say this only semantics. But semantics have power. I wrote this in my e-book:

In her book, “Mindset: The New Psychology of Success“, Psychology Professor Carol Dweck, describes a study she and her colleagues conducted with adolescences. They gave a few hundred students a non verbal IQ test. When the students finished the test, they praised them for their results. Some students were praised for their ability: “Wow, that is a really good score, you must be really smart“. Other students were praised for their effort: “Wow, that is a really good score, you must have worked really hard“. Both groups had equal scores to begin with, but after the praise the groups began to differ.

Students who were praised for their ability were not inclined to taking on new tasks. They did not want to expose their flaws. They wanted to keep their smart appearances. In contrast, the group that was praised for their effort showed a different behavior, they actually asked for new challenging tasks to handle!

After interviewing the groups, the researchers gave a new test, much harder this time. The ability group reported feelings of failure. Most of them, when asked to describe their feelings of failure, said: “We are not so smart after all”. More importantly, the ability group, who reported enjoyment of the first test, told the researchers they did not enjoy the second one. In contrast to the ability group’s reaction to the second difficult test, the effort group did not see their lesser results at the second test as failure. When confronted with their failure in the second test they mostly said: “we will just need to put in more effort in order to succeed”. More importantly, they reported enjoyment from both tests. Even the one they failed!

Later, both groups were given an easy test again. The ability group performed worse than it did in the first test. They lost their faith in their ability. The effort group actually performed better than it had done in the first test. They used the harder test to enhance their skill. Not only did they enjoy the ride, in the long run, it improved their outputs.

We need to acknowledge, everyday, the results are not a windfall. They do not just happen. They come out of hard work. And it is the hard work that we want to incentivize. Not every type of hard work off course, but hard work that leads, in the long term, to desired results.

A few days ago I wrote about the difference between decisions and outcomes. And while I believe in outcome management I am also a big believer in the idea of processes. Not standardized processes that confine people in bureaucratic prisons. Individualized processes that are the product of experience, thinking and the understanding of our own uniqueness. And the only way to do that is focus on the effort and the work we put in the created the desired results.

Nothing worth gaining is ever gained without effort. And the effort is the important part of gaining it. As usual, my epic fantasy readings give me another perspective. In Best Served Cold Joe Abercrombie writes:

…It was what you gave out that made a man, not what you got back…

Elad

The forest, the trees and the process of management

Photo by ~Sage~

Today, I was listening to a podcast episode of “This American life” called: “Return to the giant pool of money“. It is a fascinating podcast going back, a year later, to the characters of the This American life’s most listened to podcast: “The giant pool of money“. That episode tried to explain, in layman terms, some of the major causes for the global financial crisis. Both podcasts are highly recommended (especially the original one), but the thing that caught my eyes (or actually, ears) is one sentence in the entire podcast. When interviewing one of the experts about what caused some of the brightest people in the world to create financial tools that almost brought the world economy down, he says something like this (this is not an accurate quote as I write it out of my memory):

I think what happened to these people is that they suffered from the trunk phenomena.  They were so focused on what they did, that they could not see the bigger picture. To paraphrase the famous sentence, they were not only missing the forest, they were actually missing the trees.

Have you ever felt like that? Have you even been so concentrated on doing your part in the best that you can, that you forgot the big picture or even the small picture around you? I know it happened to me. And I think it happens to all of us all the time.

As our world is becoming more specialized and more focused, as we go from knowing everything about a single tree to knowing everything about a single trunk, it becomes even more important to stop and look at the bigger picture.

We are all part of a complex system and nothing we do is done in vacuum. It always has ripple effects. And understanding how our work connects with the rest of the system, be that system what it may be, should be a consistent part of doing our jobs. Part of the process of the doing the job. This is something that we need to be responsible to do for ourselves. But as managers, it is even more important that we help our teammates do it. Because they are not always able to do it alone. So it has to become part of the process management.

I don’t know what would have happened if the people in Wall Street or working with Wall Street would have stooped and looked at the trees or at the forest. They may have or may have not stopped doing what they did. But I do know that stoping to remind ourselves and our teams that there is a bigger picture is starting to be an important part of each professional process.

So, how can we make sure not to forget the big and bigger picture?

