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The Journal of the American Management Association

Volume 11, Number 3

Fall 2012

A Look at Today’s Challenges for Leaders An Interview with Jim Kouzes and Barry Posner OTHER ARTICLES Moving from Risk to Reward Change—Don’t Fall Prey to “Too Little, Too Late” How to Build a Reputation for Innovation and Client Responsiveness Multiculturalism in the Multinational: Promotion and Retention in the Overseas Workplace Coping With Customer Conflicts Online Communicating with the Newly Empowered Public The Keys to Business Transformation Success Practices Jim Kouzes & Barry Posner

Good Communication Boosts Manufacturers’ Bottom Line Five Reasons Why You Can’t Ignore Gamification

COMMENTARY

TECH TALK

CHECKPOINT

OUR VIEW

Using Emotional Intelligence to Build Trust

Personal Transformation in the Experience Economy: An Interview with B. Joseph Pine II

Mitigating Supply Chain Risk in Uncertain Times— Murphy’s Law

The Balancing Act: Operational Stability and Innovative Development


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RLD

The Journal of the American Management Association

Volume 11, Number 3

FA L L 2012

A LOOK AT TODAY’S CHALLENGES FOR LEADERS An Interview with Jim Kouzes and Barry Posner. In the fifth edition of their breakthrough book The Leadership Challenge, the authors cast their enduring work in context for today’s world. PAGE 6

from Risk to Reward. People tend to head 42 9 Moving for the storm cellar to ride out fear, but the greater the risk aversion, the more likely they’ll remain in the storm cellar. By Howard M. Guttman.

Fall Prey to “Too Little, Too 14 Change—Don’t Late.” Heralding organizational change is all well and good, but how do you drive the day-to-day operation of the organization to reflect this value? By Nancy Fredericks.

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How to Build a Reputation for Innovation and Client Responsiveness. Hatch Mott MacDonald has earned a reputation for technical excellence, innovation, and client responsiveness. To sustain that reputation, the company provides two major training programs to ensure that its leaders and managers can continue to provide business excellence.

Multiculturalism in the Multinational: Promotion 26 and Retention in the Overseas Workplace. Companies must deal with the multicultural reality of their locale if they want to capture new markets. By Cedric Leighton.

With Customer Conflicts Online. You 29 Coping need to respond quickly to customer criticism online. By Micah Solomon.

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Communicating with the Newly Empowered Public. The public is more involved than ever. What can you do? You have two options. By Stacy Armijo.

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The Keys to Business Transformation Success Practices. We are encountering so much change. Could the next big thing be a revolt against so much change? Are people asking, “Will it finally stop?” By Barbara Shannon.

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Good Communication Boosts Manufacturers’ Bottom Line. Mishandling communication can cost a manufacturer, from missed orders, quality issues, and running out of material to increased scrap, absenteeism, misunderstanding customer need, and selling the wrong product. By Del Williams. MWORLD FALL 2012

American Management Association

Five Reasons Why You Can’t Ignore Gamification. That’s the next form of social media. By Whitney Cook.

2 FROM THE EDITOR Are You Bewitched, Bothered, and Bewildered by Change? 3 COMMENTARY Using Emotional Intelligence to Build Trust. Just as it is essential to establish trust in the marketplace, it is critical to establish and maintain trust in the workplace. By Casey Mulqueen, PhD.

13 FIRST PERSON Dan Hendrix Focuses on Eliminating Any Negative Environmental Footprint. An Interview with AMA. 17 TECH TALK Personal Transformation in the Experience Economy: An Interview with B. Joseph Pine II. David Summers interviews the author, speaker, and management advisor on how companies can add value to their economic offerings.

19 CHECKPOINT Mitigating Supply Chain Risk in Uncertain Times— Murphy’s Law. A distance-based supply chain carries a risk dependent on its length and diversity. By Thomas L. Tanel.

35 SOUNDINGS Five Ways U.S. Performance Management Practices Lag Behind Other Countries. By Donna Parrey. 45 TOP SHELF Add to Your Book Library: The Leader’s Pocket Guide by John Baldoni, Raising Capital by Andew J. Sherman, and The Power of Reputation by Chris Komisarjevsky. 48 OUR VIEW The Balancing Act: Operational Stability and Innovative Development. By Edward T. Reilly. 1


FROM THE EDITOR

Are You Bewitched, Bothered, and Bewildered by Change?

MWorld The Journal of the American Management Association

EDITOR

Florence M. Stone CREATIVE DIRECTOR

There are so many opportunities for companies that are open to change. In this issue of MWorld, we offer some of those available to organizations willing to take risks and reap the rewards, whether it is gamification, the latest benefits of social media (including changing customer-business relationships), or supply change management, all subjects covered in this issue. Not every organization is willing to take risks in implementing changes. As Howard M. Guttman says in his article Moving from Risk to Reward in this issue, “The last few years have been fasten-your-seatbelt times for today’s leaders. With financial instability in major markets, sluggish growth, brutish global competitive pressure, and consumer skittishness, there has been a tendency for executives to retreat to survival mode.” Guttman goes on to suggest that “powerful leadership is the best antidote to organizational fear.” He isn’t the only author who warns of “staying in our comfort zone.” Nancy Fredericks points out how “our highly competitive, global marketplace demands savvy leaders keeping the change engine of business on track.” Fredericks tells us, “Businesses that don’t want to be combating their own ‘too little, too late’ tribulations require leaders and a workforce who are comfortable with both maintaining a smooth running operation and welcoming and initiating change—not just for today, but for the future as well.” A willingness to act in the face of change is one of the many qualities of today’s leaders, as Jim Kouzes and Barry Posner point out in their interview with AMA. In other words, leaders need to be risk averse, which the authors highlight in the fifth edition of their book The Leadership Challenge. The book’s subtitle says it all: How to Make Extraordinary Things Happen in Organizations. For nearly a century, AMA has been dedicated to assisting organizations and individuals in developing the skills and best practices they need to make extraordinary things happen. AMA doesn’t believe that today’s managers should let change leave them Bewitched, Bothered, and Bewildered, as the Rodgers and Hart song says.

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, FALL 2012, Volume 11, Number 3. 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. We encourage submissions from prospective authors. For guidelines, write to The Editor, MWorld, 1601 Broadway, New York, NY 10019-7420 or email fstone@amanet.org. Unsolicited manuscripts will be returned only if accompanied by a selfaddressed, stamped envelope. Letters are encouraged. Mail: Letters, MWorld, 1601 Broadway, New York, NY 10019-7420; email: fstone@amanet.org. MWorld reserves the right to excerpt and edit letters. Names and addresses must accompany all submissions. Subscriptions. Executive and Individual Members of American Management Association receive MWorld as part of their annual dues, a nonrefundable $50 of which is allocated for the subscription to MWorld. Single copies are available at $25 plus shipping and handling. Requests should be sent to sgoldman@amanet.org Rights and permissions. ©2012, American Management Association. No part of this publication may be reproduced or transmitted in any form or by any means without written permission. Requests should be sent to Joe D’Amico, at jdamico@amanet.org Editorial Offices 1601 Broadway, New York, NY 10019-7420 Tel: 212-903-8075; Fax: 212-903-7948 Email: MWorld@amanet.org

Florence M. Stone Editor, MWorld 2

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.

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C O M M E N TA RY

Using Emotional Intelligence to Build Trust BY CASEY MULQUEEN, PhD

The concept of “the speed of trust” has become common business parlance. Steve Forbes calls trust the “bedrock of democratic capitalism.” When companies go to market with a product or service, they are actually competing for potential clients’ confidence in their expertise, their execution, or the exceptional nature of the offering. Once an organization has garnered a customer’s trust, and the client has confidence in the company, the emotional hurdle of selling has been cleared and that customer is much more likely to buy. Just as it is essential to establish trust in the marketplace, it is also critical to establish and maintain trust in the workplace. Employees who believe in their organization’s values, actions, and goals are more productive and tend to stay put. Research on trust bears this out: ᔢ There is a strong relationship between trust and job performance. It’s as strong as or stronger than relationships with other variables (e.g., job satisfaction and job performance). ᔢ There is also a strong relationship between trust and “affective commitment” (this refers to a person’s emotional commitment). This type of commitment predicts important factors such as absenteeism and turnover. ᔢ Trust in a person’s direct leader is particularly important, often more so than trust in the organization. Having trust in the direct leader is highly predictive of job performance, job satisfaction, and intent to leave the organization. ᔢ Trust in the leader helps people focus on team results. Individuals are willing to suspend personal doubts or apprehensions if they trust the leader, which helps commitment towards the team goals.

“People want their leaders to be honest, ethical, and competent.” MWORLD FALL 2012

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Without trust, the converse is true. In a company where trust is low, it’s only a matter of time until employees abandon ship, either by unwanted turnover or presenteeism: direct reports spend their time watching their backs, or grousing about leadership, rather than completing meaningful work. No one takes risks, and no one takes responsibility. The chance of innovating or meeting business goals is slim. Emotional Intelligence (EQ) has become more common in the workplace as businesses try to harness its promise of improved performance by individuals and teams. After two decades of research, multiple studies have shown that EQ abilities often account for the difference between star performers and average performers across a variety of industries and occupations, including sales and leadership. Emotional Intelligence initially focused on insight and awareness of oneself, and awareness of others’ emotions. The current emphasis is on taking such awareness and translating it into meaningful action. The goal is to understand and develop a small number of high-impact behavioral skills. These behavioral skills are the best predictors of job performance and success—and the skills that help develop trust. Think about EQ as behavioral skills related to oneself and to others: THE ROLE OF EMOTIONAL INTELLIGENCE IN BUILDING TRUST

Behavioral EQ Skills—Self

Self-control: the ability to control emotions and impulsive urges is an indicator of ability to stay composed and focused Stress Management: the ability to withstand pressure and regulate reactions Conscientiousness: the capacity to take personal responsibility for performance Optimism: the ability to maintain a positive perspective and achieve goals 3


C O M M E N TA RY

“Leaders should … share their vision in a personable way that connects the goals of the team to the work of the individual.” Behavioral EQ Skills—Others

Building Relationships: the ability to develop and maintain meaningful and positive relations with others Influencing Others: the ability to persuade others Motivating Others: the ability to motivate and guide others toward a vision or goal Flexibility: the ability to adapt to new circumstances and changing priorities Innovation: the capacity to generate novel ideas and be open to new information These behavioral EQ skills directly affect trust in both its forms: ᔢ Cognitive trust: actors such as reliability, consistency, and integrity that promote confidence in leaders ᔢ Affective or emotional trust: having a good relationship and showing interest and concern for someone engender this type of trust in leaders In order to earn both types of trust, it is incumbent upon leaders to manifest behavioral EQ skills regarding their own actions and in their interactions with others. Leaders must exercise self-control and conscientiousness, for instance, in order to meet their commitments and help their teams meet goals. In this way, leaders build a reputation for being reliable and consistent, which creates cognitive trust. Leaders must also work to establish relationships with their direct reports, which shows employees their leaders understand them, are aware of their interests and aspirations, and will support them within the organization. This creates affective trust. The genius of EQ—and the finding of most recent EQ research—is that leaders can practice one or two behaviors at a time. In this way their efforts are not scattered in many directions and they can consistently focus energy and attention on behaviors that have the greatest impact.

Some aspects of effective leadership, and of building trust, are universal. People want their leaders to be honest, ethical, and competent. RESULTS-BUILDING TRUST WITH PEOPLE OF DIFFERENT WORK STYLES

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But people respond to their leader’s behavior in somewhat different ways, depending on their personal work style, and this influences the trust they feel for a leader. There are four reliably distinct work styles, and each style has unique behavioral patterns and work orientation. Accordingly, the most effective way to build trust is to take individuals’ work styles into account. Below are strategies for interacting with each work style in such a way that trust naturally develops. Results-oriented people look to their leaders to be confident in their own abilities, and likewise to be competent in their performance. It is the nature of these people to place less emphasis on personal relationships, at least initially. So, leaders should focus on establishing cognitive trust with these individuals by showing competence. Because they are focused on results, these people want others to show commitment to achieving goals. They don’t like to waste time, so they want their leaders to be efficient, particularly when their own goals are directly affected by the leader’s efforts. They also want their leaders to be direct and to share their opinions in a straightforward way. They appreciate no-nonsense communication and efficiency from leaders. RESULTS-ORIENTED

Recognition-oriented people are highly sociable and seek attention. They value leaders who are open with their emotions, who show a sense of humor, and who are enthusiastic about their work. Affective trust is particularly important for them. Leaders should be energetic and show excitement about working and collaborating with them. This will directly appeal to their emotions and hence to their commitment. These people are also motivated by personal recognition, so leaders can strengthen their relationships by publicly acknowledging these individuals’ contributions. This helps them feel connected and valued by the leader, which is important for them to feel trust. RECOGNITION-ORIENTED

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C O M M E N TA RY

This style of person likes to form personal connections with others, so they appreciate when leaders make an effort to establish sincere relationships. Like Recognition-oriented people, they especially value affective trust. They look for leaders to be personable and team-oriented, and they want their leaders to have the team’s best interests in mind. They value open lines of communication, and it’s important that their leaders are genuine and sincere. If leaders will share something interesting or unique about themselves, it communicates that they are open and trusting and it will help these individuals to have confidence in the relationship. Leaders should also share their vision in a personable way that connects the goals of the team to the work of the individual. RELATIONSHIP-ORIENTED

These individuals prefer to work in an orderly and logical way. They are not focused on relationships initially, so it may take some time to get to know them personally. Similar to Results-oriented people, cognitive trust is important for them, especially early in a working relationship. Because they tend to be orderly in the way they do things, they will look for patterns and predictability in their leaders. They tend to control their emotions at work, so they appreciate straightforward and professional interactions. ACCURACY-ORIENTED

Leaders should approach them in a businesslike way, and work to build a solid relationship over time by helping them open up through seeking out their opinions or experiences in areas that are of particular interest to them. These individuals will have trust in leaders who provide visions that are ambitious but also grounded in reality. Trust cannot be mandated; it can only be earned. Leaders can gain trust by being consistent, competent, and by practicing EQ behaviors related to understanding others and building authentic relationships. This is best done by understanding different work styles. This tailored approach to working with others leads to employees’ support for the team’s efforts—and to meeting business goals, as employees who trust their managers are more engaged in their work, are more committed to staying with the organization, and are better performers. MW ACCURACY-TRUST TAKES WORK

Casey Mulqueen is director of research and product development for Tracom Group. AMA’s seminar Leading with Emotional Intelligence will help you apply emotional intelligence to manage and drive peak performance in your direct reports and team. For more information, visit www.amanet.org/2133

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COVER STORY

A Look at Today’s Challenges AN INTERVIEW WITH JIM KOUZES AND BARRY POSNER

The book The Leadership Challenge: How to Make Extraordinary Things Jim Kouzes & Barry Posner

Happen in Organizations is in its

fifth edition and has sold over 2 million copies in more than 20 languages. The book’s authors—Jim Kouzes and Barry Posner—have been researching leadership and developing leaders for more than 30 years. In their breakthrough book, originally published in 1987, they turned the abstract concept of leadership into something that can be readily understood and reliably taught. Although first published a quarter of a century ago, the book’s latest edition makes it freshly current for today’s leaders. MWorld was very fortunate to get Jim Kouzes and Barry Posner to lead off this issue. You write that you uncovered in your research five practices that are evident when leaders are performing at their personal best. What are those Five Practices of Exemplary Leadership? What evidence do you have about their importance today?

