Get a Better Return on Your Business Intelligence

by Vijay Govindarajan and Srikanth Srinivas  |   10:00 AM December 25, 2013

There is a lot of hype and buzz around business intelligence. Companies are investing millions of dollars in business intelligence technology. However, unless this is accompanied by the simultaneous creation of a strong foundation for taking intelligent business actions, they are unlikely to reap a good return on that investment.

An analogy might help explain what we mean by this. Imagine a plane heading from Dallas to New York. If that flight’s trajectory were just a degree off, it would end up in the ocean instead. The fact is that planes are more than a degree off 95% of the time, yet most planes land where they are supposed to. In spite of all the storms, the changing wind conditions, turbulence, and all the volatility and uncertainty they encounter along the way, they manage to land at their intended destination. Similarly, we believe the primary purpose of an investment in business intelligence should be to help companies reach their intended destinations in spite of all the storms they are likely to encounter along the way. So by learning how pilots are successful, leaders can get a much better return on their business intelligence initiatives.

How is the pilot successful? By managing six critical variables effectively. These variables are the essential ingredients for business success:

1. Starting Point. The pilot knows clearly that he is starting in Dallas. There is nothing clouding his understanding of the current reality as it is, not as he would like it to be, not as it appears to be, not as his copilot describes it to be. Similarly, there should be a good, data-centered understanding of the reality as it is — with holistic data across the functional silos, that is available in a timely manner, and which describes the current status of the business accurately.

2. Destination. The pilot can’t just land in a random location and declare, “You have arrived.” He must make proactive choices to reach a predetermined destination. Similarly, business intelligence must be viewed against the backdrop of a clear vision, goals, and strategy, and used as a means to getting there, rather than viewed in isolation or as a technology initiative. This vision should then be cascaded down so each decision maker has a clear idea of the destination they are working toward, while at the same time, ensuring that all these will add up to the same common goal.

3. The Plan. The pilot doesn’t take off until he has a clear flight plan, and he can understand how it will take him from the starting point to the destination. Similarly, business intelligence must be leveraged to create a plan that charts a path from where the organization is today to where it should be in the future. A visual way of depicting the plan — one that connects the starting point and the destination, and takes into account all the nuances of a business (more sales in fourth quarter, a spike in sales at month end and quarter end, etc.), seasonality, trends, etc. — will help with understanding the next variable, variation. In our experience, this element is weak in most business intelligence initiatives.

4. Variation. The pilot knows that he is going to be off 95% of the time. He expects variation from the plan and deals with it. Similarly, leaders need to anticipate variation. They should neither freeze in surprise when there is variation, nor should they create so much noise that the signal gets drowned out. Just like the pilot makes a calm assessment and operates the right levers, leaders need to create a climate and culture where people can make a calm assessment and fine-tune the right set of drivers. Without this one simple prerequisite, we have seen many business intelligence initiatives fail.

5. Act Early. When you are a degree off and you correct it early, it may be a matter of no more than a mile. Leave it for a while and it can compound quickly to hundreds of miles off course. The pilot has a cockpit full of tools that tell him where he is relative to where he should be and provide the visual cues he needs to act early and course correct often. Similarly, business intelligence must provide the visual and data-centered cues that show people the widening nature of the gap. For example, a bar chart by time period, one of the most common visual tools used, may not show the widening gap. However, a cumulative line graph can visually highlight the widening nature of the gap in a powerful way. Further, sales variation can get widened much more when it comes to financial variation because of fixed costs. It is not uncommon for a 5% drop in revenue to result in a 30% drop in profitability. Along the same lines, a 5% drop in revenue can result in a 50% drop in market cap. Such gaps must be exposed clearly and visually so employees understand the true impact of making decisions early.

6. Act Often. The pilot is making dynamic course corrections, perhaps every minute or so. He is not waiting an hour before deciding what to do. Contrast that with a typical business. A whole month goes by. A couple of weeks later the books are closed. Only then do leaders know where the business was last month. In addition, at best, this gives 12 opportunities for course correction over a typical annual cycle. If a plane were to attempt that Dallas–New York flight with just 12 course corrections, based on where the plane was at the time of the previous course correction, it will most certainly end up in the ocean. As volatility increases and uncertainty builds, the need for more frequent course correction accentuates. If there is only one thing a business intelligence initiative can focus on, we would say, put all that energy and focus on more dynamic, forward-looking course correction.

Unless a strong, intelligent, action-based foundation is in place to address each of these six critical variables, organizations are likely to get swept away by the buzz of business intelligence, become distracted by pretty charts on mobile devices, and end up landing where the winds take them. And when the external forces take charge, there is no guarantee it will be a safe landing. Instead, leaders must guide their companies safely toward their intended destinations.

More blog posts by Vijay Govindarajan and Srikanth Srinivas

More on: Information & technology

VIJAY GOVINDARAJAN

Vijay Govindarajan is the Coxe Distinguished Professor at Tuck School of Business at Dartmouth College. He is coauthor of Reverse Innovation (HBR Press, April 2012).

SRIKANTH SRINIVAS

Srikanth Srinivas is the Senior Vice President of Solution Innovation at Medecision and the author of Shocking Velocity.

Office Politics: A Skill Women Should Lean Into

by Kathryn Heath  |   10:00 AM February 25, 2014

Who says women don’t like office politics? Just about everyone: My clients. My colleagues. My mother. The sommelier at the French restaurant I ate lunch at last weekend. They’ve all complained about office politics. Some women claim they are not good at it, while others simply avoid certain hot-button business situations because they think playing politics is “sleazy.”