Elad

The unconventional wisdoms: helping people succussed and long-term teams

Photo by John Spooner

One of my favourite subjects here in this blog has been conventional wisdoms. Those things that mangers usually believe in, but that have been proven wrong and ineffective. Over the life of this blog I have mentioned some of them, mostly relating to the management of people and teams. That is why it made me so happy to read Bob Sutton’s post: “What are the Dumbest Practices Used By U.S. Companies?“. It’s nice to have smarter and more experienced people reinforce your ideas from time to time.

I recommend reading the post and the comments which offer many mistaken conventional wisdoms. With so many of them out there, I sometimes wonder how the business world works at all. But I wanted to focus my attention to two of these practices that are mentioned in the original post, and add a few thoughts of my own. This is the first one:

2. Dysfunctional Internal Competition.  This is a big theme in The Knowing-Doing Gap and Morten’s Hansen’s masterpiece Collaboration.  If you dig into the problems in the banks and a lot of other companies, they actually punish people who help others succeed, both via the reward systems and who gets the most prestige.  This seems to persist even though the evidence against such assumptions and systems are so clear.

I must admit that I have never seen this problem described like this. But it makes a lot of sense. As I advocate in this blog, following Markus Buckingham preaching, is that the most important thing a manger could do is help other people succussed. And if organizations are built in a way that hinders the ability of managers to do this, that actually incentivizes them not to do what there are supposed to do, there is no wonder why so many people feel out of place in their workplace and why so many people do not reach their full potential and quote “a bad manager” as their number one reason for leaving their jobs. It is about time to not only make sure that we as managers engage in helping other people excel, but also to ensure that there are systems in the places we work for are set to support that function.

This is the second practice Sutton complains about:

3. Breaking-up Teams Constantly.  American companies often seem to love moving people around constantly, breaking-up teams, giving people new experiences, and so on.  Certainly, there is a time for fresh blood, but if you read J. Richard Hackman’s Leading Teams you will see that the weight of the evidence is that breaking up teams less often rather than more often is linked to all sorts of effectiveness indicators.  Also, see this post about the Miracle on the Hudson where I discuss this literature.

Again, I never thought of this problem in the way described here but it makes perfect sense when you think about it from a strengths perspective. An effective team, among other things, is a team where every member is attuned with his strengths; where synergies are created from the diverse opinions and talents. And it takes time to create this synergy, because people are so different. But it is their differences that creates strength and allows them to perform excellently. I think everyone who has worked in a team felt it. The difference between the beginning of the life of the team and the end of it, when each team member has learned his teammates’ traits and knows how to work in tune with them. So, maybe we need to think about long-term teams and about ways in which we sustain them.

Two challenges laid down for managers of organizations… will you take them upon yourself?

Elad

Lessons learned through a discussion of the Amazon-Zappos deal

Last week as we heard the news of the Amazon-Zappos deal an on-line discussion started between a few of my fellow students at the AGSM MBA. We discussed whether it was a good idea, what will the effect of it on the culture of the two companies, etc.

Amazon has always been a company I admired (and had some very good customer service experience with), so I was glad that as part of the discussion and even more glad to come by this movie clip of Amazon CEO and founder (Thanks Amit). You never know how much of what the CEO is actually saying is happening in real life. But, there is no doubt that Amazon is a success story. And I think that the principals they stand for and Jeff Bezos is presenting in the video are very similar to things I write about a lot in this blog.

Obsess over customers (not over competitors) – I love this approach. First, because it takes the company out of the regular We (or I) culture. As humans we attribute to much importance to ourselves in the mind of others. And this translates to companies’ strategies and tactics that focus on the company and not on the customer. Nobody really cares about company X. People care about themselves. But the second part of this concept is even more important. We spend so much of our lives comparing ourselves to others, using benchmarks, thinking – I want to be like him/her. We forget to be ourselves. We forget to excel at what we do. We forget to exploit our comparative advantage. Instead of focusing on them, we should focus on us. And I know what you are thinking. Isn’t that a contradiction? You just said that we should stop with the culture of we. Well it isn’t. They can co-exist. And anyway, F. Scott Fitzgerald famously said that “the true test of a first-rate mind is the ability to hold two contradictory ideas at the same time”.