Model the Way: Leaders clarify values and set the example.

Inspire a Shared Vision: Leaders envision the future and enlist others in a common vision.

Challenge the Process: Leaders search for opportunities, and they experiment and take risks by constantly generating small wins and learning from experience. ៑ Enable Others to Act: Leaders foster collaboration and strengthen others. ៑ Encourage the Heart: Leaders recognize contributions and celebrate values and victories. We find in 2012 the same thing we found 25 years ago. Analyzing data from over 400,000 respondents who’ve completed the Leadership Practices Inventory in the last two years, we see that those leaders who more frequently demonstrate The Five Practices have groups that are ៑

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PHOTOS: COURTESY OF JIM KOUZES & BARRY POSNER

For over 25 years we’ve collected and analyzed thousands of “personal-best” stories—the experiences people recalled when asked to think of a peak leadership experience. Despite differences in the context of people’s individual stories, their personal-best leadership experiences reveal similar patterns of leadership behavior, which we call The Five Practices of Exemplary Leadership. When leaders are at their personal best, they:


for Leaders more engaged and higher performing than those leaders who engage in these practices less frequently. Simply put, the more you demonstrate The Five Practices, the more effective you are as a leader. In your book, you talk about how leaders model the way. How do leaders set an example? One of the most important findings in our research is that credibility is the foundation of leadership. And when we ask people to give us a behavioral definition of credibility—to tell us how they know a credible leader when they see one—they say that credibility means you do what you say you will do, or DWYSYWD for short. Setting the example is all about the “do” part. It’s about practicing what you preach. How do leaders inspire a shared vision? What role do staff aspirations play in this? If you’re going to enlist others in a common vision, you have to understand that it’s not just your vision that matters most. It’s the shared vision that makes the difference. You have to make sure that what you see is also something that others can see. To do that, you must engage in conversations about their hopes, dreams, and aspirations. You have to understand where they want to go, what motivates them, and what gives their lives meaning. In this sense, inspiring a shared vision is much more of an intimate dialogue than a rousing monologue. To successfully enlist others in a common vision, you also need to bring the vision to life. People must be able to see it, hear it, taste it, touch it, and feel it. In challenging existing processes, how do leaders generate small wins? Personal-best leadership experiences always involve some sort of challenge. They are often about radical departures from the past, doing things that have never been done before, and going to places not yet discovered. Sometimes leaders seek these challenges and other times the challenges find them, but whichever it is, exemplary leaders take the initiative to change the business-as-usual environment. When it comes to implementing change, particularly major change, exemplary leaders know they are not superhuman and able to leap tall buildings in a single bound. They realize that the best way to get things moving is to break things down into small, doable steps that get people to say to themselves, “Yes, I can do that.” How do leaders foster collaboration? Every single leader needs to be constantly mindful of the fact that nothing extraordinary ever gets done by the leader alone. Leadership is not a solo performance. It’s a team effort. Collaboration is a critical competency for achieving and sustaining high performance. And it’s even more important as organizations become more diverse and more global. Winning MWORLD FALL 2012

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But “we” can’t happen without trust. How do you build staff competence and encourage self-determination?

Constituent Work Attitudes and Engagement

Clarity of Leadership Philosophy

strategies will be based on a “We, not I” philosophy.

5.00 Low L ow

4.50

High H igh

4.00 3.50 3.00 2.50 2.00 1.50

an ag Tr em ust en t Ef fe Le ct ad iv e en r es s

M

M D ak iff i er ng en a ce

M ot iv at io n

Pr id e Co m m itm en t

Te am

Sp iri t

Long before empowerment was written 1.00 0.50 into the popular vocabulary, exemplary 0 leaders understood how important it was for their constituents to feel strong, capable, and efficacious. Constituents who feel weak, incompetent, and insignificant will consistently underperform; they want to flee the organization and are ripe for disenchantment, even revolution. So the key to enhancing self-determination, as paradoxical as it might sound, is to give your power away to others. You do that by providing your constituents with choices. The only way to create an efficient and effective organization is to give people the chance to use their best judgment in applying their knowledge and skills. You have written that being an exemplary leader is a matter of learning a set of skills and abilities. Can you share these with us? Our research has revealed that these skills and abilities cluster into five factors—The Five Practices of Exemplary Leadership that we’ve been discussing in this article. But regardless of what you call them, it’s clear that the fundamentals of leadership can be identified and learned. But here’s the rub. Although leadership can be learned, not everyone wants to learn it, and not all those who learn about leadership master it. Why? Because becoming the very best requires a strong desire to excel, a strong belief that new skills and abilities can be learned, and a willing devotion to deliberate practice, persistence, passion, and continuous learning. You don’t get to the Olympics of leadership in a day or two. You get there after years of daily practice. What are some of the current trends in leadership development that excite you and that you mention in your book? There’s a lot to be excited about, but two complementary trends in leadership development stand out right now. The first is a focus on application and the second is an increasing emphasis on practice. We’ve said for a very long time that leadership development is not simply a seminar or workshop. These experiences are very important, but they’re only initial steps to becoming a better leader. You have to follow up. You have to apply on the job the lessons you learn in the classroom. Research clearly shows that those who follow up are much more likely to improve than those who don’t. MW James Kouzes is the Dean’s Executive Fellow of Leadership, Leavey School of Business at Santa Clara University, and lectures on leadership around the world to corporations, governments, and nonprofits. Barry Posner is Accolti Professor of Leadership and former Dean of the Leavey School of Business, Santa Clara University. An accomplished scholar, he also provides leadership workshops and seminars around the world. Much of the content in this interview reflects material from The Leadership Challenge: How to Make Extraordinary Things Happen in Organizations.

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Moving from RISK to REWARD BY HOWARD M. GUTTMAN

Make no mistake, the last few years have been fasten-your-seatbelt times for today’s leaders. With financial instability in major markets, sluggish growth, brutal global competitive pressure, and consumer skittishness, there has been a tendency for executives to retreat to survival mode. A number of policy wonks have used the phrase “paradox of thrift” to describe consumer behavior during the current downturn. Rather than heading to the malls, consumers are running to banks to make deposits. The paradox: by conserving their assets until rainy days pass, they are prolonging the downpour. There is a parallel phenomenon in the corporate world. Let’s call it the “paradox of risk.” In today’s slowgrowth environment, people tend to head for the storm cellar to ride out events. They avoid risk, don’t press the envelope, and hesitate to challenge peers or—heaven forbid—the leader. Better to play it safe. Stay in your comfort zone. But it’s difficult to build a vibrant, successful organization on fear. The greater the risk aversion, the more likely you’ll remain in the storm cellar, and the more likely there will not be much left when you emerge. Powerful leadership is the best antidote to organizational fear. During times of turmoil, highperformance leaders are “no-fear” models. They think of themselves as warriors who ask themselves and those around them, “How do we exercise power over, rather than become victims of, circumstance?” MWORLD FALL 2012

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“Risk is a function of two factors: how likely something is to occur, and what the impact will be if it does.” We are working with a senior leader who recently assumed the top position over a multibillion-dollar division of a consumer goods company. The company, including this leader’s division, has been reorganized. He is a true warrior, and despite the tough times—or, rather, because of them—he is not just paddling through the status quo. He is carefully considering what needs to change in his unit, treating it as a blank slate and asking himself and members of his team: “If we were to improve operations, what would it look like? What’s going to move the enterprise forward?” This leader wants to be seen as a catalyst for change. It is the best way to motivate his people to think innovatively and take risks. Here are six ways for leaders to show up more powerfully and move away from the dread of risk to the promise of greater reward: Check the “stories.” Start by looking in the mirror and asking: “Am I leading from a safety/fear mentality or from one with a bias for action, which says, ‘I’m expected to lead and add value. Let’s move forward’”? Then check the stories of team members. Ask, “What preconceived notions are my team members—and those reporting to them—holding on to?” If they are hiding in the storm cellar, coach them to come out. Align performance. Many commentators view alignment in vertical terms, as a direct line of sight from the top team to shop floor and back-office personnel. This overlooks horizontal alignment. Today, much work gets done cross-functionally and interdependently, often in a matrix setting. High performance requires being aligned not only up and down, but across the organization. Challenge the status quo. It’s been said before, but it’s worth repeating: A crisis is a terrible thing to waste. In good times, it’s easy to tread water. Why rock the boat? But when the storm clouds gather, here’s your opportunity to make an impact. Ask the challenging strategic questions about the nature and direction of your organization, about your products, markets, structure, and capabilities. Is what got you and your organization here good enough to get you there? Optimize resources. High performers don’t operate from a scarcity mentality. They prefer to

hold themselves and their teams “large.” Look for ways to optimize resources, not just cut them. Ask, “How do we drive up performance and increase the yield from our human, capital, and financial resources? In what ways can we eliminate systems ‘noise,’ thereby reducing the hang time of decisions and redirecting conflict to productive confrontation?” Take calculated risks. As I mentioned previously, in times of turmoil high-performing leaders

are “no-fear” models. While others in your organization or your competitors may be risk averse, don’t follow their lead. Risk is an omnipresent fact of business life. Standing still is often the diciest option. Risk is a function of two factors: how likely something is to occur, and what the impact will be if it does. Calculate the risk, then decide. This way, you are operating rationally and not from fear. Measure results. Many fundraisers make visible a thermometer indicating how much money has been raised toward the stated goal. This not only helps keep track of performance, but it 10

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HIERARCHICAL ORGANIZATIONS

HORIZONTAL ORGANIZATIONS

TOP LEADER

CEO as Chief Executive

CEO as Chief Enabler

TOP TEAM

Confederation of functions

Union of owners

LEADERSHIP

Leader/followers

Leader/leader-player dynamic

BUSINESS TEAMS

Conflict averse, “me/my-oriented“ followers, hesitant to cross boundaries or call out poor performance

Fully engaged, “we”-focused function” high-performing players, guided by ground rules, adept at conflict management

LINE OF SIGHT

Strategically misaligned, given silo orientation

Strategically aligned from vision to operational objectives, from planning to decision making

DECISION MAKING

Positional model that delegates responsibility from the top down

Leveraged model that distributes responsibility across organization

ACCOUNTABILITY

Limited to accountability for own and subordinates’ results

Goes beyond own and subordinates’ accountability to include accountability for peers and leaders

CULTURE

Values getting along/going along

Values transparency and confrontation

OUTCOMES

Politics govern

Results rule

encourages contributors to dig deeper as the campaign nears the mark. The same holds true for organizations, especially in the current environment. What are the strategic indicators of success? What individual- and team-performance metrics should be set to mark operational achievement? This is a time to get everyone digging deeper for results.

