harvard business review january 2012

8/2/2019 Harvard Business Review January 2012

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Harvard Business Review January 2012The theme of this issue is The Value of Happiness - How employee Well Being drivesprofits. I think it a great issue and have always sought to create happy environments

where personal growth and satisfaction are central and are seen as preconditions to

good business results. Common to all business in my view is that they are aboutdelivering units of happiness (and satisfaction) or alleviating agony such as in medicine

and pharmaceutical business. It is obvious to me that this goal cannot be fully achievedunless the whole production chain be it in goods or services is characterized byhappiness and happy participants. This is now being scientifically proven. You can of

course argue why it should be necessary to prove that happiness is worth striving for

when it is such a central human aspiration. However, for those who cant see the value,some solid proof may perhaps be helpful. A few notes from the issue:How Leaders Spark and Sustain Change by Peter Fuda and Richard Bradham. In studyinghow ineffective CEOs transformed themselves into successful leaders, the authors

found common themes, which they describe with four metaphors. Fire representsburning ambition, a motivator that is far more important than fear. A snowballshould be

a cycle of mutual accountability that creates momentum for change. Naming

your mask or revealing the persona you believe conceals your flaws, allows you to beauthentic. The movie metaphor captures the idea of self-reflection: You should view,

replay, direct, and edit your behavior continuously.

Social Strategies That Work George Eberstadt. Successful social media is like thedifference between teaching a class and hosting a party. In both cases all theparticipants are in the same room, but the dynamic could not be more different. In the

class room the teacher (the brand) dominates the conversation, and the flow is hub and

spoke, with the teacher at the hub. At the party the guests (customers and prospects)may or may not interact directly with the host, spending most of their time with one

another. But since most of the guests know and like the host, most of the comments arelikely to be favorable. Even though the host cannot control exactly what is said, the

guests at the party are every bit as likely to go home withpositive feelings towards theteacher.

How much inequality is necessary for growth? By Fuad Hasanov and Oded Izraeli.Reducing inequality has clear benefits over time: It strengthens peoples sense thatsociety is fair, improves social cohesion and mobility, and broadens support for growth

initiatives. Policies that aim for growth but ignore inequality may ultimately be self-

defeating, whereas policies that decrease inequality by say boosting employment andeducation have beneficial effects on the human capital that modern economies

increasingly need.

When naming a CEO, Ignore the Market Reaction by James M Citrin. This article showshow appointments which lead to first day share price hikes often end up indisappointments. And appointments that lead to first day falls work out to be long termsuccesses. This may reflect investors imperfect understanding of the highly specificchallenges facing companies, their unrealistic expectation that new leaders will act as

saviors, and their unawareness of the nuanced capabilities of many new CEOs.

Candor, Criticism and Teamwork by Keith Ferrazzi. Lack of candor leads to longer cycletimes, slow decision making and unnecessarily iterative discussions! A too polite veneer


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often signals an overly politicized workplace; People who are afraid to speak honestly topeoples faces do it behind their backs. This behavior exacts a price. Reme dy; 1. Breakmeetings into smaller groups. 2. Designate a Yoda one or two to be the official

advocates of candor. 3. Teach "caring criticism."

Stop Tying Pay to Performance by Bruno S. Fray. Unlink pay from performance. Theevidence keeps growing that pay for performance is ineffective. It also may induce

executives to take company-killing risks. There are other ways to motivate employees

that yield better results at lower cost. In USA CEO compensation has sky-rocketed whileits correlation with actual corporate performance has remained as weak as ever. All

variable-pay-for-performance suffer from four inescapable flaws: 1. In a modern

economy, where new challenges emerge constantly, its impossible to determine thetasks that will need to be done in the future precisely enough for variable pay for

performance to work well. 2. People subject to variable pay for performance dontpassively accept the criteria. They spend a lot of time and energy trying to manipulate

the criteria in their favor, helped by the fact that they often know the specifics of their

work better than their superiors do. 3. Variable pay for performance often leadsemployees to focus exclusively on areas covered by the criteria and neglect other

important tasks. 4. Variable pay for performance tends to crow out intrinsic motivation

and thus the joy of fulfilling work. Such motivation is of great importance to business,because it supports innovation and encourages beyond-the ordinary contributions.