Invent – There is no doubt in my mind that the need (and ability) to invent is and will be the hallmark of successful people and companies and out changing world. Not only invention of new products but also of process, of business models, of ideas and of sharing mechanisms. A company that puts invention as its core belief represent, in my mind, a great manifestation of everything that is good in the capitalistic system.  

Think long term for customers not according to customers – Again, two very strong ideas. Long term. The financial crisis has proved, if any more proof was needed, how important the idea of long term thinking is. Again, it is a manifestation of a very basic human trait that is discussed a lot these days. The need for immediate gratification. I hear about the Gen Y phenomena and the fact that people today are looking for immediate gratification and I involuntary cringe. This is not something we should celebrate. This something we should avoid. I think mentioning the famous marshmallow experiment is enough to make my point. Patience and perseverance, in the business world are essential. The second part of this concept is about customers and that they don’t always know what they want. Listen to your customers, but don’t be entrapped by them.

And not less important: “it’s always day one”. There is always more to learn, discuss, improve and question.

Elad

Are you always going for the average?

Photo by billjacobus1

A statisticians Obituary:

“We regret to announce the death of Mr. William Smith, well known statistician, who was found drowned in a lake of an average depth of 7.4 metres”

Source – this site

The average is not only dangerous for statisticians. It is also dangerous for managers and decision makers. What is the problem with being average? After all, average is safe. It is easy to come by. The average is a compromise. It is the middle ground that everybody can agree about.  But if you think about it from a business perspective, what is more important – making everybody happy or succeeding with the business?

There are so many companies who settled on average products or services and disappeared, because being average is like a death sentence. We already know that there is no such thing as an average, one suits all, product.

In contrast to the pool, in real life, the average never stays average. The standards in everything (sports, academia, and business) are rising. What was considered great yesterday is now good, and what was once considered good, is now poor. So, if you start from being average, you don’t really have a chance. That is why people who are at the top don’t feel comfortable:

Why Are Tiger Woods, Oprah, and Bill Gates Uncomfortable?

They are uncomfortable because they are the best at what they do…and the best are never comfortable with where they are. Why? Because they have a burning desire to improve and grow and this naturally creates a healthy discomfort.

Most people think that the best live a life of blissful ease and bask in the glow of their success but that is not the case. Rather the best are always thinking of ways they can take their “game” to the next level and they’re always pushing themselves out of their comfort zone

Even though we all know, in some very deep way that this is true, we still go for the average. We still don’t choose between deeper and wider when faced with the buffet dilemma, we try a mix; a little bit of both.

I think this is the reason governments fail to create changes a lot of the time. Politics is about the average. It is about compromising. You can see a lot of legislation that was much needed in principal, but when it goes through the motions, it is changes due to the different agendas and what you get is an average that causes more damage than the original situation.

Sometimes, when I work in teams, I find myself in the opposing side. Somebody is making an offer I do not agree with. in these situations, if I do not succussed in convincing the other side that I am right, I always try to consider going with the other side’s approach instead of reaching some kind of average. We can both leave the argument happy and feel like we won something, but if the final result is mediocre, than it is not worth it. I rather take the risk of failing but have the chance of excellence, than going for the average. Because in the long term. The average kills you.

Or as Hugh MacLeod puts it:

Quality isn’t job one. Being totally fucking amazing is job one.

So, when is the last time you chose the extreme over the average?

 Elad

 

 

Live long and prosper in horse manure

Photo by Rikki_

My friend Jonathan sent me a link to an article writing in the subject of the email: “long, physiologic and fascinating”.  The article, from “The Atlantic Online”, bears the very promising headline: “What makes us happy?“. Although I don’t think it actually answers this question, it sure does give you a very interesting journey of trying to understand it.

In a nut shell, the article describes the writer impressions from spending one month in the file room of the Harvard Study of Adult Development, one of the longest running – and probably the most exhaustive – longitudinal studies of mental and physical well-being in history. It begun in 1937 as a study of healthy, well adjusted Harvard sophomores (all males) and it has followed these subjects for more than 70 years. I will leave the work of reading the article and answering the question “what makes us happy?” to you, but I do want to quote and comment shortly on two quotes I liked in particular.

