Источник
Выбор редакции
11 декабря, 19:49

Why It’s So Hard to Sell New Products

  • 0

Thomas Steenburgh, a marketing professor at the University of Virginia Darden School of Business, was inspired by his early career at Xerox to discover why firms with stellar sales and R&D departments still struggle to sell new innovations. The answer, he finds, is that too many companies expect shiny new products to sell themselves. Steenburgh explains how crafting new sales processes, incentives, and training can overcome the obstacles inherent in selling new products. He’s the coauthor, along with Michael Ahearne of the University of Houston’s Sales Excellence Institute, of the HBR article “How to Sell New Products.” Download this podcast

Выбор редакции
11 декабря, 15:00

Research: When Overconfidence Is an Asset, and When It’s a Liability

  • 0

W. Wayne Lockwood, M.D./Corbis/VCG/Getty Images What happens to people who are overconfident? Are they generally rewarded, promoted, and respected? Or do we distrust them and avoid collaborating with them? Our research suggests it may depend on how they express confidence. One way people express confidence is verbally. We make specific, numeric expressions of confidence in our judgments, such as when making probabilistic forecasts (e.g., I’m 90% sure), or when estimating our performance relative to others (e.g., I’m in the top 10%). Much of the research on overconfidence looks at verbal expressions of overconfidence, because these can more clearly be compared to actual performance and outcomes. But this is not the only, or even the most common, way that people express confidence. There are a number of nonverbal things we do, using body language and tone of voice, to appear confident. For example, people who feel confident tend to act dominant—speaking boldly and loudly, at a rapid pace, and starting the conversation with their own opinion. They may also nod their head for emphasis and generally have a larger presence in the room. They are seen as powerful, and others defer to them. These nonverbal expressions of confidence aren’t always perceived accurately, however, as things like culture and context can lead to different interpretations. Both channels of communicating confidence, verbal and nonverbal, can be extremely effective at garnering positive attention and influence in groups. According to one hypothesis (the presumption of calibration hypothesis), we generally assume others have the self-knowledge to know how confident they should be, and we also assume they will truthfully communicate this confidence to us (the so-called truth bias), unless extenuating circumstances suggest otherwise. So whenever we encounter confidence, we tend to find it compelling, and we expect it to be justified. Sometimes though, we find out information that suggests someone was actually overconfident and makes us second-guess our initial view. Maybe they said they were extremely sure, or their body language exuded confidence, and it turned out they were wrong. Here, the research has been mixed about the consequences of overconfidence. Some research has reported that being overconfident while participating in a group activity did not damage the person’s reputation. Individuals who had acted confident about their task performance, but were later revealed to be worse at the task than they had claimed, did not suffer a severe drop in their social status in the group relative to someone who had been well-calibrated. The researchers concluded that “the status benefits of overconfidence outweighed any possible status costs”. But other research, using vignettes or videos of people, found that eyewitnesses and job applicants who verbally stated their confidence level to evaluators did take a large reputational hit once additional information suggested they had been overconfident. For these individuals, it seems they could have saved their credibility by being more modest. In a series of studies recently published in the Journal of Personality and Social Psychology, we teamed up with other researchers to investigate why some of us had previously observed that overconfidence could be a liability, while some of us had found it was not. We noticed a pattern in the existing research: that the confidence expressions in studies on in-person groups were primarily nonverbal; whereas in studies with vignettes or videos, they were primarily verbal. So we tested whether the way confidence was expressed was what determined the consequences of being overconfident. In our first study, we asked 444 online participants (mTurkers) in the U.S. to choose between two candidates to collaborate with on a task–one who was confident and one who was cautious. Participants overwhelmingly selected the confident candidate, regardless of whether confidence was described using verbal statements from the candidates, or was inferred from how the candidates carried themselves on recorded video. Then participants received performance information that could help them detect overconfidence; they found that, despite their confidence, all candidates were equally mediocre at a pre-screening version of the task. After this revelation, now the channel by which confidence was communicated made a difference. If the candidate had expressed confidence verbally, the candidate suffered a big blow to reputation and lost the advantage; fewer people selected them as collaborators compared to the cautious candidate. However, if the candidate had expressed confidence nonverbally, this candidate kept the advantage. We repeated this study with male and female candidates, and with two different types of tasks (an emotional IQ test and guessing strangers’ ages from photographs). We observed the same pattern of results. Confidence was always beneficial to a candidate initially, but if the candidate’s performance did not live up to expectations, then the channel of communication became a deciding factor in the candidates’ desirability as a collaborator. In a follow-up study, we replicated this finding with 256 undergraduate participants, some of whom got to meet the candidates in person, ask them questions, and observe their nonverbal behavior, before selecting a collaborator; while others in the verbal behavior condition read the same verbal statements as in the first study. We saw even stronger results. Why might the channel of communication have such an important role in whether overconfidence is a social liability? One feature of nonverbal behavior is that it is not so clearly tied to a specific, falsifiable claim as are verbal expressions. We explored whether this was what mattered in follow-up studies. In one study, we asked 462 mTurk participants to select a collaborator, as the participants had done in our first studies. After the candidates’ less-than-stellar performance was revealed, we explained that the candidates had each overtly denied being overconfident about their task ability. Our participants found the denial much more plausible when the candidate had expressed confidence nonverbally rather than verbally. This was a strong indicator that plausible deniability could be behind the advantage for the candidates expressing overconfidence nonverbally. In another follow-up study, we again found evidence to suggest that channel of communication played a key role because of plausible deniability. This time we used a judge-advisor paradigm, in which we asked 302 undergraduate participants, many of whom were majoring in business, to act as managers evaluating advisors. The advisors expressed confidence or cautiousness about their decisions on a recorded video, with varying levels of plausible deniability. For example, in one condition, the advisors expressed confidence, or lack thereof, with the video sound on mute to showcase their nonverbal behavior (e.g., head nodding for emphasis). The results replicated our previous studies, in that confidence, no matter how it was expressed, was beneficial until it became clear that performance fell short. Then, overconfidence cost the advisors. But those who expressed confidence nonverbally  (with a higher level of plausible deniability) did not lose all of their initial advantage. These studies point to one reason why some people are penalized for being overconfident while others are not. It’s harder to hold people accountable for overestimating their abilities or knowledge when they express that confidence in nonverbal ways. It’s important to recognize these cues that demonstrate confidence – standing tall, speaking loudly, and dominating conversation – to avoid  giving those who are overconfident undue influence.  You can also hold colleagues accountable by asking them to be specific in their confidence assessments and by verifying their accuracy over time.

