On ignoring best practices

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Jeffrey Pfeffer has a very interesting article in Newsweek about layoffs and how they are much less effective than people think they are. One of the closing paragraphs caught my eyes:

Despite all the research suggesting downsizing hurts companies, managers everywhere continue to do it. That raises an obvious question: why? Part of the answer lies in the immense pressure corporate leaders feel—from the media, from analysts, from peers—to follow the crowd no matter what. When SAS Institute, the $2 billion software company, considered going public about a decade ago, its potential underwriter told the company to do things that would make it look more like other software companies: pay sales people on commission, offer stock options, and cut back on the lavish benefits that landed SAS at No. 1 on Fortune’s annual Best Places to Work list. (SAS stayed private.) It’s an example of how managerial behavior can be contagious, spreading like the flu across companies. One study of downsizing over a 15-year period found a strong “adoption effect”—companies copied the behavior of other firms to which they had social ties.

That reminded me of a post I wrote about how when we did a case about SAS in our organizational behavior MBA class at AGSM. I was surprised that all three teams in my class suggested to change to a commission based sale force. This is part of what I wrote back then:

This is the reason I was truly surprised to discover that all 3 teams recommended changing the pay system for the sales representatives and adding a commission based system. My simple question is WHY? It seems to work. More important than that, this is what makes SAS unique. You know how I feel about the importance of being remarkable.

You can argue about the question whether the commissions approach is the right approach generally (or maybe argue about using a joint approach), but it seems to work for SAS. So why change it?

You might say that people think that if they are motivated by money than other people are the same. But we know they are not. People are different.

I am not sure how, but this point connected with a point I was reading in a post on the Harvard Business Review blog today, by Dan Pallotta, titled – Real Leaders Don’t Do Focus Groups:

Apple is famous for not engaging in the focus-grouping that defines most business product and marketing strategy. Which is partly why Apples products and advertising are so insanely great. They have the courage of their own convictions, instead of the opinions of everyone else’s whims. On the subject, Steve Jobs loves to quote Henry Ford who once said that if he had asked people what they wanted they would have said “a faster horse.”

And this in turn reminded me of a number of things I wrote about, especially, this post:

If you look at some of the best successes in the last few years, they come from companies that looked at the market and did not ask themselves – how do we compare? How can we do what are competitors are doing, just differently or better?

It came from companies that reinvented the game. That left the confines of the industry and created new industries where they excel. Itunes; Google; Twitter; Iphone; are just some of the examples that spring to my mind.

What are the best practices you should be ignoring but instead are trying to imitate?

Elad

Small decisions, fake sun-glasses and celebrating contradictions

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I have always been fascinated with small decisions and how one such decision can lead to a spiral that ends in enormous unwanted results in the future. Last semester, while still down at AGSM MBA, I took a business ethics class and noticed that in a lot of the cases we talked about, the current ethical dilemma was rooted in a small and sometimes insignificant decision in the past.

Then I read this post describing a very intriguing experiment:

…[The] psychologists Francesca Gino, Michael Norton and Dan Ariely asked two groups of young women to wear sunglasses taken from a box labeled either “authentic” or “counterfeit.” (In truth, all the eyewear was authentic, donated by a brand-name designer interested in curtailing counterfeiting.) Then the researchers put the participants in situations in which it was both easy and tempting to cheat. In one situation, which was ostensibly part of a product evaluation, the women wore the shades while answering a set of very simple math problems — under heavy time pressure. Afterward, given ample time to check their work, they reported how many problems they were able to answer correctly. They had been told they’d be paid for each answer they reported getting right, thus creating an incentive to inflate their scores. Unbeknown to the participants, the researchers knew each person’s actual score. Math performance was the same for the two groups — but whereas 30 percent of those in the “authentic” condition inflated their scores, a whopping 71 percent of the counterfeit-wearing participants did so. Why did this happen? As Gino puts it, “When one feels like a fake, he or she is likely to behave like a fake.” It was notable that the participants were oblivious to this and other similar effects the researchers discovered: the psychological costs of cheap knockoffs are hidden. The study is currently in press at the journal Psychological Science.