The first quote is a very short story the manager of the research, Dr. George Vaillant, gives as an answer to one of the questions:

… [T]he story of a father who on Christmas Eve puts into one son’s stocking a fine gold watch, and into another son, a pile of horse manure. The next morning, the first boy comes to his father and says glumly, “Dad, I just don’t know what I’ll do with this watch. It’s do fragile, it could break.” The other boy runs to him and says, “Daddy! Daddy! Santa left me a pony, if only I can just find it!”

We always hear the importance of looking on the part of the glass that is half full, and not the one that is half empty (link in Hebrew). As I mention in my e-book, In Randy Pausch ’s last lecture he said: “We cannot change the cards we are dealt, just how we play the hand“. When is the last time you woke up to see horse manure on your table and thought to yourself – this is an opportunity. They say that times of depression are times when people get rich. It is the people who can see the opportunity in the horse manure. The following thought is self evident. When you are assembling your team – are you looking for people who opportunities in horse manure?

This is the second quote:

In fact, Vaillant went on, positive emotions make us more vulnerable than negative ones. One reason is that they’re future-oriented. Fear and sadness have immediate payoffs – protecting us from attack or attracting resources at times of distress. Gratitude and joy, over time, will yield better health and deeper connections – but in the short term actually put us at risk. That’s because, while negative emotions tend to be insulating, positive emotions expose us to the common elements of rejection and heartbreak

I talk a lot about short-term versus long-term thinking in this blog. And about the fact that short-term thinking is to be blamed for a lot of the problems this world is facing.  Actually, my last post was about this subject. I also mentioned, a couple of times, that I believe the most important challenge of a leader is the dissipate people fear’s about the future. This outlook on the subject, gives another explanation, why long term view is so important and why it is so hard to reach. This also explains why the talent of leadership is so important and why we need to create processes that help us overcome out behavioural tendencies 

Elad

What can learn from the marshmallow?

photo by bill barber (very sporadic)

I have been watching this fascinating six minute lecture by Joachim De Posada from TED. In it, he describes the famous experiment with kids and marshmallows. They took a group of four year old kids and gave them a marshmallow. Then, they told them that if they will wait for 15 minutes without eating the marshmallow, they will get an extra marshmallow. About two thirds of the children ate the marshmallow right away.

15 years later those same kids, now adults, were invited again. This time the researchers surveyed their status in life. It turned out that the kids who did not eat the marshmallow right away were all very successful, had great grades and were doing very good socially. The kids who ate the marshmallow right away, were generally doing much worse, many of them, dropped out of school.

I heard about this experiment a number of times and I find it fascinating, but, I am not sure what the immediate implications of it are. If I am a parent you young children, what should I do to make sure that my child is in the group that waits?

But in this talk, De Posada explains, that this ability to postpone gratification, is predictive of success, because many times in life, if you wait, your success is bigger. He gives the example of a salesman not going for the quick deal, but sitting diligently with the clients to find out their real needs, thus making a more profound and sustainable sale.

I think there is a great lesson here. In a world ruined with havoc because of short term goals and gains the inclination to wait, to think things through, to try one more check, is increasingly important. And it is growing in importance even more, as are world is getting faster and faster. We hear a lot about flexibility of firms, their ability to respond quickly to the markets and the importance of constant change management. I am not saying all of that is wrong. But I am advocating, at least as part of some process, to be more patient. To learn to postpone our immediate gratification.

The problem is that it is extremely hard. Most people have a lot of trouble dealing with the unknown future and taking risk is part of the game. But there is a difference between taking a calculated risk and just taking a risk. So, how can me incorporate flexibility and risk taking and still think things through.

As usual, I think the answer lies in creating a better process, which will enable quick decisions within a more general framework, which keeps some kind of boundaries and keeps evaluating and re-evaluating decisions. This is, off course, easier said than done. I have a thought. Maybe, firms fail because they try to be both risky and prudent? What if we would allow our employees to be risky and flexible, but will create a better debriefing process. Create a process that checks every decision with milestones, ignoring sunk costs. Maybe, because we know the problems, the solution should be different?

