Mworld Winter 2014
The Journal of the American Management Association. American Management Association is a world leader in professional development, advancing the skills of individuals, teams, organizations and government agencies. With over 85 years of experience delivering 140+ training seminars throughout the country, AMA has refined their training programs to meet today’s challenges.
MW www.amanet.org RLD Volume 12, Number 4 The Journal of the American Management Association Winter 2013-14 Two Steps to More Powerful Collaborations OTHER ARTICLES 7 Ways Collaboration Builds Greater Resiliency Blinders and Hidden Biases: Recognizing Our Response to Feedback Building a Collaborative Organization Eric Lowitt is an authority on collaboration and advisor to CEOs worldwide Assembling an A-Team for Acquisition Why I’m Deeply Paranoid About Good Customer Service How Millennials Will Rewrite the Rules of Management Why Companies Ignore Billion-Dollar Category Creation Nice Guys Don’t Always Finish Last: Empathetic Leaders Outperform Others When Culture Allows Own the Room: Shape Your Organization’s Conversation About Presence COMMENTARY GLOBAL STRATEGY OUT OF THE BOX OUR VIEW “The Arsonist”: Are You Burning or Building the Bridges of Collaboration? Drucker’s Most Valuable Lesson Spans of Influence: Isn’t It About Time? Together We Can Do So Much Growth opportunities... Amazing breakthroughs... Valuable insights... Analytical Skills Information surrounds us. We’re drowning in data. The variety, velocity and volume of it are staggering. Ever feel completely overwhelmed by it? Afraid you’re missing something? Has analysis paralysis taken over, making it difficult to make a decision? What if the only thing that keeps you from making more intelligent decisions and finding real opportunities is your inability to see things more clearly, in other words, not having good analytical skills? High-performing companies rely on analytical skills to make profitable decisions. AMA offers 25 seminars in 3 key areas—Analysis, Strategy and Action—so you and your staff can develop these essential skills. Our Core Analytical Skills courses help you gather insights from data, analyze complex problems and use analytics to illustrate your ideas. Specialized Skills courses address job-specific needs, from Finance, Marketing and HR to Business Analysis and Project Management. Unleash the Power of Information! Find the Analytical Skills seminars that fit your needs. www.amanet.org/analyticalskills or call 1-800-262-9699 MW www.amanet.org RLD Volume 12, Number 4 The Journal of the American Management Association W IN TER 2013-14 TWO STEPS TO MORE POWERFUL COLLABORATIONS. Collaboration is a way to make something bigger happen than can be accomplished solely through the assets you command. Consider how collaboration by rival companies can be used to remove roadblocks that slow progress or threaten future prospects, or how companies around the world can collaborate for the common good. By Eric Lowitt. PAGE 8 12 20 7 Ways Collaboration Builds Greater Resiliency. These seven principles will help you keep all your constituents happy and achieve shared goals. By Diana Rivenburgh. Companies Ignore Billion-Dollar 39 Why Category Creation. Many companies have the resources, capabilities, and growth expectations to pursue category creation, so why aren’t they using them? By Eddie Yoon and Steve Carlotti. Blinders and Hidden Biases: Recognizing Our Response to Feedback. Learn these four steps to addressing feedback that make clear you neither agree nor disagree with another person’s remarks. By Richard S. Gallagher. Guys Don’t Always Finish Last: Empathetic 43 Nice Leaders Outperform Others When Culture Allows. The stereotype of the insensitive boss who squashes those in his way reinforces the cliché that nice guys finish last. Would you want that image? By William Schulz III, PhD. 24 Building a Collaborative Organization. Done well, collaboration will allow organizations to achieve a level of performance or create something new that is superior to what one person or entity could do alone. Do you have the capacity your firm needs? By Tamara J. Erickson. the Room: Shape Your Organization’s 46 Own Conversation About Presence. Without a doubt, high-potential professionals are set apart by their leadership presence. By Muriel Maignan Wilkins and Amy Jen Su. 28 Assembling an A-Team for Acquisition. Acquisition is a collaborative activity. To be successful at it, the first step is forming the acquisition team, a group that has been through several acquisitions and sees the opportunities such change may bring. By David Braun. 2 FROM THE EDITOR Even Some Rivals Collaborate 3 COMMENTARY “The Arsonist”: Are You Burning or Building the Bridges of Collaboration? The secret to success is to remember that behind every great company is skill in collaboration. By Kirk Dando. 32 Why I’m Deeply Paranoid About Good Customer Service. Every senior manager would agree that great customer service should be a priority for every business. But the difference between good and great is like the difference between night and day. Find out how you rate. By Steve Satterwhite. 5 INSIGHTS Drucker’s Most Valuable Lesson. Learn what that lesson was. By William A. Cohen, PhD. 36 How Millennials Will Rewrite the Rules of Management. Milliennials bring to the workplace principles that fly in the face of the way business has always been done. Find out what these changes involve, including the important role played by collaboration. By Brad Karsh and Courtney Templin. 17 OUT OF THE BOX Spans of Influence: Isn’t It About Time? Span of influence is a great tool for you and your organization. By Karen Detweiler, Alison Romney Eyring and Dan L. Ward. 48 OUR VIEW Together We Can Do So Much. By Robert G. Smith MWORLD WINTER 2013-14 American Management Association 1 FROM THE EDITOR Even Some Rivals Collaborate Four years ago, American Management Association conducted a survey to identify critical skills for the future. Four were identified, which have come to be called the 4 Cs: Collaboration, Communication, Critical Thinking, and Creativity. In this issue, we study collaboration. Within companies, as Eric Lowitt, our lead author writes, collaboration is no longer limited to an effort within a single company. Increasingly, rival companies are collaborating to move roadblocks that slow progress or threaten future prospects. To measure your organization’s own level of collaboration—in what Lowitt calls “the collaborative economy”—take the survey on page 11. The interest in collaboration between rival companies and around the world does not mean that there is no longer interest in collaboration within individual organizations. For one, Diana Rivenburgh (page 12), points to seven ways that collaboration can help build greater resiliency within a firm. “Leaders need to rip down functional silos to bring people together to meet tough, complex challenges,” she writes. “They must also reach to outside expertise to address labor and resource issues in global supply chains, cultural challenges in emerging markets, public health threats, and energy security risks.” Another author, Tamara J. Erickson, explains: “Done well, collaboration allows organizations to achieve a level of performance or create something new that is superior to what one person or entity could do alone…Today, collaboration is a powerful approach to drive the success of your business. It can increase innovation, reduce costs, build consensus for action, increase the accuracy of forecasts, improve decision making, monitor threats, and identify a host of other opportunities and other benefits.” Kirk Dando suggests that behind every great company is skill in collaboration (page 3). Collaboration goes by many names, from mergers and acquisitions (page 28), to successful coaching (page 20), to great customer service, and even to empathy and how empathetic leaders outperform others in a collaborative culture (page 43). So this issue of MWorld confirms the importance of collaboration. In our seminars, you learn and practice the collaborative skills needed to be a successful leader. “Collaborative Leadership Skills for Managers” (amanet.org/2186) teaches leaders how to inspire team performance, and in “Developing Your Collaborative Skills” (amanet.org/2185), team members learn how to work together to achieve organizational goals. If you have insights, concerns, or success stories concerning any of the 4 Cs, please share them with us. You can email me at email@example.com MWorld The Journal of the American Management Association EDITOR Florence M. Stone CREATIVE DIRECTOR Seval Newton COPY EDITORS Geoffrey Gneuhs, Laurie Russo GRAPHIC ARTIST Tony Serio PRODUCTION MANAGER Laura Grafeld PUBLISHER Robert G. Smith PUBLIC RELATIONS MANAGER Roger Kelleher Edward T. Reilly PRESIDENT & CEO MWorld© (ISSN 1540-2991) is published quarterly by American Management Association International, 1601 Broadway, New York, NY 10019-7420, Winter 2013-14, Volume 12, Number 4. POSTMASTER: Send address changes to American Management Association, 600 AMA Way, Saranac Lake, NY 12983-5534. American Management Association is a nonproﬁt educational association chartered by the Board of Regents of the State of New York. MWorld is an independent forum for authoritative views on business and management issues. Submissions. 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Requests should be sent to Joe D’Amico, at email@example.com Editorial Ofﬁces 1601 Broadway, New York, NY 10019-7420 Tel: 212-903-8075; Fax: 212-903-7948 Email: MWorld@amanet.org Opinions expressed by the editors, contributors or advertisers are not necessarily those of AMA. In addition, the appearance of advertisements, products or service information in MWorld, other than those of AMA itself, does not constitute endorsement by AMA. Florence M. Stone Editor, MWorld 2 American Management Association MWORLD WINTER 2013-2014 COMMENTARY “The Arsonist”: Are You Burning or Building the Bridges of Collaboration? BY KIRK DANDO They called him “The Arsonist,” and he lives in legend. Once upon a time, he owned a boutique creative establishment that generated ideas for clients. At least that was the stated goal of the company. But “The Arsonist” had other reasons for starting and running his own company, and many (maybe most) of those reasons were known only to him. He got the moniker because he would throw out ideas at a moment’s notice that caught fire, and others in the organization had to extinguish them. He was also well known for having brainstorming sessions that never generated a single original idea. He would shoot down everyone’s ideas. Then, a week or two later, he would announce his answer to a problem, one that was always remarkably close to something he had heard only the week before from his increasingly frustrated creative staff. Eventually, his “team” began playing a little game; the members would try to guess which ideas he would likely go for. Then, they would only present those to him, hoping for some breakthrough and a modicum of credit. But, alas, that never happened, and eventually the organization ceased to exist. If I asked you what the “The Arsonist” could teach us about collaboration, you might say nothing, but surprisingly, he can teach us plenty. For one thing, his story confirms that all organizations have collaboration of one kind or another. Either it is intentional or unintentional, but collaboration happens nonetheless. I think it’s also important to note that collaboration always implies some kind of alignment. Note that alignment doesn’t necessarily have to be positive. In the case of “The Arsonist,” it was actually negative alignment. His people figured out what not to do, and then acted on that knowledge to save themselves from being singed when they offered their ideas, browbeaten in meetings or worse. The second thing we learn from this cautionary tale is that collaboration is caught, not taught. People respond to what they see and hear. Kirk Dando You can’t just write a collaboration manual, have everyone read and study it, give a collaboration test until everyone earns an A and then say you have a collaborative organization. It doesn’t work like that. The actions of the “The Arsonist” on a daily basis taught his associates how to act and forced them to collaborate with each other to offer only ideas that he might agree with. No manual or instruction can trump actions. People pay attention. Smart people pay even more attention and then figure out how to navigate successfully through the landmines. And, if it’s true that collaboration is caught, not taught, then it is also true that collaboration muscles cannot be toned in a day. Rather, they must be worked on every day. It has to be a part of the organization’s DNA. There has to be trust and effective communication. In some ways, “The Arsonist” and his team were lucky. They were a small company with minimal billings. Eventually, they crashed and burned because they couldn’t (or wouldn’t) fix the culture. It rotted from the head down, and eventually was no more. It fell from the sky, but it wasn’t flying that high anyway. What if you are running a fast-moving, successful company? You are traveling at supersonic speed every day, and there are a lot of moving parts and danger lurking around every corner. The right kind of collaboration is even more important in that environment, yes? How do you effectively collaborate and win when you are already successful? Why does it matter so? Because success can seduce us as leaders. It’s easy to ignore the harbingers of looming trouble when the financials are looking good and your stock is THE STATE OF ORGANIZATION “When communication is stifled, collaboration stops dead in its tracks.” MWORLD WINTER 2013-14 American Management Association 3 COMMENTARY soaring. But make no mistake. Every success contains the seeds of failure. The inverse is also true. In every failure lie the seeds of success. In my 17-plus years of coaching C-level leaders around the world, I have identified 12 warning signs of success, and most of them relate to and strongly impact collaboration. They are: 1. Right idea, wrong person 2. Bad management of great opportunities 3. Open door, closed mind 4. The leadership bottleneck 5. Hope is not a strategy 6. Core values meltdown 7. Drinking the chaos Kool-Aid 8. Communication vacuum (aka: It sucks) 9. Incentivizing failure 10. The false security of revenues 11. Random acts of accountability 12. Sowing the seeds of decay Perhaps you have already encountered some of these warning signs of success in your organization. When communication is stifled, collaboration stops dead in its tracks. Sometimes it happens because of warning sign #3, Open door, closed mind. A leader lets people give their input, perhaps even encourages it, and then dismisses it out of hand. Has that ever happened to you? Or, leaders are not intentional about building a healthy, collaborative organization. See #5: Hope is not a strategy. Time and time again, I have seen the same recurring patterns, no matter the industry or company involved. Each of these 12 issues has workable answers and can be fixed if they are recognized in time. No company is immune, in my opinion. As with most problems, there are proven formulas that work. In this case, the formula sounds easy and has only three major steps: Define, Design and Decide. It’s important to note that the order is important. Get these three steps out of order, and you are courting disaster. At a minimum, your collaborative effort will not be collaborative at all. First, sit down as a team and define the issue or problem and desired outcomes. What does effective collaboration look like? How does it work when it’s working best? Can you give examples of collaboration that worked or broke down? What are the benefits or consequences? How big a priority is it? BUILDING A CULTURE OF COLLABORATION Second, design a solution, preferably measurable, that fits your circumstance and available talent pool. The solution should help you and your team prepare effectively for the issues that poor collaboration can cause to your growth. Then, decide whether you have the resources (time, talent, commitment and money) necessary to execute the design, and then act on your decision. Most important, be intentional about building the kind of collaborative organization you desire, but don’t expect it to happen without your guidance and the guidance and input of your leadership team. Trust me, the members of your team understand the things “The Arsonist” will probably never understand, such as: You get what you set yourself up for!; It is impossible to be pathetic and powerful at the same time!; and, Behind every great company is a culture of great collaboration! MW Kirk Dando is a highly sought-after and well-respected leadership and growth expert, who has been called “The Company Whisperer.” He has coached more than 5,000 growth-hungry leaders, including the 2009, 2010, 2011 and 2012 Ernst & Young Entrepreneur of the Year award winners and several “Best CEO” winners. Dando is CEO of Dando Advisors and the author of the forthcoming book, Predictive Leadership: Avoiding the 12 Critical Mistakes That Derail GrowthHungry Companies (Palgrave Macmillan, May 2014). To learn more, go to www.KirkDando.com The most successful leaders are those with the best people skills, especially during the most difficult circumstances. To gain these people skills, register for AMA’s seminar “Achieving Leadership Success Through People.” To learn about this program, visit www.amanet.org/2128 American Management Association MWORLD WINTER 2013-14 4 INSIGHTS Drucker’s Most Valuable Lesson BY WILLIAM A. COHEN, PhD [Editor’s Note: Few thinkers have had a greater impact on business than Peter Drucker. In this excerpt from his latest book on Drucker, The Practical Drucker: Applying the Wisdom of the World’s Greatest Management Thinker, William A. Cohen, Drucker’s first executive PhD graduate, offers a timeless lesson from the management master.] In interviews about my books on Drucker, journalists frequently ask: “What was Drucker’s most valuable lesson?” I find this almost impossible to answer because Drucker offered so many insights, had so many wonderful ideas and provided so much ethical and moral guidance that might have saved organizations or even countries from financial ruin. For several years, my response was something along the lines of, “It all depends.” I pointed out that Drucker’s “most valuable lesson” was situational— that it depended primarily on the issue being considered. I avoided specifying a single lesson that covered all instances because I couldn’t think of one that overshadowed all the others. However, I recently thought about this matter again and decided I could provide a much better answer. I reviewed Drucker’s various prescriptions for a range of problems. Was there a thread of commonality in his predictions? Some recommendations and solutions that might lead to a universal lesson? A principle that might honestly be described as “most valuable”? If an ethical issue arose, Drucker might recommend: Do the right thing, and since the definition of “the right thing” is based on so many situational and cultural factors, think it through to ensure that, above all, you do no harm. In Los Angeles County where I live, the small town of Bell (population 38,000) came to national attention in 2010, when the Los Angeles Times reported that the city’s chief administrative officer had an annual salary of nearly $800,000. Other top executives were being similarly rewarded. Even city council members earned almost $100,000 a year for their part-time positions, which involved meetings lasting DO THE RIGHT THING MWORLD WINTER 2013-14 only a few minutes each month. All this while employees in that same city government, some in essential services and others who grossed $9.00 an hour, were being laid off because of “budget cutbacks” and the recession. This was not a wealthy town; it was and is a working-class town. That this situation was wrong was obvious to all. Drucker died in 2005, but he knew even 40 years earlier that extremely high CEO salaries were unethical. Why would any CEO need to earn 300 times the wage paid to the lowest-level employee, particularly when the ratio of highest-paid to lowest-paid employee in every other country was no more than 20 to 1? Drucker said that this imbalance caused immeasurable harm—to companies, industries and society—and he advised stopping the practice. But advocates claimed that these incredibly high salaries were necessary to attract the best talent and were justified by the wealth these well-heeled executives created for the organizations. But Drucker pointed out that these giant bankrolls were paid whether the company was making or losing money. A few executives chose to limit their own salaries; most did not. Drucker predicted that we would eventually pay a DRUCKER’S INSIGHT American Management Association 5 INSIGHTS “Drucker abhorred the popular idea of ‘the whole man concept.’ That is, you should look for individuals who are well rounded and minimally acceptable in all facets of their managerial responsibilities but superior in none.” terrible price for this lapse in fairness. Many top executives never forgave him for publicizing the matter, and many of us didn’t even think much about it until the onset of the Great Recession that began in 2008. If a marketing challenge arose, then Drucker would advise us to think it through to determine what the customer considered of value and to be extremely cautious that marketers didn’t substitute their own definitions of value for those of their customers or prospects. This is a valuable insight. If you go down a list of failed products, you will find at their core this marketing problem. Even geniuses are not immune. In the 1980s, a young Steve Jobs claimed that the Lisa computer would be successful because it was technologically so superior to any of its competitors. The Lisa had an advanced system-protected memory, multitasking ability, a sophisticated operating system, a built-in screensaver, an advanced calculator, support for up to two megabytes (MB) of RAM, expansion slots, a numeric keypad, data corruption protection, a larger and higher resolution screen display and more. It would be years before many of these features were incorporated into any other computer. Still, Jobs was wrong. All of these features resulted in the Lisa’s high price of about $22,000 in today’s dollars, and so buyers opted for the far less expensive, although technologically inferior, IBM, which sold for less than a third of the Lisa’s price. At that time, Apple’s prospects valued cost above technological superiority. FIND OUT WHAT THE CUSTOMER VALUES ment. As a corollary, Drucker abhorred the popular idea of “the whole man concept.” That is, you should look for individuals who are well rounded and minimally acceptable in all facets of their managerial responsibilities but superior in none. If you follow this policy, Drucker emphasized that at best you’ll end up with an organization staffed with individuals who are wonderfully adequate, but none who are the best in any assigned role. Ironically, he pointed to the military (ironic because for years the military had been promoting “the whole man concept”), and he compared two generals: George Patton and Dwight Eisenhower. George Patton motivated his soldiers to extraordinary efforts. He could accomplish any mission on the battlefield and do this with one of the lowest battlefield casualty rates of any senior commander. However, Patton couldn’t get along with his allies. He said, and sometimes did, things that were certain to get him into trouble. In contrast, Eisenhower never fought on a battlefield and would have been totally lost in fulfilling Patton’s assignments. But he knew how to motivate senior officers from many different backgrounds and cultures to work together and how to minimize their differences and squabbles. He was the best choice for Supreme Allied Commander Europe, just as Patton was the best choice for commanding an army group in the field. Drucker’s solution? Think it through, and staff for strength. Ensure that a person’s weaknesses, whatever they are, are not relevant for a particular assignment. I thought a lot about Drucker’s various solutions to different problems and concluded that what Peter Drucker was doing was asking us to think. He did not accept “common knowledge” or the way things were being done as necessarily correct. In fact, the phrase I heard him use most in the classroom was, “What everybody knows is usually wrong.” Drucker never claimed great knowledge about anything, especially THINK FOR OURSELVES American Management Association MWORLD WINTER 2013-14 Drucker had a number of good ideas about placement and promotion decisions. For instance, if you put a previously successful employee in a job in which he fails, that failure belongs to you—the manager who put the individual in the job—and not to the employee given the assignPROMOTION AND PLACEMENT OF PEOPLE 6 INSIGHTS in his legendary consulting. Instead, he claimed ignorance, which required him to think and ask questions. To prove his point, Drucker would describe how the British had been losing too many transport ships to German submarines during World War II. Although the British had developed a basic design to build replacement ships less expensively and their shipbuilders were considered the best in the world, Britain was engaged in fighting the war and lacked the manpower, shipyards and production facilities to build the necessary fleet. Out of desperation, Britain turned to the United States for help, even though we did not have much shipbuilding capacity. American industrialist Henry Kaiser came to the rescue. He knew almost nothing about shipbuilding, but he approached the problem from the stance of ignorance. As a result, Kaiser revolutionized shipping operations and produced the ships even faster and more efficiently than had the British. The Sydney-to-Melbourne Ultramarathon was held between 1983 and 1991 and was considered the toughest footrace in the world. It was 544 miles long and took up to seven days to complete, with rest stops permitted along the way. Most athletes ran all day and rested at night. In 1983, an THE TORTOISE AND THE HARE unknown 61-year-old potato farmer by the name of Cliff Young entered the race. Many thought he would be lucky to finish. But Young didn’t accept what everyone knew to be true or follow the conventional way of doing things. He thought about the race, not from experience and expertise, but from complete ignorance. He realized that he could walk the distance if he chose to and that he wasn’t required to stop overnight. So he didn’t. Result? He won, shaving almost two days off the previous record and finishing almost a day ahead of the second-place winner, who was half his age. What was Drucker’s most valuable lesson? He taught us to think and ask questions. MW Excerpted, with permission of the publisher, from The Practical Drucker: Applying the Wisdom of the World’s Greatest Management Thinker by William A. Cohen. Copyright 2014, William A. Cohen. Published by AMACOM. For more information, visit www.amacombooks.org William A. Cohen, PhD, is president of The California Institute of Advanced Management. Drucker’s first executive PhD graduate, Cohen became a U.S. Air Force general, held executive positions in several companies and served as president of two universities. He is the author of several books on Drucker, including Heroic Leadership, A Class with Drucker, Drucker on Leadership, and Drucker on Marketing. THE GURU OF GURUS — NOW MADE PRACTICAL. F ew thinkers have had a greater impact on business than Peter Drucker, the inventor of modern management, whose legacy continues to inﬂuence leaders around the globe. Although Drucker is renowned as a thinker and idea generator, the “what” in his teachings was far more prevalent than the “how.” Now, e Practical Drucker mines his vast body of work to pinpoint 40 applicable truths for solving real-world problems, such as how to: Engage employees and achieve outstanding performance • Remedy destructive oﬃce politics • Foster innovation • Ensure follow-through on good ideas • Become a better decision maker • Choose the best leadership style for diﬀerent situations • Do more with less • Steer clear of leadership traps In succinct chapters, the book distills the practical wisdom from Drucker’s dozens of books and articles, as well as his decades of teaching, into a set of fresh, vital lessons that will resonate today and for years to come. www.amacombooks.org Available from your favorite bookseller! Hardcover • $25.00 • 978-0-8144-3349-2 7 COVER STORY Two Steps to More Powerful BY ERIC LOWITT As the author of The Collaboration Economy, I'm frequently asked about the formation of a Eric Lowitt “collaborative economy.” The questions usually come from someone who wants to talk about Zipcar, Yerdle or another company that enables the sharing of hard goods by many consumers. Indeed, in the six months since my latest book's publication, approximately half of the collaboration questions I've been asked are at this “sharing-of-goods” level. While these questions deserve significant attention, the real value that companies can unlock through collaboration is far greater than a new model of distribution. The key to successful collaboration for you and your organization starts with clear answers to two questions: 1. Why do you want to collaborate? 2. What kind of collaboration do you want? WHY COLLABORATE? Collaboration is a way to make something bigger happen than can be accomplished solely through the assets you command and control. This view is based on equal parts of common sense and insights from more than 30 CEOs of publicly traded companies. These CEOs see collaboration as a way to: Remove roadblocks shared with rivals that slow progress or threaten future prospects ៑ Unlock value from resources imprisoned by others ៑ Learn from and alongside other organizations that are working through similar issues or initiatives ៑ Reduce supply-chain and investment risks by coinvesting in new ideas and backup sources of vital supplies with rivals and other organizations While CEOs view collaboration at the enterprise-value level, managers are responsible for a more bounded set of needs that collaboration can solve. These include: ៑ Completion of a project or initiative ៑ Securing resources needed to achieve their agenda items ៑ Achieving results that are beyond the reach of their controlled assets Consumers view collaboration in the economic sense as a way to save money, either by pooling purchases of common goods with other consumers or by sharing assets purchased by either a ៑ 8 American Management Association MWORLD WINTER 2013-14 Collaborations company (e.g., cars via Zipcar) or other consumers (e.g., rent a bedroom in a private house for a night via Airbnb). By understanding what you want to achieve, you can determine the best approach to collaboration. WHAT KIND OF COLLABORATION? I fear that when the term “collaboration” is applied to companies, it runs the risk of becoming the next “sustainability,” Eric Lowitt addresses a group of business leaders about a “collaborative a term used so much by so many economy.” that it loses its meaning (and effectiveness) altogether. To save the term “collaboration” from this undesired fate and to equip you for collaborative success, it is useful to distinguish the three categories of “collaboration” occurring today. INTERPERSONAL COLLABORATION The type of collaboration most often referred to is the process of achieving a greater goal through work accomplished by two or more individuals. In the organization setting, this refers to colleagues, either within or across functions, working together to achieve a common good. CEOs are beginning to integrate collaboration into their talent management processes. They are spearheading a shift in their companies’ thinking from an emphasis on the need for highperformance individuals to individuals who enable high-performance teams. As an example of this insight, consider the following quotation from Steve Jobs: You need to have a collaborative hiring process. When we hire someone, even if they're going to be in marketing, I will have them talk to the design folks and the engineers. (Walter Isaacson, Steve Jobs, Simon & Schuster, 2011) Anders Dahlvig, the former CEO of IKEA, recently highlighted this counterintuitive view of collaboration and talent in the collaboration era: You have to be prepared not to promote strong performers who are great alone but not great collaborators. I see [the opposite] all the time: People who are good at optimizing themselves but cannot work with others. (M. Heffernan,“IKEA’s Former CEO on How to Collaborate,” Inc.com, accessed October 14, 2013) Interpersonal collaboration is easy to overlook because we expect our employees to work together for the company’s common good, but such collaboration can only be harvested by paying attention to your talent-management practices. MWORLD WINTER 2013-14 American Management Association PHOTOS: COURTESY OF ERIC LOWITT 9 INTRASECTOR COLLABORATION Industry associations as a way to serve the interests of an entire industry are neither new nor revolutionary, but examples of a more focused and effective collaboration between rivals to remove common roadblocks and pave the way for greater common success are now beginning to emerge. Consider the automotive industry. Since 2010, rivals Renault-Nissan Alliance and Daimler AG have forged a unique partnership for their common good. As with most collaborations, they started “small,” initially focusing on the completion of three projects in Europe. However, they recently announced that their portfolio of joint projects has grown both in size (10) and regional scope (Europe, North America, and Japan). The CEOs of both companies commented on their intrasector collaboration at an annual media briefing on the partnership. (http://www.media.blog.alliance-renault-nissan.com/news/collaborationbetween-daimler-and-renault-nissan-advances-globally-ceos-say/#sthash.nuGrbGlu.dpuf) Renault-Nissan chairman and CEO Carlos Ghosn said: While our initial collaboration focused strongly on European projects, we are now focusing on synergies in all key markets…. The largest economies of scale are always global. At the same briefing, Dieter Zetsche, Daimler AG chairman and head of Mercedes-Benz Cars, noted: We will continue to seek out new projects together that make sense for all partners and, most importantly, our customers. But herein is a complicated question: How will rivals know when to collaborate and when to compete? In search of an answer, I reviewed the interviews I conducted as part of my research for The Collaboration Economy and found deceptively simple guidelines. CEOs and other leaders agree that companies should: Engage in cross-sector collaboration to secure an ongoing supply of natural resources Compete when getting goods onto and off the shelf at common retailers ៑ Collaborate again to get materials back into the manufacturing cycle ៑ Compete for these materials once they are reprocessed ៑ Jointly develop new markets ៑ Fiercely compete for the attention and loyalty of customers in these newly opened markets As one CEO, who declined to be publicly named, explained to me, “If resources become scarce, then it’s in everybody’s interest to work together to make sure that the scarcity does not become a threat to your business. At the same time, there is the risk that it will become a threat to your business and then you will have to compete like crazy in order to get your hands on those resources.” ៑ ៑ Over time, more “collaborate-or-compete?” guidelines will become apparent. The six listed above will help you recalculate any necessary changes to your company’s competitive strategy. INTERSECTOR COLLABORATION Individuals and organizations are collectively beginning to realize that massive economic, environmental and social challenges stand in our common path. In essence, the interest of the commons is now transforming into the common interest. Take water, for example. Individuals cannot go more than three days without consuming a liquid. Companies are coming to understand a similar linear reality: no water, no product, no revenue and no company. 