Выбор редакции
11 декабря, 14:55

How Digital Leaders Get the Right Work Done - SPONSOR CONTENT FROM WORKFRONT

  • 0

Companies are spending millions on digital transformation, yet studies find many leaders feel their projects aren’t achieving their objectives. Why? Workfront CEO Alex Shootman says digitization is happening in most companies on a function-by-function basis, leaving teams to work in silos instead of executing new strategies together. Listen here to learn more about what Shootman calls the “digital work crisis.” Download this interview Angelia Herrin, HBR Welcome to the Quick Take, a conversation with Harvard Business Review Analytic Services. I’m Angelia Herrin, Editor for Special Projects and Research at HBR. And today I’m talking with Alex Shootman, President and CEO of Workfront. He’s also the author of a new book, Done Right: How Tomorrow’s Leaders Get Work Done. Alex, thanks so much for joining us today. Alex Shootman, Workfront It’s great, thank you for having me. I’m excited to have the conversation. Angelia Herrin, HBR Alex, you use a term, digital work crisis, to describe what’s going on in our workplaces today. What do you mean by that term? What’s behind it? Alex Shootman, Workfront Well, Angelia, according to a recent study by McKinsey, over $1.3 trillion will be spent by companies on digital transformation, yet over 70 percent of those projects will not achieve their intended objectives. And when you start asking the question of why do they not achieve the objectives, that “why” is really the source of the digital work crisis. And let me explain to you what I mean. Companies have spent enormous energy responding to the existential threat of new entrants. In fact, only eight percent of companies’ CEOs believe that their business model will remain economically viable if their industry continues to digitize at its current course and speed. We’ve got a very large customer that’s a financial services company. And they told me that they have spent tremendous time and money transforming and digitizing their customer experience, yet it is still connected to an analog and siloed internal organization. And that’s really the source of this digital work crisis. Companies know that digitization is the path forward. But most organizations do this kind of function by function. And so it makes it impossible for teams to execute together. And because of that, executives are flying blind; they’ve got no way to play, no way to execute, no way to measure what’s going on. And this is the digital work crisis. The digital work crisis is this unnerving pace of technological change, complex global networks, and lists product and service variation in almost infinite work streams, a whole tone of digital distractions, and fundamental access to more data than humans can handle. And that is what is causing what we see in our customers every day — an inability to get stuff done. Angelia Herrin, HBR So, we’re facing a very different workplace. Can you talk a little bit about what your research has found, about the challenges we’re facing? What’s changed in our workplace today? Alex Shootman, Workfront We’ve done a piece of research every year for five years straight. And it’s the state of work. And we surveyed over 2,000 individuals who do modern work inside of large enterprises. So, these are enterprises with over 1,000 employees. And because we’ve done this over five years, we can see some things that have not changed about this digital work crisis, and some things that are changing. So, let me start with some things that haven’t changed, and this is amazing to me. Every year over the last five years, respondents to this survey say that they spend only 40 percent of their time doing their real job. Think about that, Angelia. If you or I were the CFO of a manufacturing company, and we were in a board meeting, and the board asked, “What is your manufacture and capacity utilization?” And you and I said we didn’t know, or we said it might be 40 percent; we would probably get released to pursue other opportunities. And so it’s staggering to me that every year for the last five years, this number has not changed. And that basically only 40 percent of human capital in modern work is doing their real job. The other thing that hasn’t changed is a lack of transparency. People continue to report that work is complex, and they really don’t know what they’re supposed to do, and they don’t know what their peers are doing. And the other thing that has not changed is executives really want their people doing high-value work. They know they’ve got a lot of money invested in their folks, and they continue to ask “Why are they not spending all their time doing high-value work?” So those three things have not changed. Let me tell you what’s different this year than the past years. The first is this notion that the challenges at work, the challenges of managing modern work, really are a crisis. Five years ago, when we started asking questions around the challenges of work, people reported that it was a nuisance, you know. People were frustrated, made them not really like their job. But now what people are saying is, “I cannot execute the business strategy of the company.” So, this challenge at work, the crisis of trying to manage modern work, has gone from a nuisance to a business imperative. The second thing that’s changed is how people think about automation. Five years ago, it was all about “the robots are going to take my job.” Now what people are saying is they are demanding automation to help them do their job. Almost half of the respondents say that they are requesting tools to manage work. And what’s interesting to us is that we also do kind of a generational survey within the questions that we ask. And so millennials are more likely than Gen X and baby boomers to say that their team is requesting more technology to manage their work; 51 percent of millennials say that and 40 percent of baby boomers say that. So, their crisis is impacted by the ability to execute. People are welcoming automation. And the last thing that is awesome that I see people saying is that there’s an increasing importance of purpose. People are starting to say, “You know what? It really matters to me what I do, and I want to do a great job, and I want to spend time doing great things that have purpose, instead of just doing business work.” So, what hadn’t changed was very underutilized folks, lack of transparency, executives demanding people to do high-value work. What has changed is people are seeing this as a work crisis. People are welcoming technology investments, and people want to do great work that has a purpose. Angelia Herrin, HBR So, you’re talking about some tough issues here, as well as some opportunities. So, as you talk to leaders, how are they thinking about how they are driving toward changes? Alex Shootman, Workfront One of the things that we see our customers doing as they drive toward changes in the modern workplace is they’re beginning to treat work, the work that their people do, they’re beginning to treat it as a tier-one asset. What they realize is that they’ve always treated finance and financial management as a tier-one asset. They’ve treated human resources and human resource management as a tier-one asset. How they manage their customers, right, customer relationship management, that’s a tier-one asset for the company. Even technology, information technology, you know, they’ve invested in treating that as a tier-one asset. They’ve invested millions of dollars to manage these important assets of the company really well. And now what they’re saying is, “You know what, I’m no longer willing to manage work that is a tier-one asset using a kind of cobbled together set of legacy capabilities.” So that’s truly one of the things that we’re seeing. And we’re seeing these business leaders of tomorrow they’re really championing a new operating model of work. They’re realizing that they’ve got to have cross-functional collaboration. Think about this, if you think about a legacy product company. Let’s say it’s an apparel company, right. And then you think about how new entrants come into the market. They will design a product faster. They will create a campaign with a celebrity on YouTube very fast, get all of that to market, create a whole lot of buzz around it. And that product, the life cycle of that product, may be very short, but they strap together many, many iterations of that cycle. And so, the business leaders in some of the larger traditional apparel manufacturers, as an example, realize that they’ve got to have cross-functional collaboration, visibility, accountability, a model that allows product marketing, distribution, technology to kind of all act together as one team. And so that’s what we’re seeing the business leaders of tomorrow do — is champion a shift to this new kind of operating model of work. Angelia Herrin, HBR Alex, what opportunities are you seeing in the market for these emerging leaders, and how can they capitalize on the skills that they’ve built? Alex Shootman, Workfront You know, one of the most exciting things that I’m seeing is young leaders seizing the opportunity to improve work at their companies and get promoted as a result. One of the stories that I share in the very beginning of the book Done Right is about a lady named Allison Angelita. And she had success — success managing modern work — and she got great recognition and promotion. And I’ve been fortunate. I’ve been part of three different software companies that created brand new categories. And in each of these situations, there were young gifted leaders that had the foresight to use these new categories as rocket fuel for their careers. And when I met with leaders at Workfront and we got past the topic of the technology we were discussing, they always came back to a conversation about what they would really value. How would they get earned knowledge about how to get things done at a modern geographically distributed, dynamic and competitive enterprise? These leaders want an impact, they want to make a difference, and they’re looking for practical ways to get things done. Basically, what they want to do is they want to be masters of modern work, and it was that ambition itself that is the inspiration for the book that we wrote called Done Right. Angelia Herrin, HBR So, as you look at the people who are now coming out of school or they’re going into college, what would you tell them are the most marketable skills of the future? Alex Shootman, Workfront Yeah, I’ll tell you, and this is one of the reasons why we wrote the book. I believe that the most marketable skill in the future for any aspiring executive is the ability to get stuff done. We’re really lucky at Workfront. We’ve had a front-row seat with over 3,000 companies. We’ve had the opportunity to study the doers, for lack of a better term. And it turns out that people that get stuff done, they repeat a set of practices, they repeat it either consciously or unconsciously. And so, we wanted to codify this understanding, first, for our own people in our company, and then, you know, second, for the broader example. Let me give you an example of that. The first two chapters of this book are about the basics of being able to describe the work that you’re trying to do and determining who is going to care about that work and why they would care. Inside of Workfront, we’re an organization where we’re supposed to be able to do stuff well because that’s what we go out and help our customers do. We did a project where we looked internally, and we looked at things that we had done well and things that we didn’t execute. And what turned out in common was the things that we didn’t execute were things where we just didn’t do the basics that are in chapters one and two of the book in terms of, “Can you describe the work that you’re trying to do, and do you know the stakeholders that care?” And so, what I advocate when I’m sitting down with young leaders is, go back to basics, none of this stuff is rocket science but you have to take the time to do a small number of disciplines right. And the good news is, we’ve studied people for you, and we can share with you what those disciplines are. Angelia Herrin, HBR Alex, what’s the one overriding principle that you’d like to share, like, if you have to tell someone, “Here’s my ‘aha!’ takeaway from this book that I want you to put to work in your career”? Alex Shootman, Workfront Maybe I’d broaden it from maybe just a broader topic, and it’s the following: We have a culture inside of Workfront that’s getting it done and doing it right. So, imagine a two-by-two matrix where we sit down with folks and ask them, “Are you doing it right?” Those are the values of our organization. “Are you getting it done? Are you accomplishing your role?” And what we tell people is, “You know, if you’re not doing either, it’s probably not a great place for you. If you’re doing it right but you’re not getting it done, we want to coach you because you’re made of all the right stuff. If you’re doing both, you’re a superstar. If you’re getting it done but you’re not doing it right, we’re going to have to fire you faster than anybody else in the company.” So, the one thing I would just want to leave folks with that I’ve learned is, you can get things done and you can do them the right way. And there’s no reason to have to cut corners. There’s no reason to have to do something the wrong way, and you will personally get a whole lot more satisfaction by accomplishing your goals by doing them the right way. And you’ll inspire more people to follow you if you do things the right way. And so that’s what I would want to leave folks with is: You do not have to do the wrong thing to become a successful executive. Angelia Herrin, HBR Alex, that’s such good advice. And this has been such a good discussion. I want to thank you so much for talking with us. Alex Shootman’s new book, Done Right: How Tomorrow’s Leaders Get Work Done, will be published in December. To learn more, please click here.