And that got me thinking. Here is the comment I made on that post:

It [the research described above] actually explains the downwards trends in ethics over time and the fact that a small unethical decisions might lead to a major issues in the long run. It also reminds of the broken windows theory. As soon as we are already faced with something broken, it is easier for us to act “broken” ourselves. The importance of small choices is so significant it is almost too hard to understand it.

As always I try to translate such thoughts to the world of management and to the way managers connect with their employees. I think there are a number of implications:

1. There is no such thing as a small decision. Our every act matters. And in the things that are important, like praise and recognition and helping people excel, we are tested every day. We don’t know what deciding not to engage in such activities today means for the future.

2.While thinking about the possible outcomes of the every possible decision is impossible and paralyzing, it is important to realize that the biggest issues started small. If you decide to go down a certain path, you create momentum which is hard to recognize and hard to stop. Dr. Philip G. Zimbardo says in interview for the book Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition by Guy Kawasaki (You don’t have to read the whole book but read this chapter and page 365):

Good people don’t rush in to do evil where angels fear to tread; instead they start by straying only a small way away from their moral center and each successive step down is hardly different, barely noticeable, until it is too late and their behavior is shocking and may even be awesome or awful.

3. Finally, I write here in this blog that managers should stop with trying to create rules. I believe in employee autonomy and in practical wisdom. At the same time, I wrote this in my e-book:

I believe in doing things right because they are right. In obeying the rules because they are rules. I believe that there are certain things that are just not done. We have so many rules around us. Some are better, some are worse. But the sad thing is, that we are used to breaking them every day. Just think about jaywalking or avoiding certain tax payments or taking something from your office when you are not supposed to. I believe rules are there for a reason and we should follow them because they are there. Because it is right. If the rules are wrong, it is all right to try to change them. In fact, we must try and change wrong rules. But there is a legitimate way to do that. And as long as they are valid rules, we should obey them.

This might seem contradictory. It might be. I have also grown and changed in the year and a half that passed since I wrote those words. At the same time part of my philosophy is that we should celebrate contradictions – 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”.

Elad

Lessons about Business in Asia – it is not different

As I mentioned in my last post, in the last three weeks, I have been visiting Singapore and India as part of a International Business in Asia course (part of my AGSM MBA). While I have accumulated many ideas for new posts in the last few weeks, I think there is no better was to restart my posting than with a post that summarizes my main learnings from the trip.

Everybody talks about how different Asia is. About how business in India, China, Singapore or any other country in Asia is totally different then the western way of doing business. This is the frame of mind that I came with to a n educational trip in Asia (Singapore and Mumbai). However, I discovered  that there are no differences! Business is business. Everywhere.

“This guy is crazy”, you must think to yourselves. “Everybody knows that there are cultural differences and that companies have failed because they did not understand these differences”. And my answer is… You are completely right. Well, expect about the crazy part…

I am not saying that the countries are not different or that you do need to respect diversity before you venture into a new market. I am just saying, that this is what you would do when you will go to every country in the world. East or West. Let me go over some of the lessons I learned and try to explain this idea  a little more thoroughly:

1. Respect for the local culture – the fact that people from different countries differ from one another in habits, behavior, communication and heritage.  And companies should be careful not to make the assumption that if something works in one market, it will work in another. There is a need to first understand the culture, then tweak and customize the products and services to the local culture. However, this is true to any other “western” country. IKEA had to change its offerings when it came to the states. Starbucks failed when it came to Israel. No one would try to sell exactly the same thing in France and in Germany. Lesson: When you go into a new market, start by re-examining all your assumptions about customers. It is true in Asia as it is in any other place. Not doing it is just bad business.

2. Local differences – a theme the came up again and again in the trip is the diversity inside some of the countries. There are many Chinas and Many Indias was the theme. South India is not like North India. Different languages, different foods, different costumes and holidays. And again, the European market is not the same all over Europe.  Products that work in the UK do not necessarily work in Belgium. There are differences in foods and languages even inside some the European countries. The American market is not the same all over the states as some companies realized when tweaking their products to the Hispanic market in California and the Cuban market in Miami. Things that work in New-York will not necessarily work in Lo-s-Angles. Looking at countries as one segment or market is just not smart business. Lesson: Beware of the fallacy of the average (in the wider sense of the term – and see an interesting perspective of this here).