10 American Management Association MWORLD WINTER 2013-14 USE THIS SURVEY TO ASSESS COLLABORATION IN YOUR ORGANIZATION Which type of collaborative approach does your firm most frequently pursue? I Interpersonal I Intrasector I Intersector Which view best typifies how your organization sees employees? I As employed at-will individuals I As collaborators in your organization’s success Which view best typifies how your employees view their jobs? I As employed at-will individuals I As collaborators in your organization’s success Where does collaboration rank among the toughest behaviors at work? I Lowest I Middle I Highest Is your organization primed to operate through collaboration? I Yes I No I Not sure how to know Which trait do you more actively prioritize when considering candidates to hire for leadership positions? I Potential for individual high performance I Potential to equip team for high performance On a scale of 1 (low) to 5 (high), how highly do you rate employees’ annual contribution to effective teamwork when measuring an employee’s annual performance? I1 I2 I3 I4 I5 Can you honestly report that collaboration with rivals is a critical success factor for your business? I Yes I No Can your organization achieve its enterprise-level strategic goals without partnering with your rivals? I Yes I No Can your organization achieve its enterprise-level strategic goals without partnering with public-sector agencies? I Yes I No Can your organization achieve its enterprise-level strategic goals without partnering with your customers? I Yes I No For this reason, companies are starting to work with public- and civil-sector entities to solve massive problems held in common. Such efforts will align social good with economic development, which is the basis of my argument in The Collaboration Economy. Few would dispute that collaboration across the private, public and civil sectors is the most likely path to securing our common future. Unilever CEO Paul Polman did well to note this view recently when he said in an interview with me: “Individually, both governments and businesses have already mobilized significant resources to address the challenge of deforestation, but we all recognize that much more can be achieved if we align our efforts and work in partnership.” The key to success with such large-scale collaborations is to design joint efforts that are precisely focused, highly actionable and make it easy to hold individual entities accountable for their commitments. Otherwise, these multisector collaborations run the risk of becoming too large, unwieldy and unfocused to be successful. MW Eric Lowitt is the author of The Collaboration Economy and the managing director of Nexus Global Advisors. MWORLD WINTER 2013-14 American Management Association 11 7 Ways Collaboration Builds BY DIANA RIVENBURGH The healthiest, most prosperous companies remain resilient in the face of change. Rather than leading solely from the top, they build coalitions for change. They thrive by tapping into internal talent at all levels and reaching beyond their borders for external collaboration. Remaining resilient requires designing organizations that harness today’s social, economic and environmental forces in ways that serve all stakeholders by engaging employees, delighting customers, rewarding shareholders, serving communities and surpassing the competition. The following seven principles will serve you well in keeping all these constituents happy and achieving shared goals. 1. Become vulnerable to build trust. Let’s face it, collaborating with others can sometimes be messy. All those differing opinions, personalities and agendas can sometimes make people feel they are in the middle of a congressional debate on healthcare reform. But when collaboration occurs on a foundation of trust and respect, ideas rise to new levels, bonds strengthen, learning occurs and work gets done. One of my colleagues lives by the rule “relationships first, then business.” Although it may sound counterintuitive to include vulnerability as an ingredient for resiliency, building trust requires that people open up to their peers and staffs. By doing so, they are in a position to receive feedback and opinions from others. Such openness also fosters respect. All too often, team members frantically work to fix problems and achieve targets without taking the time to get to know each other. Yet taking that time in the beginning and throughout a project will bring greater and longer lasting results. Teams need to be built on a foundation of trust. During a leadership retreat with a group from a very successful technology company, I encouraged the participants to think of the senior leadership team as their “first” team. As with many leaders, they had traditionally viewed the functional areas for which they were responsible as their primary teams. Yet the operation could only be successful if all the functions worked smoothly together. Executives can’t operate effectively if they are acting as middle managers. They must consider what’s best for the entire enterprise. By considering the senior leadership team as a priority, they had to be willing to consult their peers when issues came up that might impact other parts of the operation and consider different ideas on how to improve their own areas. Shifting their perspectives to have a stronger allegiance to the senior team helped break down functional barriers. Once they accomplished this, their staff members followed by forging stronger relationships with other departments. 12 American Management Association MWORLD WINTER 2013-14 GREATER RESILIENCY 2. Engage employees at all levels at all times. Implementing even the most brilliant strategy requires the involvement of employees throughout the organization. Leading-edge research consistently shows that employee engagement positively impacts business results, even in a down economy. A 2012 Aon Corporation “Trends in Global Employee Engagement” report revealed that in 2010, organizations with high levels of engagement outperformed the overall stock market index and brought in total shareholder returns 22% higher than average. On the other hand, companies with low engagement levels had total shareholder returns 28% below average. A 2012 Gallup Employee Engagement Index report revealed that 70% of U.S. workers felt “not engaged”; one in five workers (18%) felt “actively disengaged” at work. Employees who lack engagement emotionally disconnect from their companies and generally fail to meet performance expectations. They lack energy and passion, put forth minimal effort and take more time off. In some cases, they disrupt the workplace, undermine coworkers, bad-mouth the company and even commit acts of sabotage. Leaders in resilient organizations understand the need to have an engaged, productive, highly motivated, continuously learning and innovative workforce. The entire company wins when people go above and beyond their job descriptions to invest extra time, brainpower and energy into their work. Middle managers are especially critical to engage. The visionary CEO or engineering geniuses can’t make things happen throughout the entire company. Middle managers can. They convert strategic aspirations into successful operations. 3. Seek cognitive diversity. Resilient organizations view diversity as far more strategic than an exercise in percentages in gender and ethnic categories. These organizations bring together people with different thinking styles, backgrounds and levels of expertise. Those closest to the MWORLD WINTER 2013-14 American Management Association 13 “You can’t be an expert in everything. Find resources and form alliances with people and organizations with the expertise, infrastructure and products you need.” work will ask questions and have ideas that are very different from those of the “experts” and formal leaders. I once worked with a large healthcare system on an initiative to increase efficiency and achieve higher levels of operational excellence. Rather than present ideas from the headquarters’ ivory tower, we brought together regional directors, clinical managers, staff coordinators, sales representatives and nurses. With this combination, one team created a caregiver model that gave greater autonomy to nurses and lowered labor costs and staff turnover, while also raising the quality of patient care. Companies increasingly require people of different educational levels and backgrounds to work together to achieve their goals for sustainable growth. Thus, one organization funded a project to have universities and technical colleges develop programs in which student engineers and technicians would serve on project teams together. The goal was to better prepare them to work across functions and levels when they moved into the workplace. 4. Engage the head and the heart. There’s a widely held misconception that the business case provides the greatest fuel for change. While that’s necessary, presenting data, calculations and research won’t be enough to move people to action. Education and information won’t move people to change. They must also care about what they are doing. And people care most about what they help create. They will move mountains to achieve goals they personally connect with. In 2008, just as the recession was taking hold, John Lyell Clarke III took action to redefine his family's eponymous third-generation insecticide company. He knew there must be a better way to kill disease-carrying mosquitoes. First, his company’s scientists used green chemistry principles to create organic compounds that would destroy mosquitoes just as effectively as decades-old poisons. But he didn’t stop there. He called upon his employees to find ways to completely transform and rebrand the 60-year-old company from an insecticide maker to a public health company. His vision became their vision, and the results have exceeded his wildest expectations. He periodically brings company’s employees together for vision and strategy sessions. One of the ideas springing from the 2013 summit, “Clarke Plus: Accelerating Sustainability,” was to build the new corporate headquarters with a “green” design that included space to collaborate, walking paths and a healthy work environment. Ideas didn’t just come from inside the company. Of the people at Clarke’s 2013 summit, 20% were external stakeholders, such as customers, bankers, government representatives and other business leaders. A few naysayers believing “that will never happen” were proven wrong, as that new headquarters nears opening day. They greatly underestimated the power of combining the heart and the head. 5. Build relationships across boundaries. Some changes just can’t be accomplished alone. It’s simply too big for any one company or sector to achieve. Today’s leaders must reach deep and wide to develop alliances to accomplish the seemingly impossible. In their own companies, they need to rip down functional silos to bring people together to meet tough, complex challenges. They must also reach to outside expertise to address labor and resource issues in global supply chains, cultural challenges in emerging markets, public health threats and energy 14 American Management Association MWORLD WINTER 2013-14 security risks. Resilient organizations engage internal and external stakeholders and build diverse coalitions for change, including sometimes with competitors. In 2011, leading apparel and footwear companies Nike, Adidas, C&A, PUMA, H&M and Li Ning, joined forces to form a Zero Discharge of Hazardous Chemicals (ZDHC) program to find ways to eliminate hazardous chemicals in the production of apparel and footwear by 2020. Other apparel companies, including Levi Strauss, Jack Wolfskin, Marks & Spencer and G-Star Raw, joined the quest. ZDHC members developed a Joint Roadmap, with higher industry standards and aggressive goals to eliminate certain chemicals from the manufacturing process, educate suppliers, improve supply-chain transparency, and monitor and report on results. As of June 2013, the ZDHC program had set up seven workstreams, including training, assessment and auditing, and initiating a pilot for chemicals management best practices. 6. Don’t create everything yourself. You can’t be an expert in everything. Find resources and form alliances with people and organizations with the expertise, infrastructure and products you need. For example, large and small organizations around the world use UPS to manage their logistics, and companies such as SAP bring in world-class technology, thereby eliminating the need for in-house systems. 7. Make collaboration part of the culture. Years ago, I worked with a company where the CEO was frustrated with the lack of collaboration. So, he decided to take away formal titles, such as vice president and manager, and call everyone a team leader. There was a huge uproar from those losing their lofty titles, and lots of time was spent making the case to be called “Senior Team Leader” or “Team Leader III.” I convinced the CEO that titles weren’t the issue; it was the culture. We put together a plan to build collaboration across functions by having all major initiatives led by cross-functional teams. These teams engaged people at all levels of the organization for input and participation. Team members trained and set individual development goals to go along with the business goals they were expected to achieve. Goals ranged from managing stress to being more openminded to improving communication skills. It was no longer acceptable to get to the target at all costs. People also had to learn to work better together. As relationships grew on these project teams, people were more likely to keep other departments informed on a greater number of routine operational issues. They had a broader perspective on what happens across the organization instead of being buried in their own functional silos. MW Diana Rivenburgh is CEO and president of Strategic Imperatives, Inc., a global consulting firm that helps clients create a sustainable, profitable, competitive advantage by developing transformational strategies, bold leaders, engaged cultures and resilient organizations. Her recent book, The New Corporate Facts of Life: Rethink Your Business to Transform Today’s Challenges Into Tomorrow’s Profits, has just been published by AMACOM. Contact Rivenburgh at firstname.lastname@example.org and follow her on Twitter @sustainableorgs Today’s executives must be visionaries, trailblazers, strategists, communicators, coaches, diplomats and politicians. To be more effective in these roles, they need the skills offered at AMA’s seminar “Developing Executive Leadership” at www.amanet.org/2501 MWORLD WINTER 2013-14 American Management Association 15 AMA is channeling some great ideas for your success... “...I didn’t realize that my presentation skills ... on YouTube Want to do your career and business a big favor? Visit the AMA channel on YouTube www.amanet.org/WhyAMA In minutes, you’ll get an inside look at how we help change people’s lives—and livelihoods. Watch and you’ll discover: would improve so quickly!” ...I learned how to get up in front of a group and stay relaxed and be able to give an effective presentation...” “...it (the course) gives you a buffet of tools that you CAN implement... CAN utilize...” ...everyone deals with the same situation, but they also bring another perspective to the table...” Why AMA? This 90-second introduction to AMA gives you a glimpse of our acclaimed, hands-on training. See what sets us apart from all the others. Three Questions Some of the top thought leaders and business experts in the world share their answers to questions about today’s most critical challenges. AMA Seminars Why is our name synonymous with great training? Find out from the people who are taking our courses in this insider’s view of the AMA experience. Growth begins with information and inspiration www.amanet.org/WhyAMA OUT OF THE BOX Spans of Influence: Isn’t It About Time? BY KAREN DETWEILER, ALISON ROMNEY EYRING AND DAN L. WARD In February 2000, Electronic Data Systems (EDS) had an average span of control (SOC) of nine subordinates for every supervisor. While this ratio was already in the highest quartile of spans, the company sought additional increases in the ratio of employees to supervisors in the belief that larger spans would result in lower management overhead costs and higher operating efficiencies. By December 2001, spans had increased to 15 to 1—a number achieved by less than 10% of the Fortune 100—yet the company continued pushing for increases. Electronic Data Systems reached a 16.2-to-1 SOC ratio in May 2002. The stock price averaged $62.90 during 2001. In September 2002, a variety of managerial and financial issues came to light. The stock fell to $11.68 on September 24th. While it would not be fair to assume SOC was the sole issue behind the company’s troubles, it might be reasonable to assume that the lack of managerial oversight implied in those extremely high spans may have been a significant contributing factor. For much of modern history, organizations have aspired to find an optimal hierarchical structure. Pyramids offered a good model—one boss at the top, then a number of senior leaders at the next level, a larger number of managers at the next level, followed by supervisors and finally individual contributors who usually functioned as members of work groups or teams at the lowest level. It generally followed the outline first documented by the Roman army in 107 BC. Organizations periodically restructure to this “clean” pyramid shape, but despite these good intentions, they seem to get top heavy over time. People are promoted upward and stay there. The organization needs some redundancy to enable succession planning. At the same time, senior management needs to retain ambitious, accomplished people who will have many opportunities elsewhere. In the never-ending quest for effectiveness and efficiency, our forebears sought simple metrics to MWORLD WINTER 2013-14 help us better manage our structures. In 1916, Henri Fayol published a book on his experience as a general manager and executive. His analysis dated back to his first managing director role in 1888. His book, Administration Industrielle et Générale, included what many believe was the first truly modern concept of SOC, providing guidance on leadership hierarchy and managerial oversight. While he did not use the specific term “span of control,” he outlined concepts regarding the appropriate and necessary levels of oversight and management to effectively manage an organization. The oversight concept continued to evolve. By 1933, V.A. Graicunas created the Graicunas formula as a measure of the complexity of oversight. The essence of his theory is that the interactions and interrelationships among team members grow geometrically, not linearly, as people are added to the work group. Based on his math, it is overly challenging to manage relationships once a team expands beyond five subordinates. Lyndall Urwick is usually recognized as the first writer to actually apply the term “span of control.” He expanded on Graicunas’ work and suggested “no superior can supervise directly the work of more than five or, at the most, six subordinates whose work interlocks” (“The Manager’s Span of “Span of control was a great tool for the Industrial Age. It is simple, easy to understand and easy to change.” 