Need more evidence? In 2013, my partners and I conducted a combination of surveys and interviews with over 270 female managers in Fortune 500 organizations to determine what they liked and disliked about business meetings, and one of the things that repeatedly fell into the dislike column was politics. In the process of coaching and training women leaders over the course of a decade, we’ve maintained a running list of common threads—and a disdain of office politics is in the top three. In reviewing several thousand 360-degree feedback surveys we found that both women and their managers cite political savvy as an ongoing development need for women.

But, as Winston Churchill once said, when you mix people and power, you get politics. Politics is a big, messy issue encompassing everything managers deal with all the livelong day. And it’s not just a sprawling topic; it’s also a pivotal one for women, because backing off in political situations makes it impossible for them to succeed in the highest levels of leadership.

With that in mind, we put together a prescriptive model suggesting several ways women can improve their political performance, which we’ve used with success in recent coaching seminars. Here’s what it looks like:

Plug In: Today’s nonstop pace causes some of us to go it alone—working through the week’s agenda simply to stay afloat. Politically speaking, operating in “survival mode” can leave us isolated. Consider this entry from a 360-degree performance report we reviewed: “Her direct reports like her and she’s the best at serving clients. However, she’s always out in the field.  I’m not even sure she knows the names of all the senior leaders in her office. This is a major liability in terms of her upward mobility.” When we say “plug in,” we mean forge internal alliances and tap into the grapevine (both the formal and informal networks) in the workplace. Even if you are a high performer at your job, if you are perpetually absent from the office you are missing opportunities to connect with the culture and stay attuned to the political context of your work environment.

Look Out: Imagine your career two to three moves ahead of where you are now and keep that image in your mind. Many women we work with are tightly focused on being perfect performers in the moment and don’t think enough about positioning themselves to reach the next level in their careers. Projecting out into the future helps keep you alert and allows you to be nimble when opportunities arise.

Line Up: In order to make office politics more palatable, we coach women to build their careers as if they were running for office. That means actively lining up a coalition of supporters  — allies, advocates, mentors, and sponsors. You need to recruit people who are willing to expend political capital on your behalf. Research indicates that men are more willing to trade favors than women are, and that may put them in a better position to line up sponsorship. Yet, even without cultivating a greater appreciation for the quid pro quo mind-set, one thing that women can do right now is to reach out and align themselves with other women who are higher up in their organization.  It is not that men don’t help women, because they certainly do. But there is something to be said for connecting with the other like-minded women around you.

Act Powerfully:  Executive presence is important in politics, and women need to manage theirs deliberately rather than let other people draw their own conclusions. As a thought exercise, we ask women to consider how they “land on” people — that is, what impression they make. It is a distinctive phrase that helps them remember to work proactively at making a strong positive impact. We also coach them to use “muscular” language – and what we mean here is to use non-generic language, which will have a bigger impact on your audience. Don’t just say: “That’s interesting data,” for instance. Anyone can say that. Instead, say “That’s robust data that supports my argument that …” This may sound like semantics, but saying something specific and distinctive allows you to own your ideas and control the conversation.

Get Out: Speak up and actually ask for assignments, opportunities, perks, and promotions. In the process, don’t handicap yourself. For example, saying “I’m not good at politics” is a type of self-handicapping. As soon as you say it, you diminish your power and put yourself in a position of having to overcome an obstacle you’ve put in your own way.

Take Credit:  Don’t be afraid to be noticed. Politics requires you to sell yourself; yet women work harder at modesty than men. Why? Self-preservation. According to Alice Eagly and Linda Carli inThrough the Labyrinth, research shows that people accept boastfulness in men but often dislike boastful women. So every woman has a choice to make: Do you want to be universally liked or do you want to get promoted? We suggest the latter. Take credit for your work. One sure way to get passed over for a promotion is to remain silent about your accomplishments and allow others to take credit.

It’s not possible to opt out of office politics. If you want to have a voice, if you want to make an impact, if you want to have a career, politics is simply part of the job.

More blog posts by Kathryn Heath

More on: Leadership transitions, Managing yourself

KATHRYN HEATH

Kathryn Heath is a principal of Flynn Heath Holt Leadership (FHHL). She is co-author of Break Your Own Rules: How to Change the Patterns of Thinking that Block Women’s Paths to Power (Jossey-Bass, 2011) and co-author of the HBR article Women, Find Your Voice: Why Your Performance in Meetings Matters More Than You Think. Join the conversation at FlynnHeathHolt.com and on Twitter @FlynnHeathHolt.com

If You Have a Bad Boss, These Are Your Options

by Ron Ashkenas  |   9:00 AM May 5, 2014

A good boss provides encouragement, development, mentoring, and support, while also being fair, constructively critical, and helpful in integrating employees into high-performing teams. This is a boss you remember for years, one who has a lasting impact on your career.

But what happens when you end up with a really bad boss – someone who not only lacks these positive characteristics, but is also a negative force? Do you just grin and bear it, complain to higher authorities, look for an escape route, or do something else? Here are two quick (disguised) examples:

Sheila was an up-and-coming manager at a well-known manufacturing company. Several years ago, she was asked to build and run a small team that would invest in start-ups aimed at bringing new technology into the company’s supply chain. Since this was a minor operation, Sheila’s supervisor, the head of Supply Chain, paid her very little attention. Eventually, her team built a portfolio that caught the interest of the CFO and the CEO, and soon she was meeting regularly with them. Unfortunately, Sheila’s success with the C-suite was met with jealousy and anxiety from her boss. For the next year, the boss turned down requests for more resources, gave her poor performance reviews, and spread the word that Sheila was “difficult to manage.” Eventually he moved the team away from Sheila and left her as an individual contributor.