Elad

Should we set goals as leaders or as managers?

photo by isobel t

People with clear, written goals, accomplish far more in a shorter period of time than people without them could ever imagine (Brian Tracy)

Earlier this week I read an article in Knowledge@Wharton called: “Is This Madness? How Losing by Just a Little Can Help a Team — or Company – Win“. This article describes research done on basketball teams who are losing by just a little on half time. The research shows that these teams come out of the half time and improve their performance usually wining the game. From this and other research, an idea of the importance of small achievable goals is described. A short excerpt:

A lot of tools are used in the workforce to motivate people, such as wages, bonuses, etc. While surely these things can have motivating effects, one should not underestimate the potential importance of psychological motivation as well. This paper shows that the psychological impact of being behind by a small amount can cause significant increases in performance … Berger and Pope suggest that the role of managers as motivators looms larger — to set goals that are understandable, achievable and within reach.

That made me think again about what I believe is the difference between leaders and managers. Leaders should deal with the future, with creating a clear picture of the world in order to dissipate the natural fear inhabited in each and every one of us. Thus, a leader focus is on the future. A manager, on the other hand, should focus on the immediate actions of his employees and on ways to help them become remarkable at what they do by finding their talents and utilizing their strength.  A big part of this is motivating them and setting the right, achievable goals. Helping people accomplish things they never could imagine.

 The problem is – and being in a MBA program myself right now, I can see it personally -the conventional wisdom is that management and leadership is the same thing. That all managers should also simultaneously be leaders. This makes managers, who should focus on their employees and the short-term achievable goals, focus instead on the far future, setting far and unreachable goals. It also puts people who do not have the talent and skill to deal with the long term future, deal with it. What follows is wrong use of goal setting that leads to disaster.

So, when you are setting goals for your employees, are you thinking like a leader or like a manager?

Elad 

Business and Sustainability

Photo by Sillygwailo

Getting me agitated

I was sitting in class listening to two consultants, Anthony & Louise Lupi, who came especially to our course in order to introduce us to the overly-used term “Sustainability”. For a day and a half they tried to convince us, MBA students, that sustainability is the right and ethical way for companies to do their business. “The world is changing”, they said,” there is no more bottom line, today companies start to talk about the triple bottom line (TPL) – economical, environmental and social”. I guess that at this stage, my face transformed into the expression I do when I don’t agree with someone (my roommate used to hate that one when we were studying together). “Combining social with commercial create the outcomes of innovation, social outcomes and profit”. My agitation level grew.  But the moment they said: “Sustainability is a goal”, I knew that I did not buy what they were trying to sell.

Companies have one goal

I believe that companies have only one goal. Ask Eli Goldrat. Their goal is to make a profit for their shareholders. There is only one outcome for a company: profit. Now, don’t get me wrong. I think helping the community and the environment is important and great, but it is not an outcome or a goal of a company. It is a side effect, although sometimes, a good one.

Companies are good at making a profit. That is their comparative advantage. And that is what they should do. And again, this does not mean that the best way to make a profit does not change or evolve over time. On the contrary. I think the concept of profit is going through an enormous change these days (and I will elaborate further up ahead).

What did Warren Buffet had to say about that?

The Lupi’s quoted Warren Buffet saying: “Companies do not exist to make profit. They make profit in order to exist”. I agree. But I don’t think Buffet meant that companies should do good things because there are good. Vice versa, I think he meant that profit is the only test that will help a company decide if something is worth doing.

The problems with the term sustainability

I personally believe there are two problems with the term sustainability.

First, what does it mean? It means different things to different people.  As English is not my first language, and in Hebrew there is no real translation for this expression, while the lecture was in progress I opened my wordweb dictionary and looked for the definition of sustainability. Guess what was it?

“The property of being sustainable”.

Wow! That really helps. So I tried looking for the word sustainable. It was not a bigger success:

“Capable of being sustained”.

 I did not give up. I looked for the word sustained. Here we made some progress:

“Maintained at length without interruption or weakening”.

So, sustainability basically means long term. I could live with that. But here the second problem presents itself. Whose long term?

Who are we talking about?

I think that a lot of the problems with the discussions about sustainability and companies are the result of it being focused on the sustainability of the plant, the environment and the society. But companies should not care about the plant, the environment and the society. They should only care about making profit. So when we use the term in regards to companies we should focus it on the company. So we should try to maintain at length without interruption or weakening the making of profit by a company. That is what sustainability should be all about.