17 American Management Association OUT OF THE BOX Control,” by Lyndall Urwick, Harvard Business Review, May-June 1956). Problem solved. Organizations optimized their hierarchical structures by enforcing a fixed ratio of subordinates to supervisors. Inevitably, this led to more and more layers as companies grew larger. But the problem of layers of management needed to be addressed, as they slowed down decision time and responsiveness. This led to the movement to reduce layers to improve cycle time and reduce overhead costs. It was assumed that with modern tools and communications, a good manager should be able to handle 10 subordinates. Or maybe 20. Or maybe 100. After delayering and expanding spans of control, organizations began to rethink organizations themselves. Why not outsource some of the nonproprietary tasks to others who might do it cheaper, better and with fewer headaches? This practice allows chunks of organizations to be eliminated. The pyramid, flat or tall, began to look more like a diamond, as more work was outsourced and automated. Midlevel managers had both internal and external managerial responsibilities. Then, spans began to shrink as managers became more functional than supervisory. A role that once had six direct reports now might only have three, but might also be overseeing a contractual arrangement that involved dozens of people working for a different organization. In spite of such radical reshaping of the modern organization, the traditional concept of SOC didn’t go away. As companies continue to find ways to improve efficiencies, SOC persists. Span of control was a great tool for the Industrial Age. It is simple, easy to understand and easy to change. It links well to economic and financial analysis. It yields a simple number that can be compared across organizations. Then came the 21st century with its organizational dynamics of virtual organizations with matrices that span geographical areas and national boundaries. Span of control isn’t suitable for organizations today. It is not just simple; it is simplistic. Leaders need a better way to think about and measure the number and kinds of interfaces that individuals can and must handle at work. Perhaps the time has come to replace the concept of SOC with “spans of influence” (SOI); the latter THE ROLE OF SPAN OF CONTROL allows us to consider the range of roles a manager today must play and the different types of complexity associated with these roles. It replaces the notion of control with influence, which more accurately describes the nature of the relationships. The concept of SOI should help us to avoid potentially negative consequences that SOC might create. Consider a plant manager, who may have 10 people reporting to him. His SOC would be 10. However, he also leads a dispersed product development team with representatives across multiple plants. The team members are responsible for taking action under his leadership. He is accountable for the results of this work. The same manager leads a talent council for the region in which he is located. This talent council is responsible for nurturing local talent and accelerating the progression of women. While accountabilities are less clear and performance feedback loops are ad hoc at best, he must influence not only this team, but also the broader organization. Traditional SOC metrics ignore these groups, counting only his formal direct reports on the static organization chart. When an organization counts only those people directly reporting to a manager in the SOC metric, it greatly underestimates the complexity of this manager’s role. Worse, if the organization is pushing to increase SOCs, the manager may not have sufficient time and attention for these critical teams. In organizations today, boundary spanning behavior is crucial. Spans of influence take this into account. DANGER AHEAD! The concept of SOI recognizes that managers today add most value to their business through acts of influence with many teams rather than by exerting control over a single group of people. These teams may have different structures, Many times, the members of the team will formally report to someone else. In fact, the amount and type of influence a manager must employ will vary across different work groups or teams. She will have the most formal levers to influence a work group reporting to her and no one else. However, when she leads a virtual team of people all reporting to other managers, the integration of influence is multidimensional—more like conducting a symphony orchestra than supervising a manufacturing team. ACTS OF INFLUENCE American Management Association MWORLD WINTER 2013-14 18 OUT OF THE BOX “Reducing the number of direct reports to a role provides a learning space that enables the company to grow managerial capability.” The concept of SOC provides a metric that companies understand. It is easy to link SOC to headcount costs and generate statistics, like “average cost per manager.” Clearly, for SOI to take root, it must be able to translate into a metric or family of metrics that can guide productive action. One dimension of the metric must reflect the volume of work the manager directs through different workgroups or teams. The size of these teams and the extent to which they report to the manager directly, indirectly, by objectives or purely by interpersonal influence should impact the metric. In addition, the complexity of the team itself must be taken into account. Traditional SOC metrics take into account whether or not the team members are of the same or different skill pool. An SOI metric would also need to take into account the degree of geographic dispersion of the team, which is a key driver of complexity. As an example, a co-located team—or even a team sitting in the same time zone— can select any of six to eight hours out of five days a week in which to come together. A globally dispersed team will have about one hour each day—if it is lucky—when all team members can come together. While work clearly happens in dispersed teams, there are times when people need to be together to discuss or resolve complex issues. Another way in which SOI should differ from SOC is in reflecting context. Current thinking assumes there is an optimal SOC that can be determined. The thinking around this concept has evolved in Western educated, individualistic, rich, developed (aka WEIRD) markets like the United States and the United Kingdom. In high-growth or emerging markets, such as those experienced in Western nations when the concept first evolved, the need for experienced managers was and remains one of the most painful barriers to growth. The original intent of SOC was to limit the number of subordinates to a reasonable range to ensure effective management, not to reduce the number of leaders to achieve simple cost savings. Reducing the number of direct reports to a role provides a learning space that enables the company REFLECTING CONTEXT MWORLD WINTER 2013-14 to grow managerial capability. Thinking in terms of SOI provides an alternative way to consider and determine an appropriate number of direct reports for a manager. It begins with the assumption that contextual factors, such as the nature of the work, organizational growth rates and culture, will impact the definition of “optimum” or “ideal.” Optimum or ideal are very dynamic concepts. The Industrial Age view considered these things static and absolute. In our generation, we are seeking an “appropriate” or “suitable” rather than an objectivist “ideal.” If someone has a large raft of direct reports, that person will lack adequate personal bandwidth to deal with large numbers of stakeholders and network interfaces. If that person has fewer formal direct reports, he would presumably have sufficient bandwidth for these other complex relationships where influence and co-created intended outcomes can be built and deployed. Furthermore, this can provide a multifaceted view into the complex reporting structures a manager today must guide. MW Editor’s Note: This article is intended to stimulate a dialogue. We need to communicate how this concept would help—and not just in a conceptual way. We see it enabling the line manager to articulate the “degree of difficulty” and complexity of his/her role. Compensation, of course, should map to complexity and results. Isn’t it time to get past the historical heuristic loaded with assumptions that just don’t fit the 21st century organization? Hasn’t the time for SOC come and gone? Is it now time for SOI? Should the new metric include a composite measure of direct and indirect leadership relationships? What will it take to dislodge and supersede the simplistic SOC? What are some other areas for consideration? Share your opinion with readers of MWorld. Email the editor at email@example.com Karen R. Detweiler, EdD, is an engineering section leader with The MITRE Corporation’s Federally Funded Research and Development Center (FFRDC) for National Security Engineering. Alison Romney Eyring, PhD, is the founder and CEO of Organisation Solutions. Dan L. Ward works within The MITRE Corporation’s Federally Funded Research and Development Center (FFRDC) for National Security Engineering. American Management Association 19 Blinders and Hidden Biases: BY RICHARD S. GALLAGHER Human beings instinctively become defensive when they are criticized, no matter how “right” this criticism is. Well, guess what? You are a human being. And if you are like most human beings, you have probably reacted to other people’s feedback in ways that didn’t exactly promote good will and harmony. If so, you are far from alone. You can count yourself among a large fraternity that includes psychologists, clergy, senior corporate executives and nearly every person who has ever appeared on a television talk show. It is, in a very real sense, the last taboo of effective communication. Let’s look at some of the reasons why we all respond negatively to critical feedback. We have emotional “blinders” that affect what we hear. There is an old saying that when you are a hammer, everything looks like a nail. In much the same way, the concerns at the top of our minds act as a filter to everything we hear from people. For example, when you are a manager, someone’s feedback may seem like an affront to your authority whether it was actually meant that way or not. We each see the world differently from other people. Each of us has subtle biases that affect how we interpret other people and the messages they send us. For example, someone may be asking for more detail but you might write the individual off as a “nitpicker.” We have a strong, innate urge to protect ourselves. Whenever anyone says anything critical of you, it is instinctive for you to CYA (cover your analysis). This is not necessarily because you are an egotist or defensive, but rather because you are strongly programmed to feel this way as a survival instinct. As a result, when someone points out a shortcoming, you immediately produce an excuse (real or imagined) for it. All of these instincts kick into even higher gear the more upset or critical another person is. RESPONDING TO DIFFICULT CONVERSATIONS: The PLAN Approach When someone starts a challenging conversation with you, human nature is not your best friend. At the same time, most of us cannot learn to respond effectively to these situations on the fly, when the other person’s agenda is hurtling toward us like a runaway freight train. This is why you need more than good intentions to respond effectively to other people. I have a PLAN for you. It is a four-step process that puts your response completely and painlessly on autopilot. Here are the steps: ៑ Paraphrase what the other person is saying to you American Management Association MWORLD WINTER 2013-14 20 Recognizing Our Response to Feedback Listen for the person’s response ៑ Acknowledge what the person is saying ៑ Negotiate a resolution Each of these steps is simple, logical and precisely the opposite of what we normally do in a difficult dialogue. At the same time, once you get used to following them, you will become amazed at how comfortable you are with anything that another person could possibly say to you. Let’s explore each of these steps in detail. ៑ STEP 1: Paraphrase Paraphrasing is the process of interpreting another person’s statements rather than simply parroting them back. More important, it demonstrates to the other person that you have processed these statements internally. When you are paraphrasing someone, your responses often begin with statements like the following: It sounds like… I can see that… ៑ So you want… ៑ You clearly feel… As we discussed, these statements do not imply that you agree or disagree with the other person; they simply mean that you heard and understood them and that it is safe to talk about what they are saying. At the same time, it sends a powerful signal of warmth, acceptance and understanding to the other person that opens the door to productive dialogue, whether you ultimately plan to accept or challenge the message. ៑ ៑ When you are receiving feedback, the power of paraphrasing is best explained in terms of how you feel in the split seconds after you get feedback. If you are like most people, questions like these are probably swirling through your mind: Will he get upset by or defensive about my response? ៑ Does he understand what I am telling him? ៑ How much does he care about what he has said? Paraphrasing puts each of these concerns to rest in a way that creates an open, accepting space for dialogue. More important, it works equally well for any kind of feedback, whether it is positive, negative, agreeable or disagreeable. ៑ STEP 2: Listen After you paraphrase what the other person has to say, the next step is something that is extraordinarily easy to remember and extraordinarily hard to do: Say nothing at all. MWORLD WINTER 2013-14 American Management Association 21 Once we successfully get into dialogue with another person, we all share a common universal urge to blurt out things designed to defend ourselves. If we are honest with ourselves, most of us recognize this urge as one of our most basic instincts. It feels logical and natural. Unfortunately, it also works completely against us, for the following reasons: ៑ ៑ It shifts the focus from the other person’s agenda to yours It doesn’t address the original concern ៑ It puts the other person on the defensive ៑ It instantly vaporizes any good will you have built up with the other person ៑ All too often, it serves as a roadblock to effective dialogue. Compare these two approaches, and you will see what we mean. STEP 3: Acknowledge This is the third of four steps that are easy but not natural when you are receiving feedback. And this step in particular will feel like sucking on a lemon if you aren’t used to doing it. But it is far and away the most powerful thing you can do when someone is trying to tell you something: Acknowledge and validate everything the other person says. This point is so important that if I were a schoolteacher, I would have everyone write the following statement on the board 50 times: Acknowledging someone is not the same as agreeing with them. Compare what a powerful difference doing this makes: Without acknowledgment: HER: That’s a really stupid way to do that. YOU: No it isn’t. This is how I usually do it. With acknowledgment: HIM: That’s a really stupid way to do that. YOU: You have a point. I can see where some people might think it is counterintuitive to do it this way. In the first case, you are closing off discussion and denying the reality of what the other person feels. In the second case, you are engaging the other person in an honest and authentic dialogue, even when you disagree with him or her. Put another way, you are always on safe ground (in fact, the safest ground possible) when you show people that you accept how they are thinking and expressing themselves by acknowledging them. Let’s put an important myth to rest about acknowledging people: It isn’t a limp-wristed, subservient process of acquiescence, nor is it a process of falsely accepting blame to try to make conflict go away. Done correctly, it is a bold, confident maneuver that shines the most brightly in your most critical situations. There is no question that it does not feel natural to acknowledge negative feedback, but there is a reason for it. While we might think acknowledgement might cause someone to become more critical, in reality the opposite is almost always true. When we frankly acknowledge people they tend to calm down; they tend to get angrier when we defend ourselves. They push even harder for their agenda and respect you less than if you had condescended to respond to them. 22 American Management Association MWORLD WINTER 2013-14 In actuality, you almost always gain power and credibility when you help the other person feel understood and respected. This is ultimately why acknowledgment, even when you are hearing painful things from another person, is one of your most powerful weapons in dialogue. STEP 4: Negotiate You may have noticed that the first three steps in this process are all about the listener. And that is important because engaging the listener first is usually the best way, and often the only way, to have a rational and productive discussion with someone after they share feedback with you. But now, it’s finally your turn. In general, our reactions to feedback aimed at ourselves take one of two forms: 1. You can see their point. 