Howard was a high-potential manager at a large life sciences firm. For the past two years he had led a well-regarded team of analysts who provided performance reports to business units. When a new head of Financial Planning and Analysis was brought in from the outside, however, Howard suddenly couldn’t do anything right. His new boss criticized the way things were done, belittled members of Howard’s team, created discord with the business unit heads (their clients), and refused to listen to anyone’s input. And when Howard tried to spend time with this boss and develop a more personal relationship, he was castigated for being “high maintenance” and someone who “needs reassurance” to do his job.

Obviously both of these cases are somewhat extreme (although I have many similar ones to draw upon). But they do illustrate how a bad boss syndrome leaves subordinates feeling trapped and intimidated, with nowhere to go. If Sheila or Howard complain to the next highest level, it could make things worse and reinforce the claim that she or he is “difficult to manage” or “high maintenance.” If they go to HR or an executive with their concerns, they could be branded as troublemakers or difficult subordinates. But if they do nothing, they will be miserable and lose the respect of their direct reports. It’s a tough dilemma.

Luckily, there are a couple of alternatives. They come with no guarantees, but they may be worth considering.

The first is to wait it out. Bad bosses can be like bullies who eventually get tired of harassing people, particularly once they realize that it won’t get them anywhere. The key is to keep doing a good job, while making sure that people above and beyond your level know that you are still performing. Most of the time, a boss’s bad behavior is visible to others, so hanging in there, without complaining, will be viewed positively. And over time, a bad boss may even self-destruct and lose credibility. In fact, that’s what happened to Howard’s boss, who was eventually marginalized by his own peers. Howard ended up with a bigger job in a different part of the organization.

The second alternative is to seek other options, both inside and out. Use the situation as an opportunity to reassess your career, your work-life priorities, and how you define success. When there are no catalytic situations forcing us to think about our trajectories, we stick to a certain path because it’s comfortable — even though it may not be optimal. Having a bad boss can force you to think about what you really want. In Sheila’s case, the turmoil that her boss generated pushed her to think about getting into the start-up sphere, using the contacts she had built over the years. In the long run, the bad boss liberated her to pursue another direction.

Nobody likes having a bad boss. But if you do, there are ways to survive.

More blog posts by Ron Ashkenas

More on: Conflict, Difficult conversations, Managing yourself

RON ASHKENAS

Ron Ashkenas is a managing partner of Schaffer Consulting. He is a co-author of The GE Work-Out and The Boundaryless Organization. His latest book is Simply Effective.

The Best Lecture I’ve Ever Heard

by Greg McKeown  |   10:00 AM May 6, 2014

Mr. Frost, my superb economics teacher in England, once shared the story of two people talking about a lecture given by the late Milton Friedman, the father of Monetarism. The first said, “Twenty years ago, I went to the worst lecture I’ve ever heard! Friedman gave it and I still remember how he just muttered on and on and all I could make out was the word ‘money.’” The second man responded, “If you can remember what the key message was some twenty years later, I think it might be the best lecture you ever heard!”

Indeed, Friedman’s singular message — that by controlling the supply of money, you can stabilize the whole economy — became, arguably, the most impactful economic theory of the second half of the 20^th century. The point I wish to emphasize is not an economic one, but a human one: if you try to say too many things, you don’t say anything at all.

It is clear, in the conference keynotes that I give anyway, that if we take on too many subjects, the message will not be remembered 20 days later, never mind 20 years later. The communication challenge is immense: often such events are packed with a dozen different speakers, each with a plethora of ideas. Then there is the digital distraction of the participants’ smart phones within easy reach. According to research reported in TIME magazine, the average phone user unlocks their phone 110 times a day and at the highest levels, 900 times a day. The best compliment I everreceived from a conference organizer was that she had not seen one person reach for a digital device during my presentation. That doesn’t happen every time, of course. But through trial and error over many years, I have learned a few lessons about ensuring that the essential message is heard amidst all the nonessential noise:

1. You can’t communicate what you haven’t defined. I was once asked to work with an executive team who wanted to find a sticky message for a new initiative they wanted to run. But after interviewing a series of executives involved, all on video, I realized the problem was really a strategy problem dressed up as a communications problem. They couldn’t communicate the message with greater effectiveness until they defined their message with greater clarity. And that meant making decisions about what their initiative was and what it was not. I have found that designing a message around the following helps: “I am teaching [this narrow subject] to [this specific audience] in order that they [clear learning objective/call to action].”

2. Lose the slides and have a conversation. I recently spoke at SXSW, a conference held in Austin, Texas that attracts thousands of creative movers and shakers.When I spoke, there was standing room only and a palpable energy. Sensing the pulse in the room, I killed the slides and just had a conversation. Basically, I asked one question: “Why are otherwise intelligent people tricked by the trivial?” Lots of people shared their thoughts and we riffed on each of the comments, which ranged from “We’ve been trained from our first days in school to do what we’re told without question,” to “We have so many things to do, we’re overwhelmed.”

Then, instead of simply moving on to another question, I led the conversation back to the same one. We just kept going deeper on the same question and the conversation in turn became richer. Slides would have inhibited that conversation. One person said afterwards that the session had been the highlight of SXSW for him; another said it was the most interactive session of the whole event. Slides lead people to lean back in their seats while a conversation causes them to lean forward and engage.

3. Kill your darlings. Stephen King has written that in order for a story to come to life, you must “kill your darlings, kill your darlings, kill your darlings, even when it breaks your egocentric little scribbler’s heart, kill your darlings.” The same type of self-editing can be applied to telling stories. Jack Dorsey, the CEO of Square and co-founder of Twitter, thinks his primary job is to be the Chief Editor of the company in order to “present one cohesive story to the world.”