Does that make sense?

This is a way to understand what is happening in the world. Frankly, I don’t find the rhetoric of companies saying something like: “we know companies should do right by their communities” quite convincing. Everybody sees the bluff. What the company should say is: “we know we know companies should do right by their communities because it is profitable”. What companies are starting to understand is that thinking long term, getting involved in their communities, using environmentally friendly technologies and other “sustainable” strategies, help them achieve the one important thing: sustainable profit for their share holders. And by sustainable I mean long term profits.

Check out the time frame

It is not a matter of ethics; it is a matter of strategy. There is no triple bottom line. Better reputation has monetary value. Employment satisfaction has monetary value. Lowering energy costs sure does have monetary value. Businesses understand only one language and that is the language of money. And as we progress, it is becoming easier to express intangible concepts with money.

But something else is happening. And this is linked with the economic crises. There is a shift in the focus of strategy. Because in order to apply “sustainability” strategies you have change your focus. You have to have as your goal not the only the next quarterly report but the state of the company in five or ten year’s time. And if you look up in this post, that is sustainability. “Maintained at length without interruption or weakening”.

When you look on for the next five or ten years, strategies that did not make sense on the next quarterly report, suddenly make sense. Ask the CEO of Coca-Cola – are you taking of soda drinks out of schools because it is right or because it is smart business? Do you care how bad it will look on your next quarterly report or do you look farther ahead? 

Stop lying to yourself

So, I think it is about time we stop lying to ourselves. It is about time companies will not be ashamed of doing what they are best at. Being agents of wealth. If the best way to be an agent of wealth means they can also be an agent of social change – great. It usually is. Not because it is right ethically, but because it is right business wise. We all know that crime pays in the short term but does not pay in the long run. The same is true with business strategy. It is just a shift of time frame you are looking at.

So, let companies do what they are best at – maintain their profit. Let the governments take care of maintaining the environment and our social communities.  The day CSR & Sustainability consultants will stop prettying up the message of sustainability and start describing it with the language of business maybe they will succussed better at selling their ideas.

Elad

Back to the future

Photo by aussiegall

Times are tough and many leaders need to make hard decisions. The main thing leaders are supposed to do is to worry about the future. The long term future. In our short term run world this is a very hard thing to do. Off course, real leaders are tested in hard times and not in good ones. So these times create great example of leadership style and behavior. The question is whether your leadership these days is affected by short or long term thinking.

Our political and economical leaders are facing hard issues that will be put down in history and might shape the future of the world for the next five, ten, twenty or years. There are many demands and there is an abundance of pressure to take certain measures like bailouts and incentive plans.  I am not an expert on these subjects, though some of the bailouts (like that of the car industry), just sounds plain wrong. I expect our leaders to do what is right in the long run and not what the public opinion demands due to panic. Every economist will tell you that most of the economic problems (including the one were facing today) start when our leaders give in to political and public pressure and act while thinking about the next election instead of the next 20 years.

I think that more interesting is the fact that every day, leaders of smaller magnitudes are also forced to make thousands of decisions that influence their teams and companies. These decisions are not always as public or scrutinized like those of the big politicians, but nevertheless will have enormous effects on some people lives.

Two examples I run into today:

The first concerns AIG incentive program which suffered real criticism lately. The critics asks how can the company spend an average of 5,000 $ on travel awards for independent agents when it is in the middle of a bailout program? Let’s say you are the man in charge of this program. As a leader you can look at this popular criticism which is derived of panic and ignores the fact that not only this program is very in line with what most companies spend on their grand travel awards for top performers, but it will also probably generate more money than it costs, and think of the short term results – no more criticism. Or you can ignore the critics (and analysts and other public opinion) and do what is right for your business.

The Second example is harder. A team leader has to explain to his team, which worked really hard for the last ten months on a project, that there their project is a part of a “let’s be fair” set of cuts that were the same 20% across the board. The question is how do you keep your team’s eyes on the larger goal that lies ahead? How do you deal with this tough call that was forced on you? I think the main thing you need to do, as a leader, is focus on the long term results. Back to the future. If you convince your team of the vision, you can lead them over the hurdle.

Elad