FROM POWERFUL LEADERSHIP TO POWERFUL ORGANIZATIONS It takes much more than one individual leader, however powerful, to keep an organization afloat and moving forcefully ahead in tough and uncertain times. It takes a high-performing, horizontal organization to do so. Two years after taking over the reins of Life Technologies, a $3.6 billion global technology company with 10,000 employees, Mark Stevenson, president and CEO, faced a number of challenges, including driving out $50 million in manufacturing costs, better integration of four major divisions, going to a centralized manufacturing model to ensure greater consistency globally, and, more generally, ensuring that his organization was fully prepared to meet the challenges of operating in an economic downturn. Stevenson decided to move his organization, beginning with his leadership team, to the highperformance, horizontal model. As he explains, “I wanted members of the leadership team to move from operating as individual unit heads to operating as a unified, interdependent team: one whose members were aligned, were accountable for one another’s—and my—success, operated with clear protocols, and could put all the issues on the table and get them quickly resolved.” Transforming the leadership team took nine months. With this done, members of the MWORLD FALL 2012

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“By having a high-performing team, you can have those candid conversations about what reality is…. It’s easier as a team to set priorities and then align everyone about where to put energy and resources.” leadership team, at their own initiative, decided to have the process embedded in their respective teams. Said Stevenson, “It’s now integral to our four business units and the functions within them, such as our commercial and sales operations.” The results at Life Technology speak for themselves. As Stevenson observed, “We took out significant costs in the summer of 2011, but we were able to do this by cutting the areas that we, as a team, felt we could cut and still make our objectives for earnings growth for the year. We entered 2012 much stronger and are now better positioned for growth…. Financially, our firstquarter revenue and earnings grew and we exceeded external expectations.” And, in terms of the “soft” side, Stevenson reports: “By having a high-performing team, you can have those candid conversations about what reality is…. It’s easier as a team to set priorities and then align everyone about where to put energy and resources. The execution of the plan is much simpler and quicker with your team behind you to execute.” The high-performing, horizontal model that Stevenson mentions has been embraced by a growing list of companies, such as Johnson & Johnson, L’Oreal, Mars, Incorporated, and Novartis Pharmaceuticals, to bolster results and manage risk and reward. Compare the high-performing, horizontal model to the traditional hierarchical one to understand why it is a superior way to manage an enterprise, no matter the economic conditions: Powerful leaders in a high-performing, horizontal organization: While there are no guarantees, the combination is surely the best way to tamp down risk and deliver on the promise of greater rewards for key stakeholders. MW Howard M. Guttman is principal consultant, Guttman Development Strategies (www.guttmandev.com), a Mount Arlington, NJ-based management consulting firm specializing in building high-performing, horizontal organizations and teams. AMA’s seminar Developing Executive Leadership combines proven-in-action techniques with peer interaction and insights from the latest research to help you master the competencies of effective executive leadership. For more information, visit www.amanet.org/2501

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FIRST PERSON

Dan Hendrix Focuses on Eliminating Any Negative Environmental Footprint AN INTERVIEW WITH AMA

American Management Association met last winter with Dan Hendrix, president and CEO of Interface Incorporated, a $1 billion global manufacturer of modular commercial and residential carpet. Under Hendrix’s leadership, the company has created a viable global market for modular carpet, an operation that once was considered no more than a niche business. The company now leads with a 35% share of the market around the world. Hendrix’s mission is to ensure that each of the Interface business units is a high-performing asset. He told AMA, “Interface is a great place to work. I see myself as a steward focused on the company’s goal to eliminate any negative environmental footprint by the year 2020.” Hendrix’s remark relates to the shoes he now fills—those of Ray C. Anderson, the founder and chairman of Interface, who led the sustainability movement there. Anderson had had an epiphany: Mother Earth was in trouble, and Interface, as does all business and industry, has a responsibility to reduce the negative environmental impact of its operations, especially its petroleum dependency. Hendrix recalled, “It was 1994, and we were a typical brown company—take, make, and waste, using 90% petroleum-based raw materials.” Hendrix was chief financial officer, and, like many employees at the company, getting off of oil didn’t make any sense to him at first. But, he said, “There was a lot of innovative thinking happening around reducing waste, it allowed us to fund a lot of the sustainability ideas Anderson had. The company had its own R&D innovators, but it also went outside for some external perspectives, including partnering with suppliers. We started pecking away at reducing waste every way we could. Early wins engaged the shop floor and management team.” Hendrix might have had reservations early on but by October 2000 when his appointment at CEO was announced, he was committed to the company’s transformation, even though the company experienced its biggest market decline. The economic downturn was short-lived, however. “I decided,” he MWORLD FALL 2012

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told us, “to get out of all those businesses that weren’t really sustainable and focus on carpet Dan Hendrix tile—modular carpet. At that time, it represented 43% of the company’s business. Today, it represents 94% of the business.” In terms of innovations, the company increasingly goes outside to farm ideas. He said, “We are now moving more to an open architecture and we actually farm outside ideas because you can’t have a closed culture and really innovate. You might be one of the smartest guys around the block but there’s usually someone out there smarter than you are. Trust me.” Summing up Interface’s transformation once he became CEO, Hendrix said, “The big story in the whole transformation was the innovations that took place and the freedom we gave people to think out of the box. The biggest thing is showing them that you’re going to fund some of the ideas that are out of the box.” But equally important, Hendrix pointed out, was convincing the organization that he was as committed to the sustainability of the company as Ray Anderson, as chairman, had been. Hendrix even admitted that on one occasion Anderson had walked into his office and asked, “Are you going to dump sustainability?” Hendrix added, “I told him, ‘No, but I’m going to figure out how to make it work from a business standpoint.’ You know, first of all, you have to have economic sustainability. However, I did recognize that due to sustainability there was goodwill in the marketplace and I did recognize that we had an engaged culture that rivaled nobody—and I mean, nobody. Besides,” Hendrix concluded, “there was no way that I could have said to our people, ‘We’re not going down this road of sustainability.’ I mean it was already in our culture—our DNA.” MW Dan Hendrix is Interface’s president and CEO. He was appointed to his current position in 2001.

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CHANGE—Don’t Fall Prey to BY NANCY FREDERICKS

Change is not simply the watchword of our past. It has to be the watchword of our today and tomorrow as well. Our highly competitive, global marketplace demands savvy leaders keeping the change engine of business on track. Heralding the necessity for organizational change is all well and good, but how constructive is it when not backed up by action? Do you know how to drive the day-to-day operation of an organization to reflect this value? Successful action emerges as organizations identify the two essential business tensions that will ensure profitability and its future. The first tension is an organization’s obligation to maintain Structural Stability. The second is the need to anticipate, champion, and nurture Purposeful Change. Leaders who understand their responsibility within these dual tensions have one foot firmly planted in present-day reality, and one in future possibility. They have an eye on the day-to-day operations, always fine-tuning for continued profitability. They visualize what currently doesn’t exist, and advocate the funding of resources to build the foundation today for “tomorrow’s” fulfillment. All are fundamental for a healthy company. And it’s not enough to balance equally and precariously between the two; rather, it is a strategic dance of choice.

STRUCTURAL STABILITY PERSPECTIVE All too often, leaders become blinded to or complacent about the full scope of their responsibilities—paying more attention to one side of the equation than the other. Consider what happens when these tensions are mishandled. If you are a leader engaged in a Structural Stability perspective, you would affirm a leadership style that is systematic, linear, rational, and incremental. Executives are thinking: “How can we improve the operation to earn more profit? What piece of the business isn’t making a profit or doesn’t match up to our core competency, or is in a diminishing market that we should divest? Is there a way to restructure that will reduce costs, yet provide us with the necessary support to get the job done? Are there new technologies or processes that will advance the operation in becoming more efficient?” 14

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“Too Little,Too Late” These leaders are producing vital incremental modifications to improve performance, yet their focus is first and foremost on the structure that already exists. Employees are evaluated on improvements, efficiencies and on-time deliverables. The management focus is on quality, quantity, and completion. A review of the corporate budget will reveal a substantial share of resources apportioned to safeguarding and augmenting “what is.” When stability is an exclusive focus, you squeeze out the “Big Idea!” opportunities to reinvent and grow. In fact, you stifle the very future of the company you believe you’re enhancing.

A LESS THAN ROSY FUTURE Encyclopedia Britannica is a company that was fixated on maintenance. They were the preeminent reference book company in the world, so far ahead of their competition that there truly wasn’t any. Their gilded reference books were marketed as a mandatory purchase by parents who wished to invest in their children’s future, and the company’s door-to-door salesmen were of the highest caliber. Encyclopedia Britannica’s future was rosy… right? Well, now we know it wasn’t. The company tumbled from its lofty perch. Why? Management was so focused on their infrastructure—improving their reference material, their sales force results, the quality of their products, and their production processes—that they missed a little change in the wind of commerce when computer CDs and then the Internet shook up the industry. They focused on securing their Structural Stability with little attention spent on non-linear, new ideas, and reinvention. Leadership never saw “tomorrow” rolling right over them until their market share disappeared along with their profits and their future. Just this past March, after 244 years of publishing, Encyclopedia Britannica announced they would no longer be printing books. They’re now entirely a digital company. Playing catch-up rarely wins back first place. So, as many other companies have discovered, it is probably “too little, too late” for Encyclopedia Britannica. MWORLD FALL 2012

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“An organization exclusively caught up in the challenge of tomorrow, even with a great product or service base, rarely achieves corporate stability and profitability.” Conversely, if you’re a leader focused on Purposeful Change that adds value to the future of the organization, you might have thoughts such as “we need to shake it up,” or “if it’s not broken— fix it anyway, or we’ll lose our market edge.” Corporations caught up in the future have a leadership thought process that is non-linear, intuitive, simultaneous, and synthesizing. Employees in this domain will be innovative, rule-breaking, expanding-the-box thinkers. Your management focus will be on idea generation and overall long-term success. And if you look at the budget, resources are allocated to R&D and future initiatives as efforts are made to gain competitive leverage for the future. An organization exclusively caught up in the challenge of tomorrow, even with a great product or service base, rarely achieves corporate stability and profitability. An inferior infrastructure guarantees reduced profit margins and a system that will ultimately buckle under the weight of all the future “might-be” activities. Remember eToys.com, the internet company that was announced as the brightest e-commerce portal introduced to the marketplace since Amazon and eBay? They spent a great deal of their attention and resources on Purposeful Change, strategically crafting eToys as the dominant online retailer of toys. Then their infrastructure broke down, leaving them unable to ship scores of Christmas orders until after the holidays. This delivery failure led to bad press… which led to lack of confidence from both their customers and investors… which led to bankruptcy. eToys didn’t go down without a fight, however. They attempted to shore up their infrastructure. Unfortunately, though, it was “too little, too late.” A sole focal point, as with Encyclopedia Britannica or eToys, puts the company at risk. Leaders must recognize that a healthy tension between the need for both Structural Stability and Purposeful Change is essential—for without it, organizations have little chance for a longterm, profitable future. It is the leader’s responsibility to anticipate and champion a strategic mission that appropriately nurtures both sides of these two indispensable business tensions with resources of money, time, and people. Businesses that don’t want to be combating their own “too little, too late”’ tribulations require leaders and a workforce who are comfortable with both maintaining a smooth, running operation and welcoming and initiating change—not just for today, but for the future as well. MW Nancy Fredericks, president of Nancy Fredericks International, has over 20 years’ experience advising companies of all sizes from Fortune 100 to small entrepreneurs. She is an expert in corporate leadership issues with an unsurpassed understanding of strategies for overcoming barriers that hinder productivity and profits. For more information, visit www.nancyfredericks.com AMA’s seminar Strategic Agility and Resilience will enhance your ability to respond to complex and unpredictable business changes by mastering the competencies of agile leadership. For more information, visit www.amanet.org/2546

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T E C H TA L K

Personal Transformation in the Experience Economy: An interview with B. Joseph Pine II

BY DAVID SUMMERS

B. Joseph Pine II is an internationally acclaimed author, speaker, and management advisor to Fortune 500 companies and entrepreneurial startups alike. Pine cofounded Strategic Horizons LLP, a thinking studio dedicated to helping businesses conceive and design new ways of adding value to their economic offerings. A prolific writer, in 2011 he updated his bestselling The Experience Economy and co-wrote Infinite Possibility: Creating Customer Value on the Digital Frontier.

Q

PHOTOS: COURTESY OF B. JOSEPH PINE II

In The Experience Economy, you and your coauthor, James Gilmore, walk the readers through an almost “stair step,” evolutionary economic model that begins with commodities, rises up into goods, moves into services, and then what you call “experiences,” culminating in a state you term “transformations.” Can you talk about what type of thinking got you to that point?

Pine: You know, to some degree, the first eight chapters of the book are a Trojan horse about what’s happening now to get you to read the last two chapters, which are about what’s coming. When I discovered The Experience Economy, it actually flowed out of the work in my first book, Mass Customization, and I discovered that mass customizing is a good automatically turned into a service. If you look at the classic economic distinctions between the two, goods are standardized; services are customized. Goods are inventoried after production, but services are delivered on demand whenever the customer says, “This is exactly what I want.” Goods are tangible, and services intangible, but part and parcel of mass customization is the intangible service of helping customers figure out what it is that they want. So if you mass customize a good, you’re really in the service business of defining and designing, and making and then delivering that exact good for that individual customer. I realized that in a flash one day. If you customize a service—design a service so appropriate for a particular person that it is exactly the service they need at this MWORLD FALL 2012

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moment in time—then you can’t help but make people go, “Wow!” and turn it into a memorable event. That’s where the notion of The Experience Economy came from 20 years ago. From there, you started to see experiences all around. You could see how more and more companies were staging experiences. You know, it was around the time that Starbucks started to come into being and created that distinctive coffee-drinking experience around a true commodity, a coffee bean. So one of the reasons that we’re shifting into The Experience Economy is because of commoditization— goods and services everywhere are being commoditized, and people want to buy them at the lowest possible price. You’ve got the Amazons and the Walmarts of the world out there commoditizing things so they can sell at higher volume and lower cost. Then customization was the antidote to commoditization. Commoditization serves this natural law of gravity that brings you down year after year, and customization shifts you up a level in this progression of economic value. This led to the realization that experiences could be customized as well. In fact, experiences may be the easiest economic offering to commoditize... because the second time you have an experience it doesn’t tend to be as good as the first, the third time not as good as that. And then when you’ve got customers saying, “Been there, done that,” you know your experience is commoditized. Think of theme restaurants as basically becoming more on the commodity end 17


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of the scale, without a heck of a lot of reason to go back two, three, four times. So using that same heuristic, I asked, “What does customization turn an experience into? What happens when you customize and design an experience that is exactly the experience someone needs right now?” And I realized the next stage would be to turn it into a life-transforming experience—in other words, an experience that changes us in some way, transformation. A transformation is when you use experiences as raw materials to guide your customers to change.

Q

As you talk about transformations in the book, you outline the three primary phases of a suggested transformational business offering. Could you share those with us?

Pine: Sure. Every transformation needs to think about these three phases. The first one gains its name from the health care industry, which is an industry based on transformation—that is, Make Me Well. You have to understand this particular customer whether it’s a consumer or a business because experiences and transformations apply in B-to-B settings as well as B to C. Of course, for this to happen, you have to understand what is the particular customer’s aspiration—what do they aspire to become, and where are they today?—and then understand that gap between what they want to become and where they are. Then you can design a set of experiences to transform them, and that’s the second stage. It’s not one set of experiences, generally not one life-transforming experience, although many people can point to a particular event that changed their life, but a series of events that take the customer to where he or she wants to be to make the transformation happen. The last phase is crucial—that’s follow-through— which is “Hi, how are you doing?” Follow-through is ensuring that the transformation takes hold. For example, you may want to be transformed from a smoker to a nonsmoker, and GlaxoSmithKline has these wonderful products that help you do that— goods called Nicoderm CQ Patches and Nicorette Gum. That company did a study and found that only 25% of the people who buy their manufactured goods ever achieve that aspiration of quitting smoking. So they put in place a transformational program 18

called “Committed Quitters,” an eight-week program based on a personal diagnosis of why you want to quit, what obstacles you encounter, when you most crave a cigarette, and so forth. They found that with this program, people had a 50% greater likelihood of quitting, of achieving their aspiration of stopping smoking. They do good follow-through because followthrough helps ensure that the transformation takes hold. If I go through that program and I quit smoking but then two months later I light up, was I really transformed? No. Transformation has to be sustained through time to really take hold, and that’s why that third step is a crucial one.