Variable pay for performance, while it may seem attractive in theory, creates more

problems than it solves. There is no proof that it helps achieve its intended purposes,

and other approaches not only work better but also strengthens employee loyalty.

Runaway Capitalism by Christopher Meyer and Julia Kirkby. Any manager who has hadto design a compensation scheme knows this; as often as not, bonuses end up rewardingbehavior contrary to the organizations espoused mission and values. There is no more

powerful question in the US corporation than "Whats the ROE on that?" Social mediaspending? Wellness checkups? Better working conditions? Elimination of bribes

overseas? Return-on-equity hurdles threaten them all. Conversely, why market

cigarettes? ROE justifies the means. The overall objective of commerce in society must

be to better peoples welfare!Enormous political weight is given to GDP and GDP per

capita, but very little to the many other indicators of value creation. Rankings of crime,

education, health, and happiness have only recently become available, and no onesbonus depends on them.

Please note that no firm actually wants to compete. Individually, all firms seek a so-called sustainable advantage, which is to say the relief from competitive pressure that

allows for ample margins, innovation on their own schedule, the pick of the graduatingclass, and many other perks. In our competition-obsessed business culture, the way to

defend oligopoly is to spend money to deter entry by new competitors. Fixation on

competition leads to failure to notice and to cultivate and preserve an equally richsource of innovation in our newly connected world: collaboration.

With some simple shifts in perspective, capitalism can evolve and centre on new

pursuits that reflect societys broader goals and doing so, bring its selection process

back into alignment. Capitalism can adapt and continue to thrive. Competition, still verymuch part of the system but unseated from its central position, moves over to allowfor collaboration. Or suppose the pursuit of financial gain were not really the heart,


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much less the soul, of capitalism. Suppose capitalism really centered on the pursuit of

valuethe greatest good for the greatest number.

It is almost impossible to change habits of mind in an incumbent firm, even whentheres a compelling logic to do so. People tend to cling to the rules they grew up with.

In 2000 more than of world GDP was accounted for by the rich countries. By 2050

that number is expected to fall to 32%. With 85% mobile phone ownership andspectacular population growth emerging economies are likely to dominate the world

scene in 2050. Those of us who believe capitalism can adapt and should not succumb to

the excesses that are crippling it will keep looking for new markers of fitness andsharing the new rules. Collectively we are capable of setting the new rules of capitalism.

The Economics of Well-Being, Have we found a better gauge of success than GDP by JustinFox. GDP is under siege for three main reasons. One is that, even on its own terms, it is

flawed: It misses lots of economic activity (unpaid household work, for example) and, as

a single-number representation of vast, complex systems, is inevitably skewed. Anotheris that it fails to factor in economic and environmental sustainability. Finally, existing,

readily available measures educational achievement, life expectancy, and so on mayreflect well-being far better than economic output does. Top Countries by Human

Development, adjusted for inequality: Norway, Australia, Sweden, Netherlands, Iceland,Ireland, Germany, Denmark, Switzerland and Slovenia.

The Science Behind the Smile by Daniel Gilbert. Happy people are more creative andmore productive. Has there ever been a human being whose misery was the source ofhis creativity? I know of no data that says that anxious fearful employees are more

creative or productive. People blossom when challenged and wither when threatened. If

I wanted to predict your happiness and could know only one thing about you, I wouldnot want to know your gender, religion, health or income. Id want to know about your

social network about your friends and family and the strengths of your bonds withthem. Achieving happiness requires the same approach as losing weight. To lose weight

you need to eat less and exercise more. You dont have to eat much less or exercise

much more you just have to do it consistently. Over time it adds up. Happiness is likethat. The things you can do to increase your happiness are small and take just a little

time. But you have to do them every day and wait for the results.