3. Time, Time, Time – people expect immediate successes. In real life going into a new market, starting a new business and overcoming cultural barriers take time. You wont succeed over night in the west. You will not succeed overnight in the east. Don’t let anybody else tell you otherwise. Lesson: Size of market does not guarantee immediate success no matter where you do business. Patience and perseverance are the keys to success (and see point number two again to understand why the size of the market is in some ways, a myth).

4. People are people – as this blog concentrates on managing people I tried to understand all through the trip if the difference in the culture has an impact on the principles of people management. Does people motivations for work differ? Does the role of a manager or a leader in these countries differ? My answer is – no, it does not. You will find the same diversity of people in Asia as you will find anywhere in the world and there is a need to understand it and leverage it. True, as a whole, Indians are more entrepreneurial in nature than Chinese and Chinese are more bound by conformity, but this is only as a whole. In the individual level, which is the most important level for the manager, people still vary. In this sense, sensitivity to communication methods is vital and understanding the preferences of each individual becomes even more important. Lesson: Managers face the same challenges everywhere, even though the tactical problems might appear to be different.

Countries and people are different. However, they are different in the same way everywhere. Smart business uses good processes and ignores assumptions and attempts to copy models from one market to another. This is true everywhere in the world.

Elad

Connections, piracy, change and business models

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It is funny how sometimes ideas comes from different directions and connect in ways you could not have guessed they will before.

A few months ago I went to have dinner with two colleagues of mine from my AGSM MBA class. We had a wonderful dinner and an even better intellectual discussion. I don’t really remember how we got to the subject but I mentioned Larry Lessig’s talk on TED about User Generated Content (how the law is choking creativity) where he claims that our society is turning kids into criminal by illegalizing activities that are natural to them.

A few days ago I gave a session to a number of people from our Public Speaking & Debating Club about modern techniques in presentation delivery. One of the examples I used to illustrate my point and stimulate the discussion was the same lecture by Lessig from TED which brought the ideas back to my mind.

This morning, as I was going over my Google Reader reading list, I came by Seth Godin’s post titled: “Teaching the market a lesson“. Here is a small sample:

Some book publishers don’t like the Kindle. Either they’re afraid of it or they’ve crunched the numbers and they don’t like what they see. (Some days, 95% of the top selling Kindle titles are free… demonstrating that digital goods with zero marginal cost and plentiful substitutes tend to move to zero in price).

Worried about the medium, they hold back, delay or even refuse to support it.

A few minutes after that, I got an e-mail from my dear friends Ajaya, one of my colleagues from the dinner a few months ago. This is what he wrote in the e-mail:

Remember talking about illegal downloads and what the fact that almost all kids break the law means to society. Finally, it seems the music industry is figuring it out.

And the email had a link to an article from The Economist titled: “How to sink pirates“. The article describes how the music industry is finally starting to relinquish its fight against piracy, starting to use a model of streaming music, gaining money from advertisements. And it ends with this conclusion:

All of this offers a lesson for other types of media, such as films and video games. Piracy thrives because it satisfies an unmet demand. The best way to discourage it is to offer a diverse range of attractive, legal alternatives. The music industry has taken a decade to work this out, but it has now done so. Other industries should benefit from its experience—and follow its example.

Suddenly, it dawned on me. The points just seemed to connect. These lessons keep repeating themselves:

  1. The world is changing. You can jump on the boat. But you cannot stop it. The past will always try to stop the future. Be it the music industry, the book publishing industry or shop owners in 19th century France. They will fail. The answer to change is change and not more of the same.
  2. Peter Drucker wrote that you can never know how a product that was created in one field could be used in another field. Products and technologies will continue to move across industries destroying business models. The answer will not be found in barricading industries and business models, but in inventing new business models.
  3. “Free” is changing the world in more ways than we can imagine.
  4. Law, legal proceedings and fear can only take you so far. Options, Transparency and self fulfillment will win eventually. It might take time, but it will happen.

You think that the smart people running some of these industries would have learned these lessons by now.