Выбор редакции
11 декабря, 14:45

Why the U.S. Needs Allies in a Trade War Against China

  • 0

ULTRA.F/Getty Images On December 1, in Buenos Aires, President Trump started the 90-day clock to negotiate a trade deal with China. He claims he wants to tackle the big systemic concerns involving theft of American intellectual property, the forced transfer of technology from American firms, and the state-driven nature of the Chinese economy. For trade watchers, the time frame for such ambitions sounds absurd. But they are not entirely out of reach. If Trump makes up with scorned friends in order to take on a common adversary, he could get a meaningful deal. Admittedly, Trump did spend the first two years of his presidency alienating traditional American allies as much as officials in Beijing. He reversed the Obama administration’s signature foreign policy moves by pulling out of the Paris Accord on climate, Iran sanctions deal, and Trans-Pacific Partnership agreement. And his own protectionist actions on trade policy – tariffs imposed on steel, aluminum, and threatened on cars – mostly hit exports in economic allies like Europe, Japan, Canada, and South Korea. Because they weaken an otherwise concerning alliance, China’s view of many of those Trump policy actions is fairly positive. But a change in approach is conceivable. In what would be a stunning policy plot twist of the Trump presidency, it is possible that American negotiators could join forces with their previously rebuffed counterparts in Europe and Japan to form a collective front, all pushing for Chinese reform. Although the White House has yet to signal anything like this, it’s worthwhile to consider how such a strategy might play out. This coalition of market-oriented economies would make three fundamental demands. First, Beijing would have to commit to a crackdown on state-sponsored cyber-espionage and theft of commercial trade secrets. Second, the Chinese government would also need to move away from its legacy system of coercing western companies to form joint ventures with domestic firms, as this has created tension with companies being compelled to transfer their technology on noncommercial terms. Finally, China would have to cut its industrial subsidies and the excess credit it has used to prop up state-owned enterprises. In fact, European and Japanese trade ministers have been working behind the scenes – with the support of President Trump’s U.S. Trade Representative, Robert Lighthizer – to develop new rules to address each of these joint concerns with China. The three publicly announced the initiative almost exactly one year ago on the sidelines of a World Trade Organization conference, coincidentally also in Buenos Aires. The trilateral group revealed further progress after meeting in March in Brussels, in May in Paris, and in September in New York. The December 1 announcement created a moment for this trilateral group to put their plan into action. Trump could take it, reunite with European Commission president Jean-Claude Juncker and Japanese Prime Minister Shinzo Abe, and confront China en masse. And proceeding as a bloc is more likely to work, mainly because it capitalizes on the right economic incentives. To see why the three must work together, remember that American negotiators have already tried to press Beijing on their own. Though it received strikingly little public attention at the time, the Obama administration undertook sustained attempts to negotiate a bilateral investment treaty with China. This one-on-one effort sought an agreement to protect foreign companies from suffering from the same problems Trump purportedly now wants to fix. Such a treaty might have addressed the coercion and theft of American intellectual property, as well as some of the concerns over China’s massive subsidies, through new rules and better enforcement. However attractive this all sounds, the U.S.-China bilateral treaty approach was probably doomed for failure. It is a deceptively simple example of what the Harvard-trained economist Mancur Olson popularized as the collective-action problem. The “harm” caused by China’s unfair trade practices is spread out across all of its trading partners, each of whom has only a minor incentive to act. Therefore, on its own, America simply does not possess enough incentive to ask China to do the structural change required to make a difference. The problem is something of a paradox. America would not reap all of the benefits if China took on all of the reforms being demanded. Beijing can’t improve intellectual property protection in a targeted fashion that would only advantage American companies, scientists, and workers – its efforts would also end up helping German, Japanese, and British entrepreneurs. And a Chinese agreement to cut back on subsidies improves conditions facing steel and aluminum companies also operating in Europe and Japan, not just in the American Midwest. The sheer inability to prevent others from benefiting from Chinese reform means that an America that goes alone will tend to underinvest in efforts to push for change. Understanding the limits to negotiating alone is critical. Beijing recognizes that the U.S. doesn’t have the stomach to put up a big enough fight on its own to fully play out a war of attrition. Why should American automobile workers in South Carolina have their exports shut out of the Chinese market due to Beijing’s retaliation to Trump’s tariffs when the main beneficiaries are car plants in Europe or Japan? American soybean farmers have noticed that this fall’s tariff on their crop means China will switch to sourcing from competitors in countries like Brazil. Even if the Trump administration feels emboldened to inflict the pain of tariffs on American consumers, the next president may not be. So, the Chinese can simply wait. The implication of Olson’s free rider problem is that, just like Obama had insufficient leverage to get China to do structural change, Americans are likely unwilling to suffer the pain of President Trump’s unilateral tariff war for long enough to get the job done. Nor should they have to. China’s biggest fear is one of collective action by the Europeans, Japanese, and Americans. Beijing will likely soon present Trump with a deal to simply agree to buy more American agricultural or industrial products, but not make much movement of reform. This offer will be tempting. Selling off the growing stockpile of American soybeans or the cars in the overflowing parking lots at the docks will appeal to an American president who has been interested thus far in deals in which only the Americans benefit. But this would be short-sighted. China importing more agriculture or cars from America without reform may simply come at the expense of someone else. And that someone else may be exports from an ally like Europe or Japan. So not only would falling for the seductive but poisonous offer not fix the long-term problem with China, it would further weaken an already fragile trilateral partnership. It would also be China’s way of buying itself out of the needed systemic reform from which the Europeans and Japanese benefit, too. All of this does assume the Trump administration is serious about fixing the trade relationship with China. The next 90 days could also reveal whether its true intention is instead to limit China’s rise based on some perceived national security or other non-economic concern. Now, the first two years of the Trump presidency do make the likelihood of collective action seem remote. And yet, the opportunity to capitalize on the moment is now there for his taking. The failure to do so may be a waste of Trump’s best, and potentially only remaining, opportunity on this issue. Beyond making up with allies, a final potential attraction to such a plot twist would be the statement that Trump had learned from the failings of his predecessor. For the Obama administration did try to negotiate structural reform with China – but its ultimately unsuccessful attempts were carried out also almost entirely alone.