Q

Does storytelling have a role in a transformational offering?

Pine: I really believe it does. Storytelling is a key way you can engage people emotionally. In fact, when I work with clients and go through a process of trying to transform them into premier experience stagers, storytelling is a key aspect of that, particularly for employees, because you have to have rituals and stories that hold up the principle that you’re trying to build on.

Q

Arguably, transformations take time. How do you respond to the aggressive deadlineoriented critics of transformation?

Pine: Well, they so often do take time. Of course, they don’t have to take time. Again, you could have those instantaneous life-transforming experiences. I suppose you can relate it to getting married. That’s a big personal transformation, and it takes a lot of time, but some people just go to Las Vegas or elope. Right? You can do it either way. But there will be pressure. As we get more and more used to it, people will want to have it done more quickly. Their aspirations may become greater. MW David Summers is the Director of Digital Media Production at the American Management Association. He is also the host of AMA’s free public Webcast programs and the AMA Edgewise podcast series. For more information, visit amanet.org/events or podcast.amanet.org. Check out Dave’s personal blog at bustedmissive.blogspot.com American Management Association

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CHECKPOINT

Mitigating Supply Chain Risk in Uncertain Times—Murphy’s Law BY THOMAS L. TANEL

The simple fact is that in today’s longer global supply chains, product moves over greater distances and across more multinational borders than in the more localized supply chains of the past. This distance-based supply chain, whose links are forged by many supplier tiers in various countries, carries a risk dependent on its length and diversity. The longer and more diverse it becomes, the more it is susceptible to unforeseen circumstances. By consequence, the supply chain is rendered delicate, extended, and bloated in some way. Are you equipped to succeed in a supply chain world of increasing difficulty and insecurity and multiple interconnected supply chains? Do you have the correct response to a supply disruption in the supply chain and the attendant supply-related risk? Supply chain disruption can destroy shareholder value and corporate profitability. More importantly, taken together, total supply chain costs consume about 7 to 12% of corporate annual revenue across all industries, which makes the task even more daunting. IMPACT ON GROWTH

In their 2005 study of the financial effect of supply chain disruptions, Kevin Hendricks, formerly of the University of Western Ontario, and Vinod Singhal, of the Georgia Institute of Technology, made some interesting findings. They discovered that the average effect of supply chain disruptions in the year leading to the disruption included a 107% drop in operating income, 7% lower sales growth and 11% growth in cost. Share price volatility in the year after the disruption was 13.5% higher than in the year before disruption. Don’t you think that BP can attest to this effect as a result of the Gulf Coast oil spill in the USA? Risk is an everyday occurrence in business, and companies either consciously or unconsciously include it in their decision-making process when managing their operations. (See sidebar: Most Common Supply Chain Risks.) Companies must invest in enhancing the integrity of their supply chains, in a manner that balances operational objectives with reputation risks (a type of risk related to the trustworthiness of business). Supply chain risk exists in many varied forms. For

MOST COMMON SUPPLY CHAIN RISKS • Financial instability, bankruptcy, or financial failure of a supplier • Fire, chemical spill, etc. at the supplier firm • Problems in electronically sharing information with suppliers • Suppliers incorrectly interpreting our requirements

• Natural disasters affecting suppliers’ operations • Political instability, terrorism, civil strife, or war affecting suppliers’ operations • Reduced accuracy of forecasts and plans • Long physical distances between buyer and suppliers

• Inability to influence /manage suppliers • Lack of alternative sources of supply • Labor availability, slowdowns, strikes, and quality of workforce • Health issues, disease, quarantines, and pandemics Source: CATTAN Services Group, Inc. Research

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CHECKPOINT

instance, damage to a firm's reputation can Figure 1: Levels of Likelihood Criteria Dimension Example result in lost revenue or destruction of shareholder value. Damage to revenue may be perDescriptor Probability Rank Value petrated by transportation disruptions, natural Highly Probable >75% High 5 disasters, strikes, and political unrest—all of which may interrupt supply of product to the Probable >50% — <75% Medium High 4 ultimate customer or components to the facOccasional >25% — <50% Medium 3 tory. By way of example, the European debt criRemote >10% — <25% Medium Low 2 sis, the Japanese earthquake and tsunami, and the Arab Spring uprisings all had a ripple effect Improbable <10% Low 1 in 2011. As PPB Newslink reported in March 2011, more than 40% of the world’s USB flash drive supply is produced in Japan. In fact, one major sup- organizations pay, on average, an additional 4% to plier, Toshiba, supplies 30% of the world’s resolve a supply incident stemming from supplier finanmemory chips alone. When the tragedy unfolded in cial distress. What specifically accounts for that 4% cost Japan due to the history-making earthquake and increase? According to the PSC research, the real cost of tsunami, memory prices jumped by 50 to 60% poor supplier risk management includes: supplier product line or facility closures; reduction in quality stanovernight–literally. dards, and supplier layoffs and bankruptcies. Recently, as a hedge against rising oil prices, Delta SUPPLY BASE A major concern for purchasing STABILITY and supply chain executives is Airlines bought the Phillips 66 refinery in Trainer, supplier financial stability as the sup- Pennsylvania, to maximize its jet fuel production ply base shakeout occurs from the last four years’ capacity. As reported by USA Today, “Fuel makes up worldwide financial reckoning. According to between 25% and 40% of an airline's costs, and soarPricewaterhouseCoopers LLP, many companies are ing prices in the past several months have dug into beginning to learn that relationships with critical industry profits and led to higher fares for the flying suppliers shouldn’t be taken for granted. public. The Pennsylvania refinery and products it Relationships must be acknowledged, protected, and produces will fulfill 80% of Delta's fuel needs in the nurtured to positively impact a company’s bottom U.S,” the publication said. Clearly, understanding and mitigating supply line. chain risk needs to be recognized by the C-level of As a case in point, the effects from the March 2011 management. For example, what does this do to our earthquake and tsunami, and the ongoing nuclear crisis in Japan: Automotive News reported that supply supply risk and the increased supplier risk dependchain management at Honda was being stress tested, ency? How do we assure ourselves of supplier viabilgiven that at least 113 of its suppliers are located in the affected areas. Closely monitoring the financial health of suppliers has become an important part of the job for anyone involved in a company’s purchasing or procurement sourcing efforts. A solvent supplier yesterday may become an insolvent supplier today. While supplier insolvency is a known risk, the recent economic downturn has brought it to the forefront. To weather this and future storms, organizations must focus on a proactive approach to better anticipate changes in supplier viability and financial health. According to a recent research project by the Procurement Strategy Council (PSC), procurement 20

Figure 2: Severity of Impact Criteria Dimension Example Descriptor

Rank

Value

Catastrophic

High

5

Critical

Medium High

4

Serious

Medium

3

Marginal

Medium Low

2

Negligible

Low

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CHECKPOINT

ity and financial health in light of these trends? Having assessed the risks and LIKELIHOOD identified those Highly that require action, plans need to be Probable drawn up and responsibilities Probable assigned to control and mitigate these risks. This means risk identifiOccasional cation, risk assessment, and risk mitigation. The intent of risk mitiRemote gation planning is to answer the question, “What is our approach for addressing this potential unfavorImprobable able consequence?” ᔢ Avoiding risk by eliminating the root cause and/or consequence ᔢ Controlling the cause or consequence ᔢ Transferring the risk, and/or ᔢ Assuming the level of risk and continuing on the Supply Chain Continuity Plan The allocation of risk should be dependent on the assessment of the likelihood and consequence of the risk and then the identification of who is best able to control or manage the risk. Normally a risk template has two critical elements: 1. Likelihood of occurrence (probability)—A risk is an event that "may" occur. The probability of it occurring can range anywhere from just above 0% to just below 100%. 2. Severity of impact or consequence (magnitude)—A risk, by its very nature, always has a negative impact. However, the severity or size of the impact varies in terms of cost and impact on some critical factor. So let’s look at the Levels of Likelihood Criteria Dimension Example in Figure 1, which represents the probability that a risk will occur. It values that risk’s probability of occurrence on a scale of 1-5 with 5 being the highest-ranked probability and 1 being the lowest-ranked. The Severity of Impact Criteria Dimension Example in Figure 2 represents the magnitude of a risk’s impact. On a scale of 1-5, it values risk’s severity of impact with 5 being the highestranked impact and 1 being the lowest-ranked. You then use the two dimensions in Figures 1 and 2 to calculate and quantify the risk in Figure 3. This Risk Analysis Levels of Likelihood and Severity of

PHOTOS: COURTESY OF THOMAS L. TANEL

RISK MITIGATION PLANNING

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Figure 3: Risk Analysis Levels of Likelihood and Severity of Impact Scorecard Example

Severity of Impact NEGLIGIBLE

MARGINAL

2x5=

1x5=

5

10 2x4=

1x4=

4

8 2x3=

1x3=

3

6 2x2=

1x2=

2

4 2x1=

1x1=

1

2

SERIOUS

3x5=

15 3x4=

12 3x3=

9 3x2=

6 3x1=

3

CRITICAL

4x5=

CATASTROPHIC

5x5=

20 4x4=

25 5x4=

16 4x3=

20 5x3=

12 4x2=

15 5x2=

8 4x1=

4

10 5x1=

5

Impact Scorecard Example gives you a quick, clear risk quantification ranking of the priority that you need to give to each risk. Do you remember what BP’s CEO said about the Gulf of Mexico oil spill? He gave it a likelihood of occurrence of 1 but a severity of impact of 5. Well, the company was certainly wrong in their risk assessment! The Scorecard Example chart in Figure 3 allows you to rate potential risks on these two dimensions: (1) the probability that a risk will occur is represented on one axis of the chart and (2) the impact of the risk, if it occurs, on the other. The higher the score, the higher the risk. You can now decide how risk-averse-based you are. Does your organization have the wherewithal to implement a robust Supply Chain Risk Management (SCRM) strategy? If not, do you feel that your organization is flirting with disaster by not exploring and investing in SCRM measures? Since SCMR is becoming an increasingly visible, multifaceted phenomenon, what are you doing to mitigate it? As companies look to recover from the uncertainty and economic turbulence of the last four years, the experience of managing supply chain risk across oceans and continents is still daunting for many organizations. Why? They unknowingly have realized that they have taken on greater exposure to risks and uncertainty as the supply chain today has been rendered weak and vulnerable. MW Thomas L. Tanel, C.P.M., CISCM, CCA, CTL, is president and CEO of CATTAN Services Group, Inc.

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CASE STUDY

How to Build a Reputation for INNOVATION How does a midsized company meet the challenges of developing its senior leaders to continue aggressively growing and improving the company, while building and retaining a cadre of its next generation of leadership? An award-winning, full-service consulting engineering firm, Millburn, New Jersey–based Hatch Mott MacDonald (HMM) is addressing those challenges by sponsoring two targeted, well-designed programs. HMM offers public and private clients multidisciplinary expertise and comprehensive capabilities in planning, project development, studies and analysis, design, procurement, construction management, and facility maintenance and operations. Formed in 1996 by two global consulting firms, Hatch Associates (headquartered in Mississauga, Canada), and Mott MacDonald (headquartered in Croydon, UK), the company has roots that date back more than 100 years. HMM has earned a reputation for technical excellence, innovation, and client responsiveness. With 2,230 employees in 68 offices in North America, HMM currently ranks no. 35 on the Engineering News Record’s list of the 500 top design firms. The company faces some of the most prominent and challenging projects, demanding continual expansion of skill sets and capabilities. Integral to its success is the need for continuous learning and development, supported by strong leaders and managers. Given client demands, the company joined with AMA to develop and run two training programs designed to enhance the skills of senior managers in the company and enable young professionals to better manage their careers. The programs—Navigator and Horizons—were started by Mott MacDonald in the UK. Due to their success and strong support, they were customized and then rolled out in North America in 2009.

Albert Mellini, PE, the Corporate Learning and Development Director, pointed to the value of the two programs today. He said, “Our people are our only assets. Our relationships with our clients are critical to our success and that success is dependent on our people. HMM has made a substantial commitment to developing better people through a process of ‘Continuous Engagement.’ Our objective is to ‘touch’ our staff every two or three years with a major corporate training program. It starts with On-Boarding and ends with Voyager (a program for senior leaders to improve talent management and develop critical skills in emotional intelligence, change management, and strategic planning).” The first AMA custom program, called Navigator, helps senior leaders and their managers to become better people managers. The second, Horizons, focuses on career development and 22

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IDENTIFYING YOUR TRUE PRODUCT


and CLIENT RESPONSIVENESS

advancement for the firm’s young professionals. These two programs, run by AMA, are part of the seven “Continuous Engagement” elements.