2. You would rather get pecked to death by ducks than agree with them. The first situation is, of course, conceptually easier to handle. Ideally, we can agree with whatever they are saying and propose a solution. For example: You: “You’re right, I do tend to like listening to loud music at my desk. Would it be OK with you if I used headphones from here on in?” The second case is a little trickier, but also one where the mechanics of what you say are more important than ever. When most people disagree with someone, the answer is usually some variant of “no,” and the way the other person reacts to this “no” is often one of the key reasons that difficult discussions escalate into arguments. This is why I want you to always phrase your responses in terms of what you can do. It feels funny, because (a) we are so highly programmed to say “no” to people and (b) when someone wants and we cannot do X, it feels really funny to respond by saying “I can do Y” instead. In situations like these, every fiber of our being wants to talk about what we can’t do, but by using “can” language, we adopt the posture of an ally and an advocate. MW Richard S. Gallagher is a popular trainer and public speaker who specializes in the mechanics of workplace culture and communication. He is the author of several books including Great Customer Connections and What to Say to a Porcupine. Excerpted, with permission of the publisher, from How to Tell Anyone Anything: Breakthrough Techniques for Handling Difficult Conversations at Work by Richard S. Gallagher. Copyright 2009, Richard S. Gallagher. Published by AMACOM. For more information, visit www.amacombooks.org Successful work relationships can help you achieve organizational and career goals. To learn the skills that will help you use more positive communication strategies and thereby create better work relationships and achieve career success, check out AMA’s seminar “Building Better Work Relationships: New Techniques for Results-Oriented Communication” at www.amanet.org/2235 MWORLD WINTER 2013-14 American Management Association 23 Building a Collaborative BY TAMARA J. ERICKSON At its most straightforward, collaboration means bringing ideas together—sharing perspectives and insights, for the purpose of accomplishing useful things. Done well, collaboration allows organizations to achieve a level of performance or create something new that is superior to what one person or entity could do alone. At its best, it creates synergy, so that the value of the whole is greater than the sum of its parts. Why is collaboration increasingly important today? Collaboration is, after all, something human beings have been doing since about 40,000 BC, when Cro-Magnon man—the first species believed to have the physical anatomy required for speech—appeared and began exchanging the ideas that led to the invention of the wheel. So, why today? Because our ability to collaborate has grown in extraordinary ways over just the last decade. Our ability to collaborate is fundamentally tied to our ability to communicate. Over the past decade, this ability has undergone extraordinary changes. Today, our ability to communicate is actually limitless. The costs have decreased to the point that communication is almost free. The reach is ubiquitous, connecting people of all nationalities and most socioeconomic groups around the world. And the type of communication has changed radically as well—today, we can easily capture and share conversation and images, while powerful search algorithms give us the ability to find virtually any information at any time. These step changes in our capabilities to communicate make collaboration possible to an extent that is entirely unprecedented. The opportunity to exchange insights to achieve new and better ends is enormous. Today, collaboration is a powerful approach to drive the success of your business. It can increase innovation, reduce costs, build consensus for action, increase the accuracy of forecasts, improve decision making, monitor threats and identify a host of other opportunities and other benefits. By employing collaboration effectively, you will redefine and extend the basic concept of an enterprise. As access increases, work—the essential process of value creation—will be based more and more on collective inputs and collaborative activity. Over time, the fundamental orientation of the organization will shift from vertical with predetermined relationships to horizontal, collaborative and networked. With these changes, new business models will emerge. But collaboration is not easy nor, despite the falling costs of communication, free. 24 American Management Association MWORLD WINTER 2013-14 Organization Collaboration of the sort that drives real business value is not about technologies— although those facilitate the change—but more important, it is about new organizations and fundamentally different approaches to work. It requires rethinking old processes and practices, creating operating models that are built around collaboration. It depends on the development of your organization’s capacity to collaborate. DO YOU HAVE THE COLLABORATIVE CAPACITY YOU NEED? Many of our existing ideas about organizations and leaders were formed at a time when our business goal was to get people to perform tasks consistently and reliably. We standardized best practices to achieve a uniform approach, created highly specialized silos of skills and made key decisions at the top. We required that everyone be present at the same place and time, in some cases to get the work done, but at a minimum to allow us to gauge performance by watching in-process activities. The organizational practices we developed, which were so right for those challenges, now work against collaboration and the divergent, creative activities it spawns. Collaboration requires rethinking many of our organizational assumptions and leadership practices—practices as diverse as those related to decision making, skill building, personal networks, feedback mechanisms and the role of leaders. It is a “pull” rather than “push” approach to achieving business results. Does your organization have the processes and practices, the leadership skills and the relationships among participants that you’ll need? Do you have the capacity to collaborate? Over the last several years, my firm has identified the characteristics of organizations that are successful at collaborative activity. With extensive data from teams from around the world, we identified 10 factors that enable collaboration (see Table 1). Investing in these 10 factors builds an organization’s collaborative capacity—its ability and willingness to share information, ideas and insights productively. Conversely, productive collaboration is unlikely to occur if these factors are not in place. A journey to leverage the benefits of collaboration in your business must begin with assessing and, as necessary, building your organization’s collaborative capacity. Think of this as if you were beginning a manufacturing business. Basic questions you would ask are: Do you have the necessary manufacturing capacity? Do you have the right facility? Is the MWORLD WINTER 2013-14 American Management Association 25 TABLE 1: 10 FACTORS TO STRENGTHEN YOUR ORGANIZATION'S COLLABORATIVE CAPACITY 10 ENABLING FACTORS I Highly engaged, committed participants I Existence of trust-based relationships I Prevalence of networking opportunities I Selection, promotion and training practices encompassing OPTIONS FOR BUILDING CAPACITY I Reinforce values, meaning—“What it means to work here” I Facilitate development of personal relationships and shared values and norms I Increase physical proximity, forums, technology; redesign processes I Adapt criteria and processes; include curricula on collaboration I Organizational philosophy supporting “community collaboration I Rethink work environment rules; adopt asynchronous of adults” I Leaders with both task- and relationship-management options I Adapt selection criteria and development processes to skills I Executives who role-model collaboration I Productive and efficient behaviors and processes I Clearly defined individual roles and responsibilities I Important, challenging tasks emphasize both sets of skills I Rethink leadership processes; create a “gift culture” I Reduce meetings; substitute technology allowing individual flexibility, asynchronicity I Clarify task-specific roles I Build excitement and understanding; leave approach facility well maintained? Do you have all the required permits and disposal mechanisms in place? What are the most critical investments you need to make to strengthen your future capacity? These questions are essential to any specific manufacturing process you plan to execute. Assessing your collaborative capacity is similar. Do you have the beliefs, processes, behaviors— the things our well-grounded research has shown to have a statistically valid correlation to collaboration—in place as a foundation upon which to build? What are the most important areas in which you need to invest to build the organization you need for the future? Engaged Participants. Collaboration is a discretionary activity. People have to want to share ideas and work together. It can be catalyzed, but it can’t be mandated. The leader’s challenge is to create an environment that encourages people to take initiative, invest discretionary effort, develop new approaches and ideas, provide extraordinary customer service or ramp up productivity. Think of this challenge as setting the stage. The most effective way to achieve this context is by conveying a clear sense of meaning or unique identity. Meaning is the new money—it’s what draws people more deeply into the work they do. Trust-Based Relationships and Networking Opportunities. The most productive collaboration occurs among people who know and trust each other. Success requires horizontal linkages. Leaders must consider which parts of the organization are likely to have complementary insights and make sure the right people know each other. Provide opportunities for relationships to develop. Selection Criteria That Include Collaborative Behavior. Very few talent management practices correlate with high levels of collaboration, but the processes for selection (hiring and promotion) do. It is important to consider a candidate’s propensity to collaborate as part of the hiring 26 American Management Association MWORLD WINTER 2013-14 “The most productive collaboration occurs among people who know and trust each other.” decision and as evidence for promotions. In addition, training people in skills associated with effective team-based interactions, including conflict resolution and project management, helps. Practices That Treat People Like Adults. Productive collaboration is fundamentally an “adult” behavior. People have to make sound independent judgments about what, when and with whom to collaborate. They are less likely to do this in highly paternalistic organizations, in which management makes all the decisions on their behalf. Organizations with high levels of collaborative behavior tend to leave many work-related decisions to the discretion of the individual—such as when and where to work, how often and from whom to seek feedback. Leaders at All Levels with Relationship Skills. Modeling collaborative behavior at the top stimulates collaborative behavior among individuals throughout the organization. Senior leaders should work to create a “gift culture,” in which they share their own time and expertise freely with others to help them succeed. The example of sharing ideas and supporting others’ success is invaluable in promoting collaboration. Similarly, team leaders should be trained to manage relationships among team members thoughtfully. Productive Processes and Well-Managed Teams. The desire to collaborate is diminished if work processes are cumbersome and bureaucratic—if it’s difficult and time consuming for individuals to get their basic work done. Efficiency supports collaborative behavior. Clearly Deﬁned Roles. Surprisingly, the idea that loosely defined, overlapping roles will encourage people to collaborate, suggesting that all should contribute to the same task, is wrong. Like the old saying “good fences make good neighbors,” collaboration is enhanced when roles are clearly defined. Without that, people waste time posturing for influence or control. The classic example is a symphony orchestra, in which the role of each instrument is well defined, allowing the musicians to play together harmoniously. Important and Challenging Tasks. Collaboration requires that individuals expend extra effort or slow their own work in the short term to make the time required to collaborate. The bottom line is that people do not collaborate on tasks that are easy or unimportant. If it’s easy, why take the time to collaborate? Just do it. And if it’s unimportant, why invest the energy? Just give it your best shot. The ability to collaborate can be a powerful competitive advantage, but doing it successfully requires the right organizational context. MW Tamara J. Erickson is a McKinsey Award-winning author and widely respected expert on collaboration and innovation, on the changing workforce and on the nature of work in intelligent organizations. She has twice been named one of the 50 most influential living management thinkers in the world by Thinkers50, the global ranking of business thinkers created by Des Dearlove and Stuart Crainer. She has written a trilogy of books on how individuals in specific generations can excel in today’s workplace and has authored or coauthored numerous Harvard Business Review articles and the book Workforce Crisis: How to Beat the Coming Shortage of Skills and Talent. She is the founder and CEO of Tammy Erickson Associates, a firm dedicated to helping clients build intelligent organizations, including ways to measure and strengthen collaborative capacity. She can be reached at firstname.lastname@example.org A collaborative leadership style can enhance team commitment and individual member performance. It’s a matter of knowing the skills for building mutual trust and applying them in a team environment. Learn these skills at AMA’s seminar “Collaborative Leadership Skills for Managers.” For details, visit www.amanet.org/2186 MWORLD WINTER 2013-14 American Management Association 27 Assembling an A-TEAM for BY DAVID BRAUN Your plan to buy, no matter how well crafted, is only as good as the people who execute it. Acquisition is a team sport for two reasons. Practically speaking, buying a company involves multiple skills—more than any single individual could possess. Just as important, successful growth requires multiple perspectives. You need to see the opportunities and risks of a potential purchase from many points of view. Let’s look at your acquisition team—what I call the “A-Team.” When should it be formed? What are the key roles? Who needs to be included? What is the leader’s function? How does the CEO fit in? These are just some of the questions we address. ACQUISITIONS AS A COLLABORATIVE EFFORT? First, we might do well to look at how acquisition teams are usually assembled and how the roadmap approach I’m advocating is different from standard industry practice. Everyone who embarks on a company purchase knows—or quickly discovers—what a wide range of expertise is required. Of course, the skills involved are not needed all at once. Early on, for example, your focus is research. Then, once a target has been selected, you need great negotiators and people who can appraise a company’s value. Due diligence draws you into more technical accounting waters, and then there are all the legal aspects that must be handled. Finally, special management expertise is demanded to achieve a successful integration of the two entities involved. What usually happens is that each of the requisite experts is engaged as and when needed, and then slips out of the picture. In other words, there never really is a “team” in the sense of a consistently active group of people focused on a common goal. Instead, a succession of players comes and goes under the direction of one or two executives. The lack of coordination and single vision that results from this habitual practice is one of the prime reasons so many acquisitions end in failure. Imagine an orchestral concert in which the players keep drifting on and off the stage to play their part of the symphony. There would be no cohesion, no theme—in fact, no music. When I undertake an acquisition for a client, I always insist on this principle: The entire acquisition team will be recruited right at the beginning, and every key player will be involved throughout the entire process—in other words, “from beginning to beginning.” Our A-Team is more than a succession of experts: It’s a brain trust, a mastermind forum for decision making that develops a collective understanding of the whole acquisition process. 