4. Be repetitive without being boring. Alastair Campbell, the communications advisor to Tony Blair for years, explained at a CIPR conference the challenge we face today in getting a message through in our noisy world: You’re in a huge room with a wall on the far side that’s painted white. Your job is to paint it blue using only the paint gun in your hand. You shoot a single ball and it hits the wall on the other side and makes the tiniest blue mark. You’ve got your message out there once, but it’s still drowned out. So you shoot another ball over. Then another and another and another. You keep going with great persistence until you look over there and the wall starts to look as if you aren’t sure if it’s white or blue. This, according to Campbell, is the best you can hope for.

But before you can be repetitive, you have to decide on the one message you want to hammer home – which means prioritizing. When the word priority came into the English language in the 1400s, it was singular. What did it mean? The very first or prior thing. It continued to have that useful definition for the next five hundred years. However, in the 1900s we pluralized the term and started speaking of priorities. But can we really have many first or prior things? Words can be potent enough to change the world, but if we try to share too many different messages, we water down the power of our message.

Whether you’re an executive preparing to give a high stakes keynote or an event organizer (which might be the most underappreciated job out there), you want participants to be impacted and inspired. You want a home run, not another forgettable talk. You want participants coming up to you months—or years—later thanking you for giving that talk or bringing in that speaker. It can be done, if you practice the disciplined pursuit of less, but better. That is the price for having people say, “That was the best lecture I’ve ever heard.”

More blog posts by Greg McKeown

More on: Communication, Personal effectiveness, Presentations

GREG MCKEOWN

Greg McKeown is the author of the New York Times bestseller Essentialism: The Disciplined Pursuit of Less. He speaks at conferences and companies including Apple, Google and LinkedIn. He is a Young Global Leader for the World Economic Forum and did his graduate work at Stanford. Connect with him @GregoryMcKeown.

The Renaissance We Need in Business Education

by Johan Roos  |   1:00 PM July 2, 2014

Having taught at five business schools over several decades and served as Dean of two, I have come to a conclusion: The educational institutions where our future business leaders are being trained must be recalibrated and transformed dramatically.

Business education today is anachronistic in both how it is conducted and what its content focuses on. Our brick institutions have in no way caught up with what today’s technologies make possible in terms of virtual learning and individualized, customized instruction. More importantly, business education needs to evolve once again, revising its goals to educate leaders of the future who have a new set of skills: sustainable global thinking, entrepreneurial and innovative talents, and decision-making based on practical wisdom.

Historically, business schools have so far been through two waves. As originally conceived, they were institutions of practical education. In the late 19th and early 20th century, successful businessmen like Joseph Wharton wanted to professionalize companies and legitimize working in business. The earliest business schools sought to provide the tools and teach the skills required to become a successful business person at the time, like bookkeeping, efficient manufacturing, and contract law.

But in the mid-20^th century the influential Ford Foundation and, separately, the Carnegie Foundation damned this approach. The Gordon-Howell Report in 1959, funded by the Ford Foundation, criticized the weak scientific foundation of business education, suggesting that professors were more like quacks than serious scholars. The curriculum was too narrow, simpleminded, and weak, and the caliber of faculty and students unimpressive. The Carnegie Foundation’s findings resulted in a thick book called The Education of American Businessmen, also published in 1959. Its message was equally harsh: Too much engagement with cases, too little research; too much practice, too little theory. Perceiving a need for a more cerebral breed of managers to preside over corporations of unprecedented scale and scope, both looked for models to the research-driven natural science fields.

The subsequent recasting of business schools 2.0 along the lines of serious academia served its purposes for decades, embedding a level of valuable intellectualism into business education. However, as every trend comes to lose sight of its need for renewal, we are now stuck with an academic system in which business schools are run as if they are deaf, blind, and dumb to a completely new emerging world. The combination of the tenure system and the publish-or-perish dictum is crowding our schools with “business scholars” whose main role is to perform original research to be published in so called A-level journals. This need to publish to make a career has led to increasingly obscure research of almost no value to real businesses, specialization that encourages silo thinking, and a serious disregard of the importance of teaching students to think.

Instead of focusing on real and practical problems of relevance to the business world today,“performance” has become the dependent variable in most management research and the root of delusions (to use Phil Rosenzweig’s term) that business scholars serve up to managers. Too many tenured professors have never worked outside academia; they are familiar with neither the day-to-day operations of companies nor the intricate processes of how decisions are made. This makes it only harder for them to see the value of real world experience as part of their students’ education.

In essence, the pendulum has swung fully the other way. Too much emphasis is now placed on theory vs. practice, ensuring that graduates are unprepared to deal with the complex problems of the world that companies actually inhabit. They lack meaningful, relevant business education that teaches them cross-disciplinary thinking, broad familiarity with humanistic and scientific trends, and, most importantly, Aristotle’s “phronesis” – the practical wisdom (also discussed in David Hurst’s blogIs Management Due for a Renaissance?) that teaches them to make decisions based on deep notions of what is good for the global community of which businesses are part.

What can and should we do? There have been many proposals for change and experiments in redesign in the past few years. My criteria for judging which are most worthwhile would be to stress five neglected qualities. The reforms we enact should make our schools more:

Humanity-Minded. We need to put philosophy and the humanities back into the core of our business education. Our future corporate leaders need to have the thinking skills necessary to appreciate the complexities of what it means to be human, as well as business’s role in sustaining an inhabitable, healthy planet. The scientific management emphasis on efficiency and profit at all costs can no longer take precedence over human values.

Blended. Technology is fast eliminating the need for students to spend the majority of their educational lives on campuses in huge halls, listening to dull, cardboard lectures. The economics of operating large campuses, and big faculties and admin staff are inflating the costs of business education beyond reason. Many government-supported universities are already cutting budgets. The growing trend of creating MOOCs (massive open online courses) taught by the world’s most skilled and talented teachers is already proving that the traditional classroom paradigm is passé.