Выбор редакции
11 декабря, 14:00

What Businesses Should Know About Brazil’s New President

  • 0

Rubberball/Mike Kemp/Getty Images On October 28th, Jair Bolsonaro of Brazil’s Social Liberal Party (PSL) defeated Fernando Haddad of the Worker’s Party (PT). Bolsonaro, a candidate coming from the far-right of the political spectrum, picked up 55% of the vote. This outcome can largely be attributed to three factors: Brazil’s lethargic and largely jobless economic recovery, a decline in public security, and a strong and sustained anti-corruption wave first instigated by the unprecedented Lava Jato investigation. The most important of these factors was the lack of a strong economic recovery following the end of Brazil’s recession in 2017, the deepest in its history. Through September of this year, Brazil’s economic activity index showed that the overall economic output in the country remained 6.5% below where it stood at the same point in 2014. In the last twelve months, Brazil’s unemployment rate has eased just barely from 12.4% to 11.9% (mostly driven by individuals leaving the labor force rather than finding jobs), while investment, which contracted by 14% YOY in 2015 and 12% YOY in 2016, climbed by just a meager 4.3% YOY. These economic trends were then exasperated by both a deteriorating security situation across Brazil’s major cities, driven by rising unemployment itself in addition to cuts to public security funding, and a strong anti-corruption wave. Both of these forces clearly favored Jair Bolsonaro, the ex-army captain who was perceived to be the “cleanest” of the candidates. (His opponents, Fernando Haddad and PSDB candidate Geraldo Alckmin, were both indicted for corruption and money laundering the month prior to the election.) Bolsonaro also portrayed himself as a strong-man capable of bringing order to the country via policies such as the liberalization of arms for private citizens and greater permission for police to use deadly force to stop crime. What business leaders should expect from the Bolsonaro administration To understand where Brazil’s economy will go following the election of Jair Bolsonaro, it’s necessary to first understand why the economic recovery to date has been so lethargic. This can largely be laid at the feet of one monumental failure of the current government under President Michel Temer: the lack of a comprehensive pension reform. As it stands today, the World Bank estimates that Brazil’s debt to GDP ratio, which currently stands at approximately 75%, would rise to above 150% by 2030 without a significant fiscal adjustment led by reform to the country’s existing pension benefits. This bleak outlook, and the continued lack of clarity around a potential fix, is the major driver of why financial institutions have yet to aggressively increase lending and why businesses appetite for new investment has remained muted. Jair Bolsonaro was the only candidate in the run-off election that supported a reform of the pension system, which may be why, despite his bombastic rhetoric on campaign, yields on Brazil ten-year treasuries fell by more than two percentage points and the currency ratio appreciated from 4.1 (Brazilian real to USD) to 3.62, between September and the day following the final electoral outcomes. (Since then, though, both indicators have moved slightly in the opposite direction, largely due to global market conditions). This demonstrates falling inflation expectations and a stronger outlook for growth, as markets believe he will likely achieve what others could not, and thus return the country to a steadier path of economic expansion. There are still fundamental concerns over whether Bolsonaro, once being sworn in on January 1st, will pursue some of his potentially more destabilizing policy proposals, such as liberating gun ownership or reducing restrictions on the exploitation of delicate areas in the Amazon rainforest for economic gain. While my firm Frontier Strategy Group is forecasting growth in Brazil at 3.0% in 2019 up from 1.6% in 2018, we believe both Bolsonaro’s extreme position on some subjects, and perhaps more importantly his lack of experience in a position of true power, are risks to his ability to sustain the political support necessary to pass the reforms that Brazil needs. Likewise, political miscalculation have proven to come with heavy consequences for the country’s past leaders, with just two of the four directly elected presidents under the current constitution having actually completed their last terms in office (and one of those who did is now imprisoned for corruption and money laundering). Our forecasts suggest that while Bolsonaro is likely to pass pension reform in 2019 (both raising the retirement age and also reducing benefits), he is unlikely to make dramatic inroads into addressing other ills of the market, such as its burdensome tax system, its challenging labor code, or its underfunded infrastructure. And despite some of his past statements, we also don’t see Bolsonaro as an immediate threat to Brazil’s democratic institutions. Bolsonaro did not win with as much popular support as it might first appear — he took 55% of the valid votes, but just 43% of the total electorate after considering blank votes and abstentions. He also does not have the sustainable super majority in Congress needed to pass constitutional amendments without significant efforts at coalition building (which require 308 votes in Brazil’s lower house and 49 votes in the Senate – in rather two votes through each body). While Bolsonaro’s party picked up 44 additional seats in the lower house, to hold 52 total seats, there remain 30 parties in Congress, making coalition building a matter of constant horse trading. For all of the differences between Bolsonaro and his predecessors, he will face many of the same governing challenges that they did. Is Brazil’s electoral outcome indicative of a broader global trend? While there are many factors across the world driving economic volatility and uncertainty — Brexit, U.S.-China trade tensions, currency upheaval in markets such as Argentina and Turkey — that could result in more populist events over the next few years, or at least anti-establishment forces coming to power, we could also easily see a further push back against these forces. That is to say that the forces that brought Bolsonaro to power in Brazil cannot be read as indicative of a cohesive global trend. In fact, as we have seen, Bolsonaro’s rise in Brazil was the result of a combination of largely unique domestic factors: an economic recession driven largely by domestic factors, rising insecurity, and a sustained anticorruption wave ignited by an unprecedented investigation targeting the country’s most powerful individuals. In that sense, while companies should not be worried about an underlying global trend lending itself to the election of highly unpredictable heads of state, the case of Brazil clearly demonstrates the need for continued application of scenario-based planning across high stakes markets to ensure the ability to  rapidly adjust to downside risks, but also take advantage of sudden emergence of new opportunities.

Выбор редакции
11 декабря, 13:05

The Case for the 6-Hour Workday

  • 0

zodebala/Getty Images The eight-hour workday harkens back to 19-century socialism. When there was no upper limit to the hours that organizations could demand of factory workers, and the industrial revolution saw children as young as six-years-old working the coal mines, American labor unions fought hard to instill a 40-hour work week, eventually ratifying it as part of the Fair Labor Standards Act of 1938. So much has changed since then. The internet fundamentally changed the way we live, work, and play, and the nature of work itself has transitioned in large part from algorithmic tasks to heuristic ones that require critical thinking, problem-solving, and creativity. Adam Grant, organizational psychologist and New York Times bestselling author of Originals: How Non-Conformists Move the World, says that “the more complex and creative jobs are, the less it makes sense to pay attention to hours at all.” Yet despite all of this, the eight-hour workday still reigns supreme. “Like most humans,” Grant says, “leaders are remarkably good at anchoring on the past even when it’s irrelevant to the present.” Heuristic work requires people to get into the physiological state of flow, coined by Hungarian-American psychologist Mihaly Csikszentmihalyi in 1975. Flow refers to the state of full immersion in an activity, and you might know it best as “the zone.” A 10-year McKinsey study on flow found that top executives are up to 500% more productive when they’re in a state of flow. A study by scientists at Advanced Brain Monitoring also found that being in flow cut the time it took to train novice marksmen up to an expert level in half. The Modern Organization Sabotages Productivity Many of today’s organizations sabotage flow by setting counter-productive expectations on availability, responsiveness, and meeting attendance, with research by Adobe finding that employees spend an average of six hours per day on email. Another study found that the average employee checks email 74 times a day, while people touch their smartphones 2,617 times a day. Employees are in a constant state of distraction and hyper-responsiveness. Jason Fried, co-founder of Basecamp and author of It Doesn’t Have to Be Crazy at Work, said on my podcast, Future Squared, that for creative jobs such as programming and writing, people need time to truly think about the work that they’re doing. “If you asked them when the last time they had a chance to really think at work was, most people would tell you they haven’t had a chance to think in quite a long time, which is really unfortunate.” The typical employee day is characterized by: Hour-long meetings, by default, to discuss matters that can usually be handled virtually in one’s own time Unplanned interruptions, helped in no small part by open-plan offices, instant messaging platforms, and the “ding” of desktop and smartphone notifications Unnecessary consensus-seeking for reversible, non-consequential decisions The relentless pursuit of “inbox zero,” a badge of honor in most workplaces, but a symbol of proficiency at putting other people’s goals ahead of one’s own Traveling, often long-distance, to meet people face-to-face, when a phone call would suffice Switching between tasks constantly, and suffering the dreaded cognitive switching penalty as a result, leaving one feeling exhausted with little to show for it Wasting time on a specific task long after most of the value has been delivered Rudimentary and administrative tasks “People waste a lot of time at work,” according to Grant. “I’d be willing to bet that in most jobs, people would get more done in six focused hours than eight unfocused hours.” Cal Newport, best-selling author of Deep Work: Rules for Focused Success in a Distracted World, echoes Grant’s sentiments, saying that “three to four hours of continuous, undisturbed deep work each day is all it takes to see a transformational change in our productivity and our lives.” Fried agreed, saying that he gets into flow for about half the day. “If you don’t get a good four hours of flow to yourself a day, putting more hours in isn’t going to make up for it. It’s just not true that if you stay at the office longer you get more work done.” Despite advances in technology, and perhaps in large part because of it, many find themselves working well beyond 5 PM just to keep up with their workloads, but it doesn’t have to be that way. How to Foster a Shorter, More Productive Workday I conducted a two-week, six-hour workday experiment with my team at Collective Campus, an innovation accelerator based in Melbourne, Australia. The shorter workday forced the team to prioritize effectively, limit interruptions, and operate at a much more deliberate level for the first few hours of the day. The team maintained, and in some cases increased, its quantity and quality of work, with people reporting an improved mental state, and that they had more time for rest, family, friends, and other endeavors. When I announced the experiment on LinkedIn, a connection responded with: “It’s nice in theory, but I can’t finish all of my tasks in six hours!” — as if all tasks were created equally. The law of nature that is the Pareto principle stipulates that about 20% of your tasks will create about 80% of the value, so it’s about focusing on those high-value tasks. If you’re the manager of a small team with limited resources, take a moment to reflect on the following productivity techniques and remember that your job as a leader is to facilitate outcomes, not just the illusion of them. Prioritize: Channel Pareto and focus on high-value tasks, aligned with both employee strengths and the team’s goals. Cut: Reduce or eliminate tasks that don’t add value. Cutting your default meeting time from 60 minutes to 30 minutes, turning off notifications, and batch checking your email are all incredibly effective places to start. Automate: If it’s a step-by-step process-oriented task, it can probably be automated, saving you from doing it yourself. Outsource: If it can’t be automated, it can probably be delegated or outsourced. You’re probably not being paid to work on $10-an-hour tasks. Test: A lot of time is wasted in paralysis analysis and on over-investing in the wrong things. Managers can avoid both through effective experimentation, measurement, and adapting accordingly. Start: Do whatever it takes to start your engine. Block out time in your calendar, work on one thing at a time, do the hardest thing first, try listening to binaural beats or use the Pomodoro technique, a time management method that uses a timer to break work down into intervals, traditionally 25 minutes in length, separated by short breaks. Set Realistic Expectations Make it okay for employees to not be in a hyper-responsive state and schedule uninterrupted time to get into a state of flow. Similarly, make it not okay to be interrupting people on a whim. My team has a simple rule; if a team member has their headphones in, you are not to disturb them unless it absolutely, positively can’t wait (which is hardly ever, by the way). Doing so has been shown to decrease workplace stress, according to research by Gloria Mark at the University of California, which found that stress levels declined when email was taken away from U.S. Army civilian employees for five days, because they felt more in control of their working lives. Some Things Are Worth Fighting For By cultivating a flow-friendly workplace and introducing a shorter workday, you’re setting the scene not only for higher productivity and better outcomes, but for more motivated and less-stressed employees, improved rates of employee acquisition and retention, and more time for all that fun stuff that goes on outside of office walls, otherwise known as life. Organizations are spending big money on digital transformation, but they could reap an immediate, and far more cost-effective transformational benefit just by changing the way they work, instead of what they use to work. Sure, it would be easy to pull out the “some great sentiments here, but it would never work in our organization” card, but some things are worth fighting for; ensuring that our people do their best work and live their best lives are certainly worth it.