28 American Management Association MWORLD WINTER 2013-14 Acquisition ASSESSING IN-HOUSE RESOURCES The first step in forming the acquisition team is to conduct an assessment of your in-house acquisition expertise. You need to be careful not to confuse “experience” with expertise. You may have people in your company who have been through a number of acquisitions. They may even have led an acquisition team. But unless they have followed the step-by-step roadmap approach we are exploring here, that history could end up being a hindrance to your acquisition plans. I have found the contrast of experience with expertise to be particularly evident among private equity groups (PEGs). Often, their main focus is to get a deal done as quickly as possible. This philosophy does not lend itself to a systematic acquisition process and threatens to produce a poor outcome for the long term. There are people who have a significant number of acquisitions on their résumés but have learned surprisingly little about what makes an acquisition successful. A prime example is a private equity client I had who would often tell me, “That’s a great company you’ve found for us, but if they aren’t willing to sell immediately, we won’t look at them.” This client had completed many acquisitions and therefore had lots of so-called experience—but too many of the purchases were unsuccessful. The past disappointments are no mystery: My PEG client lacked patience and refused to go after companies that were not actively searching for buyers. Even with years of M&A activity, there was a failure to understand that every company is for sale for the right equation if, and only if, the buyer shows the patience to discover it. Most likely you will find that your in-house team has many real skills but little expertise approaching acquisitions that focus on not-for-sale companies. This is not a cause for concern but rather an opportunity. You have a chance here to mold (or remold) your team to embrace a truly strategic outlook. With everyone starting from the same page, it will be easier to form a consensus moving forward. BUILDING THE INTERNAL TEAM Your acquisition team should consist of a mixture of people drawn from the ranks of your company and experts engaged from outside. Having gauged the level of M&A know-how in your organization, you can start to build your internal team. The first step is to win the commitment of your CEO and/or company board to making an acquisition based on your single strategic need. This may sometimes be difficult but is essential to the remainder of the acquisition process. A strong commitment from the top empowers your team and gives its members confidence that their efforts will have a definite outcome— MWORLD WINTER 2013-14 American Management Association 29 “To avoid risk-averse skeptics or delusional optimists overrunning your acquisition process, you need a good mix of the two, allowing them to temper each other.” that an acquisition will be made. Tepid support can discourage bold choices and in the process lead to stagnation. Support from the CEO must include complete alignment with the end result that you and your acquisition team have defined. Think of building a home. If you simply say, “I am building a house” to 10 different people, they will give you 10 different visions of what that house will look like. They understand the concept—building a structure for shelter—but will have different plans and blueprints to get there. Commitment from the CEO entails adopting a shared vision of what the team is working toward. With strong backing from the top, you can move forward with selecting your internal acquisition team. The first person to appoint is your acquisition coordinator, who functions (in football terms) as the team’s quarterback. The acquisition coordinator’s job is to manage the process and drive it forward. This key individual usually has another job title in your organization, such as CFO or director of business development, and therefore carries other important responsibilities. Nevertheless, he should expect to spend a minimum of 50% of his time on the acquisition process: Anything less, and it will be impossible to effectively lead the team. One essential point about the acquisition coordinator must be established here. The role should not be taken by the CEO. This may seem counterintuitive but is based on long experience. You need a team composed of strong individuals willing to question every idea, challenge each other’s positions, and ruthlessly jettison approaches that don’t add up. If the acquisition coordinator role is taken by the CEO, on whose decisions careers may depend, other team members are unlikely to speak and act freely. SKEPTICS AND OPTIMISTS When you assemble the A-Team, you are likely to find yourself with a group of diverse personalities. In my experience, these personalities generally fall into one of two groups: skeptics and optimists. Understanding this distinction is one of the keys to success. The skeptics usually come from the financial side of the business—the “bean counters,” trained to conserve resources and minimize risk. While these qualities are admirable in the day-to-day practice of financial management, they can be detrimental during the acquisition process if they are left unchecked. Skepticism can reach a point where fear of risk paralyzes your team and renders it incapable of action. The optimists typically come from sales and marketing. Great salespeople are inherently upbeat and have a tendency to believe their own stories. That’s actually what makes them so convincing! Again, this is an admirable quality in its own place, but in an acquisition scenario, optimists may develop blind spots for companies that look attractive, missing fatal flaws that lie just underneath the surface. To avoid risk-averse skeptics or delusional optimists overrunning your acquisition process, you need a good mix of the two, allowing them to temper each other. On balance, the skeptics tend 30 American Management Association MWORLD WINTER 2013-14 to be the most problematic because they are by nature avoiders of action. The danger in giving them too much sway is that they can paralyze the entire acquisition process. Optimists are constantly in motion: They simply need steering in the right direction. Either way, you always benefit from including people who adapt easily when there are bumps in the road that threaten morale. They can remind the team of its commitment to the process and sustain a constant focus on the end results: buying the best company to fill the identified need. BUILDING THE EXTERNAL TEAM Unless yours is a very large publicly traded company, you are unlikely to find in your own ranks all the expertise needed to complete a successful acquisition. You probably need to enhance your A-Team with outside specialists. Typically, the external team is drawn from the following professionals: Lawyers—assist in putting together the legal structure of the deal and tackle other legal questions such as liability issues. Accountants—handle the financial details and capital issues, as well as the tax implications that sometimes form a central component of the deal structure. Valuation experts—apply complex algorithms to bring a measure of objectivity to assessing a target company’s worth. Due diligence experts—examine the seller from a number of perspectives, such as accounting, legal, marketing, technical and environmental, and report back on risks associated with those areas. Third-party acquisition advisors—act as guides through the entire process, taking on tasks such as strategy development, market and prospect research, making first contact with owners and guiding the negotiations. Investment bankers—provide you with leads to companies that are looking to be bought and may also help you to come up with the money to finish the deal. The more integrated the external players are with the internal team, the better. They should really be seen as part of the A-Team rather than as miscellaneous appendages. That means that you benefit from recruiting the key outsiders early in the process and exposing them to your strategic thinking. Enroll any external consultants in the vision, not just the technicalities, and hold them to the same objective criteria that your internal team members are committed to. Now the search can begin. MW David Braun is founder and CEO of Capstone Strategic, Inc., one of America’s leading M&A consulting companies. His more than 20 years of experience formulating growth strategies in a wide range of manufacturing and service industries has led to an acquisition success rate way beyond the industry average. Excerpted, with permission of the publisher, from Successful Acquisitions: A Proven Plan for Strategic Growth by David Braun. Copyright 2013, David Braun. Published by AMACOM, a division of American Management Association. For more information, visit www.amacombooks.org MWORLD WINTER 2013-14 American Management Association 31 Why I’m Deeply Paranoid About BY STEVE SATTERWHITE “Just having satisfied customers isn’t good enough anymore. If you really want a booming business, you have to create Raving Fans.” —Ken Blanchard and Sheldon Bowles I’m sure that almost every executive would agree that great customer service should be a priority for every business. But the difference between good and great customer service is almost as great as that between night and day. Here’s what I mean. In the early stages of our fast-growing IT services company, I started to get obsessed with how to deliver the best customer satisfaction. I don’t mean just really good customer service. I mean I was maniacally focused on delivering “WOW!” levels of customer service—A “10” on a scale of 1 to10. And not just most of the time. I was obsessed with delivering this level of service with every customer, every engagement, every day. I became obsessed not because I was some sort of business genius. Or because I thought it was a good idea. I became obsessed because I was deeply concerned that if we didn’t deliver, we would be fired. You see, at that time, we took on some fairly large outsourcing contracts with some pretty big clients. Because we were a young and growing company, a significant part of our revenue was tied up with one 800-pound-gorilla client—that is, an 800-pound gorilla that was constantly threatening to fire us if we weren’t perfect. Everything we did for this client revolved around what it called the “customer experience.” We were continuously measured, monitored and metered by the daily customer-experience scores we achieved on the IT projects we executed for this client. So, with so much of our business tied up with one client, who can blame us for being concerned? I once heard someone say that if necessity is the mother of invention, paranoia is its father. At least it was for us. I started to read everything I could get my hands on about how to deliver great customer service. 32 American Management Association MWORLD WINTER 2013-14 GOOD Customer Service RAVING FANS One day I came across a book by Ken Blanchard and Sheldon Bowles called Raving Fans: A Revolutionary Approach to Customer Service. I was already a fan of Ken Blanchard’s from his seminal work, The One Minute Manager. Now, here was a new book on how to deliver great customer service—exactly what I was looking for. And the title, Raving Fans, caught my attention. So did the words inside the little “gold star” on the front cover. It said: “Satisfied Customers Just Aren’t Good Enough.” That was certainly true with our contract at Dell. We couldn’t have anything less than a “Very Satisfied Customer.” Or, in Blanchard and Bowles’ language, “We couldn’t have anything less than raving fans.” Written as a story or parable, Raving Fans teaches how to create a culture of great customer service and not as a one-time, flavor-of-the-month management fad, but as a repeatable, scalable system that the whole company gets behind. It’s the kind of customer service that gets in your blood, where it becomes your culture and not just number 7 on the top 10 annual company goals. In the book, we are introduced to the newly hired Area Manager, who is tasked with improving his company’s customer service. The book opens with the CEO threatening the Area Manager to either master customer service or repeat the fate of his three predecessors, who were now gone. That felt very familiar. I could really relate to that kind of pressure. The Area Manager meets a mystical customer-service guru named Charlie who, over the course of the short story, teaches the Area Manager everything he needs to know about customer service. In doing so, Charlie takes the Area Manager on sort of a customer-service rock star tour to companies that are on top of their game. Then the Area Manager meets Sally, the owner of Sally’s Market, The World’s Best Grocery Store. Now, I don’t know about you, but I never thought of a grocery store as a mecca of customer satisfaction. Still, here was the story of Sally’s Market. And right there on page 41 we see what Sally thinks makes her market the world’s best: She created a vision of customer service perfection centered on the customer. Sally explains that she used her life savings to buy an ailing grocery store and tried to turn it around. Instead, she found herself failing miserably and heading toward bankruptcy. That is until she met our hero, the customer-service guru Charlie. Charlie taught Sally to take a step back and visualize what she really wanted her grocery store to be like—especially the customer experience. So, Sally began to envision a grocery store from the customer’s point of view. She saw MWORLD WINTER 2013-14 American Management Association 33 consumer arriving at her meticulously decorated parking lot only to be greeted by red-carpet, valet-parking greeters who offered advice on today’s fresh strawberries and other specials. She envisioned real lighting so people could actually see the products they were buying. She saw in-store advisors helping people make healthy and economical food choices or letting them know where to find the specials of the week. She saw a store with carpet on the floor instead of the standard issue, cream-colored linoleum. She saw employees in every aisle to help shoppers make informed decisions and lots of checkout stands so no one is waiting in line to spend money at Sally’s Market! In other words, it was a vision, and now a reality, of the perfect grocery-shopping experience seen by Sally through the eyes of her customers. It was as if she thought of every last detail of the grocery-shopping experience and scripted it out like a ride at Disneyland. COULD WE DO THIS? Then, I started to think of the implications for our business and our industry. You see, the failure rate for IT projects has long been a concern for both business and IT managers. But now failures seem to be on the rise again, as recession-era budgets cut back on needed preparation and support. The costs of failed projects in terms of time, money, opportunity and morale can be huge. I’m constantly hearing this from IT managers in all walks of life. They all sound alike, and their headaches are the same: A third of their time is spent dealing with IT project failures, and they don’t know how to stop the failures from happening. How could this be? After all, technology is supposed to make our lives simpler. For business, it’s supposed to help us run our organizations faster, better and cheaper, thereby freeing up time and money for more strategic activities. Instead, IT project failures consume corporate IT managers, eating up their time, energy and thin budgets. But why? Is it the technology? No, not usually. Is it the complexity? Maybe. Or is it something else that has been eluding tens of thousands of IT managers for decades? For me, the reason is simple: The IT industry does not provide a systematic way to hire and train IT consultants with the right technical skills and the right soft, or customer-service, skills, nor does it provide an effective system to monitor and manage the consultants once onsite and on the job. Think of it this way. You wouldn’t want a newly minted doctor performing complex brain surgery on you without years of specialized training, internships, residencies, shadowing and certifications. Similarly, you wouldn’t want a newly licensed pilot flying your transcontinental flight on his first day on the job. Why should enterprise IT projects be any different? After all, these are the same systems that run our businesses, pay our employees, manage our customer service and allow us to buy a book from Amazon specially selected just for us because it’s been meticulously tracking our purchases for years. So, we started to think: What if we could create that kind of system for the IT projects we were delivering? What if we could start from scratch, envisioning the perfect customer service 34 American Management Association MWORLD WINTER 2013-14 experience from start to finish? Or, what if we scripted the entire IT services project like a movie? SOMETIMES CRAZY WORKS It sounded crazy. But, sometimes, crazy works. What if we could capture customer-service bottlenecks and turn them into lather-rinse-repeat solutions? After all, we were already having some success. But now it was time to ramp it up. So, we brought field consultants back into the office and asked them the Sally question: “If you could design the perfect IT project from the customer’s point of view, what would it look like?” And, our staff was brilliant. They described almost every step of the project—before, during and after the engagement. They detailed what it would look like, what we would do and how we would do it, even down to providing a script for what to say when speaking to the customer. We had checklists for before the project with deliverables, standards and scripts, as well as the first day of the project, during which we often uncovered and solved many of the problems that could arise in the days or weeks to come. We scripted out how to travel to a customer site, how to inform a customer when we would arrive and what we would be doing first, second and third. We even scripted what to say to the customer when problems did arise in a way that put customers at ease, built their confidence and alleviated any escalations of concern. We wrote it all down and created a team manual, almost like a movie script, for what we hoped would be the equivalent of the Academy Award for best customer service. The work we did together was transformational. The script we devised to deliver outstanding customer service every time to every customer gave us the basis and confidence to expand the team and grow our business. But here’s the coolest thing about it all. It turns out that when we got maniacally focused on delivering outstanding customer service, our quality went up, and our costs went down. Could something like this work in your business? Yes, by going above and beyond good customer service. Determine how can you involve everyone on your team to share the goal of making elation of your customers the highest priority? After all, we found that our people, when asked, knew just what to do. And I’ll bet your folks know just what to do for you, and for your customers too. MW Steve Satterwhite is founder and CEO of Entelligence IT and the author of Above the Line: How the Golden Rule Rules the Bottom Line. You can find him online at www.stevesatterwhite.me or email him directly: email@example.com Customer-service excellence will give you the competitive advantage you need to survive in a tough and increasingly uncertain business climate. Attend AMA’s seminar “Customer Service Excellence: How to Win and Keep Customers” and learn the people skills you need for personal and organizational success. How you handle your customers can determine how you affect your individual goals as well as your team’s and organization’s performance. Visit www.amanet/5165 MWORLD WINTER 2013-14 American Management Association 35 How Millennials Will Rewrite the BY BRAD KARSH AND COURTNEY TEMPLIN Millennials bring to the workplace principles that fly in the face of the “way business has always been done.” Our team at JB Training Solutions interviewed and talked with hundreds of millennials, and we work with thousands of millennials every year. In our conversations, we heard a few themes that rang true for the majority of them. For example, for millennial managers, work isn’t just work—it’s an extension of themselves. If you are a millennial, you know what I mean. As a start, to make your mark, you are pushing for more collaboration, more technology, more fun and more flexibility at work. Your values and principles will steer you, and you will bring these attributes to your management role to build a great team, solid relationships and a rewarding environment. The main characteristics that will define your management style are collaborative, flexible, transparent, casual and balanced. These concepts will drive your decisions, and they truly set your generation apart as managers. Let’s consider these values and how you can use them to propel your path toward senior leadership. COLLABORATIVE: We're in This Together When interviewing millennial managers, we heard time and time again that you enjoy working together. Millennial managers want to like the people on their teams—and they want the people on their teams to like them as managers. “If I’m spending 8 to 10 hours with someone every day, I want to get along with that person,” said one millennial. Millennial managers enjoy hearing the opinions of their teams and working together to solve problems. It’s about the partnership, collaboration and relationships. You value relationships, and one of the things you take pride in is being able to build a relationship with your employees. Many millennial managers don’t even like to call their direct reports their reports or subordinates because they want everyone to feel like equals. In our interviews, millennials said that they dislike when their managers bark at them, so they want to make sure they’re not doing that with their team members. You like when your manager listens to your ideas and asks for your opinion, so you, in turn, want to provide that for your team. You appreciate when you have a voice, so you choose to give one to your team. You aim for everyone to feel like they have a say and a part. This is in sharp contrast to the “command-and-control” management style of previous generations. 