Individualized. Students should be offered a range of options to customize their education to reflect their personal goals, ambitions, capabilities, and risk tolerance. Let’s have them work with a kind of advisor to structure their own program tailored to their passions and capabilities. Help them design an amalgam of classroom courses (both on their own campus and abroad), work in real companies, entrepreneurial workshops and startup weekends, MOOC courses (perhaps amounting to 20% to 50% of their classes), and other learning formats that contribute to their becoming intelligent and global business thinkers.

STEM-driven. We need to increase business students’ knowledge about science, technology, engineering and math andencourage them to expand their horizons of technology beyond IT and Angry Apps. Given that so much innovation happens in STEM-oriented industries, business education needs to help students bridge the natural and social sciences. Degree programs in Management of Technology and Industrial Economics exemplify worthy hybrid forms of education that bring these worlds together.

Hands-On. We need to merge business experience and academia far more than now. Schools need to begin working with corporations to create more meaningful internship and management training programs, designed to make the connection between theory and practice. They should also provide incentives for professors to engage more with the practical problems of everyday organizational life. For example, why not set up “Professors in Residence,” where professors live in organizations for a while, as a mirror-image to today’s Executives in Residence. In general, let’s promote more dialogue between companies and academia.

The organizers of the Global Drucker Forum have lately called for a “Great Transformation” in management, which Richard Straub of the Drucker Society describes as the best hope for advancing human prosperity. I throw my voice into this call for a radical new synthesis and approach to business in the world. But, as of now, I know that the majority of students graduating from our standard undergraduate programs and most MBA programs are unprepared for this future.

The business leaders who will succeed in the coming decade will be notable for their holistic thinking, global perspectives, international experience, multilingual capabilities, technological familiarity, entrepreneurial mindset, creativity, and ability to deal productively with complexity and chaos. Many corporations already say they cannot find the type of employees they need, so we must begin acting now to transform our business schools. It is our job as educators to produce graduates who can thrive in a radically changing world, and who can shape it in positive ways. We must educate a new generation of renaissance leaders.

This post is part of a series of perspectives by leading thinkers participating in the Sixth Annual Global Drucker Forum, November 13-14 in Vienna. For more information, see the conference homepage.

More blog posts by Johan Roos

More on: Business education, Education, Leadership development

JOHAN ROOS

Dr. Johan Roos is Dean and Managing Director of Jönköping International Business School (JIBS), where he also holds a professorship in strategy. From 2009 to March 2011 he served as President of Copenhagen Business School.

How Business Schools Can Help Reduce Inequality

by Robert Reich  |   9:24 AM September 12, 2014

No institution is more responsible for educating the CEOs of American corporations than Harvard Business School – inculcating in them a set of ideas and principles that have resulted in a pay gap between CEOs and ordinary workers that’s gone from 20-to-1 fifty years ago to almost 300-to-1 today.

A survey, released on September 6, of 1,947 Harvard Business School alumni showed them far more hopeful about the future competitiveness of American firms than about the future of American workers. But, as the authors of the survey conclude, such a divergence is unsustainable. Without a large and growing middle class, Americans won’t have the purchasing power to keep U.S. corporations profitable, and global demand won’t fill the gap. Moreover, the widening gap eventually will lead to political and social instability. As the authors put it, “any leader with a long view understands that business has a profound stake in the prosperity of the average American.”

Unfortunately, the authors neglected to include a discussion about how Harvard Business School should change what it teaches future CEOs with regard to this “profound stake.” Now, I realize that HBS has made some changes over the years in response to earlier crises, but they have not gone far enough with courses that critically examine the goals of the modern corporation and the role that top executives play in achieving them.

A half-century ago, CEOs typically managed companies for the benefit of all their stakeholders – not just shareholders, but also their employees, communities, and the nation as a whole. “The job of management,” proclaimed Frank Abrams, chairman of Standard Oil of New Jersey, in a 1951 address, “is to maintain an equitable and working balance among the claims of the various directly affected interest groups … stockholders, employees, customers, and the public at large. Business managers are gaining professional status partly because they see in their work the basic responsibilities [to the public] that other professional men have long recognized as theirs.” This view was a common view among chief executives of the time.

Fortune magazine urged CEOs to become “industrial statesmen.” And to a large extent, that’s what they became. For thirty years after World War II, as American corporations prospered, so did the American middle class. Wages rose and benefits increased. American companies and American citizens achieved a virtuous cycle of higher profits accompanied by more and better jobs.

But starting in the late 1970s, a new vision of the corporation and the role of CEOs emerged – prodded by corporate “raiders,” hostile takeovers, junk bonds, and leveraged buyouts. Shareholders began to predominate over other stakeholders. And CEOs began to view their primary role as driving up share prices. To do this, they had to cut costs – especially payrolls, which constituted their largest expense. Corporate statesmen were replaced by something more like corporate butchers, with their nearly exclusive focus being to “cut out the fat” and “cut to the bone.”

In consequence, the compensation packages of CEOs and other top executives soared, as did share prices. But ordinary workers lost jobs and wages, and many communities were abandoned. Almost all the gains from growth went to the top.

The results were touted as being “efficient,” because resources were theoretically shifted to “higher and better uses,” to use the dry language of economics. But the human costs of this transformation have been substantial, and the efficiency benefits have not been widely shared. Most workers today are no better off than they were thirty years ago, adjusted for inflation. Most are less economically secure.

So it would seem worthwhile for the faculty and students of Harvard Business School, as well as those at every other major business school in America, to assess this transformation, and ask whether maximizing shareholder value – a convenient goal now that so many CEOs are paid with stock options – continues to be the proper goal for the modern corporation. Can an enterprise be truly successful in a society becoming ever more divided between a few highly successful people at the top and a far larger number who are not thriving?