Выбор редакции
10 декабря, 15:00

Research: Hiring Managers Are Biased Against People with Longer Commutes

  • 0

shanghaiface/Getty Images Thanks to the résumé, the first things employers learn about job applicants are their names and where they live. Résumés attach a place to a person, and addresses indirectly tell employers something about the applicant’s neighbors, commute, income level, and preferences for neighborhood amenities. This bit of information may influence who employers pick. Can this perception of place perpetuate bias and inequity? In a forthcoming study, I tested how employers respond to similar applicants who report different residential addresses. I was particularly interested in whether perceptions of place can perpetuate poverty and inequality. So my team of research assistants and I identified a collection of low-wage jobs in Washington, D.C. during the summer of 2014. We sent 2260 résumés from fictional people to these jobs.  The applicants varied in their proximity to the job’s location and their neighborhood’s level of affluence. Roughly 4 in 5 applicants received no response, a handful were rejected, and about 1 in 5 received a positive response, such as an invitation to interview. My results show that applicants living in distant neighborhoods received positive responses from employers less frequently than those living near the workplace. In fact, applicants who lived 5-6 miles farther from the job received about one-third fewer callbacks. The size of this penalty is similar to the penalty for signaling race with a black-indicating name. (For background: Other prominent studies compare employer responses to fictional applicants with names that signal different ethnicities. They provide some of the clearest evidence of significant discrimination in employment and rental housing. Comparing racial discrimination to a penalty for long commutes is complicated for many reasons, not the least of which is that race and place are related in DC.  But the comparison at least provides a benchmark. In my study, an extra six miles of commuting lowers an applicant’s chances by as much as listing a black-indicating name like Jamal or Lakisha.) In some ways, avoiding applicants with long commutes makes a lot of sense from the employer’s point of view. Low-wage jobs tend to have high turnover and absence rates, which could be exacerbated when the employee has a long ride to work. Recently on a radio show discussing my research, a former suburban hiring manager called in to echo this sentiment: “We had a difficult time finding applicants for our low-level clerical positions because those applicants lived in the city. … We found that we were not able to keep those employees very long because of the long commute. … So, as we were recruiting for employees, we definitely took into account where they lived.” Transportation probably matters most for these for these entry-level employees who are less able to buy stable transportation than their high-wage counterparts. Of course, real job applicants from distant and nearby neighborhoods differ by more than just their commutes. In D.C., neighborhoods farther from jobs tend to be poorer neighborhoods, and applicants who apply to jobs from those neighborhoods face obstacles due to race, class, and so on. I wanted to understand whether employers care about an address because of proximity or these other factors. It turns out that employers care more about commute distance. When I presented employers with two applicants from neighborhoods with similar levels of affluence but different commute distances, they still preferred the nearby applicant. I also edited all aspects of the fictional person’s name, work history, education, etc., so people from different neighborhoods appeared similar on average. Other factors equal, proximity matters. And yet even if bias does not drive the commute penalty, picking employees according to distance can drive social inequity. In D.C., census data shows that a black person lives, on average, one mile farther from low-wage jobs than a white person.  In many cities, urban revitalization has also led to increased rents, gentrification, and movement of low-income, minority groups away from jobs. So, when a low-wage employer avoids an employee due to their commute, that penalty disproportionately affects groups facing other disadvantages. A person could move to a distant, low-rent neighborhood because they face a temporary economic difficulty and then become trapped by their address. Explicit bias does not need to be present to reinforce inequity. So how might employers resolve an apparent tension between a reliable workforce and reinforcing racial inequality and neighborhood poverty? The first step is to simply be aware of the equity implications of apparently neutral practices. A company that considers attributes of a candidate’s home location can cause inequity even if not intentionally redlining entire communities.  Likewise, frequently changing work schedules may disrupt precarious travel arrangements for otherwise productive workers. Second, improving the extent, quality, and affordability of employees’ transportation can help. Community-wide public transit programs, like recent low-income fare programs, are likely beyond the scope of private businesses. However, some high-wage employers actively work to manage their employees’ transportation. Several tech companies provide dedicated bus service to their Silicon Valley headquarters. These companies clearly believe that the benefits of these services for employee productivity and retention outweigh the significant cost of running a bus system. Are there similar programs that could be developed for lower-wage workers as well? Given the right circumstances, providing employee transportation could help the employer while creating social benefits. Finally, for a broader range of employers, partnerships with local government or social service providers could meet joint goals of profitability and public good. Some of this is happening already. Local governments and employers in less densely populated places, including in my own city in Indiana, are working together to supplement their low-wage workers’ unpredictable transportation arrangements with ride-sharing services.  Other employers have hired social service organizations to provide on-site services that help employees navigate instability in their lives, including with transportation, that would otherwise drive turnover. While more research is needed to ensure these options are cost-effective, creative partnerships can help navigate an employer’s tension between hiring employees who can reliably arrive at work and reinforcing social inequity.