36 American Management Association MWORLD WINTER 2013-14 RULES OF MANAGEMENT “Building a relationship” with your team is one of the accomplishments millennial managers are most proud of. You take the time to get to know your employees and share advice, and you give everyone a voice. No one is better than anyone else, including yourself—the leader. For millennials, the social and collaborative piece is one of the most rewarding aspects of work. Why work on something alone when you can have partners pooling ideas and resources? FLEXIBLE: Open to How the Job Gets Done Besides collaboration, millennials crave flexibility for themselves, and they are willing to give flexibility to employees. When talking with millennial managers, they stressed the importance of flexibility not only in work schedules but also in what work is done and how it gets done. You know that work can’t be confined to 9:00 AM to 5:00 PM, so you’re less concerned about the “where” or the “when” and more concerned about the quality of the final deliverable. Maybe an individual works better later in the day, or has personal appointments or works from home because of a long commute. Millennial managers are very open to these ideas. With technological advancements, you can tune in to the office anytime or anywhere. If a millennial needs to leave early on Friday, he can just finish up his project Sunday evening. Millennials question, “If they know what the deliverables are, why should I regulate how they work best?” As employees, millennials value flexibility, and they will instill this culture as managers. Trust goes hand in hand with this idea of flexibility, and millennial managers, as a generalization, are a trusting group. You believe that people will do what they say they will do, and you trust that employees are bright and committed enough to get the job done. Millennials are also flexible in their management style—they can decide as they go along. Since your lives are always changing, you can “roll with the punches” as change hits your team and work environment. This adaptability seems to be ingrained in your “hard drive” and makes you more nimble and open to change. Millennial managers are bringing trust paired with flexibility to their role. Again, these are two key attributes that foster highly engaged employees. This open mind toward flexibility will help millennials thrive and excel in a more diverse and virtual workplace and global economy. MWORLD WINTER 2013-14 American Management Association 37 TRANSPARENT: Being in the Know “What you see is what you get.” The millennial manager is more transparent than managers in previous generations. Millennials say, "If you want my team to be part of the solution, then I think they deserve to know the full story.” Millennials ask, “Wouldn’t it help people make better decisions if they could see the whole picture?” They want companies and leaders to be transparent in their strategies and values; according to millennials, it helps build trust and respect. A millennial manager who supervised 20 employees shared how she became more transparent as a manager and how that aided in her team’s growth. She stated, “I think when I first stepped into the management role, I wasn’t transparent enough because I was learning a lot of both roles. Now that I know what’s going on, I like to relay business decisions that I think will be beneficial for them to know from a growth standpoint. Obviously, there’s some confidentiality, but I do try to share information that I can with them, even if it’s not directly related to their role.” CASUAL: Just Be Yourself Some people may find wearing jeans or hoodies disrespectful, but millennials hardly think twice about it. Millennials have a tough time understanding how attire affects the ideas coming from their heads or how it hinders getting their work done. Think about college. If you showed up to take an exam in pink pajama pants, did it affect your grade on the test? No way. Millennials carry this perspective to the workplace, where they want to hang on to their individuality and self-expression. Millennials are much more casual in the way that they do business. Business is conducted much more casually, and ideas and strategies can come from anywhere. BALANCED: Successful at Life as a Whole “Work/life balance was always the elephant in the room. The reality is that now we are talking about it and expect it,” says a millennial manager. Rare is the millennial who jumps at the opportunity to work from 8:00 AM to 8:00 PM. In our interviews with millennial managers, we often heard that millennials want to succeed at work and outside of work. One manager said that she wanted her legacy as a manager to be that she was “successful at life”—not just that she was an amazing manager. MW Brad Karsh is president and founder of JB Training Solutions, a company focused on helping professionals achieve more in their careers. A workplace and generational expert, he appears regularly on CNN and has been quoted in dozens of business articles. Courtney Templin, a millennial manager herself, is chief operating officer at JB Training Solutions and sits on the board of the Society for Human Resource Management. Excerpted, with permission of the publisher, from Manager 3.0: A Millennial's Guide to Rewriting the Rules of Management by Brad Karsh and Courtney Templin. Copyright 2013, Brad Karsh and Courtney Templin. Published by AMACOM. For more information, visit www.amacombooks.org If you understand the climate of your organization and how to effectively navigate it, you will improve your ability to communicate, collaborate and approach others. At AMA’s “A Millennial’s Guide to Thriving in a Multigenerational Workplace,” you will learn how to adjust your style to develop an effective online and offline personal brand and relate better to your manager and staff. To find out more, visit www.amanet.org/2002 38 American Management Association MWORLD WINTER 2013-14 Why Companies IGNORE Billion-Dollar Category Creation BY EDDIE YOON AND STEVE CARLOTTI There’s an old joke about two economists walking down the street: One sees a $20 bill lying on the sidewalk and points it out; the other person, a believer in efficient markets, says, “That’s impossible. If it was really there, someone would have already picked it up.” But what if we told you there was a billion dollars on the sidewalk in front of you? Many of our clients are tasked with finding the next billion-dollar opportunity. In fact, one client recently described the despair he felt when he finished his long-range planning and realized he was one billion dollars short. Few clients believe it’s really possible to find an incremental billion dollars. And the few who do believe it, don’t know how to do it. TABLE 1— CATEGORY CREATION DEFINED CATEGORY CREATION DEFINED Breakthrough Product Innovation Benefit Breakthrough BusinessModel Innovation Manufacturing “How you make it”— a new/better way with lower cost and/or higher benefit Product delivers new or a much higher level of current benefits Brand A new brand with powerful equity that fills a key unmet need Distribution “How you move it”— a better go-to-market with lower cost and/or greater benefit Experience Shopping or using the product is much better fun-to-chore ratio Marketing “How you market it”— a better marketing model with higher ROI and impact Price Distinct pricing (higher, lower or different) that is a benefit itself Profit “How you profit from it”— distinct and/or multiple streams of profit not the norm MWORLD WINTER 2013-14 American Management Association 39 CATEGORY CREATION ECONOMICS TABLE 2— CATEGORY-CREATION ECONOMICS Incremental Revenue and Market Capitalization Growth from 2009 to 2011 Among Fortune's Top 100 List 100% 100% 100% We believe latent billion-dollar opportunities exist for many companies. The best way to find them is through a growth strategy we call category creation. We define category creation as the combination of breakthrough product 13% and breakthrough business-model 53% innovation (Table 1). Most companies 74% tend to pursue one or the other but rarely both. Yet, having both is critical. All Others 87% Breakthrough product innovation 47% 26% creates value, while a breakthrough business model ensures you can Incremental Share of Incremental Market Companies Revenue capture and protect that value. Further, Capitalization Growth category creation does not necessarily Growth mean you were the category inventor. You don’t have to be first, but you must be the most successful at commercializing product and business-model innovation. Category Creator Category creation can be very lucrative. Our analysis of Fortune’s 100 Fastest-Growing Companies lists from 2009 through 2011 showed that one in seven of these companies was instrumental in creating its category, not just in competing in existing categories (Table 2). While category creators make up only 13% of the fastest-growing companies, they account for 53% of the incremental revenue accrued between 2009 and 2011 and approximately 74% of the incremental market capitalization growth of the entire list. Given the economics and evidence of success, why aren’t more companies pursuing category creation? After all, they have the resources, capabilities and growth expectations to drive it. We asked several senior executives why their organizations don’t pursue category creation more often. All were intrigued by the concept, but we heard a few common (and incorrect) presumptions that created barriers to category creation. “ISN’T THIS ONLY FOR STARTUPS?” The first presumption is that category creation is not for them. Often, executives presume it falls into the realm of entrepreneurs. While technology is certainly an enabler of category creation, it is not an exclusive requirement. In fact, Sara Blakely (founder of Spanx) and Kevin Plank (CEO and founder of Under Armour, Inc.) both created new categories with billiondollar brands by effectively reinventing underwear (Table 3). Category creation is not only for entrepreneurs and startups. Notably, some of the largest companies in the world are well known for category creation. Procter & Gamble has a long list of breakthrough products (including Swiffer) and is extending well-known brands like Tide and Mr. Clean into new business models, such as dry cleaning and car washes, respectively. In fact, CEO Bob McDonald acknowledged the importance of category creation in helping P&G drive growth in 2012, saying, “We haven’t created a new category or a meaningful new brand in a while.” 40 American Management Association MWORLD WINTER 2013-14 TABLES: COURTESY OF EDDIE YOON AND STEVE CARLOTTI TABLE 3— UNDER ARMOUR EXAMPLE UNDER ARMOUR EXAMPLE Breakthrough Product Innovation Benefit Compression technology aids in athletic performance/recovery Breakthrough BusinessModel Innovation Manufacturing “How you make it”— a new/better way with lower cost and/or higher benefit Brand Credibility from NCAA D1 football plus key celebrity endorsements Distribution Mixture of direct sales, traditional retail and own stores Experience Snug fit said it was working, plus it provided fashion as well Marketing Word of mouth and strategic sampling of pro athletes drove the brand early Price 15x higher vs. normal undershirts, which also provided badge value Profit Traditional manufacturing and retail profit model “IS THE OPPORTUNITY REALLY THERE?” A common CEO lament combines the deep desire to create categories with the frustration that the fact base isn’t strong enough to pursue it. Ironically, the consumer insights departments would like to be given the chance to build the fact base. Large companies typically have very large budgets for insights, so resources aren’t typically the issue. Insight groups simply haven’t been asked to help create new categories. A 2009 Boston Consulting Group (BCG) study of market research budgets found only 20% to 35% of budgets are spent on strategic, forwardlooking studies. We believe this ratio should be at least 50%. Most large companies’ insight groups are overtaxed by little initiatives instead of a few big issues. In most cases, however, the issue is that companies don’t see potential because they haven’t looked. “IT’S TOO RISKY AND EXPENSIVE.” Perhaps the most prevalent presumption is that creating a new category is expensive. One executive framed category creation as spending millions of dollars on what seemed like a speculative investment. However, the biggest part of the investment in category creation is often marketing, which can be mitigated by finding a way to turn it into a variable, scalable cost instead of a fixed, one-time cost. As one consumer packaged goods (CPG) leader once said, “Traditional thinking in growth strategy is expensive. You develop a big product and spend big dollars marketing it. Our experience in Asia is that you have to be more entrepreneurial in marketing. And if you can do that, the category creation is much less daunting and risky.” Sampling is a great example. If you have a breakthrough product, sampling can be a very effective way to create a new category. For instance, Spanx and Under Armour undertook sampling as a way of creating a new category. Other category creators find ways to facilitate and fuel word-of-mouth marketing. Evangelism is a telltale sign of category creation. Distribution and marketing companies like House Party are great examples of how to leverage evangelists and word of mouth. This is where social media can be extraordinarily powerful, generating valuable, earned media, rather than just paid media. MWORLD WINTER 2013-14 American Management Association 41 WHAT LARGE COMPANIES CAN DO The first part of the solution is to build the category creation fact base. Change the scope of your consumer insight function by swapping out a list of less-important questions for a few, larger ones. Create cross-functional teams to answer these three strategic, forward-looking questions that are fundamental to category creation: 1. What is the emerging/latent demand for benefits from the products and business models that would make my most profitable consumers willing to pay twice what they pay now? 2. What categories do I compete with today… and tomorrow? What breakthrough product and business-model innovation can I steal from them? 3. What needs to be true for us to launch a local pilot for category creation? a. Characteristics of a local pilot b. Maximum investment levels c. Minimum time horizon d. Economic and strategic success factors We have seen companies do this with no incremental budget impact by simply taking many smaller, tactical studies into a larger, more strategic study. The second part is to tackle the organization barrier. One CEO said, “I’d love to do this, but my team is running my current profit and loss. My innovation and mergers and acquisitions head is looking for new products within my current categories. Whom can I give this to?” One approach is to focus category-creation efforts outside the confines of the existing organization, at least initially. Companies can make it an elite opportunity, offering it only to the “best of the best” across marketing, sales, finance, operations and insight teams for 6 to 12 months. Bring in not just your stars, but also leaders who aren’t afraid to buck the system. Clear their plates and back-fill their jobs so they can focus. Bring in select outsiders along the way for some new thinking. Provide full funding for research, travel and whatever they need, and give them the clear goal of category creation and strategic learning for the company. The goal should not necessarily be to create a new category but to move the ball forward. Give them a chance to present their findings to the highest audience without diluting it along the way. This is the process by which GE Healthcare was able to create an ultraportable, lowcost, easy-to-use ultrasound machine in China. The second approach is to change the company itself. Former Gillette CEO Jim Kilts and his head of strategy, Peter Klein, expanded the definition and scope of innovation beyond new products, all the way to new cost-cutting approaches and new business models, calling it Total Innovation. If you’re still uncertain, then ask yourself this: If we told you one billion dollars was lying at your feet, wouldn’t you at least try to pick it up? MW Eddie Yoon is a principal and Steve Carlotti is the CEO of The Cambridge Group, a growth-strategy consulting firm in