NAVIGATOR According to Burkhard Thallmayer, International Learning and Development Programs Manager for Mott MacDonald, and responsible for strategic learning and development programs outside the UK, the 20 attendees at the Navigator Program go through a 360 assessment before program launch. During the three-day offsite launch event, they learn more about the drivers for employee engagement, and participate in a series of role-plays observed by professional coaches, who all have a background in occupational psychology. The launch event ends with an individual feedback session with their coaches, where all the data gets integrated into an individual action plan. After the launch event, each Navigator works with an AMA coach to implement their action items. MWorld was told that “the specific goals were to increase selfawareness and impact on others to enable self-development, update and The AMA/HMM development team, from left: first row, Dr. Donna Dennis (AMA), HMM L&D Manager Joy Wetzel, Maribel Aleman (AMA), Jerry Mazza improve skills in the critical area of (AMA). Back row: HMM CEO Nick DeNicholo, Executive VP Al Mellini, Mott people management, increase ability MacDonald L&D Manager Burkhard Thallmayer. to effectively engage employees, and impact the business.” As Thallmayer explained, “We have in our company people who care for people, but often lack the specific skills to really engage staff. They have all the right intentions and want to do a good job, but they may not always be very skillful in the process. Navigator is designed to help them in this area and develop their people-management capabilities.” Thallmayer explained how for some people the program “was a real eye-opener. For the first time, they actually had somebody tell them, ‘Here are the strengths you should build on and these are the relevant weaknesses you need to address because they get in the way of your success.’ A lot of the participants don’t have a great awareness of how they are perceived by the people they manage. For the first time, they are getting exposed to that and receive feedback on how they are doing. We find that they cherish the opportunity to look in the mirror and learn about themselves, even though it may not always be easy to receive tough feedback. The comments are wonderful. Managers say, ‘This is really amazing. I’ve learned so much from the process.’”

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The 360 assessment is critical to the program and is customized and anchored around competencies that the company, with the help of AMA, identified in preparation for the program. The scenarios with which the leaders and managers are presented during the roleplays are tough, without black and white answers. Trained AMA role-players are used to challenge the participants and bring out the skills and behaviors assessed in the 360. This ensures that each participant gets good quality data from a variety of sources. During the feedback sessions, coaches use a variety of questions to facilitate insight into the participants’ strengths and relevant weaknesses, and help with development planning: 1. Open questions, such as “What would be the best result if you said...?” 2. Affective questions, such as “How do you feel about the employee’s response to

your concern?” 3. Probing questions, such as “Why did the employee reject your idea?” 4. Connecting questions, such as “What are the consequences of your comment?” 5. Explorative questions, such as “Have you considered…?”

After the launch event, each Navigator continues to work with their AMA coach on their action items. At the end of the program, a repeat 360 measures progress at individual and group level vs. the initial 360, and detailed evaluations are conducted to assess overall program success. Mellini recalled how one attendee of the Navigator program pointed out not only the opportunity the program offered to learn from the coaches, but also to learn from peers. “It was interesting to observe some of my colleagues and see how they go about that sort of task,” said the attendee. “Participants are learning about each other.”

HORIZONS

During a three-day launch event, participants learn career management tools and are put in Action Learning Sets (ALS). Instructors work intensively with the ALS’s to teach them methodologies to make their ALS successful. In their initial ALS meetings, “Horizonians” work together on their individual career plans and identify shared development actions. An important ALS rule is that they are not allowed to make statements, at least not without following through with a question. Questions participants are encouraged to ask include: Is this the right thing for me? How does this affect me? How will this affect those around me? What are the stakes involved? To fully understand the process, it’s important to point to the intensity of questions asked. The assumption is that people already have the answers to their questions, they just need someone to help them think things through. By teaching them to come up with their own answers, Horizonians move from a dependent mode to a very independent mode. HMM uses the Socratic method to make this training work, to help participants determine where they want to go and how they are going to get there. Answers to these questions depend 24

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PHOTOS: COURTESY OF HATCH MOTT MACDONALD

The Horizons program, with 30 participants per session, is focused on career planning and management. This two-year program is targeted to young professionals who are recently licensed or have just received advanced degrees. Horizons gives them the tools to plan and advance their careers at the firm. One reason for this program is concern that the company may lose some of its best staff members after professional licensing when they become desirable targets of other firms. Mellini said, “Having people who understand the HMM career paths with varied markets and services and who see clearer opportunities for advancement are less likely to leave the firm.”


on an assessment of circumstances, capabilities, interests and the like, not consideration of what would generate a good raise. Each Action Learning Set is further supported by an HMM coach recruited from the senior managers who graduated from the Navigator program. The role of a Horizons coach is not to give people answers, but to observe team dynamics, role-model questioning techniques, and challenge Horizonian thinking. By doing this, coaches practice and hone the people skills they learned from their Navigator Program. As HMM told MWorld, “If our managers learn how to do this with the Horizonians, it becomes a skill they can use with their teams and carry for the rest of their lives.” Another integral part of the program is a 360 assessment. Horizonians are rated not on existing competencies, but on the next level. The supervisor of an individual at Level 1 is asked to Horizons participants and coaches, and the AMA/HMM development team. rate him or her at Level 2. If the rating represents a gap, then the Horizonian will recognize what it takes to be successful at the next level. “There’s no negative reflection on where the Horizonian is right now, but it is a reflection on how far he or she will have to go to get to the next level of competency. Examining feedback increases self-awareness.” After the launch event, ALS’s stay together and work through three more phases. The first phase helps them to further enhance their individual development plans and implement their action items. In the next phase, they meet the top senior leaders and learn important business skills through lectures and assignments. The last phase gives them tools to identify further development needs, and gives them access to additional learning opportunities to help them address those needs. At the end of the program, Horizonians have: 1. Increased individual self-awareness of their strengths and weaknesses. 2. Gained an enhanced understanding of the business. 3. Developed realistic and meaningful individual career goals. 4. Created a support network to help with individual career goal. 5. Enhanced ability to work effectively within a team to achieve business impact. 6. Discovered tools to assist with career management.

Both programs are important to HMM’s relationship with its clients and employees’ relationship to each other. Although the programs receive excellent ratings from the participants, they are in continual enhancement and redevelopment. Said Mellini, “As we roll out each cohort, we use Level 3 Evaluations to identify program shortcomings and then have AMA fine-tune the content or program staffing to improve subsequent cohorts. These two programs are critical to our future.” MW

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Multiculturalism in the Multinational:

Promotion and Retentionin BY CEDRIC LEIGHTON

If you conduct practically any type of business in a major global city, you will come face to face with people from a multiplicity of cultures. From the vendor on the street to the director in the boardroom, the age of globalization is upon us. To underscore the point, on one recent trip to New York City, I decided to take an unscientific tally of the people I encountered. On the trip I met people from South Africa, Russia, China, and Israel. But the champion in my informal cultural diversity poll was one of my New York cabdrivers. He was a Sherpa from Nepal, who had moved to the Big Apple after organizing hundreds of treks in the Himalayas for Western mountain climbers. The Sherpa cabdriver was proof that, over the last 30 years, the effects of globalization had penetrated even the remotest corners of our world. His presence in New York also meant that people from the most distant places on earth could potentially have an impact on global organizations as well. All of these people had become a part of a global movement in which talented individuals could better themselves and their families by seeking opportunities in places far away from their homelands. While cross-border mobility is not new, it is, nonetheless, remarkable how diverse our global cities have become. At no time in our history could you hear so many different languages spoken simply by walking down a big city street. At no time has our workforce been as culturally diverse as it is now. Companies must deal with this multicultural reality if they want to capture new markets, retain talented employees, and survive as global businesses. Multiculturalism is a term first coined in the 1960s that is used to describe the worldview that several different cultures can co-exist harmoniously within a single country. There is quite a bit of political baggage that accompanies the term. While nations may debate whether or not they should transform themselves into multicultural societies, truly global companies donâ&#x20AC;&#x2122;t have that luxury. They have offices all around the world and operate in many different cultural contexts. Thus, global companies are already, by necessity, multicultural institutions. The question then becomes, to what degree are global companies truly multicultural minisocieties? 26

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the Overseas Workplace

MULTICULTURAL MINISOCIETIES Until recently, it was fairly common for a multinational firm to staff its main overseas offices with managers from the home country. These expatriates or “ex-pats” had the duty of transmitting the firm’s culture to its overseas employees. They did this by training their foreign colleagues in that corporate culture and by conducting business just like they did at home. But ex-pats also had another obligation to their firm. They were to provide the global headquarters with market-specific insights gleaned from contact with host-nation customers and employees. Many ex-pats failed in this arena because they did not understand key nuances in the local language and culture. In some cases, employees who did understand these nuances were shunted aside in favor of a more senior person being “helicoptered in” from the home office. The failures of that senior person would often go unnoticed by the home office until market share and local partnerships disappeared. Of course, by then it was too late and the company had to start over again in that market or abandon it entirely.

EX-PAT MODEL As a result of these failings and the sheer expense of maintaining a foreigner’s lifestyle, the expat model is now giving way to regional offices that are staffed almost entirely by local nationals. For example, in the Seoul offices of the major global banks, the meetings are conducted in Korean. In China, the local offices of major global firms are now being staffed mostly by Chinese nationals. And it’s no longer just about the make-up of the staff. Now, the heads of major corporations’ Chinese subsidiaries are often Chinese nationals as well. The same is true in other markets. MWORLD FALL 2012

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“Corporate HR policies and promotion systems need to be based on developing talent and creating opportunities for that talent to flourish globally.” Several factors precipitated these changes. Primarily, it’s a question of comparative advantage. It is cheaper to have a local national work for you in a place like China because local wages will, generally, be lower. Ex-pats bring with them significant moving, health care, and schooling expenses, which local nationals do not incur to the same degree. Locals usually have an inherent understanding of the local marketplace because they share its culture. However, many of them were trained in the U.S. or Europe, so they understand those cultures as well. It is this fusion of knowledge that makes a multinational company’s local staffs a multicultural entity as well. But how the tension between local and global corporate cultures plays out will help determine a company’s success or failure in that market. Now the company must face its own cultural challenge. How far do you let local cultures define the overall corporate culture? In addition to the natural tension between a global headquarters and its regional subsidiaries, how important is it to have an overarching corporate culture? In many cases, that corporate culture is the brand’s identity. Brands that have a global appeal may have less trouble navigating these waters, but every company will face challenges to its corporate identity as the global corporate culture evolves. The real challenge, though, is a human resources challenge. Employees in overseas subsidiaries will not always be content to live out their careers in their home countries. The crack Indonesian commodities analyst may want to compete for a trading position in the U.S.—and why shouldn’t he or she? Corporate HR policies and promotion systems need to be based on developing talent and creating opportunities for that talent to flourish globally. In essence, most firms will want to establish the credo that they must get the best available performer for the best price. But in order to keep that level of talent, they must also embrace the global potential of their top performers and foster it.

THE QUEST TO RETAIN TOP TALENT A conscious multicultural approach may be the key to your company’s quest to retain top talent, no matter where it might come from. Global companies will be challenged to maintain their corporate culture as their local subsidiaries begin to look more and more like local firms. The way to reaffirm that corporate culture is to provide talented employees with rewarding global opportunities. Those who avail themselves of these opportunities and perform well should be given even more chances to succeed. They should have the chance to cultivate their inner Sherpa. MW Cedric Leighton is the founder and president of Cedric Leighton Associates, a global strategic risk and management consultancy. He is a frequent guest on radio and television, appearing on CNN, Fox News Channel, Fox Business Network, Bloomberg TV, CTV (Canada), and CCTV (Chinese TV). He is a highly decorated retired U.S. Air Force Colonel, who served 26 years in the intelligence field.

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Coping With Customer Conflicts Online BY MICAH SOLOMON

Can you spell F-I-A-S-C-O? The formula is: Small Error + Slow Response Time = Colossal PR Disaster You need to respond quickly to customer criticism online; however, that does not mean taking a stand against the customer. It’s an ancient and immutable law: You can’t win an argument with a customer. If you lose, you lose directly; if you win, you still lose by losing the customer. But online, the rule is multiplied manifold because of all the additional customers you’ll lose if they catch sight of the argument. So you need to learn to stay calm and think of the future of your company.

OUCH The first time you discover that your company’s being discussed negatively online, it’s a tense, anxietyridden situation. What you see may look something like this, a moderately fictionalized version of a rant that was posted on the online review site Yelp: “The hostess here can’t pronounce ‘carpe diem.’ I wouldn’t notice her ignorance on this point—even though the name of HER RESTAURANT is ‘Carpe Diem’—if she hadn’t left me waiting, spilled my drink, pressured me into ordering, refused to make eye contact, said ‘uh huh’ instead of ‘You’re welcome,’… But she did all that to me. So I *am* mentioning it.” Ouch. Obviously this mixture of cattiness, generalized consumer upset, and actual, useful feedback represents something new. The world has changed. The balance of power between customer and business has changed. The timetable needed to respond also has to change. And the issue isn’t always limited to words, like those in this Yelp posting. Sometimes there are photos involved. Let’s say your above-Yelped restaurant, Carpe Diem, has a crack between two tables where your wait staff forgot to clean. No business owner wants to see an oversight like MWORLD FALL 2012

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that exposed online via TwitPic or yfrog, two services that allow you to send out photos via Twitter, but it can happen. Just getting used to that concept? What about candid video? Yeah, it’s out there. And it can bite you in the social.

A REMINDER If it helps you psychologically to get through it, try to remember that the people slamming your face are doing it off the cuff. They’re simply not acting like professional people at that moment when they mouth off in outrage. In fact, in many cases, after they’ve trashed you publicly online, they’re off to something else, to their next nasty little 140-character haiku, with no memory of what they’ve done and how it may have affected you.

TURNING TWANKERS INTO THANKERS How should you respond? If the twanker follows you on Twitter, that enables you to send him a direct message—so do it. Include a direct email address and direct phone number. If, however, said twanker isn’t one of your followers, you’ll need to figure out another way to reach him. How about replying publicly, on Twitter, listing your email address and expressing your chagrin and concern. (In an online forum such as a blog, TripAdvisor, or Facebook, you can respond in a similar manner, but through the comment mechanisms available there.) In a scenario involving an upset customer, your ideal outcome is to move the discussion out of a public venue and into a one-on-one situation, where you can work directly with your antagonist without thousands of eyes dissecting every move or, worse, catching bits and pieces as things progress, without ever grasping the whole story. This dispute resolution approach is like an in-store situation where you take an irate customer aside, perhaps into your office, to privately discuss the matter, giving you both a chance to work together to arrive at a resolution.