Выбор редакции
10 декабря, 14:00

How to Overcome Your Fear of Failure

  • 0

Caiaimage/Andy Roberts/Getty Images A client (who I’ll call “Alex”) asked me to help him prepare to interview for a CEO role with a start-up. It was the first time he had interviewed for the C-level, and when we met, he was visibly agitated. I asked what was wrong, and he explained that he felt “paralyzed” by his fear of failing at the high-stakes meeting. Digging deeper, I discovered that Alex’s concern about the quality of his performance stemmed from a “setback” he had experienced and internalized while working at his previous company. As I listened to him describe the situation, it became clear that the failure was related to his company and outside industry factors, rather than to any misstep on his part. Despite that fact, Alex could not shake the perception that he himself had not succeeded, even though there was nothing he could have logically done to anticipate or change this outcome. People are quick to blame themselves for failure, and companies hedge against it even if they pay lip service to the noble concept of trial and error. What can you do if you, like Alex, want to face your fear of screwing up and push beyond it to success? Here are four steps you can take: Redefine failure. Behind many fears is worry about doing something wrong, looking foolish, or not meeting expectations — in other words, fear of failure. By framing a situation you’re dreading differently before you attempt it, you may be able to avoid some stress and anxiety. Let’s go back to Alex as an example of how to execute this. As he thought about his interview, he realized that his initial bar for failing the task — “not being hired for the position” — was perhaps too high given that he’d never been a CEO and had never previously tried for that top job. Even if his interview went flawlessly, other factors might influence the hiring committee’s decision — such as predetermined preferences on the part of board members. You and Your Team Series Learning Learning to Learn Erika Andersen You Can Learn and Get Work Done at the Same Time Liane Davey 4 Ways to Become a Better Learner Monique Valcour In coaching Alex through this approach, I encouraged him to redefine how he would view his performance in the interview. Was there a way he might interpret it differently from the get-go and be more open to signs of success, even if they were small? Could he, for example, redefine failure as not being able to answer any of the questions posed or receiving specific negative feedback? Could he redefine success as being able to answer each question to the best of his ability and receiving no criticisms about how he interviewed? As it turned out, Alex did advance to the second round and was complimented on his preparedness. Ultimately, he did not get the job. But because he had shifted his mindset and redefined what constituted failure and success, he was able to absorb the results of the experience more gracefully and with less angst than he had expected. Set approach goals (not avoidance goals). Goals can be classified as approach goals or avoidance goals based on whether you are motivated by wanting to achieve a positive outcome or avoid an adverse one. Psychologists have found that creating approach goals, or positively reframing avoidance goals, is beneficial for well-being. When you’re dreading a tough task and expect it to be difficult and unpleasant, you may unconsciously set goals around what you don’t want to happen rather than what you do want. Though nervous about the process, Alex’s desire to become a CEO was an approach goal because it focused on what he wanted to achieve in his career rather than what he hoped to avoid. Although he didn’t land the first CEO job he tried to get, he did not let that fact deter him from keeping that as his objective and getting back out there. If Alex had instead become discouraged about the outcome of his first C-level interview and decided to actively avoid the pain of rejection by never vying for the top spot again, he would have shifted from approach to avoidance mode. While developing an avoidance goal is a common response to a perceived failure, it’s important to keep in mind the costs of doing so. Research has shown that employees who take on an avoidance focus become twice as mentally fatigued as their approach-focused colleagues. Create a “fear list.” Author and investor Tim Ferriss recommends “fear-setting,” creating a checklist of what you are afraid to do and what you fear will happen if you do it. In his Ted Talk on the subject, he shares how doing this enabled him to tackle some of his hardest challenges, resulting in some of his biggest successes. I asked Alex to make three lists:  first, the worst-case scenarios if he bombed the interview; second, things he could do to prevent the failure; and third, in the event the flop occurred, what could he do to repair it. Next, I asked him to write down the benefits of the attempted effort and the cost of inaction. This exercise helped him realize that although he was anxious, walking away from the opportunity would be more harmful to his career in the long run. Focus on learning. The chips aren’t always going to fall where you want them to — but if you understand that reality going in, you can be prepared to wring the most value out of the experience, no matter the outcome. To return to Alex, he was able to recognize through the coaching process that being hyper-focused on his previous company’s flop — and overestimating his role in it — caused him to panic about the CEO interview. When he shifted gears to focus not on his potential for failure but on what he would learn from competing at a higher level than he had before, he stopped sweating that first attempt and was able to see it as a steppingstone on a longer journey to the CEO seat. With that mindset, he quickly pivoted away from his disappointment at not getting the offer to quickly planning for the next opportunity to interview for a similar role at another company. Remember:  it’s when you feel comfortable that you should be fearful, because it’s a sign that you’re not stepping far enough out of your comfort zone to take steps that will help you rise and thrive. By rethinking your fears using the four steps above, you can come to see apprehension as a teacher and guide to help you achieve your most important goals.

Выбор редакции
10 декабря, 13:05

What Will It Take to Make Finance More Gender-Balanced?

  • 0

shutterjack/Getty Images We overheard male classmates bond with internship interviewers about fantasy football drafts. We were taught that Warren Buffett and Benjamin Graham were the best modern investors. We witnessed senior men sexualize younger women employees. It is no wonder we came to fear our gender would keep us from achieving the same level of success as our male peers in finance. Because one of us (Malin) grew up in Sweden, considered to be one of the most gender-equal countries, with family-friendly policies that emphasize both parents’ responsibility of raising a family, we wondered whether gender equality in the finance industry in Sweden had progressed further than it had in the U.S. – and if there were any lessons to be learned there. We turned to those most able to effect change in finance: the professionals actively working in the field. We surveyed 60 finance professionals —ranging from partners in top investment banks and senior members of VC firms, to junior traders and entry-level financial consultants—and interviewed 30 in more detail. Our samples were about half men and half women, and about 67% from the U.S. and 33% from Sweden. We asked about gender representation in their firms, and whether they believed they could positively impact gender equality in their workplace (also known as self-efficacy). Going into the study, we expected to see equal representation of women and men in senior leadership positions in Sweden and higher self-efficacy among professionals in Sweden than in the U.S. We doubted, for example, that we would come across Swedish investment banking teams with under 40% women. Contrary to our expectations, we found that our initial perceptions were incorrect in the more competitive fields of finance, such as venture capital, investment banking, and securities. Consider investment banking. The Swedish investment bankers we interviewed told us their teams were on average only comprised of 5% to 20% women. Those who responded to our survey also had less confidence than American investment bankers in their own ability to impact gender equality in their firms. And although there were family friendly policies in place in Swedish firms, team members expressed that it was not culturally encouraged to take full use of them. This made us think that the field you work in can matter as much or more than the country you work in. The more male-dominated fields in finance are also those with the longest working hours (over 60 hours per week), and according to estimates among the employees we interviewed, these fields seem to be comparably unequal (with women making up less than 20% of the workforce) in both the U.S. and Sweden. Family-friendly policies alone may not be enough to drive change in gender equality in finance. But in fields such as retail banking and corporate finance, where there is higher female representation, our survey respondents and interviewees did suggest that gender equality is greater in Swedish firms than in comparable U.S. firms. Many of the managers in retail and commercial banking we interviewed in Sweden stated that their teams were made up of well over 50% women. Many also had women in senior leadership positions including on boards. The U.S. finance professionals we studied reported lower numbers. When we asked interviewees why there is a lack of women in their firms, the most common response in both countries was that they believe women are not interested in finance. When pressed further, they identified two reasons: a masculine culture and long working hours. The long working hours explanation makes sense when you see it as an obstacle to raising a family. The responsibility of raising a family has, in both countries, traditionally fallen more often on women, and prior research has shown that employees who work long hours tend to have a partner that takes on disproportionate responsibility in the home. This was brought up by many of our senior interviewees. Several referred to a discrepancy in “what [men and women] are willing to compromise and give up along the way [for their career],” as stated by a senior U.S. male trader, suggesting that some senior men still believe women are more likely to forego a career in order to raise a family. But data shows that, at least in the U.S., only 2% of men and 2% of women say they plan to leave the workforce to focus on their families; Sweden’s parental leave policies allude to similar societal views. Although long working hours might have a more negative impact on women than men due to the unequal division of housework and childcare, none of our women interviewees commented that long working hours impact them more negatively than their male colleagues. More survey respondents and interviewees pointed to a masculine and unwelcoming culture as the main reason for why there weren’t more women in certain fields of finance. Many of the women we interviewed are among the only women at their firms, and they often attributed part of their success to their comfort in a masculine environment. Several described themselves as comfortable in this type of culture, or they were described this way by their colleagues. “I grew up with two brothers, and most of my closest friends are guys… to be honest, it would be more uncomfortable for me to work with a lot of women,” one Swedish female investment banker told us. It’s not hard to see how this thinking can pressure women to assimilate to the masculine culture to advance in the field, and how this might create a barrier for women, like ourselves, who don’t want to mask our femininity in order to succeed. We did learn about a few unlikely allies. A number of respondents expressed that their teams strive for more equal gender representation due to external client pressures. To our surprise, respondents told us that clients were one of the main reasons teams kept gender representation in mind. Client-side work is known for harsh hours and a lack of flexibility stemming from unpredictable client demands. But, for better or for worse, many of our female interviewees referenced being invited to meetings because they were women, seeing questions about gender representation in RFPs, and hearing clients explicitly comment on the lack of women on calls.  One woman explained, “[I am] expected to show up to a lot more meetings, because we are often criticized for not bringing along women.” Although this can encourage representation of women, some interviewees noted that it has increased perceived competition between women in their workplace. If management is incentivized to have a woman in each meeting, women are incentivized to maintain their status as the token woman on the team as a tool for career progression. Another group of allies? Young people, especially young men, in both countries, with less than four years of work experience after college, were most vocally concerned about the lack of equal gender representation at their firms. This is consistent with other research on male allies in the U.S., finding young men to be the best positioned to advocate for gender equality. The solution to the lack of female representation in masculine fields of finance may not lay in Sweden as we had hoped, but by the end of our study, we felt somewhat reassured. We learned of grassroots movements at finance firms in both countries to promote gender equality. Several of the firms our respondents worked in have started focus groups and are actively having conversations about what they can do to attract and retain graduating women. Despite the progress that has been made, we clearly still have a long way to go to reach gender equality in finance. We hope that senior level professionals at finance firms will realize that graduating women like ourselves are aware of these issues and are actively choosing careers at firms that are making concerted efforts to improve. Clients also need to use their position of power to effect positive change in the financial firms that they do business with by making crucial but simple demands for equal representation and inclusion. Future students should not have to worry about their gender being a barrier to their success.