For years, some of the nation’s most talented young people have flocked to Harvard Business School and other elite graduate schools of business in order to take up positions at the top rungs of American corporations, or on Wall Street, or management consulting. Their educations represent a substantial social investment; and their intellectual and creative capacities, a precious national and global resource.

But given that so few in our society – or even in other advanced nations – have shared in the benefits of what our largest corporations and Wall Street entities have achieved, it must be asked whether the social return on such an investment has been worth it, and whether these graduates are making the most of their capacities in terms of their potential for improving human well-being. These questions also merit careful examination at Harvard and other elite universities. If the answer is not a resounding yes, perhaps we should ask whether these investments and talents should be directed toward “higher and better” uses.

More blog posts by Robert Reich

More on: Economy, Education, Leadership

ROBERT REICH

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and has served in three presidential administrations, including as Secretary of Labor under President Bill Clinton. He is the author of thirteen books, and co-creator of the award-winning documentary "Inequality for All."

The Success Equation

by Nilofer Merchant  |   8:55 AM June 20, 2011

Human stuff — the soft stuff — is rarely valued. We talk about it, sure. But we don’t change it. We don’t reinvent it. We give lip service to it but, when times are tough, we focus on the hard stuff.

We manage numbers because it’s easier. We say we value people but we focus on the things we can track, we can inventory, we can show, and we can log in and out of. We focus on stuff that matters, surely, but we are doing the thing of managing the measurable, rather than the meaningful.

In a recent post, called “People are Not Cogs,” I argued that we still think performance or people, when we ought to think performance through people. Management experts, marketplace results, and thorough research all proves that people are central to what we produce today and how well we can produce results.

But we continue to talk about people like cogs and numbers and inputs and outputs. The cost of that is that we’re missing how to harness the power of people in our businesses. We need to recognize the need for both performance-based decision-making and people-based decision making. The former creates efficiencies and propels markets; the latter drives creativity and innovation. Both are important to the health of an organization, and to growth, and to viability. Yet given the current focus on performance-based data, how might we bridge the gap?

Maybe, as a start, we ought to describe peopley stuff in more economic language, by putting it in some context that will help our CFO and engineering friends better understand how things relate to one another.

Here is a proposal for a bridge-the-gap model:

S(uccess) = P(urpose)T(alent)^C(ulture)

Or: S = (PT)^C

Let’s talk about each one in turn.

Purpose. Purpose is when people come together because they believe in what they are there to do. A friend was interviewing for a firm where at first they said, “This guy’s asking too many questions.” He challenged their thinking, asking as many questions during the interview as they were asking him. Knowing that he was going to apply his creative energies, he inquired about purpose and mission and vision. And the reason that the team struggled with this is that they were looking to fit him into a box.

But when you look around, notice that failure today rarely happens because Employee X failed at their part, their box. Failure today happens between the boxes. It’s when engineering doesn’t deliver what marketing said the consumers want. When we have shared purpose, when we know why we joined the company and what that company hopes to do, people own the commons and we don’t let things fall between the gaps. Organizations need to be able to index how well we are communicating, and thereby understanding purpose.

Talent. Then there’s talent. Jim Collins told us many years ago to focus on getting the right people on the bus. He didn’t say shove them in the back seat and ask them to sit down and shut up and let us drive. But, at too many organizations, we live in a hierarchical bus where one group largely tells the other groups what to do.

We need to think about what we do with people after we get them on the bus. Google acts like a modern company in that way. They don’t just define box-like roles then try fill them; they hire talent as they find it. It’s the 21st century way of thinking about talent. Secondly, they enable their people to know the big picture. In most companies, only 5% of people know the strategy. That’s absurd. We ought to have 100% of our people to know the direction we’re going. Why? Because then each of us, not some manager for an hour, can work on aligning what we are working on to the big picture. This makes each of us more responsible, it’s necessary. Does it require each of us to step up? Yes, of course it does. It’s the reason Google attracts talent, as do so many companies that say: we don’t want to be told to sit down and shut up, but we do want to join organizations where we can add our strengths to co-create the future. Organizations ought to ask their people how their work ties to the big picture.

Culture. Culture’s all that invisible stuff that glues organizations together. If you follow me here at Harvard’s blog, you likely already know that I believe culture will trump strategy every time. Culture mostly comes down to two things, which are flip sides of the same coin:

Do We Trust Each Other? A team I was recently working with reminded me of 6-year-olds playing soccer, where every team member simply surrounds the issue much like a team of kids surrounds the ball. I worry that as this team grows, and they’re not all in the same room, they will fail. By always huddling, they’re signaling that they don’t know how to trust one each another to do their unique parts. They — like many teams — simply don’t know how to “let go” to and with others, thus risking their ability to scale results.

Who Cares About the Baby? A team recently described an issue where they do their best right up to a hand-off milestone, then relinquish any part of the project’s ultimate success. They described their discomfort with a baby analogy: “Will you take care of my [baby] the same way I would, knowing our shared goal is to [get this kid to a good college]?” When the “baby,” or in this case, business performance, isn’t co-owned by everyone, things can easily fall through the cracks. And truth be told, that’s where most business problems happen in our high velocity world — between the cracks of divisions or silos or the “white space” no one owns.

A healthy culture allows us to produce something with each other, not in spite of each other. Measuring that has multiple elements to be sure. The bottom line is that this is how a group of people generates something much bigger than the sum of the individuals’ outputs.