HOW NOT TO RESPOND You don’t ever want to appear to be cyber-stalking your customer. After a reasonable attempt at contact, leave the ball in the court of the posting customer. If he does return contact, this is your chance to make it clear to the customer right away that you’re on his side. What’s sure to be a failure is a courtroom approach, showing how much proof you have that you’re right and he’s wrong. Apologize and accept fault—immediately and fully. Satisfy the customer plus do something extra. Only then ask the customer—as a favor, not as a demand—to amend or even withdraw those original ugly comments. Once you’ve worked things out directly with your complainant (and I mean really worked them out), then ask in a nondemanding way if she would consider deleting the tweet. Or, in a forum where deletion is not an option, you might ask the person to post the satisfactory results of your intervention. If there is any true answer, with their round-the-clock access to the “airwaves,” make sure that the first impulse of customers is to reach you—day or night. Have “chime in” forms everywhere; it’s like building escape valves for steam into your machinery. (If you’re Amazon.com or another online aggregator, with a vast product line that’s supplied in large part by outside vendors, your 30

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SOME REMINDERS

1

You need technologically savvy people supporting your social media customer service work, but the people actually helming the operation and responding to customers need to be the same ones who are expert at day-to-day customer service operations and are responsible for interacting with your customers.

2

If you want to satisfy customers, the technology can’t be left to the technologists. Today, great companies like Apple understand that they offer both “product” and “service” simultaneously, and that in order to achieve maximum customer service satisfaction, they need to build anticipatory customer service into the product itself.

3

Customers generally enjoy, and more and more expect, a certain level of anticipation in technology-driven service. The number of clicks they expect to invest before being presented with the ideal solution diminishes every month. And their

willingness to let you allow them to make—and pay for—mistakes is on the verge of extinction.

4

When a concern is voiced online, the magnitude of a social media uproar increases exponentially, with the length of the company response time. You need to know and develop strategies for rapidly responding in a concerned, empathetic, nonconfrontational manner.

5

It’s always been true that you can’t win an argument with a customer. But online, the rule is multiplied manifold because of all the additional customers you’ll lose if they catch sight of the argument.

6

If it helps you to get through it, try to remember that those slamming you in social media land are doing so off the cuff. In many cases, after they’ve trashed you publicly online, they’re off to something else.

7

In a scenario involving an upset customer, your goal is ideally to move the

discussion out of a public venue and into a one-on-one situation, where you can work directly with your antagonist without thousands of eyes watching every move.

8

Social media is most dangerous to your company when your organizational structure and culture are set up in a way that keeps you from providing oneon-one service and responses to issues—in real time, with great flexibility.

9

Reduce the need for dealing with social media feedback by making sure your customers know, as directly as possible, how to reach you 24/7, whether that’s via email, the phone, or a feedback form on your website.

10

A secret of dealing with social media feedback is to realize that even the bad stuff is rarely 100% bad news because social media is such a remarkable source of feedback that you can use it to improve your service.

sensitivity to open conversations will be lowered; your customers can let off steam with zero downside for your overall brand. But most of us, obviously, aren’t Amazon.com. There is an answer, however, starting with a “perfect product” and “caring delivery.” The key way to avoid impact from negative public feedback is to make sure you’re doing so many things right (that your product is so perfect and your service so caring) that the occasional wrongs seem like outlying events. Exceptions to the rule. Freakish occurrences, even. If a problem does arise, then act quickly. Most important, if you set up an expectation that you will assist, interact with, and engage customers through social media, you need to do that, and do it fabulously. If you’re not up to it, then realize that giving that impression will hurt your brand. I could blow your mind by recounting the legions of immensely famous companies that don’t understand this, from high-end department stores to airlines to manufacturing and other B-to-B operations. Just as your brand is only as good as its weakest employee, customer service is only as good as your weakest channel of customer communication. MW Micah Solomon is a customer service and marketing strategist termed by the Financial Post “a new guru of customer service excellence.” An entrepreneur and business leader, Solomon coauthored the bestselling Exceptional Service, Exceptional Profit. His expertise has been featured in Fast Company, Inc. magazine, Bloomberg Businessweek, CNBC, and Forbes.com, and he helms the “College of the Customer” website. Excerpted, with permission of the publisher, from High-Tech, High-Touch Customer Service: Inspire Timeless Loyalty in the Demanding New World of Social Commerce by Micah Solomon. Copyright 2012, Micah Solomon. Published by AMACOM. For more information, visit www.amacombooks.org AMA’s seminar Leveraging Social Media to Engage Customers and Build Your Brand gives you techniques for applying social media strategies and tools to your overall marketing portfolio. For more information, visit www.amanet.org/5521 MWORLD FALL 2012

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COMMUNICATING with the BY STACY ARMIJO

I have good news: the public is more involved than ever. They’re seeking and supporting organizations whose values they share and practices they applaud by creating videos, participating in online communities, writing blog posts, “liking” Facebook pages, and much more. I also have bad news: the public is more involved than ever. If they don’t like your organization, they can now vilify it in minutes, posting rants to social networks, drawing hundreds of fans to the “I hate ACME Inc.” Facebook page, and ridiculing you with YouTube videos. Good or bad, this is today’s reality. Are you ready?

HOW DID WE GET HERE? Several things have created this new “uberinvolved” environment. First, technology has given us immediate access to news, making us instant experts who can easily support any issue with a click of a mouse. That means the “ACME Inc. is the Devil” Facebook page can be created and have thousands of fans within a matter of days. Hopefully you’re prepared with the “Friends of ACME” page and have a positive effort that’s well organized and supported in response. Also contributing to this involvement is socially conscious consumerism. Today, Americans don’t solely care about a product’s quality and price; they want to know if it was created and sold in a manner consistent with their personal values. That’s why we see “fair trade” coffee and “conflict-free” diamonds. It’s a trend that can be used to your advantage—if you think your target audience will proudly support your operation—or to your disadvantage, if you have practices they might oppose. More than ever, consumers can learn about the practices of your business and take action, positively or negatively. Are you listening and responding? Finally, citizen journalism is helping us get more involved. No longer must a reporter uncover a juicy story, gather facts, sell that idea to an editor, and hope it’s granted a precious two-minute slot in the one-hour newscast. Today, one disgruntled customer can share his or her bad experience online that same day and, within a matter of hours, you have a reputation crisis on your hands. Are you prepared to know it happened (because if you don’t have someone monitoring all media, you won’t be) and to respond effectively to keep the situation from damaging your reputation? 32

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Newly Empowered Public So, what can be done? You have two options: take advantage or take cover.

TAKE ADVANTAGE There are many ways to involve the public in your cause. First, ask yourself: What am I getting the public involved in? Is it a lifestyle? A rebellion? A party? If it’s just “to buy stuff from us,” go back to the drawing board. Once you’ve figured out the “what,” think about the “how.” You could: ៑

៑ ៑ ៑ ៑

host a contest for user-generated videos, poems, haikus, songs, speeches, or other testaments to the fandom of your cause; create Tweetups and Meetups to bring your supporters together; design a scavenger hunt on Twitter where followers collect clues to win prizes; launch a blog specific to your cause to keep your audience informed and engaged; develop an online game or iPhone app to give consumers a fun way to interact with your brand; create an online community for your customers to connect with one another, give you feedback, and increase loyalty; post videos to the YouTube accounts of your employees actively supporting their community; improve customer service by opening opportunities for support through Twitter, Facebook, and online forums; or include media relations, event hosting, community relations, and other traditional tactics to get your message across.

TAKE COVER Many organizations have no desire to engage with this newly involved public. The public may not understand what you do, have no appreciation for the value you bring, or they may just not like your executives. Whatever the case, you think you don’t need them (since you’re a business-tobusiness company, for example, or your MWORLD FALL 2012

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“You won’t know whether your reputation is at risk if you’re not even monitoring social networks, blogs in your industry, relevant online forums, opponents’ websites, bulletin boards, and of course mainstream media.” issues don’t involve the public) and you’re tempted just to ignore them. That’s a big mistake. Even if you don’t sell to the public, having them against you will limit your business opportunities. Government, clients, and top-notch employees don’t want to be affiliated with a company that has come under attack by the public. What to do? First, listen. You won’t know whether your reputation is at risk if you’re not even monitoring social networks, blogs in your industry, relevant online forums, opponents’ websites, bulletin boards, and of course mainstream media. Second, when an issue does bubble up, take one step back and evaluate the situation before responding. Your organization should consider the following questions: ៑ ៑ ៑

Do we understand this issue? Do we know all the players involved and their viewpoints? Are there any opportunities to change the way we operate to mitigate this issue? If not, do we understand our position on the issue and can we clearly articulate it? If yes, does “we” include all of our employees, especially those in customer service? Who agrees with us? Do we have relationships with those organizations and individuals in the event we need to leverage them in a public campaign? Do we have any common ground with those we consider opponents? Though we disagree on some things, do we agree on enough to create a working relationship and possibly avoid a public fight?

There are three things that are very important about the process above. 1. You must decide: Is this even worth it? Often, after analyzing an issue, organizations realize

any potential gain is not worth the possible damage it could do to their reputation, so they make simple policy changes that clear the air without more fuss. 2. You must build relationships—with allies and opponents—before you need them. If you

wait to reach out to potential allies until you’re under attack, you’ll find them hard to come by. 3. No matter what “media relations policy” you have in place, every employee in your organization could now be a public spokesperson. Are they all prepared with the right

information to respond effectively on your behalf? More than just having the bullet points, do they really understand why you have the policy or practice you do? If not, you have a lot of work to do. The newly involved public holds a lot of opportunity and a lot of risk for every organization. Your choices about how to engage with that public will dictate whether you’re a hero or a villain in our new reality. MW Stacy Armijo is vice president of Pierpont Communications and general manager of its Austin, TX, office. She counsels clients on communication planning, public relations programs, social media initiatives, and many other means of engaging with their public. For more information, visit www.piercom.com

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SOUNDINGS

Five Ways U.S. Performance Management Practices Lag Behind Other Countries BY DONNA PARREY

A new Institute for Corporate Productivity (i4cp) study has found that U.S. organizations are stuck in the past when it comes to employee performance management practices, while emerging markets are utilizing practices more highly correlated with market performance. Key findings from the threecountry comparisons are outlined in Performance Management: A Comparison of Brazil, Russia and the U.S., which is based on responses from 1,427 organizations. The results suggest that years of familiarity with performance management have led to frustration and a loss of focus for U.S. organizations, while Russia and Brazil are building programs that demonstrate their commitment to key principles of performance management. The U.S. falls behind in five key areas of performance management: 1. U.S. firms are less likely to apply performance management at all organizational levels. The U.S.

applies performance management to individual contributor-level employees more than Brazil and Russia but is 35% less likely to conduct performance management with executives, despite that practice having a high correlation with market performance. 2. U.S. organizations offer less training in effective performance management for supervisors.

The U.S. offers less training to supervisors on managing performance in all six of the training categories queried. For example, in the U.S., 37% fewer firms reported that they train supervisors in how to develop goals with their employees. Brazil and Russia also reflected a larger percentage of organizations than did the U.S. in providing supervisors with training on how to give and receive feedback, how to conduct a performance appraisal meeting, how to maintain ongoing documentation, how to write a performance appraisal, and how to provide motivation. MWORLD FALL 2012

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3. U.S. performance management systems do not address low performers. More organiza-

tions in Brazil (46%) and Russia (41%) address performers in the bottom quartile through targeted development plans than in the U.S. (34%). 4. Individual goal accomplishments are not considered as important in U.S. organizations. While Brazil and Russia consider individual

goal accomplishment a top measure of success, U.S. respondents point to performance review completion rates as their top success metric. This is an indication that, after all these years, “filling out the form” still gets more attention in the U.S. than using the results. 5. U.S. firms are not as forward-focused as their peers in Brazil and Russia. U.S. respondents were less

likely than those in Brazil and Russia to focus on forward-looking elements of their performance management process, such as goal setting and developmental plans. Instead, U.S. organizations favor the more passive task of establishing performance ratings and reviewing past accomplishments as critical elements of their performance management processes. The report presents these key findings in more detail and illuminates the performance management danger zones that U.S. firms need to recognize and address. U.S. organizations have long been viewed as forward-thinking businesses that stay on top of and, indeed, start new business trends. Worldwide, organizations pay attention to the best practices and next practices that originate in the United States. What i4cp’s survey revealed, however, was a country that’s developed distaste, even contempt, for its own performance management processes. MW Donna Parrey is a senior research analyst for i4cp and the author of this report. She is lead researcher for the i4cp Global Talent Management Exchange and the Executive Leadership Exchange.

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The KEYS to Business Trans BY BARBARA SHANNON

A Harvard Business School interviewer posed this question: “There has been so much change in the past decade that almost every major business seems to be maxed out in terms of their ability to manage it. Could the next big thing be a revolt against so much change? Will it finally stop?” This interviewer was having a ’90s flashback. When e-business was a buzzword and quantum change seemed to be everywhere, we figured the pace would eventually slow down. We know better now. Anyone who thinks the pace of change will slow down is either naive or is sitting on a tropical island somewhere. In real life, change is going faster than ever. The good news is that organizations from Google to our major political parties are getting much better at harnessing and even accelerating the change beast. The agile execution of transformative change has become part of today’s core competitive toolkit. What is happening right now in the world of enterprise transformation is different from and better than anything we have seen prior. From the boardroom to R&D, we are seeing Program Management Offices (PMOs) and Centers of Excellence (COEs) sprouting with ever-higher levels of executive sponsorship. We are seeing rigorous transformation methodologies supported by more fluid and inclusive company cultures. We are seeing leadership pipelines increasingly lined with soft skills. New models of business transformation and change management are finally taking center stage and they are being granted significant investment. Now that many market-leading companies are banking their strategies on strong change management and business transformation capability, we can begin to identify their common denominators. While every transformative initiative is as unique as the organization and people who lead it, some having well-funded program organizations and change methodologies, and some with only the passionate drive of a determined sponsor and few formal resources, those that succeed share a finite set of winning characteristics. We have identified three consistent characteristics of today’s most change-ready organizations: 1. Big Small Leadership 2. Performance Obsession 3. The Balancing Act 36

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formation Success Practices Figure 1: Leadership Maturity Index Very Big

Power by the People

Bigger More Complex

Scale and Complexity

Very Complex

All About Teams Leveraged Hierarchy Senior Power Team

One Person Show

Individual Contributors

Small

Leadership Focus

Very Simple

All About Me

All About Them

BIG SMALL LEADERSHIP Everywhere we look, we are finding that really big leadership is really small. That is to say that really successful, innovative companies are figuring out how to move beyond charismatic executive leaders and past the leveraged hierarchies and power teams of the ’90s and ’00s and are starting to capture markets and customers by harnessing the ideas and contributions of thousands of individuals. As organizations strive to deliver ever more innovative products and services to ever-expanding markets, they are learning to balance the need for standardized processes and high-powered leadership with cultures of individual freedom and agile business execution. To enable this focus on the individual performer, today’s winning organizations are using a leadership model that requires more humility, less bravado, and very strong emotional intelligence and talent management skills.