Выбор редакции
07 декабря, 21:00

Carlos Ghosn, Nissan, and the Need for Stronger Corporate Governance in Japan

  • 0

Westend61/Getty Images Carlos Ghosn was widely recognized as a hero in Japan for turning around Nissan when it was on the brink of bankruptcy in 1999. Things couldn’t look more different today. Ghosn was recently arrested for financial misconduct, fired from his position as Nissan’s board chairman, and criticized by Nissan’s Japanese CEO for accumulating too much power.  Without Ghosn, the Nissan-Renault alliance is likely to falter — leaving two small auto manufacturers without competitive economies of scale. Ghosn’s swift downfall comes as a result of a Japanese criminal case against him for causing Nissan to make incomplete securities disclosures about his deferred compensation. These disclosure problems are rooted in the company’s weak governance procedures, and they offer a lesson to investors in Japan’s other listed companies about the need for much stronger governance protections than those brought about by recent Japanese reforms. The heart of the legal controversy is whether Nissan violated Japan’s securities laws by not including Ghosn’s deferred compensation in its annual reports over the last eight years. Under Ghosn’s deferred compensation arrangement, he would receive substantial payments from Nissan after his retirement – the equivalent of $44 million. Such payments were not taxable when this arrangement was made, but would become taxable when Ghosn actually received them. Since 2009, all Japanese listed companies have been required to disclose in their annual reports an executive’s compensation if it exceeded 100 million yen – the equivalent of $800,000.  This rule was pushed through by the new head of Japan’s Financial Services Agency, an outspoken critic of the high pay awarded to corporate executives. According to this Agency, executive compensation includes retirement bonuses, which must be disclosed once they are fixed in amount.  But a lawyer for Greg Kelly, a former Nissan executive who consulted outside experts about Ghosn’s deferred compensation arrangements, said that his client believed that the payments due to Ghosn were not “fixed” in amount and therefore were not disclosable. Nevertheless, an article in the Nikkei Asian Review stated that Japanese prosecutors had obtained internal Nissan documents allegedly showing that the amounts of the deferred payments to Ghosn were fixed and therefore subject to disclosure. If these documents in fact exist, they raise fundamental questions about the company’s role in any securities violation and the failure of its governance procedures. These questions should be of concern to all investors in Japanese listed companies, as many Japanese public companies have explored strategies for reducing the amount of CEO pay included in their annual reports. As one accountant based in Japan during 2010, explained, “there was a big rush of inquiries about schemes that might be used either to split out salaries or defer part of it.” If Nissan’s internal documents show that Ghosn’s deferred compensation was “fixed” in amount, why didn’t the Chief Financial Officer include these payments in its annual reports for eight years? Didn’t Nissan have internal controls designed to assure the accuracy and completeness of its public disclosures? And didn’t Nissan’s independent auditors check the disclosures in its annual report against the compensation records for its highest paid executive? Let’s start with the last question. The independent auditor of Nissan was the Japanese affiliate of Ernst &Young, which served as the external auditor of two Japanese companies recently involved in major accounting fraud – Olympus and Toshiba.  Nissan does not have an audit committee, which would be required to appoint its independent auditor and reviews its audit procedures under the laws of most advanced industrial countries. Instead, the independent auditor is effectively chosen by the company’s chairman, subject to board approval. As a result, when making close calls on the company’s financial reports, that auditor may be too deferential to Nissan management. Another problem is Nissan’s board does not have a compensation committee, which would decide the pay of the company’s top executives under the laws of most advanced industrial countries.  Nor does the board issue a compensation report, which explains the rationale and metrics for setting executive compensation. Although Ghosn claimed that the board is “sovereign” on setting his pay, Ghosn had enormous leeway in determining the amount and structure of his compensation. His discretion undermined the connection between company performance and CEO pay that investors want to see. The Nissan board also has no nominating committee; its chairman chooses the independent directors, subject to the board’s approval. By contrast, the laws of most advanced industrial countries require the board to be composed of a majority of independent directors, who are interviewed and recommended by its nominating committee. The purpose of a nominating committee is to assure that directors are selected on the basis of competence and independence, rather than friendliness to management. Since 2002, listed Japanese companies were permitted to have three board committees— audit, compensation and nominating. However, my analysis of 3,803 such companies shows that only 22% had an audit committee and less than 1% had all three committees. In 2015, Japan reformed its corporate governance code to require boards to have at least two independent directors. Nissan was among 11 companies in Japan’s TOPIX 500 to resist this reform. In 2015, Nissan had one outside director, but he was a former Renault executive and not really independent because of the Nissan-Renault alliance. Only in April 2018 did Nissan add two new independent directors, though they both lacked business or management experience — one was a race car driver; the other was a former Japanese bureaucrat — the Chief of the International Trade Policy Bureau. After the Ghosn investigation began, Nissan did approve the creation of an advisory committee, composed entirely of independent directors. Although such committees have become popular in Japan under its new governance code, they have no real power to make corporate decisions, such as changing Nissan’s board structure. A final problem for Japanese corporate governance is the extensive cross holdings of shares between companies with close business relationships, such as distributors or suppliers.  These cross holdings make it very difficult for unaffiliated shareholders to hold management accountable for sitting on unproductive piles of cash or subpar financial performance through a proxy contest or takeover bid. While Ghosn was a vocal critic of Japanese cross holdings, the Nissan-Renault alliance remains a notable example of this practice. Renault holds a 43% voting position in Nissan; in turn, Nissan holds a 15% non-voting position in Renault.  Since Renault has de facto control of Nissan, public shareholders had no effective way to curb misbehavior by Ghosn or other Nissan executives. The ratio of cross holdings to total shares at Japanese companies (excluding shares held by insurers) has fallen on average from 35% in 1990 to 10% in 2016, according to Nikko Asset Management. On the other hand, the Japanese Pension Association says that at least one third of the shares of Japanese listed companies are held by “allegiant” investors — including insurers and banks as well as corporate parents, founders’ families, and other affiliated firms — who almost always vote with company management. In June of 2018, the Tokyo Stock Exchange introduced a revised version of the Corporate Governance Code, which strongly encourages Japanese listed companies to reduce their cross holdings. If that happens, it would give shareholders a better chance of holding management accountable for serious executive misconduct or poor company performance. Whatever the outcome of the criminal investigation of Ghosn, it demonstrates the need for different committee structures at Japanese listed companies. The board of these companies should have a majority of truly independent and qualified directors, who should constitute a majority of its nominating, audit, and compensation committees. The nominating committee should find and recommend new directors; the audit committee should appoint the external auditor and review the company’s internal controls; and the compensation committee should set the criteria for executive pay in advance and explain the results to shareholders. If Nissan’s governance procedures had followed these recommendations, it likely could have avoided the recent scandal. In short, Japan has taken some significant steps to improving the governance procedures of its listed companies.  But most of these companies still have a way to go to reach the best global practices of corporate governance.