Chicago. Mastering creative thinking techniques will enable your team to generate not only more ideas for new products but also successful ones. At AMA’s workshop “Creativity and Innovation: Unleash Your Potential for Greater Success,” you will receive a blueprint for establishing a climate of innovation and, with its help, unleash the creative potential in yourself and your team. Visit www.amanet.org/2208 42 American Management Association MWORLD WINTER 2013-14 NICE GUYS DON’T ALWAYS FINISH LAST: Empathetic Leaders BY WILLIAM SCHULZ III, PhD Outperform Others When Culture Allows The stereotype of the hard-charging, insensitive boss who climbs to the top by squashing those in his way reinforces the cliché that nice guys finish last. Yet research is beginning to show what members of healthy organizations already know—that managers who are likable and have the ability to empathize with their subordinates are among the most effective leaders. In fact, organizations that have an abundance of empathetic leaders tend to outperform competitors that do not. However, the ability to be an empathetic leader does not occur in a vacuum. It can be either hindered or fostered by the organizational setting. And, in an age of globalization, the cultural context of a country also can make a difference. Therefore, adopting empathy as a leadership mode and using it successfully is about more than knowing how to connect with other employees in a supportive manner. It also requires recognizing which behaviors are valued within the organization or country where you operate so that you can determine the most effective path to leadership success. AUTHORITARIAN LEADERSHIP: Do as I Say Bosses tell people what to do. That’s the traditional, top-down, directive approach to management that many think of when asked how companies or organizations are run. It is a familiar model in countries as diverse as China, where relationships are viewed as inherently hierarchical; France, where managers are expected to be highly educated, intellectual leaders; and South Africa, where authoritarian direction is ingrained. In the United States, the authoritarian style of leadership can be seen at companies such as Martha MWORLD WINTER 2013-14 American Management Association 43 Stewart Living Omnimedia, Inc., and The Trump Organization LLC, where their founders are famous for tightly controlling all details. What may appear purely authoritarian from the outside is not always the case on closer examination. The military has a strong hierarchy in place. However, West Point’s expert on leadership recently made it clear that operating by authority alone is not the formula for success: “Transactional leadership, which relies purely on formal authority, only works for a short time and achieves diminished results. Assuming people will do as you command just because you say so is a cowardly indicator of incompetence. This ultimately cheats the organization by achieving the minimum.” —Colonel Eric Kail Course Director of Military Leadership, U.S. Military Academy at West Point EMPATHETIC LEADERSHIP: Relationships Matter In recognizing that authoritarian leadership only gets an organization so far, Colonel Kail echoed what researchers are finding out about the most successful models of leadership. The authors of How to Be Exceptional: Drive Leadership Success by Magnifying Your Strengths analyzed the behaviors and associated outcomes of more than 51,000 leaders. They found that the effectiveness of one’s immediate supervisor is the single most important variable in predicting levels of employee satisfaction, engagement and commitment. They also found that a leader’s effectiveness is strongly related to that person’s ability to “connect” with the people for whom he or she is responsible. This makes sense because, as research in quality management and strategic human resource management shows, employees who are engaged and share a sense of collective purpose do a better job of taking care of customers and other important relationships that affect business performance. In many countries, the culture supports a less authoritarian style of management. Leadership that emphasizes engaging employees is the standard in Australia, where managers strive to be “one of the gang,” while a collective sense of purpose is evident in Japan, where managers are expected to facilitate the bottom-up flow of information. Increasingly, U.S. companies are moving away from authoritarian management styles. Those that are known for engaging employees include Southwest Airlines, where employees are encouraged to step outside the box to serve the best interests of customers, and Google, where engineers are allowed to devote work hours to projects they create and own. ORGANIZATIONAL SUPPORT FOR EMPATHETIC LEADERS Individual relationships can only be effective long term if the culture of an organization is healthy. Thus, over time, leaders who are responsive to the needs of their employees and who are both likable and empathetic can’t survive in an organization where such behaviors are not valued. This is where the roles and behaviors of executive leaders and members of the board of directors (who are responsible for senior leaders) become critical. Senior leaders are responsible not just for their own relationships with direct reports. They are also responsible for all of the relationships in the organization through their roles as the architects and keepers of organizational culture expectations. 44 American Management Association MWORLD WINTER 2013-14 In the end, it is senior leadership that is responsible for maintaining an organization’s “institutional competence” and general health—which are the fundamental precursors to sustainable financial success. WHY ORGANIZATIONAL HEALTH IS IMPORTANT The idea of organizational success relying on a healthy culture is not new. In 1957, Philip Selznick wrote Leadership in Administration: A Sociological Interpretation, in which he proposed a general theory of how and why organizations transform themselves from expendable tools “into institutions or social organisms that are infused with value and possess character.” For Selznick, an organization’s institutional competence reflects its ability to adequately build a unique, viable, healthy “organizational personality” that is neither easily imitated nor destroyed. It also enables an institution to establish credibility that can add value to both its internal and external stakeholders in the face of continuous pressures. BECOMING AN EMPATHETIC LEADER The basic story here is that if authentic two-way relationships are allowed to develop within an organization—founded on trust, shared values, and a commitment to the organization’s vision—such an organization is likely to thrive in difficult times and dominate in good times. What can you do to foster such behaviors and relationships, no matter at which level of the organization you reside: ៑ Increase positive emotional connections with others ៑ Display rock-solid integrity ៑ Cooperate with others ៑ Be a coach, mentor and teacher ៑ Be visionary and future-focused ៑ Ask for feedback and make an effort to change Bruna Martinuzzi, who wrote The Leader as a Mensch: Become the Kind of Person Others Want to Follow, suggests the following to enhance your ability to understand and identify another’s situation: ៑ Listen—truly listen to people ៑ Don’t interrupt people ៑ Tune in to nonverbal communication ៑ Be fully present when you are with people ៑ Encourage people, especially the quiet ones ៑ Give genuine and authentic praise ៑ Take a personal interest in people If you work within an organizational or national culture that does not value these kinds of behaviors, then beware—context always matters. MW William C. Schulz III, PhD, is a faculty member at Walden University’s School of Management. He specializes in strategic management, entrepreneurship, workforce development and building leadership capacity. Dr. Schulz has served as the secretary of the Institute for Behavioral and Applied Management and is a former chair of the Entrepreneurship Education Division of the United States Association of Small Business and Entrepreneurship. MWORLD WINTER 2013-14 American Management Association 45 OWN THE ROOM: Shape Your BY MURIEL MAIGNAN WILKINS AND AMY JEN SU Without a doubt, high-potential professionals are set apart not just by technical skills and a results orientation, but by their leadership presence. Next-generation leaders are often told to work on their presence, and they are sent to training sessions or provided with a coach. But are these enough? While one-on-one work with a highpotential might move the needle on his or her presence, there is tremendous opportunity to foster change by approaching leadership presence as an enterprise issue rather than just an individual challenge. Take Wiljen Co. as an example (the name of the actual company in question has been changed to protect the organization’s privacy). After working with a number of individual leaders at Wiljen, everyone observed that while each was making strides in developing individual presence, the impact at the organizational level was not being felt. Feedback on presence was not talked about openly. The deeply engrained belief that you had to look and act a certain way to have effective presence stifled the aspirations of talented individuals who felt they did not fit the mold. The long-rooted passive-aggressive culture of the organization was not changing. In fact, it was exacerbated by the behaviors of individuals at the top. IDENTIFY THE MYTHS ABOUT PRESENCE The way key people in organizations often talk about presence is counterproductive or even damaging. Three myths about leadership presence that misdirect leaders are often perpetuated by their organizations. As with most myths, they are passed down to subsequent generations. However, even if you do not have the power to challenge an entrenched company’s culture, you can set an example for others and use appropriate platforms to convey the importance of leadership presence. In this way, you can alter the discussion. Start by identifying the three most common myths that organizations perpetuate about leadership presence. MYTH #1: You Are Who You Are The most pernicious myth says: “Presence is something that you either have or you don’t. You are born with it.” For an aspiring leader, these words are stifling at best. Yet we’ve heard this statement over and over from our clients, their bosses, and even heads of talent management. In reality, there are no exclusive rights to presence. It is not just for those who are gregarious or “larger than life.” 46 American Management Association MWORLD WINTER 2013-14 Organization’s Conversation About Presence MYTH #2: One Size Fits All This myth is the opposite of the first but just as pernicious and also perpetuated within organizations. This belief holds that to have effective presence and receive a promotion or earn a reward, you must look and act in a certain way (usually like the person at the helm). MYTH #3: If It Ain’t Broke, Don’t Fix It Companies are notorious for letting individuals fend for themselves when it comes to figuring out what leadership presence they will need as they move forward. Underlying this is the myth that if you’ve established your solid presence in your current role, you’ll sail through the transitions ahead. Not true. DEBUNK THE MYTHS ABOUT PRESENCE Once leaders understand the most common myths that organizations perpetuate about leadership presence, many are inspired to challenge the myths and proactively influence the organization’s culture. Many opportunities exist for leaders to help reshape the conversation. Emphasize that presence is something anyone can build. Reinforce that presence isn’t something available only to a select few. Building bench strength begins with an open mind about what’s possible for the individuals in the organization. Don’t assume—or let others presume— that because someone hasn’t fully tapped into her leadership presence, she can’t build it. Don’t let others deﬁne presence solely as an issue of appearance or communication style. Leadership presence is a function of three things: mindset, communication skill and physical energy. Create a common language. Organizations need a common language for discussing presence that turns subjective observations into observable and meaningful actions. What has resonated with the organizations we’ve worked with is that presence is the ability to consistently and clearly articulate your value proposition while positively influencing others. Leaders with presence have a “signature voice” that enables them to be authentic, while connecting with and impacting others. MW Muriel Maignan Wilkins and Amy Jen Su are cofounders of Isis Associates, an executive coaching and leadership consulting firm. They are also coauthors of Own The Room: Developing Your Signature Voice to Master Your Leadership Presence (Harvard Business Review Press). Visit www.isisassociates.com or email firstname.lastname@example.org Leadership communication goes hand in hand with success—and the effective application of this skill is particularly essential in an uncertain economy where painful business decisions are made daily. No matter how compelling the vision or how brilliant the strategy, you need strong communication skills to shape your leadership messages, hone an authentic leadership voice, and engage in powerful conversations that achieve results. To gain these skills, register for The Voice of Leadership: How Leaders Inspire, Influence and Achieve Results, www.amanet.org/2130 MWORLD WINTER 2013-14 American Management Association 47 OUR VIEW Together We Can Do So Much Why did we choose collaboration as the theme for this issue of MWorld? It has always been important within a company. But increasingly, our global village is bringing all of us closer together every day, connecting us across time zones, through space and time, via a growing web of technologies. Twitter, Wikipedia, YouTube, Yelp, Trip Advisor and other tools allow us to share information instantaneously with a seemingly unlimited number of people. We’re connected—for better or worse. One dissatisfied customer who experiences subpar service or a bad meal can send out a message that will reach literally millions of people in a moment. Of course, we’ve learned not everything on the Internet is true. As the old proverb goes, “A lie can travel halfway around the world while the truth is putting on its shoes.” The plus side is the opportunities for knowledge sharing that technology provides us. That’s where collaboration comes in. In this issue of MWorld, Eric Lowitt writes: “Collaboration is a way to make something bigger happen than can be accomplished solely through the assets you command and control.” In other words, as the saying goes, “None of us is as smart as all of us.” As I read the many perspectives on collaboration in this issue, I realized that in a nutshell, collaboration is the basic raison d’être for AMA: We bring together a diverse group of people with real experiences so they can share and learn from each other. Our seminar participants collaborate not just with our expert faculty, but just as importantly, with their peers: managers and executives like themselves, who have dealt with the same challenges they face. Together, they create viable solutions that they can take back to their organizations to make immediate improvements. In her MWorld article, “Building a Collaborative Organization,” Tamara J. Erickson discusses two current “hot topics”—communication and leadership—that are integral to collaboration. She writes, “Our ability to collaborate is fundamentally tied to our ability to communicate.” At AMA, we constantly evolve to cover the specific skills our customers need in order to succeed in today’s workplace. Not surprisingly, our seminar “How to Communicate with Diplomacy, Tact and Credibility” is now one of our most popular. Erickson also talks about the need to foster a capacity for collaboration within an organization, a skill set we address in our portfolio of leadership offerings, including “Collaborative Leadership Skills for Managers.” All this talk about collaboration reminds me of a wonderful quotation from Helen Keller: “Alone we can do so little; together we can do so much.” As we look ahead to the opportunities and challenges of a new year, we look forward to working together with our members, customers, course developers and leaders, and employees to achieve great things: for individuals, organizations and the world. Robert G. Smith Senior Vice President Marketing & Membership American Management Association 48 American Management Association MWORLD WINTER 2013-14 UNLEASH MINDS. ACHIEVE RESULTS. Talent is as critical as technology for businesses today. But how do you identify, motivate, and grow the talent your company needs to thrive? AMA Enterpriseâ€™s Talent Transformation process has the power to unleash hidden potential and boost performance, backed by the resources of American Management Association. Find out how we can help you engage, connect, share, and challenge your talentâ€”so your organization can reach even greater levels of success. For more information, please contact info @ amaenterprise.org or call 1-877-880-0264. 600 AMA Way Saranac Lake, NY 12983-5534 Priority Code # Nonproﬁt U.S. Postage Paid American Management Association International FOLLOW US Facebook Twitter LinkedIn Stay current for FREE with AMA Sign up for a My AMA Account and get instant access to AMA’s free professional development resources. Webcasts AMA Webcasts are free, informational programs addressing key management practices, research findings, business strategies, and market trends. Each 60-minute program brings you immediate and relevant business content right on your own computer. Podcasts AMA Edgewise podcast programs are thought leadership-focused. Every two weeks a new podcast is available via iTunes and the AMA website. eNewsletters AMA’s free monthly eNewsletters provide you with the innovative strategies, insights, and solutions you need to stay competitive. • Moving Ahead offers management insights, strategies and best practices for all business professionals. • Leader’s Edge connects senior management with today’s top thought leaders. • Administrative Excellence addresses the specific career development needs and interests of administrative staff. Sign Up Today! www.amanet.org/signup