If you are a CEO, a transformation program leader, or an individual in one of today’s marketleading companies, you either achieve measurable results within an acceptable time frame or you don’t. And if you don’t, you will very likely be voted off the island by the board, your shareholders, or your boss. This is why having an acute case of performance obsession is a good thing for anyone leading a transformation initiative. Obsession is good. If you can’t get obsessively excited about your goal, you will never have the energy and fortitude required to transform yourself or your business. And if you are not passionate about the transformation, why bother? And then why should your co-workers or your employees bother? If you don’t care, they won’t care. It’s that simple. MWORLD FALL 2012

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CHART: COURTESY OF BARBARA SHANNON

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“Pierre Omidyar, founder of eBay, is a great example of a transformative leader who understands how to blend big/small leadership with an obsessive focus on performance.” So let’s say you are staying awake at night thinking about your transformation program. Be sure you are obsessing about the right things, such as identifying root cause success metrics and narrowing down your objectives to the essential vital few that will make all the difference. Think about how you can go above and beyond to get the very best talent into key leadership positions. Make consistency, accountability, and the pursuit of excellence hallmarks for you and expect them of others. Obsessively communicate and solicit ideas and feedback. Refuse to let up until you reach your goal. You will be tired, but energized by your passion. Your team will be stretched and they will discover strengths they did not know they had.

THE BALANCING ACT Now for the really hard part: balancing and simultaneously delivering Big/Small Leadership while being obsessively performance driven is counterintuitive to say the least. It can be not unlike trying to pat your head while rubbing your stomach. Many superstars have faced this challenge and failed. Many high-potentials have been told that their careers will go no further if they cannot morph from obsessive, decisive, directive, performance-driven alpha men and women into sensitive, humble, yet inspiring developers of individual talent. This is a move of the highest degree of difficulty and it is the final key to the door of transformative leadership. Pierre Omidyar, founder of eBay, is a great example of a transformative leader who understands how to blend big/small leadership with an obsessive focus on performance. In 1999, less than a year after the company went public, eBay suffered a series of extended outages. One outage lasted over 22 hours. Omidyar moved quickly to regain customer confidence. The company called over 10,000 of its top customers to apologize and assure them that everything possible would be done to prevent outages in the future. Yet, when seeking to foster innovative ideas that would keep eBay afloat through the dot-com bust of 2000, Omidyar described himself as “the guy who asks dumb questions,” to signal to his people that there were no dumb questions, and to keep digging deeper for better and better product and service ideas. Truly understanding that your performance goals are woven together with the dreams, fears, and needs of your employees and your customers is the key to finding this delicate balance. Omidyar understood that any idea he might come up with could not propel eBay to the level of market-leading success. He knew he needed the ideas of hundreds if not thousands of his people to make the company truly great. Obsess about your big transformative idea. Focus on the vital few levers necessary to make it happen. And obsess about how to find, inspire, position, and challenge your people to make it happen. If you can marry your performance obsession with an equal measure of passion for your people, you will transform not only your business, but yourself and your people along the way. MW Barbara Shannon is a transformation management expert and author of The DNA of Great Corporate Change (Sutton Hart), and tames the chaos of transformation at some of the world’s most visible companies. For more information visit www.barbarashannon.com

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Good Communication Boosts Manufacturers’ Bottom Line BY DEL WILLIAMS

Mishandling communication can cost a manufacturer, from missed orders, quality issues, and running out of material to increased scrap, absenteeism, and turnover, to misunderstanding customer need and selling the wrong product. Separate silos of information can arise between functional departments, to the point where it’s almost necessary to introduce engineering to production and sales to accounting. Weak growth, profit, and morale can result, prompting the founder-owner or president of many small to midsized American manufacturing companies to question what can be done to narrow the gap between their original entrepreneurial vision and today’s frustrating reality. While communication is typically considered a “soft skill” that’s often overlooked in machinefilled manufacturing plants focused on production, many of the ills in manufacturing are actually symptoms of poor communication. Once better communication is established, the manufacturer’s bottom line can often increase by 10% or more very quickly. “Manufacturers have focused so much on cost reduction that they’ve taken their eye off their people,” says Bill Flint, president of Flint Strategic Partners, a Midwest-based full-service business consulting firm headquartered in Goshen, Indiana, specializing in helping small to midsized manufacturers improve their results. “Too often the focus is on tasks, rather than on the people who do the tasks,” adds Flint, who rose through the ranks to become president of two manufacturing firms in almost 40 years of MWORLD FALL 2012

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industry service. “But today communication is more important than ever because companies are operating with fewer people to reduce cost. People are busier, and have less time to plan and tackle the big issues they’re facing. Yet if corporate leaders simply give orders without taking time to listen and communicate, they miss golden opportunities to make their operations more profitable.”

THE FACTORY FLOOR Poor communication can create unending production, quality, and personnel problems, particularly if training and feedback are shortchanged from the start. Some manufacturing firms are so eager to put people to work, for instance, that new hires can find themselves operating complex equipment within 30 minutes of being hired. Flint recalls the dilemma of one such frightened new hire: “My supervisor worked with me for three minutes, showed me how to make a good part, then stuck a picture of a bad part in front of me,” said the new hire. “My supervisor said, ‘This machine costs $1 million. Don’t screw it up and try not to make any bad parts.’ I haven’t seen him since.” “Imagine a football coach telling 80 new recruits, ‘We’re not going to practice this year,’” says Flint. ‘I think you are as good as you will ever be, so here’s the playbook, you figure it out, do what you need to, and we’ll all meet back here for Saturday games.’ That’s what some manufacturers do with inadequate on-the-job training, and it’s a recipe for disaster.” One simple solution to improve communication and training for new hires is to pair them with an experienced “buddy,” who can answer any questions, have lunch with them, and introduce them to others until they’re comfortable in their new position. Such an approach has significantly reduced employee turnover and absenteeism among new hires at one manufacturer, while improving part quality, according to Flint.

MIDLEVEL MANAGERS The biggest career killer in manufacturing is continuing surprises and variability, according to Flint. “Without good communication, production becomes a daily fire drill where the focus is on getting parts out the door,” says Flint. “Too often a line manager will say, ‘We didn’t make the parts that were supposed to ship at 7:00 a.m. The customer is on the line and wants to talk with you.’ One call can change the whole day’s production schedule, particularly at small to midsized manufacturers.” Many line and midlevel manufacturing managers actually have the best hands-on technical production skills at their companies but got promoted into management to increase their pay, according to Flint. “But being good with your hands does not necessarily mean that you’re good as a manager,” he points out. “Communication and leadership are different skills that need to be developed.” Manufacturers would do better to first ask their technical production stars, “If you could make the same money, would you take this promotion into management or stay where you are?” continues Flint. “Otherwise, many will later find themselves ineffective and miserable at managing others, rather than working with machines and equipment. Those who do make the jump to management will still need some help learning how to effectively communicate, delegate, and lead people.” 40

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“From Flint’s experience running manufacturing companies … he’s found that ‘people on the production floor know what the problems and issues are because they’re closest to the action.’” THE FOUNDER-OWNER The founder-owners of many small to midsized manufacturers often started the company based on their technical ability, then recruited others to support them, according to Flint, who has met many founder-owners over the years both as a manufacturer and manufacturing consultant. “The strength of those who start manufacturing firms is often in technical areas such as working with machines and parts, not communication,” says Flint. “Because of this, communication gaps can occur throughout a company, particularly between departments, if the founder-owner relies on others to convey his or her vision, or is ineffective asking for and giving feedback.” From Flint’s experience running manufacturing companies, including one that he helped to grow from $21 million to $125 million with 10 facilities, he’s found that “people on the production floor know what the problems and issues are because they’re closest to the action.” Every day, for instance, the production floor crew knows which machines are producing excess bad parts or scrap, which machines need maintenance, which materials have run out, which suppliers are continually late, as well as who’s effective or not as a work teammate. “One of the best ways to tap into the collective wisdom of the production floor is to hold regular town-hall meetings, perhaps every quarter,” says Flint. “A good way to do this is to have a pizza lunch together and say, ‘Let’s talk about the issues. What’s getting in the way of us doing a good job? What’s your biggest challenge in this shift? What can I do to be a better leader? How can I help you?’” Perhaps the most effective way to communicate and lead is to run the manufacturing company as a servant leader, suggests Flint, whose consulting company offers four modules on improving communication for small to midsized manufacturers, with sessions available for virtually any size group. A servant leader holds himself or herself and those working for them accountable for results but asks for honest feedback on how to best help them do their jobs. It’s a classic win-win perspective. Servant leaders put people first. “By opening the lines of communication, manufacturers bring problems to the forefront and work on them proactively,” concludes Flint. “Doing so can not only minimize surprises, scrap, late delivery, employee turnover, and absenteeism, but also improve the bottom line by 10% or more.” MW Del Williams is a technical writer based in Torrance, California. For more information about Flint Strategic Partners, contact info@flintpartners.com or visit www.flintpartners.com AMA’s seminar Building Better Work Relationships will help you to discover the competencies critical to solid work relationships and to become more accepting of the differences between people. For more information, visit www.amanet.org/2235

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Five ReasonsWhy You Can’t Ignore BY WHITNEY COOK

Gamification. You may not have heard a lot about this topic yet, but you will. At a recent National Retail Federation conference, gamification was touted as the next form of social media where people and employees interact and socialize around a common bond of knowledge, competitive strategy, and fun. Right now, you are probably hearing whispers of gamification in your workplace. But in the near future, you will hear it shouted out in the hallways—loud and clear. Gamification is more than newfangled training. It is engaging employees with new knowledge that encourages competition among peers and bestows public rewards and recognition on those who excel. It can cover just about any topic: improving operations, cutting logistics costs, challenging employees to understand how their role contributes to enterprise success. Yes, in the future we will start seeing people playing games at work. Gen Y professionals have been nurtured and brought up on gaming. Gamers are everywhere: at work, at home and even in the airplane seat next to you. The last statistic I saw said that the average gamer is 37 years old. Let it be known: video games are not just for kids. At the beginning of 2012, the Oxford Dictionary added “gamification” to its official new word list. Ga.mi.fi.ca.tion (n.): the application of concepts and techniques from games to other areas of activity Industry leaders and respected innovators in the field define it a thousand other ways, but any way you slice it, gamification is trending upwards at an undeniable rate. CEOs, HR directors, operations and innovation teams across various industries are learning that integrating gaming into their companies drives performance, highlights achievement, and skyrockets engagement within their organization. The experts at Gartner predict that by 2014, 70% of global organizations will have at least one “gamified” application; by 2015, 50% of organizations that manage innovation processes will gamify them. Many of the world’s largest brands are deploying gamification. Coke, AOL, Nissan, Nike and Viacom are all jumping on the bandwagon and, as more and more studies become available, the advantages to gaming in the workplace are becoming ever more apparent. 42

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GAMIFICATION Intrigued? You should be. Here are the five undisputable reasons why you can’t ignore gamification and its potential to empower your business.

1. GAMIFICATION ALLOWS YOUR EMPLOYEES TO ACTIVELY GAUGE THEIR PERFORMANCE Those dreaded yearly evaluations. Everyone has to do them, but wouldn’t it be nice to give your employees access to real-time feedback whenever they need it? The great opportunity with gaming is that there is immediate cause and effect. If you make a wrong move in a game, you are corrected on the spot. If you make a strategically smart move, you receive immediate positive reinforcement. Gamification gives the power of feedback to the employee and accelerates knowledge. This is good for the company because it creates a more efficient and engaging way to monitor employee progress. In addition, it fosters transparency about how performance is measured and where the employee actually stands. Imagine if businesses used gamification to help streamline that information so that their employees could actually grow instead of constantly wondering, “How am really I doing?” “Is my work performance being ranked fairly?” and “How am I supposed to set goals if I have no idea what I am trying to achieve?”

2. GAMIFICATION IMPROVES KNOWLEDGE It’s no secret that most of us started playing games at a young age. Indeed, our brains are built for game play. Doesn’t it make sense for us to use the same types of techniques today in our training environment? As we all know, knowledge retention is a big part of any employee’s daily life. Training and promotion isn’t just important for the employee, it’s essential to the growth of the company. Industry expert and author of Corporate Universities Jeanne Meister asserts that interactive learning games can explode long-term retention rates by up to 10 times. That’s a pretty powerful statistic when you start talking about knowledge retention. Can you imagine how powerful your employee handbook would be if you turned it into an interactive journey rather than a cumbersome document stuffed into a binder? MWORLD FALL 2012

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3. GAMIFICATION ENHANCES ACHIEVEMENT ACROSS THE BOARD Every year, companies spend thousands of dollars sending employees to seminars, classes, training sessions—the list is endless. You might know from personal experience that one of the pros of learning is displaying our achievements through certificates on our desks, letters behind our name, and highlights on our LinkedIn page. We love to compete, to win, to receive validation. In the workplace, people are automatically judged on their knowledge, achievements, and overall reputation. Translate that into a game, and virtual badges, trophies, and level mastery become the new bragging rights of Gen Y workers. Allowing your employees to become masters of their business and creating a community that openly recognizes their accomplishments will not only grow your people, it will grow your bottom line.