Creating Sustainable Advantage by Gretchen Spreitzer and Christian Porath. If you giveyour employees the chance to learn and grow, they will thrive and so will your

organization. Thriving people reported 16% better performance and 125 % lessburnout (self-reported) than their peers. They were 32% more committed to their

organization and 46% more satisfied with their jobs. They also missed much less workand reported fewer doctor visits, which meant health care savings and less lost time for

the company. Companies generate vitality by giving people a sense that what they do on

a daily basis makes a difference. People who are learning are likely to be more confidentabout their future growth.

Southwest Airlines is a well-known story, largely because of the companys reputation

for having a fun and caring culture. Flight attendants are often eager to sing, joke

around, and in general entertain customers. They also radiate energy and passion for

learning. (Southwest has consistently outperformed all competitors for a long time).


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How the Growth Outliers Do It by Rita Gunther McGrath. Only 8 % of 4,793 companies(in a worldwide sample of companies with sales exceeding one billion USD) grew theirrevenues by at least 5 % a year and only 4 % achieved income growth of 5 % in each of

last five years. Over ten years, only 10 qualified and only five grew both revenues and

income by 5 % each year. There is a great contrast between what investors and

observers expect and what the vast majority of companies deliver. The data suggest aneed to rethink assumptions about corporate performance. Steady consistent growth is

difficult to achieve even at modest rates, never mind by double digits that corporateleaders are fond of promising. (in his book

Exile on Wall Street the author Mike Mayo says that the two banks with the highest

growth ambitions, Citi and First Third, had the poorest stock price performance mycomment)

The growth outliers do a tremendous amount of experimentation and innovation. They

develop and deploy technologies, move into new markets, explore new business models,

and even open up new industries. They take on acquisitions and aggressively seek inputfrom people and organizations quite unlike their own. They rapidly adjust and readjust

resources and are comfortable moving executives and other employees from one role to

another. Outliers favor adaptability over pure efficiency, even though it occasionallyleads to less-than-perfect outcomes. They focus management attention on culture and

shared values. "When we decide to get out of something, we slow down allocatingresources to it. You dont need to chop it off you need to let it live its life. Since we are

in talent business, it is easy for us to repurpose the leadership and the talent."

The outliers keep their senior leadership stable. All ten companies had internally

promoted CEOs; there were no white knights or outside-the-industry saviors.

Interestingly - and consistent with the findings of other researchers over the years these CEOs kept a low profile. They were respected, known to have made major

contributions, and somewhat visible in the press, but not charismatic (or narcissistic).The five leaders we had the pleasure to meet with were all low-key, courteous and

attentive.

Some companies are investing in their workers and reaping healthy profits by ZeynepTon. Almost one-fifth of American workers have bad jobs. They endure low wages, poor

benefits, schedules that change with little, if any, notice, and few opportunities foradvancement. Highly successful retail chains have demonstrated that even in the

lowest-price segment of retail, bad jobs are not a cost driven necessity but a choice.Many retailers see staff as a cost driver rather than as a sales driver and therefore focus

on minimizing its costs. When retailers view labor not as a cost to be minimized but as a

driver of sales and profits, they create a virtuous cycle. Investment in employees allowsfor excellent operational execution, which boosts sales and profits, which allows for a

larger labor budget, which results in even more investment in store employees.

Dividing attention deliberately by Cathy Davidson. We all know the story ofcontemporary distractions. In the past decade the world has gone from a total of 12billion emails a day to 247 billion, from 400,000 texts messages to 4.5 billion, fromindividual weekly 2.7 hours on the net to 18 hours. Research shows that accident,

disruption, distraction, and difference increase our motivation to learn and to solveproblems, both individually and collectively. The key is to embrace and even encourage


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interruptions. In future, continuous partial attention will perhaps be seen not as aproblem but as a critical new skill. And maybe we wont call itmultitasking well call it

multi-inspiring.

harvard business review january 2012

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