Let’s take another look at our equation. Success is a function of Purpose, Talent, with a Culture accelerant. Or: S = (PT)^C

Why arrange these terms like this? Why not add them all together? Because these characteristics have multiplicative and exponential effects on each other. If you have zero purpose or zero talent, you’ll get zero product. But if you’ve got a modicum of each, you’ll get something, even if culture is zero. As you improve culture, the chances of success increase dramatically — and there’s no limit to how high they can go. That’s why I put such a focus on building cultures that fuel innovation. Culture is the exponential element that has eluded us for so long. It’s the key velocity factor for how companies outpace everyone else.

No, people are not cogs. Our job is not about measuring inputs and outputs, our job is to reinvent work to bring in purpose and talent and culture and create the kind of value that can happen when we allow it to happen.

We know enough to know people matter. But we’ve got to find a way to define how well we are doing against objective measures of purpose, talent alignment, and culture. Building a bridge means developing a common language so each of us understands that everyone else is acting out of shared interest. The equation is a first step, but certainly not the last. There’s more work to be done to create standards to let companies measure their purpose, talent alignment, and cultural norms over time and against their competitors. It could do for the world what NetPromoter did to the soft fuzzy stuff of customer love. So while I know this preliminary equation isn’t nearly complete in our ability to quantify our work fully, it’s a start for how to talk and measure what we’re doing inside our organizations.

Ultimately, blending performance and the “peopley stuff” will let us build the organization of our future, respecting all the factors affecting performance.

Nilofer Merchant is a corporate advisor and speaker on innovation methods. Her book, The New How, discussing collaborative ways to have your whole company strategize, was published in 2010. Follow her on Twitter @nilofer.

More blog posts by Nilofer Merchant

More on: Execution, Organizational culture

NILOFER MERCHANT

Nilofer Merchant has personally launched 100 products amounting to $18B in revenue. Her blue-chip career includes Apple, Autodesk, GoLive/Adobe. She's served on both public and private boards. Today, she lectures at Stanford. She’s an expert on collaborative leadership and author of The New How and 11 Rules for Creating Value in the Social Era.

We Is Bigger Than Me

by Bill Taylor  |   9:57 AM June 6, 2011

New York Times pundit David Brooks recently expressed in 800 words a message I have spent the last 15 years trying to communicate to senior business leaders and ambitious young people around the world. The title of Brooks’s column was “It’s Not About You,” and he wrote it as a rebuttal to commencement-season addresses that urge young people to follow their passion, pursue their dreams, and, above all, do what makes them happy. “This is the litany of expressive individualism,” Brooks warns, and “this mantra misleads on nearly every front.”

Truth be told, the column makes him sound like a bit of a curmudgeon, the skunk at balloon-filled graduation parties celebrating the sense of possibility and the spirit of freedom that defines life for young people who have come of age in a world of instant communications, global connectivity, and dotcom millionaires. But I’m with Brooks and his words of warning against the cult of self-fulfillment. The more executives, entrepreneurs, and talented individuals I get to know, the more convinced I become that true happiness, a genuine sense of satisfaction, comes, as Brooks suggests, not from “finding” yourself but from losing” yourself — in a company you believe in, a cause you are prepared to fight for, a commitment to solve a problem that has defied solution.

In other words, “we” is bigger than “me” — the true measure of success is not the value you create for yourself but the values that define your work and how you lead and live.

It sounds counterintuitive, I know. This is the age of the maverick, the startup, and, dare I say it, as the cofounder of Fast Company, “The Brand Called You.” That’s why it’s so easy to focus on the magazine covers, the IPO wealth, the personal narratives. But what these celebrations of business individualism overlook is that the most successful companies and the most effective leaders spend most of their time focused on things bigger than themselves — on their sense of purpose, their willingness to struggle, the legacy they and their colleagues hope to leave.

Arkadi Kuhlmann, chairman and president of ING Direct USA, is one of my favorite CEOs, and an unquestioned success. He’s brash, colorful, outspoken — in terms of his style, he personifies the sense of freedom and innovation that drives so many businesspeople today. But in terms of the substance of what he does and how he leads, he understands that he as an individual is less important than the cause in which he and his colleagues believe — creating a financial culture that is more serious, sober, and responsible than what exists today.

“Leadership is about service,” he told an interviewer last year, “and you can’t lead if you can’t follow. It’s never about you. It is always about the mission. And people will follow you if you’re prepared to get a mission done, something with a goal that is a little bit beyond the reach of all of us.”

Wise words from a game-changing CEO. That same spirit also applies to how each of us conducts our lives as individuals. The trouble with always searching to find yourself, work on what makes you happy, and communicate your attributes as a brand, is that you spend too much time looking in the mirror rather than at the world. As Brooks writes, “Today’s graduates are told to find their passion and then pursue their dreams. The implication is that they should find themselves first and then go of and live their quest.”

In fact, true success requires you to flip that logic on its head. Randy Nelson, who spent years as the influential dean of Pixar University, loves to talk about what it’s like to be surrounded by “wildly talented individuals” of the sort who work at a company as rich, powerful, and successful as Pixar. His message to these individual stars, for whom it is so easy to strut their stuff and show what they know, is as simple as it is powerful. “It’s no trick for talented people to be interesting,” he likes to say. “But it’s a gift to be interested” — interested in big problems, interested in the talents and struggles of your colleagues, interested in the enduring mission of the enterprise and in new ways of bringing that mission to life.

In other words, less interested in you and more interested in the world around you. As Brooks concludes in his must-read piece, “The purpose in life is not to find yourself. It’s to lose yourself.”

Here’s hoping all of you can get lost, in the best sense of that word.

More blog posts by Bill Taylor

More on: Innovation, Leadership development, Managing yourself

BILL TAYLOR

William C. Taylor is cofounder of Fast Company magazine and author of Practically Radical: Not-So-Crazy Ways to Transform Your Company, Shake Up Your Industry, and Challenge Yourself. Follow him on Twitter at @practicallyrad.