Elad

Managing meetings

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I have been thinking about writing this post for a long time now, ever since I read this post by Karlyn Morissette a few weeks ago. One thing I hoped to learn more about in my MBA is about how to run meetings. As it is something I have been struggling for a long time now and even once tried to help somebody prepare a lecture about.

These are five of my top ideas (rules?) for running effective meetings.:

1. Everybody must come prepared. And when I say prepared I mean totally and utterly prepared. When you get to the meeting you already: read everything; made the preparations; calculated the numbers; came up with your own ideas. I spent so many meetings where people come unprepared and as a consequence half of the meeting is spent on just understanding the issue or on doing things that should have been done earlier without wasting everybody’s time. Too many people believe that they perform the best under pressure and rationalize their way into procrastination. This trend extends itself into the meetings and people say to themselves – “hey, I learn the subject while the meeting takes place”. I even got constructive feedback about the fact that I turn up to meetings too prepared. My main challenge with this rule is that it is hard to enforce and hard to create an atmosphere where preparation is the norm and not the exception.

2. Have an agenda. I think this is where Karlyn’s post makes the point better than I can:

How many meetings do you attend actually have an agenda? Better yet, a stated purpose? I learned this technique from a lady much smarter than I, Dr. Pamela Skyrme.  Pamela is a brilliant organizational coach.  She also happens to be the Director of Professional Development in my office at Dartmouth, where I’ve had the privilege of being coached by her for the last several months.  The tactic goes like this: At the beginning of each meeting make sure the group as a whole knows what they are seeking to accomplish in that meeting (if you don’t have something you’re seeking to accomplish, then you probably shouldn’t be meeting in the first place). At the end of the meeting, assess whether or not you accomplished your initial stated goals. Do this consistently and it will keep people on track and focused, since there will be some level of accountability (however minor) for not accomplishing a stated goal.

The only thing I would add is that if possible send the agenda before the meeting. The main issue I find challenging here is what happens if the group does not agree on the agenda. You can spend more time discussing the agenda then the issue.

3. Everybody speaks. If someone is at the meeting and does not talk then it is a waste of his time to have him there. Everybody has an opinion and every opinion matters. Don’t let the meeting become a shouting contest where the one who has the loudest voice or the most confidence win. There is an added bonus to this. The more people are a part of the process, the more inclined they will be to follow the decision of the group. Any challenges with this one?

4. Respect people’s time. People have short attention span. They also have busy schedule. It is important not only to start and finish a meeting on time but also to be aware of the limitations of people. If need be, take a break. If it you realize it will have to go over time, stop, acknowledge the fact out loud and discuss how you are going to approach the fact that the meeting is going to go over time and allow people to make the needed arrangements.

5. Have a clear, actionable summary. Whatever happens, you need to spend the last few minutes of the meeting assessing the conclusions, decisions and action items that are the result of the meeting. If somebody is responsible for an action item, have him write it down (it has a psychological effect). In any case, have somebody send the details to all of the relevant parties and ask them to acknowledge it was received.

Any other ideas (rules)? Any important lessons from past meetings? Thoughts about the ideas (rules) I offered? About the challenges associated with them? Waiting to hear your thoughts…

Elad

Obliquity and management

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As part of a “Business Ethics” course I am taking at my AGSM MBA I came across this fascinating article by John Kay titled:  “The role of business in society”. It deals with the long lasting debate surrounding the role of business – to make profits or to be a good corporate citizen. It is an interesting look at the debate and I think it makes some valid points, even though I think in its essence it does not contribute something very new to the discussion. However, one concept in the article made me reach a revelation, the principle of obliquity:

I call this paradox the principle of obliquity. It says that some objectives are best pursued indirectly… We are all familiar with one application of the principle of obliquity. While Americans, characteristically, talk of the pursuit of happiness, happiness is rarely best achieved when it is pursued. Research in social psychology confirms our intuition and experience. Happy people are not, in the main, those who selfishly promote their own interests: in fact happy people are most often characterized by a kind of uncalculating and outgoing generosity

In a later article, titled: “The oblique approach”, Kay writes the following things:

With maturity – personal or corporate – comes the principle of obliquity. Goals are often best achieved indirectly. Many people have noted the paradox that the most profitable companies are not necessarily the most profit oriented

It is so inspiring to read something that actually makes you feel: “wow”. And that is the way I felt when I was reading about this concept. So many times during my life I was told that the first thing we should do is concentrate on the goals and try to align ourselves with them. Why, I taught it myself a number of times. And it is true. And useful. And effective.