4. GAMIFICATION CREATES UNPARALLELED LEVELS OF ENGAGEMENT Employees crave social interaction in the workplace. We love our lunch buddies and kickball teams, and might even go to the team-building event at the local golf course. People like to feel that they belong, that they matter, and that they are more than a cog in the big corporate machine. Gabe Zichermann, an author and the founder of the Gamification Summit, stated at a recent gaming conference in New York that “gamification can run a loyalty program that has all the bells and whistles of something like [United’s] MileagePlus, but cheaply.” Zichermann adds, “What drives loyalty is not giving away free stuff, but status and recognition. People are very into status once they achieve it, and they don’t want to lose it.” Gaming creates a virtual world where you can be productive and still have fun. This is good for your business because it fosters innovation, productivity, and fun, which inevitably enhance the work environment. Studies have shown that happier people equal higher revenue. In a 2011 field study conducted by Saatchi & Saatchi S, 55% of respondents who were employed said that they would be interested in working for a company that offered games as a way to increase productivity. Additionally, out of five different gaming options available, respondents said they preferred a probability or guessing scenario where you could play against opponents to win points.

5. GAMIFICATION REINFORCES LEARNING AND DEVELOPMENT It’s not surprising that many companies are embracing gamification to encourage innovation among their employees. In his blog, Gabe Zichermann describes the crowd-sourcing game Foldit, developed by the University of Washington. In 2011, 46,000 people worked for just 10 days to solve the secret of a key protein that scientists believe may lead to a cure for HIV. Researchers had been working on the problem for 15 years. This is a big deal! You may not be searching for a cure to a deadly disease, but creating and fostering innovation within your company is essential in today’s marketplace. Reinforcing learning and development within your team will not only foster a productive work environment, it will also create opportunities for expansion and job security for employees down the road. MW Whitney Cook joined the Inward Strategic Consulting team with over seven years of agency experience servicing some of the world’s largest brands in the consumer package goods industry. For more information, contact whitney@inwardconsulting.com or visit www.inwardconsulting.com AMA’s seminar Play to Win: Using Gamification to Solve Managerial Challenges gives you the opportunity to experience how gamification can lead to transformation in your workplace. For more information, visit www.amanet.org/2169

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TOP SHELF

How to Influence Your Colleagues BY JOHN BALDONI

One of the challenging aspects of leadership, if not the most challenging, is leading one’s peers. When you have the authority to lead, you can rely upon your position to exert authority. But when you are challenged to lead others at your own level, you must rely upon the power of your purpose that is, what you want to accomplish. Since few leaders do anything by themselves, it is necessary to build a coalition of willing partners who believe in your cause—and what’s more, believe in you. Those who are effective in leading peers are the ones who radiate competence, credibility, and confidence. In other words, they are good at what they do, others trust in those abilities, and they inspire confidence in others because they believe it themselves. The toughest aspect of management may be to persuade others to go along with them when they have no authority over these individuals. We as team leaders must do the very same. Say you are challenged to implement an initiative across multiple functions. What will you do? Do your research. Find out what your colleagues in different functions think about the initiative. Some may oppose it for any number of reasons. Make your argument. Demonstrate how the initiative will make things better in the long run. Acknowledge short-term pain for longer-term gain. Argue the business case. Listen, listen, listen. Pay attention to what your colleagues are telling you. Let them digest the change but listen to how you can adjust the initiative to meet their specific requirements. Push hard. If this initiative is important and if senior management is counting on you to drive it through, keep on it. Follow up. This is critical. Make it known up front that you will be available to help implement the initiative. You, or your staff, will help the project team get the new initiative up and running. Throughout, lead, don’t manage. Management is a discipline that must buttress every successful organization; things must be accomplished with people, MWORLD FALL 2012

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resources, schedules, and budgets. At the same time, the top person must not be involved in all these details. He or she must lead but empower others to manage. Enable others. Successful people are good at what they do, which is why they have a tough time handing off tasks to others. Type A managers never let up; they revel in micro-management. Sadly, they drive good people away—and as a result, they must do more and more. But savvy leaders learn to break this cycle. Step back and let others manage not just the details, but also the decisions. Take joy in others’ success. Achieving personal success lies at the heart of ambition. But for a leader, personal success isn’t really possible unless the whole team wins. When your team achieves an important goal, celebrate! Take personal satisfaction from seeing the people you have recruited and groomed succeed. Such personal satisfaction is important not only to keep your team feeling appreciated, but also to enrich your own life. There is one more thing that leaders who aspire to delegate more must do: Drop the hero act. This one is tough. When you do so much well, it can be tempting to think you do everything well. Trust me, many successful people I know truly believe they are good at everything. Acknowledging limitations may be easy for mere mortals to do, but it is hard for executives who have either built a company or risen to the top of a large organization. MW Excerpted, with permission of the publisher, from The Leader’s Pocket Guide: 101 Indispensable Tools, Tips, and Techniques for Any Situation by John Baldoni. Copyright 2012, John Baldoni. Published by AMACOM. For more information, visit www.amacombooks.org John Baldoni, president of Baldoni Consulting LLC, is an internationally recognized executive coach, speaker, and author. In 2011, Leadership Gurus International ranked Baldoni No. 11 on its list of the world’s top leadership experts. He is a regular online contributor to CBS MoneyWatch and Harvard Business Review.

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Are You Ready—Really Ready—to Raise Capital? BY ANDREW SHERMAN

Whether your organization is a fledgling startup, a rapid growth company, or a more established organization, the only way to take your business to the next level is to gather the funds you need to fuel growth. Not only is capital the lifeblood of a growing business, but it is also the lifeblood of our economy. When its flow stalls, our progress stalls. And when small and entrepreneurial companies cannot gain access to capital at affordable costs, we all suffer. When small companies do not have the access to the resources they need in order to grow, our nation cannot grow. If entrepreneurial leaders are too concerned with what new crisis, burdensome regulation, budget deficit, tax hike, or economic downturn may await them to make any new hiring, growth, or capital investment decisions, we are destined to be in a perpetual recession. Virtually all capital-formation strategies (or, simply put, ways of raising money) revolve around balancing four critical factors: risk, reward, control, and capital. Risk. The venture investors want to mitigate their risk, which you can do with a strong management team, a well-written business plan, and the leadership to execute the plan. Reward. Each type of venture investor may want a different reward. Your objective is to preserve your right to a significant share of the growth in your company’s value and any subsequent proceeds from the sale or public offering of your business. Control. It’s often said that the art of venture investing is “structuring the deal to have 20% of the equity with 80% of the control.” But control is an elusive goal that’s often overemphasized by entrepreneurs. Venture investors have many tools to help them exercise control and mitigate risk, depending on their philosophy and their lawyers’ creativity. Only you can dictate which levels and types of controls may be acceptable. Capital. Negotiations with venture investors often focus on how much capital will be provided, when it will be provided, what types of securities will be purchased and at what valuation, what special rights will 46

attach to the securities, and what mandatory returns will be built into the securities. You need to think about how much capital you really need, when you really need it, and whether there are any alternative ways of obtaining these resources. Virtually all equity and convertibledebt deals, regardless of the source of capital or stage of the company’s growth, require a balancing of this risk/reward/control/capital matrix. The better prepared you are by fully understanding this process and determining how to balance these four factors, the more likely it is that you will strike a balance that meets your needs and objectives. These components include a focused and realistic business plan (which is based on a viable, defensible business and revenue model); a strong and balanced management team that has an impressive individual and group track record; wide and deep targeted markets that are rich with customers who want and need (and can afford) the company’s products and services; and some sustainable competitive advantage that can be supported by real barriers to entry, particularly barriers that are created by proprietary products or brands owned exclusively by the company. Finally, there should be some sizzle to go with the steak. This may include excited and loyal customers and employees, favorable media coverage, nervous competitors who are genuinely concerned that you may be changing the industry, and a clearly defined exit strategy that allows your investors to be rewarded within a reasonable period of time for taking the risks of investment. MW Excerpted with permission from the publisher from Raising Capital by Andrew J. Sherman. Copyright 2012, Andrew J. Sherman. Published by AMACOM. For more information, visit www.amacombooks.org Andrew J. Sherman is a partner in the Washington, D.C., office of Jones Day and an internationally recognized authority on the legal and strategic issues of emerging and established companies. American Management Association

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Build a Circle of Trust BY CHRIS KOMISARJEVSKY

The steps to earning trust involve sharing praise and success for a job well done. That kind of sharing communicates a sense of partnership, support for mutual goals, and respect for everyone’s role, regardless of any individual’s seniority or stature. Earning trust is a never-ending and vital process, especially in a world where skepticism reigns. Here are some tips for how to do it. ᔢ Learn from those around you. Each person has a lot to offer. See them as among the most discerning people in the world, with deep experience. Recognize them as professionals whose input is critical to your task. They are intelligent, probing. Don’t be quick to rush to judgment and dismiss what they have to say. You likely will learn a lot. ᔢ Ask the people you work with to be your closest allies and your fiercest critics, all at the same time. The more open you are with them, the more they will believe that you care and give you their support. If you want their honest opinions and want to hear their views, they will know you trust them. They will live up to the challenge at hand even when the going gets tough. ᔢ Be open to comments, in-depth questions, and criticism … and keep your body language in check. Don’t react negatively, either by word or action, when you hear something you didn’t expect or don’t agree with. It might be tough at times not to succumb to your instinctive reaction and frown or look away in disdain, but avoid that at all costs. Your open approach to questions demonstrates confidence in yourself and trust in your team. ᔢ Demonstrate your personal commitment. As every good soldier knows, you lead from the front. Everything you do and say should communicate that you will take the first step and you don’t ask anyone to do anything you wouldn’t do yourself. If you are committed—and clearly communicate your commitment—then the team will be committed too. ᔢ Take the time to fully explain your thinking. When you pay attention to the details, you can make major inroads into a trusting relationship with the MWORLD FALL 2012

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people around you. They will know that you thought about your decisions carefully and, even more important, they will know that you cared enough about them to take the time to provide a complete explanation of your thinking. ᔢ Speak from conviction. Say what you want to say and say it with emotion … with feeling. People want to know you are concerned. ᔢ Share the leadership role. Rotate assignments so that others who have proved their potential have the chance and the challenge of taking on necessary highprofile projects. Don’t have any preconceived notions. Give them the opportunity to prove themselves. ᔢ Expect nothing but the best. Clearly lay out your expectations and let everyone rise to their full potential. People can accomplish more than you think. Look for, expect, and reward outstanding performance. More often than not, people will surprise and impress you with their ability. ᔢ Use every bit of the digital technology available to you, and use it wisely. Understand the impact of communication in the digital age. The Internet, blogs, social media, websites, and the dramatic speed at which information and news travel have all had an extraordinary impact on perceptions of trust and, therefore, reputations. Learn to use those techniques. In short, there is no lasting reputation without a circle of trust among those with whom we deal in our careers. That focus on trust must be reflected each and every day in our words and our actions. MW Excerpted with permission of the publisher from The Power of Reputation: Strengthen the Asset That Will Make or Break Your Career, by Chris Komisarjevsky. Copyright 2012, Chris Komisarjevsky. Published by AMACOM. For more information, visit www.amacombooks.org Chris Komisarjevsky retired as worldwide CEO of BursonMarsteller, one of the world’s leading global public relations and public affairs firms, in 2005 after a 35-year career in public relations. He is the coauthor of Peanut Butter and Jelly Management.

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OUR VIEW

The Balancing Act: Operational Stability and Innovative Development Maintaining balance in tumultuous circumstances is a leader’s job. Post-Fall 2008, many businesses went into lockdown. Their strategy: survive by focusing solely on standard products and practices. But this “safe route” was anything but in the long run, according to Howard M. Guttman in Moving from Risk to Reward. Guttman writes, “It’s difficult to build a vibrant, successful organization on fear. The greater the risk aversion, the more likely you’ll remain in the storm cellar, and the more likely there will not be much left when you emerge. Powerful leadership is the best antidote to organizational fear.” We must move forward even when we are afraid. We have to act on those strategic plans that offer new streams of business while simultaneously managing our core operation. So how do we balance operational sustenance with innovative development? We need excellent managers schooled in the block-and-tackle operations of running a business and we need leaders willing to take a risk on the next great idea. Ideally, this manager and leader are the same person. An individual who understands the numbers side of his business while seeing the necessity for innovation. Such a well-rounded individual is hard to find. The next best thing is having a company culture where the operational managers and organizational innovative leaders are aware of the necessity of the other, and work together in concert and mutual support for the benefit of the larger organization. Nancy Fredericks speaks to this balance in Change—Don’t Fall Prey to “Too Little, Too Late.” She writes of the dangers of putting too much emphasis on disruptive change or too much on operational stasis. She cites Encyclopedia Britannica and its 244 years of an uncontested business model that could not hold up against the overnight digital age. When they finally did adapt, like Kodak, it was “too little, too late.” In summary, the article speaks to the importance of both a consistent operational model and a culture that encourages change. At AMA, when we think of “powerful leadership,” we consider the subtle balance between operational efficiency and the dynamic creativity that produces innovation. Striking out without a plan is foolish. But not striking out at all is dangerous. Operational excellence and innovative action are tools that go together. Each is accessed from a different part of the brain and different people have strengths in different areas, but a company is one entity that fails or succeeds as one. The sooner companies learn the method to best access both skill sets cooperatively, the more successful they will be.

Edward T. Reilly President and CEO American Management Association

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MWORLD FALL 2012


UNLEASH MINDS. ACHIEVE RESULTS.

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MWorld Fall 2012  

The Journal of the American Management Association. American Management Association is a world leader in professional development, advancing...

MWorld Fall 2012  

The Journal of the American Management Association. American Management Association is a world leader in professional development, advancing...

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