Выбор редакции
07 декабря, 16:00

The Growing Business of Helping Customers Slow Down

  • 0

Westend61/Getty Images We are living in an age of acceleration. All manner of goods can be ordered online and delivered within hours. The next date is a swipe away. Even exercise and meditation are now accessed via apps and completed in minutes. This constantly increasing rate of technological advancement and social change is speeding up the pace of business and life itself, leaving most of us feeling time-poor. How are people coping? Increasingly, by seeking out opportunities to slow down. Witness the rising popularity of yoga and wellness retreats (one of fastest growing sectors of the tourism industry), the slow food movement, and the spreading popularity of digital detoxes: time away from tech devices. The former director of BBC News recently launched Tortoise Media, which defines itself as slow news and offers the tagline “slow down, wise up.” And, in South Korea, a decidedly fast-paced, high-tech society, vacations in which burnt out workers spend time in a jail cell, treated like a prisoner, so that they can disconnect and decelerate, have become popular in the past year. This desire to decelerate is a major trend with implications for companies, organizations and society. To explore why and how people can achieve deceleration, we studied another extreme version of it: we immersed ourselves with people walking the Camino de Santiago in Spain, an ancient pilgrimage route that has been drawing ever larger crowds, of varied ages, religious backgrounds and countries of origin, in the past two decades. Through this research, we identified three key dimensions to slowing down: Embodied deceleration, which is the physical slowing down of the body. In our research, this was achieved via walking on a daily basis rather than using faster forms of transportation. Technological deceleration, which is not giving up technology, but carefully controlling its use and instead focusing on face-to-face communication. This often stems from the surroundings not allowing for constant connection rather than from self-control. In our study, some respondents left their work phones at home, or they connected to Wi-Fi only in the evenings. Episodic deceleration, which is engaging in only a few activities per day — in our data, walking, eating, sleeping — and, crucially, reducing the amount of consumption choices to be made. In general, all three dimensions speak to ideas such as simplicity, de-materialization, and authenticity. How do these findings translate into business insights? Companies are beginning to provide spaces where consumers can decelerate on all three dimensions. In the retail sector, for example, “slow shopping” the creation of calming, relaxed, private yet interactive experiences that encourage customers to stay (and spend) — has become a long-awaited response to e-commerce and high-tech self-checkouts. As reported here, Origins, a skin-care and make-up brand, redesigned its stores to provide more places for shoppers to sit down, encouraging embodied deceleration. Similarly, in 2013, Selfridges, the high-end British department store, built a quiet room where consumers can relax and engage in both embodied and technological deceleration. In the tourism sector, while embodied and episodic deceleration has long been encouraged as part of luxury hotels’ wellness focus, we are beginning to see the absence of Wi-Fi marketed as an amenity, for example at Villa Stephanie in Baden-Baden, so guests aren’t posting experiences on Instagram but rather focusing on their holiday. In fashion, brands such as Patagonia encourage customers toward investment purchases: a few, key sustainable clothing and accessory items kept over longer periods of time, reflecting an emphasis on authenticity and de-materialization via episodic deceleration. We see the facilitation of deceleration — especially that which factors in all three dimensions — as beneficial for individual well-being, the environment and businesses alike. And we expect interest in such experiences to rise exponentially in coming years. Recognizing our existential need to occasionally slow down can be the basis for winning consumer strategies.

Выбор редакции
07 декабря, 15:00

What Multinationals Need to Do to Succeed in Africa

lucydphoto/Getty Images Africa shows every sign of being the world’s next big growth market. It is home to more fast-growing economies than any other region, hundreds of successful big companies, and an urbanizing consumer market whose spending outstrips that of India. In an aging world, Africa is the exception: half of its people are under 20, and its population is projected to double to 2.5 billion by 2050. Fueling this dynamism, Africa is adopting technology at a furious pace: it will soon have double the number of smartphone connections than North America. Yet Africa remains a challenging place to do business. Infrastructure is patchy, markets are fragmented, and regulations are complex — and although incomes are rising, poverty remains widespread. For some Western firms, those obstacles are just too daunting. How can companies navigate Africa’s many challenges and translate its growth trends into profitable, sustainable enterprises? Our research into firms that have succeeded in Africa highlights two essential requirements: the imagination to see the continent’s unmet needs as opportunities for growth, and the long-term commitment to build businesses of meaningful scale. Further Reading Africa’s Business Revolution: How to Succeed in the World’s Next Big Growth Market Strategy & Execution BOOK Acha Leke, Mutsa Chironga, and Georges Desvaux 35.00 Add to Cart Save Share One compelling case study is that of SABMiller. The beer maker started as South Africa’s national champion, snapped up global brands such as Pilsner Urquell, Miller Lite, and Peroni, and ended up on the London Stock Exchange’s FTSE 100 list before being acquired by rival Anheuser-Busch InBev for $103 billion in late 2016. In large part it was SABMiller’s success across the African continent that made it such a growth star and justified the eye-watering price tag for its takeover. From 2007 to 2016, the brewer saw its African sales outside of South Africa climb from $280 million to $1 billion. By 2016, SABMiller had brewing operations in around forty of Africa’s fifty-four countries. Mark Bowman was the managing director of SABMiller’s Africa region during that decade. He told us, “We spotted a huge opportunity in Africa’s beer market, and we seized it at the right moment. In the early part of this century, most global firms saw Africa as unattractive, so we had limited competition.” SABMiller knew otherwise. The continent’s young population was expanding much faster than most other regions and its economies were growing — bullish signs for beer consumption. SABMiller’s insight was simple yet powerful: like consumers the world over, Africans like beer. When they can start spending a portion of earnings on nonessentials, one of the first luxuries they turn to is an upgrade from home brews to commercial brands. To capitalize on that opportunity, SABMiller adopted a bold long-term strategy for Africa. One element was an aggressive program of brewery building across the continent. With its equipment-supplier partners, SABMiller developed a standardized “brewery in a box” that it could quickly assemble. A second element was to hone its marketing insights: using the brand-positioning approach it had developed globally, SABMiller created a diverse portfolio of African brands tailored to local markets. In Nigeria, for example, SABMiller developed a new brand, Hero. SABMiller wanted the new beer to come across as local, not the product of a multinational. It designed the label with a rising sun, a favorite symbol of the Igbo people, an ethnic group native to Nigeria. And in a country where it can take up to six hours to earn enough to buy a half-liter of beer, SABMiller priced the brew 25 percent below its main competitor. Hero turned out to be one of the company’s most successful brands ever. That is just one of the success stories we feature in our new book, Africa’s Business Revolution: How to Succeed in the World’s Next Big Growth Market. In it, we distill the insights from over 3,000 McKinsey consulting engagements across Africa, and hone case studies from interviews with dozens of successful CEOs, entrepreneurs, and development leaders. Many of those successful firms have created new products and services — and sometimes whole categories — that are targeted at African needs, tastes, and spending power. They have also innovated to solve the problem of last-mile delivery: Africa is a vast continent with generally poor transport infrastructure and big gaps in communications, where many millions of people lack formal postal addresses or even a street name. As one example of such innovations, consider the story of Indomie noodles — one of Nigeria’s most successful consumer products. Sold in single-serving packets for less than 20 US cents, the noodles can be cooked in under three minutes and combined with an egg to produce a nutritious, convenient, low-cost meal. Dufil Prima Foods introduced them to Nigeria in 1988. As Deepak Singhal, the company’s CEO, told us: “We created a food that was relevant for Nigeria. And in ten to fifteen years, we became a household name.” In part that is thanks to Dufil’s innovation of getting Indomie noodles to consumers throughout Nigeria. It has a vast “feet on the street” distribution network of more than 1,000 vehicles including motorcycles, trucks and three-wheelers. When distributors can’t go any further by vehicle, they continue by foot —making sure the noodles are available in the thousands of small, informal outlets that dominate retail in Nigeria. Western multinationals would do well to learn from the strategies of African champions such as SABMiller and Dufil. US food company Kellogg has done just that — and put its money where its mouth is by investing heavily in Dufil. In 2015 Kellogg ponied up $450 million to acquire a 50 percent stake in the West African sales and distribution arm of Dufil’s parent company, Tolaram Africa. In 2018 it invested a further $420 million for a stake in Tolaram’s food-manufacturing business. To turn the African growth opportunity into gold, companies must be ready to shape and execute targeted strategies that reinvent products, services, markets, and business models for local needs. Companies like Dufil and SABMiller provide examples that can be an inspiration to others: they have found ways to overcome persistent challenges that limited markets, hampered business growth, and made life harder for ordinary people. Their innovations and investments also create real social impact by providing products that were previously unavailable, boosting productivity and growth, and creating large numbers of jobs.