Getting Past a Communication Impasse

by Peter Bregman  |   10:50 AM May 26, 2011

What do you do when you have a communication impasse with someone you care about?

Jim* is a friend and colleague whom I hadn’t seen for a year. It’s been a hard year for Jim and I called him frequently as he navigated his business through tough times.

When I last saw him, Jim asked me to meet with a client of his, Ed, for a few minutes as a favor. I agreed. But when I arrived at Ed’s office a few days later, the receptionist told me he was out of the country. He had been expecting me a day earlier, she said, and was disappointed when I hadn’t shown up. I apologized and left.

I immediately called Jim, who checked his email and discovered that he had given Ed the wrong day. I told him I was embarrassed and asked him to send a handwritten note to the client apologizing and explaining the error. He promised he would.

We hadn’t talked about the missed meeting since it happened. Jim’s troubled business had been the focus of our conversations. But I was speaking at a conference in a week and I expected Ed to be there; I wanted to know how things had resolved.

So, recently, when I saw Jim, I asked him whether he had written the letter. He got angry and snapped at me. “I didn’t write the letter. Peter, I’m broke. I haven’t had a minute to do anything. Can’t you understand that?”

I was taken aback, hurt. I mumbled something and walked away. But I couldn’t get it out of my head. Why was he snapping at me?

I’ve always believed that if I simply talk things through with someone I can resolve any issue. So I walked back to him.

“Jim,” I said, “I know it’s been a hard year, but why are you lashing out at me? I asked about the letter because I might see Ed at a conference. The letter isn’t such a big deal to me, but your response really bothers me.”

“Well,” he answered, “I’m sorry my response bothers you.”

Sorry my response bothers you. He didn’t apologize for asking me for a favor and then putting me in an embarrassing situation. He didn’t apologize for not writing the letter. He didn’t even apologize for his response. All he did was acknowledge that his response bothered me. Which bothered me even more.

Intellectually, I understand what was going on. Having a business crash is highly emotional, very strained, and extremely difficult. In that light, my question about the letter seemed trivial and out of place. Add to that his own shame about not having followed through on his commitment and the result was misplaced anger towards me. I get it.

But emotionally it felt like a betrayal of all I had done to support him over the past year. And it left me wondering: Now what?

I could try to talk with him about it again. But I was pretty sure it would go the same way and I would leave feeling more hurt.

I could go around talking to other people about him, getting their perspective, complaining. But that’s not who I want to be.

I could write him off completely. But we travel in the same circles and it’s unlikely we could avoid each other. I didn’t want to get that rush of negative adrenaline every time we were in the same room. And anyway, do I really want to write off everyone whose actions hurt me? I’m sensitive; I might end up alone. Finally, and perhaps most important, I really like Jim. He’s been a good friend for 20 years and I enjoy his company. He’s funny, interesting, and often warm. I don’t want the friendship to end.

The rest of the party was awkward and I left with a bad feeling, not knowing what to do. Eventually, I called my smartest advisor.

My mother is surrounded by people who love her. Recently she told me she was going out with someone who had, quite literally, betrayed her; he went behind her back to buy a rare item that had been promised to her. The seller maintained his commitment to my mother and my mother maintained her relationship with both the seller and the betrayer. How was she able to get over it?

“I know what to expect from him,” she told me of her betrayer. “That’s the kind of person he is.”

“Did you ever talk to him about it?” I asked her.

“No,” she said, “Why should I? It wouldn’t make a difference. I’m not going to change him. And talking about it won’t change the situation.”

“But how can you still spend time with him? Don’t you get angry when you see him?”

“I’m too tired to be angry every time someone does something I don’t like. And I don’t want to be alienated from everyone. I enjoy him for his other attributes. But I know what to expect from him.”

My mother’s insight is profound. Her advice?

Live with it.

Jim’s response isn’t about me, it’s about Jim, and I’m living in the space between never speaking to him again and trying to fix things by speaking to him. That space is called accepting people as they are.

Jim’s response informs me about Jim. He has a reputation for snapping at people and for using anger to intimidate and avoid. It’s just that he never directed it towards me before. It’s a part of his character. He may change but I’m not counting on it. My interaction with him offered me data. Data that tells me more about what I should expect from Jim in the future.

But snapping at me isn’t all I should expect from him. And knowing that lets me appreciate the parts of Jim I like without becoming distracted by the parts I don’t. It lets me accept him fully for who he is, without illusion. And it keeps me safe in our relationship when he acts in ways I don’t like.

In retrospect, I would still ask Jim if he had written the letter. But when he snapped at me, I would have said, “I know this year has been hard for you and I’m sorry you’ve had to go through that. I understand you didn’t write the note. That’s good to know in case I see Ed at the conference next week.” And leave it at that. No hurt. No anger. No avoidance. No passive-aggressive comeback. Just acceptance of the situation and of Jim.

Will my relationship with Jim be more superficial from now on? At first, I was sure it would. But I’m going to try hard not to let it. People are imperfect. That includes my mother’s betrayer, it includes Jim, and it also includes me.

Which makes it all the more important not to write off Jim. If I did, then I’d end up writing myself off too. Accepting Jim’s imperfection and limitations enables me to accept my own.

Which now includes the realization that no matter how good I think I am at communicating, there are some situations I can’t resolve with more communication.

*Names and some details changed

More blog posts by Peter Bregman

More on: Communication, Difficult conversations, Managing yourself

PETER BREGMAN

Peter Bregman helps CEOs and their leadership teams tackle their most important priorities together. His next Leadership Week is in October, 2014. His latest book is 18 Minutes: Find Your Focus, Master Distraction, and Get the Right Things Done. To receive an email when he posts, click here.