But not always. Because sometimes the best way to reach a goal is to reach it indirectly. We all know that sometime we are so obsessed with something that we hurt our chances of actually gaining it. When we let go, it somehow comes naturally. And I know it sounds very Hollywood-Movie like. But it actually happens.  

Think about it. When do you learn the most? When you are sitting in class actually trying to learn or when you are doing something and the learning comes as a side effect? Most people say that the most they learned it from the indirect learning – from other people, from doing, from watching – and not in formal courses. Or from failing. Could you imagine that? Those of us who learned how to drive know that the best teacher of driving is the road. Once you start driving, it actually teaches you about how to drive.

And this concept is so true in so many business settings. And it explains why many of the conventional wisdoms are just wrong! Would the manager help his flowers more by solving their problems or by letting them reach the answers by themselves? If you want to improve the performance of your team do you focus your managerial attention on your strongest people or on your weakest people? The answer to both of these questions is the indirect answer. Don’t give answers and the strongest people. or just think about Judo Strategy, and its claim that sometimes we don’t need to attack by pushing, but by pulling. Or by substituting effort for ability.

I am not saying that the answer to each and every problem is the indirect approach. But when we realize that the direct approach is not working, why not try to attack the challenges we face indirectly. It could be a powerful tool. After all, as Abraham Maslow said: “When your only tool is a hammer every problem looks like a nail“.

Elad

Re-thinking tradeoffs

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During the last few weeks, as part of our AGSM MBA integrative experience, we participated in a simulation with a software called Markstrat. The simulation allowed us to run companies in teams as part of a competitive environment, making decisions about operations, marketing, strategy and more. In the end of the two weeks experience we each had to write a short essay about what we learned from the experience. Here is a short part of what I handed in:

As future managers we should be aware of that and think carefully about the implications each decision has on our cognitive resources. Attention and time are the scarcest resources a manager can allocate, even more than money. Thus, they should be considered in a decision like any other scarce resource.

This relates to an idea I have been writing and thinking about a lot lately. Tradeoffs. I think as human beings we have the immediate tendency to want everything. To try and be everything. To try and be the best at everything. Maybe instead we should focus our attention on being the best at something. Just one thing that will make us stand out. Not because being good at everything is bad. It is because it is so hard to achieve all at once. Because success is so many times the result of tradeoffs. Of actively deciding not to be good at something, because we put all our resources on something else.

Maybe, in our multi-tasking world, we need to re-learn what our forefathers, the hunters, knew how to do so good – focus on one thing. Become your prey. Follow it enough and you will understand it, start to think like it and finally hunt it.

I was reminded of this concept yesterday while I was reading Seth Godin’s post: “Spare no expense!“. Godin, makes the same point about tradeoffs in a different setting. The resources companies put into making one customer happy. A short excerpt:

The reason we get trapped by (c) is that, “I’m doing the best I can” is always much easier than, “we need to be disciplined and help more people, even if that means that some special cases will fall through the cracks. The internet makes this even more difficult because people who fall through the cracks are able to amplify their complaints ever louder.

The way around it, I think, is to set expectations early and often. If you’re going to give me your phone number, you better answer it. If you’re going to offer a warranty, you better honor it. If you position yourself as a company with real people eager to make every single person happy–you better deliver.

No matter what, you should decide. In advance. How much do you want to spend on ad hoc emergencies, how much do you want to reserve on design and helping the masses improve their experience?

The hard part is making the decision and sticking to it. We see many companies saying things like – “we put our people first” – but when it comes to making the actual choice, the actual tradeoffs, they don’t. It is not only about not fulfilling your promises; it is about not making the right tradeoffs even though you decided to make them.

So, what are your actively chosen tradeoffs? And what do you to keep them?

Elad